COA voids BCVB contract


BAGUIO CITY  – The Commission on Audit (COA) recommended for the rescission of the memorandum of agreement (MOA) entered into between the City Government of Baguio and the Baguio Conventions and Visitors Bureau (BCVB), Inc. for the use of the Philippine Tourism Authority (PTA) building at Burnham Park by the latter since the same was not authorized by the city council.

In Audit Observation Memorandum (AOM) No. 15-004 dated 11 February 2015, Margie D. Bongait, Audit Team Leader, and Shalymar M. Garcia, OIC-Supervising Auditor, stated a review done by the audit team of the agreement of the city and BCVB in March 2010 revealed that there was no prior authorization by the city council authorizing former Mayor Reinaldo A. Bautista, Jr. to enter into contract contrary to Section 22 of the Local Government Code of 1991.

In its inquiry with the Securities and Exchange Commission (SEC), the audit team found out that BCVB is a duly registered corporation, however, it has failed to submit its financial statements for the period 2006 to the present.

“It should be stressed that although the assistance extended to BCVB is not financial in nature, the city government as grantor should have evaluated the qualification of BCVB as grantee and ensured compliance by the private corporation with the necessary documents and process to protect the interest of the government,” the audit team stressed.

Aside from the non-confirmation of the agreement by the city council, the AOM stated the period of granting full custody and use of the PTA building free of charge for 50 years is too extensive to the disadvantage of the city.

On March 19, 2010, an agreement was executed between the city government of Baguio and the BCVB granting full custody and use of the PTA building located at Jose Abad Santos Drive, Burnham Park, free of rental charge or any other fees, except for the usual license and tax and permit fees charged by the city for a period of 50 years.

The audit team recommended to the local chief executive to coordinate with the city council for the immediate rescission of the agreement with BCVB the soonest and re-evaluate the validity of the same, taking into consideration its validity of 50 years for the interest of the city.

The AOM asserted the city government must ensure strict compliance of the agreement with the provisions of the concurrence of the city council as a measure of check and balance on the authority of the local chief executive to enter into contracts and to ensure that the use of resources and revenues for the development plans and programs for the city is maximized.

The audit team also found out that the ground floor and office space of the PTA building was rented out contrary to the agreement between the city and BCVB.

Based on an ocular inspection conducted at the PTA building, the audit team found out that the ground floor is being occupired by the Baguio Flower Festival Foundation, Inc. (BFFFI) and Outdoor Kinetix, a sports retail store.

As per querry with the store-in-charge of the retail store, the members of the team found out that their monthly rentals are being paid to the BCVB.

“Review of the documents pertinent to the lease disclosed that a contract of lease dated February 20, 2012 was made and entered into between BCVB and Mr. John Thomas M. Gonzales excusively for the purpose of operating and managing a sports retail store and that it shall have a term of three years which shall commence on February 1, 2012 until midnight of January 31, 2015 renewwable at the option of the lessee for another one years subject to negotiation by both parties,” the audit team stated.

Further, the lessee was obliged to pay the lessor a monthly rental of P8,000 with annual escalation rate of which shall be agreed upon by the lessee and the lessor beginning on the second year of the contract.

The audit team explained review of the agreement only stipulated the use of the PTA building primarily as office of the BCVB relative to the promotion and marketing of the City of Baguio and nothing in the agreement specified that the BCVB can have the building or any portion thereof be rented out, thus, the lease grossly violated the terms of the agreement.

The audit team asserted the city government could have earned the amount of P288,000 during the 3-year lease period had it exercised its authority over the property and closely monitored BCVB’s compliance with the agreement.

The COA directed the BCVB to immediately terminate the contract of lease entered into with Outdoor Kinetics and comply with the provisions of the agreement and in the absence of any stipulations in the agreement pertaining to any portion of the building being rented out to third parties, all income earned should still accrue to the city treasury office.

By Dexter A. See