EDMUNDO C. SAMBELI, DOING BUSINESS AS ECS ENTERPRISES, PETITIONERS, VS. PROVINCE OF ISABELA, PROVINCIAL TREASURER OF ISABELA AND COMMISSION ON AUDIT, RESPONDENTS.

The instant petition seeks to annul and set aside the ruling of
respondent Commission on Audit (COA) affirming the action of respondent Provincial
Auditor of Isabela which:

“(a) withheld the payment to petitioner of the
amount of P380,400.10, representing the unpaid balance of the price of 300
units of wheelbarrow and 873 pieces of shovel;

“(b) required the refund of the amount of
P195,893.10 representing the overpayment to petitioner for the same
items.” (p. 35, Rollo).

The pertinent background facts are uncontroverted.

On October 2, 1987, an agreement was entered into by and between
the Province of Isabela and ECS Enterprises, herein petitioner, for the
purchase of 300 units of wheelbarrows, 837 pieces of shovels and 1 set of radio
communication equipment. Out of the
items to be delivered, a partial delivery of 150 units of wheelbarrows and 419
pieces of shovels were made on November 11, 1987 for the total price of
P380,538.60. The Provincial Auditor
allowed the payment of only 50% or P190,338.20 “pending receipt of the
reply to the query to the Price Evaluation Division, COA, Technical Staff Office,
Quezon City.” (Annex ‘N’ Petition, p. 25 Rollo)

A second delivery of 150 units of wheelbarrows and 418 pieces of
shovels was made on December 1, 1987 and payment of P190,200.00 or 50% of
P380,400.00 was allowed by the Provincial Auditor, bringing the total payments
made to P380,538.20 or 50% of P761,077.20 (the total cost of 300 units of
wheelbarrows and 837 pieces of shovels).

Based on the findings of the Price Evaluation Division, COA
Technical Service Office, Quezon City, the Provincial Auditor advised the
Provincial Treasurer in his letter dated February 20, 1988 that an overprice in
the total amount of P619,042.20 exists out of the total price of P761,077.20
offered by ECS Enterprises or an overpayment of P195,893.10. The said findings of the Price Evaluation
Division are hereinbelow quoted as follows:

“A comparison between the purchase price of the Province and
the findings of the Price Evaluation Division is presented hereunder showing
the difference:

“Payment of Three Hundred Eighty Thousand Five Hundred Thirty
Eight and 60/100 Pesos Only (P380,538.60) was made on the strength of the
certification issued by the Bureau of Supply Coordination that the prices are reasonable. A difference of Two Hundred Thirty Eight
Thousand Five Hundred Three and 60/100 PESOS Only (P238,503.60) between the
amount paid of Three Hundred Eighty Thousand Five Hundred Thirty Eight and
60/100 Pesos Only (P380,538.60) and the total price due if computed on the
Price Evaluation Division canvass Manila Price of One Hundred Forty Two
Thousand Thirty Five and 00/100 Pesos Only (P142,035.00).

“If thirty percent (30%) equivalent to Forty Two Thousand Six
Hundred Ten and 50/100 (P42,610.50) of the Manila Price total will be allowed
for handling and freight expenses to be deducted from P238,503.60, still an
overpayment of One Hundred Ninety Five Thousand Eight Hundred Ninety Three and
10/100 Pesos Only (P195,893.10) still exists.

“It is recommended that future claims of ECS Enterprises be
withheld and applied to the refund for overpayment.” (Annex J, Petition,
pp. 122-124, Rollo)

The President/General Manager of ECS Enterprises in his letter
dated April 1, 1988 to the Provincial Treasurer made no comment on the
overpricing but instead proposed a 10% deduction on the unpaid balance.

The Provincial Auditor forwarded the matter to the COA Regional
Director who formally endorsed the stand of the Provincial Auditor, as follows:

“In view of the foregoing, we favorably endorse the stand of
the Provincial Auditor in his letter to
the Provincial Treasurer Ilagan, Isabela that the total claim of ECS
Enterprises in the total amount of P761,077.20 is overpriced by P619,041.40 or a
refund of P195,893.10 must be made by the supplier out of the P380,538.60 total
payments already made by the Province of Isabela as presented by the Provincial
Auditor in the preceding indorsement.” (Annex N, Petition; p. 125, Rollo)

The Regional Director further made the following findings:

“the submitted documents disclosed the following deficiencies:

“1.  The contract for the purchase of 300 units of
wheelbarrows and 837 pieces of shovels was entered into by and between the
Province of Isabela and ECS Enterprises
without the prior necessity of a public bidding to determine the most
advantageous prices;

“2.  The following conditions among others, set in
the 2nd indorsement dated December 10, 1987 of Mr. David Rubio,
Director, Supply Coordination Office to the Provincial Governor, Ilagan,
Isabela were not adhered to:

‘(a)   the agency concerned shall negotiate further
for lower prices such terms and conditions advantageous to the government; and

‘(b)   substitute offer/s at lower prices shall be
given due consideration upon appreciation of their quality and
effectiveness.’”(p. 26, Rollo)

ECS Enterprises appealed to the respondent Commission on
Audit. In a letter dated December 12, 1989, the said Commission denied the
appeal and affirmed the position of the Provincial Auditor and the COA Regional
Director, as follows:

“This has reference to your appeal in behalf of ECS
Enterprises from the action of the Provincial Auditor of Isabela in withholding
the payment of P380,400.60 representing the unpaid balance of the price of 300
units of wheelbarrows and 837 pieces of shovels purchased by the Province of
Isabela from your Company.

“Relative thereto, we invite your attention to the letter of
this Commission to then Governor Melanio T. Singson of Isabela, dated August 3,
1988, copy attached, confirming the action taken by the Provincial Auditor in
demanding the refund of the excess payment made by the Provincial Treasurer of
Isabela to your Company for the reasons stated therein.

“Upon a circumspect evaluation of the grounds relied upon,
your within appeal, this Commission finds the same to be devoid of any
merit. The price quotation of the
Supply Coordination Office provides that the prices set therein are authorized ceiling
or purchasing prices. It can be deduced therefrom that the prices to be agreed upon shall not
exceed said amount, thereby signifying that negotiations for a lower price may
be resorted to in the best interest of the government. Moreover, the action taken by the Provincial
Auditor and the COA Regional Director, as representatives of the Commission on
Audit, is in accordance with the law and in pursuance of the mandate of the
Constitution which vests in this Commission the exclusive authority ‘to
promulgate accounting and auditing rules and regulations, including those for
the prevention and disallowance of irregular, unnecessary, excessive,
extravagant or unconscionable expenditures, or uses of government funds and
properties.’” (Art. IX-D, Sec. 2 (2) 1987 Constitution).

“Accordingly, this Commission regrets to dismiss, as it hereby
dismisses, your herein appeal for lack of merit.” (Annex R, Petiton, pp.
126-127, Rollo).

Hence, the present petition.

Petitioner assails the ruling of the COA as not valid. It contends that the contract of sale has
not only been perfected between the Province of Isabela and petitioner but
delivery has been made by it with the corresponding partial payment by the
Province of Isabela. Thus, it is
allegedly incumbent upon COA to authorize the payment of the balance because to
act otherwise will constitute an impairment of contract.

We reject petitioner’s contention.

In the exercise of
the regulatory power vested upon it by the Constitution, the Commission on
Audit adheres to the policy that government funds and property should be fully
protected and conserved and that irregular, unnecessary, excessive or
extravagant expenditures or uses of such funds and property should be
prevented. On the proposition that
improper or wasteful spending of public funds or immoral use of government
property, for being highly irregular or unnecessary, or scandalously excessive
or extravagant, offends the sovereign people’s will, it behooves the Commission
on Audit to put a stop thereto. (Tantuico, State Audit Code Philippines, p. 235)

In the cases of Danville Maritime, Inc. v. Commission on Audit,
175 SCRA 701 (1989) and D.M. Consunji Inc. v. Commission on Audit, 199 SCRA 549
(1991), We defined the role of the COA in this wise:

“x x x No less than the Constitution has ordained that the COA
shall have exclusive authority to define the scope of its audit and
examination, establish the techniques and methods required therefor, and
promulgate accounting and auditing rules and regulations, including those for
the prevention and disallowance of irregular, unnecessary
excessive, extravagant or unconscionable expenditures
or use of government funds and properties.”
(Art. IX D, Sec. 2(2) 1987 Constitution
of the Philippines) (underscoring supplied)

Indeed, not only is the Commission on Audit (COA) vested with the
power and authority, but is also charged with the duty to examine, audit and
settle all accounts pertaining to x x x the expenditure or uses of funds xxx
owned by, or pertaining to, the Government or any of its subdivisions, agencies
or instrumentalities (Article IX (D-1) Section 2(1), 1987 Constitution). That authority extends to the accounts of
all persons respecting funds or properties received or held by them in any
accountable capacity. (Section 26, P.D.
No. 1445). In the exercise of its
jurisdiction, it determines whether or not the fiscal responsibility that rests
directly with the head of the government agency has been properly and
effectively discharged (Section 25 (1) ibid), and whether or not there has been
loss or wastage of government resources. It is also empowered to review and evaluate contracts. (Section 18 (4), ibid.). And, after an audit has been made, its
auditors issue a certificate of settlement to each officer whose account has
been audited and settled in whole or in part, stating the balances found due
thereon and certified, and the charges or diferences arising from the
settlement by reason of disallowances, charges or suspensions. (Sec. 82, ibid.) (Dingcong v. Guingona 162
SCRA 782)

VIEWED in this light, the disallowance made by the respondent
Commission on Audit is not without any Constitutional and legal basis. We, therefore, affirm the same.

WHEREFORE, for lack
of merit, the petition is DISMISSED. No
costs.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin,
Grino-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon, and Bellosillo, JJ., concur.