EXECUTIVE SUMMARY

A. Introduction

Pursuant to Section 4 of Presidential Decree (PD) No. 198, series of 1973, as

amended by Presidential Decree Nos. 768 and 1479 or otherwise known as the “Local
Water District Law” and “Provincial Utilities Act of 1973”, respectively, the Sto. Niño
Water District was formed and issued with a Conditional Certificate of Conformance
(CCC) No. 766 on November 27, 2009.

The Agency formally started its operation on July 1, 2015, initially serving 151
households. As of year-end, the Agency is serving two poblacion barangays, namely
Centro Norte and Centro Sur of the Municipality of Sto. Niño, Cagayan with 815
households.

The Agency’s primary objective is to supply potable water which will meet the
domestic demands through the creation, maintenance and expansion of reliable,
economically viable and sound water supply within the Municipality of Sto. Niño,
Cagayan.

The Agency is classified as Category D water district, with two job order
employees, and the Acting Manager who is an employee of the Local Government Unit of
Sto. Niño, Cagayan.

A financial and compliance audit was conducted on the accounts and operations of
the Sto. Niño Water District for the year ended December 31, 2017. We also conducted a
value for money audit in selected audit areas. The audit consisted of review of operating
procedures, interview of concerned government officials and employees, verification,
reconciliation and analysis of accounts, and such other procedures considered necessary to
ascertain the fairness of presentation of the financial statements and compliance by the
agency to laws, rules and regulations, as well as the determination of the economical,
efficient and effective utilization of agency resources.

B. Financial Highlights

Presented below is the comparative information of the financial condition and

operation of the Sto. Niño Water District for CYs 2017 and 2016:

Accounts 2017 2016 Increase/ (Decrease)

Assets =13,761,768
P =13,767,138
P =(5,370)
P
Liabilities 87,978 62,085 25,893
Equity 13,673,790 13,705,053 (31,263)
Income 2,735,714 2,567,640 168,074
Expenses 2,446,877 1,859,892 586,985
Net Income 288,837 707,748 (418,911)
C. Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the Agency the existence and valuation of Property, Plant and
Equipment (PPE), with a carrying amount of P =11,544,660.88, could not be ascertained
because the Agency did not conduct physical inventory of its PPE and maintain Property Card
for each type of PPE. Also, the Accounts Receivable account could not be ascertained due to
the non-reconciliation between the general ledger balance of ₱407,652.62 and the Aging of
Accounts Receivables of ₱351,880.10 showing a difference of ₱55,772.52. Moreover, the
existence, accuracy and reliability of the balances of the Inventory accounts totaling
=229,337.45 could not be ascertained because the Management did not conduct physical
P
count of inventory and maintain subsidiary records to support the general ledger balance.

D. Significant Observations and Recommendations

1. The water rates imposed by the Agency are not approved by LWUA, contrary to
Section 37 of PD No. 198, as amended and the LWUA Water Rates Manual.

We recommended that Management communicate with LWUA to facilitate the review

and approval of the water rate imposed by the District pursuant to Sec. 63 of PD No.
198.

2. The Agency did not undertake preliminary actions on the development of a Water
Safety Plan as required in LWUA Memorandum Circular No. 010.14 and DOH
Administrative Order No. 2014-0027, as a consequence, risks that threaten the safe
quality of drinking water and public health may not have been properly addressed by
appropriate control measures.

We recommended that Management seek assistance from other Water Districts for the
preparation and development of a Water Safety Plan as required under DOH
Administrative Order No. 2014-0027 to ensure delivery of safe and quality water to
the public.

3. Insurable properties of the Agency were not covered with the appropriate property
insurance with the Government Service Insurance System, as required in COA
Circular No. 92-390 dated November 17, 1992, thus leaving its properties at risk of
total loss without right of indemnification.

We recommended that Management insure all its insurable properties with the GSIS in
compliance with the provisions of COA Circular No. 92-390 dated November 17,
1992.

4. The Agency did not remit taxes withheld from suppliers and Job Order employees
from CY 2015 to 2017 totalling to P =71,816.46 and P
=40,232.50 respectively, contrary
to Section 251 of the National Internal Revenue Code (NIRC).
 We recommended that Management prioritize the remittance of taxes withheld from
suppliers and job orders pursuant to Section 251 of the NIRC to avoid imposition of
penalties.

5. The quantity of water generated by the Agency’s water source could not be
determined due to the absence of flow meter, as a result the non-revenue water could
not be quantified.

We recommended that Management allocate budget for the installation of water

valve/flow meter in order to fully account the water production as well as quantity of
non-revenue water. Likewise, install adequate safeguard and protection measures in
the use of water and facilities. Also, leakages and defective water meters be
immediately attended to minimize revenue losses.

E. Compliance with Tax Laws

The Agency did not remit taxes withheld from suppliers and Job Order Employees
and franchise tax as discussed in Part II, Finding Nos. 9 and 10 of this Report.

F. Compliance with the DBM-approved Corporate Operating Budget (COB)

The Agency has its Corporate Operating Budget and the disbursements are in
accordance with the budget.

G. Remittances of GSIS, Pag-ibig and Philhealth premiums

The Agency has no permanent employee hence they are not obliged to comply
with the rules on the proper deduction of GSIS premiums from the salaries of employees
and the timely remittances of Social Insurance Fund and Employees Compensation Fund
premiums to the GSIS in accordance with R.A No. 8291.

H. General Insurance of government properties with the GSIS

The Agency did not insure all its government properties with the GSIS as
discussed in Part II, Finding No. 8 of this Report.

I. Gender and Development

The Agency did not allocate funds for Gender and Development (GAD) Programs,
Projects and Activities, as required under Section 30 of the General Provisions of the
General Appropriations Act (GAA) for FY 2017. However Agency personnel attended
seminars and conducted a team building activity.
J. Implementation of Water Safety Plan

The Agency did not have projects designed to address disaster risk reduction as
discussed in Part II, Finding No. 5 of this Report.

K. Summary of total Suspensions, Disallowances and Charges as of year-end

The Status of Audit Suspensions, Disallowances and Charges (SASDC) as of

December 31, 2017 is presented as follows:

Beginning Current year Ending

Balance NS/ND/NC NSSDC Balance
Suspensions =0.00
P =0.00
P =0.00
P =0.00
P
Disallowances 0.00 0.00 0.00 0.00
Charges 0.00 0.00 0.00 0.00
Total =0.00
P =0.00
P =0.00
P =0.00
P

L. Status of Implementation of Prior Years’ Audit Recommendations

Out of the twelve (12) audit recommendations contained in the CY 2016 Annual
Audit Report, one was fully implemented while three were partially implemented and
eight were not implemented and are reiterated in Part II of this Report.