Purchase of Inventory Items

Inventories

•Expendable commodities acquired or ordered for immediate use in connection with government operations

•Not restricted to items normally consumed within one year after being put into use

Asset Method/ Perpetual Inventory Method•Asset Method- will be followed in

recording disbursements when expenditures apply to more than just the accounting period

•Perpetual Inventory Method- the moving average unit cost is used which provides a new unit cost after each purchase and/or when items are issued/used.

•Asset MethodExamples of Disbursements

o Insuranceo InterestoRent

- The expense shall be recorded upon utilization/consumption

- When insurance, interest, rent, etc., will be fully used up/ consumed within the current accounting period, the disbursement shall be taken up as expense

•Perpetual Inventory Method▫Purchases of supplies and material stock,

regardless of whether or not they are consumed within the accounting period shall be recorded using the inventory account

•Under COA Circular No. 2005-002 dated April 14, 2005 (Appendix 10), COA prescribed the accounting policy that small tangible items with estimated useful life of more than one year shall be recorded as inventories upon acquisition and as expense upon issuance.

General Guidelines in Procurement•Agencies shall procure common-use

supplies, materials and equipment from the Procurement Service

•Procurement of supplies, materials and equipment shall be through competitive public bidding

•Appropriated funds shall be available for locally manufactured goods, provided:▫Importation may be made when none of the

desired quality or standard is available in the market

▫When the price of the local product or service is more than fifteen percent (15%) of that of a similar product offered by an enterprise other than domestic entity pursuant to Section 4 of the Fag Law

General Procedures in Procurement

•Procurement of Planning and Preparation of the Annual Procurement Plan (APP)

•Requisitioning or Preparation of Supplies Availability Inquiry (SAI)

•Approval of Requisition•Preparation of Obligation Slip (OS)•Preparation, Approval and delivery of Purchase

Order Letter Order/ Contract•Delivery, Inspection and Acceptance of the

items•Payment for the Items delivered.

Procurement Planning and Preparation of the APP•All procurement should be:

▫Within the approved budget▫Meticulously and judiciously planned▫In accordance with an approved Annual

Procurement Plan

•Each procuring entity shall do the following:▫Judiciously prepare the APP▫Maintain and update APP for all its

procurement▫Include each individual project, a Project

Procurement Management Plan (PMPP)

•The PMPP shall include:▫The type of contract to be employed▫The extent size of contract scopes/

packages▫The procurement methods to be adopted

and indicating if the procurement tasks are to be outsourced

▫The time schedule for each procurement activity

▫The estimated budget for the general components of the contract

▫Development of the manuscript▫Printing of the textbooks

•Responsibilities▫Preparation and updating of the PPMPs –

Project Management offices or end-user units of the procuring entities

▫Consolidation of PPMPs into an APP – BAC Secretariat of procuring entity

Requisitioning

•The art of requiring that something be furnished

•In the procurement function, it is the submission of written requests for supplies, materials and the like.

•Under the NGAS, the request for inventory items is made through any mode of determining availability of supplies and other inventory items pursuant to GAFMIS Circular letter no. 2003-006 dated November 24, 2003▫The specifications and descriptions of the

supplies and property called for in the requisition shall include only the technical specifications, which will fill and satisfy the needs of the requisitioner

▫All measurements and weights shall be stated in the metric system except those supply or property, which can be better described in the English System.

Specification

•The heart of any contract for the supply of goods or services since they describe the supplies to be delivered and the services to be rendered

Types of Specifications

•Performance Specifications▫Performance characteristics desired for the

item•Design Specifications

▫Precise measurements, tolerances, materials in process and finished product tests, quality control, inspection requirements

•Purchase Descriptions▫Should always allow for competition

Requirements for Requisition

•Agencies may be allowed to enter into contracts for the purchase of supplies and materials for one year subject to the condition that deliveries shall be made on a staggered basis and the agencies 3 months supply requirements are not exceeded and payments shall be made after each delivery only.

•Requisitions of drugs and medicines should comply with the Generics Act of 1988 (RA 6675)

Approval of Requisition

•Head of office or department within a reasonable time approves requisitions after its submission

Preparation of Obligation Slip

•Prepared showing the certification of the Head of Accounting Unit/ Authorized Official as to the correctness and validity of obligations, and availability of funds

Preparation, Approval and Delivery of Purchase Order/ Letter Order/ Contract

•The PO/ LO/ Contract is the document evidencing a transaction for the purchase of supplies and materials, usually prepared by the Supply Officer or his/ her equivalent

•It shall include:▫Office to which account shall be charged▫Requisition number▫Name and address of the contractor/

supplier▫Office from which payment shall be

collected▫Complete description and specifications of

the supplies

▫Other information and data needed to enable agency officials and all others concerned to determine: Nature, quality of the items purchased Quantity and unit price of the items Period of delivery Shipping items and directions and other

conditions of the delivery Provisions on penalties for late or no delivery Condition regarding importation, if any Date of effectivity and termination of contract

PO is prepared after the decision on the mode of procurement has been made and the conditions pertaining thereto have been met

Approval of PO/ LO/ ContractContracts Awarded Thru Public Bidding

Full authority to Heads of Procuring entities to enter into contracts and/ or give final approval

Heads of Procuring entity may delegate in writing this full authority

Contracts Entered Into Thru Alternative Modes

For contracts involving P300 million, Head of the entity shall have full authority after obtaining:o opinion of the Justice Secretary that contract falls within the exceptions to public biddingo approval from NEDA Director- General or any authorized approving officials

Contracts below P300 million: Full authority to Head of procuring entity

Delivery of PO/ LO/ Contract

•Delivered by the agency personnel concerned to the contractor/ supplier within a reasonable time after its approval

Delivery, Inspection and Acceptance of the Items

General procedures in Conducting Inspection•Upon receipt of the request for

inspection, check the following documents as to completeness and authenticity:▫PO/ LO/ Contract or their equivalent▫Supplier’s Invoice/ Delivery Receipt▫Other required papers necessary for a

substantive inspection

•Proceed to delivery site and conduct inspection and testing procedures if applicable

•If delivery is subject to test and samples are taken, accomplish the certificate of sampling in accordance with the prescribed guidelines on testing

•Prepare inspection report immediately after inspection for submission to the agency inspector’s supervisor

Acceptance or Rejection of Delivery

•Rejection or Reduction in Price▫Shortage in quantity▫Deficiencies/ defects in quality

•After consideration of tolerable allowance, the following standards shall be observed by the inspector in the evaluation of the result of the inspection of supplies an property:▫In accordance with the required

specifications are accepted▫Quality analysis shows a deficiency of less

than 10 % are accepted▫Quantity is short by volume, weight, actual

count, etc. shall be subject to reduction in contract price.

Basic Requirements in the Payment of Supplies and Materials

•Original copy of the dealer’s invoice•Indication of acceptance by a duly

authorized official/ employee on the invoice

•Requisition for equipment or supplies approved by the agency head

•Purchase order issued by the agency supported with:▫Documentary evidence of public bidding▫Canvas from at least 3 bonafide dealers▫If procurement was from a sole distributor,

duly notarized certificate of exclusive distributorship of the dealer/supplier

•Acknowledgement Receipt for Equipment

•Where the supplies and materials delivered are subject to test, the claim should be supported by the evidence of the sampling made by the Technical Inspector

Documentary Requirements

•Purchase Request•Purchase Order/Letter Order/Contract•Original copy of the dealer’s/suppliers

invoice•Acceptance and Inspection Report•Result of test/analysis by proper

government agency if articles are subject to test

MODES OF PROCUREMENT

•Section 10 of RA 9184 provides that all procurement shall be done through competitive bidding except as provided for in article XVI.

•Article XVI provides for the alternative methods of procurement which are:▫Limited source bidding▫Direct contracting▫Repeat order▫Shopping▫Negotiated procurement

Limited Source Bidding

•Known as selective bidding•Involves direct invitation to bid by the

concerned procuring entity from a set of pre-selected suppliers or consultants

•Pre-selected suppliers or consultants▫Shall be those appearing in a list

maintained by the relevant Government authority

▫Has expertise in the type of procurement concerned

Direct Contracting

•Does not require elaborate bidding documents

•The supplier is simply asked to submit a price quotation or a pro-forma invoice together with the conditions of sale

Repeat Order

•Method of procurement of goods from the previous winning bidder, whenever there is a need to replenish goods procured under a contract previously awarded through Competitive Bidding.

REQUISITES

•A. Unit Price = < original contract price•B. The repeat order does not result in

splitting of requisitions of purchase price;•C. Available only within 6 months from

the date of the NOTICE TO PROCEED•D. It shall not exceed 25% of the qty. of

the original contract.

Shopping

•Procuring entity simply requests for the submission of price quotations for readily available off-the-shelf goods or ordinary/regular equipment to be procured directly from suppliers of known qualifications

Note:

Unforeseen contingency requiring immediate purchase

Shall not exceed P50,000.00

Negotiated Procurement

•Method of procurement of goods, infrastructure projects an consulting services, whereby the procuring directly negotiates a contract with a technically, legally and financially capable supplier, contractor or consultant

When is Negotiated Procurement Occur?•Section 53. Failure of Bidding.•A. No bids received•B. No bid qualifies as the lowest

calculated responsive bid or highest rated responsive bid;

•C. Refusal to accept the award of contract.

Other Activities After Procurement•Property Records to be Maintained

▫Property Officer- maintain Stock Cards per stock number

▫Stock Cards- all receipts and issues of supplies and the balance on hand are recorded currently on this card

•Recording of Deliveries of Supplies or Property in the Books of Accounts

• Chief Accountant- shall maintain Supplies Ledger Card per stock number, PPE Ledger Card for each category of assets and Real Property Ledger Card for land

•Report of Supplies and Materials Issued

•Supplies Ledger Card- shall be kept for each type of supply to record all acquisitions, issues and disposals.

•Equipment Ledger Card- shall be kept for each class of equipment to record the acquisition, description, custody, estimated life, depreciation, disposal and other information about the equipment, based on the source documents of the transactions

Measure of Liability of Persons Accountable for Supplies or Property•Liable for its money value in case of

illegal, improper or unauthorized use or misapplication

•Liable for all losses, damage or deterioration occasioned by negligence in the keeping or use of property

Note;

•Unless he registered his obligation in writing under the direction of a superior in using supplies or property with which is chargeable.

Return of Equipment Issued•When the equipment issued to an officer or

employee is no longer needed by him, said equipment shall be returned to the Property Officer (PO)

•PO shall cancel the original Acknowledgement Receipt for Equipment (ARE)

•Return of the equipment shall be posted by the Property Custodian in the equipment card

•A new ARE shall be accomplished and issued to the new user of the equipment

Return of Unused Supplies and Scrap Materials•Shall be returned to the Property

Custodian•Property Custodian shall acknowledge

thereof on the RIS indicating thereon “Returned to stock

•Return Receipt- shall contain the complete description of the returned Property

•Scrap Materials which may still be used in the future shall be returned to the Property Officer

Property Clearance

•Whenever an officer or employee of the government shall be transferred to another government office, retired, resigned, dismissed, or separated from the service, he shall secure clearance from property accountability