The Commission on Audit (COA) has recommended the prosecution of several officials of the Department of Public Works and Highways in Davao City District Engineering Office (DPWH-DCDEO) and E. Gardiola Construction (EGC) based on the P14.46 million notice of disallowance (ND) it issued on a road project in 2012.

The referral was made to the Office of the Ombudsman as the COA affirmed the ND it issued against DPWH-DCDEO on the payment of P14.46 million to EGC for the project that was deemed to be substandard and yet “434.30 percent higher” than the allowable cost.

The DPWH-DCDEO contested Notice of Disallowance (ND) No. 14-007-101 dated March 24, 2014 on the payment made to EGC for the project "Rehabilitation/Improvement along Manuel Roxas Avenue, with Exception, Davao City."

In denying the appeal, the COA affirmed the alleged liability of District Engineer Lorna T. Ricardo; engineers Milagros Delos Reyes, Dwight Vincent Fernandez, Eduardo Villar, and Lilibeth Sarmiento; Emilio Sucaldito; Francisco Pilapil; and EGC for the amount of P14,466,065.82.

On the other hand, it excluded from liability engineers Gregorio Yee, Joselito Jamito, Cecilia Barrientos, Ma. Gloria G. Sorrera and Perry Neil B. Palacio; Nelson B. Luayon; Resituto D. Mira; and Rolly B. Tulayba.

"The Prosecution and Litigation Office, Legal Services Sector, this Commission, is directed to refer this case to the Office of the Ombudsman for investigation and filing of appropriate charges, if warranted, against the persons liable for the transaction," the COA said in its decision.

The 17-page decision was signed by Chairperson Gamaliel A. Cordoba and Commissioners Roland Cafe Pondoc and Mario G. Lipana.

The COA’s special audit team (SAT) said that the contract cost for the road project was P19,279,365.89, which was 434.30 percent higher than the COA allowable cost of P3,608,339.70. As a result, the COA said the contract price was considered to be excessive by P15,671,026.19.

Despite the high contract cost, the COA said its SAT discovered that the as-built plans failed to comply with the planning standards set by the DPWH as they did not indicate measurements and landmarks.

Actual inspection of the project also revealed that most rails, bolts, nuts, and washers were rusty, and the road signs and pavement studs were likewise found to be substandard, it said.

While the DPWH said that 267 sets of guardrails were installed, the SAT countered that the said guardrails were already installed even before commencement of the project.

District Engineer Ricardo filed the appeal and argued that their right to due process of law was violated as the SAT Report was only furnished to them after the issuance of the ND.

The appeal pointed out that the SAT did not conduct an exit conference prior to the issuance of the ND, and that the ND did not contain detailed computation of the disallowed amount.

The COA ruled that the appeal lacked merit. It explained that an exit conference is conducted after completion of the audit on the field wherein the auditors discuss the findings with key officials of the agency.

"It is the culminating activity of the execution phase of the audit. It is not a prerequisite for the issuance of an ND," the COA explained.

It pointed out that an ND may be issued as often as disallowances are made by the auditor to notify the agency head, the accountant, and the persons liable for the amount disallowed in the audit.

It noted that the ND was issued after hearing the arguments and justifications of the DPWH-DCDEO.

The commission affirmed the propriety of the issuance of the ND and stressed that the evidence to support overpricing is not limited to sales invoices or official receipts. It said that the findings of overpricing may be supported with canvass sheets or price quotations.