EXECUTIVE SUMMARY

A. Introduction

The Rosario Water District (RWD) was created through Sangguniang Bayan
Resolution No. 147 dated June 25, 1979. The same Resolution effected the transfer of
all existing water supply facilities to the jurisdiction of the RWD. The Conditional
Certificate of Conformance (CCC No. 111) issued by Local Water Utilities Administration
on January 24, 1980 paved for the formal creation of the RWD.

The RWD is classified as a Category C Water District with active service

connections of 4,242, 5,439 and 5,944 for CYs 2015, 2016 and 2017, respectively. The
RWD is headed by Engr. Cynthia T. Luna, General Manager. In February 2017, the
RWD entered into a Joint Venture Agreement (JVA) with the Primewater Infrastructure
Corporation for the financing, development, rehabilitation, expansion, improvement,
operation and maintenance of the water supply system. Only five personnel, inclusive of
the General Manager, known as Contract Monitoring Unit (CMU) remained in the RWD
after the JVA.

The policy making function is vested with the Board of Directors (BOD) which is
composed of five members appointed by the Municipal Mayor representing the
professional, education, civic, business and women’s sectors, as follows:

Name Designation Sector

Simeona Agoncillo Chairman Civic

Nenita Cuartero Vice-Chairman Women
Priscilla Escano Secretary Business
Susan Luna Treasurer Professional
Aurea Melody Inandan Member Education

B. Financial Highlights

The following are the financial highlights:

2017 2016 2015

Assets P103,548,662.11 P101,921,003.22 P94,768,320.28

Liabilities 11,041,877.57 25,130,817.14 24,328,384.38
Equity 92,506,784.54 76,790,186.08 70,439,935.88

Gross Income 28,212,642.06 25,633,568.59 20,021,515.73

Expenses 12,496,043.60 19,283,318.39 17,951,109.34
Net Income 15,716,598.46 6,350,250.20 2,070,406.39

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C. Scope of Audit

Financial and compliance audits were conducted on the accounts and operations
of the RWD for Calendar Years (CYs) 2015, 2016 and 2017 to ascertain the propriety of
its financial transactions and operations and compliance with the prescribed government
rules and regulations. The audit was aimed to ascertain the fairness and reliability of the
RWD’s financial position and results of operation.

D. Audit Opinion on the Financial Statements

An adverse opinion was rendered on the fairness of the presentation of the

financial statements of the RWD as of December 31, 2015, 2016 and 2017 due to the
following:

1. The accuracy, reliability, validity and existence of the Accounts Receivable balances of
P57,888,749.59, P66,571,186.19 and P70,587,352.72 for CYs 2015, 2016 and 2017,
respectively, cannot be relied upon due to the non-preparation of Subsidiary Ledgers
(SLs), contrary to Section 111 of Presidential Decree (PD) No. 1445.

Allowance for Doubtful Accounts was not provided by the RWD for CYs 2015, 2016 and
2017, in violation of Section 66 of the Manual on the New Government Accounting
System (MNGAS), Volume I.

2. The accuracy, validity and existence of the Property, Plant and Equipment (PPE)
accounts for CYs 2015, 2016 and 2017 of the RWD could not be fully ascertained
due to the failure of the RWD to conduct physical count of its PPE valued at
P51,412,773.58, P51,790,158.58 and P51,870,509.63 for CYs 2015, 2016 and 2017,
respectively, and to prepare the required Report thereon, contrary to Section 490 of the
Government Accounting and Auditing Manual (GAAM), Volume I and Section 66 of the
Manual on the New Government Accounting System (MNGAS), Volume II. Likewise,
relevant property and accounting records was not prepared and regularly maintained
contrary to Section 111 of Presidential Decree (PD) No. 1445 and Section 43 of the
MNGAS, Volume 1, thus information for each item of PPE could not be ascertained.

3. Recorded balances of Loans Payable to LWUA of P11,029,525.57, P9,703,354.50 and

P4,483,268.11 for CYs 2015, 2016 and 2017, respectively, are doubtful and unreliable
due to the following:

a. Non-reconciliation of the RWD’s record with the amount certified by the LWUA officer,
resulting in a difference of P(4,146,940.92), P(7,773,361.99) and P(7,169,603.99) for
CYs 2015, 2016 and 2017, respectively, contrary to Section 111 of PD No. 1445.

b. Due and demandable portion of long-term liabilities from the LWUA for CYs 2015,
2016 and 2017 amounting to P3,958,859.39, P6,911,167.39 and P1,752,334.00,
respectively, were not classified under current liability portion as presented in the
financial statements, contrary to the provisions of COA Circular No. 2015-10 dated
December 1, 2015 and Philippine Accounting Standard (PAS) 1.

Penalties and charges totaling P6,931.06 and P8,334,515.87 were incurred for CYs
2015 and 2017, respectively, due to the RWD’s inability to effectively and efficiently

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 manage resources, contrary to Section 2 of PD No. 1445. Moreover, the recognized
penalty and interest payable of the RWD was not reconciled with the penalty and interest
receivable of the LWUA, thus affecting the fair presentation of the account in the financial
statements.

4. The Accounting Processor failed to prepare monthly Bank Reconciliation Statement

(BRS), contrary to Section 74 of PD No. 1445, rendering the existence and correctness
of the balance in Cash in Bank amounting to P191,098.30, P154,599.62, and
P365,580.80 as of December 31, 2015, 2016, and 2017, respectively, doubtful.

5. The reliability, validity and correctness of the balances of the accounts reflected in
the financial statements could not be determined due to: (a) the General Ledgers
(GLs) for all accounts for three consecutive years lack the specific details and were
not regularly updated, contrary to Section 111 of PD No. 1445; (b) non-maintenance
of Subsidiary Ledgers (SLs) for the 14 accounts, contrary to Section 114 of the
same Decree; (c) negative or abnormal balances on several accounts;
(d) unaccounted prior year’s Accumulated Depreciation of P6,386,690.45; and
(e) non-submission of the Notes to Financial Statements as required under Section
80 of the Manual on the New Government Accounting System (MNGAS), Volume I
and COA Circular No. 2015-004.

E. Significant Observations and Recommendations

For the above cited deficiencies, we recommended that Management:

a)
 require the Accounting Processor to prepare subsidiary ledgers and schedule
to support the account and facilitate the collection thereof;

 provide additional personnel to assist the Accounting Processor in generating

data for the preparation of the needed subsidiary ledgers and schedules; and

 prepare the Aging of Accounts Receivable in accordance with Section 66 of

the MNGAS, Volume I which shall be the basis in the computation of the
Allowance for Doubtful Accounts.

b)
 require the Accounting Processor and the remaining employees under the
Contract Monitoring Unit to conduct a complete physical count of
Property, Plant and Equipment, set a deadline for the completion thereof
and submit the necessary Report on Physical Count of Property, Plant
and Equipment (RPCPPE) as required under Section 66 of the MNGAS,
Volume II;

 provide an additional personnel in the Accounting Section to assist the

Accounting Processor in the recording, maintenance and updating of all
accounting records; and

 require the Accounting and Property Sections to prepare and regularly

update the General Ledger, Subsidiary Ledger, lapsing schedule and

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 Property Cards and reconcile their records to arrive at an accurate and
reliable PPE account balances.

c)
 require the Accounting Processor B to make proper reconciliation with the
person responsible in the Loans Department of the LWUA to reconcile the
differences noted between the balance of loans payable per books and
per LWUA records, and effect appropriate adjustments to fairly present
the account in the financial statements;

 ensure that subsidiary ledgers for all loan accounts including penalties
and interests are maintained and regularly updated to facilitate
reconciliation and verification thereof;

 make the necessary reclassification entries to present the current portion

of the long-term debt under the caption ‘current liability’ of the Balance
Sheet;

 likewise, make the necessary adjustments on the Penalties and Interests

Payable to fairly present the balances in the financial statements; and

 prioritize the payment of the RWD’s loan amortization and strictly follow
the amortization schedule provided by the LWUA to avoid penalties and
charges, which represent additional expense on the scarce resources of
the RWD.

d)
 exercise prudence in the use and management of the RWD’s limited cash
resources so as not to incur any more cash overdrafts in the future, and
implement austerity measures prescribed under Administrative Order (AO)
No. 103 dated August 31, 2004;

 instruct the Accounting Processor to attend seminars regarding basic

accounting courses to further her knowledge on the accounting processes
and be able to cope up with reportorial requirements; and thereafter,

 strictly prepare the monthly bank reconciliation statements for each bank
account, in accordance to Section 74 of PD No. 1445 and make the
necessary adjustments to fairly present the Cash balances in the financial
statements.

e)
 prepare and regularly update the GLs and SLs, in compliance with Sections
111 and 114 of PD No. 1445;

 exert extra effort in tracing the source of the abnormal balances of the liability
accounts and the unaccounted prior year’s Accumulated Depreciation of
P6,386,690.45 and draw the necessary journal entries to adjust the same to
their correct normal balance and to fairly present the account in the financial
statements; and

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  immediately submit the Notes to Financial Statements for CYs 2015, 2016
and 2017, and henceforth, see to it that the submitted financial statements
are always accompanied with a Notes to Financial Statements, in compliance
with Section 80 of the MNGAS, Volume I and COA Circular No. 2015-004
dated July 16, 2015.

The following are the other significant observations and recommendations:

1. Cash overdraft of P17,389,168.75, P21,155,424.31 and P7,494,494.79 were

incurred by the RWD as of December 31, 2015, 2016 and 2017, respectively, in
violation of Sections 4(3) and 102(1) of Presidential Decree (PD) No. 1445 and
Section 122 of the Government Accounting and Auditing Manual (GAAM),
Volume I.

We recommended that Management exercise prudence in the use and

management of the RWD’s limited cash resources so as not to incur any more
cash overdrafts in the future, and implement austerity measures prescribed under
Administrative Order (AO) No. 103 dated August 31, 2004.

2. The RWD maintains a bank account with non-government depository bank,

contrary to Department of Finance (DOF) Circular No. 01-2017 and Local Water
Utilities Administration (LWUA) Memorandum Circular No. 007-17 dated May 11,
2017 and May 8, 2017, respectively, thus exposing these funds to possible loss in
case of bankruptcy of the private banks.

We recommended that Management immediately close and transfer all funds

from the non-government depository banks to the proper Authorized Government
Depository Banks (AGDBs), in compliance with DOF Department Circular No. 01-
2017 dated May 11, 2017 and LWUA Memorandum Circular No. 007-17 dated
May 8, 2017.

3. Property, Plant and Equipment, excluding land and motor vehicle, amounting to
P49,160,985.23, P49.538,370.23 and P49,618,721.28 for CYs 2015, 2016 and
2017, respectively, were not covered by the Government Service Insurance
System (GSIS) General Insurance Fund and the Property Replacement Fund,
contrary to COA Circular No. 92-390, thus government properties may not be
indemnified or compensated for any damage or loss due to fire or other force
majeure.

We recommended that the General Manager insure all insurable physical

assets with GSIS under the General Insurance Fund and the Property
Replacement Fund pursuant to COA Circular No. 92-390.

4. Acknowledgement Receipts for Equipment (ARE) were not issued, hence

individual accountability for items issued could not be easily determined, contrary
to Section 105 of PD No. 1445 and Section 56 of the MNGAS, Volume II.

We recommended that Management direct the officer concerned to issue

Acknowledgement Receipt of Equipment (ARE) to individual employee who

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 receives and/or is in actual possession of property, and renew the same
every three years.

5. Review of the Joint Venture Agreement (JVA) entered into by and between
the RWD and the Primewater signed on February 20, 2017 showed the
following deficiencies:

On the approved Joint Venture Agreement (JVA)

a. The implementation of the Primewater of its obligations in the JVA in order to

attain its business objectives was not efficiently and effectively monitored by the
RWD due to the absence of a detailed plan and timeline as to how and when to
accomplish such obligations and failure of the RWD to set-up service obligations
and targets of the Primewater.

b. Several requirements which are part of the approved JVA were not included in
the submitted documents, thus the validity, legality and accuracy of the JVA could
not be fully ascertained. Likewise, transfer of inventory items without cost to
Primewater was not reasonable considering that government funds were used in
the purchase of these items.

c. The capital investment of the Primewater to the JV amounting to

P812,000,000.00 was not supported with detailed breakdown of expenses for
capital expenditures and other cash outlay, thus determination on the
reasonableness of the invested amount cannot be determined. Likewise, the
fund to support the project for the whole duration of the JV was not
established/deposited in a special bank account under dual control, contrary to
Section 4(h), Annex A of the 2013 Revised NEDA Guidelines and Procedures for
Entering into JVA between Government and Private Entities.

d. The JV share of the RWD per Section 4.1.1 of the JVA was not supported with
the necessary computations and documents, thus there was no assurance that
the most advantageous price and offer for the RWD were obtained in the
approved JV.

e. Additional JV share for the payment of its existing loans, was disadvantageous on
the part of the RWD because the latter was immediately relieved from its financial
obligations through the JV.

f. The agreed tariff rates on Section 8.2 of the JVA was likewise not provided with
an evaluation or study made by the RWD in order to protect the concessionaires
and to determine that the increases are necessary and reasonable.

g. Accounts Receivable (AR) – Customer billed prior to commencement date on May

15, 2017, were not fully collected and remitted considering that out of the
P3,098,663.50 current water bills, only P2,058,233.72 were remitted by
Primewater contrary to Sections 10.4.1 and 2 of the JVA, and the RWD on the
other hand, failed to monitor and reconcile with the Primewater the amount
actually collected and remitted, thus affecting the cash flow of the Water District.

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h. There was no detailed programs and measures to immediately address the Non-
Revenue Water (NRW). Moreover, the Primewater’s Final JV Proposal indicates
that the NRW will be addressed by year 2026 or within a period of ten years,
hence the objective of the JVA to reduce and maintain distribution losses (Non-
Revenue Water) to national or industry acceptable levels, cannot be immediately
attained.

i. There were no measures undertaken by the Primewater or standards set by the

RWD to ensure that the RWD facilities were taken cared of.

j. The RWD might be on the losing end in case of Primewater’s event of default as
stated in Sections 13.5.1 and 13.6 of the JVA considering that the RWD lacks the
necessary funds to pay the Primewater the just compensation or to pay the
reasonable amount for the use of the Primewater’s facilities. In addition, the
RWD might not be able to operate the facilities due to lack of financial, technical
and manpower capabilities.

On Selection/Tender Documents

a. There was no Feasibility Study or a Business Case/Pre-feasibility Study of the

Project conducted by the RWD as required under Annex A, Section II.1.c of the
2013 Revised Guidelines and Procedures for Entering into Joint Venture (JV)
Agreement dated May 11, 2013, thus there was no basis on the determination
whether the JVA was necessary and advantageous on the part of the
government.

b. The non-refundable fees of P150,000.00 for the complete sets of eligibility

documents and purchase of tender documents of P500,000.00 exceeded the
maximum rates provided in RA No. 9184 of P75,000.00 and P425,000.00,
respectively, thus limiting the number of interested private proponents.

c. Eligibility checklist with a ‘Pass/Fail’ criteria on the submitted documents of the

Primewater and other bid documents were not submitted to the Audit Team for
audit purposes, thus compliance thereof could not be established.

d. The conditions stated in the Instruction to Interested Private Proponents (IIPP)

under awarding of contract seems to favor the Original Proponent which is the
Primewater, contrary to Annex A, Sections IV. 4 and IX of the 2013 Revised
NEDA Guidelines.

We recommended that Management:

 require the Primewater Infrastructure Corporation to immediately submit a

detailed plan, showing how the Primewater intends to fulfill its service obligation
per JV Agreement, together with the timelines within which to accomplish the
same;

 submit the following documents to facilitate complete review of the legal and
technical aspects of the Joint Venture Agreement and to establish effective and
efficient review process and generate relevant audit results, as follows:

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 actual Physical Inventory of all the RWD’s facilities which forms part of the
RWD’s contributions to the JV, an asset condition report, a pipe network
map and assessment and a PPE maintenance report, all certified correct
for the relevant date as of date of Notice to Proceed;

 schedule of Inventory on hand and the cost of each inventory item as of

the date of Notice to Proceed;

 information/Report from the Primewater on the inventory items that it

intends to use in its operation;

 schedule or list of inventory items and the total amount which the RWD
deliver to Primewater without cost;

 BOD Resolution No. 8, s. 2016;

 Notice of Award and Notice to Proceed received by the Primewater;

 JVSC Report on the JV Selection Process and Minutes of all the

negotiations made;

 Minutes of Meetings on post-qualification, submission and opening of bids

conducted by the RWD;

 breakdown of expenses as to capital expenditures and other cash outlay

for the capital investment of the Primewater to JV activity amounting to
P812,000,000.00, as this will be the basis of the amount to be recovered
by the Primewater;

 clarification on the difference noted in the amount of capital investment by

Primewater which is P812 Million per JVA and P829.08 Million per Final
Proposal or a difference of P17.08 Million;

 certification that a fund ear-marked for the JV activity was deposited in a

special bank account under dual control of the RWD and the Primewater;

 a detailed computation and/or evaluation as basis by the RWD in

accepting the fixed revenue share of P4,500,000.00 (Year 1-5);
P5,000,000.00 (Year 6-10) P6,500,000.00 (Year 11-15); P7,000,000.00
(Year 16-20); and P7,500,000.00 (Year 21-25);
 evaluation made on the agreed tariff increases to determine whether the
same is reasonable and the increases are necessary in order to protect
the concessionaires;

 Legal, technical and financial eligibility requirements of Primewater as

enumerated under letter c, pages 13 to 15 of the AOM;

 Eligibility checklist with a ‘Pass/Fail’ criteria;

 measures imposed by the RWD to the Primewater to ensure that facilities

were taken cared of and are always in good condition; and

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  detailed programs and measures submitted by the Primewater to
immediately address the Non-Revenue Water (NRW);

 see to it that proper monitoring and reconciliation of the Accounts Receivable

billed prior to Commencement Date and collected by the Primewater were
conducted by the RWD, afterwhich, prepare demand letter for the Primewater to
immediately remit the water sales collected and billed prior to JV activity;

 require those employees left to manage the RWD to monitor and see to it that the
Primewater complies with the JVA and that implementation of the JVA is strictly in
accordance with the National Economic Development Authority (NEDA)
guidelines; and

 submit justification or explanation as to the necessity of entering into a JVA and

whether the same is advantageous on the part of the government considering the
following:

o The NRW problem of the RWD will be addressed by the Primewater within a
period of ten years or by year 2026;

o The reasonableness as to the transfer of inventory items without cost to the

Primewater;

o The process adopted in the conduct of the JVA with the Primewater,
particularly on the non-compliance with the NEDA guidelines on the conduct
of a feasibility study and the requirements as stated in the Selection/Tender
Documents;

o The RWD was not at all relieved from its financial obligations through the JV,
and payment thereof made by the Primewater is out of the regular collections
which was already being performed by the RWD even before the JV; and

o The pre-termination agreement in case of the Primewater’s event of default is

considered disadvantageous on the part of the RWD since it lacks the
necessary funds to pay the Primewater the just compensation to recover the
amount of investment of the latter to the JVA, if the RWD intends to acquire
the asset; or to pay the reasonable amount for the use of the Primewater
facilities if the RWD chose not to acquire the asset. Whether the RWD will
acquire or not acquire the asset, it lacks sufficient funds for the same. In
addition, the RWD might not be able to operate the facilities due to lack of
financial, technical and manpower capabilities.

6. The RWD’s payment of various benefits for CYs 2015, 2016 and 2017 were
not supported with complete documentation, thus creating doubt on the
regularity and validity of the payment of the transaction, as follows:

a. Payment of monetization of leave credits in the amount of P70,919.91,

P143,421.02 and P300,420.10 for CYs 2015, 2016 and 2017,
respectively, were not supported with the necessary documents.

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 Likewise, Leave Cards were not regularly updated to keep track of the
leave balances of employees.

b. Terminal leave benefits paid to the retired and resigned employees in the
amount of P113,600.89, P395,295.00 and P812,714.54 for CYs 2015,
2016 and 2017, respectively, were not supported with complete
documents, in violation of COA Circular No. 2012-001 dated June 14,
2012. In addition, paid Terminal Leave amounting to P812,714.54 in CY
2017 was not included in the approved Corporate Budget, contrary to
Section 4 of Presidential Decree (PD) No. 1445.

c. Loyalty Award paid in CY 2017 amounting to P55,000.00 is contrary to

the provisions of Civil Service Commission (CSC) Memorandum Circular
(MC) No. 6, s. 2002 dated February 8, 2002. Likewise, payment was not
supported with complete documentation, contrary to COA Circular No.
2012-001 dated June 14, 2012.

We recommended that Management:

 submit documents that will support the payment of monetization of leave

credits in CYs 2016 and 2017;

 assign a personnel that will regularly update the Leave Credit Cards to
properly reflect the leave credit balances of employees;

 submit the lacking documents pertaining to payment of Terminal Leave

benefits of separated employees;

 submit a Supplemental Budget for the Terminal Leave benefits paid in CY

2017 in the amount of P812,714.54, if there is any, otherwise, submit an
explanation or clarification why the same will not be disallowed in audit
considering that the same was not supported with approved budget;

 submit documents to evidence that no prior payment was made during

the milestone years of the noted employees, together with an updated
Service Record, and a Certification from the Human Resource Office
(HRO) that the claimants have not incurred more than 50 days authorized
vacation leave without pay within the 10-year period or aggregate of more
than 25 days authorized vacation leave without pay within the 5-year
period, as the case may be, to further justify the paid amount of
P55,000.00;

 immediately submit the documentary requirements for the payment of

Loyalty Award such as updated service records and certification that the
claimants have not incurred more than the authorized leave without pay;
and

 instruct the Accountant to stop processing payment of disbursement

vouchers with incomplete documentation.

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7. The completeness and reliability of the recorded collections of P15,946,383.18,
P17,053,521.42, and P26,310,721.09 for CYs 2015, 2016, and 2017,
respectively, could not be ascertained in view of the following: (a) out of the
133,000 Billing Receipts (BRs) purchased, 75,716 or 56.92% were not reported,
thus were not included in the Report of Collection and Deposit; and (b) alteration
of various Billing Receipts were noted, thus indicating weak internal control over
the accountable forms which may result in possible risk of misappropriation.

Printing services for water bill receipts was procured from 88 Printing Press,
which is not a recognized government printer, contrary to Section 1.2 of the
Guidelines on the Procurement of Printing Services as approved under the
Government Procurement Policy Board (GPPB) Resolution No. 05-2010 dated
October 29, 2010 and as amended under Section 22 of the General Provisions of
the Fiscal Year 2017 of the General Appropriations Act (GAA).

We recommended that the General Manager:

 account all the unreported BRs and present to the Audit Team the 75,716
pieces of unreported BRs presented in Annex A within five days from receipt
hereof to further evaluate the same. If the BRs were not yet paid by the
concessionaires, present proof such as the first and second copies of BRs to
support such claims. Otherwise , file appropriate charges against concerned
RWD officers for failure to account;

 maintain a record of purchases and issuance of all accountable forms for

proper monitoring and internal control;

 refrain from altering the BRs as it may create doubt on the reliability of
collections. If cannot be avoided, the same should be cancelled or initialed;
and

 engage the services of recognized government printer in the printing of

accountable forms and adhere strictly to the mentioned provision on the
procurement of printing services.

8. Deficiencies were noted on the internal control of the RWD which can be a
subject to risk of possible loss of government funds:

a. Receipt, custodial and releasing functions for Accountable Forms are under
the control of the Cashier, contrary to the principles of a sound internal control
which requires proper segregation of duties/responsibilities to facilitate check
and balance of all transactions, thus reducing the risks of errors or fraud.

b. The Report of Accountability for Accountable Forms (RAAF) were not

prepared monthly to determine the movement and status of issuance of the
accountable forms as required under Section 68 of the MNGAS, Volume II,
thus requisitions, issuances and balances at the end of the month could not
be readily established.

c. The RWD’s Accountable Officers did not apply for bond, in violation of
Section 101 of Presidential Decree (PD) No. 1445, Section 7.1 of COA

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 Circular Nos. 97-002 and 2006-005 dated February 10, 1997 and July 13,
2006, respectively, and Treasury Circular No. 02-2009 dated August 6, 2009,
thus the RWD is not assured of indemnity from the Fidelity Insurance Fund in
the event of defalcation or loss.

We recommended that the General Manager:

 assign a personnel who will act as Property Officer whose responsibility

includes receipt, issuance and safekeeping of accountable forms;

 direct the accountable officer to prepare the monthly Report of Accountability

for Accountable Forms (RAAF) and maintain a Logbook for Accountable
Forms, in compliance with Section 68 of the MNGAS, Volume II to facilitate
determination of accountability and monitoring of available stocks; and

 secure fidelity bond from the Bureau of Treasury for the RWD’s Cashier,
Collecting Officers, General Manager and all other accountable officers
concerned as required under Section 101 of PD No. 1445, COA Circular Nos.
97-002 and 2006-005 dated February 10, 1997 and July 13, 2006,
respectively, and Treasury Circular No. 02-2009 dated August 6, 2009.

9. Deficiencies were noted in the preparation and implementation of the Annual

Budget of the RWD for CYs 2015, 2016 and 2017, as follows:

a. The RWD’s Annual Budget were not submitted to the Department of

Budget and Management (DBM), contrary to DBM Corporate Budget
Memorandum (CBM) Nos. 35, 37 and 38 dated December 27, 2013,
January 28, 2015 and January 15, 2016, respectively, for Budget
Proposals for CYs 2015, 2016 and 2017, respectively.

b. The prepared Annual Budget for CYs 2015, 2016 and 2017 of the RWD
did not conform with the prescribed budget proposal, contrary to Volumes
I and II of the Commercial Practices Manual and DBM Corporate Budget
Memorandum (CBM) Nos. 35, 37 and 38.

c. The Budget Utilization Request (BUR) was not prepared to monitor and
control expenditures, contrary to COA Circular No. 2006-004.

We recommended that Management:

strictly adopt the prescribed processes on budget preparation, review,

approval and implementation, in compliance with DBM Corporate
Memorandum Nos. 35, 37 and 38 dated December 27, 2013, January 28,
2015 and January 15, 2016, respectively, so as to make all payments
made based on valid budgetary appropriations;

 submit immediately justification for Items of Expenditures with overdraft in

appropriation, supported with realignment or supplemental budget for
CYs 2015, 2016 and 2017, for further evaluation by the Audit Team,
otherwise, the same will be disallowed in audit;

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  direct the Requesting Unit to prepare the BUR, and the Accounting
personnel to regularly monitor the actual expenditures and budgeted
amount, in compliance with COA Circular No. 2006-004 dated January
31, 2006; and

 instruct the Accountant to stop processing disbursement voucher for

approval, unless duly supported with the required BUR.

10. The RWD was not able to develop and implement a Water Safety Plan (WSP) as
required under LWUA Memorandum Circular No. 010-14, thus exposes itself to
the risk of not being able to maintain safe, quality and continuous supply of water
to its concessionaires in case of disaster or calamity.

We recommended that Management collaborate with the Primewater

Infrastructure Corporation with regard to the development and
implementation of a Water Safety Plan, in compliance with LWUA
Memorandum Circular No. 010-14 and likewise develop policies and plans in
Disaster Risk Reduction Management to adhere to the aforementioned
State’s policy.

11. There was no prepared GAD Plan and Budget (GPB) for CYs 2015, 2016 and
2017, thus unable to submit the same to the Local Water Utilities
Administration (LWUA), which shall transmit to Philippine Commission on
Women (PCW), for final review and endorsement, contrary to Joint Circular
No. 2012–01 of the PCW, National Economic and Development Authority
(NEDA) and Department of Budget and Management (DBM).

The RWD failed to provide in its corporate annual budget, funds of at least
five percent for Gender and Development (GAD) activities, or attribute a
portion or the whole of the budget of its major programs to gradually increase
gender responsiveness under Joint Circular No. 2012–01 of the PCW-NEDA-
DBM, thus depriving the intended beneficiaries of the program.

We recommended that Management:

 prepare and submit the GAD Plan and Budget to the LWUA for
preliminary review which shall then forward the reviewed GPBs to the
PCW for final review and endorsement to ensure that the identified
gender issues and the corresponding GAD Program, Activities and
Projects were in accordance with the RWD’s mandate, in compliance with
Joint Circular No. 2012-01 and PCW Memorandum Circular No. 2015-03;
and

 attribute to the GAD budget a portion or the whole of the budget of the
RWD’s major programs to increase gender responsiveness of
government programs and budgets, in compliance with paragraph 6.4 of
Joint Circular No. 2012-01 of the PCW-NEDA-DBM.

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F. Status of Implementation of Prior Years’ Audit Recommendations

Out of the 50 audit recommendations embodied in the CYs 2013 and 2014 Annual
Audit Report, ten were fully implemented, eight were partially implemented and 32 were
not implemented by the RWD.

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