EXECUTIVE SUMMARY

A. Introduction

The Aurora Water District (Isabela), otherwise known as AWADI, was created on
June 15, 2010 pursuant to Aurora, Isabela Rural Water Works and Sanitation
Association (AIRWASA) BOD's Resolution No. 02-01, Series of 2010 dated February
26, 2010; Aurora, Isabela Sangguniang Bayan Resolution No. 04, series of 2010 dated
March 22, 2010; and after the requisite public hearing among the consumers within its
coverage area was conducted, for which it was issued by the Local Water Utilities
Administration (LWUA) its Conditional Certificate of Conformance No. 856 dated
June 15, 2010.

As of year-end, the District is classified as Category D, with one (1) co-terminus, three
(3) permanent, seven (7) temporary and one (1) job order personnel.

A financial and compliance audit was conducted on the accounts and operations of the
Aurora Water District (Isabela) for the year ended December 31, 2018. The audit
consisted of review of operating procedures, interview of concerned government officials
and employees, verification, reconciliation and analysis of accounts, and such other
procedures considered necessary to ascertain the fairness of presentation of the financial
statements and compliance by the agency to laws, rules and regulations.

B. Financial Highlights

Presented below is the comparative information of the financial condition and

operation of the Aurora Water District (Isabela) for CYs 2018 and 2017:

Increase/
Accounts 2018 2017
(Decrease)
Assets P 4,786,559 P 5,226,547 P (439,988)
Liabilities 565,343 317,174 248,169
Equity 4,221,216 4,909,373 (688,157)
Income 5,453,786 4,910,096 543,690
Expense 6,662,396 5,830,513 831,883
Net Income/(Net Loss) P (1,208,610) P (920,417) P 288,193

Also presented below is the comparative information of the budget and actual
expenditure of Aurora Water District (Isabela) for CYs 2018 and 2017:

2018 2017 Increase/ (Decrease)

Corporate Operating Budget P 7,000,000 P 6,000,000 1,000,000
Actual Expenditure 6,662,396 5,830,513 831,883
C. Auditor’s Opinion on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements 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.

D. Significant Observations and Recommendations

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.

E. Compliance with Gender and Development Plan and Budget

The District has prepared a GAD Plan and Budget for GAD activities and has incurred
P24,160 for the implementation of the identified activities included in the GAD plan.

F. Compliance with RA 9184

The District complied with the provisions of RA 9184 in the conduct of their
procurement activities.

G. General Insurance of Government Properties with the GSIS

The District did not insure all its government properties with the GSIS as discussed in
Part II, Finding No. 8 of this report.

H. Disaster Risk Management

The District did not implement the projects designed to address disaster risk reduction
as discussed in Part II, Finding No. 9 of this report.

I. Compliance with the DBM-approved Corporate Operating Budget (COB)

The District expended within the approved Corporate Operating Budget.

J. Remittances of GSIS, Pag-IBIG and Philhealth premiums

The District has complied with the rules on the proper deductions of GSIS, Pag-ibig
and PhilHealth premiums from the salaries of employees and the timely remittances of
these premiums to the GSIS, Pag-ibig and PhilHealth in accordance with Republic Act
Nos. 8291, 9679 and 7875, respectively.

K. Compliance with Tax Laws

The District has complied with the provisions of Section 4.114-2 of RR No. 16-2005
and Section 2.57.3.(C) of RR No. 2-98 in the withholding and remitting of taxes to the
BIR for CY 2018. Also, it has complied with the payment of the franchise tax in
accordance with the provisions of Section 119 of the National Internal Revenue Code of
the Philippines (NIRC).
L. Authorized Government Depository Bank

The District maintained an account with the Producers Bank – Aurora Branch, an
account used for the deposit of daily collections and disbursements. The balance of the
account per records as at December 31, 2018 is P48,670.18, which is within the maximum
deposit insurance coverage of PDIC. The District maintained all their remaining accounts
with the Land Bank of the Philippines – Roxas Branch which is an Authorized
Government Depository Bank in compliance with DOF Department Circular No. 01-2017;
DOF DC 002-2016 in relation to DOF DC No. 01-2015.

M. Compliance on the Payments of Allowances and Benefits

The District complied with existing rules and regulations on the payment of
allowances, benefits and emoluments including propriety of the grant of allowances and
benefits to the governing board and/or district officials/employees.

N. Bonding of Accountable Officers

The District has complied with the proper bonding of its Accountable Officers for
government funds and property in compliance with Treasury Circular No. 02-2009 dated
August 6, 2009.

O. Status of total Suspensions, Disallowances and Charges as of year-end

The Status of Audit Suspensions, Disallowances and Charges (SASDC) as of

December 31, 2018 is presented as follows:
Beginning Balance Current year Ending Balance
NS/ND/NC NSSDC
P - P P - P -
Suspensions
-
Disallowances 748,240.00 - - 748,240.00
Charges - - - -
Total P 748,240.00 - - P 748,240.00

P. Status of Implementation of Prior Year’s Audit Recommendations

Out of thirteen (13) audit recommendations contained in the CY 2017 Annual Audit
Report, five (5) recommendations were validated as implemented, and eight (8) were not
implemented and were reiterated in Part II of this report.