Friday, June 27, 2008
COA warns Mandaue against advance payment to contractor
THE Mandaue City Government paid the contractor of its public market P58.531 million in advance, incurring unnecessary loan interest payments, a Commission on Audit (COA) report said.
COA said the advance payment violated provisions of the Local Government Code of 1991 or Republic Act 7160 and the Government Auditing Code of the Philippines or Presidential Decree 1445.
State auditors warned officials who approved the transaction that they’ll be held personally liable.
COA said that with the 15 percent advance payment to Young Builders Corp., Mandaue City incurred P1.53 million in unnecessary interest expenses. Two different daily
rates were used in computing the interest, from June 30, 2007 to Nov. 27, 2007 then from Nov. 28 2007 to Dec. 31, 2007.
The report also said that the city accountant objected to the advance payment last May 31, 2007, citing previous disallowances. But then acting mayor Amadeo Seno Jr. reportedly still signed the disbursement voucher.
The audit observation memorandum was issued in February, but COA said it did not get any response from the officials.
During the exit conference, Mandaue officials assured COA they will no longer be paying in advance. The city legal office also assured COA that there will be no provision for advance payments in future contracts involving the City.
In 2006, COA discovered a P2.9 million overpayment to the contractor of the public market. The City, it said, still hasn’t done anything about it.
Edmund Sanchez, an adviser at the Mandaue City Hall, defended Seno, saying City Hall just wanted to finish the public market, which was already 85 percent complete, that’s why the city paid in advance.
Sanchez also assured former mayor Thadeo Ouano that Mayor Jonas Cortes will finish that public market, which costs more than P400 million. He said Cortes is not against “feasible” unfinished projects of the previous administration.
In July, Mandaue City will start paying P4.9 million monthly for the amortization of the P379 million loan for the public market. This is another reason Cortes wants to finish the project, said Sanchez.
In its recommendation, COA said the “disbursement of funds should be limited to those expenses that are necessary in operations of the agency.” The agency said advance payments to contractors should be stopped.
COA also recommended that the City look into the necessity of the projects before taking out loans. The agency said the City should consider the fact that it already had long-term loans.
Projects can still be implemented without resorting to loans, COA said.
According to the COA report, Mandaue City got a P258 million loan from the Development Bank of the Philippines (DBP) for payment of the project completion of the city public market, which costs P376,872,454.
Of the total loan proceeds, P56,530,868 was released as 15 percent advance payment to the contractor last June 2007.
The contract between City Hall and the builder contained a provision that City Hall, upon written request of the contractor, “make an advance payment to the contractor in the amount equal to 15 percent of the total contract price.”
The contract stipulated that an advance payment will be made only upon submission of a “guarantee payment bond,” which was attached to the claim amounting to P56.53 million. But the surety bond expired last March 13. (OCP)
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