Republic of the Philippines

COMMISSION ON AUDIT
Regional Office No. 02
No. 1 Dalan Na Imammo cor. Pavvurulun St
Carig Sur, Tuguegarao City

June 11, 2019

MR. ANGELITO F. DE JESUS

General Manager
Aurora Water District
Aurora, Isabela

Sir:

We are pleased to transmit the Annual Audit Report on the accounts and operations of
the Aurora Water District, Aurora, Isabela for the year ended December 31, 2018, in
compliance with Section 2, Article IX-D of the Philippine Constitution and Section 43(2) of
Presidential Decree No. 1445, otherwise known as the “Government Auditing Code of the
Philippines”.

The audit was conducted to ascertain the propriety of financial transactions and
compliance with prescribed rules and regulations. It was also made to ascertain the accuracy
of financial records and reports, as well as the presentation of the financial statements.

A qualified opinion was rendered on the presentation of the financial statements of the
Agency for the reasons stated in the Independent Auditor’s Report.

The report consists of four parts: Part I – Financial Statements, Part II – Observations
and Recommendations, Part III – Status of Implementation of Prior Year’s Audit
Recommendations and Part IV – Annexes.

The observations and recommendations were discussed with the concerned

management officials in an exit conference held on June 6, 2019, whose comments were
included in the report, where appropriate. Among the significant observations and
recommendations discussed are as follows:

1. The District did not submit its water for an Annual Physical and Chemical Quality
Analysis, hence, no result was submitted to LWUA for evaluation due to its additional
cost, which is not in compliance with LWUA Memorandum Circular (MC) No.
004.15, as a result, compliance of the District to the criteria set by the National
Drinking Water Standards could not be ascertained.
 We recommended that the District submit its water to an Annual Physical and
Chemical Quality Analysis and submit the result to LWUA for proper evaluation in
compliance with LWUA MC No. 004.15 to ensure that the criteria set by the National
Drinking Water Standard should be met.

2. Disbursement vouchers (DVs) and its supporting documents were not stamped
“PAID”, contrary to COA Circular No. 1992-389 dated November 3, 1992, thereby
exposing the said documents to risk of possible re-use for future claims.

We recommended that Management instruct the Cashier to stamp "PAID" in the

disbursement vouchers together with the supporting documents to deter the re-use of
the DVs/supporting documents.

3. The NRW of the District has exceeded the allowed maximum acceptable NRW by
17.21% resulting to unaccounted water losses, contrary to LWUA Resolution No. 444,
series of 2009 and LWUA Memorandum Circular No. 014-10 dated December 2,
2010.

We recommended that Management check the adequacy of the installed safeguard and
protection measures to further reduce the NRW to the acceptable level and make the
necessary changes or upgrades. Moreover, leakages and defective water meters be
immediately attended to minimize the revenue losses.

4. Insurable properties of the District were not all covered with the appropriate property
insurance with the Government Service Insurance System (GSIS) as required in COA
Circular No. 92-390 dated November 17, 1992, thus, leaving its properties at risk of
total loss without right of indemnification.

We recommended that Management insure all its insurable properties with the GSIS in
compliance with the provisions of COA Circular No. 92-390 dated November 17,
1992.

5. The District did not have projects designed to address disaster risk reduction and plans
to mitigate the adverse effects of climate change on the environment, not in
compliance with Section 35 of General Appropriations Act (GAA) for FY 2018.

We recommended that the District coordinate and join effort with other Agencies in
their disaster risk reduction activities which will help them acquire relevant
information and skills in addressing disaster risk reduction as well as to mitigate the
adverse effects of climate change on the environment in compliance with Section 35
of the GAA for FY 2018.

6. The District has completed its Water Safety Plan (WSP) beyond the prescribed time
period and has not submitted the same to the LWUA for review and approval, which is
not in compliance with LWUA Memorandum Circular No. 010.14 and DOH
Administrative Order No. 2014-0027. As a consequence, risks that threaten the safe
 quality of drinking water and public health may not have been properly addressed by
appropriate control measures.

We recommended that Management submit its WSP to the LWUA for their review
and approval as provided under DOH Administrative Order No. 2014-0027 to ensure
delivery of safe quality drinking water to concessionaires.

7. The District did not strictly implement its policy on collection of water bills resulting
to accumulation of uncollected receivables from concessionaires amounting to
P293,928.42, contrary to COA Circular No. 76-027.

We recommended that Management strictly enforce the disconnection policy to

delinquent customers in order to minimize uncollected receivables, otherwise institute
legal actions to enforce collection. Also, continue collection efforts by sending
collection/demand letters to delinquent customers. Likewise, if the delinquent
customers do not heed the repeated demands issued to them, resort to the issuance of
notice of disconnection in order to avoid further increase of their delinquencies.

8. The District did not strictly implement its newly approved water rates from LWUA,
resulting to non-profitable returns on its services and non-attainment of its Key
Performance Indicators for 2018, contrary to Section 37 of PD No. 198, as amended,
the LWUA Water Rates Manual and the Schedule of Approved Water Rates for
Aurora Water District (Isabela) per LWUA Board Resolution No. 43, Series of 2018.

We recommended that Management strictly implement its newly approved water rates
from LWUA to provide a more profitable return on its services and to achieve the
acceptable performance levels on the Key Performance Indicators of the District.

We request that the recommendations be implemented and we will appreciate being

informed of the action(s) taken thereon by submitting the duly accomplished Agency Action
Plan and Status of Implementation (AAPSI) Form, copy attached, within 60 days upon receipt
hereof, pursuant to Section 93 of the General Provisions of Republic Act No. 10964,
otherwise known as the “General Appropriations Act” for FY 2018.

We acknowledge the cooperation extended to the Audit Team by the Officials and
Staff of that Agency, thus, facilitating the conduct of audit and submission of the Report.

Very truly yours,

CC:

President of the Republic of the Philippines

Malacañang Complex, J.P. Laurel St.,
San Miguel, Manila

Vice-President
Quezon City Reception House
10010th St., Brgy. Mariana
New Manila, Quezon City

President of the Senate

Rm. 306 GSIS Bldg., Financial Center,
Diosdado Macapagal Blvd., Pasay City

Speaker of the House of Representatives

House of Representatives,
Constitution Hills, Quezon City

Chairperson-Senate Finance Committee

Rm 209-210 & 12 (New Wing 5/F) GSIS Bldg., Financial Center,
Diokno Blvd., Pasay City

Chairperson-Appropriation Committee
2/F RVM Building, House of Representatives,
Quezon City

Secretary of the Department of the Budget and Management

2F, Boncodin Hall, General Solano St.
San Miguel, Manila

Presidential Management Staff, Office of the President

PMS Bldg, Arlegui Street,
San Miguel, Manila 1005

LWUA Administrator
MWSS-LWUA Complex, Katipunan Avenue
Balara, Quezon City
 AGENCY ACTION PLAN and
STATUS of IMPLEMENTATION
Audit Observations and Recommendations
For the Calendar Year 2018
As of _______________

Agency Action Plan

Reason for Partial/
Action Taken/
Target implementation Status of Delay/ Non-
Action to be
Date Implementation Implementation, if
Taken
Person/Dept. applicable
Ref. Audit Observations Audit Recommendations Action Plan Responsible From To

Agency sign-off:

Name and Position of Agency Officer Date

Note: Status of Implementation may either be (a) Fully Implemented, (b) Ongoing, (c) Not Implemented, (d) Partial y Implemented, or (e) Delayed
 Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. 02
No. 1 Dalan Na Imammo cor. Pavvurulun St
Carig Sur, Tuguegarao City

June 11, 2019

THE BOARD OF DIRECTORS

Aurora Water District
Aurora, Isabela

Sirs/Mesdames:

We are pleased to transmit the Annual Audit Report on the accounts and operations of
the Aurora Water District, Aurora, Isabela for the year ended December 31, 2018, in
compliance with Section 2, Article IX-D of the Philippine Constitution and Section 43(2) of
Presidential Decree No. 1445, otherwise known as the “Government Auditing Code of the
Philippines”.

The audit was conducted to ascertain the propriety of financial transactions and
compliance with prescribed rules and regulations. It was also made to ascertain the accuracy
of financial records and reports, as well as the presentation of the financial statements.

A qualified opinion was rendered on the presentation of the financial statements of the
Agency for the reasons stated in the Independent Auditor’s Report.

The report consists of four parts: Part I – Financial Statements, Part II – Observations
and Recommendations, Part III – Status of Implementation of Prior Year’s Audit
Recommendations and Part IV – Annexes.

The observations and recommendations were discussed with the concerned

management officials in an exit conference held on June 6, 2019, whose comments were
included in the report, where appropriate. Among the significant observations and
recommendations discussed are as follows:

1. The District did not submit its water for an Annual Physical and Chemical Quality
Analysis, hence, no result was submitted to LWUA for evaluation due to its additional
cost, which is not in compliance with LWUA Memorandum Circular (MC) No.
004.15, as a result, compliance of the District to the criteria set by the National
Drinking Water Standards could not be ascertained.

We recommended that the District submit its water to an Annual Physical and
Chemical Quality Analysis and submit the result to LWUA for proper evaluation in
 compliance with LWUA MC No. 004.15 to ensure that the criteria set by the National
Drinking Water Standard should be met.

2. Disbursement vouchers (DVs) and its supporting documents were not stamped
“PAID”, contrary to COA Circular No. 1992-389 dated November 3, 1992, thereby
exposing the said documents to risk of possible re-use for future claims.

We recommended that Management instruct the Cashier to stamp "PAID" in the

disbursement vouchers together with the supporting documents to deter the re-use of
the DVs/supporting documents.

3. The NRW of the District has exceeded the allowed maximum acceptable NRW by
17.21% resulting to unaccounted water losses, contrary to LWUA Resolution No. 444,
series of 2009 and LWUA Memorandum Circular No. 014-10 dated December 2,
2010.

We recommended that Management check the adequacy of the installed safeguard and
protection measures to further reduce the NRW to the acceptable level and make the
necessary changes or upgrades. Moreover, leakages and defective water meters be
immediately attended to minimize the revenue losses.

4. Insurable properties of the District were not all covered with the appropriate property
insurance with the Government Service Insurance System (GSIS) as required in COA
Circular No. 92-390 dated November 17, 1992, thus, leaving its properties at risk of
total loss without right of indemnification.

We recommended that Management insure all its insurable properties with the GSIS in
compliance with the provisions of COA Circular No. 92-390 dated November 17,
1992.

5. The District did not have projects designed to address disaster risk reduction and plans
to mitigate the adverse effects of climate change on the environment, not in
compliance with Section 35 of General Appropriations Act (GAA) for FY 2018.

We recommended that the District coordinate and join effort with other Agencies in
their disaster risk reduction activities which will help them acquire relevant
information and skills in addressing disaster risk reduction as well as to mitigate the
adverse effects of climate change on the environment in compliance with Section 35
of the GAA for FY 2018.

6. The District has completed its Water Safety Plan (WSP) beyond the prescribed time
period and has not submitted the same to the LWUA for review and approval, which is
not in compliance with LWUA Memorandum Circular No. 010.14 and DOH
Administrative Order No. 2014-0027. As a consequence, risks that threaten the safe
quality of drinking water and public health may not have been properly addressed by
appropriate control measures.
 We recommended that Management submit its WSP to the LWUA for their review
and approval as provided under DOH Administrative Order No. 2014-0027 to ensure
delivery of safe quality drinking water to concessionaires.

7. The District did not strictly implement its policy on collection of water bills resulting
to accumulation of uncollected receivables from concessionaires amounting to
P293,928.42, contrary to COA Circular No. 76-027.

We recommended that Management strictly enforce the disconnection policy to

delinquent customers in order to minimize uncollected receivables, otherwise institute
legal actions to enforce collection. Also, continue collection efforts by sending
collection/demand letters to delinquent customers. Likewise, if the delinquent
customers do not heed the repeated demands issued to them, resort to the issuance of
notice of disconnection in order to avoid further increase of their delinquencies.

8. The District did not strictly implement its newly approved water rates from LWUA,
resulting to non-profitable returns on its services and non-attainment of its Key
Performance Indicators for 2018, contrary to Section 37 of PD No. 198, as amended,
the LWUA Water Rates Manual and the Schedule of Approved Water Rates for
Aurora Water District (Isabela) per LWUA Board Resolution No. 43, Series of 2018.

We recommended that Management strictly implement its newly approved water rates
from LWUA to provide a more profitable return on its services and to achieve the
acceptable performance levels on the Key Performance Indicators of the District.

In our transmittal letter of even date, we requested the General Manager to implement
the recommendations embodied in the report and to inform this Office of the action(s) taken
thereon by submitting the duly accomplished Agency Action Plan and Status of
Implementation (AAPSI) Form, copy attached, within 60 days upon receipt hereof, pursuant
to Section 93 of the General Provisions of Republic Act No. 10964, otherwise known as the
“General Appropriations Act” for FY 2018. We will appreciate any action(s) you may take
towards the implementation of the audit recommendations.

We acknowledge the cooperation extended to the Audit Team by the Officials and
Staff of that Agency, thus, facilitating the conduct of audit and submission of the Report.

Very truly yours,

 AGENCY ACTION PLAN and
STATUS of IMPLEMENTATION
Audit Observations and Recommendations
For the Calendar Year 2018
As of _______________

Agency Action Plan

Reason for Partial/
Action Taken/
Target implementation Status of Delay/ Non-
Action to be
Date Implementation Implementation, if
Taken
Person/Dept. applicable
Ref. Audit Observations Audit Recommendations Action Plan Responsible From To

Agency sign-off:

Name and Position of Agency Officer Date

Note: Status of Implementation may either be (a) Fully Implemented, (b) Ongoing, (c) Not Implemented, (d) Partial y Implemented, or (e) Delayed
 Republic of the Philippines
COMMISSION ON AUDIT
CGS – Water Districts & Other CGS Stand-Alone Agencies
Regional Office No. II
Tuguegarao City, Cagayan

June 10, 2019

MS. SUSAN C. RAMIREZ

Director III
Commission on Audit
Regional Office No. 2
Tuguegarao City

Madam:

In compliance with Section 2, Article IX-D of the Philippine Constitution and

pertinent provisions of Presidential Decree No. 1445, we conducted a financial and
compliance audit on the accounts and operations of the Aurora Water District, Aurora, Isabela
for the year ended December 31, 2018.

The audit was conducted to ascertain the propriety of financial transactions, and
compliance with prescribed rules and regulations. It was also made to ascertain the accuracy
of financial records and reports, as well as the fairness of the presentation of the financial
statements.

The report consists of four parts: Part I – Financial Statements, Part II – Observations
and Recommendations, Part III – Status of Implementation of Prior Year’s Audit
Recommendations and Part IV – Annexes. The observations and recommendations were
discussed with the concerned management officials in an exit conference held on June 6,
2019. Management comments were included in the report, where appropriate.

We rendered a modified opinion on the fairness of presentation of the financial

statements of the District because the existence and valuation of Property, Plant and
Equipment (PPE), with a carrying amount of P4,261,191.02, could not be ascertained because
the District did not conduct a physical count and maintain PPE Ledger Cards/Property Cards
to support the general ledger balances due to the absence of PPE records contrary to Sections
111 and 114 (2) of Presidential Decree No. 1445. Moreover, the accuracy and reliability of
the reported Inventories account with a balance of P18,086.88 could not be ascertained
because the balances per general ledger (GL) and the Report on the Physical Count of
Inventory were not reconciled showing a difference of P10,240.47, contrary to Sections 111
and 114 (2) of PD No. 1445 and Item 25 of the International Accounting Standards (IAS) 2.
 Our audit was conducted in accordance with International Standards of Supreme Audit
Institutions (ISSAIs) and we believe that it provides reasonable bases for the results of audit.

Very truly yours,

 Republic of the Philippines
COMMISSION ON AUDIT
CGS – Water Districts & Other CGS Stand-Alone Agencies
R2-02
Regional Office No. II
Tuguegarao City, Cagayan

June 7, 2019

MS. JUANITA A. CAPILI

OIC-Supervising Auditor
CGS – Water Districts & Other CGS Stand-Alone Agencies
Commission on Audit
Regional Office No. 2
Tuguegarao City

Madam:

In compliance with Section 2, Article IX-D of the Philippine Constitution and

pertinent provisions of Presidential Decree No. 1445, we conducted a financial and
compliance audit on the accounts and operations of the Aurora Water District, Aurora, Isabela
for the year ended December 31, 2018.

The audit was conducted to ascertain the propriety of financial transactions, and
compliance with prescribed rules and regulations. It was also made to ascertain the accuracy
of financial records and reports, as well as the fairness of the presentation of the financial
statements.

The report consists of four parts: Part I – Financial Statements, Part II – Observations
and Recommendations, Part III – Status of Implementation of Prior Year’s Audit
Recommendations and Part IV – Annexes. The observations and recommendations were
discussed with the concerned management officials in an exit conference held on June 6,
2019. Management comments were included in the report, where appropriate.

We rendered a modified opinion on the fairness of presentation of the financial

statements of the District because the existence and valuation of Property, Plant and
Equipment (PPE), with a carrying amount of P4,261,191.02, could not be ascertained because
the District did not conduct a physical count and maintain PPE Ledger Cards/Property Cards
to support the general ledger balances due to the absence of PPE records contrary to Sections
111 and 114 (2) of Presidential Decree No. 1445. Moreover, the accuracy and reliability of
the reported Inventories account with a balance of P18,086.88 could not be ascertained
because the balances per general ledger (GL) and the Report on the Physical Count of
Inventory were not reconciled showing a difference of P10,240.47, contrary to Sections 111
and 114 (2) of PD No. 1445 and Item 25 of the International Accounting Standards (IAS) 2.
 Our audit was conducted in accordance with International Standards of Supreme Audit
Institutions (ISSAIs) and we believe that it provides reasonable bases for the results of audit.

Very truly yours,