Danao City gov’t paying interest of loan for idle water project

CEBU, Philippines - The Commission on Audit has found out that the Bulk Water Project of Danao City remains unused while it continues to pay the bank loan interest amount of over P16 million as of December 31,2013.

This prompted COA to ask the Danao City officials to monitor the implementation of projects to maximize their use to avoid wastage of government funds.

Danao City assumed the project in 2009 through the Land Bank of the Philippines on a P450 million loan granted on December 4, 2009. The agreement provides that the loan releases be based on progress billings.

Records show that the winning bidder of the project was Wiik & Hoeglund Public Co., Ltd., a Thailand-based company.

The Notice of Award dated March 18, 2010 was received by the winning bidder on March 22, 2010 which then acknowledged the receipt of the undated Notice to Proceed on April 15, 2010.

A day after, the contractor requested for advance payment equivalent to 15 percent of the contract cost which was approved by then City Mayor Ramon “Boy” Durano Jr.

On April 23, 2010, the Bangkok Bank Public Company Limited issued Bank Guarantee for Advance Payment per Letter of Guarantee No. 1011S702494 indicating the City Government of Danao as beneficiary.

The letter states that the guarantee shall expire, at the latest, upon its receipt of a copy of Interim Payment Certificate indicating that 85 percent of the contract price has been certified for payment or on the 26th day of July 2011, whichever is earlier.

On June 7, 2010, the LBP Cebu Lending Center issued a certification that it had credited P62,760,901.94 in favor of the City Government of Danao to its account representing net proceeds of the loan released of P64,483,461.00.

With the loan proceeds, the city issued LBP Check dated June 11, 2010 in the amount of P62,760,901.94 which represents the 15 percent advance payment requested by the contractor.

However, the Danao City government has not recouped the advances it has granted to the contractor while the city has been paying its loan with LBP.

As of December 31, 2013, the advances granted to contractors, with a balance of P64,483,461, has not been reduced since it was originally booked up. Likewise, interest and principal of the loan has amounted to P16,000,566.90 and P12,090,648.96, respectively.

COA learned that the past administration failed to properly monitor the implementation of the project. Thus, it remained unused for at least three years since it has not be completed.

The agency also learned that the present administration is willing to continue the project and it is now in the process of evaluating the documents.

In the meantime, COA issued a Notice of Disallowance for the un-recouped 15 percent mobilization fee amounting to P64,483,461.00 while Danao City. — Gregg M. Rubio/ATO (FREEMAN)