GOVERNMENT auditors have questioned the release of least P64 million as advance payment for a contractor of a bulk water project in Danao City, Cebu.

The Commission on Audit (COA) issued a notice of disallowance, requiring Mayor Ramon “Nito” Durano III, four City Hall officials and a contractor of the project to return the amount to the City Government.

“The amount of P64,483,461 was disallowed in audit because advance payment for mobilization expenses was not recouped,” read the two-page notice signed by state auditors Lita Lamparas and Cymbeline Celia Uy.

The auditors disallowed last April the P64 million the City had released to Peter John Van Haren, chief executive officer of Wiik & Hoeglund Public Co. Ltd., because the water project was not fully implemented.

“The implementation of the project has not been continued, thus no additional payments have made from which the recoupment could have been deducted from,” the auditors’ notice dated April 14, 2014 read.

In a text message last night, Mayor Durano confirmed that his administration is bent on finishing the project, adding that the City is just waiting to finalize its contract with the Metro Cebu Water District (MCWD).

He pointed out that finishing the project was his 2013 campaign promise to his constituents. “I believe it is one of the reasons why I got an overwhelming vote,” he said.

The mayor added he will issue an official statement later “so it will be well explained.”

Status report

In May last year, the Danao City Council passed a resolution authorizing Councilor Oscar “Boying” Durano Rodriguez to conduct inquiries on the status of the bulk water project.

Rodriguez, who sponsored the resolution, had said the City Council wanted to know how much damage the government incurred when the project was stopped, because of the alleged refusal of former mayor Ramon “Boy” Durano Jr. to sign documents required for the project.


But Boy Durano had said his administration failed to implement the bulk water project because the City Council, then under his younger brother and former vice mayor Nito, did not cooperate.

Before the May 11, 2010 elections, then mayor Nito Durano had signed a supply contract with the MCWD for the P450-million Danao City Bulk Water Project to supply 20,000 cubic meters of water to MCWD at P21.50 per cubic meter.

But they later revised the contract because they wanted to increase the supply to 25,000 cubic meters and add the escalation clause.

City officials had feared that within the contract period of 15 years, power rates would increase and that would leave the City with no room to profit from the project.

MCWD General Manager Armando Paredes was also quoted as saying they needed a new contract between the Danao City Government and the utility company, considering that the old one was not ratified by the City Council as required by the Local Government Code. 


Under the old agreement that did not materialize, Danao would supply at least 20,000 cubic meters of water to MCWD per day at P25 per cubic meter. 

It was more than two months before Nito Durano and Boy Durano swapped positions on June 30, 2010. Nito became vice mayor while Boy became mayor. 

But before the end of 2010, the project was postponed when the Danao City Council, then presided by Nito, refused to ratify the project and did not recognize the contract signed by Boy and Paredes. 

When Nito became mayor again last July 1, 2013, he had told Sun.Star Cebu that his administration will continue the project, but will use the old water supply contract. 

In the notice of disallowance, the state auditors disallowed the payment of 15 percent mobilization expenses to the contractor.

The auditors noted that the payment made to the contractor violated Republic Act 9184 (Government Procurement Reform Act).

The law states that advance payment for mobilization expenses shall be repaid by the contractor at 15 percent from the progress payments.

6 months

But since the project implementation was stalled, the auditors said the city officials should not have released to the contractor the additional payments from which the advance payment for mobilization expenses could be deducted.

The auditors directed the city officials to “settle immediately” the disallowance. “Audit disallowance not appealed in six months from receipt of notice shall become final and executory,” the auditors said.

Apart from Mayor Nito Durano, who approved the payment, the auditors also identified five other people who “have been determined to be liable for the advance payment for mobilization expenses on a project which was not fully implemented.”

They are Danao City Accountant Jovinal Dagatan, City Treasurer Romanico Ocampo, City Budget Officer Teresita Almacen, City Administrator Thomas Mark Durano and Van Haren, the water project’s contractor.

Dagatan had certified the “completeness and propriety of supporting documents” while Ocampo certified the availability of funds.

Almacen had certified the existence of an appropriation while Thomas Durano certified the expense to be “necessary, lawful and incurred under his direct supervision.” (GMD/With OCP)