COA: DOTr underspends by ₱39 billion

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  • DOTr only used 25% of its budget
  • Out of ₱71 billion budget, DOTr only used ₱18 billion
  • DOTr-Proper underspent the most; LTFRB underspent the least
  • 153 projects had slow implementation, sometimes due to late MOAs or delayed procurement
  • COA wants ₱1 billion in damages for Dalian trains

Metro Manila (CNN Philippines, July 13) — The Department of Transportation (DOTr) drastically underspent last year thanks to slow implementation, according to a report of the Commission on Audit (COA).

In its 2017 Annual Audit Report released Thursday, the COA found the Department only utilized and disbursed ₱18 billion, or 25.60 percent of its ₱71 billion budget.

The exact record of disbursement was at ₱18,231,008,930.65, and the total budget allotted to DOTr for the year ₱71,203,164,131.52.

At least 80.90 percent of this – or ₱57,600,029,109.87 – had been obligated, or set aside for the agency to spend. This means at least P39 billion from programmed funds went unused.

The COA attributed the underspending to the "slow implementation" of 144 locally funded and nine foreign-assisted projects due to a change in policy directions, pending decisions from higher managements, and delays in procurement.

The COA's findings come amid commuter dissatisfaction over traffic and trains bogging down. The Philippines is also anticipating loans and grants for big ticket transport projects under President Rodrigo Duterte's Build, Build, Build infrastructure program.

The DOTr-Proper underspent the most, with a disbursement rate of 29.26 percent based on obligated funds. Out of its ₱64 billion budget, about P51 billion had been set aside for use, but it only used ₱14.9 billion.

The Land Transportation Franchising and Regulatory Board (LTFRB) spent its ₱487 million budget most efficiently. It disbursed ₱399 million out of its ₱427 obligations, logging a disbursement rate of 93.38 percent based on obligation.

The Land Transportation Office (LTO) fell in between, spending ₱2.8 billion out of ₱6.2 billion. It had an obligated budget of ₱6 billion, and disbursement rate of 47.34 percent based on that.

"We recommended and Management agreed to improve the utilization of its allotments and cash allocations through timely implementation of programs and projects so as not to delay the completion and availability of the projects for public use," the COA wrote.

[Translation: If the money wasn't obligated, it will go back to government. For what was obligated or disbursed, even if the disbursement was delayed, the money is not missing.]

He maintained that the reverted amount was "not necessarily wrong" and "not necessarily [an indicator] we're not doing our job."

DOTr responds

However, Transportation Secretary Arthur Tugade disputed the idea that the DOTr was not doing its job. He explained funding for bus rapid transport lines in Metro Manila and Cebu were unused because the projects were scrapped for inefficiency.

The P1.6 billion budget for the LRT-1 extension was reverted to the National Treasury due to construction problems, while P2.3 billion for the MRT-3 rehabilitation was unspent after the divorce with former service provider Busan Rail.

Tugade said DOTr will conduct procurement activities early to fast-track the utilization of its budget next year. He also said they would expedite the in-house preparation for the detailed engineering and design of a project.

The agency will require contractors to submit regular billings so the payment will be released on time.

The secretary also assured the public that the money was not lost.

"Yung hindi na-obligate, iyon ho yung babalik sa gobyerno. Yung na-obligate at disburse, maski na na-delay ang disbursement, hindi ho nawala yung pera," said Tugade.

Running late

The COA said timely disbursement of about ₱7.5 billion was affected due to late signing of memoranda of agreement.

According to the COA, the DOTr only signed documents for 20 aviation projects, 13 buildings, 21 ports, lighthouses, and harbors, three railways, and one governance project in the last quarter of the year. The late closure of the deals resulted in zero disbursements.

The agency also noted an extended or delayed procurement process for another ₱7 billion worth of projects. Among those are two airports, extensions on the Light Rail Transit (LRT) Lines 1 and 2, technical support for the Cebu Bus Rapid Transit System, and the rehabilitation of the Metro Rail Transit (MRT)-3 -- particularly in its rail replacement and CCTV surveillance network.

The government's contract termination of then-maintenance provider Busan Universal Rail Inc. also resulted in savings worth P102 million.

Delayed MRT-3 expansion

The COA called out the 345-day delay behind the operations of 48 Light Rail Vehicles (LRVs) from Dalian Co., Ltd.

The report estimated a total of ₱1 billion in liquidated damages. It said only four LRVs were ready for acceptance, 17 were uninstalled, and issues on weight and compatibility remain unresolved.

The COA recommended imposing liquidated damages on the delays the contractor, Dalian -- and possibly letting go of the trains.

"Since the computed amount of liquidated damages exceeded 10 percent of the contract cost, Management should consider exercising its option to rescind the contract," the COA advised.

The MRT-3 management said it prioritized a review of the trains with the independent auditing body TUV Rheinland.

Earlier this month, Transportation Secretary Arthur Tugade said about 12 of the controversial trains may hit the tracks this year.

The Dalian trains are part of a ₱3.8-billion contract signed in 2014 between the Chinese firm and the Aquino administration. The trains arrived in 2015, but were not used because of concerns with weight and compatibility with the MRT-3 facilities and signaling system. In April, the Chinese company that provided the trains  said it was confident the units would pass a weight test.

The COA also noted MRT passenger ridership has declined 176 million passengers a day in 2013 to 140 million in 2017. It noted that the train had 81 service interruptions in 2017, the most since five years prior. It also had 2,374 instances of train removals and 463 passenger unloadings.

It warned that less revenues could mean tapping into government funding for the the payment of equity rental fees and staffing and administration costs by the Metro Rail Transit Corporation (MRTC).

"A continued decline in passenger ridership and revenue collections would impact on the capacity of DOTr-MRT-3 to self-finance the payment of its obligations to MRTC and demand a greater government subsidy," it wrote.

According to the report, MRT-3 management has since promised to fast track procurement and delivery of spare parts; coordinate with the Japan International Cooperation Agency for the foreign funding for maintenance and rehabilitation; and continue talks with the Metro Pacific Investment Corporation to possibly take over the operations and maintenance.

It is expecting higher revenues this year.