THE Commission on Audit (COA) has called the attention of the Lapu-Lapu City Government for procuring around P218 million worth of equipment, furniture, office supplies, grocery items and other items from a supplier deemed not qualified to transact business with the City.In their 2021 audit report, state auditors uncovered that the Lapu-Lapu City Government had procured the items from Heritage Muebles Mirabile Export Inc. (HMMEI), even though the firm was not qualified to transact business with the City by reason of being just a middleman.State auditors said that based on their review of HMMEI’s registration with the Securities and Exchange Commission (SEC), they found that the firm had been engaging in the business of selling only furniture. They found no details in HMMEI’s SEC registration if it had ever engaged in the selling of office supplies and other goods.Despite HMMEI’s SEC records, the Lapu-Lapu City Government had procured from HMMEI several items that also included meals and sacks of rice.The COA audit report further states that some vouchers submitted pertinent to HMMEI’stransactions with the Lapu-Lapu City Government were not supported by complete documents such as but not limited to business permit and financial statement duly stamped by the Bureau of Internal Revenue (BIR).State auditors also called the attention of the city’s Bids and Awards Committee (BAC) for failing to determine whether HMMEI could participate in the procurement process through an eligibility check.“We are concerned that due to this practice of purchasing from middlemen in the procurement process, which is a blatant disregard of the law on procurement, it cannot be assured that Management secured the lowest possible price for the goods and obtained the best bargain for the government,” read a portion of the COA report.State auditors recommended that the members of the BAC explain and justify their recommendation to procure items from HMMEI. They also recommended to the Lapu-Lapu CityGovernment to explain why it had followed the BAC’s recommendations in order to avoid the issuance of a notice of suspension and eventually, a notice of disallowance from COA.City’s replyBut in a comment it provided to COA during the exit interview, the Lapu-Lapu City Government said its BAC had observed the bidding procedures in accordance with Republic Act 9184 (the Government Procurement Act) when it decided to allow HMMEI to transact with the City.The City submitted HMMEI’s amended articles of incorporation adopted on June 5, 2020 showing the company decided to retain its name while also doing business as a general merchandise company, and offering services in general construction, catering, automobile trading, seacraft building and supplying filming needs.The City also provided state auditors with HMMEI’s BIR Certificate of Registration that reflects the additional business information as well as trade names.Also, HMMEI’s business permit issued in 2021 was submitted by the City. The document shows that it is licensed to operate as a general merchandise company that also offers other services.“Heritage Muebles Mirabile Export Inc. submitted the necessary eligibility documents and were deemed qualified,” the City said.COA’s rejoinderIn their rejoinder, state auditors said the 2020 Annual Income Tax Return showed that HMMEI’s main line of business is “manufacture and repair of furniture and fixtures of metal; buying, selling, renting, leasing, operation of dwelling; real estate buying, developing, subdividing and selling.”State auditors said that it was only on Aug. 19, 2021 that other businesses were registered with the BIR, months after HMMEI transacted with the City for the supply of goods.“Despite being registered with the BIR only on Aug. 19, 2021, Heritage Muebles already transacted business with the City for the supply of goods prior to BIR registration date,” they said.State auditors also discovered during ocular inspections conducted in February 2022 that the store disclosed by HMMEI was situated in the premises of a school.The store that HMMEI stated in its BIR registration was actually a canteen-turned-store, but it was closed to the buying public, state auditors added.“Also, the goods displayed in a few racks are too few to cater to the general public. More so, the school employee/sales attendant disclosed that they are indeed not open for retail to the public but would only accept bulk orders,” state auditors said.Second timeThis was not the first time that the Lapu-Lapu City Government’s attention was called by COA for its transactions with HMMEI.In the 2020 annual audit report, COA found discrepancies in the City’s procurement process, including its procurement of several food and non-food relief items worth P47 million from 2020 to 2021 from HMMEI.The COA’s report in 2020 became the basis for an anti-corruption suit filed by seven village chiefs in the city against Mayor Junard “Ahong” Chan in February this year.