Messrs. Pablo T. Tamesis and Guilardo C. Baes and Ms. Aurea A. Rivera, former officers and member, respectively of BAC-ATI were among those held liable for the said disallowances. Hence, this appeal.

In a letter dated November 11, 1994 the above named officials explained that their actions were done in good faith with the objective of facilitating the procurement of supplies and materials necessary in the implementation of ATI activities. Additionally, in a supplemental manifestation dated May 30, 1996, they justified their request for the lifting of the disallowance and/or exclusion as persons liable invoking the following grounds:

1. The Auditor failed to conduct an independent price canvass but instead relied solely on the price indices issued by the Technical Services Office (TSO), this Commission. Such grave omission of an auditorial duty was a fatal defect that impugns on the credibility of the auditor's findings, much less on the correctness of imposing the disallowances in question.

2. Most of the goods subject of the disallowance were not commonly used in government offices as they were not carried or were available at the Procurement Service since these were mostly imported items. Hence, their prices in the market were affected by several economic factors such as law of supply and demand, country of origin, quality, other technical specifications, as well as the emergency nature of the purchase at the time it was undertaken.

3. Suppliers were entitled to a certain margin of reasonable profit which add up to the actual cost of the items since procurement was made on credit basis and payments thereof were usually delayed.

On the other hand, the ATI Auditor, in a 4^thIndorsement dated July 24, 1996 observed that the appeal for the lifting of said disallowance was received only on December 2, 1994 after the lapse of the reglementary period prescribed for appeal, thus the disallowances have become final and executory. It was also noted that the price references regularly issued by the Price Evaluation Division (PED), COA-TSO were invoked in previous decisions of this Commission involving the same subject matter.

Moreover, in a 9^th Indorsement dated July 15, 1997, the ATI Auditor explained that the aforementioned disallowance of P510,381.30 was reduced to P474,971010 after taking into consideration the ten (10%) percent price variance allowance. Notably, corresponding adjustments on the books of ATI were not made by the Chief Accountant of said agency.

After a circumspect evaluation of the facts and circumstances herein obtaining, this Commission finds the instant appeal deserving of merit. The Supreme Court had occasion to rule in the case of Arriola vs. COA D.R. No. 114864 dated December 6, 1996 that the price references issued by the Price Evaluation Division, Technical Services Office, this Commission are not valid bases for outright disallowance of agency disbursements for government projects due to overpricing in the absence of actual canvass sheets and/or price quotations from the identified suppliers by the Auditor of the respective government agency. Relative thereto, this Commission issued COA Memorandum No. 97-012 dated March 31, 1997 dealing on the evidence to support audit findings of overpricing, pertinent provision of which, reads thus:

"x  x  x  x

x  x  x  x"

In view of the absence of actual canvass sheets and/or price quotations from identified suppliers which should have been secured by the Auditor, to support the 1989 COA price indices to clearly support the finding of overpricing, the instant appeal from the disallowance is hereby granted. Accordingly, subject disallowance in the reduced amount of P 474,971.10 may now be lifted.

(Sgd.) CELSO D. GAÑGAN
Chairman