COA maintains P88-M disallowance vs ex-Cagayan de Oro Water District officials

MANILA, Philippines – The Commission on Audit (COA) has maintained the P88 million worth of notices of disallowance (NDs) against former Cagayan de Oro Water District (COWD) officials related to an upgrade project and a bulk water supply deal in 2008.

In its 15-page decision released on Tuesday, November 5, the COA denied the COWD officials’ appeal as they sought relief from the four NDs issued against payments made to contractors for its water supply upgrade project and bulk water supply deal.

In the first three NDs, state auditors found “price escalation” for cement and lined steel pipes totaling P16.32 million, an irregular expenditure represented by the difference between the contract cost and the evaluation of the COA technical team totaling P14.72 million, and payments exceeding the contract price which amounted to P14.48 million.

Geo-Transport and Construction Inc (GTCI) was the contractor for the Water Supply System Phase III Improvement/Expansion Project-Main Service Area and Phase III Improvement/Expansion Project-Lateral Improvement Project.

Meanwhile, Rio Verde Water Consortium Inc. was the contractor for the bulk water supply deal.

The COA disallowed P47.96 million in the contract with Rio Verde, which represented payments for the transfer of the original take-off point (TOP) which added three kilometers of pipes, and supposedly resulted in reduced water pressure.

Former Local Water Utilities Administration (LWUA) chief Lorenzo Jamora, COWD general manager Gaspar Gonzales Jr., COWD’s entire board of directors, GTCI’s Edward Tan Chona, and Rio Verde’s Jose Alvarez were held liable.

The COWD officials said in their appeal the the decision to use reinforcing steel bars was made in good faith after they had consulted with LWUA officials. They insisted that there was nothing anomalous about compensating a contractor for losses it incurred on costs that were not covered by the metallic pipe index.

They also said that the TOP transfer and additional three kilometers of pipeline were not related, as the additional distance intended to provide water connection to Lumbia Airport and some neighboring communities.

But the COA said that the decision to negotiate procurement on the water distribution system improvement contract did not comply with existing rules, making it an irregular expenditure.

“Irregular expenditures are incurred if funds are disbursed without conforming to prescribed usages and rules of discipline. These expenditures are likewise considered illegal expenditures for having violated the procurement law,” the COA said.

The commission added that changing the TOP amounted to a “substantial amendment” in the contract.

“Thus, the [Board of Directors] acted beyond its authority as the change in the TOP was tantamount to a substantial amendment of the contract. In view of the irregularities in the transaction, this case shall be referred to the Office of the Ombudsman for the filing of appropriate charges, if warranted,” the COA said. – Rappler.com