COA: Cebu City wasted funds on middlemen

THE Commission on Audit (COA) ordered the Cebu City Government to make sure it is dealing with legitimate suppliers in all its transactions and operations.

The order came after state auditors found out that the City, through the Department of Social Welfare Services (DSWS), dealt with a middleman when it purchased food items amounting to P12.9 million for the supplemental feeding program in day care centers.

COA also directed the City to strictly monitor the implementation of the feeding program, which seeks to address the problem on malnutrition, to achieve the desired results.

In their annual audit report for the City’s 2015 operations and transactions, the state auditors said the lack of post-qualification or evaluation of the winning bidder on the purchased food items was the reason the City dealt with a middleman instead of a legitimate supplier.

They visited the stall of Virgilio and Elsa General Merchandise, who was the lone bidder in the transaction, at the Unit III of Carbon Market and saw that no food item was displayed in the stall. 

The bidder’s address is indicated in their business permit.

In an interview with the store personnel, COA learned that the owner of the establishment does not sell food items but only caters to government agencies such as the Department of Social Welfare and Development (DSWD) and the Cebu Provincial Detention and Rehabilitation Center.


Auditors were told that the owner of the establishment keeps their goods at their warehouse in Barangay Cabancalan, Mandaue City.

“Actual visit was also conducted with the said address and it was found out that the said bodega is located in an inaccessible area where the residence of the supplier is located. It was also noted during the visit that few food items were on stock, which according to the personnel, were bought from the Carbon Market,” COA said in their report.

At one point, COA lamented that the distribution of goods by the City to the day care pupils was delayed for two weeks since the owner of the establishment was out of the country.

This, they said, negates the purpose and continuity of the supplemental feeding program, which was initiated by the DSWD as part of their early childhood care and development.

In reviewing the City’s transactions last year, COA also found out that the City procured monobloc chairs and tables also from Virgilio and Elsa General Merchandise but no such item was displayed when they visited the store.


“The said establishment is a known middleman. It is of common knowledge that these middlemen, posing as legitimate suppliers, got their stocks from reputable business establishments,” the state auditors said.

“Hence, it is more practical and economical if the City procured goods directly from these reputable establishments instead of from middlemen to obtain a fair and most advantageous price to the government,” they added.

With this, COA directed the City’s Bids and Awards Committee (BAC) to conduct eligibility check on winning bidders to make sure the City deals with legitimate suppliers only.

They also asked the BAC to scrutinize and evaluate the bid qualifications of any interested bidder so the City will obtain reasonable bid offers, one that is advantageous to the government.

As this developed, COA told the City to properly supervise the implementation of the supplemental feeding program.

They said the DSWS, through the city nutrition scholars (CNS) or day care workers, secures food items from their supplier every Thursday.

“However, during the conduct of inspection with selected day care centers, some were not having classes and consequently not conducting the feeding program while the others have classes but did not conduct the feeding program,” COA said.

The CNS are the ones primarily tasked to monitor the implementation of the program.

When they interviewed the CNS personnel, COA was told that they did not conduct the feeding program as they were not supplied with food. Others skipped it because they had other activities.

According to the DSWD guidelines, COA said the feeding program is supposed to be done five days a week or for a maximum of seven days. The feeding should be done for a total of 120 days.

The City, in a management comment, said they will now strictly implement and follow the guidelines for the feeding program.

Meanwhile, COA questioned why the City paid more than P9.7 million for the feeding program of the home-based pre-school children last year when it lacked supporting documents.

The supplier of the food is still Virgilio and Elsa General Merchandise.

COA said the transaction lacked the sub-allotment release order, notice to proceed, proof of posting at the Philippine Government Electronic Procurement System website, performance security, duly notarized contract, latest income tax return and audited financial statement received by the Bureau of Internal Revenue.

The state auditors asked the City to submit all the requirements. In the meantime, the transaction is suspended.


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