Guidelines on Audit of Gov't Infrastructure Contracts

Section 2, paragraph 2, Article IX-D of the 1987 Constitution grants the Commission on Audit (COA) authority to define the scope of its audit and examination, establish techniques and methods, and promulgate accounting and auditing rules to prevent and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties.
COA Resolution No. 91-52 (September 17, 1991) previously provided a reference rule for audit of infrastructure projects using the Approved Agency Estimate and a reasonableness threshold against the COA cost estimate with a variance allowance.
Republic Act No. 9184 establishes procurement rules governing infrastructure project procurement.
Republic Act No. 9184’s Implementing Rules and Regulations (IRR) (including the IRR provisions on observer attendance and documentary reporting) provide requirements that COA auditors must follow during procurement and audit stages.
Section 13.1 of the IRR of Republic Act No. 9184 governs the auditor’s role as observer in procurement processes.
Section 13.4.b of the IRR of Republic Act No. 9184 governs the required submission of the auditor’s report to the Government Procurement Policy Board and the Office of the Ombudsman.

COA issues these guidelines to ascertain the validity and regularity of government infrastructure projects, particularly with respect to contract cost.
COA requires strict compliance with procurement requirements to avoid unnecessary or excessive expenditures of government funds.
COA rejects the practice of allowing an additional variance over the COA cost estimate that could result in excessive spending when applied to infrastructure contract magnitudes.
COA mandates new review and evaluation standards for the auditorial determination of whether contract costs and related technical evaluations are consistent with procurement and auditing requirements.

Auditors must ensure strict compliance by the auditee agency with the pertinent requirements under Republic Act No. 9184 and its IRR, as amended, and other relevant issuances.
Auditors must ensure the technical review and evaluation follows Annex “Aa” – Detailed Engineering for the Procurement of the Infrastructure Project under the IRR of Republic Act No. 9184, and other relevant COA issuances.
The Approved Budget for the Contract (ABC) must serve as the reference value of the COA cost estimate.
The COA cost estimate must be computed without any allowable variance.
The technical personnel’s Technical Evaluation Report must be used as a reference in conducting the audit.
Auditors must communicate discovered defects or errors in the ABC in writing to the auditee, together with the pertinent reasons, especially those that would adversely affect the contract price.
When a contract passes the auditorial and legal review, any technical review discrepancy (contract review and inspection) that is unfavorable to the government must be disallowed in audit.

The auditor concerned (or authorized representative) must attend all stages of the procurement process as an observer in accordance with Section 13.1 of the IRR of Republic Act No. 9184.
The auditor (or representative) must prepare a report assessing the extent of the Bids and Awards Committee’s compliance with the pertinent requirements under Republic Act No. 9184 and its IRR, as amended, and other relevant issuances.
The auditor must submit the report to the Government Procurement Policy Board and the Office of the Ombudsman as required under Section 13.4.b of the IRR of Republic Act No. 9184.
The auditor must also furnish a copy of the report to the Director who has jurisdiction over the auditee agency.
Auditors must render a report stating that the contract has been found in order for legal and auditorial review before the conduct of technical review.

COA Resolution No. 91-52 dated September 17, 1991 is repealed.
COA Resolution No. 2015-014 supersedes COA Resolution No. 91-52.
All other issuances inconsistent with COA Resolution No. 2015-014 are repealed or modified accordingly.