EXECUTIVE SUMMARY

Introduction

The Kabacan Water District was established thru the passage of Sangguniang
Bayan of Kabacan Resolution No. 80-90 dated October 15, 1980 with Presidential Decree
No. 198, as amended, as the enabling law to the creation of water districts. On February
28, 1982, the former NAWASA was turned-over by the Local Government of Kabacan to
KWD. On March 30, 1982, the district was issued the Conditional Certificate of
Conformance (CCC) No. 194 by the Local Water Administration (LWUA). In compliance
with the guidelines as provided for in the DBM approved Revised Local Water District
Manual on Categorization, Re-Categorization and Other Related Matters (LWD-MaCRO),
the KWD was categorized as Category “C” Water District effective March 26, 2012.

The mandates of the district are as follows:

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

distribution systems for domestic, industrial, municipal and agricultural uses of
resident and for land within the boundaries of the district.

 To improve maintain and operate waste water collection treatment and disposal
facilities; and

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

development, utilization and disposal within the district, as are necessary or
incidental to said purpose.

Audit Scope and Methodology

Pursuant to Section 2, Article IX-D of the Philippine Constitution and Section 43

of the Government Auditing Code of the Philippines (P.D. 1445), we have audited the
accounts and operations of the District covering the period January 1 to December 31,
2015.

The audit was conducted in accordance with the generally accepted state auditing
standards, and accordingly included such tests of the accounting records and other related
documents and evaluation of the design and operating effectiveness of the controls and
such other procedures, as necessary, in the audit.

The audit was conducted to determine (a) verify the level of assurance that may be
placed on management’s assertions on the financial statements; (b) recommend agency
improvement opportunities; and (c) determine the extent of implementation of prior years’
audit recommendations.
Financial Highlights

The financial profiles of the District for CY 2015 with comparative figures of CY
2014 are presented as follows:

Financial Condition
Increase
Particulars 2015 2014 Percentage
(Decrease)
Total Assets P 88,184,091.38 P 77,472,670.27 10,711,421.11 14%
Total Liabilities 14,423,487.04 13,189,173.82 1,234,313.22 9%
Total Equity 73,760,604.34 64,283,496.45 9,477,107.89 15%

Results of Operations
Increase
Particulars 2015 2014 Percentage
(Decrease)
Income P 41,133,270.48 P 35,573,672.56 5,559,597.92 16%
Expenses 29,308,087.47 27,728,984.36 1,579,103.11 6%
Net Income (Loss) 11,825,183.01 7,844,688.20 3,980,494.81 51%

Utilization of Funds
Increase
Particulars 2014 2014 Percentage
(Decrease)
Appropriations P42,354,110.28 P 44,285,767.38 (1,931,657.10) (4)%
Obligations/Utilizations 33,993,999.27 29,429,837.26 4,564,162.01 16%
Unexpended balance 8,360,111.01 14,855,930.12 (6,495,819.11) (44)%

Like any other Water Districts, Kabacan Water District is a self-generating utility
agency. The sources of income came mainly from the water sales and application fees.

Audit Opinion on the Financial Statements

The Auditor rendered an unmodified opinion on the fairness of presentation of the

financial statements.

Summary of Significant Audit Observations and Recommendations

1. Receivables from water concessionaires totaling P1,147,198.95 remain uncollected and

inactive for 180 days to over 4 years, thus casting doubt to their collectability and
affecting the validity of the asset accounts in the financial statements.

We recommended that management:

a) intensify its collection efforts by sending follow-up demand letters or tracers to
concessionaires with long overdue accounts;
b) review and analyze the individual concessionaire accounts and the responses to the
demand letters; and
 c) for those accounts which prove to be beyond collectability, request for authority to
write-off pursuant to COA Circular 97-001 in order to clean up the books of
accounts with doubtful accounts.

2. Payment of Performance Based Incentive to the District Board of Directors totaling

P175,000.00 is suspended in audit due to non-compliance to prescribed documentary
requirements.

We strongly recommended that Management comply with the submission of the

required documents in the grant of the BOD’s PBI and wait for LWUA’s validation
and approval. We further recommended that Management ensure strict compliance
with existing laws, rules and regulations on the payment of PBI pursuant to Section 9
of Executive Order No. 65 and its implementing guidelines setforth under LWUA
Memorandum Circular Nos. 001-16 and 002-16.

3. Travelling expenses totaling P218,785.50 incurred for the District’s Lakbay Aral in the
Province of Bulacan & Maynilad Water Services, Inc., Quezon City is considered
extravagant expenditure in violation of COA Circular No. 2012-003.

We recommended that Management a) strictly comply with the existing laws, rules
and regulations pursuant to COA Circular No. 2012- 003; and b) stop the practice of
having a yearly Lakbay Aral activity, instead give priority in the implementation of
waterworks services projects such as construction, rehabilitation, and expansion of
distribution lines for the benefit of its concessionaires.

Summary of Total Suspensions, Disallowances and Charges

The total audit suspension, disallowances and charges found in the audit of various
transactions of the agency, as of December 31, 2015 is P904,961.51, based on the Notice
of Suspension (NS)/Notice of Disallowance(ND)/Notice of Charge (NC) issued by this
Commission, as summarized hereunder:

Particulars Notice of
Suspensions Disallowances Charges
Summary of Audit Suspensions, Disallowances
and Charges as of December 31, 2014 P 0.00 P 1,137,942.79 P 0.00
Add: Issuances
Less: Settlements
Prior Year 232,981.28
Current Year
Balance, December 31, 2015 P 0.00 P 904,961.51 P 0.00
Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Of the ten (10) audit recommendations contained in the Annual Audit Report for
CY 2014, eight (8) were fully implemented and two (2) were partially implemented.