The Commission on Audit (COA) has flagged the Department of Transportation (DOTr) over the delays for the past two years ending on Dec. 31, 2024 in its P175 billion Philippine National Railways’ (PNR) South Long-Haul Project.

The PNR South Long-Haul Project is a 639-kilometer railway system designed to link the National Capital Region (NCR), Region IV-A, and Region V by connecting the city of Manila to Legazpi, Matnog, and Batangas City. It has a project cost of P175,318,783,000.

The government entered into a loan agreement with China for $219,776,242.63 to fund the railway project, with an effective date of Aug. 7, 2020 and closing date of Aug. 7, 2027.

In its 2024 audit report, the COA said the project consists of 10 major components -- main railway; locomotive, rolling stock, and diesel multiple units; station yard; track; depots; maintenance bases; electrical and mechanical systems; auxiliary facilities; temporary facilities; and pollution and control devices.

It said that when its auditors checked the physical status of the project as of Dec. 31, 2024, it was discovered that only Project Management Consultancy (PMC) and Loan Acquisition had actual accomplishment, with a total weighted negative slippage of 6.17 percent.

It also said that the reason why only two components were accomplished at the end of 2024 was due to non-availability of funding.

"The audit team also inquired and was informed that there is no ongoing funding for the remaining project components because China EXIM, the foreign lending institution, has yet to respond to their application for the design and construction of the project. Meanwhile, the management is currently exploring other financing partners for the continuation of the project," the COA report said.

The COA said that the DOTr has started exploring the possibility of the change in source financing and has sought reapproval from the National Economic Development Authority for a revised project completion date.

Despite this, the DOTr told COA that all ROW activities will continue since the project alignment is already fixed and studies were already finished by the consultant.

The DOTr also said that the project is likely to be restructured due to increase in costs brought about by the higher cost of construction and right-of-way acquisition, as well as the extension of implementation period caused by the delays.

"The audit team understands that the reason for the delay is due to the uncertainty of the funding source for the other project components. However, it is noteworthy to mention that the project progressed despite the lack of funds for certain components," the COA said in its report.

The COA recommended that the DOTr should instruct the PNR South Long Haul Management Office to submit to the audit team any updates or any future plan relative to the exploration of new funding sources.

The DOTr assured that pre-construction works have not halted and will continue in preparation for the Design and Build Contractor despite any changes with the financing partner.