EXECUTIVE SUMMARY

INTRODUCTION

The Tagum Water District (TWD) was created through Sangguniang Bayan of
Tagum Resolution No. 103 dated 1980 pursuant to the provisions of PD 198 as amended
by PD 768 and 1749. On December 16, 1981, the Local Water Utilities Administration
(LWUA) awarded Conditional Certificate of Conformance (CCC) No. 175 to the TWD
after it had complied with all the requirements.

The TWD operates as a government corporation with proprietary functions and is

independent from the local government of Tagum City. It is located at Mirafuentes
National Highway, Tagum City.

On March 21, 2012, the LWUA issued a certificate categorizing the Tagum Water
District as a Category “B” Water District effective March 2012.

At present, the TWD operates 9 pump stations to service more than 24,000
concessionaires in Tagum City. The TWD envisions a sustainable, responsive, world
class and progressive water service for the communities of Davao del Norte.

For calendar year 2013, the District had a personnel complement of 168,
consisting of 63 permanent, 43 casual and 62 job order personnel. The District is headed
by General Manager Nelly M. Gentugaya, MM. Its top management is composed of the
following:

Name Position
Nelly M. Gentugaya, MM General Manager
Luz S. Arnilla, CPA, MPA Manager, Administrative Department
Edgardo Rey J. Bula Manager, Commercial Department
Pilar M. Mula, CE, RMP Manager, Engineering Department
Glenda A. Miraflor Manager, Internal Audit Division
Estella D. Aparece Manager, Personnel & General Services Division
Elena L. Budiongan Manager, Cash & Property Division
Jocelyn S. Emotin OIC-Manager, Financial Services Division
Marie Jane A. Clavero Manager, Customer Services Division
Christopher R. Lanaja Manager, Billing Division
Keith G. Nicart OIC-Manager, Construction Division
Richard L. Emotin Manager, Maintenance Division
Gerardo M. de Leon Manager, Production Division
 The TWD Board is the policy-making body of the District but the executive,
administrative and ministerial power is delegated to the management. It has five (5)
members who are appointed by the local chief executive. The members of the Board and
the sectors they represent are as follows:

Board Member Position Term of Office Sector

Represented
Alma L. Uy, RN, Chairman 01/01/2011 to 12/31/2016 Women
MBA
Rebecca O. Lectura Vice Chairman 01/01/2009 to 12/31/2018 Civic
Nenita R. Malbas, CPA, Secretary 01/01/2009 to 12/31/2014 Education
MBA
Benjamin A. Arboso Member 01/01/2009 to 12/31/2014 Professional
Vincent A. Arriesgado Member 06/24/2013 to 12/31/2018 Business

OPERATIONAL HIGHLIGHTS

The 2013 operational highlights of the District in terms of service connection,

water sales, and collections from water bills are as follows:

Percentage of
PARTICULARS Target Accomplishments
Accomplishments
Service Connections 4,000 2,527 63%
Sales P145,999,533.72 P147,987,729.10 101%
Collection from water
P164,424,223.29 P152,494,811.14 93%
bills and other collections

Other Milestones

 Incurred capital expenditures of P13,542,625.00 on projects for artesian wells,

reservoir and pumping stations to enhance the service delivery of the District.

 Laid down 38,617 linear meters (LM) of pipe lines, 8,410 LM of transmission
lines and 30,207 LM of distribution lines.

 Added 2,527 new water service connections thus expanding its customer base to
about 27,243.
FINANCIAL HIGHLIGHTS

Comparative Financial Position:

The District’s total assets increased by 17% over that of CY 2012 due to increases
in several asset accounts namely: 46% in Cash-in-Bank, Time Deposit account, 33% in
Accounts Receivables –Customers, 673% in Prepayments and 13% in Property, Plant and
Equipment (PPE). In PPE, the District had increased capital expenditures of 25% in
Other Structures, 10% in Construction and Heavy Equipment and 16% in Water Systems
and Structures.

On the other hand, liabilities decreased by 35% due to a significant decline in

Accounts Payable of 55% while equity rose by 22% as a result of substantial growth in
net income by 41% compared to CY 2012.

Increase
2013 2012 %
(Decrease)
Assets 330,931,745.62 282,845,460.21 48,086,285.41 17%

Liabilities 16,257,311.34 25,077,354.65 (8,820,043.31) (35%)

Equity 314,674,434.28 257,768,105.56 56,906,328.72 22%

Comparative Results of Operation:

The increase in Gross Income of 16% for CY 2013 was mainly due to the rise in
Income from Waterworks System-Water Sales of 16% and Other Business Income of
33%. The uptrend in both income sources and the slight increase in expenses of 5%
resulted in the increase in Net Income of 41%.

Increase
2013 2012 %
(Decrease)
Gross 158,299,683.47 136,763,158.47 21,536,525.00 16%
Income
Expenses 101,432,590.01 96,464,792.73 4,967,797.28 5%

Net Income 56,867,093.46 40,298,365.74 16,568,727.72 41%

SCOPE OF AUDIT

The financial and compliance audits were conducted on the accounts and
transactions of Tagum Water District for the year ended December 31, 2013, on a test
basis, to ascertain the propriety of the financial transactions and compliance of the agency
to prescribed laws, rules and regulations. It was also made to ascertain the accuracy of
financial records and reports as well as the fairness of the presentation of financial
statements.

AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

We rendered an unqualified opinion on the fairness of presentation of the

financial statements.

OBSERVATIONS AND RECOMMENDATIONS

Presented below are the significant audit observations and recommendations

noted in the course of audit and discussed with the District’s officials and employees in
an exit conference on December 5, 2014:

1. a) A designated Regular Member of the BAC did not meet the minimum
qualification standards of at least 5th ranking permanent official as provided in
the Revised IRR of R.A. 9184.

We recommended that the Board designate qualified personnel for the regular
membership in the BAC in accordance with the Revised IRR of R. A. 9184,
inasmuch as the District’s Plantilla of Personnel indicates that there are other
available qualified personnel.

b) The members of the BAC were not designated for a fixed term of one (1)
year contrary to Section 11.2.6 of the Revised IRR of RA 9184.

We recommended that management designate a new set of BAC members and

Head of BAC Secretariat with a fixed term of one (1) year as required in the
Revised IRR of RA 9184.

c) Two (2) regular BAC members, TWG and BAC Secretariat have not
attended the basic training seminars in procurement as required for BAC,
TWG Members and Procurement Units under Sections 11.2.2, 12.2 and 16
of the same IRR.
 We recommended that management ensure that the concerned BAC regular and
TWG members as well as the BAC Secretariat have undergone the basic
training seminar on RA 9184 and its IRR to equip them with the basic
knowledge on the laws, rules and regulations and processes/procedures in
procurement.

d) The District did not prepare the Procurement Monitoring Reports

covering all procurement activities specified in the APP nor submitted
same to the GPPB on prescribed deadlines, thus resulting in non-
compliance to Section 12.2 of the Revised IRR of RA 9184.

We recommended that management ensure that PMR is prepared in the form

prescribed by the GPPB covering all procurement activities specified in the
APP and shall be approved by the HOPE and submitted to the GPPB in printed
and electronic format within fourteen (14) calendar days after the end of each
semester.

e) The proposed PPMPs of the various departments were not summarized

into one (1) document indicating the estimated totals for the budget for
Maintenance and Other Operating Expenses (MOOE) and Capital Outlay
(CO) as well as the overall total, thus it could not be determined whether
the overall estimated budget for PPMPs would equal to the estimated
budget of the Annual Procurement Plan (APP).

We recommended that management instruct the respective departments to

indicate the estimated budget totals for MOOE and CO and to summarize the
overall total for all the departments with the end in view of ensuring said
estimated total would equal with that of the estimated budget of the APP.

f) The District’s APP for CY 2013 did not provide for the overall total
estimated budget, as prescribed under GPPB Circular 1-2009 dated 20
January 2009, thus it could not be determined if the APP was within the
District’s annual budget .

We recommended that management instruct the BAC Secretariat to provide

for the overall estimated total of the APP which shall be consistent with the
District’s budget.
 g) Attendance of Observers during BAC proceedings could not be
ascertained even when invitations were sent to them since their presence
or absence were not indicated in the minutes, thus the District’s
compliance to Section 13 of RA 9184 could not be established.

We recommend that management instruct the BAC Secretariat to indicate the

attendance of invited Observers to the BAC proceedings by specifically
indicating their presence or absence on the minutes of BAC meetings.

2. a) Receivables aged over one (1) year totaling P7 Million or 39% of the ₱17.9
Million Receivable Accounts as at December 31, 2013 were classified as
Current Assets contrary to IAS 1, thereby affecting the fair presentation
of the financial statements.

We recommended that management direct the Accountant to classify inactive

and dormant receivable accounts aged over one (1) year totaling P7,001,738.23
under Non-Current Assets for purposes of financial statements presentation.

Ensure that the Accountant shall include only current year receivable accounts
which the District expects to collect in the next 12 months to the current assets
while the immediately prior and past years be classified as non-current assets.

Request for write-off from the Commission on Audit for inactive and dormant
accounts aged over 10 years as of December 31, 2013, after exhausting all
means to collect the accounts from the concessionaires and other debtors, but
had proved to be futile.

b) Balances of Accounts Receivable per General Ledger and Records of

Customers Services Division have a variance of P3,771,083.65 due to lack
of concerted efforts to reconcile both records.

We recommended that management direct the Accountant, the SL In-Charge

and the Customers Services Division Accounts In-Charge to exert efforts to
reconcile their balances to reflect reliable data and promote efficient records-
keeping.

c) The Other Receivables account of ₱198,965.68 was not properly disclosed

in the Notes to Financial Statements, thus it could not be determined
whether the accounts were valid receivables of the District.
 We recommend that management ensure that accounts are properly disclosed
or explained in the Notes to the Financial Statements so that users, readers and
other stakeholders will be well-informed.

d) Cash Advances totaling P351,185.43 had remained unliquidated for years

contrary to COA Circular No. 97-002 dated February 10, 1997, thus
resulting in overstatement of receivables account since the amount had
long been expended.

We recommended that management cause the immediate settlement of the long

unliquidated cash advances of P351,185.43.

Determine the officers responsible for clearing them of their obligations to the
District.

If documentary settlement is not possible, collect the amounts due to the

District from the Estate of the deceased persons.

3. Misclassification of accounts totaling to P10,138,385.81 contrary to prescribed

COA Chart of Accounts and the New Government Accounting System –
Corporate led to misleading information which overstated and understated
the accounts in the financial statements.

We recommended that management refrain from recording accounts other than its
prescribed classifications such as collections considered as payable not within
specific classification should be classified as Other Payables, Salaries of Job
Order Employees either assigned in the District’s office or at far-flung LGUs
should be classified as General Services, Per Diems of the members of the Board
of Directors should be classified as Travelling Expenses, and Monetization of
leave credits should be classified at as Other Personnel Benefits.

Strictly adhere to the prescribed government standards for chart of accounts and
the presentation/classification of accounts in the financial statements in the
ensuing years.

4. Various assets in the Schedules of PPE marked as defective, not found, sold,
and unserviceable with a total cost of P15,017,356.61 were still recorded as
part of the Property, Plant and Equipment causing an overstatement of the
said asset with the same amount casting doubt on the reliability of the
balances reported in the financial statements.
 Management shall endeavor to prepare necessary journal entries to adjust the
assets involved to arrive at their accurate balances and cause the disposition of
the unserviceable ones so that balance in the financial report be properly
presented.

Form an inventory and disposal committee to facilitate the evaluation and

subsequent disposal of these assets.

Reconcile the variance of the accumulated depreciation accounts and effect the
necessary adjustments to reflect the correct balances in the financial statements.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT

RECOMMENDATIONS

Out of 52 audit recommendations embodied in the Annual Audit Reports of CY

2011 and prior years, 42 or 81% were fully implemented while 10 or 19% were partially-
implemented.