11-AsuncionWD2015 Part2-Observations and Recomm

DETAILED AUDIT OBSERVATIONS AND RECOMMENDATIONS
PART II – DETAILED OBSERVATIONS AND RECOMMENDATIONS
Performance Audit
1. Water District has been operating without the benefit of a written standard
operating manual, thus, may not effectively communicate policies and
procedures within the organization, inconsistent execution of Agency’s
procedures and operations and may not provide personnel the independence and
security they need to operate in their jobs for maximum results.
Strong internal control dictates that one of the most useful systems to
streamline business operations is to have a Standard Operating Procedures Manual.
The operations manual is the authoritative guidebook of how things are done within
the organization.
It provides an Agency an effective way of communicating policies and

procedures and gives personnel the independence and security they need to operate
in their jobs for maximum results.
The main purpose of the operations manual, however, is not only to describe
how each aspect of the Agency’s procedures and operations must be executed. It also
sets the mainframe of rules and regulations that will ensure consistency and reach its
full potential and success.
Inquiry with the Management revealed that Asuncion Water District has been
operating without the benefit of a written comprehensive standard operating manual
or operations manual. More specifically, the District has no written standard
operating procedures on the following:
1) Office Structure;
2) Personnel Policies;
3) Office Procedures; and
4) Standard Formats.
Moreover, because of the following conditions, the need for the manual has
been emphasized:
a. Personnel are performing multiple tasks that violate the principle of

segregation of incompatible functions;
b. Time consuming in clarifying procedures during employee absences due

to illness or vacation and when employee turnover occurs;
Asuncion Water District, Province of Davao Del Norte Page 53

c. The importance of aiding the cross-training of employees to assure

continuity in the performance; and
d. Inconsistent application of standardized processes.
The development and preparation of written standard operating manual for

Asuncion Water District may further and consistently apply sound internal control
and assure the continuity of performance during employees’ turnover or absences,
thus, may result in a more effective and efficient operations.
We have recommended that Management create a committee to materialize

the Manual and to expedite its formulation, finalization, publication and
institutionalization.
Management’s Comment:
The Management has not commented on the audit issue.
COA’s Rejoinder:
We stand firm with our recommendation that Management create a committee

to materialize the Manual and to expedite its formulation, finalization, publication
and institutionalization.
2. Development and preparation of Operations Manual and Desk Procedures

Manual for the Cashier’s Section may further and consistently apply sound
internal control and assure the continuity of performance during employees’
turnover or absences, thus, may result in a more effective and efficient
implementation of cash management system and provide a more reliable
accounting information.
An important element of a strong internal control system is the recognition by

all employees of their specific duties within their office to carry out their
responsibilities effectively and efficiently.
This can be achieved when desk operational policies and procedures are
contained in clearly written documentation that is made available to all relevant
personnel. As Asuncion Water District continues to expand its operations, it is
important to formalize operating procedures in order to maintain an effective control.
Review of the operations of Cashier Section revealed that it has been

operating without the benefit of an updated cash management policies and procedures
manual.

The need for an updated cash management policies and procedures manual is
very appropriate with the diverse nature of the processes involved, i.e., collections,
deposits and disbursement processes, as well as the fragmented oversight
responsibilities generally associated with these processes.
Moreover, because of the following conditions, the need for the manual has
been emphasized:
a. The frequency of the turnover rate of operating personnel in cash

management functions;
b. The assignment of cash handling responsibilities to personnel with limited

fiscal experience or understanding;
c. The fragmentation of billing and cash handling functions which makes

monitoring the whole process difficult; and
d. The inherent risk of loss, or opportunity for personal gain, created by the
nature of cash transactions.
On the other hand, the desk procedures manual is beneficial in clarifying

procedures and aiding the cross-training of employees to assure continuity in the
performance during employee absences due to illness or vacation and when employee
turnover occurs.
The development and preparation of Operations Manual and Desk Procedures

Manual for the Cashier’s Section may further and consistently apply sound internal
control and assure the continuity of performance during employees’ turnover or
absences, thus, may result to a more effective and efficient implementation of cash
management system and provide a more reliable accounting information.
We have recommended that the Cashier’s Section develop and prepare an

Operations Manual and Desk Procedures Manual for approval by the Board of
Directors.
“With those observations the district is admittedly has a lack of

knowledge on the adequate control activities and standard cash operating
procedures. Therefore, the will strictly impose this year the day to day
detailed written procedures to address the weakness in internal control

for receiving, disbursing, recording, reconciling, safeguarding and

depositing cash.
COA’s Rejoinder:
We stand firm with our recommendation that the Cashier’s Section develop
and prepare an Operations Manual and Desk Procedures Manual for approval by the
Board of Directors.
3. Asuncion Water District’s failure to provide its personnel with a clear personnel
or employee manual may affect the level of competence and integrity of
personnel in executing the Agency's policies, procedures and controls, thus, the
vision to strengthen its labor force cannot be effectively attained.
The level of competence and integrity of personnel are essential elements of a

strong internal control system because the effectiveness of policies and procedures,
including controls, depends on the individuals who execute them.
This can be achieved when human resource policies, practices and operational
procedures are contained in clearly written documentation or generally referred to as
Personnel/Employee Manual that is made available to all relevant personnel.
Personnel/Employee Manual aims to provide with basic concepts such as

employee welfare and benefits, roles of employee organizations as partners in good
governance, bases of employee discipline and the norms of conduct and the career
growth of employees in government.
Inquiry with personnel concerned revealed that the District has been operating
without the benefit of a written personnel or employee manual. The current guidelines
available in relation to employees were limited to the following:
a) Recruitment
b) Appointment
c) Employment Status
d) Nature of appointment
e) Contract of Service/Job orders
f) Official working hours and leave of absences
g) Separation from the service
Further review of the current guidelines and actual observations of the daily
activities of officers and staff revealed the following deficiencies:
1. No employment policies on the following:

a. Uniform

b. Punch card and lining up in the Bundy clock

c. Computer games
d. Overtime services
e. Other policies
2. Under the recruitment guidelines, the prohibition and limitation of

appointment were not included–nepotism and double or indirect
compensation.
3. Appointment pertains to summary of requirements or documents needed

for submission.
4. No clear guidelines on duties, responsibilities and accountabilities:

a. Norms of conduct
b. Update of employee information
c. Turn-over of accountabilities
d. Use of office, office equipment, supplies and telephone
e. Information security and internet usage
f. Prohibited acts
i. Discrimination and harassment
ii. Rumormonger and False Complaints
iii. Sexual harassment
iv. Substance abuse and gambling
v. Releasing of classified and confidential information
vi. Conflict of interest
5. No policies on required Net Take Home Pay.
6. No guidelines on the following employee benefits:

a. Retirement Benefits
b. Medical Benefits
c. Overtime Compensation
d. Non-monetary Remuneration for Overtime Services Rendered
7. No policies on the proper implementation and execution of Orientation

and Re-orientation program.
8. No clear mechanism on grievance.

a. Application of grievance machinery
b. Procedures
c. Modes of dispute of settlement
9. No policies on personnel discipline:

a. Grounds for disciplinary action and penalties

b. Classification of Offenses
c. Preventive suspensions
The above deficiencies have resulted, but not limited to, the following:
1. Employees have no guide and reference material in their day to day

operation.
2. Employees have limited knowledge in performing their respective duties

and responsibilities based on the norms and standards.
3. Top Management has no basis in dealing with any violation that will be
committed by concerned employees.
4. Inconsistent application of operational guidelines, policies and procedures.
Asuncion Water District’s failure to provide its personnel with a clear

personnel or employee manual may affect the level of competence and integrity of
personnel in executing the Agency's policies, procedures and controls, thus, the vision
to strengthen its labor force cannot be effectively attained.
We have recommended that the General Manager create an Employee Manual

Technical Committee to materialize the Manual and to expedite its formulation,
finalization, publication and institutionalization.
The Human Resource Office/Unit may conduct focus group discussions from
all personnel group to gather inputs, recommendations and relevant information to be
given to the Technical Committee.
COA’s Rejoinder:
We stand firm with our recommendation that the General Manager create an
Employee Manual Technical Committee to materialize the Manual and to expedite its
formulation, finalization, publication and institutionalization.

4. Asuncion Water District’s organizational structure may not effectively satisfy the
scope and complexities of the operating requirements, to the disadvantage of the
government.
Compliance with an established internal control system is heavily dependent

on well documented and communicated organizational structure that clearly shows
lines of reporting responsibility and authority and provides for effective
communication throughout the organization.
The organizational structure of any government agency provides the overall

framework for planning, directing and controlling operations. An effective
organizational structure provides for the assignment of responsibility.
An essential element of a strong internal control system is the recognition of

an employee or a division/department of the need to carry out their responsibility
effectively and to communicate to the appropriate level of Management any problems
in operations, instances of non-compliance with the code of conduct, or the policy
violations or illegal acts that are noticed.
The Local Water District Manual on Categorization/Re-Categorization and

Other Related Matters (LWD–MaCRO) provides the general framework in
determining the Organizational Structure, Staffing Pattern and Position Classification
for every category of water district.
While Model Organizational Structure–Staffing Pattern for Key positions

under Category D as provided under the MaCRO includes the following:
1. Office of the Board of Directors
2. Office of the General Manager
2.1 Every major function or activity may be allowed a section:
2.1.1 Administrative Section.

1) Administrative/General Service Officer,
2) Storekeeper/Property/Supply Officer
3) Driver, among others.
2.1.2 Finance Services Section

1) Budget Officer,
2) Accounting Processor,
3) Accounting Analyst,
4) Corporate Accountant,
5) Cashier,

6) Collection Assistant, among others.
2.1.3 Commercial Services Section

1) Customer Service Officer,
2) Customer Service Assistant, among others.
2.1.4 Operations/Technical Section

1) Water Management Officer,
2) Water Resources Facilities Operator,
3) Senior Engineer,
4) Engineering Assistant, among others.
2.2 Positions under the General Manager shall be on “straight listing” only.
Moreover, the MaCRO provides, upon approval of the new category of LWD
xxxx, the LWD may opt to retain its existing Organizational Structure and Staffing
Pattern (OSSP) for the first three years. Thereafter, the LWD shall submit to the DBM
Regional Office concerned a proposal for the modification of the OSSP in accordance
with the models xxxx.
The Asuncion Water District has been operating under Category D. The
District’s existing organizational structure is equipped with one regular employee,
three casuals and ten job orders.
Assessing the current organizational structure revealed that positions which

are indispensable to the District’s operations are not available. These positions
include:
a) Budget Officer, in charge of the District’s funds;
b) Supply/Property Officer/Storekeeper, in charge of the receipts,

recording/reporting, issuance and disposal of District’s properties/fixed
assets; and
c) Collection Officer/Assistant in charge/assist in the receipt of collections,

issuances of official receipts, depositing, recording and preparation of
collection reports.
The category of the District (Category D) requires satisfaction of

requirements set forth under the LWD-MaCRO in terms of “human resource
requirements” or organizational structure, however, the District is deficient of this
requirement, hence, did not fully satisfy the complexities/scope of its operation.

In effect, deficient manpower resulted in multi-tasking and assignment of

works inappropriate to his/her positions, absence of check and balance in the
assignment of duties or non-segregation of incompatible functions or duties,
detrimental to the District’s operation.
We have recommended that Management review and match the current

manpower complement with the complexities of the operation and revisit the human
resource requirements laid down under the Revised Local Water District (LWD)
Manual on Categorization, Re-Categorization and Other Related Matters (MaCRO) to
fully satisfy the scope/complexities of the District’s operating requirements consistent
with the MaCRO at the same time strengthening its internal control.
COA’s Rejoinder:
We stand firm with our recommendation that Management review and match
the current manpower complement with the complexities of the operation and revisit
the human resource requirements laid down under the Revised Local Water District
(LWD) Manual on Categorization, Re-Categorization and Other Related Matters
(MaCRO) to fully satisfy the scope/complexities of the District’s operating
requirements consistent with the MaCRO at the same time strengthening its internal
control.
5. Inadequate control activities and laxity in the implementation of standard

operating procedures by the Head of the Agency, has resulted in violation of
existing and applicable rules and regulations, thus, a clear reflection of an
ineffective administrative supervision and ineffective implementation of internal
control system.
An essential element of an effective system is a strong control culture. It is the

responsibility of the Top Management to emphasize the importance of internal control
through their actions and words. This includes the ethical values that Management
displays in their dealings, both inside and outside the organization. The words,
attitude and actions of the Top Management affect the integrity, ethics and other
aspects of the Agency’s control culture.
An effective internal control system requires that an appropriate control

structure is set up, with control activities clearly defined within the organization at all
level. These should include:

a) Top level reviews;
b) Appropriate activity controls for different divisions;
c) Physical controls;
d) Checking for compliance with exposure limits and follow-up on non-

compliance;
e) A system of approvals and authorizations; and
f) A System of verification and reconciliation.
Asuncion Water District has been equipped with qualified and competent
personnel, however, based on the review of documents and actual observations on the
operations of the Agency, we have noted the following deficiencies:
1. The organizational structure may not be appropriate to set up with control

activities that would cater specific clients;
2. There were no clear written standard operating procedures and manual;
3. No clear system of approval and authorizations;
4. Inadequate monitoring for compliance with existing rules and regulations;

5. No system of verification and reconciliation;
6. Inadequate activity controls for different units; and
7. Presence of significant audit findings have been noted in the previous

audit.
In view thereof, inadequate control activities and laxity in the implementation

of standard operating procedures by the Head of the Agency, has resulted in violation
of existing and applicable rules and regulations, thus, a clear reflection of an
ineffective administrative supervision and ineffective implementation of internal
control system.
We have recommended that Management and its personnel need to recognize

the importance of internal control through their actions and words and displaying
ethical values in their dealings with all clients, employees and the entire community
of Agency.

COA’s Rejoinder:
We stand firm with our recommendation that Management and its personnel
need to recognize the importance of internal control through their actions and words
and displaying ethical values in their dealings with all clients, employees and the
entire community of Agency.
6. Asuncion Water District did not create, organize and operate an internal audit
service that functions in accordance with the intent of existing laws and
administrative issuances.
Sections 2 and 3 of R.A. No. 4177 amending R.A. No. 3456 known as the
Internal Auditing Act of 1962 provides that:
“Section 2. There shall be created, organized and operated in all

branches, subdivisions and instrumentalities of the government,
including government-owned and/or controlled corporations to be
known as agency for purposes of this Act, internal audit services which
shall assist Management to achieve an efficient and effective fiscal
administration and performance of agency affairs and functions.
Section 3. The Internal Audit Service shall be under the direct

administrative supervision and control of the heads and/or assistant
heads of the agency. It shall be organized as an independent staff unit
and shall correspondingly perform staff functions. x x x.”
The above provisions of law are supported by administrative issuances, such

as, Administrative Order Nos. 70 and 278 that directed the strengthening of the
internal control systems of government offices and agencies of the government, thus
providing the following:
“All heads of government offices, agencies, government-owned and/or

controlled corporations, including government financial institutions,
State Universities and Colleges (SUCs) and local government units,
shall organize an Internal Audit Service (IAS) in their respective
offices.
The IAS shall be an integral part of the office and shall assist in the
Management and effective discharge of the responsibilities of the

office, without intruding into the authority and mandate of the

Commission on Audit (COA) granted under the Constitution. xxx”
(Sec. 1, A.O. No. 70)
“x x x. However, it shall not be responsible for or required to

participate in procedures which are essentially a part of regular
operating activities or in operations which are the primary
responsibility of another unit in the organization. The IAS shall be
detached from all functions of routine operating character, such as the
following:
Pre-audit of vouchers and counter-signature of checks;
xxx
All other activities related to operations.” (Sec. 2, A.O. No. 278)”
“x x x
In the performance of their function, the internal auditors should be
able to exercise independence to render impartial and unbiased
judgments essential to the proper conduct of the audit.” (Sec. 3, A.O.
No. 278)
Verification of the organizational structure of the Asuncion Water District

disclosed that there is no internal audit service that is functioning in accordance with
the above-quoted law and administrative orders.
The functional responsibilities of the Internal Audit Division as envisioned

under R.A. No. 4177 and Administrative Order Nos. 70 and 278 includes the
following functions:
• Ascertaining the reliability and integrity of financial and operational

information and the means used to identify, measure, classify and report
such information;
• Ascertaining the extent of compliance and reviewing the systems

established to ensure compliance with government policies, plans and
procedures, laws and regulations which have impact on operations;
• Reviewing and evaluating the soundness, adequacy and application of

accounting, financial and other operating controls and promoting the
most effective control at reasonable cost;

• Reviewing operations and programs to ascertain whether or not results

are consistent with established objectives and goals and whether or not
such programs are being carried out as planned;
• Evaluating the quality of performance of groups/individuals in carrying

out their assigned responsibilities; and
• Recommending corrective actions on operational deficiencies observed.
The absence of internal audit services has resulted in several weaknesses in

the internal control system that compromised the reliability of financial information
and operational efficiency. The following are some of the weaknesses identified:
1. Asuncion Water District has been operating without the benefit of a

written standard operating manual, thus, may not effectively communicate
policies and procedures with the organization, inconsistent execution of
Agency’s procedures and operations and may not provide personnel the
independence and security they need to operate in their jobs for maximum
results;
2. The continuity of performance during employees’ turnover or absences,

cannot be assured due to non-development and non-preparation of
Operations Manual and Desk Procedures Manual for the Cashier’s
Section, that may result in a more effective and efficient implementation
of cash management system and provide a more reliable accounting
information;
3. Failure to provide personnel with a clear personnel or employee manual

may affect the level of competence and integrity of personnel in executing
the Agency's policies, procedures and controls, thus, the vision to
strengthen its labor force cannot be effectively attained;
4. The current organizational structure may not effectively satisfy the scope
and complexities of the operating requirements, to the disadvantage of the
government;
5. Asuncion Water District does not have a formal contingency plan in place
to ensure an adequate recovery of computer resources in the event of a
disaster or other major disruption in service;
6. The inadequacy of internal control procedures and processes for

Requisitions, Deliveries and Issuances processes expose the Agency to
potential risk of wasteful utilization of supplies and materials and other
property, plant and equipment; and

7. The Agency could have saved personnel time and effort involved in the
distribution of salaries and wages had they opted to avail of the Land
Bank of the Philippines (LBP) Automated Teller Machine (ATM) payroll
account for officers and employees and take advantage of the convenience,
economy, safety and facility of LBP’s payroll services thru ATM.
These deficiencies may have been minimized, if not eliminated, with the
proper functioning of an internal audit unit that will perform the above-mentioned
activities.
We have recommended that an internal audit service be created and organized

independent of the Accounting Department, to perform staff functions in accordance
with the above provisions of R.A. No. 4177 and Administrative Order Nos. 70 and
278.
COA’s Rejoinder:
We stand firm with our recommendation that an internal audit service be

created and organized independent of the Accounting Department, to perform staff
functions in accordance with the above provisions of R.A. No. 4177 and
Administrative Order Nos. 70 and 278.
7. The inadequacy of internal control procedures and processes for Requisitions,

Deliveries and Issuances processes expose the Agency to potential risk of
wasteful utilization of supplies and materials and other property, plant and
equipment.
Sound internal control dictates that in any adopted mode of procurement, the
following control measures should have been established:
a) The Purchase Request (PR) must be filled up by the Property Officer as

the case may be, based on the Approved Procurement Program (APP) and
accompanied by a voucher payable duly certified by the Budget Officer
and Chief Accountant or equivalent position;
b) The PR shall be approved by the head of the office or department

concerned, except in case of requisition for supplies to be carried in stock,
which shall be approved by the head of procuring entity concerned.

Immediately after, a Purchase Order (PO) shall be issued to the supplier or

his duly authorized representative;
c) Delivery of items purchased shall be accepted first by the District Property

Officer, as the case may be, before inspection;
d) Inspection of purchases shall be made by authorized inspectors for

conformity with specification in the order, using the Acceptance and
Inspection Report (AIR);
e) Deliveries of supplies or property shall be recorded in the property records

on the basis of the Acceptance and Inspection Report and other supporting
documents;
f) The Property Officer shall maintain Property Cards per category of

Property, Plant and Equipment (PPE); while the Chief Accountant shall
maintain Supplies Ledger Cards per stock number, PPE Ledger Cards for
each category of assets; and
g) Real Property Ledger Cards for land. Upon completion of the

disbursement process pertaining thereto the Chief Accountant shall
prepare the Journal Entry Voucher (JEV) taking up in the books the
procurement made.
Asuncion Water district failed to provide various related documents, such as:
supplies ledger card, property ledger cards, physical inventory count plan and other
documents related to the inventories and property, plant and equipment.
The deficiencies within the established internal processes and procedures on

such activity particularly the failure to provide various related documents as basis for
proper recording in the supplies ledger cards and property ledger cards, respectively,
are indications of evident wasteful utilization of supplies and materials. The control
procedures clearly indicated that the Agency has no defined objective as to this area
of responsibility.
The established procurement procedures of the Agency are indications of a

weak internal control in safeguarding supplies and property against loss or wastage
through irregular usage contrary to Section 114 to 124 of NGAS Manual Vol. I of
which prescribe the regular processes to be followed to ensure efficiency, economy
and effectiveness of a sound supply management.
We have recommended that Management adopt proper internal control over

supplies or property and ensure that proper and accurate recording as to its valuation,

existence, ownership and completeness shall be kept for all incoming and out-going
supplies or property in pursuant to Sec. 114 to 124 of NGAS Manual Vol. I.
The Management has commented on the audit issue.
“As part of the internal control procedure and process those failure by
the district to provide various documents related to the inventories and
property, plant and equipment are undeniable. However, as we noted to
other AOM we already acquired ledgers cards for inventories and the
district will strictly impose the internal control procedure and process as
required in the Section 114 to 124 of NGAS Manual Vol. I.
COA’s Rejoinder:
We stand firm with our recommendation that Management adopt proper

internal control over supplies or property and ensure that proper and accurate
recording as to its valuation, existence, ownership and completeness shall be kept for
all incoming and out-going supplies or property in pursuant to Sec. 114 to 124 of
NGAS Manual Vol. I.
8. Asuncion Water District could not provide a secured office space for the
Accountable Officer/Cashier, thus, could not ensure that government funds are
protected from the risks of possible losses.
A crucial aspect of a strong internal control system on control environment is

the adoption of measures to safeguard the physical assets of an Agency. One of the
office spaces of Asuncion Water District that should be closely guarded is the Cashier's
Office because of its crucial role in ensuring that government funds are protected from
the risks of possible loss.
During the ocular inspection of the Agency’s premises to determine the

measures/procedures adopted to safeguard the cashiering activities, the following were
noted:
a. The accountable officer/Cashier is occupying an open office space along

with other employees;
b. The table where the accountable officer is located is not properly enclosed
in a cubicle, thus it is not secured from client/visitors, co-employees and
other private persons;

c. The accountable officer was not provided with a well-protected- table and
cabinets for the cashiering activities;
d. The Agency has no security guard on duty to protect the personnel from
harm and loss of government funds as well as the safety of their employees;
and
e. The Office has no other security devices like CCTV.
Inquiry with the personnel concerned revealed that the current office set-up has
not been changed since she started working with the District. Moreover, she
emphasized that they have limited office space to provide a separate cubicle for the
cashier’s office.
In view thereof, Asuncion Water District could not provide secured office
space for the accountable officer/Cashier, thus, could not ensure that government
funds are protected from the risks of possible loss.
We have recommended that General Manager make representation with the

Board to obtain approval on the renovation of the office to ensure that the office space
where the Cashier is located will be adequately enclosed and secured from
client/visitors, co-employees and other private persons in order to protect the
government funds from risks of loss thru theft/burglary.
COA’s Rejoinder:
We stand firm with our recommendation that General Manager make

representation with the Board to obtain approval on the renovation of the office to
ensure that the office space where the Cashier is located will be adequately enclosed
and secured from client/visitors, co-employees and other private persons in order to
protect the government funds from risks of loss thru theft/burglary.
9. Inadequate control activities and lack of standardized cash operating procedures

of receiving, disbursing, recording, reconciling, safeguarding and depositing
cash, expose the cash and property to high risks of loss, misuse, or
misappropriation and delay or difficulty in ascertaining cash accountability.
Section 123 of Presidential Decree 1445 provides that

“an internal control is the plan of organization and all the coordinate
methods and measures adopted within an organization or agency to
safeguard its assets check the accuracy and reliability of its
accounting data and encourage adherence to prescribed managerial
policies.”
Moreover, Section 69 of P.D. 1445 also provides that public officers

authorized to receive and collect money arising from taxes, revenues or receipts of
any kind shall remit and deposit intact the full amount so received and collected by
them to the treasurer of the agency concerned and credited to the particular accounts
to which said money belongs.
Section 111(1) of P.D. 1445 further provides that the accounts of an agency
shall be kept in such detail as is necessary to meet the needs of the agency and at the
same time be adequate to furnish the information needed by fiscal or control agencies
of the government.
Our review disclosed the following deficiencies in the internal controls over
proper handling of cash:
1. Lack of day-to-day detailed written procedures for receiving, disbursing,

recording, reconciling, safeguarding and depositing cash;
2. Inadequate maintenance of updated subsidiary ledger per collecting officer to

establish complete documentation and accountability;
3. Insufficient supervisory oversight through daily reconciliation of cash to point

of sale system/cash register/receipt log, surprise cash counts, periodic audits,
etc.;
4. Some substitute collectors/tellers were not properly bonded. Also, they do not
have their own cash drawer and respective accounts in the collection system to
establish accountability;
5. Checks were not properly endorsed for deposit only;
6. Mandatory cash count during the end of the day, especially during Fridays and
a day before holidays were not conducted to validate and compare the cash
book balance with the cash on hand/vault, considering the materiality of
amount that remains in the cash vault;
7. Petty cash funds were not counted periodically on a surprise basis by an

authorized official;
8. Petty cash fund was not recorded in the Petty Cash Register;

9. Collections were not recorded daily in the accounting books;
10. Collections were not deposited intact on a daily basis; and
11. Official receipts and other attachment to the Disbursement Vouchers were not
stamped or marked with “PAID”.
The above deficiencies have been committed due to the following:
1. The organizational structure may not be appropriate to set up control activities

that would cater specific clients;
2. There were no clear written standard operating procedures and manual;
3. No clear system of approval and authorizations;
4. Inadequate monitoring for compliance with existing rules and regulations;
5. No system of verification and reconciliation;

6. Inadequate activity controls for different units; and
7. Management and its personnel have not recognized nor embodied the
importance of internal control through their actions and words and displaying
ethical values in their dealings with all clients, employees and the entire
community of the Agency.
In view thereof, the inadequate control activities and lack of standardized cash
operating procedures of receiving, disbursing, recording, reconciling, safeguarding
and depositing cash, expose the cash and property to high risks of loss, misuse, or
misappropriation and delay or difficulty in ascertaining cash accountability.
We recommended that Management design, study and implement a day-to-day

detailed written procedure to address the above cited weaknesses in internal control
for receiving, disbursing, recording, reconciling, safeguarding and depositing cash.
We further recommended that Management and its personnel recognize and

embody the importance of internal control through their actions and words and
displaying ethical values in their dealings with all clients, employees and the entire
community of the Agency.

COA’s Rejoinder:

We stand firm with our recommendation that Management design, study and
implement a day-to-day detailed written procedure to address the above cited
weaknesses in internal control for receiving, disbursing, recording, reconciling,
safeguarding and depositing cash.
10. Collection of revenues and receipts done by job order personnel and not
regularly appointed collecting officer/treasurer exposes the government funds
from possible losses and a clear deviation from the existing government
accounting and auditing rules and regulations.
Sound internal control, in terms of Management commitment to competence,

dictates that all personnel appear to have the competence, qualification and training
necessary for the assigned level of responsibility or the nature and complexity of the
Agency’s operation.
One of the control measures in the proper administration of cash activities is

that all collection of revenues and receipts shall be done by the regularly appointed
collecting officer/treasurer. Moreover, as embodied in the government accounting
and auditing manual, every officer of any government agency whose duties permit or
require the possession of custody of government funds or property shall be properly
bonded in accordance with law.
The current Collecting Officer of the Asuncion Water District may be

considered to be technically equipped in performing the collections of all revenues
and receipts of the District, however, the said personnel was employed by the District
as a Job Order personnel and has been in this status for almost three years.
The above personnel has not committed any violations against Asuncion
Water District’s existing policies and procedures nor has committed unfavorable
incidents in previous audit.
Moreover, it was noted that the above personnel was not bonded because of
their status of employment as job order.
In view thereof, collection of revenues and receipts done by job order

personnel and not regularly appointed collecting officer/treasurer exposes the
government funds from possible losses and a clear deviation from the existing
government accounting and auditing rules and regulations.
We have recommended that the Head of the Agency revisit and strictly adhere
with the provisions of the existing government accounting and auditing rules and
regulations

We further recommended that the Head of the Agency and the Board of
Directors review the current manpower assigned at the Cashier’s Section in terms of
qualifications, trainings and experiences.
We have also recommended that the current personnel of Cashier’s Section

take the initiative to have the necessary trainings and technical qualifications to be
qualified as regular employee and become more competent in rendering cashiering
services.
COA’s Rejoinder:
We stand firm with our recommendations that the Head of the Agency revisit
and strictly adhere with the provisions of the existing government accounting and
auditing rules and regulations and, together with the Board of Directors, review the
current manpower assigned at the Cashier’s Section in terms of qualifications,
trainings and experiences.
11. The Management’s practice of hiring personnel on a job-order basis whose

contract of services are renewed every six months in a period of more than one
year is prejudicial to the interest of the personnel and the Agency as well.
CSC Resolution No. 02-0790 dated June 5, 2002 and CSC Memorandum
Circular No. 17-02 dated June 24, 2002 re: policy Guidelines for Contract of Services
describes the individual contract of Service/Job order as follows:
1. The contract covers lump sum work or services such as janitorial, security,
or consultancy where no employer-employee relationship exists between
the individual and the government;
2. The job order covers piece work or intermittent job or short duration not
exceeding six months and pay is on a daily basis;
3. The contract of services and job order are not covered by Civil Service
law, rules and regulations, but covered by Commission on Audit (COA)
rules;
4. The employees involved in the contract or job order do not enjoy the
benefits enjoyed by government employees, such as PERA, ACA and
RATA; and

5. Services rendered thereunder are not considered as a government service.
Moreover, Section 28 of the General Provision of RA 10651 or the CY 2015

General Appropriations Act (GAA) provides that the agencies, within the limits of
their appropriations, may hire contractual personnel who are considered as employee
of the hiring agency during the period their services are required, in order to perform
agency functions or specific vital activities or services which cannot be provided by
the regular or permanent staff of the hiring agency. This provision on contractual
employees has also been stipulated in prior years’ GAAs.
Asuncion Water District has been hiring job order (JO) personnel over the
years in order to augment its workforce because of the alleged lack of plantilla
positions in the Agency. The contracts of services of these job order personnel
includes the following pertinent provisions:
1. Work to be performed is not performed by the regular employee;
2. Schedule of work is to be agreed upon by both parties;
3. There is no employer-employee relationship;
4. The appointment is not considered government service;
5. Contract not covered by CSC Rules but by COA Rules; and
6. Not entitled to benefits of regular employees.
During the year 2015, the Agency has re-hired and hired a number of
personnel on a job order (JO) basis to perform functions necessary in carrying out the
activities, programs and projects of the Agency.
Further analysis of the contract of services of the job order personnel and the
duties and responsibilities of the JOs specified therein disclosed that the
duties/responsibilities indicated in the contracts or services are those of regular
employees, despite the fact that their contracts indicated no employer-employee
relationship.
The above conditions do not, in any way, protect the interest of the JOs and
the Agency on the following grounds:
1. The Agency has no hold on its people who are hired on a job order basis
since these JOs could exit gracefully anytime they want, thus, affecting the
continuity of the Agency’s operations.

2. The JOs have no assurance of being hired/re-hired for a long period of

time since their contract is subject to the discretion of the Management.
3. Moreover, security of tenure is not accorded to the JOs especially those

who are rendering efficient services.
We have recommended that Management revisit their need for contractual

personnel, if not plantilla positions, that may be considered as government employees
that could handle critical tasks.
COA’s Rejoinder:
We stand firm with our recommendation that Management revisit their need
for contractual personnel, if not plantilla positions, that may be considered as
government employees that could handle critical tasks.
12. Asuncion Water District does not have a formal contingency plan in place to
ensure an adequate recovery of computer resources in the event of a disaster or
other major disruption in service.
An effective internal control system requires that there are reliable

information systems in place that cover all significant activities of an organization.
These systems, including those that hold and use data in an electronic form, must be
secure, monitored independently and supported by adequate contingency
arrangements.
Sound internal control further dictates that an Agency should have procedures
in place to protect information resources and minimize the risk of unplanned
interruptions, a plan to recover critical operations should interruptions occur and
controls to ensure service continuity that address the entire range of potential
disruptions from minor interruptions to major disasters. Departments should maintain
backup infrastructure, including upgrading the hardware and software as needed.
The purpose of backup is to protect the files on the disks from catastrophic
loss. The backup of disk files is performed on a daily basis to protect data from being
lost due to a hardware or software malfunction.

Personnel from the administrative sections, collections and accounting

sections are heavy users of information technology resources. However, Asuncion
Water District does not have a formal contingency plan in place to ensure an adequate
recovery of computer resources in the event of a disaster or other major disruption in
service.
Although those personnel concerned regularly backup their files, the Agency
has no adequate offsite storage. We have learned that storage of relevant
information/data was maintained at an employee's personal data storage device.
Since the Agency does not have adequate offsite storage, it cannot be assured
that its network can quickly and effectively be recovered in the event of an
emergency. This may also be true in cases where an employee or personnel
concerned handling the relevant information is transferred, resigns or is facing
permanent disconnection with the Office as a result of incidents beyond his/her
control.
We have recommended that Management put in place a formal contingency

plan to ensure adequate recovery of computer resources in the event of a disaster or
other major disruption in service. There should be a plan to continue working in the
event when the central systems are down for an extended period.
We have also recommended that Management explore alternatives to the

current method of storing backup, like off-site storage location. More specifically, we
would recommend that the following actions be immediately considered:
a) The General Manager may be provided with a copy of the backup of

relevant and updated data from all sections concerned;
b) Critical files of each personnel assigned with relevant information/data

should be regularly backed up and stored in a protected area that prohibits
it from being compromised;
c) Backup files should be periodically restored as a test to verify that these

are usable; and
d) Contingency plan should be periodically tested to verify that it could be

followed to resume critical processing.
The Management has commented that:

“Although, the district have already practice the procedure, but we

will enhance more the system in keeping our records and strictly impose
your recommendation for the security of our file even in the disruption
event.”
COA’s Rejoinder:
We stand firm with our recommendations that Management put in place a

formal contingency plan to ensure adequate recovery of computer resources in the
event of a disaster or other major disruption in service. There should be a plan to
continue working in the event when the central systems are down for an extended
period.
13. Improper observance of material and supply handling procedures by Asuncion

Water District could impede the proper implementation of an effective and
efficient inventory management.
One of the characteristics of a sound internal control system at the

Management Level is the presence of plans of organization and coordinated methods
and measures adopted within the Agency in safeguarding its assets.
One of these methods and measures is the proper observance of materials and
supply handling procedures which should have, but not limited to, the following
characteristics:
a) It ensures a continuous supply to facilitate uninterrupted rendition of

services;
b) It ensures that supplies are available for use in services as and when
required;
c) It protects the inventory against deterioration, obsolescence and

unauthorized use; and
d) Control investment in inventories, minimize the carrying cost and time

and keep it at an optimum level.
The Asuncion Water District has been operating without the benefit of a
written guideline for storeroom management system. Moreover, ocular inspection at
the premises of Property and Supply Office revealed lapses and deficiencies in the
current handling procedures and non-adherence with the existing guidelines, to wit:
a) Receiving Dock

1. Receiving docks were not kept clean and maintained which would protect
deliveries from all possible elements that may affect the integrity of deliveries;
b) Receiving Dock Signage
2. No clear warning discouraging the leaving/dumping of deliveries without

proper receiving by stores/warehouse personnel;
3. No clear statement(s) waiving responsibilities for dumped deliveries and the
consequences;
c) Storage Area
4. Supplies, such as electrical motors or air conditioning units, were not

protected from (or minimize exposure to) dust, dirt, rain, direct sunlight,
extreme heat conditions;
5. Storage was not kept free from insects and vermin;
6. Majority of the supplies were not properly arranged;
7. Some supplies were not stored off the ground and on dedicated clean pallets or
racking;
d) Storage Area Signage
8. Shelves were not clearly marked with goods details/barcode labels to promote
easy/accurate picking and eliminate unnecessary handling or wrong picking;
e) Floors Storage Area Signage
9. Floors were not kept clean and tidy on a daily basis;
f) Shelving
10. Failed to ensure safety, accessibility and maintenance of supplies in usable

condition;
11. Shelves were not regularly maintained. Evidence of dust and other
materials/elements that may affect supplies’ integrity were not minimized;
12. Shelves provided open freestanding racks with walkways that have
insufficient width between them, to enable stores/warehouse personnel to
move freely between racks for stacking and picking; and

13. The current racking/shelves used were not in good condition.
Moreover, review of the available reports at the time of inspection revealed

the following deficiencies:
1. No updated inventory report on each of the following item:

a. Office Supplies Inventory
b. Construction Materials Inventory
c. Medical, dental and laboratory supplies
2. Stock cards or bin cards were not available.
Inquiry with the personnel concerned revealed that the present physical
arrangement of the supplies has been the same since the start of operation.
The current physical arrangement of Property and Supply Section at various

stock rooms rendered the following:
a. Physical counting or inventory taking is difficult to perform;
b. Proper segregation of supplies as to level of hazards cannot be complied;
c. Inadequate protection of the inventory against deterioration and

obsolescence;
d. Inadequate protection against unauthorized use; and
e. It does not ensure that supplies are available for use in services as and
when required.
Hence, improper observance of material and supply handling procedures by

the Property and Supply Section of Asuncion Water District could impede the proper
implementation of an effective and efficient inventory management.
We have recommended that Management prepare a written guideline for

storeroom management system. Management may revisit and adhere to the existing
guidelines and procedures in handling the supplies and materials.
We have also recommended that Management require the personnel to
rearrange the inventories inside the stockroom, conduct a complete physical count of
the inventories, maintain stock cards and supplies ledger cards, to prepare a report
thereon and submit RPCI to the auditor’s office on time.

Since the agency has an undersize storage facility we failed to

comply the requirement and the correct procedure in handling our material
and supply. As of this present we still don’t have a huge storage facility
which lead the district the difficulty to implement the proper procedure
that facilitate the effectiveness and efficiency of our inventory
management.
Despite of this situation, the agency will endeavor adopt some of

your recommendation and a constantly conduct the reliability of our
inventory. As soon, if the district will have a proper storage facility we
will immediately impose all correct procedures.”
COA’s Rejoinder:
We stand firm with our recommendation that Management prepare a written

guideline for storeroom management system. Management may revisit and adhere to
the existing guidelines and procedures in handling the supplies and materials.
14. The current inventory taking methodical system of Asuncion Water District on
Supplies may be further enhanced by preparing a well-defined inventory plan,
clear written instructions and inventory count sheet to help maintain an effective
control of government’s property.
Physical stock-taking of supplies and other physical assets require a good

methodical system to achieve an accurate report and maintain an effective control of
government property.
Sound methodical system in the conduct of physical count dictates that in

order to achieve an accurate inventory report and maintain an effective control of
government property, the following must be present:
1. Well-defined plans with emphasis of the following:
a. The date of physical inventory;

b. Who is to supervise the count;
c. The personnel to act as counters and checkers; and
d. Sequence of counting.

2. Prepared set of written instructions to be observed by each person

connected with the taking of inventory.
3. Prepared inventory sheets.
Asuncion Water District has asserted that they have conducted the actual
physical count on Supplies in calendar year 2015. However, inquiry with the
personnel concerned to verify the procedures performed revealed that the conduct of
inventory showed the following deficiencies:
1. No information as to the time of physical inventory
2. Incomplete information as to personnel supervising the count
3. Incomplete information as to personnel acting as counter and checker
4. No systematic sequence in counting
5. Location of the supplies/equipment was not indicated in the inventory

sheet.
The above deficiencies are clear indication of the following:
1. Failure to develop definite plans in conducting the physical stock-

taking; and
2. Absence of written instruction.
In view thereof, the current inventory taking methodical system of the Agency
may be further enhanced by preparing a well-defined inventory plan, clear written
instructions and inventory count sheet to help maintain an effective control of
government’s property.
We have recommended that the personnel concerned revisit the procedures as

embodied in New Government Accounting System to facilitate the proper inventory
taking.
We have also recommended that Management create an Inventory Committee

to develop a definite plan concerning on a) the date of physical inventory, b) person
responsible for the supervision, counters and checkers, and c) sequence of counting to
be implemented in the future inventory taking.

“Indeed, the district had declared during the actual audit of the
assigned auditors in our agency that we managed the actual physical count
on supplies in the calendar year 2015, but the practice that we conducted
are not favorable and considerable in the require procedure in inventory
process, because of this, we extend our apology for mistakenly assertion
of the matter. The agency will make an action to correct the practice and
impose strictly all the procedures stated in your AOM.”
COA’s Rejoinder:
We stand firm with our recommendation that the personnel concerned revisit
the procedures as embodied in New Government Accounting System to facilitate the
proper inventory taking and create an Inventory Committee to develop a definite plan
concerning on a) the date of physical inventory, b) person responsible for the
supervision, counters and checkers, and c) sequence of counting to be implemented in
the future inventory taking.
15. Asuncion Water District has been operating without the benefit of a well-defined
and written Preventive and Maintenance Program, thus, may greatly affect the
efficiency and effective utilization of available resources and may lead to
disruption of the operations as water purveyor.
The presence of plans of organization and coordinated methods and measures

adopted within the Agency in safeguarding its assets is one of the characteristics of a
sound internal control system at the Management Level. As provided in Executive
Order No, 292 “Administrative Code of 1987”:
“Administrative supervision which shall govern the administrative

relationship between a department or its equivalent and regulatory
agencies or other agencies as may be provided by law, shall be
limited to the authority of the department or its equivalent to
generally oversee the operations of such agencies and to insure that
they are managed effectively, efficiently and economically but
without interference with day-to-day activities.”
Moreover, sound internal control dictates that for the Water District to
continue to fulfill its role as a water source, planning for present and future
maintenance of the water system facilities must be made. The role of maintenance is
to preserve the value of the physical infrastructure and ensure that the District can
continue to provide a safe and reliable water supply.

The most cost-effective method for maintaining a water system is to provide a

planned preventive maintenance program. A preventive maintenance program can
provide the optimum level of maintenance activities for the least total maintenance
cost.
Generally speaking, the District’s preventive and maintenance program
involves defining the tasks to be performed, scheduling the frequency of each task
and providing necessary staff to perform the task. More specifically, preventive and
maintenance program includes the following characteristics:
1. The District has a maintenance plan;
2. The maintenance and repair manuals for water related equipment are in
one location;
3. There is a master record of maintenance of each piece of equipment in the

District;
4. There is an action record that details the scheduled maintenance to be

performed for each piece of equipment on a regular basis or schedule;
5. There is a system of reports to show the state of each piece of equipment

at the time of each test and to initiate any further action which may be
necessary;
6. There are routine inspections, oiling and replacement of defective parts for
electric systems; and
7. There are routine inspections, oiling and replacement of defective parts for
mechanical systems.
Review of the financial records and inquiry with personnel concerned

revealed the following:
1. No master record of maintenance of each piece of equipment in the

District;
2. No action record that details the scheduled maintenance to be performed

for each piece of equipment on a regular basis or schedule can be found;
3. No system of reports to show the state of each piece of equipment at the
time of each test and to initiate any further action which may be necessary;
4. No routine inspections, oiling and replacement of defective parts for


5. No routine inspections, oiling and replacement of defective parts for

mechanical systems.
The following are the reasons for the occurrence of deficiencies noted above
and as provided by the Head of Section:
1. The Engineering Services/Section has limited personnel who has the

technical expertise to perform the required 24 hours maintenance;
2. The ratio of specific technical personnel to entire area of the District is

very impractical;
3. The Technical staff has inadequate trainings to deal with other

maintenance work;
4. The Engineering Services Section has inadequate accommodation and

facilities;
5. Inadequate documentation related to servicing and operations of

equipment, which should have been kept with the equipment;
6. Inaccurate equipment inventory from Property and Supply Office. The

required specification and details of information as to proper maintenance
were not provided;
7. No maintenance records. The Engineering Section has not used job cards
nor has maintained a proper and effective filing system; and
8. No clear maintenance reports as to the status of the equipment repaired

and repairs to be performed in the future to facilitate the proper forecasting
of the required budget for maintenance services.
In view of the above discussion, the District continues to incur repair and
maintenance cost, overtime payments and emergency purchases due to sudden
breakdown of machines, equipment and other water related facilities at an increasing
rate. Moreover, the non-preparation of the preventive and maintenance program has
increased the number of unserviceable assets.
It is worth emphasizing that planning for present and future maintenance of

the water system facilities is an important task, as important as planning water main
extensions and other physical improvements. The maintenance work must be
perpetual in order for the District to continue to fulfill its role as a water purveyor in
the future.

In view of the above, the District could have increased efficiency and more
effective utilization of available resources had there been a well-defined and written
Preventive and Maintenance Program.
We have recommended that the Management thru the Engineering

Services/Section prepare a well-defined, clear and implementable maintenance plan
and manual for the District’s equipment and facilities and be kept under the custody
of the Top Management.
We have also recommended that the General Manager ensure the following:
a. There is a master record of maintenance of each piece of equipment in the

District;
b. There is an action record that details the scheduled maintenance to be

performed for each piece of equipment on a regular basis or schedule;
c. There is a system of reports to show the state of each piece of equipment at

the time of each test and to initiate any further action which may be
necessary;
d. There are routine inspections, oiling and replacement of defective parts for
e. There are routine inspections, oiling and replacement of defective parts for
mechanical systems.
“We look for your consideration which our agency is still young which
is the reason that the proper internal controls not only in this matter but also
in your other observations are not yet implemented. Though the district was
established last 2009, but we conduct the existent operation in the year
2014 after the implementation of the proposed water rates, the fully
constructed pump house at Barangay Sta. Felomina and pipelining
activities in various barangay of Asuncion. The numerous activities we
conduct overlook the planning procedures especially on preventive and
maintenance program. However, the district in this current would seek
assistance from other water district to gain an idea regarding on this matter.
COA’s Rejoinder:

We stand firm with our recommendation that the Management thru the
Engineering Services/Section prepare a well-defined, clear and implementable
maintenance plan and manual for the District’s equipment and facilities and be kept
under the custody of the Top Management.
16. Asuncion Water District issues official receipts generated by private printers to
evidence its collection receipts for CY 2015 instead of the prescribed Accountable
Form 51A, contrary to Section 4 of Memorandum Circular No. 180 dated
August 13, 2009 issued by Office of the President.
Section 68 of PD 1445 provides that (1) No payment of any nature shall be

received by a collecting officer without immediately issuing an official receipt in
acknowledgement thereof and the receipt may be in the form of postage, internal
revenue or documentary stamps of the like, or officially numbered receipts, subject to
proper custody, accountability and audit; and (2) Where mechanical devices are used
to acknowledge cash receipts, the Commission may approve upon request, exemption
from the use of accountable forms.
Moreover, Section 4 of Memorandum Circular No. 180 dated August 13, 2009
issued by Office of the President, Affirming the Printing Jurisdiction of the National
Printing Office emphasized that with respect to the printing of official standard and
accountable forms other than those specified under Sections 2 and 3, government
agencies, instrumentalities and corporations may source their printing services outside
the National Printing Office provided that a prior written waiver by the National
Printing Office should be secured by the requisitioning office before it commences
the proper procedure in contracting the services of private printers.
Audit of collection revealed that the Agency has been using the pre-numbered
official receipts generated by private printers instead of using the prescribed
Accountable Form (AF) No. 51A for their collections in CY 2015. These receipts
were used to acknowledge the Agency’s receipt of funds.
Review of the documents further revealed that no written waiver by the

National Printing Office (NPO) was ever produced for the recourse to private printers
and even if one does exist, AF 51A could have been printed rather than any other pre-
numbered ORs.
The pre-numbered official receipts they are issuing and using to evidence its
collections are customized as to the data needed by the Agency such as Water Bill
(Current), Arrears, Penalty Charges, Registration Fee, etc. The ORs were likewise
registered with the Bureau of Internal Revenue.

The use of non-prescribed Official Receipts may be disadvantageous that

could hinder examination as to the accuracy, propriety and validity of the collection
transactions of the Agency such as:
a) Duplication of Official receipts with the same series; and
b) Incapability of the pre-numbered receipts to be monitored as to

completeness, consecutiveness and accountabilities.
We have recommended that Management use the prescribed Accountable

Form (AF) 51A to serve as proof of its collection receipts and not the pre-numbered
unofficial receipts, the printing of which has no prior written waiver from the
National Printing Office.
“The agency already perceived this observation, but last year 2015
we don’t have a regular employee/s that would qualify for the fidelity
bond which also a requirement that should be presented for application
of accountable officer. However, the district will surely adopt your
recommendation as prescribe in the section 4 of Memorandum Circular
No. 180 dated August 13, 2009 issued by office of the President.”
COA’s Rejoinder:
We stand firm with our recommendation that Management use the prescribed
Accountable Form (AF) 51A to serve as proof of its collection receipts and not the
pre-numbered unofficial receipts, the printing of which has no prior written waiver
from the National Printing Office.
17. The basic and necessary information that should appear in the Purchase Order
as required under COA Circular No. 96-010 were not provided, hence, it was not
ensured that the interest of the District has been protected.

Adequate information and effective communication are essential to the proper

functioning of a system of internal control. In order for the information to be useful,
it must be relevant, reliable, timely, accessible and provided in a consistent format.
COA Circular No. 96-010 dated August 15, 1996 prescribes the guidelines in
the preparation and submission of purchase orders (PO) relative to the procurement of
supplies and equipment. It enumerates the basic data or information that should
invariably appear in the PO, among which are the following:
(a) Purchase Order Number;
(b) Date of Purchase Order;
(c) Information whether the supplier is a manufacturer or exclusive

distributor;
(d) registered with SEC, DTI or both;
(e) Date of Delivery;
(f) Terms; and
(g) Mode of Procurement.
Post audit of disbursement vouchers covering 96 procurement transactions

aggregating Php5,127,252.92 disclosed the following deficiencies:
1. The date of delivery, delivery terms and payment terms were not provided.
2. 24 POs or 25% do not have a PO Number.
3. 77 POs or 80.21% do not bear the date of receipt by the supplier.
4. 15 POs or 15.63% do not bear the place of delivery.
The absence of the required information indicates that there is inadequate

control in monitoring the timetable of procurement activities since the timely delivery
of the goods to the District cannot be ensured.
Indicating the terms in the purchase order does not only avoid confusion
between both parties to the transaction as to how payments will be made, but also, it
would be a guide for the Agency as to how it will manage its cash flows to ensure that
cash is available when the liability is due and to prevent unnecessary penalties
because of the inability to pay on time. Also, the terms will be one of the components

in computing for liquidated damages should the supplier fail to deliver the goods
promptly.
Likewise, the District could not also enforce liquidated damages should the
supplier fails to satisfactorily deliver the goods on time since the date of receipt by
the supplier is not indicated in the PO.
We have recommended that all the basic data and information in the Purchase
Order shall be provided pursuant to COA Circular No. 96-010 to ensure that the
interest of the District shall be protected at all times.
“Admittedly, we fail to adhere to the rules under COA Circular No. 96-
10 as appropriate requirements for preparing a Purchase Order when our
agency acquires service or material to suppliers.
To take an immediate action on this matter, the district will strictly

impose the rule for the accuracy and informative of the transaction”
COA’s Rejoinder:
We stand firm with our recommendation that all the basic data and
information in the Purchase Order shall be provided pursuant to COA Circular No.
96-010 to ensure that the interest of the District shall be protected at all times.
18. Purchases of equipment and other supplies totaling Php1,321,983.44 from non
bona fide suppliers are clear violations of Section 52.1 of the Implementing Rules
and Regulations (IRR) of Republic Act (RA) No. 9184 and GPPB Resolution No.
09-2009 No. 3.j.
Section 52.1 of the IRR of RA No. 9184 provides that when a procuring entity
resorts to shopping as an alternative method of procurement, the procuring entity
simply requests for the submission of price quotations for readily available off-the-
shelf goods or ordinary/regular equipment to be procured directly from suppliers of
known qualifications.
Moreover, Section 52.3 of the same Republic Act also states the instruction to
acquire quotations from bona fide suppliers.

A bona fide supplier is further defined under the GPPB Resolution No. 09-
2009, Guidelines for Shopping and Small-Value Procurement, particularly in the
Procedural Guidelines letter “J” which states that:
“The procuring entity must validate whether it is entering into a

contract with a technically, legally and financially capable supplier,
contractor or consultant by requiring the submission of relevant
documents or through other means.”
Post-audit of disbursement vouchers showed that purchases of equipment and

supplies from various suppliers were not supported with documents that would
facilitate in determining whether or not the suppliers are indeed eligible/bona fide
supplier.
The following table shows the transactions with various equipment and
supplies totaling Php1,321,983.44:
Supplier Amount
Allan's Bookstore and Educational Supply 3,695.00
Allied Soil Test Services 95,000.00
Anchor Water Resources 29,500.00
Blinque Computer Sales Inc. 27,939.00
BMS Builders Supply 107,208.94
Dimmer Lights General Merchandise 197,797.50
Domaenik Enterprises 70,265.00
Footprints Printing Press 26,000.00
Hydrotech Construction and Supply 280,809.00
J and N Signfactor 2,600.00
J.S. Store 2,700.00
Janreel Trading 5,692.00
Kinglyn Marketing 2,100.00
Lawian Computer Services 1,007.00
Metro Davao Supreme Pumps Industries Inc. 396,000.00
Miles Advertising and General Merchandise 1,634.00
XD Ever Transformer Service Corp. 39,050.00
ZEK Marketing 26,861.00
Zel Copy & General Merchandise 6,125.00
Grand Total 1,321,983.44
The insufficiency of information may render the responsiveness of the

supplier as to the technical, legal and financial qualification doubtful.
Because of the foregoing, there is a risk of non-compliance or non-

performance of the supplier on his obligations to the Agency due to his ineligibility.
We have recommended that Management require the suppliers to submit all

his legal documents to support all the transactions undertaken with them.

We have also recommended that Management advice the BAC Committee to

maintain a list of bona fide suppliers whom they have previously entered into
contracts and a list of marked suppliers as non-qualified due to failure to meet the set
eligibilities.
We have further recommended that Management advise the BAC Committee

to conduct post-qualification of every new supplier before entering into contract with
them in accordance with the Implementing Rules and Regulations of Republic Act
No. 9184 and GPPB Resolution No. 09-2009.
“Admittedly, the agency did not follow the rules stated in the IRR of
the Republic of Act (R.A) No. 9184 and GPPB Resolution No. 09-2009
No. 3.j., and limit the document requires to suppliers to be presented in
our agency such as price quotations without knowing further the suppliers
if bona fide or non bona fide.
For the accuracy of our records and transaction activity with the
suppliers, the agency will strictly impose your recommendation by
implementing the rules under Section 52.10 of the Implementing Rules
and Regulations (IRR) of the Republic Act (R.A) No. 9184 and GPPB
Resolution No. 09-2009 No. 3.j.
COA’s Rejoinder:
We stand firm with our recommendation that Management: a) require the

suppliers to submit all his legal documents to support all the transactions undertaken
with them; b) advice the BAC Committee to maintain a list of bona fide suppliers
whom they have previously entered into contracts and a list of marked suppliers as
non-qualified due to failure to meet the set eligibilities; c) advise the BAC Committee
to conduct post-qualification of every new supplier before entering into contract with
them in accordance with the Implementing Rules and Regulations of Republic Act
No. 9184 and GPPB Resolution No. 09-2009.
Financial and Compliance Audit
19. The accuracy, completeness, valuation and fair presentation of Accounts

Receivable amounting to Php461,230.58 as of December 31, 2015 cannot be

ascertained due to undetermined reporting difference of (Php31,642.80) with the

amounts calculated from the comparative balance sheet, income statement and
cash flows statement.
Section 111 of P.D. 1445 provides that:
“(1) The accounts of an agency shall be kept in such detail as is

necessary to meet the needs of the agency and at the same time be
adequate to furnish the information needed by fiscal or control
agencies of the government.
(2) The highest standards of honesty, objectivity and consistency shall

be observed in the keeping of accounts to safeguard against
inaccurate or misleading information.”
In view of the above provision, in all government agencies, the Head of the
Agency has the responsibility to develop and install the internal control structure of
the agency to include the control environment, accounting system and control
procedures. One of the elements of a sound system of internal control is that the
accounting and other records should be kept up-to-date, accurate and can be verified.
Asuncion Water District has reported a total Accounts Receivable amounting

to Php461,230.58 as of December 31, 2015. This can be broken down as follows:
Account Classification 2015 2014

Accounts Receivable Current 461,230.58 243,392.34
Non Current 0.00 0.00
Total 461,230.58 243,392.34
Review of the reported balance revealed that the reported balances do not
agree with the amounts calculated from the comparative balance sheet, income
statement and cash flows statement. An unaccounted variance of (Php31,642.80) was
noted. This can be presented as follows:
Accounts Receivable 2015 2014

Beginning Balance 243,392.34 174,623.10
Sales 4,947,588.66 1,538,786.04
Total 5,190,981.00 1,713,409.14
Collection 4,761,393.22 1,460,088.54
Ending Balance 429,587.78 253,320.60
Reported Ending Balance 461,230.58 243,392.34
Variance (31,642.80) 9,928.26
The presence of unaccounted variance is an indication of Management’s laxity

in keeping of accounts to safeguard against inaccurate or misleading information.
In view thereof, the accuracy, completeness, valuation and fair presentation of

Accounts Receivable amounting to Php461,230.58 as of December 31, 2015 cannot
be ascertained due to undetermined reporting difference of (Php31,642.80) with the
amounts calculated from the comparative balance sheet, income statement and cash
flows statement.
We have recommended that Management require the Accounting Personnel

concerned to analyze and review the details of the variance of accounts receivable
and prepare the necessary adjusting entries.
The Management has commented on the audit issue.
“We cannot give you a detail of adjusting entries for this matter at this
moment, but the agency already order the accounting processor to review
his record of Inventory Accounts.”
COA’s Rejoinder:
We stand firm with our recommendation that Management require the

Accounting Personnel concerned to analyze and review the details of the variance of
accounts receivable and prepare the necessary adjusting entries.
20. The fair presentation of accounts receivable Php461,230.58 as of December 31,

2015 cannot be ascertained due to Management’s failure to provide Allowance
for doubtful accounts, thus, a clear violation of Section 66 of the New
Government Accounting System (NGAS), Volume 1.
Section 66 of the New Government Accounting System (NGAS), Volume 1

provides that:
“Trade receivables shall be valued at their face amounts minus,

whenever appropriate, allowance for doubtful accounts. Bad debts
expense and/or any anticipated adjustments, which in the normal
course of events will reduce the amount of receivables from the
debtors to estimated realizable values, shall be set up at the end of the
accounting period. The Allowance for Doubtful Accounts shall be
provided in an amount based on collectability of receivables balances

and evaluation of such factors as aging of the accounts, collection

experiences of the agency, expected loss experiences and identified
doubtful accounts.”
The determination of bad debts expense shall be derived from computations

based on percentages and aging of accounts receivables as follows:
Age of the Accounts Percentage
1-60 days 1%
61-180 days 2%
181-1 year 3%
More than 1 year 5%


Non-Current 0.00 0.00
Total 461,230.58 243,392.34
For CY 2015, the agency had not provided an Allowance for Doubtful
Accounts based on the trade accounts receivable as of December 31, 2015. The non-
provision of allowance was due to Management’s failure to provide the aging
summary/analysis and failure to classify accounts as current or non-current.
In such condition, trade accounts receivable was not presented at its realizable
value. It may be mentioned that the provision for doubtful accounts is a requirement
under the “Conservatism” and “Realization” concepts of Accounting.
In view thereof, the fair presentation of accounts receivable Php461,230.58 as

of December 31, 2015 cannot be ascertained due to Management’s failure to provide
Allowance for doubtful accounts, thus, a clear violation of Section 66 of the New
Government Accounting System (NGAS), Volume 1.
We have recommended that accounting processor provide allowance for

doubtful accounts to its trade accounts receivable to comply with the requirements
afore-cited.

“The Board of Directors already approved a resolution for this matter

and for this year 2016 agency will prepare the aging summary of accounts
receivable for the classification of doubtful accounts as the requirement of
Section 66 of the New Government Accounting System Volume 1.”
COA’s Rejoinder:
We stand firm with our recommendation that the designated accounting

processor provide allowance for doubtful accounts to its trade accounts receivable to
comply with the requirements afore-cited.
21. Non-recognition of impairment loss on undisclosed past due accounts receivable

as of December 31, 2015 is not in accordance with Philippine Accounting
Standards (PAS) 39.
The Philippine Accounting Standards No. 39 on Subsequent Measurement of

Financial Assets and Impairment and Uncollectibility of Financial Assets, states the
following:
“46. After initial recognition, an entity shall measure financial assets,

xxx. At their fair values, without any deduction for transaction costs
xxxx, except for the following financial assets:
a. Loans and receivables which shall be measured at amortized
cost using the effective interest method;
b. xxxxxx
c. xxxxxx
58. An entity shall assess at each balance sheet date whether there is
objective evidence that a financial asset or group of financial assets is
impaired. xxxxxx.
59. A financial asset xxxx is impaired and impairment loss are incurred
if, and only if, there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of the
asset (a “loss event”) and that loss event (or events) has an impact on
the estimated future cash flows of financial asset or group of financial
asset that can be reliably estimated. It may not be possible to identify
a single, discrete event that caused the impairment. Rather the
combined effect of several events may have caused the impairment.
Losses expected as a result of future events, no matter how likely, are
not recognized. Objective evidence that a financial asset or group of
assets is impaired includes observable data that comes to the attention
of the holder of the asset about the following loss events:

a) significant financial difficulty of the issuer or obligor;

b) a breach of contract, such as a default or delinquency in
interest or principal payments;
c) xxxxxxx
d) it becoming probable that the borrower will enter bankruptcy
or other financial reorganization;
e) xxxxxxx
f) xxxxxxx
63. If there is objective evidence that an impairment loss on loans and

receivables or xxxxx has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and
the present value of estimated future cash flows discounted at the
financial asset’s original effective interest rate. The carrying amount
of the asset shall be reduced either directly or through the use of
an allowance account. The amount of loss shall be recognized in
profit or loss. (underscoring supplied).


Non Current 0.00 0.00
Total 461,230.58 243,392.34
Inquiry with the accounting personnel revealed that no aging analysis has
been made by the Agency. With the absence of the aging analysis, Management
failed to classify past due accounts and recognized impairment loss.
Although Management has exerted efforts to take appropriate remedial

measures to collect these past due accounts, they should have made an assessment
whether there is an objective evidence that the financial assets are impaired as
required by the above provision of PAS 39.
The non-recognition of impairment loss on past due accounts which have been
outstanding for several years is not in accordance with Philippine Accounting
Standards (PAS) 39.
We have recommended that Management comply with the provisions of

Philippine Accounting Standards (PAS) 39.

We have also recommended that Accounting Processor revisit the provisions

as embodied in relation to PAS 39 for proper accounting information and guidance.
“The agency as of this current year in the level of the accounting

processor is making a reviewed on the accounts receivable that
undoubtedly did not classify and recognize the past due account of our
concessionaires. Therefore, in order to preclude this lack of information
we provide, the district will strictly impose a monitoring on the accounts
of our concessionaires to properly classify either they are past due or a
non-past due. Also, the BOD Members had already approved a resolution
for the implementation of percentage to determine doubtful accounts in the
aging summary which is also part or connected to the issue stated above.”
COA’s Rejoinder:
We stand firm with our recommendation that Management comply with the
provisions of Philippine Accounting Standards (PAS) 39 and the accounting processor
revisit the provisions as embodied in relation to PAS 39 for proper accounting
information and guidance.
22. The accuracy, validity and reliability of Accounts Receivable amounting to

Php461,230.58 as of December 31, 2015 cannot be established due to
Management’s failure to provide the accounts receivable aging schedule.
In all government agencies, the Head of the Agency has the responsibility to
develop and install the internal control structure of the Agency to include the control
environment, accounting system and control procedures. One of the elements of a
sound system of internal control is that the accounting and other records should be
kept up-to-date, accurate and can be verified.
An Accounts Receivable Aging Schedule is a periodic report that categorizes

an entity's accounts receivable according to the length of time a bill/account has been
outstanding. It is a critical management tool as well as an analytic tool that helps
determine the financial health of an agency’s clients/customers.
Asuncion Water District has reported a total accounts receivable of

Php461,230.58 as of December 31, 2015. This represents open accounts arising from
services rendered to customers (both active and non-active) for water sales.

Upon requiring the submission of the Aging Analysis, the audit team has not
received such reports. The personnel concerned admitted that they have not prepared
the aging analysis for CY 2015.
Further inquiry revealed the following deficiencies:
1. The Agency has no written policy guidelines on the proper classification

of accounts as either active or inactive;
2. Information as to the due dates used in aging the active accounts were
not available; and
3. The lack of complete information as to the details of each clients with the
corresponding due dates has hindered the application of other audit
procedures.
In view thereof, the accuracy, validity and reliability of Accounts Receivable

amounting to Php461,230.58 as of December 31, 2015 cannot be established due to
Management’s failure to provide the accounts receivable aging schedule.
We have recommended that Management review all records, prepare the

aging analysis and provide the needed information to facilitate the preparation of
aging analysis of the accounts.
We have also recommended that Management prepare written guidelines,

subject to the approval of the board, on proper classification of accounts as either
active or inactive.
The Management will implement the recommendation.
COA’s Rejoinder:
We stand firm with our recommendation that Management review all records,
prepare the aging analysis and provide the needed information to facilitate the
preparation of aging analysis of the accounts.
23. The existence, completeness, valuation and fair presentation of Inventory

amounting to Php233,500.00 as of December 31, 2015 cannot be ascertained due
to undetermined reporting difference of (Php532,279.07) with the amounts
calculated from the comparative balance sheet, income statement, and cash flows
statement.

Section 43 of the Manual on National Government Accounting System

(MNGAS) provides the accounting for supplies and materials as follows:
a) Purchase of supplies and materials for stock, regardless of whether or not

they are consumed within the accounting period, shall be recorded as
Inventory account. Under the perpetual inventory method, an inventory
control account is maintained in the General Ledger on a current basis.
b) Regular purchases shall be recorded under the inventory account and

issuance thereof shall be recorded based on the RSMI. Xxx
c) The Accounting Unit shall maintain perpetual inventory records, such as

the Supplies Ledger Cards (SLC) for each inventory stock. The SLC shall
contain the details of the General Ledger accounts.
d) For check and balance, the Property and Supply Office/Unit shall maintain
xxx Stock cards (SC) for inventories, the balance in quantity per SC
should always reconcile with the ledger cards of the Accounting Unit.
The Office supplies inventory account and the related accounts of Asuncion
Water District can be presented as follows:
Particulars CY 2015 CY 2014 CY 2013

Inventory - end (Office Supplies, Accountable Forms
233,500.00 8,100.04 2,925.00
and Other Supplies)
Supplies and Materials Expenses (Office Supplies,
870,178.96 17,804.35 21,357.65
Accountable Forms, Other Supplies)
Purchase of inventory (per Cash flows Statement) 96,299.85 0.00 0.00
However, review of the reported balance amounting to Php233,500.00 as of

December 31, 2015 revealed that this figure could not be verified due to the following
inconsistencies and deficiencies noted:
a) The reported balances do not agree with the amounts calculated from the
comparative balance sheet, income statement and cash flows statement.
This can be presented as follows:

Inventory 2015 2014

Beginning 8,100.04 2,925.00
Acquisition 96,299.85 0.00
Available for Use 104,399.89 2,925.00
Reported Inventory Expense 870,178.96 17,804.35
Ending Balance (765,779.07) (14,879.35)
Reported Ending Balance 233,500.00 8,100.04
Variance (532,279.07) (6,779.31)
b) The Agency failed to apply perpetual inventory method, which requires

that all purchases of supplies and materials for stock, regardless of
whether or not they are consumed within the accounting period, shall be
recorded as Inventory account.
Moreover, various deficiencies were also noted in relation with the Inventory
account:
1. The inadequacy of internal control procedures and processes for

Requisitions, Deliveries and Issuances processes expose the Agency to
potential risk of wasteful utilization of supplies and materials and other
property, plant and equipment.
2. The actual conduct of inventory showed the following deficiencies:
a) No information as to the time of physical inventory;

b) Incomplete information as to personnel supervising the count;
c) Incomplete information as to personnel acting as counter and
checker;
d) No systematic sequence in counting; and
e) Location of the equipment was not indicated in the inventory sheet.
3. Improper observance of material and supply handling procedures affected

the proper implementation of an effective and efficient inventory
management.
In view thereof, the existence, completeness, valuation and fair presentation of

Inventory amounting to Php233,500.00 as of December 31, 2015 cannot be
ascertained due to undetermined reporting difference of (Php532,279.07) with the
flows statement.

We have recommended that Management require the Accountant-designate to

analyze and review the details of the variance office supplies inventory account and
prepare the necessary adjusting entries.
his record of Inventory Accounts.”
COA’s Rejoinder:

Accountant-designate to analyze and review the details of the variance office supplies
inventory account and prepare the necessary adjusting entries.
24. Procurement of common-use supplies and materials amounting to Php96,299.85

are purchased from different suppliers instead of the Procurement Service of the
Department of Budget and Management (DBM), contrary to the provisions of
RA 9184 and its IRR, Administrative Order No. 17 dated July 28, 2011 and DBM
Circular Letter No. 2011-6 dated August 25, 2011.
Sec. 53 of RA 9184 (Procurement Reform Law) provides for the different
modes of Negotiated Procurement; specifically, under (e) thereof, the following is its
specific provision:
“Subject to the guidelines specified in the IRR, purchases of Goods

from another agency of the government, such as the Procurement
Service of the DBM, which is tasked with a centralized procurement of
commonly used Goods for the government in accordance with Letter
of Instruction No. 755 and Executive Order No. 359, series of 1989."
Corollary thereto, the IRR of RA 9184 also provides the following modes of
procurement classified under Negotiated Procurement:
“53.5 Agency-to-Agency. Procurement of infrastructure projects,

consulting services, and goods from another agency of the GOP, such
as the PS-DBM, which is tasked with a centralized procurement of
Common-Use Supplies for the GOP in accordance with Letter of
Instruction No. 755 and Executive Order No. 359, series of 1989. x x
x. The GPPB shall issue guidelines to implement this provision".

Moreover, Administrative Order No. 17 dated July 28, 2011 provides basically
the same requirement, as quoted hereunder:
“Section 1. Reiteration of Policy. x x x In line with this, all agencies

shall procure their common-use supplies from the PS and use the
PhilGEPS in all their procurement activities, x x x."
Common-use supplies, as defined in Sec. 3a, of the IRR of RA 9184 refers to

those supplies, materials and equipment included in the price list of the PS which are
necessary in the transaction of the official business of the procuring entity and
consumed in its day-to-day operations.
In addition, Sec. 4 thereof provides that “Common-use supplies shall be

procured directly from the PS or its depots without need of public bidding as provided
in Section 53.5 of the Implementing Rules and Regulations (IRRs) of R.A. 9184.”
This provision was further emphasized in Paragraph 1.1 of DBM Circular Letter No.
2011-6 dated August 25, 2011 requires that all procurement of common-use supplies
without need for public bidding shall be made from the Procurement Services (PS).
Asuncion Water District has reported a total amount of Php96,299.85 as

office and other supplies for the calendar year ended December 31, 2015. Post audit
of selected payments for the said purchases revealed the following:
a) Office supplies were not procured from the Procurement Service;
b) No other documents can be used to prove that the items provided in each
purchase were not available; and
c) There were no other valid reasons gathered to justify the purchases from
other suppliers.
The practice of purchasing common-use supplies from suppliers other than the
Procurement Service is a clear indication of Management’s lack of support with the
government in attaining transparency, competitiveness, streamlined procurement
process, system of accountability and public monitoring contrary to RA 9184 and its
IRR, as well as Administrative Order No. 17 dated July 28, 2011 and DBM Circular
Letter No. 2011-6 dated August 25, 2011, directing the use of the Procurement
Service (PS) and the Philippine Government Electronic Procurement System
(PhilGEPS) in procurement activities.
We have recommended that Management ensure that procurement of

common-use supplies shall be made from the Procurement Service, in compliance
with RA 9184, Administrative Order No. 17 and DBM Circular Letter No. 2011-6
dated August 25, 2011.

“The failure of our agency to conform the provisions under R.A 9184
and its IRR, Administrative Order No. 17 dated July 28, 2011 and DBM
Circular Letter No. 2011-6 dated August 25, 2011 is undeniable; thus, the
agency will strictly adopt the provision under this law.”
COA’s Rejoinder:
We stand firm with our recommendation that Management ensure that

procurement of common-use supplies shall be made from the Procurement Service, in
compliance with RA 9184, Administrative Order No. 17 and DBM Circular Letter
No. 2011-6 dated August 25, 2011.
25. Management’s failure to provide the revaluation and/or appraisal value of the
Property, Plant and Equipment amounting to Php25,974,203.62 as of December
31, 2015 rendered the fair presentation doubtful.
Paragraphs 31 and 32 of Philippine Accounting Standards No. 16 provide that:
“31. After recognition as an asset, an item of property, plant and

equipment whose fair value can be measured reliably shall be carried
at a revalued amount, xxx. Revaluation shall be made with sufficient
regularity to ensure that the carrying amount does not differ materially
from that which would be determined using fair value at the balance
sheet date.
32. The fair value of land and buildings is usually determined from the
market-based evidence by appraisal that is normally undertaken by
professionally qualified valuers. The fair value of items of plant and
equipment is usually their market value determined by appraisal.”
Moreover, COA Resolution No. 89-17 dated March 17, 1989 provides that:
“xxx, the revaluation shall be done by an independent appraiser or

expert every five (5) years (on fixed assets existing as of the end of the
fifth year), or even before the five year period ends, whenever there is
a currency devaluation or price increase which raises price levels
(based on the Consumer Price Index) xxxx”

Asuncion Water District has reported a carrying value of its Property, Plant
and Equipment amounting to Php25,974,203.62 as of December 31, 2015. This can
be broken down as follows:
Particulars 2015 2014

Land 100,000.00 100,000.00
Office Equipment 2,672.85 16,065.58
Furniture and Fixtures 67.72 67.72
IT Equipment and Software 26,881.41 0.00
Other Property, Plant and Equipment 25,844,581.64 26,854,365.88
Total 25.974.203.62 26,970,499.18
It was noted that the Agency failed to determine the appraisal value of its
property, plant and equipment as of December 31, 2015. Since no appraisal on PPE
was recorded in the books from the start of the operations, the carrying value of the
assets as of December 31, 2015 in the amount of Php25,974,203.62 was not correctly
stated.
We have recommended that Management immediately conduct appraisal of all

its property, plant and equipment by hiring an independent and qualified appraiser or
expert as required under PAS 16 and COA Resolution No. 89-17.
“The agency will immediately conduct appraisal in all our property,

plant and equipment as required under PAS 16 and COA Resolution No.
89-87.
COA’s Rejoinder:
We stand firm with our recommendation that Management immediately

conduct appraisal of all its property, plant and equipment by hiring an independent
and qualified appraiser or expert as required under PAS 16 and COA Resolution No.
89-17.
26. The accuracy, completeness, valuation and fair presentation of Property, Plant
and Equipment-net amounting to Php29,448,872.40 as of December 31, 2015
cannot be ascertained due to unreconciled balance of Php5,836,702.78 in the
beginning balance and undetermined reporting difference of (Php550,020.76)

with the amounts calculated from the comparative balance sheet, income
statement and cash flows statement.
environment, accounting system, and control procedures. One of the elements of a

(MNGAS) provides that:
“Property, plant and equipment acquired through purchase shall

include all costs incurred to bring them to the location necessary for
their intended use, like transportation costs, freight charges,
installation costs, etc. These are recorded in the books of accounts as
Assets after inspection and acceptance of delivery”.

(MNGAS) also provides the accounting for Property, Plant and Equipment as follows:
“The Accounting Unit shall maintain perpetual inventory records, such

as Property, Plant and Equipment Ledger Cards (PPELC) for each
category of plant, property and equipment including work and other
animals, livestock, etc. The PPELC shall contain the details of the
General Ledger accounts”.
“For check and balance, the Property and Supply Office/Unit shall
maintain Property Cards (PC) for property, plant and equipment. The
balance in quantity per PC should always reconcile with the ledger
cards of the Accounting Unit”.
Asuncion Water District has reported net book value of Property, Plant and
Equipment amounting to Php29,448,872.92 as of December 31, 2015.
Review of the account balance revealed that the reported figure does not agree
with the amounts calculated from the comparative balance sheet, income statement
and cash flows statement. This can be presented as follows:
Cost 2015 2014

Beginning 29,276,941.09 21,899,732.64
Acquisition 3,347,653.88 19,436.67
Total 32,624,594.97 21,919,169.31
Disposal 0.00 0.00
Ending Balance 32,624,594.97 21,919,169.31
Reported Ending Balance 33,172,310.39 29,276,941.09

Variance (547,715.42) (7,357,771.78)
Accumulated Depreciation
Beginning 2,306,374.19 156,535.61
Depreciation Expenses 1,419,369.14 628,769.58
Total 3,725,743.33 785,305.19
Disposal 0.00 0.00
Ending Balance 3,725,743.33 785,305.19
Variance 2,305.34 (1,521,069.00)
Net Book Value

Net Book Value 28,898,851.64 21,133,864.12
Net Book Value - Reported 29,448,872.40 26,970,566.90
Variance (550,020.76) (5,836,702.78)
Difficulties in reconciling the computed variance were due to the following

inconsistencies/deficiencies:
The Property and Supply Office/Unit failed to maintain Property Cards, which
requires timely recording of every Property, Plant & Equipment movement and
should be reconciled with the ledger cards of the Accounting Unit.
Property, Plant & Equipment Ledger Cards (PPELC) was not maintained by
the Accounting unit, which made it difficult to ascertain the propriety of reported
balance of the said account.

Property, Plant and Equipment-net amounting to Php29,448,872.40 as of December
31, 2015 cannot be ascertained due to unreconciled balance of Php5,836,702.78 in the
beginning balance and undetermined reporting difference of (Php550,020.76) with the
flows statement.
We recommend that Management require the Accounting Personnel

concerned to analyze and review the details of the variance of Property, Plant and
Equipment account and prepare the necessary adjusting entries.

his record on the property, plant and equipment.”
COA’s Rejoinder:
We stand firm with our recommendations that Management require the

Property, Plant and Equipment account and prepare the necessary adjusting entries.
27. The accuracy and completeness of Property, Plant and Equipment amounting to
Php29,448,872.92 as of December 31, 2015 cannot be ascertained due to
Management’s failure to maintain Property, Plant and Equipment Ledger Cards
(PPELC) and Property Cards (PC) by the Accounting and Property Divisions,
respectively.
Moreover, Annex F-7 of the NGAS Manual-Corporate provides that Supplies

Ledger Cards & Property, Plant and Equipment Ledger Cards (PPELC) shall be
kept by the Accounting unit for each specific item of supplies and property to record
the acquisition, description, estimated life, depreciation, disposal, accumulated
maintenance expenses incurred and other information about the asset. PC and Stock
Cards by category of property, plant and equipment shall likewise be prepared by the
Property unit for appropriate check and balance.
The accounting system has emphasized that PC shall be used to record the
following relevant information:
a) Detailed description,
b) Nature of transfer/acquisition,
c) Disposal, and
d) Other information.

Moreover, the PPELC shall be used to record description, details of receipt

e.g., quantity, unit cost and total cost, accumulated depreciation and transfers and
adjustments.
These control cards are necessary tools that serve as bases for the accuracy
and completeness of entries to the Property, Plant and Equipment account. Moreover,
as part of post inventory-taking procedures, the inventory listing of equipment shall
be compared with the property card as against the equipment ledger cards and the
total thereof shall be reconciled with the control accounts in the general ledger and
any discrepancies should be immediately verified.
Review of the records of the Asuncion Water District revealed that they have
not prepared the PPELC and PC. They also emphasized that they did not maintain the
control cards. It was also noted that the issue on non-maintenance of the required
control cards has been reported as an audit issue in previous years.
The non-maintenance of the control cards may be attributed on the following

factors:
1) The Agency has no appropriate operational manual;
2) The Agency has no sound property management;
3) Management has considered the ledger maintained by the accounting

sections as the control cards; and
4) The Agency has limited manpower to prepare such control card.
The failure to maintain these cards renders the validity of entries to subject
account and its balance difficult to ascertain. Moreover, monitoring of transfer of
property from one location or accountable officer to another is not done.
We have recommended that Management maintain PPELC and PC for PPE to

completely support the validity of the entries and corresponding account balances and
to facilitate the mandatory annual reconciliation of items recorded between
Accounting and Property Divisions to comply the provision of Annex F-7 of the
NGAS Manual-Corporate.
“Undoubtedly, the agency really did not follow the correct

procedure as requires of Annex F-7 of the NGAS Manual-Corporate.

However, the office have already ordered a quantity of Supplies Ledger

Card, Property, Plant and Equipment Ledger Card and Property Card as
of this year 2016 for the strict implementation of the correct method in
keeping record of Property, Plant and Equipment.”
COA’s Rejoinder:
We stand firm with our recommendation that Management maintain PPELC

and PC for PPE to completely support the validity of the entries and corresponding
account balances and to facilitate the mandatory annual reconciliation of items
recorded between Accounting and Property Divisions to comply the provision of
Annex F-7 of the NGAS Manual-Corporate.
28. The existence of Property, Plant and Equipment amounting to Php29,448,872.92

as of December 31, 2015 cannot be ascertained due to Management’s failure to
prepare and submit in prescribed format Report on the Physical Count of
Property, Plant and Equipment (RPCPPE).
Section 102 of PD 1445 provides for the primary and secondary responsibility
for government funds and property. It states that:
“1. The head of any agency of the government is immediately and

primarily responsible for all government funds and property
pertaining to his agency.
2. Persons entrusted with the possession or custody of the funds or

property under the agency head shall be immediately responsible to
him, without prejudice to the liability of either party to the
government.”
Annex B-7 of the NGAS Manual–Corporate provides important guidelines in

relation with the property, plant and equipment:
a) The Report on the Physical Count of Property, Plant and Equipment

(RPCPPE) shall be used to report on the physical count of PPE and
prepare it yearly in four copies;
b) The reports shall be certified correct by the Inventory Committee and

approved by the Head of the Agency;
c) Any discrepancy (shortage/overage) shall be immediately

verified/checked; and

d) In case of loss, the official accountable for the property shall be held
accountable thereto.
Upon requiring the submission of the RPCPPE, the audit team has not
received such reports, instead a subsidiary ledger from the Accounting Division was
provided.
Management’s inability to submit the required report was due to the following
deficiencies noted:
a) No Inventory Committee was created;
b) No sound methodical system in the conduct of physical count;
c) Inadequacy of internal control procedures and processes for requisitions,

deliveries and issuances processes of property, plant and equipment; and
d) Control activities were not clearly defined within the organization at all
levels.
Failure to ascertain the existence and condition of assets presented in the

financial statements through proper reporting of results of physical count materially
affected the reliability of the amount recorded under PPE account.
We have recommended that Management constitute an Inventory Committee

to be responsible in the conduct of inventory count and to prepare the RPCPPE,
which should be submitted the same to the audit team.
We have also recommended that the Inventory Accounts section be required to

conduct immediate reconciliation of variances identified.
“Admittedly, our agency did not prepare nor use the correct format
for the report of prior year which cause perplexity of our presentation. The
agency will impose the correct procedure, as of this year we have already
appointed an employee to take charge the responsibility in the physical
count and record of the property, plant and equipment.”
COA’s Rejoinder:

We stand firm with our recommendation that Management constitute an

Inventory Committee to be responsible in the conduct of inventory count and to
prepare the RPCPPE, which should be submitted the same to the audit team.
29. The responsibility and accountability of issued government property/equipment

cannot be established due to Management’s failure to prepare the required
Acknowledgement Receipt for Equipment (ARE), thus, a clear violation of
Section 46, Volume II of the New Government Accounting System (NGAS)
Manual.
Section 2 of Presidential Decree No. 1445 otherwise known as The State

Auditing Code of the Philippines provides that
“all resources of the government shall be managed, expended or

utilized in accordance with law, rules and regulations & safeguarded
against loss or wastage through illegal or improper disposition with the
view of ensuring economy, efficiency, and effectiveness in the
operation of the government”. The responsibility to take care of such
policy rests directly with the chief or the head of the government
agency concerned.
In line with the above provision, Section 46, Volume II of the New
Government Accounting System (NGAS) Manual provides that the
Acknowledgement Receipt for Equipment (ARE) shall be used to acknowledge the
receipt of property and equipment for official use from the Property Officer. The ARE
shall be renewed every three years or every time there is a change in accountability.
The primary objective of ARE is the determination of accountability of issued

property in case of loss or missing properties.
Review of the Property, plant and equipment of Asuncion Water District

amounting to Php29,448,872.92 as of December 31, 2015 revealed that applicable
assets were not supported with ARE.
Inquiry with personnel concerned revealed that they were not aware of the
existing accounting rules and regulations that each item recorded under the property,
plant and equipment should be provided with ARE. Moreover, they have emphasized
that with the limited personnel, compounded with multi-tasking load, they have relied
heavily on trust and confidence among the employees.
The limited manpower and other reasons provided may be accepted

momentarily, however, the need to prepare for the ARE should prevail.

The non-preparation of the required AREs is a manifestation of non-

compliance of pertinent provision of NGAS, which resulted in the difficulty in the
determination of accountability of issued property in case of loss or missing
properties.
We have recommended that Management require the property custodian to

properly account the issued properties/equipment and establish control measures to
safeguard government resources from misuse or possible losses by issuing ARE to
personnel concerned.
COA’s Rejoinder:
We stand firm with our recommendations that Management require the

property custodian to properly account the issued properties/equipment and establish
control measures to safeguard government resources from misuse or possible losses
by issuing ARE to personnel concerned.
30. The existence, completeness and fair presentation of Guaranty Deposit Payable
amounting to Php34,018.54 as of December 31, 2015 cannot be established due
to Management’s failure to maintain subsidiary ledgers/schedules.
Section 12 of the New Government Accounting System (NGAS), Volume II,

provides that:
“The SL is a book of final entry containing the details or breakdown

of the balance of the controlling account appearing in the GL.
Postings to the SL generally come from the source documents. x x x.
The totals of the SL balances shall be reconciled with their respective
control account regularly or at the end of each month. Schedules
shall be prepared periodically to support the corresponding
controlling GL accounts. x x x.”
Dormant accounts, as defined in COA Circular No. 97-001 dated February 5,

1997, refer to individual or group of accounts which balances remained non-moving
for more than five years.
Asuncion Water District has reported a Guaranty Deposit Payable amounting

to Php34,018.54 as of December 31, 2015. This amount represents various payments

from the concessionaires such as service application fee, customer deposit, meter
installation, maintenance fee and installation fee.
Analysis of the account revealed the following observations:
a) No available breakdown/schedules can be used to determine the details of

the account;
b) the Accounting Processor was not able to present the subsidiary ledgers
for the Customers’ Deposit account; and
c) Management has not validated if the liability still exists or is valid.
Inquiry with the accounting personnel revealed that the balances reported in
the financial statements has been outstanding for long periods, however, the exact
number of years could not be identified due to limited documents.
Alternative audit procedures to validate the account balance cannot also be

applied because there were no related documents made available at the time of audit.
In view thereof, the existence, completeness and fair presentation of Guaranty

Deposit Payable amounting to Php34,018.54 as of December 31, 2015 cannot also be
established due to Management’s failure to maintain subsidiary ledgers/schedule and
has remained non-moving for more than five years.
We have recommended that Management direct the Accounting Processor to

reconstruct the subsidiary ledgers for the Customers’ Deposit account so that the
Water District can validate the account balance and determine the following:
a) Whether this liability still exists or valid claimants still exist; and
b) Whether there is a need to reclassify the liability account as a prior period
adjustment.
“We would like to clarify that the Guaranty Deposits Payable that
recorded in our book is not about the payment of concessionaires as
customer’s deposit, because this policy did not yet exist in our agency.
However, we understand you interpretation on this matter due to lack of
data in our presentation.

Elucidate further, the guaranty deposits that you remark in the Audit
Observation Memorandum is the retention money deducted from the
payment of contractor King Josum Construction and Supply, which
became stagnant in the record after they completed the project.
COA’s Rejoinder:
We stand firm with our recommendation that Management direct the

Accounting Processor to reconstruct the subsidiary ledgers for the Customers’
Deposit account so that the Water District can validate the account balance and
determine the following:
a) Whether this liability still exists or valid claimants still exist; and
b) Whether there is a need to reclassify the liability account as a prior
period adjustment.
31. The accuracy, completeness, valuation and fair presentation of Loans Payable
amounting to Php21,510,036.72 as of December 31, 2015 cannot be ascertained
due to undetermined reporting difference of Php1,940,174.78 in the beginning
balance and with the amounts calculated from the comparative balance sheet
and cash flows statement.
Section 111 of P.D. 1445 provides that:
“(1) The accounts of an agency shall be kept in such detail as is

necessary to meet the needs of the agency and at the same time be
adequate to furnish the information needed by fiscal or control
agencies of the government.
(2) The highest standards of honesty, objectivity and consistency shall

be observed in the keeping of accounts to safeguard against inaccurate
or misleading information.”
In view of the above provision, in all government agencies, the Head of the
Agency has the responsibility to develop and install the internal control structure of
the agency to include the control environment, accounting system and control
procedures. One of the elements of a sound system of internal control is that the
accounting and other records should be kept up-to-date, accurate and can be verified.
Review of the reported balance of Loans Payable amounting to

Php21,510,036.72 as of December 31, 2015 revealed that the reported beginning
balances do not agree with the amounts calculated from the comparative balance
sheet and cash flows statement. This can be presented as follows:

Loans Payable 2015 2014

Beginning Balance 18,042,484.72 19,982,659.50
Acquisition of Loan 3,467,552.00 0.00
Total 21,510,036.72 19,982,659.50
Payment of amortization 0.00 0.00
Ending Balance 21,510,036.72 19,982,659.50
Variance 0.00 1,940,174.78
The presence of unaccounted variance is an indication of Management’s laxity

in keeping of accounts to safeguard against inaccurate or misleading information.

Loans Payable amounting to Php21,510,036.72 as of December 31, 2015 cannot be
ascertained due to undetermined reporting difference of Php1,940,174.78 in the
beginning balance and with the amounts calculated from the comparative balance
sheet and cash flows statement.
We have recommended that Management require the Accounting Personnel

concerned to analyze and review the details of the variance of Loans Payable and
prepare the necessary adjusting entries.

“The beginning balance of December 31, 2014 amounting of
Php19,982,659.50 realized by the district that the record of Loans Payable was
overstated oppose to the amount actual received from the Local Water Utilities
and Administration (LWUA) in which the district occurred on adjustment of
Loans Payable for the year 2014. Though, we will review once more this
account.”
COA’s Rejoinder:

Loans Payable and prepare the necessary adjusting entries.
32. The validity, accuracy and fair presentation of Fines and Penalties amounting to
Php8,733.49 for the year ended December 31, 2015 cannot be ascertained due to

immediate recognition as income despite the non-collection thereof, a clear

violation of Section 19, Volume 1, of NGAS.
The Philippine Accounting Standards (PAS) No. 18 provides that
“Revenue is recognized only when it is probable that the economic

benefits associated with the transaction will flow to the enterprise.
However, when an uncertainty arises about the collectability of an
amount already included in revenue, the uncollectable amount, or the
amount in respect of which recovery has ceased to be probable, is
recognized as an expense, rather than as an adjustment of the amount
of revenue originally recognized.”
Moreover, Section 19 of the NGAS Manual further provides that:
“Fines and Penalties, either from tax revenue or other specific income
accounts, shall be recognized as income of the year these were
collected.”
Asuncion Water District has reported a total income – fines and penalties
amounted to Php8,733.49 for the year ended December 31, 2015. However, review
of the account revealed that the monthly fines and penalties were recognized and
included in the monthly receivable of the Agency. Shown below are the recorded
monthly receivables.
Total Amount
Income from Fines &
Month Other Business Water Sales Reported as
waterworks Penalties
Billed Income (C) Discount (D) Receivable
system (A) (B)
(A+B+C-D)
January 211,357.50 6,108.49 33,000.00 250,465.99
February 178,206.75 0.00 7,260.00 185,466.75
March 196,877.25 375.00 8,310.00 205,562.25
April 286,956.50 0.00 23,325.00 310,281.50
May 311,449.00 0.00 38,690.00 350,139.00
June 322,136.25 2,250.00 19,215.00 343,601.25
July 343,280.50 0.00 21,345.00 364,625.50
August 366,602.00 0.00 7,495.00 374,097.00
September 331,784.00 0.00 10,418.00 342,202.00
October 387,945.25 0.00 3,720.00 391,665.25
November 388,934.25 0.00 3,910.00 392,844.25
December 395,305.75 0.00 33,618.35 1,601.25 427,322.85
Total 3,720,835.00 8,733.49 210,306.35 1,601.25 3,938,273.59
Inquiry with personnel concerned revealed that it has been the practice of the
Agency to record the total receivable and has not been aware of the existing
accounting policies.

The practice of recognizing penalty charges amounting to Php8,733.49 for the

year ended December 31, 2015 as income despite non collection thereof is contrary to
Section 19, Volume 1, of NGAS and the inclusion of such in the accounts receivable
affected the fair presentation of the Financial Statements as it resulted in the
overstatement of the receivable and income accounts. This inclusion resulted in the
misstatement of doubtful accounts expense and the corresponding receivable contra
account.
We have recommended that Management review the receivable account as of

December 31, 2015 and provide the details of receivable to facilitate the proper
accounting adjustments and to reflect the fair amount in the financial statement.
We have also recommended that Management strictly observe the provisions

of Section 19, Vol. 1 of NGAS and to direct Accounting processor to discontinue
recording penalty charges as accounts receivable and recognize income only upon
actual collection.
The Management will discontinue the recording penalty as accounts receivable

and will strictly imposed Section 19, Volume 1 of NGAS.
COA’s Rejoinder:
We stand firm with our recommendation that Management review the

receivable account as of December 31, 2015 and provide the details of receivable to
facilitate the proper accounting adjustments and to reflect the fair amount in the
financial statement and strictly observe the provisions of Section 19, Vol. 1 of NGAS
and to direct Accounting processor to discontinue recording penalty charges as
accounts receivable and recognize income only upon actual collection.
33. The accuracy and validity of Salaries and Wages amounting to Php261,039.62
for the year ended December 31, 2015 cannot be ascertained due to
Management’s failure to use Bundy clock to register their attendance, thus, a
clear violation of Section 686 of the Revised Administrative Code and Civil
Service Rule XV.
sound internal control system is proper maintenance of accounting and other records

that are updated, accurate and verifiable. One of the specific controls needed to
validate data entry for the salaries and wages is the use of Bundy clock or biometrics.
Section 686 of the Revised Administrative Code and Civil Service Rule XV,
Section 4, provides that each head of department or agency shall require a daily
record of attendance of all the officers and employees under him, including those
serving in the field or on water, to be kept on the proper form and, whenever possible,
registered on the Bundy clock.
Below are some of the pertinent provisions in relation with the use of Bundy
clock to record and register the attendance:
1) Only Chiefs and Assistant Chiefs of agencies who are appointed by the
President or Officers who are of higher rank and other Presidential
appointees are exempt from keeping their daily record of attendance, but
all absences of such officers must be recorded.
2) Whenever possible, daily record of attendance must be registered on the

Bundy clock using the prescribed daily time record, Civil Service Form
No. 48.
3) In the absence of a Bundy clock, a log book or locator book must be

maintained, but the official/employee concerned must accomplish their
respective CSC Form No. 48 which shall be verified by their immediate
supervisors (applicable when on fieldwork).
4) In case of temporary employees working directly in the field, their record

of attendance shall be prepared by their timekeeper/foreman in charge and
certified to by the next higher supervisor.
5) Every office shall maintain a time record book which shall reflect, aside
from the Bundy clock or daily time record of attendance, the arrival at or
departure from office of each official or employee for every full day's
attendance, twice in the morning and twice in the afternoon.
6) At the end of each month, the Bundy clock entries on the time cards shall
be checked against the handwritten entries in the Time Record Book, after
which the same shall be transmitted to the Administrative Office, together
with the Report of Absences, Tardiness and Man hours Lost.
Asuncion Water District has reported a total amount of Php261,039.62 as

salaries and wages for the calendar year ended December 31, 2015. Post audit of the
transactions revealed the following deficiencies:
1) The Agency has no Bundy clock;

2) The Agency has the logbook to register the attendance of the employees,
however, daily record of the attendance was not made;
3) Payment of salaries and wages were not supported with Budget Utilization
Slip;
4) No leave forms were attached; and
5) Summary report of absences, tardiness and man hour lost was not
prepared.
Moreover, we have noted that Management has not installed proper control
system to ensure accuracy of the recorded time of arrival at or departure from office
of each official or employee.
Management’s failure to use Bundy clock to register their attendance hindered

the independent verification of the reported attendance, moreover, the absence of
proper control system rendered the reliability of the attendance logbook doubtful.
We have recommended that Management consider the use of Bundy clock to

register the attendance of the employees and review the current control system in
monitoring the use of logbook.
We have also recommended that Management revisit the provisions as

embodied in the Revised Administrative Code and Civil Service Rule.

“We accept your findings and observation regarding on this matter.
Though, the requirement to use a bundy clock was already conformed by
our agency last May 30, 2016. In connection with the salaries and wages
amounting Php261, 039.62 for the year 2015 even we did not comply
the said requirement, we guarantee and assure that our presentation was
true and correct.
COA’s Rejoinder:
We stand firm with our recommendation that Management consider the use of
Bundy clock to register the attendance of the employees and review the current
control system in monitoring the use of logbook and revisit the provisions as
embodied in the Revised Administrative Code and Civil Service Rule.

34. The validity of payments of Overtime Services of the District’s regular and
casual employees amounting of Php8,099.96 cannot be ascertained due to lack of
legal basis, thus, resulting in irregular disbursements of public funds.
Section 2 of Budget Circular No. 10 dated March 29, 1996 provides the
general policies on overtime as follows:
“Overtime work should be avoided by adequate planning of work

activities. It should not be resorted to in the performance of regular
routine work and activities, except in cases when unforeseen events
and emergency situations will result in any of the following:
2.1.1 Cause financial loss to the government or

its instrumentalities;
2.1.2 Embarrass the government due to its

inability to meet its commitments; or
2.1.3 Negate the purposes for which the work or

activity was conceived.”
The Malacañang, through Administrative Order No. 103, had ordered all
government agencies, except Local Government Units, to adopt a scheme that will
allow employees rendering overtime to be compensated through time/days off work
instead of monetary remuneration. Consequently, the DBM and the CSC jointly
issued CSC-DBM Circular No. 02-04 to provide guidelines pertaining to
Compensatory Time-Off (CTO) in lieu of overtime pay.
“All national government agencies (NGAs), including state

universities and colleges (SUCs), government-owned and controlled
corporations (GOCCs), xxx whether or not they receive funding
support through the General Appropriations Act, are hereby ordered to
adopt the following austerity measures”
xxx (d) Adoption of a scheme that will allow employees rendering

overtime to be compensated through time/days off work in lieu of
overtime pay, in accordance with guidelines jointly issued by the
Department of Budget and Management (DBM) and the Civil Service
Commission (CSC).” xxx
Moreover, Section 4, paragraph 2. Compensatory Time-Off (CTO) of CSC-

DBM Joint Circular No. 02-04 defines CTO as the number of hours or days an
employee is excused from reporting for work with full pay and benefits. It is a non-
monetary benefit provided to an employee in lieu of overtime pay.

Furthermore, claim for overtime pay should be supported with the following
documents:
a) Authority of personnel for the rendition of OT services;
b) Program of work; and
c) Accomplishment report duly signed by the employees and supervisor.
Asuncion Water District has paid a total amount of Php8,099.96 to both

regular and casual employees for the period of January to December 2015. These can
Date Check # DV # Amount

4/15/2015 49838761 15-04-0100 1,840.90
7/14/2015 50248569 15-07-0201 736.36
7/29/2015 50248587 15-07-0217 736.36
9/15/2015 50248631 15-09-0261 1,104.54
9/15/2015 50248631 15-09-0261 1,104.54
10/15/2015 50248683 15-10-0304 736.36
10/29/2015 51987502 15-10-0319 1,082.45
11/27/2015 JEV 15-11-0959 22.09
12/15/2015 51987554 15-12-0364 736.36
Total 8,099.96
However, review of the disbursements made in relation with the payment of

overtime revealed the following:
1) The time spent for overtime services were used to perform routine works
and activities. These activities include the following:
a) Update record of financial activities,
b) Update record of billing & payments,
c) Install distribution line & water meter,
d) Tap and install the water line,
e) Install water control,
f) Change ball valve repair,
g) Repair water mainline,
h) Repair distribution line,
i) Remove and install pipelines,
j) Repair of service line & installation of secondary line,
k) Construct chlorinator shed,
l) Install meter for new applicant concessionaire,
m) Transfer & organize data of concessionaires into new billing system
and assist to extract culvert.
2) Payments for the overtime services were not supported with the Program
of work;

3) The computation of the overtime time cannot be validated due to

Management’s failure to use the Bundy clock or biometrics to record and
register their attendance; and
4) The Agency paid monetary compensation for overtime services rendered

rather than Compensatory Time-Off.
The payment of monetary compensation for overtime services instead of

Compensatory Time-Off, is a clear violation of Section 1(d) of Administrative Order
No. 103 dated August 31, 2004 and CSC-DBM Joint Circular No. 02, series of 2004
when it requires that all government agencies should adopt a scheme to pay overtime
services other than monetary pay.
It is worth emphasizing that in COA Decision No. 2014-320 dated November

10, 2014, referring to Administrative Order No. 103, expressly states that:
“The purpose of the law is to adopt austerity measures to help the

government generate savings as a cost-cutting measure, without
sacrificing the rights of the employees to be entitled to proper
compensation of the overtime work rendered by providing
compensatory time-off. The wordings of the AO do not provide for
an option to the agency to provide monetary compensation for
overtime services. What it provides is to compensate such services
for time/days off in lieu of overtime pay which is in harmony with
the implementation of austerity measures necessary to meet the
country’s fiscal targets.
In view thereof, the validity of payments of Overtime services of the District’s

regular and casual employees amounting of Php8,099.96 cannot be ascertained due to
lack of legal basis, thus, resulting in irregular disbursements of public funds.
We have recommended that Management discontinue granting monetary

compensation for overtime services rendered and observe strictly the Civil Service
Commission and Department of Budget and Management Joint Circular No. 2.
We have also recommended that Management plan work activities adequately

to avoid overtime work and grant authority to render overtime services only during
emergency and urgent situations. Management may conduct proper planning in
scheduling time-off of its personnel in such a way that overtime services are avoided.
Management may consider the following:
a) Allowing some personnel to have their time-off during weekdays and go

to work during weekends/holidays; and

b) Working during weekends/holidays will not be treated as overtime but

regular work. In this case, assigning personnel in the pumping stations
whether weekdays, weekends or holidays is a must and form part of the
regular activities/operations of the District, hence, does not qualify as
overtime work.
We have further recommended that Management and personnel revisit Section

1(d) of Administrative Order No. 103 dated August 31, 2004 and CSC-DBM Joint
Circular No. 02, series of 2004 which requires that all government agencies should
adopt a scheme to pay overtime services other than monetary pay, and which provide
guidelines for the Non-Monetary Remuneration of overtime services rendered,
Section 1(d) of Administrative Order No. 103 and Section 2 of Budget Circular No.
10.
“We understand the observation you have made regarding on this

matter and indeed, due to inexperienced of this regulation we fail to
comply the section 2 of Budget Circular No. 10 dated March 29, 1996
and section 1(d) of Administrative Order No 103 dated August 31, 2004
and CSC-DBM Joint Circular No. 2. But we wish to consider the practice
we made last year 2015 seeing that the Asuncion Water District in that
time was in the expansion period, especially in the field personnel we
have only a limited workforce to conduct the job in the field which was
resulted that weekends and holidays were consumed in order to
accomplish those works.”
However, your recommendations seem to be an advantage by our

agency. We will discontinue granting a monetary compensation for
overtime services and implement those guidelines under section 1(d) of
Administrative Order No 103 dated August 31, 2004 and CSC-DBM
Joint Circular No. 2.”
COA’s Rejoinder:
We stand firm with our recommendation that Management discontinue

granting monetary compensation for overtime services rendered and observe strictly
the Civil Service Commission and Department of Budget and Management Joint
Circular No. 2 and plan the work activities adequately to avoid overtime work and
grant authority to render overtime services only during emergency and urgent
situations. Management may conduct proper planning in scheduling time-off of its
personnel in such a way that overtime services are avoided

35. The validity, accuracy and fair representation of Traveling Expenses amounting
to Php146,827.90 from January to December 2015 cannot be ascertained due to
lack of complete documentation, presence of excessive claims and improper
recording of transactions, thus, a clear violation of existing government
accounting rules and regulations.
Section 4 paragraph 6 of the Presidential Decree 1445 provides that
“Claims against government funds shall be supported with complete

documentation”.
Moreover, Section 4 and 5 of Executive Order (EO) 298 dated March 23,
2004 provides that:
“SEC. 4. The first (1st), second (2nd), and third (3rd) paragraph of
Section 6 of the said EO are hereby amended to read as follows:
Section 6. Allowable Travel Expenses. The travel expenses of

government personnel regardless of rank and destination shall be in the
amount of Eight Hundred Pesos (P800.00) per day which shall be
apportioned as follows: a) fifty percent (50%) for hotel/lodging, b)
thirty percent (30%) for meals and c) twenty percent (20%) for
incidental expenses.
SEC. 5. The seventh (7th) paragraph of Section 6 of the said EO is

hereby amended to read as follows:
“Claims for payment of travel expenses travel/assignment to places

within the fifty (50) kilometer radius from the last city or municipality
covered by the Metropolitan Manila Area in the case of those whose
permanent official station is in the Metropolitan Manila Area, or the
City or municipality wherein their permanent official station is located
in the case of those outside the Metropolitan Manila Area, shall be
allowed only upon presentation of proof, duly supported by bills or
invoices with official receipts of expenses incurred, that they
stayed in the place of their assignment for the whole duration of
their official travel. If they commute daily from the place of their
assignment to the place of their residence or permanent official station,
they shall be allowed only the reimbursement of actual fare at the
prevailing rates of the authorized mode of transportation from the
permanent official station to the destination or place of work and back,
and a reasonable cost for meals. The total actual fare and cost of meals

and incidental expenses shall in no case exceed Four Hundred Pesos

(P400.00) per day.” (emphasis ours)
In addition, Section 10 of EO 65 provides that:

“Further, reimbursement for travel expenses for official travel
of members of the Board of Directors of LWDs shall be in accordance
with the guidelines in EO No. 248 (s. 1995), as amended by EO No.
248-A (s. 1995) and EO No. 298 (s. 2004).
Furthermore, Section 112 of PD 1445-Recording of financial transactions

requires the following:
“Each government agency shall record its financial transactions
and operations conformably with generally accepted accounting
principles and in accordance with pertinent laws and regulations”.
Asuncion Water District reported a total of Php146,827.90 of Traveling

Expenses for the calendar year 2015. Post audit of the disbursement vouchers
revealed the following deficiencies:
1) Travel expenses amounting to Php18,900.00 exceeded the daily threshold of

Php800.00 per day by Php9,060.00. Moreover, the required documents such
as Itinerary of Travel and Certificate of Travel Completed were not attached.
This can be broken down as follows:
Travel Place Should

DV # Claimant Particulars Amount Excess
Date Visited Be
Karl Kristofer
15-01-0022 1/27/2015 Davao City Per Diem 800.00 800.00 0.00
P. Aurelio
Karl Kristofer Board &
15-01-0022 1/27/2015 Davao City 150.00 0.00 150.00
P. Aurelio Lodging
Karl Kristofer
P. Aurelio
Karl Kristofer Board &
15-01-0022 1/28/2015 Davao City 150.00 0.00 150.00
P. Aurelio Lodging
Karl Kristofer
P. Aurelio
Engr.
15-03-0053 Felixberto C. 2/26/2015 Davao City Per Diem 800.00 320.00 480.00
Neri
Engr.
Neri
Engr.
Neri
15-04-0105 Engr. 3/23/2015 Davao City Per Diem 800.00 320.00 480.00
Felixberto C.

Neri
Engr.
Neri
Engr.
Neri
Karl Kristofer
P. Aurelio
Karl Kristofer
P. Aurelio
Engr.
Neri
Karl Kristofer
P. Aurelio
Ann Lorenie
P. Paclibar
Ann Lorenie
P. Paclibar
Ann Lorenie
P. Paclibar
Karl Kristofer
P. Aurelio
Engr.
Neri
Engr.
Neri
Karl Kristofer
P. Aurelio
Karl Kristofer
P. Aurelio
Engr.
Neri
Karl Kristofer
P. Aurelio
Engr.
Neri
Karl Kristofer
P. Aurelio
Engr.
Neri
Karl Kristofer
P. Aurelio
Engr.
Not
15-10-0318 Felixberto C. 10/22/15 Per Diem 800.00 320.00 480.00
indicated
Neri
Engr.
Neri
Total 18,900.00 9,840.00 9,060.00
2) Disbursements amounting to Php2,650.00 pertain to fourteen (14) travels

made within the 50 kilometer radius from the official station. These
transactions were paid without the complete documentary attachments such as

official receipts, itinerary, travel order and certificate of travel completed to

support travel claims. This can be broken down as follows:
Claimant Amount
Jerry M. Ballara 200.00
Jose M. Catimbang 1,150.00
Karl Kristofer Aurelio 200.00
Melville S Biona 300.00
Roden Mades 800.00
Total 2,650.00
3) Payments for the Board of Director and Recording Secretary’s per diems and
Job Order Honorarium amounting to Php74,900.00 were recorded under
Traveling Expense instead of Other Professional Fees.
Date DV # Particulars Amount

Grant of C.A for transportation allowance (Zonnavy
1/23/2015 15-01-0019 Fernandez [1k] & Felixberto C. Neri [2k]- 1,000.00
Honorarium)
Grant of C.A for BOD/Recording Sec Transportation
1/30/2015 15-01-0028 3,130.00
Allowance-January 31, 2015
Cash Advance for Salary, Honoraria & Gen. Services
2/12/2015 15-02-0037 (Zonnavy Fernandez [1k] & Felixberto C. Neri [2k]- 3,000.00
Honorarium)
Grant of C.A for transportation allow of BOD and
2/18/2015 15-02-0042 3,130.00
Recording Sec.
C.A for Honararia and transpo. Allowance. (Zonnavy
4/15/2015 15-04-0099 1,000.00
D. Fernandez-Honorarium)
C.A for Salary of J.O & Casual and Travel allow.
4/30/2015 15-04-0119 (Honorarium for Kristine B. Aboyme & Teresa O. 2,000.00
Estibaya)
To record unrecorded expense for the travel allowance
dated April 30, 2015 (JEV 15-05-0338). (Zonnavy
4/30/2015 15-05-0143 4,000.00
Fernandez [2k], Kristine B. Aboyme [1k], Teresa O.
Estebaya [1k]-Honorarium)
JEV 15-05-
5/2/2015 Travel allowance for BOD & Recording Secretary 3,130.00
0329
C.A for Salary, Honoraria and travel allow of BOD
5/12/2015 15-05-0132 (Zonnavy Fernandez [2k], Kristine B. Aboyme [1k], 3,000.20
Teresa O. Estebaya [1k]-Honorarium)
C.A for Salary, Travel and Gen. Services (Zonnavy
6/1/2015 15-06-0152 999.80
Fernandez [1k])
C.A for salary of for allow. Of BOD and Recording
6/14/2015 15-06-0172 3,130.00
Sec.
6/15/2015 15-06-0167 C.A for travel allow. Of employees 3,850.00
C.A for travel allow. Of employees (Zonnavy
6/15/2015 15-06-0167 Fernandez [2k], Kristine B. Aboyme [1k], Teresa O. 4,000.00

C.A for trnsportation Allow. Of BOD and recording

7/2/2015 15-07-0190 3,850.00
Sec.
C.A for travel allowance of J.O Employees (Zonnavy
7/14/2015 15-07-0203 Fernandez [2k], Kristine B. Aboyme [1k], Teresa O. 4,000.00
7/29/2015 15-07-0218 C.A for Travel allow. Of BOD and Recording Sec. 3,850.00
Grant of C.A for travel allow of J.O Employess

9/11/2015 C.A for Travel Allow. Of BOD and Recording Sec. 3,850.00
C.A fo Travel allowance contractual employees

C.A for transportation Allow. (Zonnavy Fernandez
10/15/2015 15-10-0301 3,000.00
[2k] & Kristine B. Aboyme [1k]-Honorarium)
11/6/2015 15-11-0325 Cash Advance for Travel Allow. Of BOD 3,850.00

Grant of C.A for Travel Allowance (Zonnavy
11/16/2015 15-11-0337 Fernandez [2k] & Kristine B. Aboyme [1k]- 3,000.00
Honorarium)
Grant of Cash Advance for BOD Travel Allow - Dec.
12/15/2015 15-12-0361 3,130.00
19, 2015
Grant of Cash Advance for Travel Allow. (Zonnavy
12/15/2015 15-12-0360 Fernandez [2k] & Kristine B. Aboyme [1k]- 3,000.00
Honorarium)
Total 74,900.00
4) Payments for various transactions amounting to Php36,057.90 were erroneously

recorded under Traveling Expenses. This can be broken down as follows:
Should be under Gasoline, Oil and Lubricants:

2/24/2015 15-02-0047 Replenishment of Petty Cash Fund.-gasoline 200.00
6/15/2015 15-06-0170 Payment for fuel 4,965.84
7/13/2015 15-07-0197 Payment of fuel as travel allowance 4,035.19
8/14/2015 15-08-0230 Replenishment of Petty Cash Fund 50.00
8/26/2015 15-08-0236 Payment of Fuel for travel allowance 4,965.84
9/15/2015 15-09-0260 Replenishment of Petty Cash Fund-unleaded 50.00
9/15/2015 15-09-0260 Replenishment of Petty Cash Fund-unleaded 500.00
9/23/2015 15-09-0277 Payment of fuel for travel allowance 3,262.70
10/26/2015 15-10-0313 Payment of fuel for travel allowance 6,444.68
12/3/2015 15-12-0352 Payment for the travel Allow. (fuel) 5,942.20
12/17/2015 15-12-0367 Payment for travel Allow 5,741.45
Total 36,157.90
Should be under Training Expenses:


Grant of C.A for Travel Allowance - includes
3/27/2015 15-03-0085 2,400.00
registration fee of Php2,400 (Civil Service).
Replenishment of Petty Cash fund - Includes
4/30/2015 15-04-0118 500.00
Registration Fee of Php500 (SOCEMWIC)
Total 2,900.00
In view thereof, the validity, accuracy and fair representation of Traveling

Expenses amounting to Php146,827.90 from January to December 2015 cannot be
ascertained due to lack of complete documentation, presence of excessive claims and
improper recording of transactions, thus, a clear violation of existing government
accounting rules and regulations.
We have recommended that Management revisit Executive Order (EO) 298

dated March 23, 2004 for proper guidance and information and require the General
Manager and Board of Directors to refund the excess amount of travel claims
amounting to Php9,060.00 and require the employees concerned to refund the amount
of Php2,650.00 representing travel claims with insufficient supporting documents.
We have also recommended that Management prepare the necessary adjusting

accounting entries for the reclassification and adjustment on erroneous recording of
transactions.
“As per recommendation the agency will stop granting traveling

allowance that exceeds the allowable travel expense as prescribe in the
Executive Order 298 dated March 23, 2004. Likewise, the agency will
strictly impose the proper and complete documentations of traveling
expenses.”
COA’s Rejoinder:
We stand firm with our recommendation that Management revisit Executive

Order (EO) 298 dated March 23, 2004 for proper guidance and information and
require the General Manager and Board of Directors to refund the excess amount of
travel claims amounting to Php9,060.00 and require the employees concerned to
refund the amount of Php2,650.00 representing travel claims with insufficient
supporting documents.

36. The validity of payments of Gasoline, Oil and Lubricants amounting to

Php185,007.61 for CY 2015 cannot be ascertained due to lack of legal basis as
required under Section 16 of the General Provisions of the General
Appropriations Act FY 2015 Vol. 110, No. 1.
Section 16 of the General Provisions of the General Appropriations Act FY

2015 Vol. 110, No.1 provides that:
“Sec. 16. Use of Government Funds. Government funds shall be

utilized in accordance with the appropriations authorized for the
purpose. Moreover, all departments, bureaus, and offices of the
National Government, including Constitutional Offices enjoying fiscal
autonomy, SUCs, GOCCs and LGUs shall ensure that utilization of
government funds comply with applicable laws, rules and regulations,
such as, but not limited to, the following:
(a) ...
(b) ...
(c) ...
(d) Provisions for fuel, parts, repair and maintenance of government
vehicles properly identified as such and which carry its official
government plate number: PROVIDED, That in case of transport
crisis, such as that occasioned by street demonstrations, welgang
bayan, floods, typhoons and other emergencies, government
vehicles of any type shall be made available to meet the emergency
and may be utilized to transport for free, commuters on a round-
the-clock basis.” (emphasis ours)
Asuncion Water District has reported a total amount of Php185,007.61 of

Gasoline, Oil & Lubricants Expenses for the calendar year 2015. Based on the lapsing
schedule submitted, the District does not have any government motor vehicles.
From the above-cited applicable provisions, it is clearly indicated that only

vehicles that carry official government plates are allowed to have provisions for fuel.
The use of government funds for invalid disbursements diminished resources that
may have been used for operational requirements.
In view thereof, the validity of disbursements for Gasoline, Oil and Lubricants
amounting to Php185,007.61 for CY 2015 cannot be ascertained due to absence of
government motor vehicles owned by the District.
We have recommended that Management revisit pertinent government rules

and regulations on the use of funds for Gasoline, Oil and Lubricants and to refrain
from making invalid payments thereof.

“With regard of this matter, we would like to clarify that the payments
made in the Gasoline, Oil and Lubricant which the total amount of Php185,
007.61 in CY 2015 was acquire for the Backhoe Loader, government
equipment owned by the Local Government Unit (LGU) Asuncion. The
said equipment was lent by the Asuncion Water District from Economic
Enterprise Development and Management Office (EEDMO) of the LGU-
Asuncion with the memorandum of agreement intended for water supply
project of Asuncion Water District in which the district was accountable of
the fuel and the emolument of salary of backhoe operator during weekends
and holidays.”
COA’s Rejoinder:
We stand firm with our recommendation that that Management revisit

pertinent government rules and regulations on the use of funds for Gasoline, Oil and
Lubricants and to refrain from making invalid payments thereof.
37. Various deficiencies on payments amounting to Php3,795.25 for

telephone/communication charges for the period from January to December
2015 is a clear violation of Section 4 of Presidential Decree 1445 and COA
Circular No. 2012-001 dated June 14, 2012.
Section 4, paragraph 6 of Presidential Decree 1445 provides that “Claims

against government funds shall be supported with complete documentation”.
Moreover, Section 6.2 of COA Circular No. 2012-001 dated June 14, 2012
required the following documents to support payment relating to
Telephone/Communication Services:
1) Statement of Account/Bill;
2) Invoice/Official Receipt or Machine validated statement of account; and
3) Certification by Agency Head or his authorized representatives that all

National Direct Dial (NDD), National Operator Assisted Calls and
International Operator Assisted Calls are official calls.

Asuncion Water District paid telephone charges amounting to Php3,795.25

(Gross of taxes) covering the period from January 1 to December 31, 2015. This can
8/4/2015 50248590 15-08-0220 401.36
9/3/2015 50248617 15-09-0247 504.71
9/21/2015 50248642 15-09-0268 560.70
10/23/2015 50248692 15-10-0312 734.35
11/20/2015 51987532 15-11-0344 595.56
11/23/2015 51987538 15-11-0347 524.94
12/27/2015 51987566 15-12-0374 473.63
Total 3,795.25
Post-audit of disbursement transactions revealed the following deficiencies:

a) No Budget Utilization Slip;
b) Certification from the Head of the Agency or its authorized representative
that all calls are official;
c) Petty cash transactions were not supported with duly accomplished petty
cash vouchers;
d) Non withholding of EWT and GMP; and
e) Attached documents were not stamped 'Paid'.
The supporting documents mentioned above are necessary to ascertain that the
payments amounting to Php3,795.25 for telephone/communication charges for the
period January to December 2015 are correct, valid and proper.
We have recommended that Management submit the required supporting

documents for post-audit purposes and make necessary reclassification and
adjustment to erroneous recording of transactions, in compliance with the existing
rules and regulations.

COA’s Rejoinder:
We stand firm with our recommendation that Management submit the required
supporting documents for post-audit purposes and make necessary reclassification
and adjustment to erroneous recording of transactions, in compliance with the
existing rules and regulations.
38. The accuracy, validity and fair presentation of Repairs and Maintenance
amounting to Php105,228.62 for the calendar year 2015 cannot be ascertained
due to inclusion of transactions amounting to Php82,289.17 that were
erroneously charged to the said account and submission of incomplete
documentations as required under COA Circular 2012-001.
Section 4 paragraph 6 of the Presidential Decree 1445 provides that “Claims

against government funds shall be supported with complete documentation”.
Moreover, the general documentary requirement for a particular type of

disbursement was clearly enumerated in COA Circular No. 2012-001 dated June 14,
2012. As provided in paragraph 5.2 in relation to Repairs and Maintenance payment,
the required and applicable documents to be submitted are as follows:
1) Copy of the pre-repair evaluation report and approved detailed

plans by the agency showing in sufficient detail the scope of
work/extent of repair to be done;
2) Report of the waste materials;
3) Copy of the documents indicating the history of repair;
4) Post inspection report;
5) Warranty Certificate;
6) Request for Payments;
7) Bills/Invoices;
8) Certificate of Acceptance; and
9) Pre-repair inspection reports
Furthermore, Section 112. Recording of financial transactions also of the same

code provides that:
“Each government agency shall record its financial transactions and
operations conformably with generally accepted accounting principles
and in accordance with pertinent laws and regulations”.

The Agency has reported a total repair and maintenance amounting to

Php105,288.62 for the calendar year 2015. Post audit of the transaction revealed the
following deficiencies:
1) A total amount of Php4,845.00 charged to current year expense were not
supported with approved purchase request, purchase order, canvass,
inspection and acceptance report, waster materials report, pre-repair
evaluation report, pre-repair inspection report, post inspection report and
documents were not stamped “paid”. This can be broken down as follows:
Date Check # DV # Nature of Payment Amount

Replenishment of Petty Cash
2/18/2015 49838701 15-02-0040 800.00
Fund-4 pcs tube re-thread
6/1/2015 50248513 15-06-0153 Fund-labor and reset of canon 500.00
ip2770 and canon MP
7/29/2015 50248589 15-07-0219 500.00
9/23/2015 50248646 15-09-0275 825.00
10/30/2015 51987501 15-10-0318 720.00
12/8/2015 51987575 15-12-0355 1,500.00
Total 4,845.00
2) Transactions amounting to Php82,289.17 were erroneously charged
directly to repairs and maintenance account instead of charging to
appropriate accounts. This can be broken down as follows:

1/27/2015 48492281 15-01-0023 1,900.00
Fund
Reimbursement for purchase of
1/27/2015 48492279 15-01-0021 800.00
materials
Payment for various materials
2/3/2015 48492291 15-02-0030 3,220.60
for repair.
2/10/2015 48492299 15-02-0038 272.00
Fund. - various materials
2/18/2015 49838701 15-02-0040 510.00
Fund.-Tee head
2/24/2015 49838710 15-02-0047 60.00
Fund.-sandflex
2/24/2015 49838710 15-02-0047 420.00
Fund.-Tee head
2/24/2015 49838710 15-02-0047 290.00
Fund.-P.E. hose, coup


2/24/2015 49838710 15-02-0047 940.00
Fund.-Coupling
2/24/2015 49838710 15-02-0047 290.00
Fund.-P.E. hose, coup
2/24/2015 49838710 15-02-0047 90.00
Fund.-P.E. hose
Replenishment of Petty cash
3/3/2015 49838747 15-03-0086 250.00
fund-saddle, clamp
3/3/2015 49838719 15-03-0053 290.00
fund-saddle, clamp
3/3/2015 49838719 15-03-0053 468.00
fund-end cup, coupling
3/3/2015 49838719 15-03-0053 155.00
fund
3/3/2015 49838719 15-03-0053 45.00
fund-plug adaptor
3/3/2015 49838719 15-03-0053 15.00
fund-coupling
3/3/2015 49838719 15-03-0053 60.00
fund-sandflex
3/3/2015 49838719 15-03-0053 65.00
fund-adaptor
Payment for purchase of
3/13/2015 49838731 15-03-0066 9,951.34
various materials for repair
Payment for purchase of
4/24/2015 49838774 15-047-0113 2,100.00
various materials for repair.
5/12/2015 49838788 15-05-0129 515.00
Fund-various materials
6/1/2015 50248513 15-06-0153 814.00
Fund-various materials
7/14/2015 50248572 15-07-0205 Purchase of Materials 7,347.00
7/29/2015 50248589 15-07-0219 290.05
Fund-1 break circuit
9/2/2015 50248615 Purchase of Materials 8,468.85
10/23/2015 50248691 15-10-0311 2,310.00
Fund-Pneumatic hose
10/30/2015 51987501 15-10-0318 420.00
Fund-nails
11/11/2015 15-11-0326 Purchase of Materials 5,692.00
12/8/2015 51987575 15-12-0355 60.00
Fund-Sandflex
Total 80,637.17
3) Transactions amounting to Php1,652.00 was erroneously charged to Repairs

and Maintenance that should have been charged to representation expenses:

11/11/2015 51987517 15-11-0331 Replenishment of Petty Cash-meals 1,652.00
Total 1,652.00
The supporting documents mentioned above are necessary to ascertain the

accuracy, validity and fair representation of Repairs and Maintenance amounting to
Php105,288.62 for the period January to December 2015.
In view thereof, the accuracy, validity and fair presentation of Repairs and
Maintenance amounting to Php105,228.62 for the calendar year 2015 cannot be
ascertained due to inclusion of transactions amounting to Php82,289.17 that were
erroneously charged to the said account and submission of incomplete
documentations as required under COA Circular 2012-001.
We have recommended that Management submit the required supporting

documents for post-audit purposes and make necessary reclassification and
adjustment to erroneous recording of transactions, in compliance with the existing
rules and regulations.
“Undoubtedly, the district fail to conform those requirements needed to

append in the Repairs and Maintenance Expenses totaling Php4, 845.00 as
prescribe in COA Circular No. 2012-001 dated June 14, 2012. Likewise,
we would like to elucidate that the transaction purchase of various
materials amounting to Php82, 289.17 is actually use in repair activity,
though we cannot certified due to lack of supporting documents.
Therefore, the agency will impose strictly and implement COA Circular
No. 2012-001 in order to correct our transaction documents.
COA’s Rejoinder:
We stand firm with our recommendation that Management submit the required
supporting documents for post-audit purposes and make necessary reclassification
and adjustment to erroneous recording of transactions, in compliance with the
existing rules and regulations.

39. The validity of payments for food expenses amounting to Php38,140.90 contrary
to Section 3.2, & 3.4 of COA Circular 85-55A dated September 8, 1985 and
Section 335 of RA No. 7160, thereby exposing public funds to wastage.
Section 3.2 of COA Circular 85-55A provides that:
“Unnecessary expenditures pertains to expenditures which could not

pass the test of prudence or the diligence of a good father of a family,
thereby denoting non-responsive 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. This would also include incurrence of
expenditure not dictated by the demands of good government. An
expenditure that is not essential or that which can be dispensed with
without loss or damage to property is considered unnecessary.”
Moreover, Section 3.4 of the same COA Circular 8 provides that:
“Extravagant expenditure signifies those incurred without restraints,

judiciousness and economy. Extravagant expenditures exceed the
bounds of propriety. These expenditures are immoderate, prodigal,
lavish, luxurious, waste grossly excessive, and injudicious.”
Furthermore, Section 4 paragraph 6 of the Presidential Decree 1445 provides

that “Claims against government funds shall be supported with complete
documentation”.
Post audit of the District’s disbursement vouchers for CY 2015 disclosed that
expenditures incurred for food expenses were personal, unnecessary and extravagant
amounting to Php38,140.16. This can be broken down as follows, with the
corresponding deficiencies:
Date Check # DV # Nature of Payment Amount Remarks

No minutes, attendance
Payment for 8,368.4 sheet, other documents to
2/2/2015 48492289 15-02-0029
representation 2 establish validity. Not
stamped 'Paid'.
Reimbursement of
Representation
3,270.0 No minutes, attendance
2/4/2015 48492294 15-02-0036 Expenses-
0 sheet. Not stamped 'Paid'.
conference with
LWUA personnel

No PR, minutes, attendance

2/19/2015 49838707 15-02-0045
representation. 0 establish validity. Not
stamped 'Paid'.

5/24/2015 50248501 15-05-0139
Catering services 3 establish validity. Not
stamped 'Paid'.

10/2/2015 50248662 15-10-0287
Catering Service 4 establish validity. Not
stamped 'Paid'.
Breakdown: Resort
Accommodation-2,500;
Grant of Cash
Fuel-500, Others (Rice, etc.)-
Advance for
250. No travel order,
Representation for 3,250.0
12/16/2015 51987553 15-12-0363 itinerary, minutes of the
the BOD Meeting 0
meeting, OR from the resort,
and Year End
supporting documents for the
Evaluation
fuel & other expenses. Not
stamped 'Paid'.
Reimbursement for
1,045.0 sheet, other documents to
12/29/2015 51987569 15-12-0376 representation and
0 establish validity. Not
travel
stamped 'Paid'.
No PR, minutes/program,
Payment for 11,727.3 attendance sheet, other
12/29/2015 51987570 15-12-0377
Representation 7 documents to establish
validity. Not stamped 'Paid'.
Total 38,140.16
The necessity of abovementioned transactions encompasses no guidelines or

any legal basis presented in the procurement of food expenses. Consequently, the
aforementioned are deemed unnecessary disbursements of government funds since it
could be dispensed without loss or damage to property, thereby exposing public funds
to wastage.
We have recommended that Management stop spending on personal,

unnecessary and extravagant disbursements and ensure that transactions involving
public funds are compliant with the existing government rules and regulations.
The Management ha commented that:
“Admittedly, the agency fails to submit requirement under Section

3.2, & 3.4 of COA Circular 85-55A dated September 8 1985 and Section
335 of R.A No. 7160. We wish to consider our mistake for we are so
ignorant and careless due to lack of further research of the legal

document requires for this matter. However, those representation
expenses with corresponding deficiencies were disbursed for official
purposes and not in our personal intent.
Consequently, the district will strictly impose the rule and regulation
of the proper disbursement for food expenses to prevent this to occur
once again for this year and in the succeeding years.”
COA’s Rejoinder:
We stand firm with our recommendation that Management stop spending on

personal, unnecessary and extravagant disbursements and ensure that transactions
involving public funds are compliant with the existing government rules and
regulations.
40. Management’s practice to pay prior year expenses amounting to Php24,305.06

with the current year budget and to record as current expenditures rendered the
validity and fair presentation of various expenses difficult to ascertain, thus, a
clear violation of Section 4(a) of Chapter 2, Volume 1of the NGAS.
Section 4(a) of Chapter 2, Volume 1 of the National Government Accounting

System transaction provides for the use of the modified accrual basis of accounting.
In this accounting policy, all expenses shall be recognized when incurred and reported
in the financial statements in the period to which they relate.
Management’s assertions in relation with the recording of transactions are

that:
1) All obligations of the Agency have been accurately recorded;
2) Only bona fide obligations of the Agency have been included, the
obligations incurred are properly authorized;
3) All provisions of trust indentures or mortgages are complied with; and
4) Mortgages and other encumbrances are fully disclosed.

Post audit of payments made for calendar year 2015 revealed that a total
amount of Php24,305.06 representing prior year expenses was paid using the current
year budget. This amount can be broken down as follows:
Date Check # DV # Payee Nature of Payment Amount

Payment for bill for the
Asuncion Water
1/12/2015 48492265 15-01-0010 period Dec. 3, 2015 to Jan. 235.00
District
5, 2016
Payment for Electric Bill
1/28/2015 48492285 15-01-0025 DANECO, NEA for the period Nov. 6 to 24,070.06
Dec. 4, 2014
Total 24,305.06
Further review of the financial statements of the Agency revealed that

Management has failed to accrue the above expenses in the previous year. Such
disbursements/expenses should not be charged against the current year’s
budget/expenses because government agencies can only pay expenses or payables
that have been properly recorded and obligated.
Management’s practice to pay prior year expenses with the current year
budget and to record as current expenditures resulted in the misstatement of related
expenses in CY 2015 and understatement of prior year’s expenses.
We have recommended that Management make the necessary adjusting entry
to facilitate the proper and fair presentation of the balances in the financial
statements.
We have also recommended that, in the future, Management accrue expenses

or payables at the end of the calendar year and ascertain the true balance of in
conformity with Section 4(a) of Chapter 2 of Volume 1 of the NGAS.
“The Accounting Processor have review the record of the said

payments you have stated in the AOM, with regard to the electricity
expenses amounting to Php24, 070.06 for the period covered November
06 to December 2014 was already set up on December, 2014 and not in
the CY 2015. Then, the water expense amounting to Php235.00 for the
period December 03, 2014 to January 5, 2015 cannot be set up as accrued
expenses for prior years since the bill was received on the month of
January 5, 2015. Further, the water connection was installed for the district
consumption was on December 03, 2014 which we cannot determined the
amount of bill for prior years.

COA’s Rejoinder:
We stand firm with our recommendation that Management make the necessary
adjusting entry to facilitate the proper and fair presentation of the balances in the
financial statements and in the future, Management accrue expenses or payables at
the end of the calendar year and ascertain the true balance of in conformity with
Section 4(a) of Chapter 2 of Volume 1 of the NGAS.
41. The accuracy and fair presentation of depreciation expense amounting to

Php1,419,369.14 for the calendar year 2015 cannot be ascertained due to non-
preparation of lapsing schedule on depreciation expense for each category of
property and equipment.
A lapsing schedule is a worksheet containing specific accounting data about

the details of the Property, Plant and Equipment (PPE). This schedule is an
accounting tool used to provide relevant information in determining the net book
value of an asset in a specific point in time.
It is a specific accounting data regarding fixed assets. Included in the schedule

are the original purchase cost of each asset, additions to the assets, sales of the assets,
accumulated depreciation and depreciation expense. This type of worksheet aids in
control over fixed assets by keeping detailed track of each fixed asset.
A lapsing schedule (to be prepared monthly) basically includes the following

information for each PPE item:
1) Complete description of the PPE item including the property number;
2) Date Acquired;
3) An indication of whether the asset was purchased new or used;
4) Estimated Useful Life;
5) Purchase Cost/Acquisition Cost;
6) Depreciation Method;
7) Salvage/Residual Value;
8) Amount Subject to Depreciation;

9) Depreciation Expense This Month;
10) Depreciation Expense To Date (Current Year);
11) Accumulated Depreciation to Date; and
12) Carrying Value.
Thus, with the use of the lapsing schedule, an entity can easily validate the
PPE balances, the Accumulated Depreciation and the Depreciation Expense as
recorded in the books of accounts.
Asuncion Water District has reported a total depreciation expense of

Php1,419,369.14 for the calendar year 2015. Review of the accounts revealed that the
Accounting Department does not prepare and maintain lapsing schedule of the
account and its corresponding depreciation charges, thus, the independent checking of
computation of depreciation expense cannot be attained. This difficulty was
aggravated by Management’s failure to maintain the PPE ledger cards for each
category and to provide complete information as to the following:
1) Date Acquired
2) Estimated Useful Life
3) Purchase Cost/Acquisition Cost
4) Depreciation Method
5) Salvage/Residual Value
In view thereof, the accuracy and fair presentation of depreciation expense

amounting to Php1,419,369.14 for the calendar year 2015 cannot be ascertained.
We have recommended that Management require the Accounting unit to

prepare lapsing schedule to support depreciation expense and maintain ledger cards
for each category of PPE Items.
The Management has commented that they have submitted the documents
submitted regarding of this matter, but were not certain on the format and information
that we presented if considerable. They emphasized that their agency will make
action and certainly apply the correct format and procedures for the presentation of
depreciation expenses of property, plant and equipment for next audit.

COA’s Rejoinder:

Accounting unit to prepare lapsing schedule to support depreciation expense and
maintain ledger cards for each category of PPE Items.
Tax Compliance Audit
42. Non-withholding of taxes from the Honorarium of the members of the Board of
Directors and General Manager amounting to Php10,077.50 for period from
January to December 2015, is a clear violation of existing Bureau of Internal
Revenue (BIR) Revenue Memorandum Circular No. 34-2008 dated April 15,
2008.
Revenue Memorandum Circular No. 34-2008 dated April 15, 2008 of the
Bureau of Internal Revenue (BIR) clearly provides that:
“It is a well settled rule that director’s fees are taxable, for income tax
purposes, as compensation income when the recipient director is an
employee of the corporation which pays the same…
“However, if these fees are paid to a director who is not an employee of

the corporation paying such fees (i.e., whose duties are confined to the
attendance of and participation in the meetings of the board of directors),
such fees are not treated as compensation income because of the absence
of employer-employee relationship, but rather, the same should squarely
fall under Section 32(A)(2) of the Code under the caption “Gross income
derived from the conduct of trade or business or exercise of a profession.”
The fees received by the director who is not an employee of the payor
corporation are subject to ten percent (10%) creditable withholding tax if
his gross income for the current year do not exceed P720,000.00 or fifteen
percent (15%) if his gross income exceeds P720,000.00 pursuant to
Revenue Regulations No. 30-2003. These payments fall under
“Professional Fees, talent fees, etc., for services rendered by
individuals” which include under its (purview “Fees of directors who
are not employees of the company paying such fees, whose duties are
confined to attendance at and participation in meetings of the board
of directors.” (Section V 2.5 7.2 (A) (9), RR No. 2-98). It is also
emphasized that the amount subject to the 10% or 15% creditable
withholding tax is not only confined to fees, but also per diems,
allowances and any other form of income payment made to the director.”
(underscoring ours)

Asuncion Water District has been paying Honorarium to both the Board of
Directors and to the General Manager. However, not all payments were recorded
under the Honoraria account. Payments were recorded in the following manner:
Nature of Payment Account title Used

Payment of Honoraria to Board of Directors Travelling Expenses
Travelling Expenses and/or
Payment of Honoraria to General Manager
Honoraria
Post audit of disbursement vouchers revealed that such payments for

Honorarium from January to December 2015 were not subjected with 10% tax.
Details of which can be shown as follows:
1) Payment of Honoraria to Board of Directors amounting to Php32,400.00

were not deducted with tax. A total of Php3,240.00 was not withheld from
the payment. Details of which can broken down as follows:
Date Check # DV # Amount 10% Tax

1/30/2015 48492282 15-01-0028 2,880.00 288.00
2/18/2015 49838703 15-02-0042 2,880.00 288.00
5/2/2015 JEV 15-05-0329 2,880.00 288.00
6/14/2015 50248519 15-06-0172 2,880.00 288.00
6/15/2015 50248532 15-06-0167 3,600.00 360.00
7/2/2015 50248553 15-07-0190 3,600.00 360.00
7/29/2015 50248588 15-07-0218 3,600.00 360.00
9/11/2015 50248626 3,600.00 360.00
11/6/2015 51987508 15-11-0325 3,600.00 360.00
12/15/2015 51987551 15-12-0361 2,880.00 288.00
Total 32,400.00 3,240.00
2) The District Payments to the General Manager for CY 2015 amounted to

Php80,275.00, the District has withheld a 2% Expanded Withholding Tax
from the said amount, however, there were three instances where taxes
were not withheld.
Amount
Withheld (2%)
1/23/2015 48492277 15-01-0019 2,000.00 60.00
2/12/2015 48492298 15-02-0037 2,000.00 0.00
4/15/2015 49838760 15-04-0099 5,650.00 113.00
5/12/2015 49838792 15-05-0132 5,650.00 113.00
6/15/2015 50248530 15-06-0165 5,650.00 113.00
7/14/2015 50248570 15-07-0202 8,475.00 169.50
8/14/2015 50248603 15-08-0233 8,475.00 0.00
9/15/2015 50248634 15-09-0263 8,475.00 169.50
10/15/2015 50248679 15-10-0300 11,300.00 0.00
11/16/2015 51987523 15-11-0336 11,300.00 226.00
12/15/2015 51987549 15-12-0359 11,300.00 226.00

Total 80,275.00 1,190.00
3) With regard to item No. 2, although the District has withheld taxes for the
payment of Honoraria to the General Manager, the District failed to
withhold the exact amount of tax equivalent to 10% of the payments, thus,
there was an under-withholding of taxes amounting to Php6,837.50. This
can be broken down as follows:
Amount
Date Check # DV # Amount 10% Tax Withheld Variance
(2%)
1/23/2015 48492277 15-01-0019 2,000.00 200.00 60.00 140.00
2/12/2015 48492298 15-02-0037 2,000.00 200.00 0.00 200.00
4/15/2015 49838760 15-04-0099 5,650.00 565.00 113.00 452.00
5/12/2015 49838792 15-05-0132 5,650.00 565.00 113.00 452.00
6/15/2015 50248530 15-06-0165 5,650.00 565.00 113.00 452.00
7/14/2015 50248570 15-07-0202 8,475.00 847.50 169.50 678.00
8/14/2015 50248603 15-08-0233 8,475.00 847.50 0.00 847.50
9/15/2015 50248634 15-09-0263 8,475.00 847.50 169.50 678.00
10/15/2015 50248679 15-10-0300 11,300.00 1,130.00 0.00 1,130.00
11/16/2015 51987523 15-11-0336 11,300.00 1,130.00 226.00 904.00
12/15/2015 51987549 15-12-0359 11,300.00 1,130.00 226.00 904.00
Total 80,275.00 8,027.50 1,190.00 6,837.50
The erroneous and non-deduction with an aggregate amount of Php10,077.50

(Php3,240.00 plus Php6,8737.520) was due to Management’s manner in recording the
said transaction, in which, payments were recorded as travelling expense instead of
other professional fees.
The above deficiencies have deprived the National Government of additional

revenues in the form of taxes to be utilized for its various programs/projects.
We have recommended that Management require the accounting personnel

concerned to ensure that the required and appropriate withholding taxes are deducted
before making any payment to the Board of Directors in accordance with the above-
mentioned provisions and the same are remitted to the BIR within the prescribed
period.
We have also recommended that the accounting personnel concerned should

retain and attach BIR forms to the related disbursement vouchers.

“Admittedly, we did not follow the rule under the Bureau of Internal
Revenue’s rules and regulations which revealed the inaccuracy of
withholding tax deduction of the Member of the Board of Directors and
General Manager. Though, the agency will strictly adopt the procedure
under this rule.”
COA’s Rejoinder:

accounting personnel concerned to ensure that the required and appropriate
withholding taxes are deducted before making any payment to the Board of Directors
in accordance with the above-mentioned provisions and the same are remitted to the
BIR within the prescribed period and the accounting personnel concerned to retain
and attach BIR forms to the related disbursement vouchers.
43. Non-withholding of taxes from job order personnel amounting to Php20,790.22

from January 1 to December 31, 2015 is a clear violation of existing Bureau of
Internal Revenue (BIR) rules and regulations.
Revenue Memorandum Order (RMO) No. 23-2014 dated June 20, 2014 was
issued to clarify and consolidate the responsibilities of the public sector to withhold
taxes on its transactions as a customer (on its purchases of goods and services) and as
an employer (on compensation paid to its officials and employees) in connection with
Revenue Memorandum Circular No. 23-2012 dated February 14, 2012 on the
“Reiteration of the Responsibilities of the Officials and Employees of Government
Offices for the Withholding of Applicable Taxes on Certain Income Payments and the
Imposition of Penalties for Non-Compliance Thereof”.
RMO No. 23-2014 also provides for the withholding of the 5% Final VAT on
GMP. The application of the said provision should be synchronized with the
provisions of RR No. 2-98, as amended, on the withholding of income tax of 1% on
purchase of goods and 2% on purchase of services, except on purchases recorded as
reimbursable allowance, benefit or incentive to government official and employee by
the concerned government office (e.g., RATA) and on casual government
purchases amounting to not more than Php10,000. The basis of the withholding of
income tax should always be net of the Value-Added Tax (VAT) imposed on the said
purchase of goods and/or services.
On the other hand, percentage tax of 3% is the tax withheld by National

Government Agencies (NGAs) and instrumentalities, including government-owned
and controlled corporations (GOCCs) and local government units (LGUs), before
making any payments to non-VAT registered taxpayers/suppliers/payees. Government

purchases that are subject to percentage tax shall be governed by R.A. No. 1051 as
well as by RR No. 2-98, as amended, on the withholding of percentage tax.
Moreover, purchases of the government that are covered by Purchase Orders

duly signed by the authorized official/s as well as purchases using the Petty Cash
Fund shall be subject to the 5% final VAT withholding.
Review of disbursement vouchers covering transactions made for the period

January to December 2015 revealed that accounting personnel concerned has failed to
withhold taxes amounting to Php20,790.22, such as 3% percentage tax for non-VAT
registered and expanded withholding tax of 2% on purchase of services on payments
made to job order personnel as required in the above-mentioned regulations. This can
Should Be Actual Difference Total Taxes

Date DV # Amount GMP GMP Not
GMP 3% GMP 2% GMP 2% GMP 3% Withheld
3% 2%
1/15/2015 15-01-0015 22,032.00 660.96 440.64 0.00 0.00 660.96 440.64 1,101.60
1/23/2015 15-01-0019 1,000.00 30.00 20.00 0.00 0.00 30.00 20.00 50.00
1/28/2015 15-01-0026 27,229.70 816.89 544.59 0.00 605.61 816.89 (61.02) 755.88
1/28/2015 15-01-0027 678.00 20.34 13.56 0.00 13.56 20.34 0.00 20.34
2/12/2015 15-02-0037 3,000.00 90.00 60.00 0.00 0.00 90.00 60.00 150.00
2/12/2015 15-02-0037 23,388.00 701.64 467.76 0.00 467.76 701.64 0.00 701.64
2/27/2015 15-02-0051 26,380.80 791.42 527.62 0.00 527.62 791.42 0.00 791.42
3/13/2015 15-03-0067 20,985.90 629.58 419.72 0.00 419.72 629.58 0.00 629.58
3/30/2015 15-03-0088 24,375.90 731.28 487.52 0.00 487.52 731.28 0.00 731.28
4/15/2015 15-04-0099 1,000.00 30.00 20.00 0.00 0.00 30.00 20.00 50.00
4/15/2015 15-04-0101 18,327.00 549.81 366.54 0.00 366.54 549.81 0.00 549.81
4/16/2015 15-04-0104 1,525.50 45.77 30.51 0.00 30.51 45.77 0.00 45.77
4/30/2015 15-04-0119 2,000.00 60.00 40.00 0.00 0.00 60.00 40.00 100.00
4/30/2015 15-05-0143 4,000.00 120.00 80.00 0.00 0.00 120.00 80.00 200.00
4/30/2015 15-04-0119 21,203.40 636.10 424.07 0.00 424.07 636.10 0.00 636.10
5/12/2015 15-05-0132 3,000.20 90.01 60.00 0.00 0.00 90.01 60.00 150.01
5/15/2015 15-05-0142 25,494.00 764.82 509.88 0.00 509.88 764.82 0.00 764.82
6/1/2015 15-06-0152 999.80 29.99 20.00 0.00 0.00 29.99 20.00 49.99
6/1/2015 15-06-0152 23,540.50 706.22 470.81 0.00 470.81 706.22 0.00 706.22
6/9/2015 15-06-0161 1,356.00 40.68 27.12 0.00 27.12 40.68 0.00 40.68
6/15/2015 15-06-0167 4,000.00 120.00 80.00 0.00 0.00 120.00 80.00 200.00
6/15/2015 15-06-0164 20,748.00 622.44 414.96 0.00 414.96 622.44 0.00 622.44
6/29/2015 15-06-0187 24,389.70 731.69 487.79 0.00 487.79 731.69 0.00 731.69
7/14/2015 15-07-0203 4,000.00 120.00 80.00 0.00 0.00 120.00 80.00 200.00
7/14/2015 15-07-0200 23,401.80 702.05 468.04 0.00 468.04 702.05 0.00 702.05
7/29/2015 15-07-0216 24,300.70 729.02 486.01 0.00 486.01 729.02 0.00 729.02
8/14/2015 15-08-0234 4,000.00 120.00 80.00 0.00 0.00 120.00 80.00 200.00
8/14/2015 15-08-0231 20,070.00 602.10 401.40 0.00 401.40 602.10 0.00 602.10
8/28/2015 15-08-0241 24,562.80 736.88 491.26 0.00 491.26 736.88 0.00 736.88
9/15/2015 15-09-0262 4,000.00 120.00 80.00 0.00 0.00 120.00 80.00 200.00
9/15/2015 15-09-0265 29,548.05 886.44 590.96 0.00 590.96 886.44 0.00 886.44
10/1/2015 15-10-0283 27,078.34 812.35 541.57 0.00 541.57 812.35 0.00 812.35
10/15/2015 15-10-0301 3,000.00 90.00 60.00 0.00 0.00 90.00 60.00 150.00
10/15/2015 15-10-0302 26,680.98 800.43 533.62 0.00 533.62 800.43 0.00 800.43
10/29/2015 15-10-0321 28,168.80 845.06 563.38 0.00 563.38 845.06 0.00 845.06
11/16/2015 15-11-0337 3,000.00 90.00 60.00 0.00 0.00 90.00 60.00 150.00

11/16/2015 15-11-0338 28,147.80 844.43 562.96 0.00 562.96 844.43 0.00 844.43
11/27/2015 15-11-0350 27,557.10 826.71 551.14 0.00 551.14 826.71 0.00 826.71
12/15/2015 15-12-0360 3,000.00 90.00 60.00 0.00 0.00 90.00 60.00 150.00
12/15/2015 15-12-0365 30,859.80 925.79 617.20 0.00 617.20 925.79 0.00 925.79
12/22/2015 15-12-0371 17,114.40 513.43 342.29 0.00 342.29 513.43 0.00 513.43
12/28/2015 15-12-0372 24,541.65 736.25 490.83 0.00 490.83 736.25 0.00 736.25
Total 653,686.62 19,610.60 13,073.73 - 11,894.11 19,610.60 1,179.62 20,790.22
The abovementioned deficiencies have deprived the National Government of

additional revenues in the form of taxes to be utilized for its various
programs/projects.
In view thereof, the non-withholding of taxes from job order personnel

amounting to Php20,790.22 from January 1 to December 31, 2015 is a clear violation
of existing Bureau of Internal Revenue (BIR) rules and regulations.
We have recommended that Management require the accounting personnel

concerned to ensure that the required and appropriate withholding taxes are deducted
before making any payment to local suppliers for the purchase of goods and services
in accordance with the above-mentioned provisions and the same are remitted to the
BIR within the prescribed period.
We have also recommended that the accounting personnel concerned should

retain and attach BIR forms to the related disbursement vouchers.
The Management has commented that:.
“Admittedly, we did not follow the rule under the Bureau of Internal
Revenue’s rules and regulations which revealed the inaccuracy of
withholding tax deduction of the Job Order Employees. Though, the
agency will strictly adopt the procedure under this rule.
COA’s Rejoinder:

accounting personnel concerned to ensure that the required and appropriate
withholding taxes are deducted before making any payment to local suppliers for the
purchase of goods and services in accordance with the above-mentioned provisions
and the same are remitted to the BIR within the prescribed period.
Value For Money Audit

44. The Agency could have saved personnel time and effort involved in the
distribution of salaries and wages had they opted to avail of the Land Bank of
the Philippines (LBP) Automated Teller Machine (ATM) payroll account for
officers and employees and take advantage of the convenience, economy, safety
and facility of LBP’s payroll services thru ATM.
Sound internal control dictates that those having administrative supervision

over an Agency take the responsibility to oversee the operations of such Agency and
to ensure that they are managed effectively, efficiently and economically but without
interference with day-to-day activities.
The above criteria was based on Chapter 7, Book IV paragraph 2(a) of the
Executive Order No, 292 “Administrative Code of 1987”, which provides that:
“Administrative supervision which shall govern the administrative

relationship between a department or its equivalent and regulatory
agencies or other agencies as may be provided by law, shall be limited
to the authority of the department or its equivalent to generally oversee
the operations of such agencies and to insure that they are managed
effectively, efficiently and economically but without interference with
day-to-day activities.” (underscoring ours)
Review of the schedule of total Payroll Fund revealed that the Agency has
disbursed thru cash advance–encashment of checks, by the accountable officers
concerned who are responsible in processing and releasing the salaries and wages of
the regular employees, job order personnel and per diem of the Board of Directors.
Personnel assigned to handle payroll has consumed hours every month to

encash the check from the bank, prepare payslip and envelopes, release cash proceeds
and the liquidation of cash advances.
However, the Agency has opted to use the manual system after giving
consideration on the following:
a) The distance of the depository bank; and
b) The meager salary of the employees who cannot afford to have a

maintaining balance as required by the Bank.
The current practice of the Agency using the manual system in paying salaries
and wages has the following consequences:

a) Deprives the concerned employees of the early enjoyment of the benefits

and convenience and safety offered by LBP’s payroll services thru
automatic credit to the employees’ individual accounts;
b) Additional burden on the part of the personnel concerned; and
c) The manual payment thru cash advances exposes the funds in the custody
of the cashier to possible loss and misuse.
We have recommended that Management consider the use/availment of the

payroll services facility thru ATM by making proper representation with Land Bank
of the Philippines (LBP), Tagum Branch.
COA’s Rejoinder:
We stand firm with our recommendation that Management consider the

use/availment of the payroll services facility thru ATM by making proper
representation with Land Bank of the Philippines (LBP), Tagum Branch.
PWD / GAD Compliance Audit
45. Non-formulation of plans, programs and projects related to senior citizens and
persons with disability for CY 2015 is a clear non-compliance with Section 35 of
the RA 10651, General Appropriations Act of 2015.
Section 35 of the general provisions of the General Appropriations Act (GAA)

for FY 2015 provides that:
“All agencies of the government shall formulate plans, programs and

projects intended to address the concerns of senior citizens and
persons with disability, insofar as it relates to their mandated
functions, and integrate the same in their regular activities.
Moreover, all government facilities, including infrastructure, non-

infrastructure and civil works projects of the government, as well as
office buildings, streets and highways shall provide architectural or
structural features, designs or facilities that will reasonably enhance

the mobility, safety and welfare of persons with disability pursuant to

B.P. Blg. 344 and R.A. No. 7277.”
Our verification of the Agency’s compliance on the above-stated provisions
revealed that for CY 2015:
a. The Agency has not formulated nor conducted any programs, projects and
activities for senior citizens and persons with disability.
b. The Agency failed to provide architectural or structural features, designs

or facilities that will reasonably enhance the mobility, safety and welfare
of persons with disability.
c. Management failed to provide the following:
c.1 Lanes for the seniors and persons with disabilities;
c.2 Readable sign boards;
c.3 Information that raises the level of awareness of the general

public and policy makers/decision makers on ageing, needs of
person with disabilities and prevention of discrimination
against abuse of older persons and persons with disabilities;
and
c.4 Other activities within the current capacities and capabilities of

personnel of Asuncion Water District.
Non-formulation of plans, programs and projects related to senior citizens and

persons with disability for CY 2015 is clear non-compliance with Section 35 of the
RA 10651, General Appropriations Act of 2015, thus, defeats the purpose that would
benefit the senior citizen and differently-abled person.
We have recommended that Management formulate plans, programs and

projects intended to address the concerns of senior citizens and persons with disability
integrated in their regular activities.
COA’s Rejoinder:

We stand firm with our recommendation that Management formulate plans,

programs and projects intended to address the concerns of senior citizens and persons
with disability integrated in their regular activities.
46. Non-formulation of plans, programs and projects related to Disaster Risk

Reduction Management including climate change mitigation for CY 2015 is clear
non-compliance with Sections 39 and 40 of the RA 10651, General
Appropriations Act of 2015.
Section 39 of RA 10651, General Appropriation Act of 2015 provides that all

agencies of the government are encouraged to implement projects designed to address
disaster risk reduction and management activities under R.A. No. 10121 known as “An
Act Strengthening the Philippine Disaster Risk Reduction and Management
Framework and Institutionalizing the National Disaster Risk Reduction and
Management Plan, Appropriate funds therefor and For Other Purposes”.
Some of the important provisions of the RA 10121 are as follows:
(a) Adopt a disaster risk reduction and management approach that is

holistic, comprehensive, integrated, and proactive in lessening the
socioeconomic and environmental impacts of disasters including
climate change, and promote the involvement and participation of all
sectors and all stakeholders concerned, at all levels, especially the
local community;
(b) Develop, promote, and implement a comprehensive National

Disaster Risk Reduction and Management Plan (NDRRMP) that aims
to strengthen the capacity of the national government and the local
government units (LGUs), together with partner stakeholders, to build
the disaster resilience of communities, and' to institutionalize
arrangements and measures for reducing disaster risks, including
projected climate risks, and enhancing disaster preparedness and
response capabilities at all levels;
(c) Adopt and implement a coherent, comprehensive, integrated,

efficient and responsive disaster risk reduction program incorporated
in the development plan at various levels of government adhering to
the principles of good governance such as transparency and
accountability within the context of poverty alleviation and
environmental protection;
(c) Mainstream disaster risk reduction and climate change in

development processes such as policy formulation, socioeconomic

development planning, budgeting, and governance, particularly in the

areas of environment, agriculture, water, energy, health, education,
poverty reduction, land-use and urban planning, and public
infrastructure and housing, among others.
In response to the above provisions, the Local Water Utilities Administration

issued Memorandum Circular No. 004-14 dated May 16, 2014, directing all water
districts to prepare, update and implement action plans to mitigate the expected
effects of El Niño, one of the climate change consequences.
Our verification of the Agency’s compliance on the above-stated provisions

revealed that for CY 2015:
a. The Agency has not formulated nor conducted any programs, projects and
activities for Disaster Risk Reduction Management including climate
change mitigation; and
b. The Agency failed to provide public information activities in schools and

barangays to promote general awareness on the need to conserve water and
prepare for the effects of the El Niño phenomenon and other climate
change consequences related to water resources.
Non-formulation of plans, programs and projects related to Disaster Risk

Reduction Management including climate change mitigation for CY 2015 is clear
non-compliance with Sections 39 and 40 of the RA 10651, General Appropriations
Act of 2015, thus, the role and the contribution of the District to build a disaster-
resilient community cannot be assessed.
We have recommended that Management formulate plans, programs and

projects intended to address the concerns in Disaster Risk Reduction Management
including climate change mitigation and to coordinate with the Local Disaster Risk
Reduction and Management Council on the role and contribution of the District in
terms of financial capacity and areas of expertise.
We have also recommended that Management implement action plans

identified in the LWUA Memorandum Circular No. 004-14 especially in conducting
regular public information activities in schools and barangays to promote general
awareness on the need to conserve water and prepare for the effects of the El Niño
phenomenon and other climate change consequences related to water resources.

COA’s Rejoinder:
We stand firm with our recommendation that Management formulate plans,

programs and projects intended to address the concerns in Disaster Risk Reduction
Management including climate change mitigation and to coordinate with the Local
Disaster Risk Reduction and Management Council on the role and contribution of the
District in terms of financial capacity and areas of expertise.
47. Non-preparation of Gender and Development (GAD) Plans and Budgets and
Accomplishment Reports for CY 2015, is a clear violation of the provisions as
embodied in the PCW-NEDA-DBM Joint Circular No. 2012-01 and Executive
Order No. 273 dated September 08, 1995.
Executive Order No. 273 dated September 08, 1995 has mandated all agencies
to incorporate and reflect GAD concerns in their Agency performance commitment
contracts, annual budget proposals, and work and financial plans.
Moreover, Joint Circular No. 2012-01, amending the Joint Circular No. 2004-
01 issued by DBM, NEDA and the National Commission on the Role of Filipino
Women (NCFRW), requires all government agencies the preparation of Annual GAD
Plan and Budget and submission of Accomplishment Reports, which include
activities that are either client-focused or organizational-focused. The GAA provides
that GAD Plan constitute at least five percent (5%) of the total agency budget.
Inquiry with personnel concerned disclosed that Asuncion Water District has
not prepared annual GAD Plan for CY 2015. The non-preparation of the GAD plan
was due to, but not limited to, the following deficiencies:
1. Management has failed to conduct gender analysis;
2. Management has failed to identify relevant gender issues; and

3. Management has not maintained GAD database on gender statistics and
sex disaggregated data.
We have recommended that Management formulate annual GAD plan and

budget utilizing at least five percent of the Agency’s total budget which shall be
included in their budget proposals for approval.
Revisit the provisions embodied in PCW–NEDA–DBM Joint Circular No.

2012 -01 “Guidelines for the Preparation of Annual Gender and Development (GAD)
Plans and Budgets and Accomplishment Reports to Implement the Magna Carta of
Women” for proper guidance and reference.

COA’s Rejoinder:
We stand firm with our recommendation that Management formulate annual

GAD plan and budget utilizing at least five percent of the Agency’s total budget
which shall be included in their budget proposals for approval.

11-AsuncionWD2015 Part2-Observations and Recomm

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DETAILED AUDIT OBSERVATIONS AND RECOMMENDATIONS

PART II – DETAILED OBSERVATIONS AND RECOMMENDATIONS

It provides an Agency an effective way of communicating policies and

a. Personnel are performing multiple tasks that violate the principle of

b. Time consuming in clarifying procedures during employee absences due

Asuncion Water District, Province of Davao Del Norte Page 53

c. The importance of aiding the cross-training of employees to assure

d. Inconsistent application of standardized processes.

The development and preparation of written standard operating manual for

We have recommended that Management create a committee to materialize

The Management has not commented on the audit issue.

We stand firm with our recommendation that Management create a committee

2. Development and preparation of Operations Manual and Desk Procedures

An important element of a strong internal control system is the recognition by

Review of the operations of Cashier Section revealed that it has been

Asuncion Water District, Province of Davao Del Norte Page 54

a. The frequency of the turnover rate of operating personnel in cash

b. The assignment of cash handling responsibilities to personnel with limited

c. The fragmentation of billing and cash handling functions which makes

On the other hand, the desk procedures manual is beneficial in clarifying

The development and preparation of Operations Manual and Desk Procedures

We have recommended that the Cashier’s Section develop and prepare an

The Management has not commented on the audit issue.

“With those observations the district is admittedly has a lack of

Asuncion Water District, Province of Davao Del Norte Page 55

for receiving, disbursing, recording, reconciling, safeguarding and

The level of competence and integrity of personnel are essential elements of a

Personnel/Employee Manual aims to provide with basic concepts such as

1. No employment policies on the following:

Asuncion Water District, Province of Davao Del Norte Page 56

b. Punch card and lining up in the Bundy clock

2. Under the recruitment guidelines, the prohibition and limitation of

3. Appointment pertains to summary of requirements or documents needed

4. No clear guidelines on duties, responsibilities and accountabilities:

5. No policies on required Net Take Home Pay.

6. No guidelines on the following employee benefits:

7. No policies on the proper implementation and execution of Orientation

8. No clear mechanism on grievance.

9. No policies on personnel discipline:

Asuncion Water District, Province of Davao Del Norte Page 57

1. Employees have no guide and reference material in their day to day

2. Employees have limited knowledge in performing their respective duties

4. Inconsistent application of operational guidelines, policies and procedures.

Asuncion Water District’s failure to provide its personnel with a clear

We have recommended that the General Manager create an Employee Manual

The Management has not commented on the audit issue.

Asuncion Water District, Province of Davao Del Norte Page 58

Compliance with an established internal control system is heavily dependent

The organizational structure of any government agency provides the overall

An essential element of a strong internal control system is the recognition of

The Local Water District Manual on Categorization/Re-Categorization and

While Model Organizational Structure–Staffing Pattern for Key positions

1. Office of the Board of Directors

2. Office of the General Manager

2.1 Every major function or activity may be allowed a section:

2.1.1 Administrative Section.

2.1.2 Finance Services Section

Asuncion Water District, Province of Davao Del Norte Page 59

6) Collection Assistant, among others.

2.1.3 Commercial Services Section

2.1.4 Operations/Technical Section

Assessing the current organizational structure revealed that positions which

a) Budget Officer, in charge of the District’s funds;

b) Supply/Property Officer/Storekeeper, in charge of the receipts,