Palace confirms COA memo


    MALACAÑANG on Friday confirmed the existence of an audit observation memorandum (AOM) issued by the Commission on Audit (COA) regarding the Defense department’s purchase of several aircraft from various suppliers, saying the DND is “reconciling” the points raised by state auditors.

    “There is an ongoing process of reconciliation to address points raised in an audit observation memo. Several developments have occurred since the time of the last COA audit hence the reconciliation,” Communications Secretary Herminio Coloma Jr. told The Manila Times.

    An exclusive story published by this paper reported COA’s move to raise the red flag on three major acquisition projects meant to beef up the capabilities of the Philippine Air Force.

    A COA spokesman told The Manila Times that their resident auditor in the Defense department is looking into documents submitted by the agency in connection with the three projects that were “suspended in audit.”

    After evaluation of the submitted documentary requirements, the auditor will then be able to determine during post-audit if the transactions were regular or irregular, the COA official said.

    “The documents were submitted and [they are]still under evaluation by the resident auditor,” Jonathan Beltran, director of COA’s Public Information Office (PIO) told this paper.

    The transactions were suspended in audit because of incomplete documentation, Beltran said.

    No details, however, were immediately available on what specific documents were submitted.

    A notice of suspension is issued pending submission of various requirements for transactions that may result in pecuniary loss to the government.

    The 2009 Revised Rules of Procedure of the Commission on Audit states, “The Auditor may issue Notices of Suspension (NS) for transactions of doubtful legality/validity/propriety to obtain further explanation or documentation.”

    Coloma, quoting the Department of National Defense (DND), clarified that contrary to The Manila Times report there was no suspension notice issued against the projects, which include the acquisition of 12 FA-50 fighter jets from South Korea, eight Bell 412 EP helicopters from Canada and the P1.2-billion UH-1D helicopters, which this paper earlier exposed .

    “According to the DND [Department of National Defense], there is no notice of suspension or disallowance from COA pertaining to the procurement of aircraft,” Coloma said.

    The Palace official was reacting to The Manila Times story that came out also on Friday about the COA’s issuance of an AOM and NS for the three deals, which have a combined amount of P25 billion. The report was based on a conference notice provided by a DND insider, which called for a meeting among all Philippine Air Force (PAF) officials involved in the three deals. The officers are members of the Technical Working Group for each project.

    The notice indicated that the sole agenda for the conference was “Compliance to the AOM/ Notice of Suspension issued by COA on the above-mentioned AFP Modernization Program Projects.”

    State auditors red-flagged the projects for certain “deficiencies.”

    Based on COA’s definition, an AOM is “a written notification to the agency head and concerned officer/s informing of deficiencies noted in the audit of accounts, operations or transactions and requiring comments thereto and/or submission of documentary and other information requirements within a reasonable period.”

    The concerned officials are required to reply within 15 days.

    On the other hand, a Notice of Suspension is issued “for transactions of doubtful legality/propriety/regularity which may result in pecuniary loss of the government, and which will be disallowed in audit if not satisfactorily explained or validly justified by the parties concerned.”

    COA rules state that a suspension should be settled within 90 calendar days from receipt of the NS; otherwise transactions covered by it shall be disallowed/charged after the auditor shall have satisfied himself that such transaction is appropriate.

    If state auditors are not satisfied, they can issue a Notice of Disallowance (ND) if the project is “disapproved either in whole or in part for being an illegal, irregular, unnecessary, excessive, extravagant or unconscionable expenditure.”

    Coloma confirmed that there is “ongoing” audit conference at the DND for the projects but said such is a matter common to all government agencies.

    “An audit conference such as what is currently ongoing at DND is a regular exercise conducted by COA with all government agencies to reconcile data,” he said.

    “The accounts pertaining to the FA50 and Bell 412 helicopters have already been reconciled in previous years and have been found to be above-board and compliant with auditing rules,” Coloma added, again citing information provided by the DND.

    The latest conference was held last Thursday at the DND headquarters in Camp Aguinaldo in Quezon City. Several PAF officers, with ranks from major to colonel, were invited to attend the meeting, which was presided by lawyer Patrick Velez, the Defense Undersecretary for Acquisition, Installation and Logistics.

    Velez, as well as Undersecretary Fernando Manalo, who heads the special bids and awards committee of the agency, were among the DND officials whom whistleblower Rhodora Alvarez had accused of “tailor-fitting” the UH-1D project specifications for Rice Aircraft Services Inc.

    The Manila Times early this year came out with a series detailing the alleged anomalies in the P1.2-billion helicopter deal based on documents provided by and interviews with whistleblower Alvarez, whose identity was initially masked with the codename Joey.

    The case is now the subject of a Senate investigation.

    The jet fighter deal involves the acquisition of FA-50 fighter/trainer jets from Korean Aerospace Inc. The deal was done through government-to-government negotiation with the contract signed during President Benigno Aquino 3rd’s visit to Seoul in March 2013.

    The revelation of the COA “grounding” notice came a few days after the DND announced the successful maiden test flight of the jets in South Korea last week. The Korean contractor committed to deliver two of the 12 fighter jets by the last quarter of the year or early next year.

    The test flight of the newly manufactured FA-50 jet was conducted on June 19. A team of PAF pilots and ground crew are also in training in South Korea on how to handle the jet fighter, which is patterned after the US-made F-16 Fighting Falcon.

    Two of the eight brand-new Bell 412EP helicopters have reportedly arrived early this month and are assembled and tested in a secured air force facility. A total of six helicopters from Bell Helicopter Canada are expected to be delivered until August this year.

    Like the jet fighter contract, the Bell 412EP acquisition involved a government-to-government transaction with Canada through the Canadian Commercial Corporation. The contract was signed in March 2014.


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    1. Just for clarity, the COA issued a temporary suspension of the audit until the DND provides the required documentation. The programs themselves have not been suspended. The article is misleading. This is a normal audit of the G2G transaction. Nothing to see here folks. Let’s move on. The AFP Modernization needs to proceed unfettered so we can defend our sovereignty.

    2. ben_tumbling on

      Nothing will happen to the investigations bec those transactions are for fundraising projects of Pnoy for the 2016 elections! Marcos- era style ‘yan!

    3. Rey S. Mendoza on

      SENATOR Teofisto “TG” Guingona III is set to hear on July 7 the fourth segment of the Blue Ribbon Committee’s investigation of the Defense department’s procurement of 21 refurbished combat UH-1 helicopters. Whistleblower Rhodora Alvarez will again take the stand to reveal more details on the P1.25-billion chopper deal. But, this time, DND officials will be allowed to refute allegations made by Alvarez.