INTRODUCTION The ownership and management of the water system of Tanjay, Negros Oriental was turned over by the Municipal Government to the Tanjay Water District (TWD) on December 20, 1980 when it was created by virtue of Sangguniang Bayan Resolution No. 104. This resolution was filed with Local Water Utilities Administration (LWUA) on June 17, 1981. A Conditional Certificate of Conformance (CCC) No. 163 was issued to the Tanjay Water District by LWUA on September 24, 1981, thus, entitling the Water District to all the benefits under Presidential Decree No. 198. Pursuant to this Decree, water districts are quasi public corporation performing public service. But in 1992, an en banc decision by the Supreme Court has declared water districts as government owned or controlled corporations or GOCCs. As mandated by P. D. 198, Title II, Chapter II, Section 5, thereof, the water districts shall have the following purposes:
acquiring, installing, improving, maintaining and operating water supply and distributions systems for domestic, industrial, municipal, and agricultural use for residents and lands within the boundaries of the districts,
providing, maintaining, and operating wastewater collection, treatment and disposal facilities
conducting such other functions and operations incidental to water resource development, utilization and disposal within the district, as necessary or incidental to said purpose
The administration of the water district and the exercise of its corporate powers are vested exclusively in the Board of Directors and the General Manager as authorized by the Board. As of December 31, 2013, the water district had a total workforce of forty seven (47) personnel composed of twenty seven (27) permanent employees, nineteen (19) casual employees and one (1) job order.
FINANCIAL HIGHLIGHTS Below is a comparative presentation of the financial condition of the water district for Calendar Years 2013 and 2012:
Assets Liabilities Equity Total Liabilities & Equity
CY 2013 48,382,155.55 31,039,588.55 17,342,567.00 48,382,155.55
CY 2012 36,467,266.98 29,558,945.08 6,908,321.90 36,467,266.98
In the current year, the water district garnered a total income of P 25, 385,610.31 or an increase of P 1, 308,772.34 or approximately 5.44% over that of last year’s P 24, 076,837.97. The bulk of the increase came from water sales, as shown below: Sources of Income Metered Sales (Water Sales) Other Income Total
CY 2013 23,478,129.77 1,907,480.54 25,385,610.31
CY 2012 22,345,369.98 1,731,467.99 24,076,837.97
OPERATIONAL HIGHLIGHTS The following were among the reported accomplishments of the water district in the calendar year 2013, as furnished to the Audit Team: Table I (Active Service Connections) Classification Domestic Government Commercial Active unbilled connections TOTAL
2012 6,410 50 276
6,271 48 267 58 6,644
Table II (Meter Readings/Bills Served)
Month January – December
2013 No. of Meters Read/Bills Served
2012 No. of Meters Read/Bills Served
Table III (Disconnections and Reconnections) 2013 Month JanuaryDecember
No. of Disconnection 230
No. of Reconnection 169
No. of Disconnection 180
No. of Reconnection 135
Below are the projects implemented by the water district as of December 31, 2013 as reported by the Acting General Manager: Name of Project/Location Maquinia Pumping Station Mangoto Parallel Line
% of Completion 735,161.41 98% Cost
Remarks On-going On-going
SCOPE OF AUDIT The audit covered the financial transactions of Tanjay Water District for Calendar Year 2013. The audit was primarily aimed at ascertaining the reliability of financial reports and the adequacy of the books of accounts in order to express an opinion on the fairness of presentation of the financial statements. On a test basis, it also included a review on the propriety of disbursements and other financial transactions to determine whether or not the transactions were made in accordance with existing laws, rules and regulations.
AUDITOR’S REPORT The auditor expressed a qualified opinion on the financial statements of the water district due to various account balances that cannot be relied upon as discussed in detail in Part II and in brief, Part III of this Report.
OBSERVATIONS AND RECOMMENDATIONS The following are the findings and corresponding audit recommendations contained in the Report: 1. The audit recommendation requiring the Water District to finish the conduct of the annual physical count of its Utility Plant in Service (UPIS) remained partially acted, a condition which strongly suggests that Management has not taken serious efforts to implement the audit recommendation contained in previous audit reports. With this omission, the existence and condition of
the items recorded under the UPIS accounts with a net value of P15,635,435.44 have not been ascertained as of December 31, 2013 and accordingly, the account balance cannot be relied upon. In addition, both the Accounting and Property Units did not keep subsidiary records for UPIS though required under the New Government Accounting System. We reiterated the following prior year’s audit recommendations, with additional instructions, to ensure the accuracy and validity of the PPE account balance in the ensuing year:
Direct the Inventory Committee/Team to finish the physical count of the District’s properties not later than September 30, 2014 and thereafter require the submission of the physical inventory report.
Thereafter, direct the Accounting and Property Units to reconcile the results of the physical count with the related property and accounting records. Then, direct the Acting Corporate Budget Specialist to prepare the necessary adjustments for all valid variances to put all PPE records in order.
Require the Inventory Team to indicate in the physical inventory report the unserviceable and obsolete items noted so that these properties can be reclassified to Other Assets in the books of accounts and be auctioned to generate additional income for the water district.
Direct the Accounting Unit to maintain Property, Plant and Equipment Ledger Cards (PPELC) and the Supply Unit to keep Property Cards (PC) for all properties of the Water District to comply with the NGAS regulations.
2. The year end balance of the Accounts Receivable-Customers in the amount of P3,637,861.00 cannot be fully relied upon for the following reasons:
The account balance was still not stated at its estimated realizable value because the Allowance for Doubtful Accounts with a balance of P540,643.70 has not been reviewed since 2004 even if there were changes in the status of the inactive accounts and the balance still included dormant/unclassified receivables totaling P511,067.85.
The GL balance and the Aging of Receivables still differed by P43,200.31 which is partly due to the unrecorded Senior Citizen’s Discount granted at the time of payment, a condition creating further doubts on the reliability of the Accounts Receivable year-end balance.
We recommended that management cause the implementation of the following audit recommendations, some of which are reiterations from previous years’ Audit Reports:
Review the amount set up as Allowance for Doubtful Accounts using as reference the accounting policy adopted under the New Government Accounting System (NGAS) in order to present the receivable account balance at its estimated realizable value.
Require the Billing Section/Unit to send demand/collection letters to all customers under the “inactive accounts” as this will determine the collectibility of these accounts which is one factor to be considered in the review of the above-mentioned Allowance.
Reassess the validity of the dormant/unclassified Accounts Receivable totaling P511,067.85 so that Management and the Board can take other appropriate action on these accounts. If warranted, inquire from the City of Tanjay on possible payables due the Tanjay Water District which are still carried in their accounts. This activity is necessary to support the request for dropping of the accounts from the books of the Water District.
Require the Accounting Section to prepare, at the end of each month, a Reconciliation Statement of Accounts Receivable-Customers for early detection and correction of errors/variances between the GL Balance and the Aging of Receivables. This activity will not only validate the GL Balance but will also test the appropriateness of the computer programs affecting the Accounts Receivable-Customers account.
3. The percentage of Non-Revenue Water (NRW) to total water production was between 29% to 53% which is much higher than the 20% maximum acceptable limit for NRW as set forth under LWUA Resolution No. 444, Series of 2009. This condition is not only an immediate threat to the financial viability of the Water District but is also indicative of lapses in the management of the most important economic resource of water districts, the water sources and related facilities. We requested that management identify the possible causes of TWDs substantial water losses so that the Water District can take appropriate actions to reduce the Non-Revenue Water to at least the maximum acceptable limit of 20% to total production. 4. The water district still granted Rice and Medical Allowance to its personnel totaling P2,723,000.00 even if these allowances were already reported as not authorized under the Senate and House of Representatives Joint Resolution No. 4, duly approved by the President on June 17, 2009. Hence, the Water Distict has incurred another set of expenditures without legal basis. We reiterated the following audit recommendations: (a) Stop the payment of unauthorized allowances and benefits to the officials and employees of the
Water District; (b) Require the concerned officials to refund the amount of P 2,723,000.00, representing the total subsidy granted in CY 2013 but without legal basis, and (c) Secure prior approval/authority from the President of the Philippines thru the Department of Budget and Management (DBM) for the grant of allowances and other fringe benefits that are not included in Joint Resolution No. 4. 5. Several Check Vouchers with the corresponding checks were approved despite the lack of the necessary and appropriate supporting documents for the transactions which is a violation of Section 4.6 of PD 1445. This condition is not only a strong indication of weak internal control but may also result in the payment of illegal and irregular expenditures, if tolerated. We recommended that management instruct the Acting Corporate Budget Specialist to thoroughly check the supporting documents for each claim prior to issuance of the check, using as reference the requirements enumerated under COA Circular No. 2012-001 dated June 14, 2012, as this will assure management of the validity of all disbursements. The above audit observations and recommendations were discussed with the Acting General Manager and concerned division managers in an exit conference held on February 19, 2014.
IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS Of the twenty eighteen (18) recommendations contained in the 2012/2011 and 2010/2009 Biennium Audit Report (BAR), six (6) were partially implemented and twelve (12) were not implemented.
ON UNSETTLED SUSPENSIONS, DISALLOWANCES AND CHARGES Stated hereunder is the summary of unsettled suspensions, disallowances and charges as of December 31, 2013: Particulars Balance, December 31, 2012 Add: Issued Less: Settlements Balance, December 31, 2013
Disallowances 5,886,783.00 0.00
Charges 0.00 0.00
The above summary was ascertained having been issued and received by management only in the last quarter of CY 2013. Notices of Disallowance for disbursements in CY 2011-2012 are still for review. Notices of Suspensions and Disallowances for disbursements in CY 2013 shall be prepared and will be issued in CY 2014.
ON COMPLIANCE WITH TAX LAWS The Tanjay Water District (TWD) has substantially complied with all tax laws on withholding of income taxes from compensation and Value-Added Taxes (VAT) on goods and services purchased. The taxes withheld were remitted to the Bureau of Internal Revenue (BIR) regularly along with the franchise tax due from TWD as seller of water. The details of taxes remitted to BIR are as follows: Code 1601-C 1601-E 2307 2307 2551M Total
Taxes Income Taxes Witheld on Compensation Income Taxes Witheld Expanded Creditable Tax Witheld at Source Final Tax Witheld at Source Monthly Percentage Tax Return
Amount 677,124.93 1,304.78 15,690.36 75,889.79 217,535.33 987,545.19
ON GENDER AND DEVELOPMENT In CY 2013, management set aside the total amount of P700, 000.00 for GAD concern activities. This is only 2.45% of the total budget of P28, 556,071.72.