Adverse COA audit seen to disqualify Cebu City for WB Yolanda loan facility
Will Cebu City Hall use its own funds or can it qualify for a grant-and-loan package from national and financial institutions to build the new Cebu City Medical Center (CCMC)?
According to the Cebu City Council, the city has a slim chance of securing a loan to build a new city hospital since the city government failed to meet the requirements set by the World Bank (WB).
The World Bank set a US $500 million loan facility to help local government units (LGUs) that sustained losses caused by supertyphoon Yolanda and the October 15 earthquake in 2013.
One such requirement is a certification from the Bureau of Local Government Finance (BLGF) on the city’s net paying or borrowing capacity.
Securing this certification means getting a favorable audit assessment from the Commission on Audit (COA) for the past three years.
Difficult
In yesterday’s Cebu City Council session, Councilor Margot Osmeña, who heads the committee on budget and finance, said City Hall had received adverse audit reports from the COA in 2011 to 2013.
“These (documents) can be submitted later on. Eventually, it should be submitted. It will be very difficult for us to get that (based on the COA audit reports). Are we eligible? Will we still have a chance to be eligible?” Osmeña asked.
Officials of the Land Bank of the Philippines (LBP) told the council that while the requirement of a Seal of Good Housekeeping from the Department of Interior and Local Government (DILG) may be waived, other requirements cannot be eased.
“We can work out with the local governments because the World Bank, the national government and LBP believe that those that sustained losses due to Yolanda and the earthquake, it has to be done immediately for the people. It (the requirements) will be a post-release,” said LBP vice president Elsie Fe Tagupa.
Tagupa said they can only delay but not waive compliance of the requirements, especially the COA certification.
Estimates
Aside from the seal and the BLGF certification, the LBP also needs a council resolution authorizing the mayor to enter and negotiate on the loan, a copy of the approved budget and approved annual investment plan for the current year.
Other requirements include copies of the project feasibility study, initial environment assessment, approved budget for the contract, approved detailed bill of materials and cost estimates and detailed plans and specification and the approved work program.
Tagupa said they already received a letter of intent from Cebu City Mayor Michael Rama to avail of the loan package and a Detailed Engineering Design for the hospital building pegged at P1.2 billion.
She said the 90 percent grant is not provided by the World Bank, as earlier reported, but by the national government through the Department of Budget Management.
Tagupa said the World Bank’s funds covers only 10 percent loan to be availed of by the city through the LBP.
Package
The WB’s Support for Strategic Local Development and Investment Project (SSLDIP) seeks to finance reconstruction, rehabilitation, expansion and upgrading of basic local infrastructure in LGUs affected by Yolanda and the earthquake.
The deadline for applications will be on April 2016.
As part of the package, 10 percent of the total project cost for CCMC or P120 million will have to be availed through a loan.
“The loan will be amortized for 12 years with a yearly interest of seven to nine percent,” Tagupa said.
The city government needs to use its Internal Revenue Allotment (IRA) as collateral for the loan.
Intention
The Daanbantayan municipal government also sought the intercession of the Cebu provincial government to secure a World Bank loan.
Tagupa said the city can still use the IRA but the LBP can deduct from it if the city can’t pay within the due date.
Councilor Sisinio Andales insisted that the city government cannot qualify for the loan because the CCMC wasn’t destroyed by the earthquake nor by supertyphoon Yolanda.
“There was an intention on the part of the office of the mayor to really demolish CCMC. In other words, based on this, the city of Cebu is not qualified,” he said.
Retrofit
He pointed out an earlier recommendation of former City Engineer Kenneth Carmelita Enriquez and consultant structural engineer Ariel Dela Cruz to the city council that the city should just retrofit the CCMC.
But Andales said the mayor ignored the recommendation of the engineers and insisted on the demolition.
“Because if you use the parameter of restructuring CCMC on the basis of calamity, there was no calamity when CCMC was demolished. It was due to the mayor’s order to demolish it thinking he wants to build a new 10-story CCMC building which has yet to start work up to now,” he said.
First phase
More than a year after the 2013 earthquake, the site for the new CCMC building remains at ground zero.
Bidding for the P300 million first phase of the project started last year.
But the Bids and Awards Committee (BAC) decided to post-disqualify the lowest bidder of the project for misrepresentation and falsifying documents.
Rama later on decided to declare a failure of bidding in December last year.
Although there were already changes in the BAC composition, the rebidding of the project has not started.
The executive department however started focus group discussions on how to go about the rebidding.
City Attorney Jerone Castillo, a member of the BAC, said based on initial discussion, the rebidding amount for the project will be P600 million.
The amount refers to the initial P300 million appropriation of the city last year. The other P300 million is appropriated in the city’s annual budget this year.
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