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Republic of the Philippines

COMMISSION ON AUDIT
Regional Office No. XIII
Butuan City

ANNUAL AUDIT REPORT

ON THE

BUTUAN CITY WATER DISTRICT


Butuan City

For the Calendar Year Ended December 31, 2013

Annex A

BUTUAN CITY WATER DISTRICT


ButuanCity
AGENCY ACTION PLAN and STATUS of IMPLEMENTATION
Audit Observations and Recommendations
For the Calendar Year 2013
As of ______________
Reason for
Agency Action Plan
Target
Partial/ Delay/
Person/ Implementatio
Status of
Nonn
Date
Action
Dept.
Implementatio
Implementation,
Audit
Audit
To
Ref. Observations Recommendations Plan Responsible From
n
if applicable

Agency sign-off:
_______________________________ __________
Name and Position of Agency Officer
Date

Note: Status of Implementation may either be (a) Fully Implemented, (b) Ongoing,
(c) Not Implemented, (d) Partially Implemented, or (e) Delayed

Action
Taken/
Action
to be
Taken

Republic of the Philippines


COMMISSION ON AUDIT
Office of the Supervising Auditor
Water District Audit Group
Butuan City
October 10, 2014
MR. ROLAND A. REY
Regional Director
Commission on Audit
Regional Office No. XIII
Butuan City
Sir:
In compliance with Section 2, Article IX-D of the Philippine Constitution and
Section 43 of Presidential Decree No. 1445, we conducted a Financial and
Compliance Audit on the accounts and operations of the Butuan City Water District,
Butuan City for the year ended December 31, 2013.
The audit was conducted to ascertain the propriety of financial transactions
and compliance of the District to prescribed 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 the financial statements.
Our attached report consists of five parts: Part I, the Agency Background;
Part II, the Audited Financial Statements; Part III, the detailed Findings and
Recommendations, which were discussed with concerned Management officials and
staff; Part IV, the Status of Implementation by the Auditee of Prior Years Audit
Recommendations; and Part V, the Annexes.
Except for the effects of the noted deficiencies, as discussed in detail in
Part III of this report, there is reasonable assurance that the financial statements are
free of material misstatements and were prepared in accordance with applicable laws,
rules and regulations and in conformity with generally accepted state accounting
principles.
Our audit was conducted in accordance with the Philippine Public Sector
Standards of Auditing and we believe that it provides reasonable bases for the results
of audit.

Very truly yours,

VICTORIANA P. MAQUILING
Supervising Auditor

Republic of the Philippines


COMMISSION ON AUDIT
Regional Office No. XIII
Butuan City
September 8, 2014

MR. ROLAND A. REY


Regional Director
Commission on Audit
Regional Office XIII
Butuan City
Thru :

MS. VICTORIANA P. MAQUILING


Supervising Auditor
Water Districts Audit Group

Sir:
In compliance with Section 2, Article IX-D of the Philippine Constitution and
Section 43 of the Government Auditing Code of the Philippines (PD1445), we
conducted a financial and compliance audit on the accounts and operations of the
Butuan City Water District, Butuan City for the year ended December 31, 2013.
The audit was conducted to verify that the Agencys financial reports are free
of material misstatements and were prepared in accordance with applicable laws, rules
and regulations and in conformity with generally accepted state accounting principles.
Except for the effects of the noted deficiencies, as discussed in detail in Part
III of this report, there is reasonable assurance that the financial statements are free of
material misstatements and were prepared in accordance with applicable laws, rules
and regulations and in conformity with generally accepted state accounting principles.
Our audit was conducted in accordance with the Philippine Public Sector
Standards of Auditing and we believe that it provides reasonable bases for the results
of audit.

Very truly yours,

ELSA A. LOPEZ MONTON


State Auditor III
Audit Team Leader Team I

EXECUTIVE SUMMARY
INTRODUCTION
The Butuan City Water District was created by virtue of Resolution No. 256
adopted by the Municipal Board of the City of Butuan in its regular meeting on March
28, 1974 pursuant to Presidential Decree No. 198, as amended. The Resolution was
approved by the City Mayor on April 1, 1974.
On June 6, 1974, the District was given its Conditional Certificate of
Conformance officially recognized by the Local Water Utilities Administration
(LWUA).
The Management of the District is governed by a policy making body whose
functions are to formulate and to establish sound operating policies of the District in
order to maintain its viability and self-sufficiency.
The policy making body is composed of five (5) representatives from the
different sectors of the community with a term of six years, as provided by P.D. 198,
appointed by the City Mayor of Butuan City.
Presidential Proclamation No. 1076 dated September 4, 1997 declared the
preservation of 4,367.44 hectares of the Taguibo River Watershed Forest Reserve at
Taguibo, Butuan City.
Since July 2008, the District has expanded its service area connections from
the initial number of 16 to 53 urban and rural barangays out of the 86 total numbers of
barangays in Butuan City boosting the total number of service connections to 37,703.
In CY 2007, it completed its Phase II Comprehensive Water Supply System Project,
involving development of new water supply source, installation of 900 mm. diameter
transmission line from the new source at Sitio Iyao, Barangay Anticala which
stretches for nine kilometers to Barangay Taguibo, construction of Infiltration
Gallery, 467 linear-meter tunnel, pressure regulating valve structure, water treatment
and storage facilities.

FINANCIAL HIGHLIGHTS
For CY 2013, the Butuan City Water District had total assets of
P1,295,457,657.92, total liabilities and deferred credits of P956,298,071.03 and
equity of P339,159,586.89. Net income for CY 2013 was P22,833,491.31, which is
388% more than the CY 2012 income of only P4,678,366.81.
OPERATIONAL HIGHLIGHTS
For CY 2013, the District has the following financial ratios to show for its
performance.
A. Liquidity Ratios indicate the ability of the District to meet/pay short
term (1 year) obligations.
i

Ratio

Formula

Ratio

1. Current Ratio

Current Assets/Current Liabilities


(140,399,843.71/43,354,638.59=3.24)
(100,405,445.97/25,417,280.92= 3.95)

2. Quick Ratio

Cash+Receivables/Current Liab.
(122,293,227.60/43,354,638.59 =2.82)
(80,466,424.53/25,417,280.92 =3.17)

3. Net Working
Capital

Current Assets-Current Liabilities

2013
3.24:1

2012
3.95:1

2.82:1

3.17:1

97,045,205.12

74,988,165.05

The ratios above showed that although the District is very liquid, current ratio
slightly decrease in CY 2013 as compared to CY 2012. But on the positive note,
working capital increased, meaning more funds to carry its operations.
PLANS AND TARGETS AGAINST ACCOMPLISHMENTS
For CY 2013, the District has the following major projects and corresponding
accomplishments:
1. WMMP
2. Rehabilitation of Emenville Reservoir
3. Renovation of Engineering Office
4. Steel Collar Plate - Brgy. Anticala
5. Construction of Deepwell - Brgy Taguibo
6. Ampayon/Pagatpatan Temporary Lines
7. Dumalagan Expansion Line
8. Perimeter Fence of Pinamanculan Sub-station
9. Water Meter Maintenance Program
10. Improvement of BOD Room/Library
11. Meter Shop-Pump Station 1
12. Brgy. Mahayahay Multi-purpose hall
13. CR at Brgy. Mahayahay
14. Libertad In Line Booster Pump
15. Barangay Anticala-Capsulized Manhole
16. Pinamanculan Steel Reservoir

14,887,717.00
3,611,567.24
122,104.85
597,461.60
2,774,747.50
548,199.86
1,186,194.00
490,914.05
13,083,230.01
329,473.89
212,457.40
215,156.42
203,692.86
1,858,264.12
137,781.05
1,893,645.83

In progress
In progress
Completed
Completed
Completed
Completed
In progress
Completed
In progress
In progress
Completed
In progress
In progress
In progress
In progress
In progress

BUDGET AGAINST ACTUAL EXPENDITURES


Account
Revenue
Personal Services
Supplies and Other Expenses
Depreciation
Repairs and Maintenance
Financial Expenses
Total Expenses
Net Income

Per Actual
279,464,818.91 P

Per Budget
286,695,722.83 P

Variance
(7,230,903.92)

62,671,852.60
35,978,799.52
51,908,454.00
18,598,966.56
87,473,254.92
256,631,327.60
22,833,491.31 P

75,557,058.92
43,657,400.65
52,791,168.54
24,930,873.48
86,264,591.88
283,201,093.47
3,494,629.36 P

(12,885,206.32)
(7,678,601.13)
(882,714.54)
(6,331,906.92)
1,208,663.04
(26,569,765.87)
19,338,861.95

ii

SCOPE OF AUDIT
A financial and compliance audit was conducted on the accounts and
operations of the District for Calendar Year 2013. The audit consisted of verification,
reconciliation and analysis of accounts, and such other procedures considered
necessary to ascertain the extent of compliance with laws, rules and regulations and
budgetary requirements.
INDEPENDENT AUDITORS REPORT
The Auditor rendered a qualified opinion on the fairness of presentation of the
financial statements as of December 31, 2013 due to some deficiencies noted in the
accounts as discussed in Part III of this report.
SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS
1.

The percentage of the Non-Revenue Water of the District exceeded the


20% maximum acceptable level as required under the LWUA Circular
No. 004-10 dated February 23, 2010, resulting in an estimated revenue
loss of P5,294,555.87 in CY 2013.
Create a team who is directly responsible in the implementation of plans and
programs to reduce the percentage of NonRevenue Water (NRW). These
plans and programs should be translated into concrete actions to address the
problem on unaccounted water losses.
Require the team to monitor regularly the water connections so that any
pilferages, defective water meters and pipeline leakages can be reported
promptly to Management for immediate action.

2.

Cash Advances for Intelligence Fund totaling P600,000.00 for CY 2013


were considered liquidated based on the certifications signed by the
General Manager and the Program Administrator that funds were used
in connection with Project/Program Confidential/Intelligence Data
Gathering, instead of a Credit Advice from the COA Chairman or
his/her representative in accordance with COA Circular 2003-003 dated
July 30, 2003.
Restore the cash advance account until after the receipt of the Credit Notice
from the COA.
Ensure that cash advances for intelligence fund should only be considered
fully liquidated upon receipt of the credit advice from the COA Chairman or
his/her representative.

3.

Allowances and fringe benefits amounting to P2,644,558.25 were granted


to its officials and employees without legal basis.
Stop the granting of allowances and benefits without legal or valid basis and
require immediate refund by the concerned officials and employees of the
amount received.
iii

4.

The District still hired a Technical Services Consultant for the Office of
the Board of Directors on January to April 2013 who was paid the total
amount of P 60,000.00 which was considered unnecessary per COA
Circular No. 85-55A because her tasks can be handled by the existing
personnel of the District.
Discontinue the engagement of a Technical Services Consultant specially that
she is out of the country. Fill up the position of Board Secretary if it is
necessary.

5.

Accounts ReceivablesCustomers (water sales) and Installment Sales


Receivable (Service Connection and Materials) per Accounting Records
amounting to P34,401,765.09 and P1,338,988.03 respectively, or a total of
P35,740,753.12, did not tally with the Aging of Accounts Receivable
maintained by the Billing Division of the Commercial Department
amounting to P33,841,222.52, contrary to COA Circular Letter No. 200401, thereby showing a difference of P1,899,530.60.
Require the Accounting Department to coordinate with the programmer of the
Billing and Collection System and look for the cause of the discrepancy to
arrive at the reconciled balance.
Assign a permanent personnel in the accounting and the billing section of the
Finance and Commercial Department respectively, whose main duties and
responsibilities include among others to review, analyze and trace all
adjustments reflected in the Commercial Department so that the accounting
and the commercial department records will be consistently reconciled at any
period in time.

6.

Receivables from inactive/disconnected concessionaires amounting to


P8,476,893.37, which remained outstanding for more than one (1) to
thirty-two (32) years were classified as current assets contrary to the
generally accepted accounting principles on receivables, COA Circular
No. 97-001 and the Commercial Practices Manual (CPM) on Water
Districts.
Require the Bookkeeper to make necessary adjustment to reclassify the
inactive accounts to Other Assets-Non Current Receivables account.
Exhaust all means to collect the amounts by sending out bills, statements of
accounts or demand letters to verify the existence of the concessionaires in
their indicated address. Otherwise, agency officials may request authority to
write-off uncollectible/dormant accounts from the Commission on Audit
following the guidelines under COA Circular No. 97-001 dated February 5,
1997.
Review or analyze the dormant accounts in accordance with the guidelines and
procedures mentioned in E.O. 431. If the analysis or review is not possible due
to the absence of records and documents, the District should seek for the civil
remedies or request for the write-off and/or adjustments of the account
balances from the Commission on Audit. The request should be duly
iv

supported with the list of available records and extent of confirmation made
as to its collectability and the reasons for the adjustments thereof, subject to
certain conditions:
1. Death of the respondent official/ employees; or
2. Unknown whereabouts of the official/employees, and that he could
not be located despite extra-diligent effort to find him; or
3. Incapacity to pay or insolvency of the respondent employee;
4. The account remained unpaid and outstanding for more than 5
years despite diligent efforts to collect exerted by the accountable
officer; and
That all conditions aforementioned shall exist and be certified to by the
respective accountable officer.
7.

Sixty-Eight percent (68%)of the total Accounts Receivable amounting to


P23,123,412.09 were not collected within the specified collection period
and had been overdue for more than 30 days to over 120 days due to
failure of Management to implement strictly its collection and
disconnection policy, causing an increasing trend of the total balance of
Accounts Receivable.
Exhaust effective strategies by launching an aggressive campaign to improve
collection efficiency and to ensure the sustainability of the operations of the
District.
Enforce strictly the disconnection policy in case of failure of payment of water
bills, to minimize, if not to eliminate, past due accounts.

8.

The Districts four units of vehicles were not registered in the name of the
District and were still not marked with For Official Use Only and the
agency name, contrary to Section 58 of P.D. 1445 and COA Circular
No. 75-6.
Exert effort in facilitating the immediate transfer of the ownership of the
subject vehicles to the Butuan City Water District as the registered owner. In
the meantime, pending the transfer of ownership and the change to
government plate, implement the marking of the vehicles with the prescribed
three (3) inches For Official Use Only together with the name and logo of
the District.

9.

Internal Control on the computerized Collection System is weak due to


the following deficiencies:
a. Data from the Collection System of the District includes only the
water sales and not the other collections, thus creating gaps in the
numerical sequence of the ORs issued by each collector.
We recommended that the EDP develop another program to incorporate
the other collections into the water sales data in order to make
v

verification easier, and also accurately establish accountability of the


Accountable Officers of the District at any period of time.
b. Some OR numbers reflected in the Daily Collectors Report did not
coincide with the actual OR number (pre-printed and with serial
number) issued to payor/concessionaire.
We recommended that Management require the AO to be extra careful in
encoding the first OR to prevent errors.
Additional feature should be incorporated in the system so that the OR
number in the system will be printed side by side with the OR number in
the actual OR issued to readily identify errors.
c. Some Official Receipts were issued twice in the system but have
separate actual pre-printed OR issued.
We recommended that Management consider incorporating internal
control features in the system that if an OR was already used, a message
would prompt or an error message will appear, informing the AO that the
OR number was already used, thus preventing duplication in the encoding
of ORs.
d. There were instances that the ORs were not issued in numerical
sequence. Also, duplicate ORs were not properly filed intact for easy
verification. Further, original copies of cancelled ORs were not filed
with the duplicate copies.
We recommended that:
i. Management review the Collection System and incorporate controls to
include complete series of ORs issued for collections made to ensure
completeness of collection report.
ii. Management require the AOs to file ORs properly on a daily basis,
properly labeled by date and by AO. Original copy of cancelled ORs
should be filed together with its duplicate copies and properly marked
on its face with the word Cancelled.
e. The Daily Collection Report in loose pages used in lieu of cashbook
was not certified by the AO to show accountability. Monthly Report of
Accountability for Accountable Forms was also not prepared in
violation of Section 04(e) of the NGAS Manual, Volume I.
Require the Accountable Officers to certify on the Daily Collection Report
to establish accountability.
Require also the AOs to prepare the Monthly Report of Accountability for
Accountable Forms as required.

vi

COMPLIANCE WITH TAX LAWS


The District religiously remitted the value added tax and other percentage
taxes withheld on the Districts purchases of goods and services, creditable income
taxes withheld and income taxes withheld on compensation of personnel to BIR, in
compliance with Revenue Regulation 2-98 dated January 14, 1998.
For taxes payable included under Inter Agency Payables account, the same
were remitted on January 2013.

STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES


The status of unsettled audit suspensions, disallowances and charges inclusive
of disallowances on appeal is presented below.
Beginning
Bal. 1/1/2013

This Period
NS/ND/NC
Settlement

Ending Bal.
12/31/2013

Notice of Suspension
Notice of Disallowance
Notice of Charge

153,400.00
15,236,213.63
-

600,000.00
10,258,072.51
-

600,000.00
25,494,286.14
-

Total

15,389,613.63

10,858,072.51

26,094,286.14

153,400.00

The following disallowances issued in CY 2013 are currently on appeal with


the Regional Director:
ND#

Details

ND#2013-001 to 012-101(2011)
ND#2013-013 to 023-101(2011)
ND#2013-026 to 036-101(2011)
ND#2013-037-101(2011)
ND#2013-038 to 127-101(2011)
ND#2013-128 to 132-101(2011)
ND#2013-133-101(2011)
ND#2013-134 to 193-101(2011)
ND#2013-194 to 198-101(2011)

Amount

Rice Subsidy
Meal Subsidy
Subsistence Allowance
Gift Certificates
Excessive RATA
BOD-Financial Assistance
Year-end Incentives
BOD-Honorarium
Excessive Travelling Allowance

TOTAL

4,759,630.00

2,194,500.00
593,253.60
396,121.00
2,082,330.00
98,000.00
P

10,123,834.60

The following disallowances were currently on appeal with the Commission


Proper:
Case No.

Amount

CGS-ND-2013-001
CGS-ND-2013-002
CGS-ND-2013-003
CGS-ND-2013-001

92,492.20
2,183,370.00
865,400.00
12,023,931.43

Total

15,165,193.63

vii

STATUS OF IMPLEMENTATION BY THE AUDITEE OF PRIOR YEARS


AUDIT RECOMMENDATIONS
Of the ten (10) audit recommendations embodied in the CY 2012 Annual
Audit Report, five (5) were implemented, four (4) were partially implemented and
one (1) was not implemented.

viii

TABLE OF CONTENTS
Part

Page

AGENCY BACKGROUND

II

AUDIT FINANCIAL STATEMENTS

Independent Auditor's Report


Statement of Management's Responsibility for
Financial Statements
Financial Statements
Notes to Financial Statements

8
13

4
7

III

DETAILED FINDINGS AND RECOMMENDATIONS

24

IV

STATUS OF IMPLEMENTATION BY THE


AUDITEE
OF
PRIOR
YEARS
AUDIT
RECOMMENDATIONS

46

ANNEXES

PART I - AGENCY BACKGROUND


A. PROFILE
The Butuan City Water District was created by virtue of Resolution No. 256
adopted by the Municipal Board of the City of Butuan in its regular meeting on March
28, 1974 pursuant to Presidential Decree No. 198, as amended. The Resolution was
approved by the City Mayor on April 1, 1974.
On June 6, 1974, the District was given its Conditional Certificate of
Conformance officially recognized by the Local Water Utilities Administration
(LWUA).
The District is a Category A District effective March 2012 . It has 37,703
active connections and 5,520 inactive connections.

B. MISSION
Butuan City Water District, a service-oriented entity, endeavours to preserve
the environment, deliver quality service and satisfy its customers.

C. VISION
A leader in the water and sanitation industry advancing integrated water
resource management.

D. FINANCIAL HIGHLIGHTS
The comparative financial condition and results of operations of the Butuan
City Water District for Calendar Years 2013 and 2012 were as follows:
2013

2012

Increase/Decrease
Amount
%

Financial Condition
Assets
Liabilities
Equity

1,295,457,657.92 P
956,298,071.03
339,159,586.89

1,273,021,571.37 P
956,432,318.23
316,589,253.14

22,436,086.55
(134,247.20)
22,570,333.75

2%
0%
7%

279,464,818.91 P
169,158,072.68
110,306,746.23
87,473,254.92
22,833,491.31 P

267,025,185.64 P
160,958,824.29
106,066,361.35
101,387,994.54
4,678,366.81 P

12,439,633.27
8,199,248.39
4,240,384.88
(13,914,739.62)
18,155,124.50

5%
5%
4%
-14%
388%

Results of Operation
Income
Expenses
Operating Income
Interest and Bank Charges

Net Income

For CY 2013, the District showed a 2% increase in assets, a very minimal


decrease in liabilities and increase in equity of 7%. Net Income in CY 2013 increased
by a significant 388% or P18,155,124.50. This is mainly because of the
P12,439,633.27 increase in receipts and decrease in interest expenses of
P13,914,739.62.
1

E. OPERATIONAL HIGHLIGHTS
For CY 2013, the District has the following financial ratios to show for its
performance.
A. Liquidity Ratios indicate the ability of the District to meet/pay short
term (1 year) obligations.
Ratio

Formula

Ratio

1. Current Ratio

Current Assets/Current Liabilities


(140,399,843.71/43,354,638.59=3.24)
(100,405,445.97/25,417,280.92= 3.95)

2. Quick Ratio

Cash+Receivables/Current Liab.
(122,293,227.60/43,354,638.59 =2.82)
(80,466,424.53/25,417,280.92 =3.17)

3. Net Working
Capital

Current Assets-Current Liabilities

2013
3.24:1

2012
3.95:1

2.82:1

3.17:1

97,045,205.12

74,988,165.05

The ratios above showed that although the District is very liquid, current ratio
slightly decrease in CY 2013 as compared to CY 2012. But on the positive note,
working capital increased, meaning more funds to carry its operations.
B. Financial Leverage Ratios indicates how much of the Districts assets
are financed through borrowings or liabilities.
Ratio

Formula

Ratio

1. Debt Ratio

Total Liabilities/Total Assets

2013
72%

2.Debt/Equity
Ratio

Total Liabilities/Total Equity

2.77:1

2012
74%
3.02:1

Data showed that 72% of the Districts total assets for CY 2013 and 74% for
CY 2012 were financed through borrowings or debts. It also showed that its liability
ratios were 3.02:1 of its equity for CY 2012 and 2.77:1 for CY 2013, showing
unhealthy financial leverage indicator since creditors and not equity have more claims
over its assets.

PLANS AND TARGETS AGAINST ACCOMPLISHMENTS


For CY 2013, the District has the following major projects and corresponding
accomplishments:
1. WMMP
2. Rehabilitation of Emenville Reservoir
3. Renovation of Engineering Office
4. Steel Collar Plate Brgy. Anticala
5. Construction of Deepwell Brgy Taguibo
2

P 14,887,717.00
3,611,567.24
122,104.85
597,461.60
2,774,747.50

In progress
In progress
Completed
Completed
Completed

6. Ampayon/Pagatpatan Temporary Lines


7. Dumalagan Expansion Line
8. Perimeter Fence of Pinamanculan Sub-station
9. Water Meter Maintenance Program
10. Improvement of BOD Room/Library
11. Meter Shop-Pump Station 1
12. Brgy. Mahayahay Multi-purpose hall
13. CR at Brgy. Mahayahay
14. Libertad In Line Booster Pump
15. Barangay Anticala-Capsulized Manhole
16. Pinamanculan Steel Reservoir

548,199.86
1,186,194.00
490,914.05
13,083,230.01
329,473.89
212,457.40
215,156.42
203,692.86
1,858,264.12
137,781.05
1,893,645.83

Completed
In progress
Completed
In progress
In progress
Completed
In progress
In progress
In progress
In progress
In progress

BUDGET AGAINST ACTUAL EXPENDITURES


Account
Revenue
Personal Services
Supplies and Other Expenses
Depreciation
Repairs and Maintenance
Financial Expenses
Total Expenses
Net Income

Per Actual
279,464,818.91 P

Per Budget
286,695,722.83 P

Variance
(7,230,903.92)

62,671,852.60
35,978,799.52
51,908,454.00
18,598,966.56
87,473,254.92
256,631,327.60
22,833,491.31 P

75,557,058.92
43,657,400.65
52,791,168.54
24,930,873.48
86,264,591.88
283,201,093.47
3,494,629.36 P

(12,885,206.32)
(7,678,601.13)
(882,714.54)
(6,331,906.92)
1,208,663.04
(26,569,765.87)
19,338,861.95

PART II - AUDITED FINANCIAL STATEMENTS

Independent Auditors Report


Statement of Managements Responsibility for the Financial
Statements
Financial Statements
Comparative Balance Sheet
Comparative Statement of Income and Expenses
Comparative Statement of Cash Flows
Comparative Statement of Changes in Government Equity
Notes to Financial Statements

Republic of the Philippines


COMMISSION ON AUDIT
Office of the Supervising Auditor
Water Districts Audit Group
Regional Office No. XIII, Butuan City

INDEPENDENT AUDITORS REPORT

MR. CRISPIN L. YOUNG


Chairman
Board of Directors
Butuan City Water District
Butuan City
We have audited the accompanying financial statements of the Butuan City
Water District, Butuan City, which comprise the Balance Sheet as of December 31,
2013, and the Statement of Income and Expenses, Statement of Changes in Equity
and Statement of Cash Flows for the year then ended, and a summary of significant
accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these
financial statements in accordance with Commercial Practices System and the
generally accepted accounting principles and reflect amounts that are based on
estimates and informed judgement of management with an appropriate consideration
for materiality
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit in accordance with the Philippine Public Sector
Standards of Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected depend
on the auditors judgement, including the assessment of the risks of material
misstatements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entitys preparation and fair
presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entitys internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management as well as evaluating the overall presentation of the
financial statements.

We believe that the evidence we have obtained is sufficient and appropriate to


provide a basis for our adverse opinion.
Basis for Qualified Opinion
As discussed in Part III of this report, Detailed Findings and
Recommendations and in the Notes to Financial Statements, the following
deficiencies were noted:
a. Unreconciled difference of P1,899,530.60 between accounting records and
aging schedule of accounts receivable and instalment sales receivable.
b. Accounts ReceivableCustomers and Installment Sales Receivable in the
aggregate amount of P8,476,893.60 which remains outstanding from one
year to thirty-two years were recorded as current assets.
c. Cash Advances for Intelligence Fund amounting to P600,000 recorded as
liquidated despite absence of Credit Advice from the COA Chairman or
his/her representative.
d. Concessioners consumption deposit totalling P706,755.00 were recorded
as Other Investment
e. Sinking Fund and other reserve funds totalling P29,341,111.64 which
should form part of the Cash account were booked up as Other Assets.

Qualified Opinion
In our opinion, except for the possible effects of the matter described in the
preceding paragraph, the financial statements present fairly, in all material respects,
the financial position of Butuan City Water District as at December 31, 2013, and its
financial performance and its cash flows for the year then ended in accordance with
the Generally Accepted Accounting Principles.

Emphasis of Matter
We draw attention to Note 7 to the financial statements which pertains to the
uncertainty of the appeal filed by the District with the Local Water Utilities
Administration (LWUA) for the cancellation of the pre-termination fee amounting to
P17,143,088.76 for Loan Account No. 3-757 and 4-2531 which is already in the
Office of the Government Corporate Council (OGCC) for final decision.
Likewise, Note 9 to the financial statement emphasized that part of the
properties were held as collateral for the loan from the DBP amounting to P550M.
These include the Land, Building and Structures, PRV and Pumping Station No 1.

Other Matter
For CY2013, allowances and benefits amounting to P2,644,558.25 were still
granted to the Districts officials and employees without legal basis despite the
issuance by the Auditor of Notices of Disallowances on prior years claims.

COMMISSION ON AUDIT
By:

VICTORIANA P. MAQUILING
Supervising Auditor

September 12, 2014


COA Regional Office XIII
South Montilla Boulevard
Butuan City

NOTES TO FINANCIAL STATEMENTS


1.0 Brief Background
The Butuan City Water District (BCWD) was created on April 1, 1974
through the Municipal Board of Butuan City under the leadership of Mayor
Figurado O. Plaza. Its birth was covered by Resolution No. 256 and in accordance
with the provisions of Presidential Decree No. 198, as amended, otherwise known
as the Provincial Water Utilities Act of 1973.
The current members of the Governing Board include Dir. Juanito A. Lao,
Dir. Crispin L. Young, Chairman, Dir. Pacita P. Buol, Vice Chairman, Dir.
Roldan L. Torralba, and Dir. Claudio B. Estacio.
Headed by its dynamic General Manager, Engr. Anselmo L. Sang Tian,
the BCWD is continually growing. From 700 service connections at the onset of
its service to 37,703 active service connections distributed in 54 urban and rural
barangays as of Balance Sheet date. For the past thirty-nine years, the District
strived to expand its communities served. In fact, it has implemented several
expansion projects for CY 2013. Among these barangays where new distribution
lines were constructed are Dumalagan, Ubod-Ubod & Basay, Malalag, Lemon,
Brgy. Mahay and Amakan, Tiniwisan, Sunrise, Ampayon, and Dalingdingan.
As one of the pioneers in the water industry, the District had been
reinventing itself, moving forward towards a new vision of becoming a leader in
the water and sanitation industry, advancing integrated water resource
management and still, staying true to its mission of preserving the environment,
delivering quality service and most of all, satisfying its most valued customers.

2.0 Summary of Significant Accounting Policies


a. Basis of Financial Statements
Financial Statements has been prepared in accordance with the
accounting system based on Commercial Practices System (CPS)/New
Government Accounting System Modified Accounts for use of water districts.
Transactions are recorded on accrual basis.
b. Inventory
Inventories are valued at cost on a first in, first out basis. A periodic
physical inventory is conducted at the close of the year.
c. Property, Plant and Equipment
Property, Plant and Equipment are carried at cost less accumulated
depreciation. Depreciation is computed on the straight-line method over the
estimated useful lives of the properties, 10% of the acquisition cost has been
provided as residual value. Minor repairs and maintenance cost are charged to
expense when incurred.
13

3.0 Cash- P 82,081,094.69


2013
Cash Collecting Officer
Petty Cash Fund
Working Fund
Cash in Bank - Local Currency

2012

2,074,496.79 P
30,000.00
30,000.00
79,946,597.90

1,208,544.76
30,000.00
48,310,359.02

82,081,094.69 P

49,548,903.78

Cash Collecting Officer pertains to available cash on hand representing


cash collections on December 28, 2013, which were deposited on the next banking
day.
Petty Cash Fund account pertains to funds handled by a designated
disbursing officer for various petty cash disbursements not exceeding One
Thousand Pesos (P 1,000.00).
Working Fund account pertains to funds handled by a designated
disbursing officer for various petty cash disbursements for subscriptions,
inventoriable supplies and materials, and others, not exceeding One Thousand
Pesos (P 1,000.00).
Cash in Bank Local Currency is composed of the following bank
accounts:
Account Details

Account No.

Balance

Savings 1

0805-019620-530

324,752.57

Current

0805-019619-030

1,281,638.60

Savings 2

0805-019621-530

20,487.97

JSA-Savings 2

0805-019505-530

67,848,547.21

Savings

0805-019620-531

75,111.00

Savings

0361-1158.72

Savings

0033-006749-001

252,155.42
10,143,905.13
P

79,946,597.90

4.0 Accounts Receivables P 35,124,040.45


2013

2011

Accounts Receivable
P
Installment Sales Receivable
less : Allowance for Doubtful Accounts

34,401,765.09 P
1,338,988.03
(616,712.67)

30,447,426.76
470,093.99
(156,568.45)

35,124,040.45 P

30,760,952.30

14

Accounts Receivable derived from water sales are classified according to


zone as follows:
Account
111-1
111-2
111-3
111-4

Zone
01 to 05
06 to 10
11 to 15
16 to 20

Amount
6,119,045.93
6,287,252.79
10,883,322.75
11,112,143.62
34,401,765.09
616,712.67
33,785,052.42

Total
Less: Allowance for Doubtful Accounts
Net Realizable Value

P
P

Installment Sales Receivable account refers to receivables from customers


for installation of new service connections and sales of P.E. tubes.
5.0 Other Receivables P 4,471,379.82
2013

2012

Advances to Officers and Employees P


Due from Officers and Employees
Insurance/Reinsurance Claims Rec.
Other Receivables

98,164.67 P
205,498.04
4,167,717.11

26,899.70
388,437.94
4,182,873.00

4,471,379.82 P

4,598,210.64

Advances to Officers and Employees refers to various cash advances used


for purposes such as purchase of uniforms and other advances necessary in the
performance of official duties.
Due from Officers and Employees on the other hand pertains to cash
advances granted to officers and employees for travel expenses and other
expenditures necessary to carry out the affairs of the District. Also forms part of
this account is the excess of cash advances amounting to P29,405.70 and is
subject to payroll deduction in the succeeding payroll period.
Other Receivables consist of the following:
Details

Date

RD Policarpio
Saranggani Mixer
FF Cruz Construction
Receivable from former BCWD employees
Receivable from various concessionaires
Receivable from various water districts
Others
Total

15

12/31/2008
10/31/1996
12/31/2006
varoius dates
varoius dates
varoius dates
varoius dates

Amount
P

3,024,996.48
630,531.53
118,492.00
15,967.42
16,075.45
47,865.63
313,788.60
4,167,717.11

Part of water districts accounts have been partially settled through


installment payment. While the receivables from various BCWD Employees
consist of accounts from motorcycle loans.
6.0 Inventories P 18,106,616.08
This refers to materials and supplies available in the warehouse intended
for the Districts operations as follows:
2013

2012

Office Supplies Inventory


P
Fuel, Oil and Lubricants
Chemicals and Filtering Supplies Ivty
Work in Progress Inventory
Construction Materials Inventory
Transm/Distr. Pipes & Fittings
Maintenance Supplies Inventory
Meters Inventory
Service Connection Materials Inventory

513,491.11 P
41,610.00
583,056.38
86,682.15
344,281.00
5,744,498.62
94,094.64
5,850,235.00
4,848,667.18

582,250.39
44,290.00
348,439.89
61,845.15
490,111.00
4,557,115.74
110,694.64
3,290,960.00
5,855,103.99

18,106,616.08 P

15,340,810.80

7.0 Prepayments and Deposits P 19,213,094.13


Details of this account are broken down as follows:
2013
Prepaid Insurance

2012

138,185.74 P

Advances to Contractors

Guaranty Deposits

1,092,070.59

Other Prepayments and Deposits


Pre-termination fee from LWUA Loans
Other Deferred Charges

106,630.53
368,544.84
998,819.87

601,643.58

658,020.40

17,143,088.76

17,389,656.43

238,105.46
P

19,213,094.13 P

19,521,672.07

Prepaid Insurance account pertains to insurances premiums of vehicles,


buildings and other properties. This also includes fidelity bond of employees,
particularly storekeepers, collecting officers and cashier.
Guaranty Deposits account includes the following:
Special Deposit - Expropriation case
Chlorine Tank Deposits
Oxygen/Acetylene Tank Deposits
ANECO Consumption Deposit
Globe Lines Deposit
Telephone Lines Deposit

16

2013
52,690.81 P
431,150.00
16,000.00
549,279.27
42,950.51
1,092,070.59 P

2012
52,690.81
431,150.00
16,000.00
463,620.55
12,581.00
22,777.51
998,819.87

Other Prepayments and Deposits account arise from purchases of uniform


materials for BCWD officers and employees.
Also includes payments for
renewal of registration for CY 2013 BCWD vehicles and real property tax of
Imadejas Subd., Butuan City.
Other Deferred Charges account refers to the following accounts:
Bidding Expenses
Franchise Taxes
Kajima IRA Housing Project
Total

P 211,398.20
P 19,166.66
P 7,540.60
P 238,105.46

Pre-termination fee of P17,143,088.76 was charged by LWUA for early


termination of Loan Account No. 3-757 and 4-2531 which was refinanced by
DBP. An appeal had already been filed by the District for the cancellation of this
fee and is now in the Office of the Government Corporate Council (OGCC)
waiting for final decision.
8.0 Other Investment P 706,755.00
This represent a special savings deposit with the Development Bank of the
Philippines (DBP) representing consumption deposit from concessionaires.
Interest earned for this investment for CY 2013 amounted to P7,118.85
2013
Other Investments

2012

706,755.00 P

699,636.15

706,755.00 P

699,636.15

9.0 Property, Plant and Equipment ( net ) - P 1,106,121,366.11


Beginning Bal.

Accu. Dep'n

Balance, End

Land and Other Improvements P


Plant
Buildings and Structures
Equipment and Machinery
Furniture, Fixture and Books
Books
Transportation Equipment
Construction in Progress

6,779,041.90 P
1,054,100,283.41
77,132,909.13
176,720,764.81
784,004.82
134,409.02
8,580,864.23
30,345,439.61

P
165,353,844.82
16,800,311.25
59,820,804.74
532,835.44
5,948,554.57
-

6,779,041.90
888,746,438.59
60,332,597.88
116,899,960.07
251,169.38
134,409.02
2,632,309.66
30,345,439.61

TOTAL PPE - GROSS

1,354,577,716.93 P

248,456,350.82 P

1,106,121,366.11

Part of the properties were held as collateral for the loan refinancing
availed from the DBP amounting to P 550M. Properties include the Land, Bldg.
& Structure such as the Admin Bldg. and Lot, PRV and Pumping Station No 1.
17

Also form part of this account is the Phase II project amounting to a total
of P947,601,138.01. This was previously included in Construction-in-Progress
and was only reclassified as completed project last year CY 2011 subject for
depreciation. Components of this project include, among others, the transmission
and distribution pipelines, civil work structure, installation of valves, service
vehicles used in the project, and electro-mechanical equipment.
The Phase II project was temporarily turned over to the District on June
2005, but was commissioned for operation only on June 2007. However, to date,
there has been no final acceptance executed because of the on-going case filed
against RD Policarpio arising from the said project.
Construction in-Progress account amounting to P 30,345,439.61covers on-going
projects which aimed to improve the services of the District, to wit:
WMMP
Multi-Purpose Hall at Mahayahay
CR at Mahayahay
Emenville Reservoir Rehab
Line Booster Pump Station and Site Devt.
Bod Record Room / Library
Perimeter Fence at Pump Station 2
Bunkhouse Renovation
Deep Wellat Brgy. Taguibo
Dumalagan Expansion Line
Pump Station at Taguibo
Perimeter Fence at Pinamanculan
Construction of CR at Training Hall
Ground Steel Reservoir
EMT (for adjustment)
Ubod-Ubod&Basay Upgrading of lines
Malalag Expansion
Lemon Expansion
Brgy. Mahay&Amakan Upgrading
Tiniwisan Upgrading
Casa Peral Upgrading
Sunrise, Ampayon
Dalingdingan Expansion
Upgrade Mag 500
Backfilling
Renovation of CR @ garage
Renovation of GM's Office
Renovation of Physicians Clinic
Renovation of Conference room
Repainting Of Boardroom Walling
Construction of CR at Emenville Reservoir
Renovation of AGM's Office
Total
18

16,351,100.66
204,398.60
142,585.00
3,999,903.80
2,053,204.12
296,526.50
103,540.00
13,922.00
584.40
74,634.16
77,824.00
115,600.00
430.00
1,817,900.00
(2,630.00)
440,063.76
48,544.48
700,210.88
1,022,579.01
1,182,689.00
126,207.52
49,321.00
517,741.52
350,000.00
31,476.70
158,907.00
197,043.10
35,224.95
11,808.00
45,380.00
149,631.45
29,088.00
30,345,439.61

10. 0 Other Assets ( net ) - P 29,633,311.64


2013

2012

Sinking Fund-DBP#0805-026855-530
P
Other Reserve Funds
Intangible Assets / IT Software
Other Assets
Total Other Assets
P
Less: Accumulated Amortization-Intangible Assets

29,034,813.64 P
306,298.00
343,638.48
14,920.00
29,699,670.12 P
66,358.48

20,968,259.46
306,298.00
82,838.48
14,920.00
21,372,315.94
40,438.48

Total Other Assets

29,633,311.64 P

21,331,877.46

Sinking Fund P 29,034,813.64


Sinking fund account represents 5% of the monthly revenue collection
which is set aside as restricted fund as part of the loan agreement between DBP
and the District.
Other Reserve Funds P 306,298.00
This account consists of the following:
Environmental Monitoring Fund
Environmental Guarantee Fund
BCWD Mutual Fund
Total

200,298.00
100,000.00
6,000.00
P 306,298.00

The Environmental Guarantee Fund was established last March 2010 per
Board Resolution No. 024, Series of 2010, as fund source for the indemnification
of damages caused by the Phase II Water Supply System Project and the
immediate rehabilitation and/or restoration of affected parties, communities and
ecosystems.
Other Assets P 14,920.00
This consists of Property and Equipment with useful life of more than one
year but small enough to be depreciated. This is maintained by recording a par
value of P1.00 for every properties of this kind.

11.0 Liabilities - P 941,603,834.29


2013
Current Liabilities
Payable Accounts
P
Inter-Agency Payables
Other Payables
Current Portion of Loans Payable
Total Current Liabilities
P
Loans/Lease Payable
Total Liabilities

19

2012

14,006,221.50
2,580,029.75
11,236,617.02
15,531,770.32
43,354,638.59
898,249,195.70

941,603,834.29

12,616,110.48
2,217,047.34
10,584,123.10
10,197,368.63
35,614,649.55
907,782,916.85
943,397,566.40

Accounts Payable P 14,006,221.50


Part of the Payable Accounts is the Accounts Payable consisting of the
following major suppliers and creditors of the District as follows:
Creditor/Details

Amount

Tradepoints, Inc.

December 2013

EC La Forteza

December 2013

1,527,051.20

WaterKonsult Equipment, Inc

December 2013

941,217.00

Fast Autoworld Phils. Inc,

December 2013

787,750.00

Visa Security & Gen. Services

December 2013

741,370.70

Moldex Products

December 2013

444,814.52

Vocom Enterprise

December 2013

439,000.00

RD Policarpio

December 2013

506,476.63

Timbercity Jetti Gas Station

December 2013

430,153.82

Makati Foundry

December 2013

436,516.00

Kupler Industries

December 2013

368,000.00

Mabuhay Vinyl Corp

December 2013

292,578.50

Columbia Computer Center

December 2013

380,165.00

Other Constructors and Suppliers

December 2013

4,103,128.13

Total

2,608,000.00

14,006,221.50

Inter-agency Payables P 2,580,029.75


This account is composed of the following:
Creditor/Details

Amount

Due to GOCC

Due to NGA's

1,045,862.66
1,511,347.16

Due to LGU ( City Tax )

22,819.93

2,580,029.75

Other Payables P 11,236,617.02


Details

Amount

Due to Officers and Employees

Contractor's Security Deposits

4,004,743.63
5,985,709.63

Accrued Light and Power

580,711.36

Due to Members

474,802.07

Others

190,650.33

20

11,236,617.02

Loans Payable P 913,780,966.02


This pertains to various long-term loans net of current portion availed by
the BCWD from LWUA and DBP as shown below:
Loan
Account
Number

Type/Kind
of Loan

Current
Portion

Long Term

Total Amount

Paying
Period

Amortization
Period

Monthly
Amortization

December 2010
- November
2025

4,158,836.33

2,623,404.95

LWUA
Open
Account Bill

4-2531

paid thru dbp


refinancing

Supplemental
Works - RWIG

RWIG
TOTAL
LWUA

19,232,891.60

19,232,891.60

3,350,000.00

3,350,000.00

22,582,891.60

22,582,891.60

DBP
3965-004004-7

P 550M

9,574,127.39

3965-004007-6

P 350M

5,439,348.06

3965-004008-9

P 5.5M

203,839.59

3965-004010-1

P 2.38M

95,064.68

3965-004009-6

P 5.4M

TOTAL DBP
TOTAL LOANS PAYABLE

522,547,590.62

532,121,718.01

180
months

340,907,630.19

346,346,978.25

180
months

November 2012
- October 2027

5,174,561.23

5,378,400.82

180
months

April 2013
March 2028

50,395.15

2,235,853.46

2,330,918.14

180
months

April 2013
March 2028

22,356.30

219,390.60

4,800,668.60

5,020,059.20

180
months

December 2013
Nov. 2028

51,593.93

15,531,770.32

875,666,304.41

891,198,074.42

15,531770.32

898,249,195.70

913,780,966.02

6,906,586.69

The LWUA Loan account nos. 3-324, 3-265,and 3-521 were paid in full
last November 2013.
Furthermore, the request for a decrease in interest rate on loans to DBP
was finally approved and implemented this month, December 2013. From a rate
of 10% for the P550M and 9.5% for the P350M loan and the other loans, it was
decreased to 7.5% per annum.

12.0

Deferred Credits P 14,694,236.74


This account is composed of the following:
Customers Deposit
Deferred Income from Penalty
Other Deferred Credits
Total

12,719,064.25
543,598.89
1,431,573.60
P 14,694,236.74
21

Part of the Deferred Credits account is the Customers Deposits amounting


to P12,719,064.25, which pertains to deposits made by customers upon
application for service connections as embodied in the District policy.
Other Deferred Credits of P1,431,573.60 pertains to bidding fees
received from various suppliers during bidding for the procurement of goods and
services for use in the Districts operations. It also includes trust receipts from
Bacuag Water District to defray expenses for the administration of bidding of their
supplies and materials but duly conducted by the BCWD BAC. Details are as
follows:
KAJIMA

27,693.48

Breakwater

28,000.00

NORMINRMC

1,100.00

Bidding Fees

1,279,819.22

Twin Peak Hydro Resources Corporation

(67,784.50)

Legal case on BCWD vs Danilo Furia

6,413.04

8th in a Series Management Training Course

53,449.02

Registration Fee Bacuag Water District

42,000.00

Ramonito R. Caneda (hospital bills)

10,677.49

Payroll Refundable to J. Fernandez

6,844.52

Basic Policy Seminar

38,361.33

Sponsorship Surigao Metro Water District


Total

5,000.00
1,431,573.60

The negative balance of other deferred credits Twin Peak Hydro,


represents excess of expenses over the set up of cash deposited by Twin Peak,
credited as Deferred Credits, for the initial operations of the Public Private
Partnership (PPP) between Twin Peak and the District. The excess will be
reimbursed by Twin Peak later.
13.0 Government Equity P 339,159,586.89
2013

2012

Government Equity
Donated Capital
Retained Earnings

2,367,355.65 P
15,546,853.94
321,245,377.30

2,367,355.65
15,546,853.94
298,675,043.55

Total Gove rnme nt Equity

339,159,586.89 P

316,589,253.14

Government Equity refers to assets turned over by the National and Local
Government during the inception and initial operations of the District. Included is
the donated lot by the City Government with TCT No. 6033 amounting to Ninety
Seven Thousand Six Hundred Sixty Pesos Only (P 97,660.00). Also included in
this account is the donated lot, with market value of P100,000, by E.B. Villarosa for
Reservoir Site located at Emenville Subdivision with a land area of 400 sq. m.
22

Retained Earnings account represents the cumulative earnings of the District


since its inception. Details are as follows:
2013

2012

Balance, Beginning
P
Add: Net Income for the Year
Add/Deduct: Prior Year Adjustment

298,675,043.55 P
22,833,491.31
(263,157.56)

302,872,851.42
4,678,366.81
(8,876,174.68)

Balance, End

321,245,377.30 P

298,675,043.55

Prior Years Adjustment is composed of the following:


Details

Debit

Liquidation of cash advances for travel of


GM Sangtian for CY 2012
Prior years's maintenance expense
Prior years's operating expense
Adjustment of stale check
Excess of revenue over expenses during
EPANET seminar
Adjustment of interest on loans-LWUA
Expenses incurred for environmental monitoring

Credit

157,501.90 P
30,536.00
123,059.28
30,901.22
38,067.49
52,792.45
73,821.54

384,918.72 P

121,761.16

Net adjustment - Dr. P 263,157.56

15.0 Net Income P 22,833,491.31


This account represents the District's result of operations for year 2012.
Charged to income is the financial charges for interest on loans to LWUA
amounting to P96,559,972.10.
Account

CY 2013

Business and Service Income


Other Income
Total Income
Operating Expenses
Maintenance Expenses
Interest and Financial Charges
Total Expenses

276,020,722.35 P
3,444,096.56
279,464,818.91 P
150,559,106.12
18,598,966.56
87,473,254.92
256,631,327.60 P

264,377,970.21
2,647,215.43
267,025,185.64
144,433,428.74
16,525,395.55
101,387,994.54
262,346,818.83

22,833,491.31 P

4,678,366.81

Income

23

CY 2012

PART III - FINDINGS AND RECOMMENDATIONS


1.

The percentage of the Non-Revenue Water of the District exceeded the


20% maximum acceptable level as required under the LWUA Circular
No. 004-10 dated February 23, 2010, resulting in an estimated revenue
loss of P5,294,765.37 in CY 2013, and affecting the efficient and effective
delivery of water service to its concessionaires, as well as detrimental in
the achievement of its goals to improve further its operations.

The Butuan City Water District is a service-oriented entity, whose aim is to


preserve the environment, deliver quality service and satisfy its customers. It is
committed to provide quality, sufficient and affordable water supply thru honest and
excellent service.
Memorandum Circular No. 004-10 dated February 23, 2010 of the Local
Water Utilities Administration (LWUA) provides that: to accelerate further
improvement in the efficiency level, the maximum acceptable level of the NonRevenue Water was reduced from 25% to 20% applicable to all water districts,
(Annex 1). In fact, the criteria for approval of financial assistance, water rate
adjustments, and performance evaluation of water districts shall include this
requirement.
Review of the accounts and operations of the District disclosed the following
data/information on revenue producing water and non-revenue producing water
percentages for CY 2013 taken from the Monthly Data Sheet (MDS) which revealed
that for the nine (9) month period, the District had exceeded the 20% allowable limit
to wit:
Water
Production
(m3)

Billed Water
Consumption
(m3)

Revenue
Water %

Non-Revenue
%

Allowable

Excess

January
February
March
April
May
June
July
August
September
October
November
December

a
797,442
611,082
663,849
764,106
826,031
738,584
863,529
917,498
659,835
885,167
797,315
1,024,043

b
540,170
549,293
501,622
580,902
578,285
621,204
606,264
556,721
551,695
584,906
636,260
570,679

c=b/a
67.74%
89.89%
75.56%
76.02%
70.01%
84.11%
70.21%
60.68%
83.61%
66.08%
79.80%
55.73%

d=1-c
32.26%
10.11%
24.44%
23.98%
29.99%
15.89%
29.79%
39.32%
16.39%
33.92%
20.20%
44.27%

e
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%

f=d-e
12.26%
-9.89%
4.44%
3.98%
9.99%
-4.11%
9.79%
19.32%
-3.61%
13.92%
0.20%
24.27%

Total

9,548,481

6,878,001

72.03%

27.97%

20%

7.97%

Month

Converting non-revenue water losses for the period January to December 2013
using the average water rate of P20.86/m3 (minimum charge of P208.65 for the first 10
m3 of water = P208.65/10) would result to an estimated revenue loss of P5,294,555.87.
This amount is computed by deducting unbilled metered water percentage from NRW
percentage, to come up with water revenue losses net of the allowable 20% NRW.
Details of computation is shown below:
24

% of
Meter
Unbilled
Water
(g=f/a)

NRW % in
Non Revenue
Excess of
Water in m3 (In Rate/m3
20% less
Excess of 20%) of Water
Unbilled %
(i=hxa)
(h=e-g)

Month

Water
Production
(m3)
(a)
a

January
February
March
April
May
June
July
August
September
October
November
December

797,442
611,082
663,849
764,106
826,031
738,584
863,529
917,498
659,835
885,167
797,315
1,024,043

540,170
549,293
501,622
580,902
578,285
621,204
606,264
556,721
551,695
584,906
636,260
570,679

67.74%
89.89%
75.56%
76.02%
70.01%
84.11%
70.21%
60.68%
83.61%
66.08%
79.80%
55.73%

32.26%
10.11%
24.44%
23.98%
29.99%
15.89%
29.79%
39.32%
16.39%
33.92%
20.20%
44.27%

12.26%
-9.89%
4.44%
3.98%
9.99%
-4.11%
9.79%
19.32%
-3.61%
13.92%
0.20%
24.27%

48,342
53,214
47,146
43,219
45,166
33,551
32,748
34,505
27,234
129,615
9,012
3,218

6.06%
8.71%
7.10%
5.66%
5.47%
4.54%
3.79%
3.76%
4.13%
14.64%
1.13%
0.31%

6.20%
-18.60%
-2.66%
-1.68%
4.52%
-8.65%
6.00%
15.56%
-7.74%
-0.72%
-0.93%
23.96%

49,442
-113,641
-17,689
-12,836
37,374
-63,888
51,811
142,772
-51,061
-6,387
-7,420
245,337

20.86
20.86
20.86
20.86
20.86
20.86
20.86
20.86
20.86
20.86
20.86
20.86

1,031,351.78
-2,370,559.60
-368,988.37
-267,763.13
779,617.47
-1,332,699.51
1,080,781.63
2,978,232.26
-1,065,132.46
-133,241.16
-154,781.20
5,117,738.16

Total

9,548,481

6,878,001

72.03%

27.97%

7.97%

506,970

5.31%

2.66%

253,814

20.86

5,294,555.87

Revenue
Water (m3)
(b)

Revenue
Water %
(c=b/a)

Excess from
Meter
Non
20%
Unbilled
Revenue %
Allowable ( Water -Per
(d=100%-c)
e=d-20%)
MDS (f)

Estimated
Losses (k=ixj)

In view of the above, the Districts delivery of water service to its


concessionaires might be greatly affected as well as detrimental in the achievement of
its goals to improve further its operations.
Management, in an interview, justified that the losses were due to possibilities
of illegal connections, pilferages, defective water meters and pipeline leakages in
some transmission lines installed that could not sustain the water pressure. Another
factor is due to other maintenance operation of the District such as the on-going
replacement and rehabilitation of some of its transmission pipelines and water meters.
Recommendation:
a. Create a team who shall directly responsible in the implementation of
plans and programs to reduce NRW. These plans and programs should be
translated into concrete actions to address the problem on unaccounted
water losses.
b. Require the team to monitor regularly the water connections so that any
pilferages, defective water meters and pipeline leakages can be reported
promptly to Management for immediate action.
During the exit conference, Management commented that their non-revenue
data found in their MDS may not be reliable because of some problems with their
technical equipment measuring their water production. They will be replacing their
equipment and by next year, their water production measurements may then be
reliable and non-revenue water computations will be more accurate. They, however
thank the team for including their production performance in the audit, because their
attention was called to review the accuracy of their equipment and their production
data.
They are also conducting leakage control program thru massive meter
inspection and calibration to identify defective meters for replacement.
Management should prioritize upgrading its technical equipment to come up
with accurate non-revenue water data and should the result still show above allowable
25

NRW percentage, address possible causes of the problem such as illegal connections
and pilferages through random surprise inspections of water meters and lines.
Conduct also rehabilitation of old and defective water meters and pipelines to
strengthen against high water pressure that may cause leakages.

2.

Cash Advances for Intelligence Fund totaling P600,000.00 for CY 2013


were considered liquidated based on the certifications signed by the
General Manager and the Program Administrator that funds were used
in connection with Project/Program Confidential/Intelligence Data
Gathering, instead of a Credit Advice from the COA Chairman or
his/her representative in accordance with COA Circular 2003-003 dated
July 30, 2003.

COA Circular 2003-003 provides for the guidelines in the liquidation of


Intelligence Fund as follows:
1. The liquidation report shall not be coursed through the Agency Auditor
or Regional/Cluster Director, but shall be submitted in a sealed
envelope with a visible label "CONFIDENTIAL For COA Chairman
Only" directly to the Chairmans Office, COA thru any of the
following modes:
a) registered mail
b) courier
c) authorized liaison officers
2. The address appearing in the envelope shall be as follows:
COMMISSION ON AUDIT
Commonwealth Avenue
Quezon City
3. The report should have a covering transmittal letter itemizing the
documents being submitted.
4. If the liquidation vouchers and supporting papers are in order, the COA
Chairman or authorized representative shall issue a credit advice
addressed to Head of the local government unit, Attention the Chief
Accountant, copy furnished the provincial or city auditor of the local
government unit.
5. Subsequent cash advances shall be granted only after the issuance of
credit advice from the Chairman or the submission of liquidation
vouchers/reports for the previous cash advance to the COA Chairman.
One copy of the transmittal letter, for the purpose, duly received by the
Chairman or his authorized representative, must be forwarded to the
Accountant of the local government unit and the auditor concerned for
reference.
Verification of the transactions of the District revealed that the General
Manager advanced a total amount of P600,000.00 for Confidential and Intelligence
26

Fund for CY 2013. These were granted in pursuant to Board Resolution No. 044-2013
dated March 23, 2013. The authority to disburse such fund was granted by the Office
of the President on September 6, 2012. Summary of the funds advanced is as follows:
JEV#

JEV Date

13-06-094
13-09-016
13-12-140

6/30/2013
9/30/2013
12/31/2013

Amount
P

300,000.00
150,000.00
150,000.00

600,000.00

Further verification revealed that the funds were liquidated through the
issuance of certifications, signed by the General Manager and the Program
Administrator (Annex 2) and not by the credit advice from the COA Chairman or his
representative as required by COA Circular 2003-003.
Recommendation:
a. Ensure that cash advances for intelligence fund should only be considered
fully liquidated upon receipt of the credit advice from the COA Chairman
or his/her representative.
b. Restore the cash advance account until after the receipt of the Credit
Notice from the COA.
During the exit conference, Management commented that they dropped the
cash advances from their books because they have not received any credit notice from
the office of the COA Chairman for all their liquidations that they submitted for the
last two (2) years. The GM also want to clear the advances in the books since he will
be retiring soon.
We stressed to them that the policy on the liquidation should be followed, that
is, cash advances for intelligence fund will be liquidated and dropped from the books
upon the receipt of credit notice from the COA Chairman. We also asked for copies of
the transmittal letters of their liquidation submitted to the COA Chairman, for us to
follow up the liquidation specially that the GM will be retiring soon and needs to be
cleared of his cash advances.

3.

Allowances and fringe benefits amounting to P2,644,558.25 were granted


to its officials and employees without legal basis, thus considered illegal or
irregular expenditures.

Records disclosed that the District still granted in CY2013 allowances and
fringe benefits regularly or on a monthly basis to its officials and employees without
legal basis despite our audit recommendation contained in the prior years Annual
Audit Reports to stop granting the following unauthorized allowances and benefits:
1.) Rice Allowance P1,000.00
2.) Meal Subsidy Allowance at P70.00 per day
27

3.) Subsistence Allowance of P500.00 per month for Officials receiving fixed
RATA
4.) Medical/Dental/Ophthalmological benefits at P9,000.00 per year/
personnel
The total amount of P2,644,558.25 were granted for such allowances and
fringe benefits for CY 2013 as follows:
Allowances Granted

Amount per Person

1. Rice Allowance
P1,000.00/month
2. Meal Subsidy Allowance P 70.00 / day
3. Subsistence Allowance
P 500/month
5. Medical Allowance
P 9,000.00/employee
5. Dental Allowance
Total

Total for the Year

Annex #

814,000.00 Annex 3
694,550.00 Annex 3.1
36,000.00 Annex 3.2
1,100,008.25

Annex 3.3

2,644,558.25

These allowances and benefits are considered illegal or irregular expenditures


for lack of legal basis to wit:
Paragraph 3 of COA Resolution No. 2004-006 provides that:
WHEREAS, this Commission has consistently disallowed these
benefits on the ground that water district directors are prohibited from
receiving compensation other than the per diems mandated under Section 13
of P.D. 198 while organic personnel who were not receiving these benefits as
of July 1, 1989 were held to be not entitled thereto under Section 12 of R.A.
6758 and Corporate Compensation Circular No. 10.
Moreover, Paragraph 8 of the same Resolution states that:
NOW THEREFORE, in consideration of the foregoing premises, this
Commission hereby resolves to prescribe the following guidelines on the
matter of allowances and benefits granted by the water district to the members
of the Board of Directors and their organic personnel, viz.:
1. The disallowances of allowances/benefits received by all members of the
Board of Directors of water districts pursuant to LWUA Resolution No.
313 s. 1995 and No. 39 s. 1996 prior to the promulgation of the Baybay
Water District case on January 23, 2002 are hereby affirmed xxxxxxxxxx;
2. Allowances and benefits of organic personnel of water districts who were
incumbents as of July 1, 1989 and were receiving such allowances and
benefits shall be allowed in audit. Conversely, those hired after that date
including those hired to the positions vacated by the said incumbents shall
not be entitled to the said allowances and benefits;
3. Allowances and benefits granted after January 23, 2002 other than those
allowed under the Salary Standardization Law as implemented by DBM
Corporate Compensation Circular No. 10 shall be disallowed in audit;
and
28

4. Water districts shall comply strictly with the parameters laid down by the
Department of Budget and Management for the continued receipt of
allowances and benefits enjoyed as of July 1, 1989 embodied in two (2)
separate letters of the Secretary of Budget and Management addressed to
the General Manager, Davao City Water District and the President,
Philippine Association of Water Districts (PAWD) dated November 9,
2002 and April 27, 2001, respectively, which letters shall be denominated
as Annexes A and B and form integral part of this Resolution.
Furthermore, the General Appropriations Act provides among others:
Section 15 Restrictions on the Use of Government Funds No
government funds shall be utilized for the following purposes:
(e) Pay honoraria, allowances or other forms of compensation to any
government official or employee, except those specifically authorized by law.
The provisions of this section shall also apply to GOCCs.
Implementation shall be in accordance with the rules and regulations issued
by the DBM, in coordination with the COA.
Executive Order No. 518 also provides that:
Section 2 - Declaration of Policy xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
The budgets of government-owned or controlled corporations shall
observe the budget, organization and compensation policies and guidelines
which govern agencies of the national government and which are contained in
pertinent budget and compensation laws, rules and regulations.
Notices of Disallowances were already issued for the years 2008, 2009, 2010
and 2011 which were appealed by the Management of Butuan City Water District but
denied by COA-CARAGA Regional Director. These were further appealed to the
COA Commission Proper. Notices of Disallowances for the same allowances for
CY2012 were also issued and were currently on appeal at the Regional level. For
CY2013 allowances, Notices of Disallowance will be issued accordingly.
Recommendation:
Stop the granting of allowances and benefits without legal or valid basis and
require immediate refund by the concerned officials and employees of the
amount received.
During the exit conference, Management commented that what they are
granting to their officials and employees were only those allowances that the LWUA
and DBM approved.
We stressed to the Management that although the LWUA is an authority in
their operations, the granting of said allowances is not allowed by the above-cited
laws and regulations. In fact, there is already a Supreme Court decision sustaining the
29

disallowance issued for the same allowances that BCWD granted. We, however
advised Management that they may continue their appeal on their disallowed
allowances, as it is their right to do so.

4.

The District still hired a Technical Services Consultant for the Office of
the Board of Directors on January to April 2013 who was paid the total
amount of P 60,000.00 which was considered unnecessary expenditures
per COA Circular No. 85-55A because her tasks can be handled by the
existing personnel of the District.
Under Section 2(2), Article IV-D of the 1987 Constitution, the Commission on
Audit (COA) shall have exclusive authority, subject to the limitation in this Article, to
xxxx promulgate accounting and auditing rules and regulations, including those for
the prevention of irregular, unnecessary, excessive, extravagant, or unconscionable
(IUEEU) expenditures or uses of government funds and properties.
Section 4.0 of COA Circular No. 2012-003 defines Unnecessary
expenditures as:
The term pertains to expenditures which could not pass the test of prudence
or the diligence of a good father of a family, thereby denoting nonresponsiveness to the exigencies of the service. Unnecessary expenditures are
those not supportive of the implementation of the objectives and mission of the
agency relative to the nature of its operation xxx. An expenditure that is
not essential or that which can be dispensed with without loss or damage to
property is considered unnecessary.
The consultancy contract was awarded through negotiated procurement which
was approved per Board Resolution No. 118-2011 dated October 25, 2011. The
contract was renewed in March 2012, still awarded through negotiated procurement
which stipulated payment of P30,000.00 per month, thus, Notices of Disallowance
were issued, for it was considered unnecessary expenditures.
Review of the transactions of the District for CY 2013 revealed that
Management still hired the services of a Technical Services Consultant for the Office
of the Board of Directors for the period January to April 2013 despite the audit
finding and recommendation contained in the CY 2012 Annual Audit Report.
Further verification revealed that the consultant was still paid even if she was
out of the country, receiving half of the amount of her monthly professional fee
(Annex 4) because Management claimed she was still able to serve her duties as
consultant, just like other consultants of big corporations who are communicating
with their clients thru cellphones, teleconferencing and other modern means of
communications. For CY 2012, the Consultant was in the country only from January
to March, and was already out of the country since April 2012.
It was noted that the main accomplishment of the consultant was the
preparation of board resolutions, a task that can be done/handled by existing
personnel of the District. There was also no evidence that showed her
accomplishment of research and review of documents. From the summary of
accomplishment submitted to support her consultancy/professional fee, there was no
30

direct proof that she was performing tasks as a consultant. Even the tasks in her
consultancy contract as enumerated below can be handled by existing personnel of the
District.
The following duties and responsibilities might be handled by the
secretary/clerk of the Board:
a. Review minutes of board meetings as prepared by the Minutes and Agenda
Officer and institute revisions and/or amendments;
b. Review the existing policies and recommend revisions and/or amendments
as necessary to be constructed in coordination with the Interim General
Manager or the General Manager;
c. Oversee records keeping and filing of important documents;
d. Prepare board resolutions and communications for the Office of the Board
of Directors;
e. Consult the Interim General Manager/General Manager in the
preparation of agenda of board meetings;
f. Attend board meetings.
The succeeding duties and responsibilities might be handled by the Board of
Directors and/or other Officials of the BCWD:
g. Review the implementation of policies and/or policy setting actions;
h. Review the preparation of Annual Budget specifically for the Office of the
Board of Directors;
i. Act as a liaison with other water district organizations where the
membership of the Board is associated such as the Philippine Association
of Water Districts (PAWD) and other WD associations;
j. Attend out-of-town conventions, conferences, seminar/workshops,
meetings, etc. where the presence of the Consultant is required by
Management; the former shall be entitled to traveling and other valid
expenses/allowances incidental thereto in accordance with the legal
provisions of the law.
These duties might be performed by the Legal Retainer of BCWD:
k. Review legal cases of BCWD and track the development and/or status of
each case, which files are being kept and maintained in the Office of the
Board;
l. Ensure confidentiality and safekeeping of important records and
documents in the Office of the Board.
Management commented that they hired the services of a Technical Services
Consultant because they do not have a full time Board Secretary and that they have
full trust and confidence in their technical consultant whom they hired due to her
expertise in board related matters.
We respect the trust and confidence the Board of Directors have on the
consultant as well as the expertise she is known of but it is our opinion that the
District needs someone who is present during board meetings and on full time regular
duty to help them assess the operation of the District. For the meantime that the
31

District do not have a full time Board Secretary, the Minutes and Agenda Officer and
a clerk/secretary are very much capable of doing clerical works enumerated in items
(a-e) above.
Thus, the hiring of a Technical Services Consultant for the Office of the Board
of Directors is considered unnecessary expenditures under COA Circular No. 85-55A.
Notice of Disallowance will be issued later for this transaction.
Recommendation:
Discontinue the engagement of a Technical Services Consultant specially that
she is out of the country. Fill up the position of Board Secretary if it is
necessary.
During the exit conference, Management commented that they already
discontinued the services of their consultant in CY 2014. They are also planning to
open the position of a technical specialist and hire someone who will be an expert on
the operation of the District.

5.

Accounts Receivables Customers (water sales) and Installment Sales


Receivable (Service Connection and Materials) per Accounting Records
amounting to P34,401,765.09 and P1,338,988.03 respectively, or a total of
P35,740,753.12, did not tally with the Aging of Accounts Receivable
maintained by the Billing Division of the Commercial Department
amounting to P33,841,222.52, showing a difference of P1,899,530.60
contrary to COA Circular Letter No. 2004-01, thereby casting doubt on
the fairness of the presentation of these accounts in the financial
statements.

COA Circular Letter No. 2004-01 dated May 7, 2004 provides that the account
balance in the General Ledger should always reconcile with the subsidiary ledger.
In addition, the New Government Accounting System requires that controlling
accounts shall be supported with subsidiary ledgers whose total shall equal the
balance of the controlling account.
Examination of records disclosed that the book balances of Accounts
ReceivablesCustomers (water sales) and Installment Sale Receivables (Service
Connection and Materials) amounting to P34,401,765.09 and P1,338,988.03,
respectively, or a total of P35,740,753.12 reflected in the general ledger maintained
by the Accounting Division as of December 31, 2013 did not reconcile with the
Aging of Accounts Receivable maintained by the Billing Division of the Commercial
Department amounting to P33,841,222.52 (Annex 5), showing a difference of
P1,899,529.60.
Analysis of the entries in the general ledger showed that there were
adjustments made reducing the amount of accounts receivables for water bills due to
adjustments on penalties, discounts for senior citizens, tax withheld imposed by
government agencies and other adjustments which have long been automatically
32

deducted from the aging schedule but were deducted in the books of accounts much
later. This is one of the reasons for the unreconciled balance of P1,899,530.60,
thereby casting doubt on the fairness of the presentation of the receivable account in
the financial statements.
We have been communicating with the Commercial Department on the
possible reconciliation of the Accounts Receivable and Installment Sales Receivable
but they reasoned out that they only received their data from the Electronic Data
Processing (EDP) Department which maintains the Billing and Collection System of
the District, where the Accounts Receivable originated. The EDP on the other hand
claims that they also want to come up with a reconciled balance and was in fact
working on it but it was not made a priority because they were busy with other tasks.
Recommendation:
a. Require the Accounting Department to coordinate with the programmer of
the Billing and Collection System and look for the cause of the
discrepancy to arrive at the reconciled balance.
b. Assign a permanent personnel in the accounting and the billing section of
the Finance and Commercial Department respectively, whose main duties
and responsibilities include among others to review, analyze and trace all
adjustments reflected in the Commercial Department so that the accounting
and the commercial department records will be consistently reconciled at
any period in time.
During the exit conference, the Accounting Department commented that a
reconciliation will be possible if the EDP Department where the aging of accounts
receivable is generated, will furnish them the monthly aging for them to reconcile the
discrepancy. Management also assigned a personnel from the Commercial
Department that handles the receivables after it is generated by the EDP to help in
the reconciliation.

6.

Receivables from inactive/disconnected concessionaires amounting to


P8,476,893.37, which remained outstanding for more than one (1) to
thirty-two (32) years were classified as current assets contrary to the
generally accepted accounting principles on receivables, COA Circular
No. 97-001 and the Commercial Practices Manual (CPM) on Water
Districts, resulting in the overstatement of Current Assets-Receivable
accounts as of December 31, 2013.
The Commercial Practices Manual (CPM) for Water Districts
prescribed by the Local Water Utilities Administration (LWUA) provides that
Current Assets and Other Debits include cash and other assets or resources
which are reasonably expected to be realized in cash or utilized and consumed
during the normal operating cycle of the Water District.
Moreover, the Generally Accepted Accounting Principle on
Receivables states that a receivable account shall be classified as current when
it satisfies any of the following criteria:
33

a. It is expected to be realized in, or is intended for sale or


consumption in, the entitys normal operating cycle;
b. It is held primarily for the purpose of being traded;
c. It is expected to be realized within twelve months after the balance
sheet date; or
d. It is cash or cash equivalent (as defined in IAS 7 Cash Flow
Statements) unless it is restricted from being exchanged or used to
settle a liability for at least twelve months after the balance sheet
date.
All other assets shall be classified as non-current (Philippine
Accounting Standards 1 Paragraph 57).
In addition, COA Circular No. 97-001 dated February 5, 1997 states that
Dormant Accounts refer to individual or group of accounts which balances
remained non-moving for more than five years
The above cited Circular also provides guidelines on the proper
disposition/closure of dormant accounts:
IIIB.1 Dormant accounts in an active fund shall be reviewed,
analyzed and reconciled together with other related accounts in the trial
balance.
IIIA.10 If the analysis/review of the accounts/fund is not possible due
to absence of records and documents, the agency head concerned should
request for write-off and/or adjustment of account balances from the COA,
supported by:
10.1 List of available records and extent of validation made on the
accounts; and
10.2 Certification and reasons why the books of accounts/ records,
financial statements/ schedules and supporting vouchers/documents cannot be
located.
Further, Executive Order No. 431 dated May 30, 2005 requires the reversion
of all dormant accounts.
Review of the Aging of Accounts Receivable-Customers (Water Bills) and
Accounts Receivable-Service Connection (Installation Fee and Materials) as of
December 31, 2013, amounting to P33,841,222.52, revealed that P8,476,893.37
were from inactive and disconnected accounts. These accounts have long been
inactive ranging from one (1) to more than thirty-two (32) years but were still
classified as Current Assets-Accounts Receivable, contrary to the Generally
Accepted Accounting Standards on Receivables and the CPM as stated in the abovementioned provisions. The summary of the Accounts Receivable aged more than one
(1) year to thirty-two (32) years is shown below:
34

Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total A/R considered as Non-Current
CY 2013 Disconnections

No. of Concessionaire
1
2
2
2
6
11
5
9
26
66
48
67
55
61
75
103
110
147
110
98
119
113
111
178
198
274
230
268
429
430
413
472
4,175
1,377

Amount
P

12.00
1,344.80
299.20
101.20
1,864.90
1,475.00
1,396.51
5,137.31
13,688.71
48,371.36
35,494.33
78,341.78
54,757.36
37,111.68
73,876.33
168,715.92
181,901.93
301,787.26
230,267.19
343,268.21
371,737.79
320,658.39
211,916.23
280,007.14
292,131.70
466,047.22
312,524.39
438,670.33
947,623.04
1,100,426.43
1,053,412.29
1,102,525.44
8,451,573.74
3,074,722.83

The table above showed that Accounts Receivable-Customers (Water Bills)


and Installment Sales Receivable (Installation Fee and Materials) amounting to
P8,476,893.37 should have been classified as Other Assets-Non Current Receivables.
Interview disclosed that the above inactive/disconnected accounts were
lumped in the more than 120 days category of the Aging of Accounts of the
District. Management admitted that the computerized system of collections of the
Commercial Division do not automatically generate an output that shows the number
of years the accounts have been outstanding, hence, Management was not able to
monitor the increasing amount of overdue accounts and was not able to strategize
means to collect them.

35

As a result, the Receivables and Other Asset accounts of the District were not
fairly presented in the financial statements.
Recommendations:
1. Require the Bookkeeper to make necessary adjustment to reclassify the
inactive accounts to Other Assets-Non Current Receivables account.
2. Exhaust all means to collect the amounts by sending out bills, statements
of accounts or demand letters to verify the existence of the concessionaires
in their indicated address. Otherwise, agency officials may request
authority to write-off uncollectible/dormant accounts from the
Commission on Audit following the guidelines under COA Circular No.
97-001 dated February 5, 1997.
3. Review or analyze the dormant accounts in accordance with the guidelines
and procedures mentioned in E.O. 431. If the analysis or review is not
possible due to the absence of records and documents, the District should
seek for the civil remedies or request for the write-off and/or adjustments
of the account balances from the Commission on Audit. The request
should be duly supported with the list of available records and extent of
confirmation made as to its collectability and the reasons for the
adjustments thereof, subject to certain conditions:
a. Death of the respondent official/ employees; or
b. Unknown whereabouts of the official/employees, and that he could
not be located despite extra-diligent effort to find him; or
c. Incapacity to pay or insolvency of the respondent employee;
d. The account remained unpaid and outstanding for more than
5 years despite diligent efforts to collect exerted by the accountable
officer; and
That all conditions aforementioned shall exist and be certified to by
the respective accountable officer.
During the exit conference, Management commented that they have started
sorting these inactive accounts to verify its status, whether collection is still possible
or not anymore. They have started the procedures for write-off but they find the
requirements very tedious to produce. However, they promised to prioritize
addressing this long in-active accounts by following the recommendation and identify
and prepare necessary documentation for accounts that will be recommended for
write-off.
They also promised to re-classify the accounts as recommended and come up
with a fairly presented accounts in their financial statements.
7.

Sixty-Eight percent (68%)of the total Accounts Receivable amounting to


P23,123,412.09 were not collected within the specified collection period
and had been overdue for more than 30 days to over 120 days due to
failure of Management to implement strictly its collection and
disconnection policy, causing an increasing trend of the total balance of
36

Accounts Receivable, thus, depriving the District of the much needed


financial resources for its operations and payment of loans.
The collection policy of the District as reflected in the monthly bill provides
concessionaires obligation as follows:
x x x. . .
5. Concessionaires are given fifteen (15) calendar days after its billing date
to pay their bills on time. Starting on the sixteenth day, a penalty of 6%
will be added to the current water bill and other current charges billed.
6. Disconnection follows after due date of this bill if accounts not settled
Further, sound management practices dictate that it is extremely important to
have a system in place to manage accounts receivable.
Audit of Accounts Receivable-Customers disclosed that collectible accounts
from the Districts 55,138 concessionaires are classified as follows:
Concessionaire

Government

Comml./Industrial

Residential

TOTAL

Active Connection

565

2,756

46,201

49,522

Inactive Connection

47

548

5,021

5,616

612

3,304

51,222

55,138

Total

Analysis of Accounts Receivable based on the submitted schedule and aging


for CY 2013 (Annex 6) showed that a total of P23,123,412.09 or 68% of active and
inactive accounts are already past due as the accounts were unpaid for more than 30
days to over 120 days, as follows:
Aging Schedule of Accounts Receivable
Age
Less than 30 days
Sub-total
31-60 days
61-90 days
91-120 days
Over 120 days
Sub-total
Penalty
Total

Active
9,407,241.34
9,407,241.34
6,242,143.11
2,845,155.96
776,000.68
2,192,412.87
12,055,712.62

Inactive
29,073.25
29,073.25
196,814.93
375,105.62
284,728.98
10,211,049.94
11,067,699.47

Totals
9,436,314.59
9,436,314.59
6,438,958.04
3,220,261.58
1,060,729.66
12,403,462.81
23,123,412.09

826,652.36

454,843.48

1,281,495.84

4%

22,289,606.32

11,551,616.20

33,841,222.52

100%

28%

68%

Both for active and inactive accounts receivable aged thirty days and below
amounted only to P9,436,314.59, or 28% of the total Accounts Receivable, while
those aged 31 days or over are already considered past due per Collection Policy of
the District which amounted to P23,123,412.09 or 68% of the total receivables of
P33,841,222.52, and the remaining 4% or P1,281,495.84 was charged as penalty.
37

It was further observed that some concessionaires of the District having


unpaid obligations for 120 days and over were disconnected from the service and
some were not, having the same length of delinquency as shown in Annexes
7,7.1,7.2, and 7.3 and summarized below:
Active Accounts Unpaid For More Than 120 days
No. of
Concessionaire
55
41
102
130
328

Account No.
125-1
125-2
125-3
125-4

Amount
416,799.19
192,635.79
297,370.31
566,952.23
1,473,757.52

ANNEX 7
ANNEX 7.1
ANNEX 7.2
ANNEX 7.3

Review of Accounts Receivable for the years 2011, 2012 and 2013, showed
increased uncollected accounts on trade receivables as shown in the graph below:
Year
35,740,753.12
Trade A/R

30,603,995.21

28,350,662.14

Other
Receivables

2013

4,167,717.11

2012

4,182,873.00

2011

2013
2012

4,324,316.63

2011
0.00

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

2013

Lack of documents hinder us from ascertaining how much of the collections


represents the Current Account, the Current Years Arrears and the Past Due accounts
2012
since these were integrated into one account. Interview conducted revealed that the
2011
Collection System does not generate the breakdown of amount for the above itemized
collections since these were lumped as one ever since the system started operating.
The escalating trend of the accounts receivable implies that the District failed
to implement strictly the disconnection policy per service agreement. This situation
may result in low collection, thus affects the operation of the District in major
perspective.
The non-collection of overdue accounts deprived the District of the much
needed funds which could have been utilized for its operations and payment of loans.
If this continued, chances are that the Districts existing funds may not be able to
sustain the needed funds to meet the maintenance and operating requirements.
Recommendation:
a

Enforce strictly the disconnection policy in case of failure of payment of


water bills, to minimize, if not to eliminate, past due accounts.

Exhaust effective strategies by launching an aggressive campaign to


improve collection efficiency and to ensure the sustainability of the
operations of the District.

38

Management commented that they will be incorporating some features in their


computerized collection system that will show the application of collection, whether it
is applicable to water bills, materials paid in installment, or other accounts so that
the District will keep tract of their receivable collection. The additional feature in the
Collection System will enable Management to see if their collection efficiency is
improving and past due accounts were still being collected.
Management also commented that they have been strictly following their
disconnection policy but still accounts continue to build up because of materials
loaned to new concessionaires to be paid in installment (6 months term) and large
water consumptions that were also paid in installment for as long as three (3) to five
(5) years.

8.

The Districts four units of vehicles were not registered in the name of the
District and were still not marked with For Official Use Only and the
agency name, contrary to Section 58 of P.D. 1445 and COA Circular No.
75-6, thus ownership could not be ascertained and control over the assets
is inadequate.

This observation is a reiteration of the finding contained in the previous years


audit report which Management failed to comply with our recommendation.
Section 58 of Presidential Decree No. 1445 requires that the examination and
audit of assets shall be performed with a view to ascertaining their existence,
ownership, valuation and encumbrances as well as the propriety of items composing
the respective asset accounts, determining their agreement with records, proving the
accuracy of such records; ascertaining if the assets were utilized economically,
efficiently and effectively, and evaluating the adequacy of controls over the accounts.
Regulations in the proper use of government vehicles are provided under
Commission on Audit Circular No. 75-6 dated November 7, 1975. Under Rule V(2),
it states that all motor vehicles owned by the National Government, its agencies and
instrumentalities, and all local government units including government-owned or
controlled corporations, except those used by the officials with proper authorization,
should bear the markings For Official use Only under which should be written the
corresponding name of the bureau, office, corporation, provincial, city, municipality,
or other local government unit operating or using the same.
The markings should appear on each side of the motor vehicle. When there is
no sufficient space on each side, the same should appear at the back and on the front
just below the windshield of the motor vehicle. (General Circular No. 59, dated
November 20, 1958).
Audit examination of the four (4) motor vehicles as described below revealed
that these were not registered in the name of the District and still carried private plate
numbers and did not bear markings of For Official Use Only which is supposed to
be written on each side of the motor vehicle under which the corresponding name of
the Agency operating is to be indicated.

39

Description of Vehicle

Year Acquired

Value

a. D-4D Toyota Hilux 3.0 with green


plate no. LGG 996 (Dark Blue)

2008

1,693,030.00

b. Toyota Hi- Ace Van with green


plate no. LGG 843 (White)
c. Toyota Hilux with green plate no.
WGP 601 (Blue)

2008

1,308,614.00

2011

634,000.00

d. Toyota Hilux with green plate no.


WGP 611 (Red)

2011

634,000.00

Interview with the Property Officer revealed that the two (2) Toyota Hilux
(Blue and Red) were purchased way back in January, 1999. However, these were
entered only in the inventory records in CY 2011 because these two vehicles were
part of the loan granted by the LWUA and to date, it remained as a private vehicle
registered under the name of the contractor, R.D. Policarpio and Co. Efforts were
made to transfer the registration from private to government, however, the documents
required by the Land Transportation Office were not available from the LWUA Office
or from R.D. Policarpio Co., hence, transfer of ownership failed.
While, the two vehicles first mentioned above, the Toyota Hilux (dark blue)
and Toyota Hi-Ace Van (white) were not given due course by Management in
transferring the ownership from R.D. Policarpio Co. to the District because of
security reason.
In effect, ownership of subject vehicles is not fully ascertained and controls
over the property are not adequate. Further, if the said deficiency were not given due
course, chances are that all expenses in connection with the use of the same vehicles
will be disallowed in audit as these are not government property.
Recommendation:
Exert effort in facilitating the immediate transfer of the ownership of the
subject vehicles to the Butuan City Water District as the registered owner. In
the meantime, pending the transfer of ownership and the change to
government plate, implement the marking of the vehicles with the prescribed
three (3) inches For Official Use Only together with the name and logo of
the District.
During the exit conference, Management commented that the two (2) vehicles
were acquired through Phase II Projects, part of the package in the form of loan with
the LWUA. Accordingly, they will secure pertinent documents for the transfer of
ownership to BCWD after the case in Arbitration Tribunal filed by the Contractor
against LWUA and BCWD is finally disposed off.
The other two (2) vehicles, Toyota Vigo-pick-up and Toyota Hi-Ace Van which
are assigned to GM Sang Tian and the BOD are used with green plates for overriding
security reasons. However, the LTO allowed the BCWD to use the green plates for
such reason and continued the registration of said vehicles but with government
stickers pasted on the windshields.
40

Nevertheless, BCWD promised to comply with the requirements of COA.

9.

Internal Control on the computerized Collection System is weak due to the


following deficiencies:
a. Data from the Collection System of the District includes only the
water sales and not the other collections, creating gaps in the
numerical sequence of the ORs issued by each collector, thus,
susceptible to misuse and entails tedious and time-consuming process
in validating the completeness of transactions.

The District have a computerized Billing and Collection System that captures
the collection data of all Accountable Officers of the District. This system was
developed by the Electronic Data Processing (EDP) Department of the District.
During the course of our audit, we were provided with the collection data from
the data base of the system. We noted that there were gaps in the numerical sequence
of the ORs issued by each Accountable Officer. It was later learned that the data
includes only the collections from water bills. The gaps were either ORs that were
cancelled or issued for the other collections ( sale of PE tubes, installation, other
collections). We inquired whether it was possible to incorporate the other
collections into the water sales collection but we were told that it would take another
program to add that feature. Since we are after the completeness of the collection
report, we were forced to manually trace the other collections and incorporate the
same in the collection data taken from the system.
The design of the system is susceptible to misuse of the ORs since these are
not issued numerically and makes verification of collection accounts tedious and time
consuming considering the voluminous ORs that were issued daily by each collector.
Recommendation:

We recommended that the EDP develop another program to incorporate the


other collections into the water sales data in order to make verification
easier, and also accurately establish accountability of the Accountable Officers
of the District at any period of time.
Management commented that they will be incorporating the other
collections into their water bills collection report per Accountable Officer. The EDP
Department will prioritize developing this additional feature in their system.
b. Some OR numbers reflected in the Daily Collectors Report did not
coincide with the actual OR number (pre-printed and with serial
number) issued to payor/concessionaire.
The District uses pre-printed Official Receipts in continuous paper form with
serial numbers for their collections. These collections were directly encoded into the
computerized Collection System.

41

Cash examination of the Accountable Officers-Collectors of the District


revealed that there were collections reported in the system that bears OR numbers that
were different from the actual pre-printed OR issued to payors/concessionaires of the
District. This was found out when we asked for collection data from the database of
the system and verified some ORs with the duplicate actual ORs issued.
Interview with the AO revealed that the said deficiency existed because
although the printed OR already have serial numbers, the AO is required by the
system to encode the first OR number to be used every time the AO logged into the
system and start the collection (Summary of these ORs are attached as Annex 8).
Sometimes, due to human error, a wrong OR number was encoded at the start of the
session. This will in turn make all ORs issued in the Collection System erroneous or
different from the actual ORs issued.
This weakness in the system will make it hard during verification of collection
in the Collection System against actual ORs issued since there are instances when
they have different OR numbers. Only after tedious tracing will it be reconciled.
Recommendation:
a. Management require the AO to be extra careful in encoding the first OR to
prevent errors.
b. Additional feature should be incorporated in the system so that the OR
number in the system will be printed side by side with the OR number in
the actual OR issued to readily identify errors.
Management, thru its EDP Department promised to add the feature that will
print the system OR number side by side with the pre-printed OR number to readily
identify errors.
c. Some Official Receipts were issued twice in the system but have
separate actual pre-printed OR issued.
In the course of cash examination of the District, we found out that there were
ORs issued to different payors but with the same numbers (Annex 9) making it appear
that an OR was issued twice. Verification disclosed that different actual ORs were
really issued but there was an error made in encoding the OR number in the system.
Recommendation:
We recommended that Management consider incorporating internal control
features in the system that if an OR was already used, a message would
prompt or an error message will appear, informing the AO that the OR number
was already used, thus preventing duplication in the encoding of ORs.
Management, thru its EDP Department commented that if the recommended
measure that a prompt message will appear everytime an OR already issued will be
used again will be incorporated in the collection system, the collection transaction
will lagged because the system will still search in the database if that particular OR is
42

already used. The design of the system is not capable of readily identifying if an OR is
used twice.
It is important that testing should be done first to see how much time will it
take for the system to identify if an OR is already used, if it will really lagged the
collection of accounts. This feature should be incorporated because its a high risk if a
system allows the issuance of an OR twice or more.
d. There were instances that the ORs were not issued in numerical
sequence. Also, duplicate ORs were not properly filed intact for easy
verification. Further, original copies of cancelled ORs were not filed
with the duplicate copies.
Further verification of the cash accounts of the AOs revealed that there were
times when ORs issued per systems data were not issued in numerical sequence
(Annex 10). Interview with the AO revealed that the actual ORs were really issued in
numerical sequence. The gaps in the system was due to system downtime and system
errors.
It was also found out that the duplicate copies of the ORs were not properly
filed by each AO making it very difficult during verification. The ORs were
supposedly bundled per AO per day but because of voluminous OR and the AOs were
not aware that these ORs were still to be audited, they just left them without proper
filing.
There were also cancelled ORs that the original copies were not filed with the
duplicates and marked Cancelled. Only the duplicate copies were marked
cancelled (Annex 11). The original copies were only found after digging into all the
ORs in the cash division bodega.
Recommendation:
a. Management review the Collection System and incorporate controls to
include complete series of ORs issued for collections made to ensure
completeness of collection report.
b. Management require the AOs to file ORs properly on a daily basis, properly
labeled by date and by AO. Original copy of cancelled ORs should be filed
together with its duplicate copies and properly marked on its face with the
word Cancelled.
Management promised to follow the recommendation and require its
Accountable Officers to file intact its accountable forms and reports to facilitate
audit.
e.

The Daily Collection Report in loose pages used in lieu of cashbook


was not certified by the AO to show accountability. Monthly Report of
Accountability for Accountable Forms was also not prepared in
violation of Section 04(e) of the NGAS Manual, Volume I.

43

Section 04(e) of the NGAS Manual, Volume I provides that:


Basic Features and Policies Books of Accounts The Books of
Accounts are as follows:
Journals and Ledgers
All the above records shall be maintained by the accounting unit of the
Agency. However, treasurers and disbursing officers shall also maintain their
respective cash records such as:
Cashbook Cash Receipts Record (CRR)
Cashbook Cash in Bank
Cashbook Cash Disbursements Record (CDR)
The Treasurers/Collectors shall prepare the Report of Collections and
Deposits (RCD) daily and the Report of Accountability for Accountable Forms
(RAAF) monthly.
During our conduct of cash examination, it was found out that the required
cashbooks were not prepared by the Accountable Officers of the District. In lieu of
the cashbook, they prepared the Daily Collection Report in loose pages. Since the
advent of computerized technology, computerized report in loose pages may now be
accepted in lieu of cashbook but it should be certified by the AO to establish
accountability.
Further review also revealed that the Monthly Report of Accountability for
Accountable Forms was not prepared as required by the above mentioned provision.
Recommendation:
a. Require the Accountable Officers to certify on the Daily Collection Report
to establish accountability.
b. Require also the AOs to prepare the Monthly Report of Accountability for
Accountable Forms as required.
Management promised to follow the recommendation, requiring all its
Accountable Officers to prepare the necessary reports. Since their reports were
computer-generated, the certification of the AOs will be incorporated by the EDP
Department in the system to establish accountability.

COMPLIANCE WITH TAX LAWS


The District religiously remitted the value added tax and other percentage
taxes withheld on the Districts purchases of goods and services, creditable income
taxes withheld and income taxes withheld on compensation of personnel to BIR, in
compliance with Revenue Regulation 2-98 dated January 14, 1998.
For taxes payable included under Inter Agency Payables account, the same
were remitted on January 2013.
44

STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES


The status of unsettled audit suspensions, disallowances and charges inclusive
of disallowances on appeal is presented below.
Beginning
Bal. 1/1/2013

This Period
NS/ND/NC
Settlement

Ending Bal.
12/31/2013

Notice of Suspension
Notice of Disallowance
Notice of Charge

153,400.00
15,236,213.63
-

600,000.00
10,258,072.51
-

600,000.00
25,494,286.14
-

Total

15,389,613.63

10,858,072.51

26,094,286.14

153,400.00

The following disallowances issued in CY 2013 are currently on appeal with


the Regional Director:
ND#

Details

ND#2013-001 to 012-101(2011)
ND#2013-013 to 023-101(2011)
ND#2013-026 to 036-101(2011)
ND#2013-037-101(2011)
ND#2013-038 to 127-101(2011)
ND#2013-128 to 132-101(2011)
ND#2013-133-101(2011)
ND#2013-134 to 193-101(2011)
ND#2013-194 to 198-101(2011)

Rice Subsidy
Meal Subsidy
Subsistence Allowance
Gift Certificates
Excessive RATA
BOD-Financial Assistance
Year-end Incentives
BOD-Honorarium
Excessive Travelling Allowance

TOTAL

Amount
P

4,759,630.00

2,194,500.00
593,253.60
396,121.00
2,082,330.00
98,000.00
P

10,123,834.60

The following disallowances were currently on appeal with the Commission


Proper:
Case No.

Amount

CGS-ND-2013-001
CGS-ND-2013-002
CGS-ND-2013-003
CGS-ND-2013-001

92,492.20
2,183,370.00
865,400.00
12,023,931.43

Total

15,165,193.63

45

PART IV - STATUS OF IMPLEMENTATION BY THE AUDITEE OF PRIOR


YEARS AUDIT RECOMMENDATIONS
Audit Observation

Recommendation

Ref.

Management
Action

Status of
Implementation

CY 2011 AAR
1.

Physical Inventory Report


as of December 31, 2011
of Property, Plant and
Equipment amounting to
P1,310,035,590.09 did not
tally with the Property
Cards and Balance Sheet
inventory accounts with
unreconciled amount of
P10,221,567.71 thus, the
accuracy of the recorded
Inventory
and
PPE
accounts were doubtful.

Require
the
Accountant and the
Members
of
the
Inventory Committee
to
reconcile
the
balances
in
the
Inventory
Report
against the balance per
Balance Sheet PPE
accounts and Property
Cards records.

AAR
2011

Implemented

2.

Subsidiary Ledgers for


Inventories and Property,
Plant and Equipment
accounts amounting to
P13,295,756.86
and
P1,310,035,590.09
respectively
that
contained the details or
breakdown of balances of
controlling
accounts
appearing in the general
ledger
were
not
prepared/maintained
as
provided for in Sections
11 and 12 of the NGAS
Manual, Volume II, thus,
the correctness of the
balances of the accounts
in the financial statements
cannot be ascertained.

Require
the
Accountant to prepare
the
prescribed
subsidiary ledgers in
accordance
with
Sections 11 and 12 of
the NGAS Manual,
Volume II.

AAR
2011

Implemented

3.

The Cashier and Tellers


were not using the
Official Cashbooks for
collections
and
disbursement transactions
contrary to Sections 04 (e)
and 41 of the NGAS
Manual, Volume I and
Sections 38, 39, 40, and
57 of the NGAS Manual,
Volume II. Likewise,
Monthly
Report
of
Accountability
for
Accountable
Forms
(RAAF)
were
not

Require the Cashier


and Tellers to use the
official cashbooks and
to prepare the Report
of Accountability for
Accountable
Forms
(RAAF) every end of
the month as required
under NGAS for easy
tie-back
of
accountabilities.
Likewise,
prepare
Report of Collections
and Deposits (RCD) to
report all collections
received and deposits

AAR
2011

46

Implemented

Reason for
Partial/NonImplementation

Audit Observation

Recommendation

Ref.

Management
Action

Status of
Implementation

Reason for
Partial/NonImplementation

prepared as required under


Section 68 of the NGAS
Manual.

made.

4.

Allowances and fringe


benefits amounting to
P7,992,292.69
were
granted to its Board of
Directors, officials and
employees without legal
basis.

Stop the granting of


allowances
and
benefits without legal
or valid basis and
require
immediate
refund
by
the
concerned
officials
and employees of the
amount received.

AAR
2011

Manageme
nt
still
grants
allowances
for
CY
2013.

Not
Implemented

Management
believed they
are entitled to
such
allowances

5.

The General Manager of


the BCWD was still
granted Confidential and
Intelligence
Fund
of
P600,000.00 for CY 2011
without
proper
authorization/approval by
the President of the
Philippines. Liquidation
reports were not submitted
to the COA Chairman as
required.

Stop
the
granting/payment of
Confidential
and
Intelligence
Funds
unless there is an
approval
by
the
President
of
the
Philippines. Submit to
the COA Chairman
accomplishment
reports
and/or
liquidation reports on
the Confidential and
Intelligence
Funds
disbursed.

AAR
2011

Manageme
nt already
secured the
necessary
authorizati
on
but
liquidation
was
not
done
properly.

Partially
Implemented

They
liquidated the
CA
without
the
credit
notice
from
COA because
they
have
submitted their
liquidation but
its been two
(2) years, yet
COA have not
issued
any
credit notice.

6.

Representation Allowance
and
Transportation
Allowance (RATA) paid
to the Officials of the
Water District for CY
2011 were in excess of the
authorized
rate
by
P593,257.60 as provided
under Corporate Budget
Circular No. 18 dated
November 18, 2000 and
the equivalent positions in
the
General
Appropriations Act.

Require the officials


concerned to refund
the excess RATA
granted
over
the
authorized rate under
Corporate
Budget
Circular No. 18 dated
November 18, 2000.
Strictly adhere to the
provisions
of
the
General
Appropriations Act on
the
equivalent
positions as the basis
of the grant of the
RATA to officials
concerned.

AAR
2011

Some
officials
already
corrected
their claim
for RATA
but others
still
continue to
claim
excess
amounts.

Implemented

Management
still continue
to
grant
excessive
RATA
to
some officials.

7.

The Board of Directors of


the
Water
District
continued to receive/claim
the Year-End Financial
Assistance
of
P283,000.00,
excessive
monthly honorarium of
P1,729,323.12 with an

Stop the payment of


excessive
honoraria
and related incentives /
financial benefits to
the members of the
Board of Directors of
the Butuan City Water
District. Effect the

AAR
2011

47

Implemented

Audit Observation

Recommendation

Ref.

Management
Action

Status of
Implementation

addition of a Year-End
Supplemental Incentive of
P479,121.52 or a total of
P2,491,444.64 for CY
2011 in violation of
Executive Order No. 7,
Memorandum
Circular
No.
015-10
and
Administrative Order No.
103 and COA Resolution
No. 2004-006.

immediate refund of
the excess payment of
honoraria,
year-end
financial
assistance
and
year-end
supplemental incentive
and all other benefits
received without legal
basis.

The Board of Directors of


the Water District were
granted per diem rates of
P6,000.00
per
day,
contrary to Section 6 of
Executive Order No. 298
dated March 23, 2004,
thus considered excessive
and illegal under COA
Circular No. 85-55A.
Total excess claim for the
period
amounted
to
P366,300.00.

Stop the payment of


excessive per diem
rates
of traveling
expenses to the Board
of Directors and effect
the immediate refund
of the excess claim of
per diem on traveling
expenses incurred by
the Board of Directors
pursuant to COA
Order of Execution
and Notice of Finality
of Decision previously
issued.

AAR
2011

Implemented

9. Shopping or as the
need arises method
of procurement was
resorted to on the
purchases of supplies,
materials
and
equipment
totaling
P4,391,219.48 instead
of public bidding,
contrary to Section 10
of the Implementing
Rules and Regulations
of R.A. No. 9184.

Require the Districts


BAC Secretariat to
consolidate all the
quarterly requirements
of supplies, materials
and equipment of
every
department/office
embodied
in
the
Approved
Annual
Procurement Plan and
to
procure
them
through Competitive
Public Bidding as
mandated
under
Section 10 of IRR-A
of R. A. No. 9184.
This is to be done to
prevent incurrence of
excessive expenditure
of
public
funds
pursuant to COA
Circular No. 85-55A.

AAR
2011

Implemented

10. The possibility of savings


generation could have been
realized, had the nine (9)
units
service
vehicles
(Multi-Cab) rented been
purchased instead of on

Consider
procuring
units of Multi-Cabs for
official service use
instead of entering into
rental contract.

AAR
2011

8.

48

Multicab
Service
Vehicles
were still
rented but

Not
Implemented

Reason for
Partial/NonImplementation

Management
claimed it is
more
advantageous
to the District
to rent than to

Audit Observation
rental basis.

Recommendation

Ref.

Engage into contract


only those legitimate
licensed suppliers and
contractors in the
business required by
the water district.

Management
Action

with
lower
price.

Status of
Implementation

Reason for
Partial/NonImplementation

buy their own


service
vehicles.

Post all Invitation to


Bid in the PHILGEPS
as required under
Section 21.2.1.b of
IRR-R.A. No. 9184.
.

Always present the


ABC before posting
the Invitation to Bid.

CY 2012 AAR
1. Allowances and fringe
benefits amounting to
P6,253,260.74
were
granted to its Board of
Directors, officials and
employees without legal
basis.

2. Butuan City Water District


continued to give monthly
per diem/honoraria to its
Board of Directors during
board
and
committee
meetings in excess of the
rates prescribed under
Executive Order No. 65.
For CY 2012. Excess
payments
reached
P1,163,100.00.
3.

Stop the granting of


allowances
and
benefits without legal
or valid basis and
require the immediate
refund thereof by the
concerned
officials
and employees.
Stop the payment of
excessive per diems to
the members of the
Board of Directors.
Effect the immediate
refund of the excess
payment of per diems
received without legal
basis.

Cash
Advances
for Submit to the Office of
Intelligence
Fund the COA Chairman all
amounting to P600,000.00 liquidation vouchers
for CY 2012 was liquidated and supporting papers
by
issuing
only
a for disbursements out
certification signed by the of the Intelligence
General
Manager
and Fund for proper audit.
Program Administrator that
funds were used in
connection
with
Cash advances for
Project/Program
Intelligence
Fund
Confidential/Intelligence
only
be
Data Gathering, and not should
considered
fully
by the Credit Advice from
the COA Chairman or liquidated upon receipt
his/her representative in of the credit advice
the
COA
accordance with COA from
Chairman
or
his/her
Circular 2003-003 dated

49

AAR
2012

Manageme
nt continue
to appeal
the
disallowan
ces issued.

AAR
2012

AAR
2012

Not
Implemented

Management
believed they
are entitled to
such
allowances

Implemented

Manageme
nt submits
the
liquidation
to the COA
Chairman
and drops
the
advances
from
the
books.

Partially
Implemented

They
liquidated the
CA
without
the
credit
notice
from
COA because
they
have
submitted their
liquidation but
its been two
(2) years, yet
COA have not
issued
any
credit notice

Audit Observation

Recommendation

Ref.

Management
Action

Status of
Implementation

Reason for
Partial/NonImplementation

July 30, 2003.

representative.

Bank
Reconciliation
Statements
were
not
submitted on time and
supporting documents were
not attached to the BRS in
accordance
with
the
provision of COA Circular
96-011.

Prepare and submit


Bank Reconciliation
Statements
with
complete supporting
documents as required
by Section 3.2 and 3.4
of COA Circular 96011.

AAR
2012

Implemented

5. The Four (4) vehicles of the


District did not carry
government plates and
were not marked For
Official Use Only and
thus, these were not
properly
identified
as
governmentowned
vehicles exposing it to risks
of private or personal use
in violation of Section 361
(d) and (e) of GAAM
Volume I.

Instruct the Property


Officer to apply for
red plate numbers
which are appropriate
for
government
vehicles and direct
him also to mark these
vehicles For Official
Use Only.

AAR
2012

Partially
Implemented

Management
did
not
prioritize the
marking of the
vehicles
because they
believe their
internal
control on the
use of these
vehicles
is
more
than
enough
to
prevent
unnecessary
use or abuse.

6.

The BCWD hired a


Technical
Services
Consultant for the Office of
the Board of Directors who
was paid the total amount
of P 235,430.82 for CY
2012 but was considered
unnecessary per COA
Circular
No.
85-55A
because her tasks can be
handled by the existing
personnel of the agency.
The contract was also
awarded
through
negotiated procurement but
there
was
no
BAC
resolution
attached
to
justify why negotiated
procurement was done,
instead of public bidding.

Discontinue
the
engagement
of
a
Technical
Services
Consultant and adhere
to the provision of RA
9184 in awarding
contracts
thru
negotiated
procurement.

AAR
2012

Partially
implemented

The
recommendati
on
was
implemented
in the late part
of CY 2014.

7. The District failed to post in


the Phil-GEPS purchases of
spare parts, supplies and
materials
amounting to
P2,081,797.06 contrary to
pertinent provisions RA

Strictly comply with


the requirements on
posting
with
PHIlGEPS of all bid
opportunities
and
notices of award as

AAR
2012

4.

50

Manageme
nt promised
to
implement
the
recommend
ation.

Manageme
nt already
opened a
plantilla
position
that whose
job
description
includes
the work of
the
consultant.

Implemented

Audit Observation

8.

Recommendation

Ref.

9184. Thus, the agency was


unable to fully benefit from
the services offered by this
Electronic
Procurement
System.

provided for under


Section 8 of RA 9184.

Unserviceable property
which were no longer
being used by the District
as reported in the Inventory
and Inspection Report of
Unserviceable
Property
amounting
to
P
3,720,251.42 were not
reclassified to the Other
Assets Account. Likewise,
these property were not
disposed of to generate
additional income.

Conduct
physical
inventory
of
all
unserviceable property
and accomplish the
Inventory
and
Inspection
Report.
Submit this report to
COA for inspection
and appraisal, after
which conduct public
auction of those which
still have salvage
value and destroy
those which have no
economic value.

Management
Action

Status of
Implementation

AAR
2012

Implemented

AAR
2012

Implemented

Instruct
the
Accounting Section to
prepare the necessary
adjusting entry to
reclassify
the
unserviceable
fixed
assets
to
Other
Assets. Subsequently,
the assets shall be
dropped from the
books after these are
sold or disposed of.

9. The District incurred the


total
amount
of
P7,395,770.36
for
penalties/surcharges due to
unpaid
accounts
with
LWUA per Section 4,
Article 5 of the Loan
Contract that were not
promptly paid.

Observe
periodic
reconciliation of loan
accounts with LWUA,
DBP
and
other
creditors to establish
correct
balances.
Strictly
observe
promptness in the
payment of loans to
avoid
penalties/surcharges
and
also
make
representations with
LWUA to condone
penalties/surcharges
that might be incurred
in the future.
Hold the
responsible

officials
for the

51

Reason for
Partial/NonImplementation

Audit Observation

Recommendation

Ref.

Management
Action

Status of
Implementation

Reason for
Partial/NonImplementation

Manageme
nt
personnel
identified
to facilitate
GAD
activities
were sent
to
attend
seminars
on GAD.

Partially
Implemented

Management
is still learning
on the basics
of
GAD
implementatio
n.

payment of loans and


interest
personally
liable for the amount
of penalties paid.
10. Gender and Development
(GAD) Plan formulated by
the Agency amounted only
to P86,700.00 which is
only .01% of the CY 2012
total budget of the agency
instead of the minimum 5%
required by Section 2.4 of
DBM/NEDA/NCFW Joint
Circular No. 2004-1.

Plan, organize and


formulate a GAD
Focal Point or group
of people within the
agency who will be
tasked to initiate,
assess, facilitate and
motivate
the
institutionalization of
gender mainstreaming
and
womens
empowerment with the
agency in accordance
with Executive Order
No. 273. This group
will
also
be
responsible
to
advocate, coordinate,
guide and monitor the
development
and
implementation of the
agencys GAD Plan
and
GAD-related
programs,
activities
and projects, duly
observing
the
guidelines prescribed
under DBM, NEDA
and NCRFW Joint
Circular No. 2004-01,
and most importantly,
to
make
proper
representation for the
funding support of
Gender
and
Development (GAD)
Program of at least
five percent (5%) of
the total appropriation.
Include in the over-all
plan of the District the
GAD activities and
appropriate an amount
at a minimum of five
(5%)
of
total
appropriation
to
address the national
governments
objectives for gender
equality in all areas of
social and economic
development.

52

AAR
2012

PART V - ANNEXES
Annex
1. LWUA Memo Circular No. 004-10
2. Intelligence Fund Liquidation Certificate
3. Summary of Allowances for CY 2013
3.
- Rice Allowance
3.1
- Meal Subsidy
3.2
- Subsistence Allowance
3.3
- Medical/Dental/Optical Allowance
4. Summary of Consultancy Payment CY 2013
5. Aging of Accounts Receivable CY2013
(Active and Inactive Accounts)
6. Schedule of Percentage of Past Due Accounts
Aged Less Than 30 days and Over 30 Days
7. Unpaid Accounts Zone 125-1
7.1 Unpaid Accounts Zone 125-2
7.2 Unpaid Accounts Zone 125-3
7.3 Unpaid Accounts Zone 125-4
8. OR Numbers in the Collection System that have different pre-printed
OR numbers
9. OR Numbers used twice in the Collection System
10. ORs not issued in numerical sequence
11. Cancelled ORs original not filed and stamped cancelled