MANILA, Philippines — The Commission on Audit (COA) has ordered the inspection of all flood control projects in Bulacan, particularly those with huge fund allocations, as it conducts a fraud audit covering over three years of public works spending.
In a memorandum dated Aug. 20, COA Chairman Gamaliel Cordoba directed Technical Services Office director Flora Ruiz to “designate technical personnel for the immediate conduct of technical inspections of all ongoing and completed flood control projects” in Bulacan from Jan. 1, 2022 to July 30, 2025.
The order instructed inspectors to prioritize projects based on contract cost, starting with the highest-valued projects.
It also asked inspectors to verify and document two key aspects: “physical existence and status” and “compliance with design and specifications.”
Under the first, auditors are tasked to confirm the physical existence of the projects and assess their actual progress against the approved work program and schedule, including videos and geo-tagged pictures as part of the documentation.
The second, meanwhile, directed inspectors to verify that the projects are being implemented in strict adherence to the approved plans and specifications, including basic evaluation on the quality of materials and workmanship.
Cordoba said the auditors are directed to submit the technical inspection reports to the Overall Team Supervisor of the Fraud Audit Teams immediately after every inspection.
“The report shall detail the findings for each project, including any identified deficiencies, irregularities or issues. For this purpose, the designated technical personnel shall be temporarily relieved of their current workload to focus on this undertaking,” he said.
Cordoba’s orders were issued after the COA-Fraud Audit Office received the first batch of documents involving the Bulacan flood control projects, which was estimated at P44 billion.
Out of the P548 billion earmarked nationwide for flood control from July 1, 2022 to May 30, 2025, Central Luzon received the single largest allocation at P98 billion, with Bulacan getting the biggest share.
Tax fraud audit
At the same time, the Bureau of Internal Revenue will conduct a tax fraud audit on contractors linked to anomalous flood control projects, following the administration’s order to investigate irregularities in government infrastructure spending.
BIR Commissioner Romeo Lumagui Jr. said contractors found guilty of under-declaration or evading taxes will not be issued updated tax clearances, effectively disqualifying them from future government projects and suspending settlement of their current contracts.
The BIR said the directive is anchored on its revenue regulation, which requires contractors to present an updated tax clearance before final payment of any government project.
Hence, failure to do so will lead to the suspension of final settlement for the concerned government contract, along with the imposition of a tax lien over the contract amount in favor of the government, safeguarding public funds.
Lumagui also addressed reports of “ghost” flood control projects, which the government had fully paid for and declared as completed, but which, upon subsequent verification and validation, were discovered to have never been actually constructed or physically undertaken.
He explained that upon receipt of official certification from the concerned government agencies confirming the non-existence of these fraudulent projects, the agency will proceed to issue deficiency tax assessments against the contractors directly involved in such irregularities.
“If the BIR, through certification or endorsement from the appropriate government agencies, confirms that a flood control project is a ghost project, we will disallow all related cost and expense claims. No project means no deductible expense,” Lumagui said.
He mentioned earlier that ghost projects translate to lower reported expenses for a company, effectively creating fake deductions and leaving taxable income on which they should have paid the proper taxes. — Marco Luis Beech