AUDIT OBSERVATION MEMORANDUM NO. 6

AUDIT OBSERVATION MEMORANDUM NO. 6. Construction of Bulan Integrated Bus Terminal and Slaughterhouse as published on the “Philippine Star” dated September 15 and 22, 2006 issues states that funding source was through Municipal Bond Issue in the amount of P33 million and P5 million respectively, while on the contrary said twin projects was funded through a loan from LBP in the amount of P38,486,744.52 dated September 10, 2007 to refinance the same.

DISCUSSION:

The Municipal Government of Bulan, Sorsogon thru the Bids and Awards Committee awarded the construction of Bulan Bus Terminal to S.R. Baldon Construction Supply, on December 11, 2006 in the amount of P32,984,700.00, while the construction of slaughterhouse was awarded to Steven Construction & Supply dated December 29, 2006 in the amount of P4,991,800.00 in the total amount of P37,976,500.00 as against the aggregate amount of loan granted by the bank of P38,426,744.52 which revealed a difference of P450,244.52.

The contract agreement for the construction of Bus Terminal was notarized on December 31, 2006, and for the construction of Slaughterhouse was likewise notarized on December 29, 2006. As a consequence, Resolution No. 033, series of 2007 was passed by the Sangguniang Bayan of Bulan, Sorsogon, authorizing the Hon. Mayor Helen C. De Castro for and in behalf of the LGU Bulan, Sorsogon, to apply, negotiate and enter into a contract og loan with LBP, Irosin Branch, Province of Sorsogon. A loan agreement made and executed at Legaspi City on September 3, 2007 by and between the LBP Legaspi Branch and the Municipal Government of Bulan, Sorsogon for the purpose of refinancing the construction of Bulan Bus Terminal and Municipal Slaughterhouse originally funded by LBP-TBG (Trust Banking Group) via issuance of Bulan Bonds while on the other hand, again a Promissory Note with Assignment of Internal Revenue Allotment (IRA) and Revenues from the project was entered into by and between the Municipal Government of Bulan, Sorsogon and the Land Bank of the Philippines (LBP) Legaspi Branch represented by Mayor Helen C. De Castro and Dept. Mgr. Hil Benedict G. Manzanades, respectively, effective September 10, 2007.

Purchase Order (PO) No. 029 and Unnumbered PO both dated October 29, 2006, were certified by the Municipal Accountant that there is funds available and approved by the requisitioning officer, the Municipal Mayor for the construction of Bulan Integrated Bus Terminal at Brgy. Fabrica, Bulan, Sorsogon and construction of slaughterhouse at Zone 7, Bulan, Sorsogon, respectively.

Our audit disclosed that analysis and verification of pertinent document revealed that the source of fund as published as of the awarding of contract on December 11, 2006 was via issuance of Bulan Bonds, while on the contrary the source of funding was through a succeeding loan agreement at LBP approved on September 10, 2007. The project was on-going since December 8, 2006 after a lapsed of more than eight (8) months after said loan was approved and released by the bank.

COA’S RECOMMENDATION:

Require the Municipal Accountant to explain in writing, why funds availability for the twin projects were certified both dated October 29, 2006, while the loan was approved on September 3, 2007 for the purpose of refinancing the construction of the twin projects abovementioned.

LGU’S COMMENT:

The certification on the availability of funds for the projects was made on the basis of the “Underwriting Agreement” executed by and between the Local Government Unit of Bulan and the Land Bank of the Philippines on August 25, 2006. The agreement has “authorized the issuance of bonds in the aggregate amount of Forty Million Pesos to finance the improvement, construction and development of appropriate areas . . . as the sites of a new Municipal Bus Terminal and a new Municipal Slaughterhouse.” That there indeed were funds available for the twin projects in 2006 is further evidenced by the charges against, and releases from, the same in the ensuing month of December, 2006, and during the first two (2) quarters of CY 2007, as follows:

DATE		PAYEE		AMOUNT
12/17/06		Junio Ragrario/DPEM Inc.		P1,200,000.00
1/5/07		CDF		1,284,000.00
1/8/07		S.R. Baldon Construction & Supply		4,947,705.00
1/8/07		Steven Construction & Supply		748,770.00
3/9/07		S.R. Baldon Construction & Supply		15,997,579.50
3/9/07		Steven Construction & Supply		1,747,130.00
4/27/07		S.R. Baldon Construction & Supply		4,165,968.00
4/27/07		Steven Construction & Supply		1,447,622.00
6/4/07		S.R. Baldon Construction & Supply		3,340,511.70
6/4/07		Steven Construction & Supply		1,048,278.00
		TOTAL		P35,927,564.20

The Thirty Eight Million Four Hundred Twenty Six Thousand Seven Hundred Forty Four Pesos & Fifty Two Cents (P38,426,744.52) loan taken out of Land Bank of the Philippines, Legaspi City on September 10, 2007, was not intended to defray expenses connected with the construction of the twin projects. Rather, the entire proceeds were utilized to buy out and retire the “Bulan Bonds.”

COA’S REJOINDER:

The contract awarded in the amount of P32,984,700.00 registered a difference of P4,532,935.80 compared to the actual payments made by LGU Bulan, Sorsogon to S.R. Baldon Construction & Supply in the total amount of P28,451,764.20.

BAC Resolution No. 12, series of 2006 have determined S.R. Baldon Construction & Supply as the Lowest Calculated Responsive Bid (LCRB) in the amount of P32,984,700.00 for the construction of Bulan Integrated Bus Terminal.