Académique Documents
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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.
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:
Management’s Comment:
COA’s Rejoinder:
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.
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:
d. The inherent risk of loss, or opportunity for personal gain, created by the
nature of cash transactions.
Management’s Comment:
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.
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.
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:
b. Classification of Offenses
c. Preventive suspensions
The above deficiencies have resulted, but not limited to, the following:
3. Top Management has no basis in dealing with any violation that will be
committed by concerned employees.
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.
Management’s Comment:
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.
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.
Management’s Comment:
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.
c) Physical controls;
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:
Management’s Comment:
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:
The IAS shall be an integral part of the office and shall assist in the
Management and effective discharge of the responsibilities of the
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)
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;
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.
Management’s Comment:
COA’s Rejoinder:
Sound internal control dictates that in any adopted mode of procurement, the
following control measures should have been established:
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.
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.
Management’s Comment:
“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:
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.
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
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.
Management’s Comment:
COA’s Rejoinder:
“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.”
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:
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;
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;
8. Petty cash fund was not recorded in the Petty Cash Register;
11. Official receipts and other attachment to the Disbursement Vouchers were not
stamped or marked with “PAID”.
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.
Management’s Comment:
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.
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.
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.
Management’s Comment:
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.
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
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:
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.
Management’s Comment:
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.
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.
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.
Management’s Comment:
COA’s Rejoinder:
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:
b) It ensures that supplies are available for use in services as and when
required;
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;
c) Storage Area
7. Some supplies were not stored off the ground and on dedicated clean pallets or
racking;
8. Shelves were not clearly marked with goods details/barcode labels to promote
easy/accurate picking and eliminate unnecessary handling or wrong picking;
f) Shelving
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
Inquiry with the personnel concerned revealed that the present physical
arrangement of the supplies has been the same since the start of operation.
e. It does not ensure that supplies are available for use in services as and
when required.
Management’s Comment:
COA’s Rejoinder:
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.
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:
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.
Management’s Comment:
“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.
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.
2. The maintenance and repair manuals for water related equipment are in
one location;
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.
The following are the reasons for the occurrence of deficiencies noted above
and as provided by the Head of Section:
7. No maintenance records. The Engineering Section has not used job cards
nor has maintained a proper and effective filing system; and
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.
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 also recommended that the General Manager ensure the following:
d. There are routine inspections, oiling and replacement of defective parts for
electric systems; and
e. There are routine inspections, oiling and replacement of defective parts for
mechanical systems.
Management’s Comment:
“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.
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.
Management’s Comment:
“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.
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:
1. The date of delivery, delivery terms and payment terms were not provided.
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.
Management’s Comment:
“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.
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:
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
Management’s Comment:
“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:
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 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:
Management’s Comment:
“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:
1-60 days 1%
61-180 days 2%
181-1 year 3%
More than 1 year 5%
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.
Management’s Comment:
COA’s Rejoinder:
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:
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.
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.
Management’s Comment:
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.
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.
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.
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.
Management’s Comment:
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.
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.
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:
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:
Moreover, various deficiencies were also noted in relation with the Inventory
account:
Management’s Comment:
“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:
Corollary thereto, the IRR of RA 9184 also provides the following modes of
procurement classified under Negotiated Procurement:
Moreover, Administrative Order No. 17 dated July 28, 2011 provides basically
the same requirement, as quoted hereunder:
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.
Management’s Comment:
“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:
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.
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:
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:
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.
Management’s Comment:
COA’s Rejoinder:
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.
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.
“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:
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
Reported Ending Balance 3,723,437.99 2,306,374.19
Variance 2,305.34 (1,521,069.00)
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.
Management’s Comment:
“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 on the property, plant and equipment.”
COA’s Rejoinder:
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.
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.
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.
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 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.
Management’s Comment:
COA’s Rejoinder:
Section 102 of PD 1445 provides for the primary and secondary responsibility
for government funds and property. It states that:
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:
d) Control activities were not clearly defined within the organization at all
levels.
Management’s Comment:
“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:
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.
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.
Management’s Comment:
COA’s Rejoinder:
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.
from the concessionaires such as service application fee, customer deposit, meter
installation, maintenance fee and installation fee.
b) the Accounting Processor was not able to present the subsidiary ledgers
for the Customers’ Deposit account; and
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.
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.
Management’s Comment:
“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:
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.
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.
Management’s Comment:
COA’s Rejoinder:
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
“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.
Management’s Comment:
COA’s Rejoinder:
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.
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 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.
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.
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;
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.
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:
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.
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.
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;
COA’s Rejoinder:
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.
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:
Neri
Engr.
15-04-0105 Felixberto C. 3/27/2015 Davao City Per Diem 800.00 320.00 480.00
Neri
Engr.
15-04-0118 Felixberto C. 3/31/2015 Davao City Per Diem 500.00 320.00 180.00
Neri
Karl Kristofer
15-04-0105 4/10/2015 Davao City Per Diem 800.00 320.00 480.00
P. Aurelio
Karl Kristofer
15-04-0118 4/10/2015 Davao City Per Diem 800.00 320.00 480.00
P. Aurelio
Engr.
15-04-0118 Felixberto C. 4/24/2015 Davao City Per Diem 800.00 320.00 480.00
Neri
Karl Kristofer
15-05-0129 4/28/2015 Davao City Per Diem 500.00 320.00 180.00
P. Aurelio
Ann Lorenie
15-03-0085 5/5/2015 Davao City Per Diem 800.00 800.00 0.00
P. Paclibar
Ann Lorenie
15-03-0085 5/6/2015 Davao City Per Diem 800.00 800.00 0.00
P. Paclibar
Ann Lorenie
15-03-0085 5/7/2015 Davao City Per Diem 400.00 240.00 160.00
P. Paclibar
Karl Kristofer
15-06-0153 5/28/2015 Davao City Per Diem 400.00 320.00 80.00
P. Aurelio
Engr.
15-06-0153 Felixberto C. 5/29/2015 Davao City Per Diem 600.00 320.00 280.00
Neri
Engr.
15-06-0162 Felixberto C. 6/2/2015 Davao City Per Diem 600.00 320.00 280.00
Neri
Karl Kristofer
15-06-0189 6/26/2015 Davao City Per Diem 400.00 320.00 80.00
P. Aurelio
Karl Kristofer
15-12-0378 7/8/2015 Davao City Per Diem 400.00 320.00 80.00
P. Aurelio
Engr.
15-07-0219 Felixberto C. 7/27/2015 Davao City Per Diem 800.00 320.00 480.00
Neri
Karl Kristofer
15-08-0230 8/3/2015 Davao City Per Diem 400.00 320.00 80.00
P. Aurelio
Engr.
15-08-0230 Felixberto C. 8/8/2015 Davao City Per Diem 800.00 320.00 480.00
Neri
Karl Kristofer
15-09-0275 9/11/2015 Davao City Per Diem 400.00 320.00 80.00
P. Aurelio
Engr.
15-09-0275 Felixberto C. 9/16/2015 Davao City Per Diem 800.00 320.00 480.00
Neri
Karl Kristofer
15-10-0311 10/8/2015 Davao City Per Diem 400.00 320.00 80.00
P. Aurelio
Engr.
Not
15-10-0318 Felixberto C. 10/22/15 Per Diem 800.00 320.00 480.00
indicated
Neri
Engr.
15-12-0376 Felixberto C. 12/18/15 Davao City Per Diem 800.00 320.00 480.00
Neri
Total 18,900.00 9,840.00 9,060.00
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.
7/29/2015 15-07-0218 C.A for Travel allow. Of BOD and Recording Sec. 3,850.00
9/11/2015 C.A for Travel Allow. Of BOD and Recording Sec. 3,850.00
Total 74,900.00
Management’s Comment:
COA’s Rejoinder:
(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)
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.
Management’s Comment:
“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:
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;
Total 3,795.25
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.
Management’s Comment:
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.
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.
Management’s Comment:
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.
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:
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
Management’s Comment:
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:
2) Only bona fide obligations of the Agency have been included, the
obligations incurred are properly authorized;
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:
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.
Management’s Comment:
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.
2) Date Acquired;
6) Depreciation Method;
7) Salvage/Residual 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.
1) Date Acquired
4) Depreciation Method
5) Salvage/Residual Value
Management’s Comment:
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:
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…
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:
Amount
Date Check # DV # 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
Asuncion Water District, Province of Davao Del Norte Page 144
DETAILED AUDIT OBSERVATIONS AND RECOMMENDATIONS
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
Management’s Comment:
“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:
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.
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.
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
Management’s Comment:
“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:
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.
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:
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.
However, the Agency has opted to use the manual system after giving
consideration on the following:
The current practice of the Agency using the manual system in paying salaries
and wages has the following consequences:
c) The manual payment thru cash advances exposes the funds in the custody
of the cashier to possible loss and misuse.
Management’s Comment:
COA’s Rejoinder:
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.
a. The Agency has not formulated nor conducted any programs, projects and
activities for senior citizens and persons with disability.
Management’s Comment:
COA’s Rejoinder:
a. The Agency has not formulated nor conducted any programs, projects and
activities for Disaster Risk Reduction Management including climate
change mitigation; and
Management’s Comment:
COA’s Rejoinder:
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:
Management’s Comment:
COA’s Rejoinder: