EXECUTIVE SUMMARY A. Introduction 1. Section 5 of PD No. 198 provides that, “Local water districts may be formed for the purpose of (a) acquiring, installing, improving, maintaining and operating water supply and distribution systems for domestic, industrial, municipal and agricultural uses for residents and lands within the boundaries of such districts, (b) providing, maintaining and operating wastewater collection, treatment and disposal facilities, and (c) conducting such other functions and operations incidental to water resource development, utilization and disposal within such districts, as are necessary or incidental to said purpose”. 2. Pursuant to the above provision, the Placer Water District (PWD) was formed and created by virtue of Resolution No. 421 dated June 07, 1988 of the Sangguniang Bayan of Placer, as provided for under Presidential Decree (PD) No. 198 otherwise known as the Provincial Water Utility Act of 1973 as amended. 3. The District is categorized as Category D Water District per Certificate of Categorization dated March 4, 2012 issued by the Local Water Utilities Administration (LWUA). As of December 31, 2016, it has total service connections of 3,197, composed of 553 inactive and 2,644 active connections. 4. As of December 31, 2016, the District has a total of 23 personnel composed of 11 permanent employees and 12 Job Orders.
Scope and Objectives of Audit 5. The audit covered the transactions, accounts and operations of Placer Water District for CY 2016. The audit was conducted to determine the (a) level of assurance that may be placed on the management’s assertions on the financial statements; (b) the propriety of transactions and compliance with existing rules and regulation as well as management’s policies; and (c) the extent of the implementation of prior years’ audit recommendations. 6. The audit involved performing procedures to obtain audit evidence to determine the fairness of presentation of the financial statements and the propriety of the financial transactions, in accordance with the Philippine Standards of Auditing, applicable laws, rules and regulations.
C. Financial Highlights Comparative Financial Position 2016 39,366,869.11 17,026,685.89 22,340,183.22
Total Assets Total Liabilities Equity
2015 38,880,370.28 17,408,025.61 21,472,344.67
Increase (Decrease) 486,498.83 (381,339.72) 867,838.55
Comparative Results of Operations 2015
2016 Operating Income Personal Services Maintenance and other Operating Expenses Profit from Operations Other Income (Expenses) Net Income before tax Income Tax Net Profit
1,872,187.95 6,251,358.89 2,089,898.76 (1,274,342.40) 815,556.36 815,556.36
1,737,482.65 5,701,990.06 3,144,912.54 (1,300,922.80) 1,843,989.74 1,843,989.74
134,705.30 549,368.83 (1,055,013.78) 26,580.40 (1,081,594.18) (1,028,433.38)
D. Auditor’s Opinion 7. The Auditor rendered a qualified opinion on the fairness of presentation of the financial statements of the Placer Water District, Placer, Surigao del Norte as of December 31, 2016 due to the following reasons; 1. The Accounts Receivable balance of P792,804.59 per General Ledger is not supported with subsidiary ledgers resulting to difficulty in the reconciliation of the balance with the Aging Schedule of P809,283.26 maintained by the Billing Unit, thereby, casting doubt on the accuracy of the account balance by at least P16,478.67. 2. The valuation and correctness of the Inventories account in the General Ledger in the amount of P2,066,411.22 could not be ascertained due to nonreconciliation of records between the Property and Accounting Units with unreconciled difference of P348,952.89 and non-maintenance of supplies ledger cards. ii
Summary of Significant Audit Observations and Recommendations 8. For the above-mentioned audit observations which have caused the issuance of a qualified opinion, we recommended that Management shall: i. Direct the Accounting Unit to: a. Prepare and maintain subsidiary ledgers and schedules on the Accounts Receivables in accordance with existing regulations to ensure the accuracy of presentation of the account in the financial statements; b. Maintain a detailed subsidiary ledgers independent from the Billing Unit and reconcile the same with the General Ledger on a regular basis; and c. Reconcile monthly the balance of the AR per SL with balance per Aging Schedule of the Billing Unit. ii. Direct the Property and Accounting Units to: a. Perform periodic reconciliation of their property records; and b. Prepare and maintain supplies ledger cards, for each item as control records and to facilitate the reconciliation between the two offices. This should be given utmost importance. 9. The other significant audit observations and recommendations are as follows: i. The remaining cash balance or project savings of P4.5 Million from the initial release of P13.5 Million Non-LWUA Initiated Fund (NLIF) was not utilized for more than two years from project completion due to re-alignment and/or reprogramming issues between the District and Local Water Utilities Administration (LWUA), thereby defeating the purpose of the funds as embodied in Bilang (Blg.) 17 of the DPWH Budget under the General Appropriations Act (GAA) of FY 2008, and resulting in non-implementation of additional infrastructure projects intended to reduce the Non-Revenue Water. We recommended that Management shall immediately utilize the P4.5 Million savings for the intended NRW Reduction Projects so that the remaining P3.7 Million will be released by LWUA. For future project implementation with fund releases from LWUA, ensure that the POW actually reflects the actual need of the District to avoid subsequent revisions and realignment. ii. The District could have prevented the incurrence of water loss of 193,790 cu.m. or 26 percent of the total water produced, equivalent to revenue loss of iii
P115,343.81 had management instituted some measures to substantially reduce its Non-Revenue Water (NRW) at an acceptable level of 20 percent as set by the LWUA under Resolution No. 444 series of 2009. We recommended that Management shall: a)
Immediately utilize the approved and available budget to institute measures that would address the known causes of continued loss of water;
Intensify its field activities which are focused on NRW reduction. Inspection should not only be done for main lines at the distribution area but also include those transmission lines situated in secluded areas;
Make representation with the DPWH requesting their full cooperation in requiring their contractors to coordinate with the District before they start with construction works in areas with District properties; and
Utilize the savings from NLIF for the procurement of pipes to replace and/or rehabilitate the old transmission lines.
iii. Of the total Accounts Receivable balance of P809,283.26 per aging schedule, P673,201.89 or 83.18 percent pertains to accounts aging 181 days to over 3 years which remained uncollected at year-end, due to leniency in the enforcement of collection and disconnection policies, thereby depriving the District of the use of its funds to meet its maintenance and operating requirements and to fund other projects and programs. We recommended that Management shall intensify its collection efforts, send demand letters to concessionaires with delinquent account, and design activities that will attract former concessionaires to avail again of the District’s services. iv. The District did not set its plans and targets for each year of operation, due to lack of defined organizational objectives resulting in programs, projects and activities undertaken that may not appropriately address the current condition and environmental issues affecting the District and not aligned or linked with its mission and vision. We recommended that Management shall find time to convene together with the members of the Board of Directors and key personnel and to formulate their organizational objectives that are aligned towards attainment of the District mission and vision. From these objectives, plans and quantified iv
performance targets shall be set taking into consideration the financial capability of the District to execute said plans. v. The District has no CSC-Approved Strategic Performance Management System (SPMS) contrary to Section 5 of Administrative Order No. 241 dated October 2, 2008 and CSC MC No. 6 series of 2012, thus, there is no scientific and verifiable basis in assessing the District’s performance and the collective performance of its employees which may result in gaps not appropriately addressed. We recommended that Management shall coordinate with the Agency Facilitator from CSC for guidance, and fast track and/or prioritize the preparation of additional documents as required by the CSC. Further, immediately pilot test the District’s SPMS, when approved, and ensure the involvement of all personnel concerned. vi. Disbursement Vouchers for 42 transactions with total amount of P1,630,830.08 were paid without complete supporting documentation contrary to the pertinent provisions of Presidential Decree (PD) No. 1445, indicating weak internal control in the disbursement process and casting doubts on the validity and correctness of the paid claims. We recommended that Management shall: a.
Direct the personnel in charge to submit the following lacking documents:
Minutes of meeting duly certified by the Board Secretary Evidence of services rendered in Daily Time Record (DTRs); approved travel orders and certificates of appearance for official travel; application for leave duly-certified as to the balance of leave credits on the date of application prior to approval by the head of agency;
Instruct the Accountant and other personnel concerned to ensure that all claims are properly and completely supported with documents to establish the correctness of the claims pursuant to Section 496 of PD 1445;
Ensure that measures to strengthen the internal control are adopted or in place to ensure that no claims shall be paid without complete supporting documents; and
vii. Of the P23,008,287.78 District’s insurable Property, Plant and Equipment, P21,669,511.67 or 94 percent were not insured with the Government Service Insurance System (GSIS) as required in the pertinent provisions of Republic Act No. 656 (Property Insurance Law), thus, exposing the interest of the government to risks of loss and damages without indemnity. We recommended that Management shall: a.
Direct the Property Officer to conduct inventory of the serviceable properties of the District; and
Coordinate and request assistance from the Government Service Insurance System in determining the insurable properties based on the inventory conducted and the value thereof and apply for insurance coverage to protect the interest of the government.
viii. The District engaged the services of private printers to undertake the printing of their Official receipts contrary to the requirement of Section 23 of the 2016 General Appropriations Act (GAA), thus, ORs may not have been afforded with appropriate security. We recommended that Management shall: a.
Observe the provisions of LWUA Memorandum Circular No. 013.16 dated October 21, 2016 for the ORs still on hand; and
Henceforth, the Management should ensure strict compliance to the requirements of Section 23 of the 2016 GAA.
ix. The Monthly Report of Official Travels, Monthly Report of Fuel Consumption for government motor vehicles and machinery, and the Purchase Orders/Job Orders/Contracts were not submitted to COA within the prescribed period of time contrary to the pertinent provisions of Section 361 of Government Accounting and Auditing Manual Vol. I and COA Circular No. 2009-001, thus, precluded the auditorial review on said reports. We recommended that Management shall: a.
Require the Supply and Property Unit to submit Monthly Report of Official Travels and the corresponding Monthly Report of Fuel Consumption of government motor transportation to the Auditor within the first ten days of the succeeding month; and
Require the personnel in charge of preparing the POs/JOs/Contracts to submit to COA said contracts together with supporting documents within five (5) working days from issuance thereof. vi
To facilitate our audit, we likewise recommend that in case of out of town travels, copy/ies of the Travel Orders of passengers be made as supporting document of the Monthly Report of Official Travels and Monthly Report of Fuel Consumption. x.
The District has not institutionalized its GAD Focal Point System and did not formulate Gender and Development (GAD) Plan for CY 2016, contrary to PCW-NEDA-DBM Joint Circular No. 2012-01, thus, the provision in the corporate operating budget of P180,546.33 for its programs and budget were not utilized due to lack of trained personnel to act as focal person and to initiate its proper implementation. We recommended that Management shall:
Create a GAD Focal Point System to take the lead in mainstreaming gender in the District’s Program, Activities and Projects (PAPs).
Coordinate with concerned agencies for GAD seminars and trainings and authorized the members of the GFPS to attend to provide them the required gender capacity or capability building on Gender and Development;
Direct the Budget Officer to coordinate with the GFPS for the preparation of the Gender and Development (GAD) Plan and Budget in accordance with PCW-NEDA-DBM Joint Circular No. 2012-01 and submission of the same to LWUA for preliminary review and shall then forward the reviewed GPB to the PCW for final review and indorsement as required under PCW Memorandum Circular No. 2015-03; and
Direct the GFPS to design programs and activities that will respond to the identified gender issues and concerns both organization and client focused of the District and utilize the amount allocated for GAD.
Summary of Notices of Suspensions, Disallowances and Charges 10. As at year-end, the District has an unsettled balance of audit disallowance in the amount of P22,700.00. This pertains to the disallowed payment of retainer’s fee to Atty. Henry Filoteo without COA’s concurrence. 11. Prior to effectivity of COA Circular No. 2009-006 dated September 15, 2009, prescribing the use of the Rules and Regulations on Settlement of Accounts (RRSA), the audit disallowance has a balance of P51,693.00. vii
G. Status of Implementation of Prior years’ Audit Recommendations 12. Out of 25 audit recommendations issued in CY 2015, eight were fully implemented, nine were partially implemented and eight were not implemented. Details are discussed in Part II.A of this Report. 13. On the other hand, out of 14 audit recommendations issued in CY 2014, seven were fully implemented, five were partially implemented and two were not implemented, with details discussed in Part II.B of this Report.