ADB raises red flags over $150m farm project

Published by rudy Date posted on June 3, 2010

THE Asian Development Bank has raised red flags over possible irregularities in a $150-million agricultural project aimed at improving the incomes of nearly 1 million poor farmers in Bicol, Eastern Visayas and Mindanao.

In a recent review, the bank’s Office of Anti-corruption and Integrity said it saw signs of possible fraudulent or corrupt practices in the way the Infrastructure for Rural Productivity Enhancement Sector project was being carried out by the Agriculture Department and local government units.

Specifically, the review said the Agriculture department chose a consultancy firm to coordinate the management of the project after only 15 days of its announcement, contrary to the minimum 30 days required.

While the Department assured the review team that ADB clearance was obtained at each stage of the bidding process, there was no record on file justifying the decision for a short advertising period, or concurrence by the bank.

The bank said it was also not provided evidence that the proceeds from the sale of pre-qualification documentation, if received, were appropriately recorded.

As of 2008, there were P484.21 million ($9.94 million) worth of unliquidated advances to national government agencies. In 2008, implementing agencies were not able to explain the P10.17 million and P76.80 million “donations” in their consolidated financial statements for 2008, the report said.

InFRES is a seven-year project of the Agriculture Department covering poor areas of the Visayas, Mindanao, and the Bicol and Mimaropa regions.

It was designed to raise the annual income of 700,000 farmers and indirectly benefit another 160,000 people. As of March 2009, some $46.82 million worth of contracts had been awarded for implementation in different areas.

The review team evaluated the project’s procurement process for 58 contracts worth $25.38 million, or 54 percent of the total value of contracts awarded, and inspected 11 contracts in 15 completed project sites.

The bank’s anti-corruption team based its conclusions on 15 site visits and a review of 46 locally-bid contracts across 25 local government units.

Only one of the 15 sites was found to have met the standard requirements for detailed engineering. The remaining 14 sites, all farm-to-market roads, did not appear to totally meet the requirements, indicating that some aspects could have been improved, it said.

“This implies that the design and preparatory aspects of LGU participation in InfRES did not always meet national standards and best practice,” the report said.

Local government units are responsible for procurement of locally bid contracts, construction work for farm-to-market roads, communal irrigation systems, and rural potable water supply systems. While no specific budget was provided, the bank estimated that farm-to-market roads for InfRES cost between P2 million and P4.5 million per kilometer.

The bank did not identify the LGUs with questionable completed contracts.

“It cannot be concluded that InfRES funds were used effectively or efficiently overall, given the quality of design and construction at sites visited was generally found not to be in substantial compliance with Public Works standards,” the bank’s anti-corruption unit said.

“In spite of the scope limitations, but based on a review of 41 percent of procurement, it can be concluded that at least, in a number of cases, ADB’s procurement guidelines have not been consistently followed.”

“While many of the red flags were clustered around certain LGUs, the majority of the LGUs had similarly weak internal controls,’’ the report said.

“It is therefore reasonable to infer that similar problems are likely to be occurring at sites not visited, and for contracts either not selected for review or which could not be properly reviewed due to scope limitations.” –Roderick T. dela Cruz, Manila Standard Today

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