EXECUTIVE SUMMARY

A. Introduction

The Taytay Palawan Water District (TPWD) was established in February 2004 by
virtue of a Sangguniang Bayan Resolution, pursuant to Presidential Decree (PD) No. 198.
It was recognized as an organized public utility with the issuance of the Conditional
Certificate of Conformance No. 604 by the Local Water Utilities Administration
(LWUA).

The TPWD is classified as Category D with 599 active concessionaires as of

December 31, 2018. It is presently managed by General Manager Deo A. Del Rosario
with three regular employees and seven contractual/Job-Order personnel performing
administrative and other functions. The Board of Directors that serves as the policy-
making body is composed of five members chaired by Ms. Ma. Nora G. Decosto.

B. Financial Highlights

For Calendar Year 2018, the Water District registered total income of
P3,213,791.82 derived from water bills, service charges, reopening, fines and penalties
and installation and collection fees.

The Water District’s total assets, liabilities, equity, income and expenses for CY
2018 with comparative figures for CY 2017 are summarized as follows:

Increase
2018 2017
(Decrease)
Assets P15,966,513.54 P17,358,630.03 (P1,392,116.49)
Liabilities 31,681,344.52 30,733,502.57 947,841.95
Equity 15,714,830.98 13,374,872.54 (2,339,958.44)
Income 3,213,791.82 3,098,776.30 115,015.52
Expenses 5,553,750.26 5,434,474.32 119,275.94

C. Scope of Audit

The Audit Team conducted Financial, Compliance and Value for Money Audits
on the accounts, transactions, and operations of the Water District for CY 2018. It
included analysis of accounts in the financial statements, review of transactions and test
of compliance with financial rules and regulations. The objectives of the audit are to
ascertain the fairness and reliability of the Water District’s financial position and
financial performance, and to determine whether its operations were conducted in
compliance with applicable laws, rules and regulations and to assess the level of
effectiveness, efficiency and economy of the quality of water service offered by the
Water District.

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D. Audit Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
financial statements of the Water District for CY 2018 because the accuracy and
existence of the recorded balances of the Property, Plant and Equipment (PPE) accounts
with net book value of P14,053,053.76 as of December 31, 2018 could not be ascertained
due to (a) non-conduct of physical count of properties and non-submission of the Report
on the Physical Count of Property, Plant and Equipment (RPCPPE); and (b) net variance
of P10,701,843.75 in the balances of PPE per General Ledger (GL) and Lapsing Schedule
(LS). Also, the noted variance of P9,565,273.59 in the Loans Payable accounts as
confirmed with the Local Water Utilities Administration (LWUA) rendered the accounts
in the financial statements inaccurate.

E. Significant Observations and Recommendations

For the exceptions cited above, we recommended that the General Manager (a)
create an Inventory Committee that will conduct complete physical count of all
properties; prepare the corresponding RPCPPE in proper form; reconcile the amounts
with the accounting and property records and investigate discrepancies, if any; (b) require
the Accounting Processor and the Property and Supply Officer to maintain a complete
and updated PPELC and PC, respectively, for each class of property and ensure that both
records are reconciled to reflect the correct balances of PPE accounts in the financial
statements; and (c) direct the Accounting Processor to fast-track the reconciliation of the
noted variance with LWUA and prepare the necessary adjusting entry to correct the
balances of Loans Payable-Domestic, Interest Payable and Loans Penalty Payable
accounts in the financial statements and ensure the proper recording of loans payable
accounts.

In addition, the following are the other significant observations and

recommendations in the audit of the Water District for the year 2018:

1. The accuracy and completeness of the reported collections and deposits for the year
2018 amounting to P3,025,668.27 and P2,997,538.50, respectively, could not be
ascertained due to the failure of the Cashier/designated Collecting Officer (C/CO) to
maintain and record collections and deposits in the Cash Receipts Record (CRR)
and prepare and submit Report of Collections and Deposits (RCD) as required under
Section 7, Chapter II of the Revised Cash Examination Manual. Also, collections for
the year were not deposited intact and within the period prescribed in Section 32,
Chapter II of the same manual, such that a cumulative amount of P205,914.04
remained undeposited as of year-end, thus exposing the collections to possible loss
or misuse.

We recommended that the General Manager require the Cashier/Collecting Officer

to (a) maintain the Cash Receipts Record and prepare and submit the Report of
Collections and Deposits regularly as required under Section 7, Chapter II of the
Revised Cash Examination Manual; and (b) deposit all collections daily and intact

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 pursuant to Section 32, Chapter II of the same manual to avoid exposing government
funds to possible loss or misuse.

2. Liquidations of Cash Advances (CAs) granted to officials and employees of the

Water District for salaries and wages, travelling expenses and procurement of
ordinary office supplies with an aggregate amount of P1,579,559.38, P78,770.00 and
P20,990.00, respectively, were not fully supported with required documents contrary
to Section 4.6 of Presidential Decree (PD) No. 1445 and COA Circular No. 2012-
001 dated June 14, 2012, thus validity and propriety of the reported expenditures
could not be substantiated.

We recommended that the General Manager (a) require the submission of all
necessary supporting documents from concerned officials and employees of the
Water District to avoid audit suspensions and disallowances; (b) instruct the
Accounting Processor to verify completeness of supporting documents before
certifying any and all financial transactions of the Water District in compliance with
Section 4.6 of PD 1445; and (c) henceforth, exercise fiscal responsibility to the
greatest extent over the financial affairs, transactions, and operations of the Water
District.

3. The Water District failed to enforce collection of its accounts receivables from active
and inactive concessionaires of P287,699.37 and P1,348,620.18, respectively, thus
resulted in the accumulation of the balance of the Accounts Receivable per Aging
Schedule as of December 31, 2018 of P1,636,319.55, thereby depriving the Water
District of funds which could have been used to finance its programs and projects.

We recommended that the General Manager cause the immediate collection of past
due accounts receivables by sending collection and demand letters to all
concessionaires with delinquent accounts and institute appropriate legal actions, if
warranted. Henceforth, ensure that collection and disconnection policies are strictly
observed and implemented to enforce collection of accounts receivable from water
sales.

4. The Water District was not compliant with the revised Local Water District Manual
on Categorization and Recategorization set forth under LWD-MACRO 2011, thus
affecting the effectiveness of the internal control structure of the Agency.

We recommended that the General Manager (a) immediately reorganize the Water
District to comply with LWD-MACRO 2011 staffing guideline and hire competent
personnel to fill up vacant positions; and (b) avoid overlapping of functions by
restricting the commercial services section in-charge to have control over
administrative matters; the Accounting Processor not to perform cashiering functions
and the General Manager to delegate the collection to appropriate personnel.

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5. Property, Plant and Equipment (PPE) with total acquisition costs of P23,658,459.20
as of December 31, 2018 were not insured with the General Insurance Fund (GIF) of
the Government Service Insurance System (GSIS) in violation of the pertinent
provisions of Republic Act (RA) No. 656, thus the Water District will not be
indemnified or compensated in case of damage or loss of properties due to fire, or
other fortuitous event.

We recommended that the General Manager insure with the GIF of the GSIS all
insurable properties pursuant to RA 656 to adequately protect the government in case
of damage or loss of properties due to fire, typhoon or other fortuitous event.

6. Audit Fees amounting to P181,436.80 were not recognized as liability in the books
of accounts of the Water District, thus resulted in the understatement of the Payable
account and the overstatement of Retained Earnings by the same amount as of
December 31, 2018 contrary to Paragraph 27 of the Philippine Accounting Standard
(PAS) 1 and Paragraph 46 of the Conceptual Framework for Financial Reporting.

We recommended that the Acting Accounting Processor prepare the necessary

adjusting entries to correct the misstatements in the Payable and Retained Earnings
accounts amounting to P181,436.80 and henceforth, recognize in the books the cost
of audit as expense and liability based on the statement of accounts received from
COA Region IV-B pursuant to Paragraph 27 of the Philippine Accounting Standard
(PAS) 1 and Paragraph 46 of the Conceptual Framework for Financial Reporting.

7. The Water District garnered an “Unsatisfactory” rating for its overall service in a
survey conducted from January 3 to 7, 2019 on 50 respondent-concessionaires.
Moreover, some of the respondent-concessionaires signified complaints on
unpleasant taste and smell, presence of dirt particles and the frequency of
interruption of water supply which are found to be inconsistent with its mission of
providing safe and potable water at affordable cost and its commitment to sustain
water quality standards.

We recommended that the General Manager and his staff seek ways to fully satisfy
its concessionaires on the quality of water, supply and affordability of water and
overall services. We also recommended that Management consider including in the
Annual Planning and Budgeting programs to improve the quality, supply and
affordability of water and overall services provided by the Water District to
effectively attain their mission and improve public service and consumers’
satisfaction.

8. The Non-Revenue Water (NRW) rate of the Water District of 28.53 percent for CY
2018 exceeded the maximum acceptable NRW of 20 percent as prescribed by
LWUA Board Resolution No. 444 dated September 15, 2009. The equivalent peso
value of excess on allowable NRW of P299,430.00 could have been an additional
revenue had the water loss been reduced within the tolerable level of 20 percent.

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 We recommended that the General Manager initiate regular inspection of water
distribution lines to promptly detect water leakages. Henceforth, ensure that
necessary repairs of damaged pipelines are immediately instituted to minimize NRW
to an acceptable level.

9. The Water District was unable to conduct periodic performance audit of the water
meters being used by its concessionaires as prescribed in Local Water Utilities
Administration Memorandum Circular (LWUA-MC) No. 014-10 dated December 2,
2010, thus the accuracy of water meter readings was not ensured.

We recommended that the General Manager cause the conduct of periodic

performance audit of water meters to comply with LWUA MC No. 014-10
December 2, 2010 to ensure the accuracy of their performance which would
eventually help in the reduction of its NRW.

10. The Water District failed to develop and implement a Water Safety Plan (WSP) in
violation of Department of Health (DOH) Administrative Order No. 2014-0027
dated September 9, 2014 as directed by Local Water Utilities Administration
(LWUA) Memorandum Circular No. 010.14 dated December 1, 2014, thus the
mission of the Water District to provide safe, affordable and adequate potable water
supply to its concessionaires was not achieved.

We recommended that the General Manager cause the immediate development and
implementation of the WSP of the Water District to be used as guide in the
prevention and/or mitigation of future risks on the safety of water provided to
concessionaires.

11. The Gender and Development (GAD) objective to address gender issues and
concerns was not fully attained due to the failure of the Water District to allocate at
least five percent of its total budget for GAD programs, activities and projects and to
prepare and submit the GAD Plan and Budget for CY 2018 to the Local Water
Utilities Administration (LWUA) contrary to Section 30 of the General Provisions of
Republic Act No. 10964 (General Appropriations Act for FY 2018), Joint Circular
No. 2012-01 of Philippine Commission on Women-National Economic Development
Authority-Department of Budget and Management (PCW-NEDA-DBM) and PCW
Memorandum Circular No. 2015-03 dated May 19, 2015.

We recommended that the General Manager (a) comply with the general provisions
of Section 30 of the GAA for FY 2018 and the guidelines of PCW-NEDA-DBM
Memorandum Circular No. 2012-01 relative to fund allocation and implementation
of the Gender and Development Program; (b) designate a GAD focal person and
send him/her to trainings or seminars on the preparation and implementation of GAD
Plan and Budget and require him/her to prepare the Annual GPB in accordance with
the guidelines prescribed under DBM-NEDA-PCW Joint Circular No. 2012-01 and
PCW Memorandum Circular No. 2015-03 dated May 19, 2015 and submit the same
to LWUA; and (c) implement GAD programs, activities and projects that promote

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 gender-responsive governance, protect and fulfill women’s rights and promote
women’s economic empowerment.

The above observations and recommendations were discussed with concerned

officials and staff of the Water District during the exit conference conducted on January
31, 2019. Management’s comments were incorporated in the report, where appropriate.

F. Summary of Audit Suspensions, Disallowances and Charges

The following are the unsettled Notices of Suspensions, Disallowances, and Charges
as of December 31, 2018:

NS/ND/NC Amount
Date Payee
No. Suspended Disallowed Charged
04/22/2014 13-001-(12) Juanco P. Sadio P 100,000.00
10/20/2015 15-001-(11) Various Payees P 84,322.15
10/20/2015 15-002-(12) Various Payees 78,781.95
10/20/2015 15-003-(13) Various Payees 187,888.32
10/20/2015 15-004-(14) Various Payees 138,000.84
10/08/2018 18-001-(14) Various Payees 3,600,521.36
10/08/2018 18-001-(17) Various Payees P1,562,529.88
10/08/2018 18-002-(17) Various Payees 136,179.88
Total P1,698,709.76 P 3,700,521.36 P488,993.26

G. Status of Implementation of Prior Years’ Audit Recommendations

Out of the 68 audit recommendations embodied in the CYs 2012 to 2017 Annual
Audit Reports, two were fully implemented, three were partially implemented and 63
were not implemented.

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