EXECUTIVE SUMMARY

A. Introduction

Peñablanca Water District was established on August 22, 1990, by virtue of

Section 4 of PD 198, series of 1973, as amended by Presidential Decree Nos. 768 and
1479 or otherwise known as the “Local Water District Law” and “Provincial Water
Utilities Act of 1973”, respectively. The District formally started its operation on
September 10, 1999 with 315 initial concessionaires. The decree authorized the
formation of local water as provided for their government and administration to
facilitate improvement of local water utilities and granted said administration such
powers as are necessary to optimize public service from water utility operations and
for other purposes. Currently, it is serving five Barangays of the Municipality of
Peñablanca, Cagayan with 3,359 concessionaires.

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

The District is classified as Category D, with one (1) co-terminus, ten (10)
permanent and eight (8) job order employees.

A financial and compliance audit was conducted on the accounts and

operations of the Peñablanca Water District for the year ended December 31, 2022.
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 District resources.

B. Financial Highlights

Presented below is the comparative information of the financial condition and

operation of the Peñablanca Water District for CYs 2022 and 2021:

Increase/
Accounts 2022 2021
(Decrease)
Assets P 35,072,191 P 33,513,739 P1,558,452
Liabilities 12,783,371 12,691,858 91,513
Equity 22,288,820 20,821,881 1,466,939
Income 17,382,263 16,159,143 1,223,120
Expenses 15,915,384 13,811,749 2,103,635
Net Income 1,466,878 2,347,395 (880,515)
 Also presented below is the comparative information of the budget and actual
expenditure of Peñablanca Water District for CYs 2022 and 2021:

Increase/
2022 2021
(Decrease)
Corporate Operating Budget P22,765,378 P17,343,025 P5,422,353
Actual Expenditure 15,915,384 13,811,749 2,103,635

C. Auditor’s Opinion on the Financial Statements

We rendered a qualified opinion on the fairness of presentation of the

Financial Statements of the District because:

a. Accounts Receivable amounting to P1,217,704.64 remained outstanding for more

than ten (10) years and the collectability could no longer be ascertained due to
unknown whereabouts or death of the concessionaires, which is not in accord with
the Philippine Accounting Standards (PAS) 36. Also, the accuracy of this
Accounts Receivable could not be ascertained due to the absence of updated
subsidiary ledgers which is not in accord with Section 111 of Presidential Decree
No. 1445. Thus, this affects the fair presentation of accounts in the Financial
Statements;

b. Completed project amounting to P946,900.00 was still in Construction in Progress

– Infrastructure Assets account due to non-reclassification to Plant-Utility Plant in
Service (UPIS) account thus, understating the Plant-Utility Plant in Service
account by P946,900.00 and overstating the Construction in Progress-
Infrastructure Assets by the same amount; and

c. Tangible items costing below P50,000.00 considered as Semi-Expendable

properties were still included in the Property, Plant and Equipment (PPE)
accounts due to non-adjustments to the appropriate accounts in the Financial
Statements which is not in accord with COA Circular No. 2022-004 dated May
31, 2022.

D. Significant Observations and Recommendations

1. Unserviceable properties amounting to P205,354.85 were not yet disposed due to

non-preparation of documents needed to facilitate the disposal which is not in
accord with Section 79 of Presidential Decree (PD) No. 1445 and COA Circular
No. 89-296 dated January 27, 1989 thereby, exposing the items 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 inventory report showing the

itemized list and complete description of the assets and Appraisal Report
showing the appraised values of the assets;

b. dispose the said properties properly in accordance with COA Circular No.
89-296 dated January 27, 1989 and COA Circular No. 2020-006 dated
January 31, 2020; and

c. direct the Accounting Processor to effect necessary adjustment in the books

of accounts upon disposal of unserviceable properties.

2. Insurable properties of the District amounting to P37,491,198.00 were not

covered with the appropriate property insurance with the Government Service
Insurance System due to non-monitoring of the status of application with GSIS, as
required in Item 5.1 of COA Circular No. 2018-002 dated May 31, 2018 and Item
1.1.2 of COA Circular No. 92-390 dated November 17, 1992 thus, leaving its
properties at risk of total loss without indemnity or protection.

We recommended that Management:

a. follow-up the application of property insurance with the GSIS; and

b. comply strictly with the provisions of COA Circular No. 2018-002 dated
May 31, 2018.

3. The Accountable Officers were not properly bonded due to failure to renew their
fidelity bonds through online application which is not in accord Section 4.1 of
Treasury Circular No. 02-2019 dated April 25, 2019 therefore, exposing the cash
to risk of non-recovery in case of loss.

We recommended that Management:

a. follow-up and intensify their efforts on the application of their fidelity bonds;

b. ensure that Accountable Officers are properly insured from the BTr to secure
that the District is protected in case of loss of fund caused by shortages and
defalcations; and

c. comply strictly with Section 4.1 of Treasury Circular No. 02-2019 dated
April 25, 2019.

4. Regular office supplies and equipment amounting to P165,397.10 were not

purchased from the DBM-PS instead thru Shopping which is not in accord with
Section 8.1.2 and Section 52 of the 2016 Revised Implementing Rules and
 Regulations (RIRR) of Republic Act (RA) No. 9184 thus, significant built-in
efficiencies of the PhilGEPS were not availed of.

We recommended that Management:

a. properly plan the need requirements of the common-use supplies and

equipment during the year and provide a definite schedule of procurement in
the Annual Procurement Plan; and

b. strictly observe the procurement of common-use supplies and equipment

from DBM-PS pursuant to the provisions of 2016 Revised Implementing
Rules and Regulations (IRR) of Republic Act (RA) No. 9184.

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, presented as follows:

Particulars PhilHealth Pag-IBIG GSIS

Beginning balance, January 1, 2022 P 9,260.59 P 17,005.90 P 81,218.35
Contributions during the year 2022 115,325.54 196,578.07 1,034,405.30
Remittances during the year 2022 (114,043.38) (201,454.96) (1,033,380.52)
Ending balance, December 31, 2022 P 10,542.75 P 12,129.01 P 82,243.13

The amounts withheld for December 2022 were remitted in January 2023.

G. Compliance with Tax Laws

The District has complied with the withholding of taxes on compensation,

goods and services, their remittances and the filing of the appropriate returns within
the prescribed period as well as the payment of franchise tax, presented as follows:

Particulars Amount
Beginning balance, January 1, 2022 P 134,453.09
Deductions during the year 2022 547,610.70
Remittances during the year 2022 (564,463.97)
Ending balance, December 31, 2022 P 117,599.82
 The amount withheld for December 2022 was remitted in January 2023.

H. General Insurance of Government Properties with GSIS

The District did not insure all its government properties with the GSIS as
discussed in Part II, Observation No. 10 of this Report.

I. Authorized Government Depository Bank

The District maintained all its accounts from Land Bank of the Philippines,
Tuguegarao in compliance with Department of Finance Department (DOF) Circular
No. 002.2022 dated May 16, 2022.

J. Non-Revenue Water

The Non-Revenue Water of the District is District exceeded the 20%

maximum acceptable NRW prescribed by Local Water Utilities Administration
(LWUA) by 3.31% as discussed in Part II, Observation No. 11 of this Report.

K. Gender and Development

The District has prepared a GAD Plan and Budget for GAD purposes, which
is in compliance with the General Provisions of the General Appropriations Act for
FY 2022, particularly Section 34 thereof, thereby implementing the District’s
mandate and capability to effectively address issues and promote women’s
empowerment.

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

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

December 31, 2022 is presented as follows:

Beginning Current Year Ending

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

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

Out of the 23 audit recommendations contained in the CY 2021 Annual Audit

Report, nine (9) were validated as implemented and 14 were not implemented and are
reiterated in Part II of this report.