EXECUTIVE SUMMARY

A. Introduction

Amulung Water District (AmWaDi) was formed and organized thru

Sangguniang Bayan Res. No. 43, series of 2009 dated May 13, 2009, pursuant to the
provisions of Section 4 of PD 198, series of 1973, as amended by Presidential Decree
Nos. 768 and 1479 or otherwise known as the “Local Water District Law” and
“Provincial Water Utilities Act of 1973”, respectively. LWUA awarded the Conditional
Certificate of Conformance on July 21, 2009 with CCC No. 657 officially recognizing
Amulung Water District. The AmWaDi became operational on April 20, 2010 with 35
initial concessionaires. Currently, it is serving five (5) Barangays of the Municipality
of Amulung, Cagayan with 1,141 concessionaires.

The District has one (1) pumping station located at Barangay. Dugayung,
Amulung, Cagayan. A well is the main source of supply with rated capacity of 13 lps.

The District is classified as Category D, with five (5) permanent employees,

three (3) casual employees and two (2) job order employees.

A financial and compliance audit was conducted on the accounts and operations
of Amulung Water District for the year ended December 31, 2021. 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 District to laws, rules and regulations.

B. Financial Highlights

Presented below is the comparative information of the financial condition and

operations of the Amulung Water District for CYs 2021 and 2020:

Increase/
Accounts 2021 2020
(Decrease)
Assets P 32,565,445 P 29,092,979 3,472,466
Liabilities 32,300,732 25,714,250 6,586,482
Equity 264,713 3,378,729 (3,114,016)
Income 7,403,284 4,916,856 2,486,428
Expenses 8,576,408 5,126,777 3,449,631
Net Income/(Loss) (1,173,124) (209,921) (963,203)
 Also presented below is the comparative information of the budget and actual
expenditure of Amulung Water District for CYs 2021 and 2020:

Increase/
2021 2020
(Decrease)
Corporate Operating Budget P 8,798,126 P 6,364,367 P2,433,759
Actual Expenditure 8,576,408 5,126,777 3,449,631

C. Auditor’s Opinion on the Financial Statements

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

Financial Statements of the District because the following audit observations disclosed
inaccurate account balances:

a) The current maturing portion of the Loans Payable-Domestic was not

recognized in the Financial Statements as at December 31, 2021 of the District
amounting to P1,772,817.00 thus, understating the Current Portion of Loans
Payable-Domestic by P1,772,817.00 and overstating the Non-current Portion
of Loans Payable-Domestic by the same amount;

b) There were discrepancies of P1,527,509.36, P580,325.51, and P145,859.51,

respectively of the Loans Payable-Domestic, Interest Payable and Other
Financial Liabilities, respectively, between the General Ledger and Local
Water Utilities Administration (LWUA) records due to non-reconciliation of
the accounts hence, the accuracy of the accounts are doubtful and may affect
the fair presentation of the accounts in the Financial Statements; and

c) Semi Expandable Inventories account totaling P65,630.00 in the Financial

Statements which were already issued to end-users were not recognized as
Expense but remained as Inventories thus, Semi Expandable Inventories
account was overstated by P65,630.00 and the Retained Earnings was
understated by the same amount.

D. Significant Observations and Recommendations

1. Misclassification of accounts totaling P342,806.00, which represent supplies and

materials for water systems operations were recorded in the Merchandise
Inventory account instead of Supplies and Materials for Water Systems account
due to non-familiarization with the updated Chart of Accounts of the Accounting
Processor which is not in accord with Section 112 of Presidential Decree No.
1445 and Item 2.1 of COA Circular No. 2020-002 dated January 28, 2020 hence,
overstating the Merchandise Inventory account and understating the Supplies
and Materials for Water Systems Operations account by P342,806.00
 We recommended the Accounting Processor to:

a. reclassify the Merchandise Inventory account to Supplies and Materials for

Water Systems Operations account totaling to P342,806.00; and

b. familiarize and fully adopt the updated chart of accounts as presented in

COA Circular No. 2020-002.

2. Past Due Accounts amounting to P602,567.92 or 60% of the total Accounts

Receivable of P1,005,252.81 was noted due to leniency of the District in
implementing the disconnection policy for delinquent payment which is not in
accord with Sections 123 and 124 of Presidential Decree (PD) No. 1445, COA
Circular No. 76-027 and District Board Resolution No. 02, series of 2011 of
Amulung Water District, resulting to accumulation of past due accounts of the
District.

We recommended that Management:

a. strictly enforce its existing policy that will help enhance the collection
efficiency of the District; and

b. intensify collection efforts by sending collection/demand letters to

delinquent customers.

3. The District paid various disbursements totaling P72,381.22 on reimbursement

basis and without complete supporting documents due to improper planning,
which is not in accord with Sections 93 and 4(6) of Presidential Decree No. 1445
hence, the government was deprived of the most advantageous prices and taxes
withheld from the procurement.

We recommended that Management:

a. draw checks directly in the name of the suppliers in compliance with the
provisions of Section 93 of Presidential Decree No. 1445;

b. maintain stocks of supplies, materials and equipment spare parts not to

exceed 2-month requirement of the District to avoid emergency purchases;
and

c. support all claims with complete documents.

4. The Accountable Officers were not properly bonded due to non-renewal of the
fidelity bond immediately after its expiration, which is not in accord with Section
305 (f) of RA 7160 and Item 7.1 of COA Circular No. 97-002 thus, the interest
of the District is not protected from possible loss of public funds.
 We recommended that the Accountable Officers of the District expedite the
renewal of the fidelity bonds with the Bureau of Treasury to ensure that public
funds are protected from possible loss pursuant to Section 305 (f) of RA 7160
and Item 7.1 of COA Circular No. 97-002.

5. Insurable properties of the District amounting to P27,340,782.00 were not

covered with the appropriate property insurance with the Government Service
Insurance System due to non-resubmission of application with GSIS, as required
in Item 5.1 of COA Circular No. 2018-002 dated May 31, 2018 and Item 1.1.2
of COA Circular No. 92-390 dated November 17, 1992 thus, leaving its
properties at risk of total loss without indemnity or protection.

We recommended that Management:

a. resubmit the complete documents/information needed for the application of

property insurance with the GSIS; and

b. comply strictly with the provisions of COA Circular No. 2018-002 dated
May 31, 2018.

E. Implementation of Water Safety Plan

The District has submitted its Water Safety Plan (WSP) to LWUA for review
as required in LWUA Memorandum Circular No. 010.14 and DOH Administrative
Order No. 2014-0027.

F. 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 R.A Nos. 8291, 9679 and 7875, respectively, presented as follows:

Particulars PhilHealth Pag-IBIG GSIS

Beginning balance P 8.24 P (999.48) P 6,995.70
Contributions during the year 21,794.03 109,457.79 207,985.08
Remittances during the year (21,785.79) (108,458.32) (216,063.66)
Ending balance P 16.48 P (0.01) P (1,082.88)

G. Compliance with Tax Laws

The District has complied with the withholding of taxes on compensation and
goods and services, their remittances and the filing of the appropriate returns within the
prescribed period as well as the payment of franchise tax, presented as follows:
 Particulars Amount
Beginning balance, January 1, 2021 P -
Deductions during the year 2021 549,378.83
Remittances during the year 2021 (547,355.11)
Ending balance, December 31, 2021 P 2,023.72

The amount withheld for December 2021 was remitted in January 2022.

H. Authorized Government Depository Bank

The District maintained all its account with 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.

I. Gender and Development

The District allocated P439,906.29 of its annual budget for CY 2021 for GAD
purposes and utilized only P131,042.86 for gender related programs and activities
incorporated in the GAD Plan of the District due to pandemic.

J. Summary of Total Suspensions, Disallowances and Charges

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

December 31, 2021 is presented as follows:

Beginning Current year

Ending Balance
Balance NS/ND/NC NSSDC
Suspensions P - P - P - P -
Disallowances 129,214.51 - 19,306.49 109,908.02
Charges - - - -
Total P 129,214.51 P - P 19,306.49 P 109,908.02

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

Of the six (6) audit recommendations contained in the CY 2020 Annual Audit
Report, three (3) recommendations were validated as fully implemented, one (1) was
partially implemented and two (2) recommendations were not implemented and are
reiterated in Part II of this report.