EXECUTIVE SUMMARY A. INTRODUCTION

The existence of Bais City Water District (BCWD) began on October 6, 1993 when ... and operating wastewater collection, treatment and disposal facilit...

0 downloads 87 Views 331KB Size
EXECUTIVE SUMMARY

A.

INTRODUCTION

The existence of Bais City Water District (BCWD) began on October 6, 1993 when Resolution No. 93-332 was approved by the Sangguniang Panlungsod of Bais City. The Resolution was submitted to the Local Water Utilities Administration and a Conditional Certificate of Conformance No. 530 dated February 4, 1994 was issued to BCWD. Pursuant to the LWD-MaCRO, the district has been classified as Category “C” effective March 2012, per letter from LWUA dated April 12, 2012. 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 is vested exclusively in the Board of Directors and the General Manager as authorized by the Board. As of December 31, 2015, the water district had a total workforce of 50 personnel composed of 24 permanent employees, 9 casuals and 17 job order employees.

i

B.

FINANCIAL HIGHLIGHTS Shown below are the comparative presentation of the financial condition and performance of BCWD for calendar years 2015 and 2014:

ii

C.

OPERATIONAL HIGHLIGHTS As of December 31, 2015 the water district had total active service connections as follows: Classification Domestic Government Commercial TOTAL

CY 2015

CY 2014

4,324 0 488 4,812

4,114 0 472 4,586

Shown also below are the meter readings and bills served by the water district in CYs 2015-2014:

Month January-December

CY 2015 No. of Meters Read/Bills Served 56,423

CY 2014 No. of Meters Read/Bills Served 53,995

The water district was also able to disconnect and reconnect some service connections, as follows: CY 2015 No. of No. of Disconnection Reconnection 762 844

No. of Disconnection 773

CY 2014 No. of Reconnection 734

As reported by the water district, shown below are projects undertaken by them: Name of Project / Location

Budget

Bangkoloon-Kawayan WSS Repair, rehab., & maintenance of various Brgy. Hinterland WSS Construction of WSS at Sitio Maigsing, Brgy. Tagpo to Manlipac, Brgy, Manlipac (Phase III) Construction and Installation of Transmission Pipelines-Cross Over Tamogong River at Brgy. Cabanlutan Sitio Amalao WSS ( Phase I) Kalumboyan WSS

iii

Total Cost

Remarks

317,878.00

250,306.50

On-going

185,660.00

84,530.00

On-going

1,141,280.00

24,150.00

On-going

719,000.00

629,241.85

Completed

87,290.00

43,591.10

Completed

96,867.42

31,155.06

Completed

D.

SCOPE OF AUDIT The audit covered the financial transactions of BCWD for Calendar Year 2015. The audit was aimed to ascertain the level of assurance that may be placed on management assertions on the financial statements and adequacy of the books of accounts in order to express an opinion on the fairness of presentation of the financial statements. It was also aimed to recommend agency improvement opportunities and determine the extent of implementation of prior years’ unimplemented audit recommendations. 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. The audit instructions for the Conduct of the CY 2015 Audit of Water Districts were likewise considered, where applicable.

E.

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 I of this report, labeled as Independent Auditor’s Report.

F.

OBSERVATIONS AND RECOMMENDATIONS The following are the findings and corresponding audit recommendations contained in the Report:

1. The required controls over Property, Plant and Equipment (PPE) have either not been corrected or still not complied with, which matters affect the reliability of the PPE account balance of P66.170 million, as follows: A. The results of the physical inventory count of the Water District‟s properties, made in the last quarter of 2015, were still in a “list” form at the time of audit which cannot be used for comparison with the General Ledger (GL) balance. Until the data therein are transferred to the prescribed format for the Report on the Physical Count of Property, Plant and Equipment (RPCPPE), management will not be able to validate the existence and condition of the recorded PPEs in the books of accounts. B. The subsidiary records required to be maintained for the PPE accounts were either not updated or not kept. Moreover, the items in the lapsing schedule were still not grouped according to the PPE account classification in the books of accounts which hampers the reconciliation of the schedule with the GL Balance. Thus, the difference of P362,345.54 between the depreciable cost in the said schedule and the GL Balance could not be identified at the time of audit, creating questions on the accuracy of the depreciation expense recognized during the year. These deficiencies will also delay the conduct of the physical inventory count. We recommended that management closely monitor the conduct of the annual physical inventory, the preparation and submission to the concerned parties of the RPCPPE, and the proper keeping of subsidiary records which shall include the revision of the lapsing schedule in order to strengthen the internal controls over PPEs.

iv

2. The Nissan Eagle Pick Up that was donated by LWUA in 2012 has not been recorded in the books of accounts while two transport vehicles with a combined cost of P309,800.00 are carried under the Plant (UPIS) account, both circumstances have understated the Land Transport Equipment account as of year end. We recommended that management instruct the Senior Accounting Processor A to prepare a Journal Entry Voucher to record all of the above-mentioned vehicles under the Land Transport Equipment account to conform with the CPS-NGAS Chart of Accounts for Water Districts and in compliance with PAS 16. 3. The audit recommendation for management to review the adequacy of the Allowance for Doubtful Accounts is considered unacted since the allowance was still pegged at P300,000.00, the amount set up in 2012 which is far below the level of the inactive accounts which totaled P1.212 million. Also, the GL and SL balances still differed by P86,070.41. Hence, it can reasonably be concluded that that the year-end balance of the Accounts Receivable (AR) in the amount of P2.781 million was not stated at its estimated realizable value. We reiterated our audit recommendation for Management to review the adequacy of the Allowance for Doubtful Accounts using the accounting policies adopted under the New Government Accounting System (NGAS), particularly on the identification of doubtful accounts. We also recommended that management revise the Aging Schedule of Accounts Receivable to the age grouping set in the NGAS Manual. We further recommended that Management instruct the Accounting Unit to prepare a reconciliation statement of Accounts Receivable, at the end of each month, to facilitate the location/identification of the cause/s of the difference between the GL and SL balances. Thereafter, prepare the necessary adjustments for all valid reconciling items to bring the GL and SL balances in agreement. 4. Purchases on account amounting to P217,807.00 were not recognized/booked-up as a liability though these were already delivered and accepted by the Water District in 2015, a practice which is not in conformity with the accrual basis of accounting and in particular, the policy on recognition of liability. As a result, the inventory account balance and current liabilities presented in the Statement of Financial Position as at December 31, 2015 were both understated. This condition occurred because the Accounting Unit does not record deliveries of materials which are purchased on account. We recommended that management require the Senior Accounting Processor A to recognize a liability at the time the goods and services have been accepted or rendered irrespective of the time of payment to conform with the accrual basis of accounting and the NGAS/PFRS policy on recognition of liability. 5. Cash collections were utilized for payments of various expenses which resulted in the following: (a) Several collections were not deposited intact on the next banking day, and (b) Numerous checks were issued to the order of the Cashier to reimburse the cash that was temporarily borrowed from collections. If left unchecked, this practice exposes government funds to possible misuse and in extreme case loss due to misappropriation. We recommended that management strictly enforce the regulations on the deposit of collections intact and daily to the AGDB as instructed under Section 21, NGAS Manual, Volume I, to adequately protect the cash resources of the Water District. We further recommended that management stop using collections for payment of expenses to comply with Section 172 of the GAAM and strengthen controls over disbursement of funds. v

6. Lapses were noted in the recording of transactions which resulted in either an overstatement or understatement of some year-end account balances, as follows: a) The franchise tax of November 2015 and December 2015 amounting to P100,463.25 was not taken up as expense of 2015, which omission understated the reported expense for the year and overstated the net income for the same period. This condition occurred because of: (a) the November tax due that was automatically debited in the LBP account for eTax payment was not also taken up in the books, and (b) the December tax due was not accrued at year end which is not in conformity with the accrual basis of accounting adopted by the water district. b) The government shares (employer shares) for the PHIC, Pag-ibig and GSIS contributions of December 2015 were not recognized in the books as expense and liability of the current year, thereby misstating these accounts at year end. c) The unpaid billing adjustments of NORECO I in the amount of P320,879.58 were not taken up as Accounts Payable at year end though said billing has been accepted by management and duly supported with relevant documents. We recommended that management require a thorough review of all financial transactions prior to the closing of the books of accounts, particularly payments made thru the BIR EFPS, to ensure reliable year-end account balances. 7. Loan amortizations of employees due to a community cooperative totaling P1.118 million were deducted from their salaries/payroll though contrary to Section 48 of the General Provisions of the CY 2015 General Appropriations Act (GAA). Also, with this arrangement, the Water District has become a collecting arm of the cooperative that is disadvantageous since the service is for free. We recommended that management stop the automatic deduction of loan repayments from salaries of employees unless the lending institution is among those authorized to be accommodated by government agencies pursuant to Section 48 of the General Provisions of the CY 2015 GAA in order to save man-hours and supplies that may be used to manage the loan accounts. 8. The water district paid P350,000.00 as the CY 2014 Performance-Based Bonus (PBB) of its officials and employees even without authority/approval from DBM and LWUA of said benefit as specifically instructed in Section 2.0 of IATF Memorandum Circular No. 2014-01 dated April 21, 2014 and reiterated under DBM-LWUA Memorandum Circular No. 2014-02 dated August 29, 2014. We recommended that management secure from DBM and LWUA the approval/authority to grant the CY 2014 Performance-Based Bonus (PBB) to the officers and employees of BCWD. The above audit observations and recommendations were discussed with the General Manager and concerned officials of the BCWD in an exit conference held on March 11, 2016.

vi

G. GENDER AND DEVELOPMENT In CY 2015, the water district appropriated a total amount of P 1,297,533.74 for GAD concerned activities. This is 5% of the total budget of P 27,600,000.00. Out of the budget, an amount of P1,289,369.00 was expended.

H. GSIS DEDUCTIONS AND REMITTANCES BCWD has consistently deducted from the salaries of their employees the mandatory GSIS Life and Retirement insurance premiums (personal share) and loan repayments. These deductions along with the government share for the employees’ insurance premiums were remitted to the GSIS on time. The balance of the account Due to GSIS as at December 31, 2015, in the amount of P199,364.46 was remitted on January 8, 2016 per GSIS OR No. 001500010993.

I. COMPLIANCE WITH TAX LAWS For CY 2015, total taxes amounting to P 1,224,592.08 were remitted to the Bureau of Internal Revenue on a regular basis along with the franchise tax due from BCWD as seller of water. (Please refer to Part II, page 23 of this report.)

J. STATUS OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES Total disallowances as of December 31, 2015 amounted to P 722,391.87. K. IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS Of the 20 audit recommendations contained in the Biennium 2009-2010, Biennium Audit Report 2011-2012 and CY 2013 and CY 2014 Annual Audit Reports, five were fully implemented, nine were partially implemented, and six were not implemented.

vii