EXECUTIVE SUMMARY A. INTRODUCTION

₱500,000.00 from a loan provided by the Development Bank of the Philippines (DBP). This loan was used for the ... awarded the Conditional Certificate ...

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EXECUTIVE SUMMARY

A. INTRODUCTION The water supply system of Masinloc was constructed in 1950 by the National Water and Sewerage Authority (NAWASA). They constructed a 380m³ elevated reinforced concrete tank for storage which was supplied by adjacent water from a deep well. After five years of operation, the water well became blackish, thus, necessitating the second well in Sitio Hawaii. This power-driven well became uneconomical due to its high fuel consumption which led to higher operational cost. In 1964, a new water source was opened at Bulsa Spring having an initial funding of ₱500,000.00 from a loan provided by the Development Bank of the Philippines (DBP). This loan was used for the installation, construction of some 7.3 km-150mm. diameter pipes and other related source developmental works. In 1965, the Municipality took over the operations of the water system from NAWASA. The District acquired the ownership and management of the system in accordance with Presidential Decree (PD) No. 198. The Local Water Utilities Administration (LWUA) awarded the Conditional Certificate of Conformance (CCC) No. 430 on February 7, 1990. The District is located at Mamacoy Road, Masinloc, Zambales and obtains its supply from Bulsa Creek. It is about 7,300 meters from the service area and has an elevation of 103 meters from reservoir and with a total source production of about 100 liters per second during the rainy season and 30-40 liters per second during dry season. The District was created to provide reliable and high quality potable water services at a fair price to meet the needs and expectations of its stakeholders. Water supply from the creek is available throughout the year. It is mainly for domestic use, specifically for drinking, bathing and washing. Water is distributed by gravity through a 150mm and 200mm transmission line. The 200mm line goes into the 380m³ elevated tanks while the other line is directed to the distribution system. Water is available 24 hours a day. The raw water from Bulsa Creek is normally clear most of the time. No water treatment is made except for disinfection and hypo-chlorination. The District is presently headed by General Manager Rene E. Edora. It has a total workforce of 13 regular and six job order employees. The Board of Directors is composed of the following: Position Chairman Vice Chairman Secretary Member

Mrs. Prudencia C. Lacerona Mrs. Lilia E. Delos Reyes Engr. Huberto D. Mogan Mr. David D. Ermitano i

Sector Civic Women Professional Business

For the CY 2015, the District serves seven barangays with 2,299 active service connections. We conducted our audit of the financial transactions and operations of the District for the years ended December 31, 2015 and 2014 in accordance with Philippine Standards on Auditing and we believe that it provided a reasonable basis for the audit results. The audit was conducted to (a) ascertain the degree of reliance that may be placed on Management’s assertions on the financial statements; (b) recommend agency improvement opportunities; and (c) determine the extent of implementation of prior years’ audit recommendations.

B. FINANCIAL HIGHLIGHTS The comparative analysis of the District’s Financial Condition and Results of Operations for CYs 2015, 2014 and 2013 are shown below: 2015 FINANCIAL CONDITION Assets Liabilities Equity RESULTS OF OPERATIONS Income Expenses Excess of Income over Expenses

2014

2013

₱47,880,217.97 ₱46,404,813.26 ₱45,653,406.66 13,832,917.37 14,143,094.17 13,374,042.89 34,047,300.60 32,251,719.09 32,279,363.77 10,602,504.02 8,827,896.69 1,774,607.33

9,862,581.59 8,294,260.08 1,568,321.51

9,033,215.09 7,628,153.94 1,405,061.15

C. INDEPENDENT AUDITOR’S REPORT The Auditor rendered a qualified opinion on the fairness of presentation of the financial statements of the District for the years ended December 31, 2015 and 2014 due to the following deviations: (a) inclusion of the unserviceable properties in the Property, Plant and Equipment overstated the PPE and understated the Other Assets accounts by the same amount of ₱63,511.44; and (b) error in application of estimated useful life in the computation of depreciation which resulted in the overstatement of the Retained Earnings and understatement of corresponding Accumulated Depreciation both in the amount of ₱4,606,478.02. For the above deficiencies, we recommended that Management: (a) reclassify unserviceable properties as Other Assets prescribed in Section 143 of the Manual on the NGAS, Volume III; and (b) use 30 years as the useful life in depreciating properties charged to Transmission and Distribution Mains in future accounting periods. ii

D. OTHER SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS The other significant observations noted during the audit and the corresponding recommendations were discussed with the concerned officials and employees of the District. Their comments are incorporated in the report, where appropriate. 1. The system of collections, deposits and disbursements of government funds revealed various departures from the prescribed rules and regulations of Section 21 of the Manual on New Government Accounting System (NGAS), Volume I, Sections 69 and 93 of PD No. 1445 and COA Circular No. 97-002 dated February 10, 1997, resulting in the utilization of collected revenues for the payment of expenditures thereby exposing cash to unauthorized use, misappropriation and loss thru theft and unforeseen/fortuitous event. (Observation No. 1) We recommended that Management require the Cashiering Assistant to (a) deposit all collections intact with the AGDB daily or not later than the next banking day; (b) refrain from using collections to pay creditors and employees; and (c) use checks in paying for the District’s obligations to creditors and for legitimate reimbursements of employees. 2. Parcels of land acquired through purchase/donation were still without title and not transferred in the name of the District, therefore, absolute ownership was uncertain contrary to Section 39 of Presidential Decree (PD) No. 1445. (Observation No. 2) We recommended that Management facilitate the titling of the lots in order to protect the District’s interest over the property for possibility of any third party claims. 3. The District procured second-hand vehicle amounting to ₱500,000.00 which exceeded the remaining useful life in violation of Section 4.2 of National Budget Circular (NBC) No. 446-A dated January 30, 1998. Likewise, no evaluation and recommendation from the Department of Budget and Management (DBM) was secured contrary to Memorandum Circular (MC) No. 9 dated December 14, 2010 issued by the Office of the President. (Observation No. 4) We recommended that Management (a) be extra vigilant and more prudent in the procurement of motor vehicles taking into consideration its different aspects and conditions; and (b) strictly adhere to the provisions of NBC No. 446-A dated January 30, 1998, Memorandum Circular No. 9 dated December 14, 2010 and other governing rules and regulations specifically on acquisition of second-hand vehicles to avail the best prices from bonafide sources. 4. The approved amount of fidelity bond for the Cashiering Assistant of the District of ₱75,000.00 was insufficient to cover the maximum cash accountability of ₱1,182,839.04, by ₱675,000.00 resulting in underpayment of bond premium by ₱10,125.00 per revised schedule of premium rates under Paragraphs 5.1, 5.3 and 7.3 of Treasury Circular No. 02-2009 dated August 6, 2009, thus, the District may not recover funds that may be lost through theft or force majeure. (Observation No. 9) iii

We recommended that Management (a) require the Cashiering Assistant to apply for the renewal of bond application using the maximum cash accountability; and (b) pay the appropriate amount of bond premiums of the accountable officer pursuant to Paragraphs 5.1, 5.3 and 7.3 of Treasury Circular No. 02-2009.

E. SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES As per Statement of Audit Suspensions, Disallowances and Charges (SASDC) as of December 31, 2015, the District has ₱1,600,630.38 audit disallowances under ND Nos. MWD 2014-001 and 002 (12 and 13), both dated September 26, 2014, issued by the previous Audit Team. Management failed to file an appeal within the reglementary period, thus, the current Audit Team issued Notice of Finality of Decision (NFD) Nos. 2016-001 and 002 (13 and 12) dated August 1, 2016. For CYs 2015 and 2014, audited transactions resulted in total audit disallowances in the amount of ₱792,265.42.

F. STATUS OF IMPLEMENTATION OF UNIMPLEMENTED AUDIT RECOMMENDATIONS

PRIOR

YEARS’

Of the 30 recommendations embodied in the CYs 2013 and 2012 Financial Audit Report, 17 were fully implemented, seven were partially implemented and six were not implemented.

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