EXECUTIVE SUMMARY

Introduction

The Pagadian City Water District (PCWD) was organized by virtue of Resolution
No. 54 of the Sangguniang Panlungsod (SP) of Pagadian City on September 6, 1976.
Upon the filing of the said Resolution with the Secretary of the Local Water Utilities
Administration (LWUA) pursuant to Section 7 of Presidential Decree (PD) No. 198,
PCWD was deemed duly formed and existing.

The PCWD was formed pursuant to Section 5 of PD 198 for the purpose of (a)
acquiring, installing, improving, maintaining and operating water supply and distribution
systems for domestic, industrial, municipal and agricultural uses for residents and lands
within the boundaries of such districts, (b) providing, maintaining and operating
wastewater collection, treatment and disposal facilities, and (c) conducting such other
functions and operations incidental to water resources development, utilization and
disposal within such districts, as are necessary or incidental to said purpose.

It started its operation as a quasi-public corporation performing public service

pursuant to the provisions of PD 198 and the Conditional Certificate of Conformance No.
051 issued on January 30, 1978. In Supreme Court (SC) decision promulgated on
September 13, 1991 which obtained finality on March 12, 1992, local water districts are
declared government-owned or controlled corporations (GOCC), thus, covered by Civil
Service Commission (CSC) and the Commission on Audit (COA) rules and regulations.

In compliance with the guidelines as provided for in the Department of Budget and
Management (DBM) approved Revised Local Water District Manual on Categorization,
Re-categorization, and Other Related Matters (LWD-MaCRO) under DBM Circular Letter
No. 2011-10 dated November 18, 2011, the PCWD was classified as Category B effective
March 2012 per Certificate of Category issued by the LWUA on April 2, 2012.

The PCWD plantilla of personnel has a total of 147 regular positions. During the
year, 69 were filled and distributed as follows: 2 at the Office of the General Manager; 12
at the Administrative Services and Human Resource Department; 14 at the Commercial
Services Department and 41 at the Engineering and Operations Department.

Audit Methodology

The Commission has been implementing risk-based audit in the conduct of its
audit services. However, to meet the evolving developments in public governance and
fund management, the results-based approach in audit was incorporated. The integration of
these two approaches, called the Integrated Results and Risk-Based Audit (IRRBA)
Methodology, was applied in the audit of the accounts and operations of the Water District
(WD).

Scope of Audit

A comprehensive audit was conducted on the accounts and operations of PCWD

for 2016. The audit consisted of review of operating procedures, evaluation of the WD’s
programs and projects, interview of concerned officers and employees, verification,
reconciliation, and analysis of accounts, and such other procedures considered necessary.
i
 Specifically, the objective of the audit is to ascertain the propriety of the financial
transactions and compliance of the agency to prescribed laws, rules and regulations. It was
also made to ascertain the accuracy of the financial records and reports as well as the
fairness of the presentation of the financial statements. Performance audit was likewise
conducted with the objective of informing management where improvement can be
instituted in the field of revenues, expenditures and management of resources.

The audit covered the examination on test basis, the accounts and operations of the
PCWD, Pagadian City for the period January 1 to December 31, 2016.

Financial Highlights

I. Comparative Financial Position

Increase/
Accounts 2016 2015
(Decrease)
Assets ₱293,528,441.78 ₱ 277,304,107.65 ₱ 16,224,334.13
Liabilities 130,555,837.56 136,985,434.53 (6,429,596.97)
Capital ₱162,972,604.22 ₱ 140,318,673.12 ₱ 22,653,931.10

II. Comparative Results of Operations

Increase/
Particulars 2016 2015
(Decrease)
Business and Service Income ₱153,712,914.92 ₱ 146,984,844.22 ₱ 6,728,070.70
Current Operating Expenses 139,370,359.33 128,465,609.03 10,904,750.30
Income from Operations ₱ 14,342,555.59 ₱ 18,519,235.19 ₱ (4,176,679.60)
Interest and Other Income 560,677.19 526,458.33 34,218.86
Net Income ₱ 14,903,232.78 ₱ 19,045,693.52 ₱ (4,142,460.74)

III. Comparative Data of Budget and Actual Expenditures

2016
Particulars Budget Actual Variance
Personal Services ₱26,351,530.00 ₱23,135,377.30 ₱3,216,152.70
Maintenance and Other
Operating Expenses 14,016,080.00 14,744,829.28 (728,749.28)
Capital Outlay 14,030,000.00 19,022,460.19 (4,992,460.19)
Totals ₱54,397,610.00 ₱56,902,666.77 ₱ (2,505,056.77)

2015
Particulars Budget Actual Variance
Personal Services ₱ 46,268,771.00 ₱ 39,220,346.30 ₱ 7,048,424.70
Maintenance and Other
Operating Expenses 75,577,232.00 64,115,436.14 11,461,795.86
Capital Outlay 63,365,000.00 27,834,290.05 35,530,709.95
Totals ₱ 185,211,003.00 ₱ 131,170,072.49 ₱ 54,040,930.51

ii
Operational Highlights

The PCWD’s source of water supply is from seven wells and eight springs for
2016. Total water sales increased by ₱5,648,776.71 or 3.83% as compared to that of CY
2015 of ₱147,593,781.97. Water connections for the year were 17,923, of which 17,905
were billed, and served a population of 248,328.

No. of Billed Water Connections Increase/

Classification
2016 2015 (Decrease)
Domestic/Government 17,532 16,647 885
Commercial/Industrial 1,328 1,258 70
Total 18,860 17,905 955

The collection on current accounts and current year’s arrears was ₱147,138,073.33.
This figure over total billing of ₱153,242,558.68, collection efficiency on water sales was
at 96.02%, an increase of 0.36% from that of last year.

Independent Auditor’s Opinion

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

statements for CY 2016 as the balance of the Construction in Progress (CIP) account is
overstated by ₱1,350,934.73 due to non-reclassification of completed projects to their
appropriate PPE accounts.

Summary of Significant Observations and Recommendations

1. The District did not comply with the minimum frequency of sampling for drinking-
water supply for physical and chemical analysis in violation of Department of
Health (DOH) Administrative Order (AO) No. 2007-0012 dated March 9, 2007.

We recommended that management subject their water to testing in

accordance with DOH AO No. 2007-0012 and to comply strictly with the
requirements on the frequency of testing and samples of water as outlined in the
said DOH AO to ensure quality standards of drinking water, thus protecting public
health, safety and welfare.

2. The Board of Directors (BOD) participated in the exercise of

administrative/ministerial/detailed management of the District in violation of
Presidential Decree (PD) No. 198.

a. We recommended that the Board of Directors (BOD) limit its role to setting
policies and not to participate in the administrative or detailed management of
the District.

b. We recommended that the BOD to serve as guide for management to follow in

the operation of the District, relative to its mandate as policy-makers.

iii
Summary of Total Suspensions, Disallowances and Charges

Beginning This Period (January - Ending Balance

NS/ND/NC Balance as of December 2016) as of December
January 1, 2016 NS/ND/NC NSSDC 31, 2016
Notice of Suspension (NS) - - - -
Notice of Disallowance (ND) 8,123,364.85 - - 8,123,364.85
Notice of Charge (NC) - - - -
Total 8,123,364.85 - - 8,123,364.85

The balance at year-end does not include disallowances, suspensions and charges
prior to the effectivity of COA Circular No. 2009-006.

Status of Implementation of Prior Year’s Audit Recommendations

Of the ten audit recommendations contained in the CY 2015 Annual Audit Report
(AAR), five were fully implemented; two were partially implemented and three were not
implemented..

Of the two unimplemented recommendations contained in CYs 2010, 2011, 2012

and 2013 AARs, one was implemented while the other one was partially implemented.

iv