ADJUDICATION AND

SETTLEMENT BOARD
DECISION NO. 2010-057
June 3, 2010

Subject: Appeal of Engr. Gilbert C. Olfindo, et al., Department of Public Works and Highways
(DPWH), 2 nd Engineering District, Baras, Canaman, Camarines Sur, from Notice of
Disallowance (ND) No. C-VIII, DPWH-03-01-101-(01) dated December 29, 2003, on
the repair of vehicles, in the total amount of P453,145.00

DECISION

FACTS OF THE CASE

In CY 2001, the Camarines Sur 2 nd Engineering District repaired/ rehabilitated four (4) vehicles as follows:

Plate No. Cost of Repair

line-height:15pt;">Jeep/Ford
1. Fiera H1 1564 P162,500.00
2. Jeep/Ford Fiera H1 1408 163,000.00
3. Jeep/Jiffy Type SBJ 421 166,000.00
4. Pick up/Toyota Hi-Lux SBJ 419 170,000.00
P661,500.00

The mode of procurement was through canvass from various repair shops in the locality. The repair/rehabilitation was
awarded to two (2) suppliers - Magarao Auto Shop and MB Motorworks.

Meanwhile, an anonymous complaint by a Mr. Citizen alleged anomalies in the repair of the vehicles, and thus an audit
team was created to conduct a special audit thereof. On April 2, 2003, the Audit Team, in a Memorandum to Atty. Francisco R.
Velasco, Regional Cluster Director (RCD), Legal and Adjudication Sector (LAS), COA Regional Office No. V, recommended
that an ND be issued to the persons liable for the transactions for being excessive, in violation of COA Circular No. 85-55A
(Amended Rules and Regulations on the Prevention of Irregular, Unnecessary, Excessive or Extravagant Expenditures or Uses
of Funds and Property) dated September 8, 1985. On December 29, 2003, ND No. C-VIII DPWH 03-01-101 (01) in the amount
of P453,145.00 was issued by the RCD, LAS, disallowing in audit the payments for the repair of the vehicles. The persons
named liable thereon were as follows:

1. Gilbert C. Olfindo - for approving payment

2. Efren O. Regondola - -do-
3. Valeriano J. Fausto - for certifying that expenses were
necessary, lawful and incurred under
his direct supervision
4. Haydee N. Severo - -do-
5. Amelia B. Fajardo - -do-
6. Gilbert P. Romero - -do-
- for certifying as to funds
7. Teresita B. Demabasa availability
pre-
8. Erlinda I. Martin - for passing in audit the
disbursement

The bases for the disallowance were: 1) the cost of the repairs exceeded 30% of the current market price of the vehicles and
hence considered excessive under COA Circular No. 85-55A, and 2) a re-canvass undertaken by the Auditor showed that the
repair cost was excessive.

On June 1, 2004, the management requested for reconsideration of ND No. C-VIII, DPWH 03-01-101-(01), which was
denied by the RCD, LAS in his 1 st Indorsement dated March 8, 2006. A subsequent appeal was likewise denied under the 2 nd
Indorsement dated January 15, 2007 of the same RCD. Hence, this appeal, based on the following grounds:

1. There is no valid basis for the COA price findings. The re-canvass conducted by the COA personnel was from suppliers
different from those where the agency conducted its own canvass. Moreover, the price findings do not have actual canvass
sheets or price quotations. The COA should adhere to the cases of Arriola vs. COA, et al., G.R. No. 90364, September 30,
1991 and National Center for Mental Health Management vs. COA, G.R. No. 114864, December 6, 1996;

2. The current market price of the same or similar equipment in COA Circular No. 85-55A refers to the current market price of
a brand new, same or similar equipment and not the current market price of the rehabilitated equipment;

3. The repair cost was reasonable based on the lowest canvassed price among several repair shops;
4. The Sub-Prequalification Bid and Award Committee (SPBAC) awarded the contract to the supplier with the lowest quotation;
and
and

5. The repair was 100% complete, and the vehicles are in good running condition.

ISSUE

Whether or not the appeal is meritorious

DISCUSSION

After an evaluation of the herein documents, this Board finds the herein appeal not meritorious.
It was admitted by the management that the benchmark set for repairs of government vehicles under COA Circular No. 85-
55A is 30% of the current market price of a brand new, same or similar equipment, and that the vehicles for repair were about 20-
30 years old, antiquated and worn-out. Thus, economy in repairing these vehicles should have been the paramount consideration
in the decision of management. The essence of the proscription under COA Circular No. 85-55A is to limit repair cost to that level
where the vehicle would still be economical to maintain.

The current market prices of similar vehicles at the time of the repair of the subject vehicles were ascertained by the COA
Technical Audit Specialists in their Memorandum dated April 2, 2003. Under COA Circular No. 85-55A, the current market prices
of similar vehicles are instructive to determine the reasonable amount of disallowance, as shown hereunder:

Current Maximum Repair

Market Price Cost Cost under COA Excess Repair
of Similar of Repair Circular No. Cost
Equipment 85-55A(30% of
Vehicle ​(CMPSE) CMPSE)

Ford Fiera
HI 1564 P230,000.00 P162,500.00 P69,000.00 P 93,500.00

Ford Fiera
HI 1408 P230,000.00 P163,000.00 P69,000.00 P 94,000.00
Toyota Pick-
up
SBJ 421 P400,000.00 P166,000.00 P120,000.00 P 46,000.00

Toyota Hi-Lux
SBJ 419 P500,000.00 P170,000.00 P150,000.00 P 20,100.00

TOTAL P253,600.00

It bears to emphasize that the management admitted that the cost of repair works exceeded 30% of the current market price
of the same or similar equipment, taking into account that the subject vehicles are antiquated, worn out, and fully depreciated and
that ordinary repair thereof was not advisable. The management argued that it was constrained to have those vehicles repaired at
the amount quoted by the repair shops rather than resort to acquisition and rental of equipment in view of the urgent need of
service vehicles and equipment during those times. However, the urgency posited was sufficiently rebutted by the evidence at
hand. Records disclosed that the unavailability of the spare parts within the locality had delayed the completion of the works. The
winning bidder requested for an extension of time and the same was granted.

Clearly, the repair work is inconsistent with sound financial management in terms of economy and practicality. The
vehicles have been phased out of the market practically that maintenance will be frequent, expensive and spare parts will be
unavailable. This being the case, the action taken by the management is impractical that resulted to a wastage of government
funds. This Commission ratiocinated in COA Decision No. 98-439 dated 25 August 1998 as follows:

“The Director further noted the assertions made by the DOLE Auditor that several minor repairs have been made,
the engines of the subject vehicles had been overhauled several times and still the vehicles were in a sorry state
requiring major body and engine repairs. With this information and considering all the expenditures incurred, it
would be safe to conclude that the motor vehicles were beyond economical repair and, therefore, expenditures for
repairs should have been channeled to other priority programs or projects.”

The enumeration under COA Circular No. 85-55-A of Situational Cases of Excessive Expenditures explicitly provides that
“payment for repair of government equipment at a cost exceeding 30% of the current market price of the same or similar
equipment is an excessive expenditure.” Considering that the vehicles are no longer available in the market, the COA adopted the
current market prices of similar vehicles in the computation of excess repair cost. Having determined that the cost of repair
exceeded the 30% benchmark and finding no justification to merit the management action to pursue the repair works instead of
acquisition or rental of similar vehicles, the excess is inarguably disallowable in audit. Inasmuch as the repair is grossly
excessive, there is no necessity to discuss the other issues posed.

The degrees of responsibility of the persons found to be liable on the disallowed transactions have been duly ascertained as
disclosed in the ND. These persons are bound by their signatures on the documents related to the transaction. In the case of the
accountant, Ms. Teresita B. Demabasa, who certified as to funds availability, her exclusion from liability is in order. This is in
view of her participation which is not directly related to the audit finding of excessive expenditures. The rest of the persons liable
stay liable.

RULING
RULING

WHEREFORE, premises considered, the instant appeal is hereby DENIED. However, the amount of disallowance is the
difference between the cost of repair and the maximum repair cost allowable under COA Circular No. 85-55A, or the amount of
P253,600.00.

Further, Ms. Teresita B. Demabasa is hereby excluded from liability under the subject disallowance as discussed above.

(Sgd.) ELIZABETH S. ZOSA

Asst. Commissioner – Legal Services
Chairperson

(Sgd.) EMMA M. ESPINA (Sgd.) ARCADIO B. CUENCO

Asst. Commissioner - National Asst. Commissioner - Special Services
Member Member

(Sgd.) JAIME P. NARANJO (Sgd.) GLORIA S. CORNEJO

Asst. Commissioner - Corporate Asst. Commissioner - Local
Member Member

Copy furnished:

Mr. Gilbert C. Olfindo

Ms. Amelia B. Fajardo
Ms. Erlinda I. Martin
Ms. Teresita B Demabasa
Ms. Haydee N. Severo
Mr. Efren O. Regondola
Mr. Valeriano J. Fausto
Mr. Guilbert P. Romero

All of the 2 nd Engineering District

Department of Pubic Works and Highways
Baras, Canaman, Camarines

The Audit Team Leader

DPWH 2 nd Engineering District
Baras Canaman, Camarines Sur

The Regional Director

COA Regional Office No V
Rawis, Legazpi City

The Assistant Commissioners

National Government Sector
Legal Services Sector
Both of this Commission

ESZ/Mayette

PC/Atty. Pinaga
Gilbert Olfindo

ESZ/JPM/VBL