Danao water system operates sans permit

CEBU, Philippines —  The Commission on Audit (COA) has called out the Danao City Government for operating a ?418.65-million bulk water system without the mandatory permits from the Department of Health (DOH) and the National Water Resources Board (NWRB).

State auditors also flagged idle assets and infrastructure projects worth a combined ?38.15 million that remained unusable.

COA said the Danao City Bulk Water System, completed in December 2021, had been operating without the required permits, exposing the city to possible regulatory sanctions and the risk of interruption of an essential public utility service.

Under the Supplemental Implementing Rules and Regulations of Presidential Decree No. 856, or the Code on Sanitation of the Philippines, water supply operations require an initial permit or notice to proceed and an operational permit from the DOH regional director.

A sanitary permit from the city or municipal health office is also required before operation, with a valid DOH operational permit serving as a pre-requisite.

COA also cited Presidential Decree No. 1067, or the Water Code of the Philippines, which requires a permit from the NWRB for the appropriation of water, except for purely domestic use limited to a single household consuming no more than 250 liters per capita per day.

The audit team formally requested copies of the initial permit, operational permit and NWRB water permit from the city on March 5, 2026.

However, the city administrator submitted only a sanitary permit and certificate of potability of drinking water on March 10, 2026.

COA noted that the sanitary permit was issued only on March 17, 2025, more than three years after the bulk water system was completed. The permit was marked “new,” which COA said confirmed that the system had operated without the required clearances during the first three years of its operation.

The submitted sanitary permit also expired on December 31, 2025, meaning the facility was again without a valid sanitary permit as of the audit report date.

The city administrator attributed the three-year regulatory gap from 2021 to 2024 to operational urgency, transitional administrative challenges and delays in completing technical and regulatory requirements.

According to the administrator, the city placed the system into operation after its completion because of the immediate need to provide a reliable and continuous water supply to residents amid increasing demand and limited alternative sources.

The preparation of documentary and technical requirements for the DOH operational permit and NWRB water permit was also delayed by technical studies, data validation and coordination with various offices, the administrator said.

The administrator added that the city regularly conducted water quality monitoring and testing despite the absence of the formal permits, resulting in the subsequent issuance of a certificate of potability.

The city government acknowledged the regulatory lapse and said corrective measures were already being undertaken, including the processing of the DOH operational permit, reapplication for the NWRB water permit and strengthening of its internal compliance monitoring system.

COA, however, said the issuance of the sanitary permit itself was procedurally deficient because the required DOH operational permit had not yet been secured.

The city health officer told auditors that the sanitary permit was issued after physical, chemical and microbiological tests conducted on January 24 and March 7, 2025. The tests passed the standards under the Philippine National Standards for Drinking Water, the official said.

COA nevertheless maintained that the continued operation of the bulk water system without the requisite permits exposed the city to the risk of non-continuity of the essential service.

The audit team recommended that the city immediately secure and submit the mandatory NWRB water permit and DOH operational permit. The city mayor, through the OIC-Waterworks Operations Officer, agreed to the recommendation.

Idle waterworks office, generator

COA also found that an administrative office building and a generator remained idle or unutilized, contrary to the requirement under Section 2 of PD 1445 that government resources be managed and safeguarded against loss or wastage and used with efficiency, economy and effectiveness.

During an on-site inspection on January 21, 2026, auditors found an office building at the city’s Waterworks Operations Division that had remained unused since its completion about five years earlier.

Auditors also found an idle generator that had been relocated to the area without protective covering or shelter. According to the City Accounting Office, the bulk water project, including the office building, had a recorded book value of ?405,035,098.38 as of December 31, 2025. The administrative office did not have a separate book value because the entire bulk water project was recorded as a lump-sum asset.

The generator h.ad a book value of ?800,000.

The city administrator and OIC-waterworks operations officer explained that the office building had originally been intended to serve as an administrative office for water bill collections.

The generator, meanwhile, had been relocated to the Waterworks Operations Division for repair after the fire that destroyed the city public market in June 2022, where the equipment had previously been located.

COA said the non-utilization of the assets exposed them to deterioration and deprived the city of the benefits that could have been derived from them.

The audit team said the situation also defeated the purpose of procuring the assets and could result in the wastage of scarce government resources.

The city mayor, through the City General Services Officer, agreed to safeguard the generator, assess its condition and prepare a utilization plan.

The city also agreed to coordinate and implement measures to expedite and prioritize the use of the administrative office building (CEBU NEWS)