Conditional Matching Grant to Provinces (CMGP) Program

What COA Found

As of July 31, 2023, the CMGP Program has significantly upgraded 2,643.75 kilometers of its 2,747.79 funded core provincial roads, with a total project cost of ₱40.17 billion. However, this accomplishment represents only 32% of the 8,270.54 kilometers identified and targeted for improvement. This shortfall can be attributed to several factors: (a) Prioritization: Despite the DILG’s Road Inventory identifying three provinces with little to no unpaved and poor-to-bad paved core provincial roads as of June 2016, these provinces received ₱1.05 billion in CMGP allocations from 2017-2022, funding 96.05 kilometers of roads that were not prioritized. While the DILG explained that allocations are based on criteria beyond immediate road repair needs, such as equal sharing and performance, the allocation of funds to provinces without critical road deficiencies appears to contradict the program's primary objective. This approach may have deprived provinces with urgent infrastructure needs that require crucial investment; (b) Funding Constraints: The total budget allocated to the CMGP Program for 2017-2022 was ₱43.55 billion, representing only 12% of the ₱374.8 billion requested by the DILG from the DBM. This fiscal constraint limited the program's reach, resulting in funding for only 2,747.79 kilometers (33%) of the targeted roads. Furthermore, despite these limitations, the CMGP failed to utilize ₱1.60 billion, which could have supported the improvement of an additional 106.67 kilometers; (c) Non-Compliance with Grant Requirements: Six provinces failed to meet the documentary requirements necessary for fund disbursement. Consequently, ₱946.94 million remained unreleased, hindering the improvement of 27.37 kilometers of roads and depriving communities of potential benefits.

The DILG faced several challenges during the CMGP Program implementation: (a) Coordination Issues: Coordination challenges among key stakeholders, including PLGUs, the Department of Public Works and Highways (DPWH), and public utility companies, led to project overlaps and communication gaps. This resulted in the demolition, removal, or replacement of CMGP road project structures and concrete pavements affected by DPWH or Manila Water projects, leading to an estimated ₱37.02 million demolished/removed/replaced road projects; (b) Unutilized Fund Balances: The DILG's monitoring efforts primarily focused on the physical and financial progress of CMGP projects, with limited attention given to the return of unutilized funds. As of July 31, 2023, ₱176.46 million in unexpended CMGP funds remained unreturned by PLGUs to the Bureau of Treasury. This delay deprives other eligible beneficiaries and government programs of these resources; and (c) Personnel Continuity: High turnover of contractual field personnel in DILG field offices resulted in knowledge gaps and inconsistent reporting practices. This contributed to data discrepancies, inaccurate information, and delays in reporting at-risk projects.

The DILG's assessment of governance reform targets under the CMGP appears to have been overly optimistic. Many provinces have failed to gain capacities relative to the CMGP reform areas due to DILG’s inadequate assessment of the achievability of the governance targets and the limited to noninvolvement of Holistic Undertaking Bridging Solutions for Governance or the GHUBS. As of December 2022, only 56 out of 82 provinces, on average, demonstrated improved capacities in Local Road Management, and 57 in Public Financial Management.

Significant challenges were encountered in achieving targets related to the Road and Bridge Information System (RBIS) and customized procurement processes. The RBIS faced persistent downtime, incomplete maintenance, and server inaccessibility since March 2021. Progress on customized procurement through the Customized Provincial Procurement Operations Manual (CPPOM) was hindered by the DILG’s issuance of a memorandum advisory dated July 8, 2019, indefinitely suspending the deadline for the submission of CPPOM. The DILG decided not to pursue this reform target as it was overtaken by the implementation of the e-procurement process, which already incorporates the key elements of the CPPOM though the e-procurement process was not completely implemented according to the provinces.

Furthermore, the GHUBS that were established per region consisting of local experts and possible mentors to assist the PLGUs were no longer functioning as the CMGP Program ended in CY 2022.

Why COA Did This Study

In 2016, a mere 24.6% of the Philippines' provincial roads were deemed to be of acceptable quality. This alarming statistic highlighted a significant infrastructure deficit, with 66.5% of the nation's 12,430.74 kilometers of core provincial roads, or 8,270.54 kilometers, classified as being in poor-to-bad condition. While the responsibility for road development and management falls under the purview of Local Government Units (LGUs) as mandated by the 1991 Local Government Code of the Philippines, these LGUs often encounter substantial challenges in fulfilling this mandate.

Recognizing the critical need for enhanced financial support at the local level, the national government established the Conditional Matching Grant to Provinces (CMGP) program under the Local Government Support Fund. Administered through the Department of the Interior and Local Government (DILG), the CMGP Program channels funding from the Department of Budget and Management (DBM) to Provincial Local Government Units (PLGUs) specifically for upgrading and rehabilitating core provincial roads. Between 2017 and 2022, the program received a substantial allocation of ₱43.55 billion, targeting the improvement of 2,747.79 kilometers of core provincial roads. Despite considerable progress, with 2,643.75 kilometers already upgraded, challenges such as project completion delays, cancellations, and noncompliance with grant requirements have hampered the efficient, economical, and effective implementation of the CMGP.

Therefore, the COA undertook this audit to ascertain the underlying reasons for the discrepancy between the program's targets and its actual accomplishments as well as assess the following key areas: (a) the extent to which the CMGP Program successfully upgraded and/or maintained the targeted length of poor-to-bad core provincial roads; (b) the effectiveness of the DILG's administration of the program, including its responsiveness to challenges encountered during implementation; and (c) the capabilities of PLGUs in local road management (LRM) and public financial management (PFM) as a result of the program's governance reform interventions.

In conducting the audit, COA employed a multi-faceted approach, including a thorough review of program documents and accomplishment reports, ocular and technical inspections of selected CMGP road projects, interviews with key DILG and PLGU personnel, and a survey of selected beneficiary provinces.

What COA Recommends

With the anticipated institutionalization of the CMGP Program through various House and Senate Bills under consideration in Congress, COA emphasizes the following recommendations to the DILG: (a) Prioritization Reassessment: Undertake a reassessment of the program's prioritization criteria, considering the finite nature of available funds. This will ensure that provinces with the most critical road infrastructure needs are prioritized; (b) Enhance Coordination: Bolster coordination mechanisms between PLGUs and relevant stakeholders to prevent project overlaps and unreturned funds, which can lead to financial losses and missed opportunities; (c) Mitigation of Personnel Turnover Impact: Formulate strategies to mitigate the disruptive effects of personnel turnover. This includes implementing comprehensive handover processes and providing robust training support for new staff to ensure the timeliness and continuity of data management practices, and (d) Strengthen Support for Holistic Undertaking Bridging Solutions for Governance (GHUBS): Revisit the achievability of reform targets and sustaining the GHUBS to provide PLGUs with enhanced support, enabling them to effectively achieve the desired capacities in the reform areas.