COA: Cebu City bought P91M sacks of rice from ‘middleman’
CEBU CITY, Philippines – The Commission on Audit (COA) has asked the Cebu City Government to justify its decision to purchase over 39,000 sacks of rice from a questionable supplier.
The state auditing body found out that the city shelled out approximately P90.8 million in public funds to purchase 38,478 sacks of rice that were then distributed to residents adversely affected by the COVID-19 pandemic.
However, COA, in its 2021 Annual Audit Report, pointed out that the city bought sacks of rice, on August 5, 2021, from an ineligible supplier.
In its 123-page report, state auditors discovered signs and indications that the supplier in question, Markabi Distributors Philippines Inc. (MDPI), only acted as a middleman.
This prompted them to put a red flag on the transaction and recommended to the city government to direct its Bids and Awards Committee (BAC) to shed light on the matter.
“We recommended that (the Cebu City Government) direct the BAC to fully explain why they negotiated with MDPI despite clear indications that it acted only as a middleman,” COA added.
‘Clear Indications of a Middleman’
COA questioned MDPI’s eligibility on two bases.
Citing the supplier’s Income Tax Return (ITR), state auditors found out that MDPI had zero inventory at year-end 2019 and 2020, and therefore could not have the capacity to provide the city government’s order of more than 39,000 sacks of rice right away.
COA did not also find “signs of businesses being conducted” when they made a surprise inspection of MDPI’s business address at North Reclamation Area.
“The above circumstances taken together may fairly conclude that MDPI was only a middleman… In the final analysis, the City may not able to obtain the most advantageous contractual terms and price from this transaction,” they added.
During the audit, executives of the city government explained to COA that MDPI had been an existing supplier for them.
They also said that only MDPI manifested interest or willingness to help the city procure supplies in large quantities and volumes, such as 39,478 sacks of rice, during the height of COVID-induced lockdowns.
While acknowledging that mobility restrictions had affected the city government’s decision to look for suppliers, COA disagreed with the justifications they provided.
“There was no showing that the BAC had tried to reach out to other legitimate suppliers which refused to participate in the bidding that we could say then that indeed only MDPI was willing to supply the rice for the City government,” they explained.
In turn, they reminded the city’s BAC to award only or negotiate directly from a “reputable and legitimate supplier other than a middleman, to ensure reasonable and advantageous contract for the City Government.”
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