EXECUTIVE SUMMARY

A. Introduction

Aparri Water District was formed on January 18, 1978 by virtue of Resolution
No. 5 Series of 1978, approved by the Sangguniang Bayan, to cover the entire
Municipality of Aparri. The Resolution was filed with LWUA on February 13, 1978
and became the 68th Water District to receive its Conditional Certificate of Conformance
(CCC) on November 6, 1978.

Section 5 of P.D. 198, as amended, explicitly enumerates the purposes of the

local Water District namely:

 To acquire, install, improve, maintain and operate supply and distribution

systems for domestic, industrial, municipal and agricultural uses for residence
and lands within the boundaries of such districts;

 To provide, maintain and operate waste water collection, treatment disposal

facilities; and

 To conduct such other functions and operations incidental to water resources

development, utilization and disposal within such District, as necessary or
incidental to said purpose.

The District is classified as Category D, with eleven (11) permanent employees,

one (1) co-terminus and five (5) job orders. The District has 3,902 total service
connections as of December 31, 2020. The District is managed through policies
formulated by its Board of Directors, in accordance with the regulation imposed by the
Local Water Utilities Administration, National Government and the regulatory bodies.

A financial and compliance audit was conducted on the accounts and operations
of the Aparri Water District for the year ended December 31, 2020. 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 District to laws, rules and regulations.

B. Financial Highlights

Presented below is the comparative information of the financial condition and

operation of the Aparri Water District for CYs 2020 and 2019:

Increase/
Accounts 2020 2019
(Decrease)
Assets P 41,312,171 P 39,897,656 P 1,414,515
Liabilities 53,090,293 47,522,697 5,567,596
 Equity (11,778,122) (7,625,041) (4,153,081)
Income 10,018,128 13,082,420 (3,064,292)
Expense 13,783,659 22,281,055 (8,497,396)
Net Income (3,765,531) (9,198,635) 5,433,104

Also presented below is the comparative information of the budget and actual
expenditure of Aparri Water District for CYs 2020 and 2019:

Increase/
2020 2019
(Decrease)
Corporate Operating Budget P 20,231,387 P 22,945,548 P(2,714,161)
Actual Expenditure 13,783,659 22,281,055 (8,497,396)

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 District because the current portion of the Loans Payable-
Domestic account was not recognized in the Statement of Financial Position as at
December 31, 2020 amounting to P2,748,706.04. Also the Other Receivables account
amounting to P193,842.00 is doubtful due to the absence of a schedule.

D. Significant Observations and Recommendations

1. The District did not pay the monthly amortization of its loans from Local Water
Utilities Administration (LWUA) pursuant to Sections 2 (A), 1.d and 2.d of Article
V of the Financial Assistance Contract, which resulted in the accumulation of
interest and penalties amounting to P 4,414,682.97 and P502,758.90, respectively, as
at year-end.

We recommended that Management:

a. intensify collection efficiency to improve financial standing to be able to

meet financial obligations;

b. conduct periodic marketing to attract concessionaires future concessionaires

to increase water sales and collection;

c. should attain minimum tolerable level of non-revenue water to maximize

income derived from water produced; and

d. make written representation with LWUA for the application of the Debt
Relief Program or other remedies to mitigate the penalties incurred.

2. Procurements made through Alternative Methods of Procurement – Emergency

Cases and Small Value Procurements totaling P1,408,717.81 were not supported
with documents required under Appendix A, Annex H of the 2016 Revised
 Implementing Rules and Regulations of R.A. 9184 hence, casting doubts on the
regularity of the transactions.

We recommended that Management instruct the Bids and Awards Committee of the
District the submission of the documentary requirements for Alternative Modes of
Procurement and indicate in the Request for Quotation for Alternative Methods of
Procurement at what stage of the procurement process that these must be submitted.
Also, we recommended that the BAC maintain an updated file of the bidder’s
requirements stated in Appendix A, Annex H of the 2016 Revised Implementing
Rules and Regulations of R.A. 9184 so that the BAC may no longer require its re-
submission for the succeeding transactions.

Further, we recommended that the Accounting Processor see to it that all vouchers
are supported with complete documents prior to payment.

3. Unserviceable properties amounting to P1,053,882.59 were not yet disposed off,

which is not in accord with Section 79 of PD 1445 and COA Circular No. 89-296
dated January 27, 1989 thereby, exposing to further deterioration and may lower the
value of the said items upon disposal.

We recommended that Management:

a. direct the Property Custodian to prepare the Inventory and Inspection Report
of Unserviceable Properties; and

b. dispose the said properties properly in accordance with COA Circular No.
89-296 dated January 27, 1989 and drop the same from the books of
accounts.

4. Insurable properties of the District amounting to P9,831,093.00 were not covered

with the appropriate property insurance with the Government Service Insurance
System, as required in COA Circular 2018-002 dated May 31, 2018 thus, leaving its
properties at risk of total loss without insurance.

We recommended that Management insure all its insurable properties with the GSIS
in compliance with the provisions of COA Circular No. 2018-002 dated May 31,
2018.

5. The Non-Revenue Water (NRW) of the District equivalent to 40.11% exceeded the
20% maximum acceptable NRW prescribed by Local Water Utilities Administration
(LWUA) which could affect its financial viability and operational efficiency.
 We recommended that Management:

a. prioritize the repair/replacement of old pipelines and install adequate

safeguard and protection measures in the use of water and facilities in order
to minimize the revenue losses; and

b. follow up on their request for financial and technical assistance from LWUA
in order to facilitate the implementation of projects to reduce NRW.

E. Implementation of Water Safety Plan

The District submitted its Water Safety Plan to LWUA for review as required in
LWUA Memorandum Circular No. 010.14 and DOH Administrative Order No. 2014-
0027.

F. Remittances of GSIS/Pag-IBIG/PhilHealth Premiums

The District has complied with the rules on the proper deductions of GSIS, Pag-
IBIG and PhilHealth Premiums from the salaries of employees and the timely
remittances of these premiums to the GSIS, Pag-IBIG and PhilHealth in accordance with
R.A Nos. 8291, 9679 and 7875, respectively.

G. Compliance with Tax Laws

The District has complied with tax laws and appropriately withheld taxes from
payment of goods and services, contracts, as well as franchise tax, in accordance with
tax laws.

H. Bonding of Accountable Officers

The District has complied with the proper bonding of its Accountable Officers
for government funds and property in compliance with Treasury Circular No. 02-2009
dated August 6, 2009.

I. Authorized Government Depository Bank

The District maintains its depository accounts at the Development Bank of the
Philippines, Aparri Branch and Land Bank of the Philippines, Aparri Branch.

J. Gender and Development Plan and Budget

The District allocated P995,265.00, equivalent to 5% of its annual budget of

P20,231,387 for CY 2020, for GAD purposes and utilized P22,796.50 for gender related
programs and activities incorporated in the GAD Plan of the District due to the
pandemic.
K. Status of Audit Suspensions, Disallowances and Charges as at year-end

The Status of Audit Suspensions, Disallowances and Charges as at December 31,

2020 is presented below:

Beginning Current year Ending

Balance NS/ND/NC NSSDC Balance
Suspensions P - P - P - P -
Disallowances - - - -
Charges - - - -
Total P - P - P - P -

L. Status of Implementation of Prior Year’s Audit Recommendations

Of the seven (7) audit recommendations contained in the CY 2019 Annual Audit
Report, five (5) recommendations were validated as fully implemented and two (2) were
partially implemented and are reiterated in Part II of this Report.