Requesting Entity: House of Representatives

Issues Concern: Un-audited Financial Statements as Supplemental Eligibility Requirements

Details

Whether an “un-audited financial document for the current year” may be included as part of the standard eligibility requirements.

The reason for the rule (Section 23.6(i), IRR-A) is two-pronged: First, as a financial document, it is aimed at providing factual basis in determining the financial capability of the prospective supplier or contractor to undertake the procurement project; Second, to ensure that all suppliers, contractors, and consultants dealing in government procurement pay the correct amount of taxes due from them in accordance with the mandate of the law and in consonance with the government’s policy of transparency, efficiency, and good governance.

In light of the above-stated rationale, this Office opines that un-audited financial statements may not be required as eligibility requirements if the same are purported to substitute audited financial statements or if the same are intended to corroborate data in audited financial statements.

The reasons for requiring the submission of audited financial statement, stamped “received” by the BIR, may be skirted by allowing submission of an un-audited financial document, whether as a supplement to the audited financial statements or, worse, as a substitute thereto. The rules seek to provide an objective basis to establish as a matter of fact the capability of prospective bidders to undertake the project of the government. Thus, to replace audited financial statements with documents of unconfirmed declarations would be to veer from this purpose. Also, the un-audited financial statements may not be used to corroborate the facts in the audited financial statements, inasmuch as to allow these documents to strengthen or ratify the data in the audited financial statement would be to give weight to their contents or the representations therein.

The foregoing discourse notwithstanding, the procuring entity is not precluded from requiring additional documents/materials which they may see fit or necessary, with the caveat that the same shall not be used to either substitute or corroborate the required audited financial statement or otherwise be required as eligibility document.