WATCH VIDEO 🔺️
NEGROS ORIENTAL, Philippines — A sweeping audit by the Commission on Audit (COA) has raised serious fiscal and governance concerns over ₱5.85 billion in loan-funded infrastructure projects undertaken by the Provincial Government of Negros Oriental without feasibility studies, exposing what auditors described as a breakdown in legally required planning safeguards and long-term debt risk for taxpayers.
The findings, detailed in the 2024 Annual Audit Report (AAR) for the province, indicate that seven major projects — including a ₱3.3 billion medical complex and a ₱1.46 billion government center — proceeded to loan approval and early procurement stages despite the absence of preparatory analyses mandated by Philippine procurement and auditing laws.
Auditors warned that committing billions in public borrowing without verifying economic or social viability creates the possibility of “non-productive endeavors” and could lock the province into debt obligations lasting up to 15 years.
A Multi-Billion Peso Portfolio Without Feasibility Studies
According to COA, the province secured loan authority totaling ₱5.85 billion — ₱4.05 billion from Land Bank of the Philippines and ₱1.8 billion from the Development Bank of the Philippines — for a portfolio of health, infrastructure and utility projects.
The audit cited the absence of feasibility studies, cost-benefit analyses, and market research for the following undertakings:
Negros Oriental Medical City — ₱3.3 billion
Negros Oriental Government Center — ₱1.46 billion
Solar streetlights across 25 LGUs — ₱750 million
Three district hospital upgrades — ₱300 million combined
Perdices Coliseum improvement — ₱40 million
Under the Government Procurement Reform Act and related regulations, detailed engineering and feasibility documentation must precede bidding and contract awards for infrastructure projects.
COA concluded that the provincial government “failed to produce” these preparatory documents when requested during the audit period ending Dec. 31, 2024.
Legal Safeguards Bypassed
Philippine public finance law treats feasibility studies as protective controls against waste and debt misallocation. COA found possible non-compliance with multiple statutes, including:
Presidential Decree 1445 (Government Auditing Code)
Republic Act 9184 (Procurement Reform Act)
Republic Act 7160 (Local Government Code)
Government Procurement Policy Board Circular 06-2019
The audit noted that loan agreements were signed on Feb. 16, 2024. Yet when auditors formally requested feasibility documentation nine months later, provincial officials did not present any studies for most projects.
The gap, auditors said, indicated that borrowing commitments preceded viability assessment — reversing the legally required order of planning and financing.
Debt Tied to Provincial Revenues
To secure the loans, the province executed a deed assigning part of its National Tax Allotment (NTA) — the main fiscal transfer from the national government — as collateral.
COA computed that projected debt servicing in 2025 would reach ₱179.36 million, equivalent to 28.69 percent of the province’s legally mandated 20-percent development fund.
The province’s annual NTA stood at ₱3.126 billion in 2024.
Because only ₱1.16 billion of the loans had been released as of Dec. 31, 2024, auditors warned that debt-service obligations would rise substantially as the remaining ₱4.69 billion is drawn down.
Interest payments alone were projected at ₱51.56 million for 2025 — funds auditors described as non-productive expenditures that reduce fiscal capacity for social services.
Intergenerational Fiscal Burden
COA emphasized that repayment periods of nine to 15 years create a structural accountability gap: officials who authorized the borrowing may leave office before projects are completed or debt retired.
In Philippine local governments, elected terms last three years.
The audit noted that future administrations — and taxpayers — will shoulder repayment regardless of whether projects ultimately prove viable.
Late Submissions, Ongoing Review
Provincial management submitted feasibility studies on Feb. 6, 2025 for the medical city and district hospitals after the audit period. COA said these remain under evaluation to determine compliance with legal requirements.
As of the audit report, no feasibility documentation had been submitted for the solar streetlight rollout, government center or coliseum projects.
COA recommended that the province conduct full financial, socio-economic and management feasibility studies for all loan-funded projects to determine sustainability and alignment with development plans.
Fiscal Risk and Public Trust
Public finance experts note that feasibility studies serve as the principal mechanism for demonstrating that infrastructure investments will produce measurable economic or social returns.
Without them, governments cannot establish whether large-scale projects — such as a regional medical complex or province-wide utility system — will generate sufficient benefits to justify debt costs.
COA warned that committing significant portions of public borrowing capacity to unverified projects could undermine fiscal stability and public trust.
Provincial Context
Negros Oriental is among Philippine provinces pursuing large infrastructure expansions in health care and administrative facilities amid rising borrowing access from government banks.
The COA findings do not constitute a judicial determination of liability. Audit observations reflect conditions during the examined period and are subject to management response and compliance actions.
The Stakes Ahead
As the province moves toward full loan utilization, the central fiscal question remains unresolved: whether the ₱5.85 billion portfolio will deliver the promised public benefits or impose long-term debt pressure on local finances.
Until feasibility studies for all projects are validated, COA concluded, the province faces heightened fiscal uncertainty.
Source: Commission on Audit, Annual Audit Report for the Province of Negros Oriental, year ended Dec. 31, 2024 (Part II, Sec. 9, pp. 58–62).