MOWD2012 Audit Report

Republic of the Philippines
COMMISSION ON AUDIT
Regional Office No. 10
Cagayan de Oro City
August 30, 2013
Engineer Ferdinand D. Revelo

General Manager
Misamis Occidental Water District
Ozamis City
Dear Engr. Revelo:
We are pleased to transmit the Annual Audit Report of Misamis Occidental

Water District, Ozamis City, for calendar year ended December 31, 2012 in compliance
with Section 2, Article IX-D of the Philippine Constitution and Section 43 of Presidential
Decree No. 1445, otherwise known as the Government Auditing Code of the Philippines.
The audit was aimed at ascertaining the propriety of financial transactions,

compliance by the Corporation with prescribed laws rules and regulations, the accuracy
of financial records and reports and ultimately the fairness of presentation of the financial
statements. Further, the audit was conducted in accordance with the generally accepted
auditing standards and we believe that it provides reasonable basis for the results of the
audit.
The report consists of four (4) parts, namely: Part I – Audited Financial
Statements, Part II – Findings and Recommendations, Part III – Status of Implementation
of Prior Year’s Audit Recommendations, which were discussed with concerned
management officials and staff and Part IV – the Annexes.
We will appreciate being informed on the actions taken on the recommendations

contained in the report within sixty (60) days from the date of receipt of this report.
We acknowledge the support and cooperation extended to our Audit Group by the
officials and employees of the Misamis Occidental Water District.
Very truly yours,
LYNN S. F. SICANGCO
Director IV
Regional Director
COMMISSION ON AUDIT
Cagayan de Oro City
August 30, 2013

The Chairman
Board of Directors
Ozamis City
Gentlemen:
We are pleased to transmit the Annual Audit Report (AAR) of Misamis

Occidental Water District, Ozamis City for the year ended December 31, 2012, in
compliance with Section 2, Article IX-D of the Philippine Constitution and Section 43 of
Presidential Decree No. 1445 otherwise known as the Government Auditing Code of the
Philippines.
The audit was aimed at ascertaining the propriety of financial transactions,

compliance by the Corporation with prescribed laws rules and regulations, the accuracy
of financial records and reports and ultimately the fairness of presentation of the financial
statements. Further, the audit was conducted in accordance with the generally accepted
auditing standards and we believe that it provides reasonable basis for the results of the
audit.
The report consists of four (4) parts, namely: Part I – Audited Financial
Statements, Part II – Findings and Recommendations, Part III – Status of Implementation
of Prior Year’s Audit Recommendations, which were discussed with concerned
management officials and staff and Part IV – the Annexes.
We have requested the General Manager, Misamis Occidental Water District, for
the information on the actions taken on the recommendations, contained in the report,
within sixty (60) days from the date of receipt thereof.
We acknowledge the support and cooperation extended to our Audit Group by the
officials and employees of the Misamis Occidental Water District.
Very truly yours,
LYNN S.F. SICANGCO

Director IV
Regional Director
Commission on Audit
Cagayan de Oro City
ANNUAL AUDIT REPORT
ON THE
MISAMIS OCCIDENTAL WATER DISTRICT

OZAMIS CITY
FOR THE YEAR ENDED DECEMBER 31, 2012

COMMISSION ON AUDIT
Cagayan de Oro City
August 2, 2013
Ms. Lynn S. F. Sicangco

Director IV
Regional Director
Commission on Audit
Cagayan de Oro City
Madam:
In compliance with Section 2, Article IX-D of the Philippines Constitution and

pertinent provisions of Presidential Decree No. 1445, otherwise known as the
Government Auditing Code of the Philippines, we audited the accounts and operations of
Misamis Occidental Water District, Ozamis City for the year ended December 31,
2012.
The audit was conducted to (a) verify the level of assurance that may be placed on
management’s assertions on the financial statements; (b) recommend agency
improvement opportunities; and (c) determine the extent of implementation of prior
year’s audit recommendations.
Our report consists of four parts, namely: Part I - Audited Financial Statements;
Part II – Findings and Recommendations; Part III - Status of Implementation of Prior
Year’s Audit Recommendations and Part IV – the Annexes. The observations and
recommendations were communicated to Management thru Audit Observation
Memorandum and discussed with management officials and staff. Their comments are
included in the appropriate portion of this report.
There is reasonable assurance that the financial statements are free of material
misstatements and are prepared in accordance with the Philippine Financial Reporting
Standards (PFRS)/accounting principles generally accepted in the Philippines.
Our audit was conducted in accordance with the Philippine Standards on Auditing
(PSA) and we believe that the audit evidence we have obtained provides reasonable basis
for our audit opinion/report.
Very truly yours,
EDWIN GAA CANIOS

State Auditor V
Supervising Auditor
EXECUTIVE SUMMARY
Introduction
The Misamis Occidental Water District (MOWD) is a Government-Owned and/or

Controlled Corporation (GOCC) established on July 13, 1973 by virtue of PD 198, as
amended, otherwise known as the Provincial Water Utilities Act of 1973.
Initially, MOWD composes two cities and three municipalities namely: the Cities
of Ozamis and Oroquieta, and the Municipalities of Clarin, Tudela and Calamba,
Misamis Occidental. On May 7, 2003, the MOWD Board of Directors approved the
exclusion of the Calamba Waterworks System from the coverage of MOWD in its Board
Resolution No. 030 series 2003.
Sometime in 2009, the Local Government Unit (LGU) of Oroquieta requested to

de-annex from the coverage of MOWD in which after the public hearing conducted on 20
March 2009, the attending public favored the said de-annexation, while MOWD opposed.
The Sangguniang Panlungsod of Oroquieta City, in its Resolution No. 2009-05-371, has
expressed its commitment of financial support to Oroquieta City Waterworks System
upon its formation. The LWUA Board of Trustees (BOT) approved the de-annexation of
Oroquieta City from Misamis Occidental Water District and the formation of Oroquieta
City Water District (OCWD) on March 26, 2009 in its BOT Resolution No. 130, Series of
2009.
On April 15, 2010, a Memorandum of Agreement (MOA) was entered into by

MOWD and OCWD and duly approved by the Local Water Utilities Administration
(LWUA) on May 7, 2010.
Presently MOWD provides water services to Ozamis City; and the municipalities
of Clarin and Tudela after the de-annexation of Oroquieta City effective 15 April 2010.
The district is run by a five-member Board of Directors appointed by the City

Mayor. In early 2010, LWUA took over the policy making body of MOWD because of
its arrearages and appointed three (3) members of the Interim Board of Directors and two
(2) Local Board of Directors appointed by the City Mayor, namely:
Engr. Edgardo C. Demayo - Chairman, Interim Board of Directors

LWUA Acting Deputy Administrator
Engr. Bede G. Gata - Vice Chairman

LWUA OIC – WDD Area 9 – Mindanao
Atty. Rebecca A. Barbo - Secretary

LWUA Acting Deputy Administrator, Financial
Services
Ms. Alein G. Quinones - Member
Local Interim Board of Directors
Mr. Jorge C. Neri lll - Member

Local Interim Board of Director
The Water District is getting financial and technical assistance from the Local
Water Utilities Administration (LWUA), a Government-Owned and/or Controlled
Corporation created by virtue of PD 198 which purpose is to provide financial and
technical assistance to Local Water Districts. In fact MOWD at present has an
outstanding various loan balances including its arrears with LWUA in the amount of
Php142,906,276.67 as of December 31, 2012.
Goal
The center of the “State of the Art Water Utilities in Mindanao.”
Vision
Misamis Occidental Water District, a non-profit but service oriented entity,

envisions to improve the people’s quality of life, health and sanitation with sustainable
water supply.
Mission
MOWD is committed to provide a 24-hour, safe, adequate, affordable and potable

water supply to the consuming public through an inspired leadership with the support of
employees, truly dedicated to promote the highest quality of service.
Organizational Set up
The District is headed by a General Manager and ably supported by a five-

member Board of Directors. It has three (3) Division Managers from the Administrative
and Finance Division, Commercial Division and the Operations Division. The District
has a total workforce of one hundred eleven (111) personnel complement, sixty six (66)
regular, ten (10) casual and thirty five (35) job orders as of December 31, 2012.
Operational Highlights
Target Actual Variance

COMMERCIAL DIVISION
Collections P 88,750,168.65 P 83,059,732.76 P 5,690,435.89
Service Connections 1,140 890 250
OPERATIONS DIVISION
Non-Revenue Water 50% 55% (5%)
Target Actual Variance
Potable Water Maintained adequate and Bacteriological Test.
Negative Results for (Physical and Chemical) and met
the National Standard for drinking water.
Financial Highlights
The Agency’s financial condition is as follows:

Increase
Particulars 2012 2011 (Decrease)
Total Assets P187,295,841.13 P173,579,847.76 P13,715,993.37
Total Liabilities 143,834,973.84 156,020,072.37 (12,185,098.53)
Total Equity 414,479,271.12 15,842,364.25 398,636,906.87
Total Income 86,750,806.18 76,297,970.11 10,452,836.07
Total Expenditures 75,726,736.76 71,707,881.80 4,018,854.96
Scope of Audit
Comprehensive audit was conducted on the accounts and operations of the

MOWD, Ozamis City, for the Calendar Year 2012. The objectives of the audit were to
ascertain the fairness and reliability of the agency’s financial position and results of
operation as well as the utilization of funds in line with their mandated functions.
The audit foci for the financial and compliance audit are accounts receivables,
loans payables and the property, plant and equipment.
Value for money audit was also conducted on the utilization of water supply by
the District.
Independent Auditor’s Report on the Financial Statements
The Auditor rendered qualified opinion on the fairness of presentation of the

financial statements of the Water District because of the significance of the matters
discussed in the Bases for Audit Opinion paragraph.
Summary of Significant Observations and Recommendations
The following audit observations and recommendations were discussed with the
concerned agency officials in an exit conference conducted on July 17, 2013.
1. Accounts receivable per general ledger amounted to P 18,970,206.58 while in

the subsidiary ledger it is P 19,474,411.29 or a difference of P 504,204.71 at
the end of the year, rendering both records inaccurate and unreliable.
We have recommended to management to require the Senior Corporate
Account Analyst in the Finance Division and the person in charge of
receivables in the Commercial Division to reconcile the difference in the total
amount of receivables to make both records reliable and accurate. Moreover,
transfer the maintenance of subsidiary ledgers for accounts receivable from
the Commercial Division to the Accounting Section, Finance Division after
both records have been reconciled so that the Commercial Division can
concentrate on the marketing aspect of the District.
2. Accounts receivable earned covering computation for fines and penalties and
water meter fees amounting to P 1,569,730.38 were not booked up in violation
of Section 18, Volume I of the Manual on National Government Accounting
System, thus understating the receivables account of the District by the same
amount.

Account Analyst to book up the income corresponding to the fines and
penalties and the water meter fees during the period these are computed and
make necessary adjusting entries if there are amounts in these accounts
which cannot be collected anymore. Moreover, there must be a written policy
when to forego the non-collection of fines and penalties and who is authorize
to approve it.
3. Aging of Accounts Receivables showed that out of P 21,052,605.56,

P15,181,243.40 or 72% comprises accounts in arrears while only P
5,871,362.16 or 28% comprises the current portion which has a very low
collection ratio, thus deprived the District of the much needed resources and
the possible benefits had it been collected. Moreover, the provision for
doubtful accounts is very inadequate.
We have recommended to management to require the Division Manager -

Commercial to establish strategy to intensify collections of receivables to
improve cash position of the District. Also, require the Senior Corporate
Account Analyst – Finance Division to establish separately the controlling
account for active and inactive accounts receivables for easy monitoring.
Finally, there must be a written policy relative to provision of allowance for
doubtful accounts which must adequately address the outstanding accounts
receivables.
4. Sharing of loans payable between MOWD and OCWD remained unsolved

after more than two (2) years of de-annexation by the OCWD from MOWD
resulting to inaccurate loan balances as well as underpayment of loan
amortizations by both water districts at year end. Moreover, the LWUA, the
financing institution, is not helping in the reconciliation of accounts thus,
adding to the very heavy and unconscionable interest expenses on arrears
before de-annexation.
We have recommended to management to make representations to the

LWUA, through the Board of Directors MOWD, to prioritize the acceptance
by OCWD on the reconciled amount of loan balances to make the balances
accurate.
5. Loan amortizations in arrears amounting to P 8,963,027 as of December 31,

2012 were not booked up in violation of Section 111 of PD 1445, thus
understating the current liabilities, giving misleading information about the
financial statements and affects decision making of the users.
We have recommended that the Senior Corporate Account Analyst of the

Finance Division should book up the accrued loan amortization payable to
present fairly the loans payable arrearages account of the District. It is also
recommended to management to use part of the sinking fund to pay off the
accrued loans payable in arrears to hasten the payments of these payable.
6. Due to incomplete filling up of the driver’s trip tickets, verification of the

consumption of gasoline as well as its usage of all the agency vehicles cannot
be made in violation of Section 2 of the specific rules and regulation of COA
Circular No. 77-61 dated September 26, 1977.
We have recommended to require all the drivers to fill up the driver’s trip
ticket completely and accurately relative to fuel consumption as well as
require passengers to sign every time they use the vehicle for audit purposes.
7. The Agency did not submit copy of perfected government contracts,

purchase orders and supporting documents within five (5) working days
upon approval for review to the Office of the Auditor in violation of COA
Circular No. 2009-001 dated February 12, 2009, thus, prompt initial review
cannot be made.
We have recommended that management strictly adhere to the requirements

of COA Circular No. 2009-001 dated February 12, 2009.
8. The District’s Purchase Orders are signed by the Bids and Awards
Committee (BAC) Chairman instead of the Head of the Procuring Entity in
violation Section 12 of Republic Act No. 9184 dated July 22, 2002.
We have recommended to management to stop the practice of requiring the

Chairman of the BAC to sign the purchase orders and instead let the HOPE
or the General Manager signs the purchase orders to adhere to the provisions
of RA 9184.
9. Other Assets Held For Sale account of MOWD in the amount of
P7,739,143.53 represents the unserviceable PPEs and is still carried in the
books of accounts due to failure of the District to apply for its ultimate
disposal or dropping from the books of accounts resulting to overstatement
of asset accounts.
We have recommended to management to create a disposal team per COA

Circular No. 83-206 to evaluate properly the assets listed as other assets held
for sale and submit the report to the Auditor for evaluation by the Technical
Audit Specialist and apply the disposal depending on the mode selected and
after which draw a jev for the dropping of unserviceable PPEs accounts
from the books. Moreover, require the Senior Corporate Account Analyst to
restore the P933,012.49 to the specific property, plant and equipment
account, to draw a jev to take up the sale of the Isuzu tanker made last year,
and also to draw a jev covering the assets transferred to OCWD. Finally,
require the General Services Officer to look into the missing laptops held by
former members of the Board of Directors to fully account for the properties
of the District.
10. Delivered construction materials amounting to P 8,041,319.35 from LWUA as

part of the loan granted in the total amount of P 161,079,000 to MOWD in
2004 which were excessive and unnecessary remained unused resulting to
losses on the part of MOWD in the form of additional interest, additional
storage burden in the bodega and ultimately deterioration of these
construction materials due to rust and wear and tear.
We have recommended to management to return the unnecessary

construction materials which are in the bodega to the LWUA and make
representation, through the BOD to deduct the amount of P 8,041,319.35
from the loans given to MOWD from that time these were delivered for
knowingly sending these without use anymore on FOB shipping point in
order to lessen the loans payable of the District.
11. Failure to post invitation or request for price quotation of shopping/small

value procurement of supplies and materials in the Phil-GEPS website, as
required under of Section 21.2.1 of Revised IRR.
We have recommended that management require the BAC Secretariat to

comply with the posting of all invitations/request for price quotation as
well as the Notice of Award in the Phil-GEPS as provided in the Section
53.1 and 54.3 of IRR in order to ensure transparency and accountability in
government transactions and enhance efficiency and effectiveness in the
procurement of goods, supplies and materials.
12. Retained Earnings balance soared up to P36,301,502.36 from P10,664,595.49
as reflected at the year-end financial statements, due to an adjustment
erroneously credited to Prior Years Adjustment account resulting from
Oroquieta City de-annexation, and inadequate provision for Allowance for
Doubtful Accounts thus giving misleading information and henceforth
affecting the decision making of the users of the financial statements.
We have recommended to require the Division Chief - Finance and

Commercial Section to draw a correcting entry on the adjustment
erroneously credited to the Prior Year’s Adjustment account to effect
correction on the Retained Earnings Account and to provide an adequate
provision for doubtful accounts.
13. The District could have earned more had they intensified information,
education campaign as well as determined the unaccounted water utilization
since water utilization of rated production capacity is only 58% resulting to
underutilization of water production available to consumers. Moreover,
water accounted for is only 41% of the total available for distribution thus,
resulting to 59% unaccounted water or losses.
We have recommended to management to intensify information and

education campaign as well as establish strategy to determine the real causes
of unaccounted water to lessen the unaccounted water utilization as well as
increase the would be income of the District.
Compliance with Tax Laws
During the year, the Agency remitted to the Bureau of Internal Revenue the total
amount of taxes of P 3,418,400.52 broken down to P 1,403,651.98 for personal services,
franchise P 1,540,034.38 and P 474,714.16 for purchases and contracts.
Implementation of Prior Year’s Audit Recommendations
Out of the twenty one (21) prior years’ audit recommendations, eighteen (18)
were fully implemented and three (3) were partially implemented.
TABLE OF CONTENTS
Page
Part I - Audited Financial Statements
- Independent Auditor’s Report 1-2
- Statement of Management’s Responsibility for the 3

Financial Statements
- Comparative Balance Sheet 4-5
- Comparative Statement of Income and Expenses 6-7
- Comparative Statement of Cash Flows 8
- Comparative Statement of Government Equity 9
- Notes to Financial Statements 10-18
Part II - Findings and Recommendations 19-34
Part III - Status of Implementation of Prior Year’s Audit 35-43

Recommendations
Part IV - Annexes (A-K) 44

Part I - Audited Financial Statements
- Independent Auditor’s Report
- Statement of Management’s Responsibility

for the Financial Statements
- Comparative Balance Sheet
- Comparative Statement of Income and Expenses
- Comparative Statement of Cash Flows
- Comparative Statement of Government Equity
- Notes to Financial Statements

-
COMMISSION ON AUDIT
Regional Office No. X
Cagayan de Oro City
INDEPENDENT AUDITOR’S REPORT
The Chairman
Board of Directors
Ozamis City
We have audited the accompanying financial statements of the Misamis

Occidental Water District, Ozamis City which comprise the balance sheet as of
December 31, 2012 and the statements of income and cash flows for the year ended, and
a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with Philippine Financial Reporting Standards. This
responsibility includes: designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial statements and are free from
material misstatement, whether due to fraud error, selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our

audit. We conducted our audit in accordance with Philippine Standards on Auditing.
Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness on
the entity’s internal control. An audit also includes evaluating the appropriateness of
1
accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide basis of our audit opinion.
Bases for Audit Opinion
As discussed in finding Nos. 2, 3, 5, 6 and 13, Part II of the report, the accuracy and
reliability of the contested loans payables amounting to P85,677,581.09 transferred to
OCWD as a result of de-annexation together with the accompanying assets could not be
ascertained due to incomplete documentation; loan payables balance of MOWD at year
end amounting to P142,906,276.67 did not reconcile with the statement from Local Water
Utilities Administration of P182,752,127.46 or a difference of P39,845,850.79;
unrecorded loans amortizations in arrears amounting to P8,963,027.00; Account
receivable per general ledger amounted to P18,970,206.58 unreconciled with the
subsidiary ledger of P19,474,411.29 or a difference of P504,204.71; Water sales in the
Statement of Income and Expenses amounted P86,488,168.41 differs by P17,040,618.41
from the reports/records in Commercial Division amounting to P64,447,550.00; and the
unrecorded account receivables earned on fines and penalties of P1,569,730.38.
Audit Opinion
In our opinion, subject on the effects of the matters discussed in the Bases for Audit
Opinion paragraph, the financial statements present fairly, the financial position of
Misamis Occidental Water District, Ozamis City as of December 31, 2012 and of its
financial performance and its cash flows for the year ended in accordance with
accounting principles generally accepted in the Philippines and International Financial
Reporting Standards.
Other Matters
The exit conference for the results of the financial and compliance audit of the CY 2012
operations was conducted on July 17, 2013.
COMMISSION ON AUDIT
By:
EDWIN G. CANIOS
State Auditor V
Supervising Auditor
July 31, 2013
2
Maningcol, Ozamiz City
Tel Nos. (088) 521-0339/Telefax (088) 521-1743
STATEMENT OF MANAGEMENT RESPONSIBILITY

FOR FINANCIAL STATEMENTS
The Management of Misamis Occidental Water District (MOWD) is responsible

for all information and representation contained in the Balance Sheet as of December 31,
2012 and the related Statement of Income and Expenses and Statement of Cash Flows for
the year then ended. The financial statements have been prepared in conformity with
generally accepted accounting principles and reflect amounts that are based on best
estimates and informed judgment of management with an appropriate consideration of
materiality.
In this regard, management maintains a system of accounting and reporting which

provides for the necessary internal controls to ensure that transactions are properly
authorized and recorded, assets are safeguarded against unauthorized use or disposition
and liabilities recognized.
SABINA O. TABUGOL FAITH T. ELLACER

Sr. Corporate Accounts Analyst Division Manager – Admin.
FERDINAND D. REVELO
General Manager
“Water is Life..Conserve it”
3
Detailed Balance Sheet
As of December 31, 2012
(With Comparative Figures for 2011)
ASSETS 2012 2011
Current Assets
Cash and Cash equivalents
Cash- Collecting Officers Note 2 P 227,931.23 P 138,364.47
Cash in Bank - Local Currency Note 2 3,897,081.06 419,581.03
Receivables
Accounts Receivable - Customers Note 3 18,970,206.58 17,427,003.87
Due from Officers & Employees Note 4 146,270.52 146,270.52
Advances to Officers & Employees Note 5 10,764.14 35,617.77
Allowance for Doubtful Accounts Note 3 (1,609,697.98) (1,154,203.18)

Inventories
Office supplies inventory Note 6 108,305.15 28,220.29
Other supplies inty. - chemicals & filtering
mat. Note 6 11,324.96 34,645.70
Spare parts inventory Note 6 10,191.96 33,418.92
Construction materials inventory Note 6 31,237.09 3,927.44
Other inventories - fittings & watermeters Note 6 8,654,441.61 8,457,079.60
Other Prepayments Note 7 5,000.00 2,500.00
Other Non-Current Assets
Investments
Sinking fund/Reserved fund Note 8 3,280,076.22 2,469,000.72
Other Investment Note 9 7,000.00 7,000.00
Property, Plant and Equipments Note 10
Land 2,283,664.52 2,283,664.52
Plant,distribution mains 184,028,123.23 184,578,448.95
Office buildings 5,130,330.51 4,711,086.99
Office equipments 115,054.40 153,894.40
Furnitures & fixtures 482,605.20 484,604.61
IT equipment & software 818,624.00 1,040,407.80
Other machinery equipment 10,565,887.60 10,277,413.65
Communication equipment 163,908.80
Motor vehicles 1,956,600.00 2,123,665.90
Other asset held for sale 7,739,143.53
Other asset held in trust 65,836.49
Accumulated Depreciation Note 10 (59,640,160.89) (68,090,955.03)

Non-current assets held in trust-unclassified UPIS 7,739,143.53
Others 66,136.49
TOTAL ASSETS P 187,295,841.13 P 173,579,847.76
4
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable Note 11 P 733,475.26 P 1,125,797.37
Due to BIR Note 13 173,312.34 179,619.60
Due to GSIS Note 12 1,069.57 481,841.32
Due to PAG-IBIG - 2,160.92
Due to PHILHEALTH - 28,325.00
Guaranty Deposits- customers Note 14 20,840.00 576,081.12
Guaranty deposits-meter - 8,939.37
Non-Current Liabilities
Loans Payable- Domestic Note 15 142,906,276.67 153,617,307.67
TOTAL LIABILITIES P 143,834,973.84 P 156,020,072.37
Deferred Credits Note 16 P 1,981,596.17 P 1,717,411.14

Equity Note 17
Government Equity 5,135,677.35 2,433,517.35
Donated Capital 42,091.41 2,744,251.41
Retained Earnings 36,301,502.36 10,664,595.49
TOTAL EQUITY P 41,479,271.12 P 15,842,364.25
TOTAL LIABILITIES & EQUITY P 187,295,841.13 P 173,579,847.76
See Accompanying Notes to Financial Statements
5
Detailed Statement of Income and Expenses
For the Year Ended December 31, 2012
INCOME 2012 2011
Sales- Water Note 18 P 81,488,168.41 P 70,722,759.89

Other business/service Note 19 1,760,289.15 1,970,388.87
Fines & penalties Note 20 3,399,601.80 3,023,226.98
Other Income
Interest Note 21 28,225.04 26,050.58
Miscellaneous Note 22 74,521.78 129,940.39
Gain on sale of disposed assets Note 23 - 425,603.40
GROSS INCOME 86,750,806.18 76,297,970.11
EXPENSES
Personal Services
Salaries and wages Note 24 16,870,856.19 15,168,147.78
Other compensation Note 25 2,940,577.78 2,816,055.09
Personnel benefits and contributions Note 26 2,361,663.16 2,168,516.66
Other personnel benefits Note 27 4,361,537.86 4,146,133.69
Maintenance and other operating expenses Note 28
Traveling 848,553.36 774,931.64
Training and scholarship 288,900.00 213,711.00
Supplies and materials-fittings 388,723.38 820,890.78
Utility - electricity 11,061,860.43 9,698,715.27
Communication 298,095.51 223,930.12
Membership dues and contribution to
organizations 35,358.52 27,404.52
Advertising 109,329.23 92,702.72
Printing and binding 38,509.00 73,455.40
Rent 15,000.00 15,000.00
Representation 6,491.00 12,219.25
Transportation and delivery 8,940.00 7,387.00
Rewards and other claims/donations&wreath 8,089.90 9,793.95
Professional services 1,449,485.74 1,651,993.79
6
Repairs and maintenance 376,477.71 385,949.99
Confidential, intelligence,extraordinary 78,693.84 79,121.35
Taxes, insurance premiums and other
fees 1,949,450.16 125,008.99
Bad debts 455,494.80 332,973.96
Depreciation 9,760,806.08 9,604,044.18
Others operation & maintenance
expenses 499,218.01 365,053.58
Note
Financial expenses 29
Bank charges 109,603.88 100,247.07
Interest - loans 21,355,213.00 22,755,566.00
Other - Misc. Income deduction 49,808.22 38,928.02
TOTAL EXPENSES P 75,726,736.76 P 71,707,881.80
Net Income ( loss) before tax 4,590,088.31
Less: Provision for (benefit from)income tax (1,724,106.70)
NET INCOME AFTER TAX P 11,024,069.42 P 2,865,981.61
7
Detailed Statement of Cash Flows
2012 2011
Cash flow from operating activities
Note
Cash inflows: 30
Service income P 1,760,289.15 P 1,977,147.12
Business income 79,249,981.69 69,224,508.73
Other income 3,474,123.58 3,246,501.30
Other receipts 734,316.90 1,179,339.53
Total Cash inflows P 85,218,711.32 P 75,627,496.68
Note
Cash outflows: 31
Personal services-Salaries & wages 16,870,856.19 15,168,147.78
Maintenance and other operating expenses 24,848,826.98 23,871,881.05
Payables 7,045,598.07 6,164,653.91
Total Cash outflows P 48,765,281.24 P 45,204,682.74
Total Cash provided from operating activities P 36,453,430.08 P 30,422,813.94
Cash flow from investing activities -

Note
Cash inflows: 32
Interest and dividends & other cash receipts 89,484.59 873,669.11
Total Cash inflows P 89,484.59 P 873,669.11
Total Cash provided from investing activities P 89,484.59 P 873,669.11
Cash flow from financing activities

Note
Cash outflows: 33
Loan amortization 32,066,244.00 32,066,244.00
Financial expenses/Bank charges 909,603.88 121,353.04
Total Cash outflows P 32,975,847.88 P 32,187,597.04
Total Cash used from financing activities P (32,975,847.88) P (32,187,597.04)
Net decrease in Cash and cash equivalents P 3,567,066.79 P (891,113.99)
Cash and cash equivalents,beginning balance P 557,945.50 P 1,449,059.49
Cash and cash equivalents, ending balance P 4,125,012.29 P 557,945.50
8
Detailed Statement of Changes in Equity
2012 2011
Government Equity
Balance, beginning P 5,135,677.35 P 2,433,517.35
Doanted Capital
Balance, beginning 42,091.41 2,702,160.00
Additions/(deductions) 42,091.41
Balance, end P 42,091.41 P 2,744,251.41
Restricted Capital
Balance, beginning 10,664,595.49 8,469,884.87
Prior period adjustments 14,612,837.45 (559,588.67)
Changes during the period (111,682.32)
Net income/(loss) for the period 11,024,069.42 2,865,981.61
Balance, end P 36,301,502.36 P 10,664,595.49
TOTAL EQUITY P 41,479,271.12 P 15,842,364.25
9
NOTES TO FINANCIAL STATEMENTS
AGENCY PROFILE
The Misamis Occidental Water District (MOWD) is an independent entity, a non- profit Government Owned
and Controlled Corporation (GOCC) which provides and caters public service. It was creadted by the Provincial
Board of Misamis Occidental by virtue of the Board Resolution No. 105-1 issued on July 13, 1973. It comprises
of one (1) city and two (2) municipalities, the city of Ozamiz and the municipalites of Clarin and Tudela.
The accounting procedures adhered by the water district is in conformance with the Commerical Practices
Manual of LWUA, the sole authority governing the use and disposal of water resources pursuant to Presidential
Decree 198.
However, part of the accounting system implemented by the water district is in accordance with the New
Government Accounting System (NGAS). Recording of transactions specifically on Revenue/Income were based
on accrual method of accounting.
BALANCE SHEET ACCOUNTS
CASH AND CASH EQUIVALENTS
Note 1 - CASH COLLECTING OFFICER - includes cash collectons still in the possession of the cashier
awaiting deposit to the depository banks. The balance comprise the following
Other Income 23,857.62

Office Collection 158,531.61
Mall Collection 38,123.10
Tudela Sub-Office 6,765.25
227,277.58
ADD: Underdeposit 11/26/12 Office Coll. 350.70
Underdeposit 12/21/12 Public Mall Coll. 300.00
Underdeposit TWS Collection 2.95 653.65
TOTAL 227,931.23
Note 2 - CASH IN BANK - LOCAL CURRENCY - represents deposits and savings in the bank readily
available for general expenditures in the operation and maintenance of the Water District.
LBP - Ozamiz Branch IBCA0812-10539-6 3,673,609.30

Rural Bank of Tudela-SA # 3919 66,279.62
Rural Bank of Clarin-SA # 3159 157,192.14
3,897,081.06
10
Note 3 - ACCOUNT RECEIVABLE - CUSTOMERS refers to all unsettled water bill accounts of the
concessioner (active and in-active) connections. As of December, 2012, accounts receivable-customer totalled
Accounts Receivable - Customers 18,970,206.58

Allowance for Doubtful Accounts (1,609,697.98)
A/R-net 17,360,508.60
Note 4 - DUE FROM OFFICERS AND EMPLOYEES this were the receivable from MOWD employees, to
wit:
1. Mr. F.B. Gonzaga 98,841.26

2. Ms. Susan R. Babayran 47,429.26
TOTAL 146,270.52
Note 5 - ADVANCES TO OFFICERS AND EMPLOYEES - Cash advances were the amount granted to
officers and employees of the water district intended for a specific purpose essentially on defraying expenses like
pier diems on travels on seminars and trainings and the like. Total unliquidated amount as of December 31, 2012
amounted to P10,764.14 which composed of the following officers and employees;
1. Ellacer, Faith T. 63.00

2. Estela, Arlyn S. 240.00
3. Galorio, Anecita M. 63.00
4. Lim,Marina Carmen T. 6,218.00
5. Neri,Jorge III C. 400.00
6. Quiñones, Alien G. (400.00)
7. Revelo, Ferdinand D. 4,180.14
TOTAL 10,764.14
Note 6 - MATERIALS AND SUPPLIES INVENTORIES - This account pertains to unused and unissue
materials and fittings which are kept in the stock-room for future use of the water district in its operation.
Composition as follows:
1. Office supplies inventory 108,305.15

2. Chemicals & filtering materials inventory 11,324.96
3. Construction materials inventory 31,237.09
4. Other Inventories- fittings &water meters 8,654,441.61
5.Maintenance supplies inventory-spareparts 10,191.96
TOTAL 8,815,500.77
Note 7 - Prepayments - The amount of P5,000.00 prepayments pertaines to the unexpired portion of the
payments of the television broadcast which contract ends on April, 2013.
11
Note 8 - Sinking Fund - Sinking Fund pertains to cash set aside to reserve to secure outstanding obligations of
the water district to Local Water Utilities Administration (LWUA). Total funds reserved for the year 2012
amounted to P3,280,076.22.
Note 9 - OTHER INVESTMENTS - The amount of P7,000.00 investment pertains to the deposit of 7 cylinders
of liquid chlorine.
Note 10 - PROPERTY, PLANT AND EQUIPMENT - The acquisition costs and accumulated depreciation as
of December 31, 2012 were as follows:
12
Acquisition Cost Accum. Dep'n Net Book Value
Land 2,283,664.52 - 2,283,664.52
Building & other structures 5,130,330.51 3,201,033.82 1,929,296.69

Office Equipments 115,054.40 49,086.76 65,967.64
Office furnitures & fixtures 482,605.20 187,353.79 295,251.41
Land transport equipments 1,956,600.00 1,332,182.30 624,417.70

Other machinery equipments 10,565,887.60 3,856,121.05 6,709,766.55
IT equipments 818,624.00 287,670.99 530,953.01
Plant-Distribution Mains 184,028,123.23 47,453,054.70 136,575,068.53
Other assets held for sale 7,739,143.53 3,273,657.48 4,465,486.05
Other assets held in trust 65,836.49 - 65,836.49
TOTAL 213,185,869.48 59,640,160.89 153,545,708.59
CURRENT LIABILITIES
Obligations of the water district that can be settled with in one year.
Accounts Payable 733,475.26
Due to GSIS 1,069.57
Due to National Gov't Agencies-BIR 173,312.34
TOTAL 907,857.17
Note 11 - ACCOUNTS PAYABLES - These were obligations of the water district to supplier and other
that were not settled at the end of the year, to wit:
PAYEE Particulars Amount

Acapulco Machine Shop fabrication of plastic bushing 5,000.00
DXDD airtime spot, 12/2012 1,000.00
DXOC airtime spot, 12/2012 1,000.00
Estela, Arlyn Honorarium as recording secretary 1,000.00
Guipetacio,Richard Janitorial works,12/16-31/2012 1,500.00
Kristan Educational Supply various office supplies 26,535.00
LBP for the Account of BIR Franchise tax, 11/2012 & 12/2012 156,382.91
Lim Ho Chuan Seng gasoline,diesel,lubricants for 12/2012 162,736.25
13
Lim, Marina Carmen T. Honorarium of security guard,per diem, 74,479.87
13th mo payof casual for 2012
LRCA Trading sublersible pump 244,998.00
Ozamiz Allied Conts.supply 30 bags cement 7,050.00
PLDT telephone bill12/2012 4,342.24
Quinones,Allien travel expenses 11,095.88
Rockstar Aggregates 20cu.m. crushed stone 15,800.00
Shell Sto.Nino & Gen. Mdse. diesel fuel & lubricants for Innova 19,961.17
Suan, Genesis V. overtime,12/2012 593.94
TOTAL 733,475.26
Note 12 - DUE TO GSIS - The amount of P1,069.57 is the net amount of the remittance and premiums
deducted from employees and employer's share to be remitted on the following month of January, 2013.
Note 13 - DUE TO NATIONAL GOVERNMENT AGENCIES - BIR - The amount of P173,312.34

consists of taxes withheld from suppliers to be remitted on the 10th day of the following month.
Particulars Amount
Tax withheld on wages,December 2012 111,258.28
Tax withheld on suppliers, December 2012 62,054.06
TOTAL 173,312.34
Note 14 - GUARANTY DEPOSIT CUSTOMER - The outstanding balance of P20,840.00 pertains to the
deposits received from consumers who availed water services from the water district (TWS).
Note 15 - LONG TERM LOANS PAYABLE - DOMESTIC - The amount of the P142,906,276.67 were
the outstanding liabilities of the water district to the LWUA. As of December 2012 loan account balances
followed:
Loan # Amount
3412-R 9,159,837.22
3412-S 9,427,158.52
3281-R 1,236,254.24
3281-S 399,266.35
4-1820 R 5,955,109.09
4-1820 S 7,004,964.31
2124 RL-A 55,109,562.41
2124 RL-B 34,092,665.29
2468-RL 20,521,459.24
TOTAL 142,906,276.67
14
Note 16 - OTHER DEFERRED CREDITS - The amount of P1,981,596.17 pertaines to the collection of
water maintenance fee (WMF) from the registered concessionaires.
Note 17 - EQUITY
Government Equity 5,135,677.35
Donated Capital 42,091.41
Retained Earnings 36,301,502.36
TOTAL EQUITY 41,479,271.12
Note 18 - WATER SALES - pertains to the total billings of the water district in the amount of
P81,488,168.41, breakdown as follows:
Generation Income 81,482,492.41

Public fire protection 5,676.00
Total 81,488,168.41
Note 19 - OTHER BUSINESS & SERVICE - pertains to the amount collected on installation fees for
new service connections, reconnection fees, inspection fees and other water revenues totaled
P1,760,289.15 in 2012.
Other business/service revenue 1,717,241.31

Other water revenues 43,047.84
Total 1,760,289.15
Note 20 - FINES AND PENALTIES - were the amount collected on the overdue water bills of the
concessionaires and penalties on illegal tapping of service connections totaled P3,399,601.80.
Penalties-overdue water bills 3,333,945.80

Penalties-illegal connections 65,656.00
Total 3,399,601.80
Note 21 - INTEREST - This pertains to the income from bank interest on all depository banks for the year
2012 in the amount of P28,225.04.
Note 22 - MISCELLANEOUS - pertains to miscellaneous non operating income of the district amounted
to P74,521.78. This includes income/excess of cost from sales of fittings to outsiders, other damage
fittings and others.
Note 23 - GAIN ON SALE OF ASSETS - It is derived from the sale of unserviceable and fully
depreciated assets. For the year 2012, the district did not sell any assets.
15
Note 24 - SALARIES AND WAGES - It includes salaries of regular, casual and job order employees of
the district. The total amount as follows:
Regulars 14,734,402.94
Casual & job orders 2,136,453.25
Total 16,870,856.19
Note 25 - OTHER COMPENSATION - it includes

the following:
RATA 444,000.00
PERA 1,759,818.18
Overtime & holiday pay 736,759.60
Total 2,940,577.78
Note 26 - PERSONNEL BENEFITS & CONTRIBUTION - It includes employer's contribution to

GSIS, Pag-ibig and Philhealth. The total contribution for the year amounted to P2,361,663.16 as follows:
GSIS Contribution 1,876,662.84

ECC Contribution 84,750.00
Pag-ibig Contribution 223,025.32
Philhealth Contribution 177,225.00
Total 2,361,663.16
Note 27 - OTHER PERSONNEL BENEFIT -consists of other benefits received by the employees for
the year 2012 as follows:
Clothing allowance 370,000.00

Year end bonus 1,680,575.43
Other bonuses & allowances 1,216,587.65
Vacation & sick leave benefits 643,505.43
Retirement Benefits 450,869.35
Total 4,361,537.86
Note 28 - OTHER MAINTENANCE and OTHER OPERATING

EXPENSES
Travelling Expenses 848,553.36

Training and Scholarship expenses 288,900.00
Supplies and supplies/fittings;
Office supplies 263,413.81
Spareparts 113,129.32
Fittings 12,180.25 388,723.38
Utility - Electricity & fuel for pumping stations,office&vehicles;

Electricity-Office 358,409.45
Fuel & power for pumping 9,792,441.39
Fuel, oil & lubricants 911,009.59 11,061,860.43
Communications;
Landline 56,924.51
Mobile 204,423.00
Internet 11,788.00
Cable & radio 24,960.00 298,095.51
Membership dues & contribution to organization

Membership dues 30,358.52
Cultural & athletic expenses 5,000.00 35,358.52
Advertising 109,329.23
Printing 38,509.00
Rental 15,000.00
Representation 6,491.00
Transportation & delivery 8,940.00
Rewards & other claims,donation & wreath 8,089.90
Professional Fees;
Legal services 84,000.00
Directors fees &
remuneration 842,765.74
Security services 342,720.00
General & Janitorial
services 180,000.00 1,449,485.74
Repairs and maintenance 376,477.71

Extraordinary expenses 78,693.84
Franchise taxes, insurance premiums & other
fees 1,949,450.16
Bad Debts 455,494.80
Depreciation;
Plant 8,310,724.24
Building & other structures 174,590.52
Office equipment 21,206.68
Land transport equipment 278,813.47
Other machinery equipment 763,361.85
IT equipment 140,887.35
Furnitures & fixtures 71,221.97 9,760,806.08
Other Operation Expenses;

Pumping operation expenses 173,960.23
Water treatment expenses 15,000.00
Chemicals & filtering
materials 170,264.18
Other operation expenses 139,993.60 499,218.01
NOTE 29 - FINANCIAL EXPENSES
Financial Expenses;
Bank charges 109,603.88
Interest on loans 21,355,213.00
Misc. income deduction 49,808.22
21,514,625.10
Total Expenses 75,726,736.76
NOTE 30 - CASH INFLOWS from operating activities - These are cash receipts from the ff:
Service Income;
Misc. Service Revenues 1,717,241.31
Other Water Revenues 43,047.84 1,760,289.15
Business Income - Water Sales 79,249,981.69
Other Income;
Penalty Charges 3,399,601.80
Misc. Non-Operating
Revenues 74,521.78 3,474,123.58
Other Receipts;
Refund from Cash Advance 49,071.42
Other Receipts 685,245.48 734,316.90
Total 85,218,711.32
NOTE 31 - CASH OUTFLOWS FROM OPERATING ACTIVITIES - These are cash disbursements
from the following:
Payment of Salaries and wages 16,870,856.19

Payment of Personnel benefits 6,029,313.85
Payment of Power, fuel for pumping 7,305,313.63
Payment of Other Operation & maintenance
expense 7,469,028.22
Payment of Remittances 2,620,131.41
Payment of Cash Advances 1,425,039.87
Payment of Accounts Payables 7,045,598.07
Total 48,765,281.24
NOTE 32 - CASH INFLOWS FROM INVESTING ACTIVITIES
Other Receipts/Adjustments 72,335.05

Bank Interest 17,149.54 89,484.59
NOTE 33 - CASH OUTFLOWS FROM FINANCING ACTIVITIES
Payment of domestic loans 32,066,244.00

Other financial charges/bank charges 909,603.88 32,975,847.88
Part II - Findings and Recommendations
Part II - Findings and Recommendations
Financial and Compliance Audit
Unreconciled Accounts Receivables
1. Accounts receivable per general ledger amounted to P 18,970,206.58 while in

the subsidiary ledger it is P19,474,411.29 or a difference of P 504,204.71 at the
end of the year, rendering both records inaccurate and unreliable.
Reliable financial statements are always the results of accurate data and
reconciled amounts between the controlling and subsidiary accounts.
In the District, the preparation of the general ledger is lodge with the
administrative and finance division while the maintenance of the subsidiary ledgers is
lodge with the commercial division since the names of all the consumers/concessionaires
are maintained by them as an aid in the preparation of targeting the revenue for the
district. .
Our audit showed that accounts receivable per general ledger amounted to
P18,970,206.58 while in the subsidiary ledger it is P19,474,411.29 or a difference of
P504,204.71 (Annex A). The bases of recording the amount in the general ledger are the
billings statements, collections reports, as well as adjustments coming from the
commercial division. On the other hand, the amounts recorded in the subsidiary are also
taken from these reports on a cumulative basis thus, resulting to a difference in amounts.
Also, part of the receivables are generated from the report of the Billing and Collection
Clerk of Tudela Water System whose software for billing and collection program is not
compatible with the MOWD Office adding to the difference in the balances recorded in
the books.
Management replied that “ The balance after its adjustment made by the finance
section as of this writing is reduced from P504,204.71 to P207,456.81. Supporting
documents to this effect is at the Finance Office should there be need for examination.
Recommendation noted and acted upon.”
“Please be informed that, the Senior Corporate Account Analyst has drawn a JEV
No. 13-05-0330 dated May 31, 2013, making an adjustment of P 296,747.90 which
covers for double entries in taking up water sales leaving an unadjusted balance of
P207,456.81.”

Account Analyst in the Finance Division and the person in charge of receivables in
the Commercial Division to reconcile the difference in the total amount of
receivables to make both records reliable and accurate. Moreover, transfer the
20
maintenance of subsidiary ledgers for accounts receivable from the Commercial
Division to the Accounting Section, Finance Division after both records have been
reconciled so that the Commercial Division can concentrate on the marketing aspect
of the District
Unbooked Accounts Receivables
2. Accounts receivable earned covering computation for fines and penalties

and water meter fees amounting to P1,569,730.38 were not booked up in
violation of Section 18, Volume I of the Manual on National Government
Accounting System, thus understating the receivables account of the District
by the same amount.
Section 18, Volume I of the Manual on National Government Accounting states

that accrual method of accounting shall be used by government agencies when income is
realized (earned) during the accounting period regardless of cash receipts. Accounts
receivable is set up and the general or specific income accounts according to nature and
classification are credited.
The accounts receivable of the agency comprises the water sales, other
business/services coming from water installations, and fines and penalties. The accrual
method of accounting is used in recognizing water sales while the cash method is used
for other income-water meter installations, and fines and penalties which are inconsistent
in application.
During the year, examination of amounts from the subsidiary ledger in the
commercial division showed that total accounts receivables amounted to P21,052,605.56
where P 19,474,411.29 is for water sales, P 1,517,352.82 for fines and penalties, and
P52,377.56 for water meter fees. However, the accounting section has no subsidiary
ledger of their own and the amount recorded in the general ledger of P 18,970,206.58 was
taken from billings statements, collection reports, and adjustmentsand disregarding the
amount of P1,569,730.38 (Annex B) computed for fines and penalties and water meter
fees as earned for the period. Management alleged that not all fines and penalties are
collected because there were times when these are foregone just to collect the arrears in
water sales. But there was also no policy as to when to forego collections of fines and
penalties and who is authorized to approve these. Thus, total recorded receivable in the
books is understated by P1,569,730.38.
Management commented that “ The non-recording of the fines and penalties at the
finance section was stopped sometime in 2005. It is booked as revenue/other income
upon its collection while the water maintenance fee is booked up as other deferred credits
per COA AOM No. 2.2-2005.”
21
“Considering this year’s Auditor’s recommendation, the Management is cognizant
and will adhere to it effective August 2013.”

Account Analyst to book up the income corresponding to the fines and penalties and
the water meter fees during the period these are computed as earned and make
necessary adjusting entries if there are amounts in these accounts which cannot be
collected anymore. Moreover, there must be a written policy when to forego the non-
collection of fines and penalties and who is authorize to approve it.
Very Low Collection Efficiency Ratio
3. Aging of Accounts Receivables showed that out of P21,052,605.56,

P15,181,243.40 or 72% comprises accounts in arrears while only P
5,871,362.16 or 28% comprises the current portion which shows a very low
collection ratio, thus deprived the District of the much needed resources and
the possible benefits had it been collected. Moreover, the provision for
doubtful accounts is very inadequate.
Government-owned and/or controlled corporations are usually income generating

thus, income is the lifeblood of any corporate agency.
MOWD is a government-owned and/or controlled corporation which is self-

liquidating. They exist and operate on the income they earned. Water sales are the main
income of the District.
During the year, total water sales of the District amounted to P81,488,168.41 with
an account receivables of P18,970,206.58 or 23% recognized in the books. But the actual
total receivables amounted to P21,052,605.56 including fines and penalties and water
meter sales. Out of the total receivables of P21,052,605.56, P15,181,243.40 or 72%
(Annex C) covers receivables in arrears. During the year, the total provision for
allowance for bad debts amounted to P1,609,697.98 which is only 11% of the total
amount in arrears.
We made a query on the basis on the provisionof allowance for bad debts but the
District has none.
Also, in the general ledger, only one controlling account is maintained for the
receivables since the active accounts and the inactive accounts were not separated.
Moreover, management alleged that there are various parts of the city dominated by
lawless elements where collections are low and cutting of meters is hard to implement.
Though, the move is very necessary but also at the risk or expense of the employees
involved.
22
Thus, the condition showed that the District is deprived of the much needed
resources as well as the possible benefits they will have, had they collected their
receivables promptly.
Management commented that “As far as the collection of A/R-Customers inactive

is concerned, the Commercial Division has already been sending collection notices with
detailed statement of accounts. But only few who came to the office and promised to
pay; some ignored; some were no longer residing at the said addresses; others were
nowhere to be located; and some deceased. The Commercial Division now is working
out with the accounts that are 10 years old and above for write off, subject to Boards’
approval. With regard to the segregation of A/R-Customers for active and inactive, this is
noted and work item is going on. In connection with the written policy relative to the
provision of doubtful accounts, there is already a standing policy to this effect, attached
is Resolution No. 068-2008.”
We have recommended to require the Division Manager- Commercial to

establish strategy to intensify collections of receivables to improve cash position of
the District. Also, require the Senior Corporate Account Analyst – Finance Division
to establish separately the controlling account for active and inactive accounts
receivables for easy monitoring. Finally, there must be a written policy relative to
provision of allowance for doubtful accounts which must adequately address the
outstanding accounts receivables.
Unreconciled Loan Balances
4. Sharing of loans payable between MOWD and OCWD remained unsolved

after more than two years of de-annexation by the OCWD from MOWD
resulting to inaccurate loan balances as well as underpayment of loan
amortizations by both water districts at year end. Moreover, the LWUA, the
financing institution, is not helping in the reconciliation of accounts thus,
adding to the very heavy and unconscionable interest expenses on arrears
before de-annexation.
The OCWD was de-annexed last April 2010 per Memorandum of Agreement
(MOA) dated April 15, 2010 (Annex D) and duly approved by LWUA on May 7, 2010.
In that MOA, loans payable amounting to P 269,769,314.87 of MOWD was shared to
OCWD per agreed sharing of 70:30 based on the number of connections for outstanding
loans and per approved program of work per water systems for the new loans. The result
was that MOWD will shoulder P 184,091,733.79 while OCWD will shoulder
P85,677,581.08. However, that sharing was not accepted by OCWD. So, on September
28, 2012, after careful evaluation and review, the Board of Directors of MOWD issued
Resolution No. 30 (Annex E) revising the sharing such that MOWD will shoulder
P190,989,489.00 and OCWD will shoulder P57,509,071.46.
23
Sometime in March 2010, the Board of Directors of MOWD was taken over by
LWUA due to non-payment of loan arrearages which amounted at that time to over six
million pesos already. From that time up to the present, three (3) of the Board of
Directors comes from LWUA and two (2) from the locality.
Our audit showed that, at year end, the OCWD still has not accepted the amount
of loans payable shared to them, thus, at the LWUA level, the total loans payable is still
in the name of MOWD. Moreover, the amount of loans payable is inaccurate at
P142,906,276.67 which is only based on original MOA while after reconciliation with
LWUA statement, it is more or less P 182,752,127.46. We have prepared the
reconciliation/presentation on the final sharing of loans payable account for OCWD and
MOWD taking into account the final report from the loans department of the LWUA
(Annex F).
Management replied that they took note of the finding and to be deliberated yet by the
MOWD Board of Directors. They further stated that “Please be informed that the OCWD,
on May 14, 2013 issued Resolution No. 38, accepting the fifty seven million (57M)
revised loan sharing between MOWD and OCWD” (Annex G).
We have recommended to management to make representations to the

LWUA, through the Board of Directors MOWD, to prioritize the acceptance by
OCWD on the reconciled amount of loan balances to make the balances accurate.
Unbooked Accrued Loans Amortization Payable
5. Loan amortizations in arrears amounting to P8,963,027 as of December 31,

2012 were not booked up in violation of Section 111 of PD 1445, thus
understating the current liabilities giving misleading information about the
financial statements and affecting decision making of the users.
Section 111 of Presidential Decree 1445 provides that the highest standards of
honesty, objectivity and consistency shall be observed in the keepings of accounts to
safeguards against inaccurate or misleading information.
Generally accepted accounting principles require sound accounting procedures to

come up with the fair presentation of the accounts in the financial statements.
Loan arrearages of P 8,963,027, is computed as follows:
Amortizations paid by MOWD:

April 2010 to October 2010 @ P 2,951,674 - P 20,661,718
Nov. 2010 to Dec. 2012 @ P 2,672,187 - 69,476,862
P90,138,580
24
Less: Amortization computed by LWUA@
P 3,003,079 Apr. 2010 to Dec. 2012 - 99,101,607
Amount of loan arrearages due Dec. 2012 P8,963,027
=========
This computed accrued loans payable in arrearages is not booked up in the loans
payable general ledger account nor in the accrued accounts payable at year end thus,
understating the total payables by the same amount and giving misleading information
about the financial condition of the District and affects the decision making of the users
thereof.
Also, our review on the financial statements showed that the District has a sinking
fund of over three million pesos which is not being used.
Management commented that “After BOD Resolution No. 41-2013, the Finance
had booked already the said arrears. As far as the use of the sinking fund is concerned,
this will be presented by the Management to the Board for action/approval.”
We have recommended to management that the Senior Corporate Account

Analyst of the Finance Division should book up the accrued loan amortization
payable to present fairly the loans payable arrearages account of the District. It is
also recommended to management to use part of the sinking fund to pay off the
accrued loans payable in arrears to hasten the payments of these payable.
Incomplete Filling-Up of Driver’s Trip Tickets
6. Due to incomplete filling up of the driver’s trip tickets, verification of the

consumption of gasoline as well as its usage of all the agency vehicles cannot
be made in violation of Section 2 of the specific rules and regulation of COA
Circular No. 77-61 dated September 26, 1977.
Number 2 of the specific rules and regulations of COA Circular No. 77-61 of the
Manual on Gasoline Consumption provides that the use of government vehicles shall be
properly controlled and regulated through properly accomplished and duly approved
Driver’s Trip Tickets which should be serially numbered, a summary of which shall be
made at the end of the month in a Monthly Report of Official Travels for audit purposes.
The Monthly Report of Fuel Consumption of Motor Transportation shall also be
submitted to the Auditor for verification, to determine the reasonableness of fuel
consumed during the period. The report shall show among others, the different types of
motor vehicles utilized by the agency during the month, total distance travelled, total fuel
used and the normal fuel consumption for each vehicle.
25
Our examination of the disbursement vouchers for gasoline purchases showed that
driver’s trip tickets were not filled up completely and accurately.
The District is purchasing gasoline from Lim Ho Chuan Seng Enterprises and
Shell Sto. Nino and General Merchandise. Every time an official travel is approved, the
concerned driver is given a duly approved POL withdrawal slip for the manager of the
gasoline station which shows the authorized quantity of gasoline needed. Based on this,
the gasoline station issues a charge slip which will be collated as one of the supporting
documents for the statement of account prepared at the end of the month. The
withdrawal of gasoline is properly documented.
However, in the driver’s trip tickets, the data on fuel consumption is not filled-up
as to beginning balance, issued/received and used, as well as the balance at the end of the
trip, even the data on the used mileage. Moreover, in some vouchers, data on the
authorized passengers were not filled up too. Thus, verification as to consumption of
gasoline as well as who used the vehicle cannot be made.
Management commented that “As far as the speedometers of the MOWD vehicles
are concerned, out of none (9) vehicles only two (2) are functional. The seven (7) are
second hand vehicles which were purchased way back in 1975.”
“The trip tickets were properly filled up except the portion of the gasoline
consumption due to defective/non-functional speedometers of the seven (7) vehicles. The
Management will try its best to have all the defective speedometers repair or install. The
passengers affixed their signatures in a separate sheet of paper attached to their trip ticket
per Audit advised sometime in July 2011. The new Audit recommendation is noted.”
We have recommended to management to require all the drivers to fill up the

driver’s trip ticket completely and accurately relative to fuel consumption as well as
require passengers to sign every time they use the vehicle for audit purposes.
Non Submission of Copies of Government Contracts and Purchase Orders
7. The Agency did not submit copy of perfected government contracts,

purchase orders and supporting documents within five (5) working days
upon approval for review to the Office of the Auditor in violation of COA
Circular No. 2009-001 dated February 12, 2009, thus, prompt initial review
cannot be made.
Section 3.1.1 of COA Circular No. 2009-001 provides that within five (5)
working days from the execution of a contract by the government or any of its
subdivision, agencies or instrumentalities, including government-owned or controlled
corporations and their subsidiaries, a copy of said contract and each of all the documents
forming part thereof by reference or incorporation shall be furnished to the Auditor of the
26
agency concerned. The reason for this is to make an initial review of the said contracts so
that defects or deficiencies can be easily communicated to the Agency for correction.
Our review of the purchase orders and other government contracts of the Agency
showed that copy of these were not submitted to the Auditor within the reglementary
period. Although we do not hold office in the vicinity of the Agency but our Office is
still very accessible to the agency.
In addition, it is also the duty and responsibility of the agency officials to furnish
copies of delivery documents within twenty four (24) hours after acceptance of deliveries
of goods and services to enable the Auditor to conduct inspection of said deliveries.
Thus, initial review could not be made because management have not passed the
required contracts and supporting documents as well as inspection of deliveries since the
delivery documents were not also furnished to the Auditor. Management apologized for
their inadvertent lapse and promised to submit these contracts to follow COA rules and
regulations upon receipt of the observation.
Management noted our audit recommendation.
We have recommended that management strictly adhere to the requirements

of COA Circular No. 2009-001 dated February 12, 2009.
POs and Canvass Papers Signed by BAC Chairman
8. The District’s Purchase Orders are signed by the Bids and Awards
Committee (BAC) Chairman instead of the Head of the Procuring Entity in
violation Section 12 of Republic Act No. 9184 dated July 22, 2002.
Section 12 of RA No. 9184 provides that the BAC shall have the following
functions: advertise and/or post the invitation to bid, conduct pre-procurement and pre-
bid conferences, determine the eligibility of prospective bidders, receive bids, conduct the
evaluation of bids, undertake post-qualifications procedures, recommend award of
contracts to the Head of the Procuring Entity (HOPE) or his duly Authorized
representative. Letter (j) of Section 5 of the same Act provides that the Head of Procuring
Entity is the governing board or its duly authorized official for government-owned and/or
controlled corporation.
The BAC shall sign the canvass papers or may delegate the same to the General
Services Officer and the signing of the contract shall be done by the Board or may
authorize the same to the General Manager. The canvass papers may be served by the
canvasser or purchaser who is administratively under the General Services.
27
Our review of the disbursement vouchers showed that the purchase orders of the
District are signed by the Chairman of the BAC which is a weakness in the internal
control procedures of any agency. The BAC prepares the recommendation of the winning
bidder or supplier but in no case signs for the contract since fiscal responsibility rests
with the HOPE.
Management noted our audit recommendation.
We have recommended to stop the practice of requiring the Chairman of the

BAC to sign the purchase orders and instead let the HOPE or the General Manager
sign the purchase orders to adhere to the provisions of RA 9184.
Unserviceable Equipment Carried in the Books
9. Other Assets Held For Sale account of MOWD in the amount of

P7,739,143.53 represents the unserviceable PPEs and is still carried in the
books of accounts due to failure of the District to apply for its ultimate
disposal or dropping from the books of accounts resulting to overstatement
of asset accounts.
Section 4 (p), Chapter 2 of the NGAs Manual, Volume I provides that assets
declared by proper authorities as obsolete and unserviceable, including assets of the
agency no longer used, shall be classified to “Other Assets” account from the
corresponding inventory and property, plant and equipment accounts.
Likewise, Section 79 of PD 1445 provides that – “When government property has

become unserviceable for any cause, or is no longer needed, it shall, upon application of
the officer accountable therefore, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if found to be
valueless or unsalable, it may be destroyed in their presence or if found to be valuable, it
may be sold at public auction to the highest bidder under the supervision of the proper
committee on award or similar body in the presence of the auditor concerned or other
duly authorized representative of the Commission, after advertising by printed notice in
the Official Gazette, or for not less than three consecutive days in any newspaper of
general circulation, or where the value of the property does not warrant the expense of
publication, by notices posted for a like period in at least three public places in the
locality where the property is to be sold. In the event that the public auction fails, the
property may be sold at a private sale at such price as may be fixed by the same
committee or body concerned and approved by the Commission.
Base on the financial statements as of December 31, 2012, the total reported
property, plant and equipment account amounted to P153,545,708.59. Out of this
28
amount, the said Other Assets held for sale account amounted to P7,739,143.53 which
represents the unserviceable properties of the agency.
Ocular inspection conducted by the auditor revealed that there are some
unserviceable properties of the District and no application was made for its disposal and
eventual dropping from the books of accounts. On the other hand, the inspection
disclosed the following information, (Annex H):
A. Still serviceable P 933,012.49

B. One unit Isuzu tanker sold already 350,000.00
C. Assets transferred to OCWD 258,032.03
D. Missing in the hands of former BODs 136,000.00
E. Unserviceable for disposal 6,062,099.01
F. Total P 7,739,143.53
===========
Thus, the total reported unserviceable assets listed under “Other Assets
held for Sale is overstated by P1,677,044.52 representing serviceable and/or other reasons
listed above to fully account for the properties of the District.
Management noted our audit recommendation and adjusted already.
We have recommended to management to create a disposal team in

accordance with COA Circular No. 83-206 to evaluate properly the assets listed as
other assets held for sale and submit the report to the Auditor for evaluation by the
Technical Audit Specialist and apply the disposal depending on the mode selected
and after which draw a jev for the dropping of unserviceable PPEs accounts from
the books. Moreover, require the Senior Corporate Account Analyst to restore the
P933,012.49 to the specific property, plant and equipment account, to draw a jev to
take up the sale of the Isuzu tanker made last year, and also to draw a jev covering
the assets transferred and received to OCWD. Finally, require the General Services
Officer to look into the missing laptops held by former members of the Board of
Directors to fully account for the properties of the District.
10. Delivered construction materials amounting to P8,041,319.35 from LWUA as

part of the loan granted in the total amount of P161,079,000 to MOWD in
2004 which were excessive and unnecessary remained unused resulting to
losses on the part of MOWD in the form of additional interest, additional
storage burden in the bodega and ultimately deterioration of these
construction materials due to rust and wear and tear.
29
COA Circular 85-55A provides the standards on excessive, unnecessary,
extravagant and unconscionable ways and methods of transactions. Unnecessary is
procuring goods and materials which not needed by the Agency.
Sometime in 2004, MOWD obtained a loan from LWUA in the amount of

P161,079,000 intended for Small Towns Water Supply Sector Project (STWSSP). Part of
the contract agreement is that LWUA shall procure, for and in behalf of the District, all
major construction materials (pipes and water meters) intended for the project as well as
to provide technical assistance by sending their own engineers for the construction and
supervision until the completion of the project.
The LWUA technical engineers came to Ozamis to inspect the program of works
which was to construct the water system using gravity from the Dalingap Spring.
However, after inspection, the LWUA engineers recommended instead to source water by
drilling deep wells for the pumping stations instead of using the gravity for fear of
insufficient water supply. Thus, the LWUA, as the lending institution, knew that there
was diversion of plans because the technical engineers came from their Office. The BOD
of MOWD issued Resolution No. 081-2003 (Annex I) requesting the LWUA for the
revision of the approved P161,079,000 million program of work to include water districts
request for change of water source of the Ozamis-Clarin sub-system project from the
development of Dalingap Spring to construction of deep well source/s and to update the
costing of work items under the program of work without exceeding the total project cost.
It is worthwhile to mention that, before the signing of contract per Resolution No. 065-
2003 (Annex J) on August 11-12, 2003, the bidding of the supply and delivery of pipes
was made on July 28, 2003. In spite of this, the LWUA still made the delivery of
construction materials for the program of work for Dalingap Spring amounting to
P8,041,319.35 which were no longer needed resulting to storage of these construction
materials in the bodega without the hope of using them. Also, the local technical engineer
in charge of the project was negligent for not informing the Manager that the delivered
materials were no longer needed. Nine years has passed and these construction materials
are still in the bodega and have consumed and continue consuming interest expense and
principal without return of investment but losses and more losses if not corrected.
Management noted our audit recommendation subject for Boards’ deliberation

and approval.
We have recommended to management to return the unnecessary

construction materials which are in the bodega to the LWUA and make
representation, through the BOD who are also from LWUA to deduct the amount of
P8,041,319.35 from the loans given to MOWD from that time these were delivered
for knowingly sending these without use anymore on FOB shipping point in order to
lessen the loans payable of the District.
30
Lack of Phil-GEPS Publication
11. Failure to post invitation or request for price quotation of shopping/small

value procurement of supplies and materials in the Phil-GEPS website, as
required under of Section 21.2.1 of Revised IRR.
For alternative methods of procurement, advertisement and posting as prescribed

in Section 21.2.1 of this IRR may be dispensed with: Provided, however, That the BAC,
through its Secretariat, shall post the invitation or request for submission of price
quotations for Shopping under Sections 52.1 (b) and Negotiated Procurement under
Sections 53.1 (two-failed biddings) and 53.9 (small value procurement) of this IRR, in
the Phil-GEPS website, the website of the procuring entity concerned, if available, and at
any conspicuous place reserved for this purpose in the premises of the procuring entity
for a period of seven (7) calendar days.
In all instances of alternative methods of procurement, the BAC, through the

Secretariat, shall post, for information purposes, the notice of award in the Phil-GEPS
website, the website of the procuring entity concerned, if available, and at any
conspicuous place reserved for this purpose in the premises of the procuring entity.
In the audit of procurement of purchases of fittings and water meters, office

supplies and construction materials, it was found out that the BAC Secretariat did not
post the invitation or request for quotation in the Phil-GEPS website as mandated under
Section 53.1 of Revised IRR RA 9184 and also to post the Notice of Award of winning
supplier for information purposes as required under Section 54.3 of IRR.It was also found
out that procurement of goods, supplies for transmissions and construction materials were
usually made thru shopping and/ or negotiated mode of procurement. As a result, the
objectives of economy, efficiency and effectiveness in the acquisition of goods, supplies
and materials were not obtained or achieved.
As a result, the objective of wide dissemination of bid opportunities thru the

internet was not achieved due to the non-posting of invitation and request for
quotation.
Management noted our audit recommendation and will work on the installation of
the MOWD website.
We have recommended that management should require the BAC

Secretariat to comply with the posting of all invitations/request for price
quotation as well as the Notice of Award in the Phil-GEPS as provided in the
Section 53.1 and 54.3 of IRR in order to ensure transparency and accountability
in government transactions and enhance efficiency and effectiveness in the
procurement of goods, supplies and materials.
31
12. Retained Earnings balance soared up to P36,301,502.36 from P10,664,595.49
as reflected at the year-end financial statements, due to an adjustment
erroneously credited to Prior Years Adjustment account resulting from
Oroquieta City de-annexation, and inadequate provision for Allowance for
Doubtful Accounts thus giving misleading information and henceforth
affecting the decision making of the users of the financial statements.
Section 111 of Presidential Decree (PD) 1445 provides that: “The highest
standards of honesty, objectivity and consistency shall be observed in the keepings of
accounts to safeguards against inaccurate or misleading information”.
Generally accepted accounting principles require sound accounting procedures to

come up the fair presentation of the accounts in the financial statements.
The December 31, 2012 year-end financial statements showed retained earnings
balance amounting to P36,301,502.36. At a glance, the firm appeared so profitable.
However, verification revealed that the significant soaring up of the Retained Earnings
account was brought about by an adjustment amounting to P14,483,161.55 which was
erroneously credited to Prior Year’s Adjustment account instead of crediting the same to
Utility Plant in Service (UPS) on actual assets transferred to the newly created Oroquieta
City Water District due to de-annexation, thus blowing up the Retained Earnings.
Records also showed that the net income in 2011 amounting to P2,865,981.61
went up to P11,024,069.42 in 2012 with an extraordinary increase of P8,158,087.81 or
285%. Water Sales increased by P10,765,408.52 or 15.22% from P70,722,759.89 to
P81,488,168.41 despite the reduction of area of operations due to de-annexation and
creation of Oroquieta City Water District. However, the water sales in the Statement of
Income and Expenses amounting P86,488,168.41 differs by P17,040,618.41 from the
reports/records in Commercial Division C amounting to P64,447,550.00. Further
verification disclosed that an Allowance for Doubtful Accounts amounting to
P1,609,697.98 was only 8% of the Accounts Receivables of P18,970,206.58 which was
so inadequate. Considering that 65% of this receivables or P12,907,912.26 were aging 6
months or more and 50% of which or P 6,453.956.13 ran for more than more than 5
years, collectivity of which was dim. These would most likely fall into bad debts or
doubtful accounts. Failure to set up the provisions for the estimated doubtful accounts to
a more or less adequate level had understated the expenses and overstated the net income.
This condition was cited under our observation no. 3.
However, reasonable judgment had to be exercised in setting up the provision for

doubtful accounts as this is not a leeway to justify increasing uncollectibles at the end.
Increasing trend of receivables spells out ineffective collection strategy. Reasonable
provision for doubtful accounts is set up for conservatism purposes.
32
Accounts in the financial statement not fairly presented would give misleading
information and henceforth affecting decision-making of the users of the financial
statements.
Management commented that “The total amount of assets transferred to Oroquieta

City Water District (OCWD) during de-annexation was based on the original or actual
cost. The amount of P14,483,161.55 was the total accumulated depreciation which was
not included in the transfer to OCWD. Since the said amount is not yet reflected in the
books as of December 31, 2011 under Accumulated Depreciation Accounts hence the
overstatement. In order to correct the entry, the COA Auditors who audited the financial
and operation transaction for CY 2011 recommended to adjust the said amount to prior
years’ adjustment and closed it to retained earning account thus, the increased.”
We have recommended to management to require the Division Chief -

Finance and Commercial Section to draw a correcting entry on the adjustment
erroneously credited to the Prior Year’s Adjustment account to effect correction on
the Retained Earnings Account. Require him further to provide an adequate
provision for doubtful accounts based on aging of accounts to bring about the
accurate amount of net income for the period.
Value for Money Audit
Underutilization of Water Production Capacity
13. The District could have earned more had they intensified information,
education campaign as well as determined the unaccounted water utilization
since water utilization of rated production capacity is only 58% resulting to
underutilization of water production available to consumers. Moreover,
water accounted for is only 41% of the total available for distribution thus,
resulting to 59% unaccounted water or losses.
The Misamis Occidental Water District is presently serving Ozamis City and the
municipalities of Tudela and Clarin. It has four (4) existing water pumping stations
namely, the Nailon in Tudela, Cocok, Bacolod, Carangan stations in Ozamis City. It has
also one (1) spring at Segatic, Clarin being run by gravity. These pumping stations and
the spring have water rated production capacity of 9,983,148 cubic meters during the year
which is equivalent to P579,016,784.00 in monetary value.
Our review of the water utilization during the year, showed that the District has
pumped 5,666,219 cubic meters available for distribution which is equivalent to
P328,639,592.00. However, out of this available for distribution, only 2,577,902 cubic
meters which is equivalent to P149,517,206 were covered with water meters resulting to
unaccounted water of 3,088,317 cubic meters which is 59% and is equivalent to
33
P179,116.586. The unaccounted water covers unmetered utilization, allowable losses and
non-revenue consumption, losses due to illegal connections, and defective meters among
others. The unaccounted water utilization is higher than the accounted water sales,
resulting to lesser income but the same water maintenance cost for the District (Annex
K).
Management commented that “As far as the Non-Revenue Water (NRW) or

unaccounted water is concerned, this is a major and perennial problem and needs
considerable amount of funding to finance the NRW reduction program. In line with this,
the Management had prepared a 5-year development plan to reduce the NRW by 1%.”
We have recommended to management to intensify information and

education campaign as well as establish strategy to determine the real causes of
unaccounted water to lessen the unaccounted water utilization as well as increase
the would be income of the District.
34
Part III - Status of Implementation of Prior Year’s Audit
Recommendations
35
Part III - Status of Implementation of Prior Year’s Audit
Recommendations
We made a follow-up on the action taken by the Management of MOWD, Ozamis

City to implement the recommendations of prior years and noted that out of the twenty
one (21); three (3) in 2010 and eighteen (18) in 2011; eighteen (18) were fully
implemented and three (3) were partially implemented as follows:
Audit Observation Recommendation Status of

Implementation
AAR CY 2010
1. Parcels of land acquired by We recommend that management Fully Implemented

the district totaling P407, facilitate the processing of titles to
284.00 were not supported with convey real ownership of the land
legal documents of ownership in the name of the district, review
and the audit recommendation procedures prior to acquisitions of
remained un-acted by land and see to it that land to be
management as of December purchased has no legal impediments
31, 2009. to ensure complete documentations
prior to payment and recording in
the books of accounts.
2. The amount of P156, 325.75 We recommend that management to Fully Implemented

recorded as other receivables submit required documentation for
from officers and employees the proper write-off of accounts,
remained outstanding and not specifically the two (2) inactive
enforced during the year. accounts and request full
settlement/refund of long
outstanding account of one active
employee.
3. Board of Directors was paid We recommend that management Partially Implemented

allowances and benefits totaling strictly abide with the ceiling of the
P123,600.00 without legal maximum combined amount of
basis. benefits/allowances that maybe
given to the Board of Directors,
pursuant to AO 103 and LWUA
Memorandum Order NO. 003-04
dated September 24, 2004 at the
maximum amount of P20, 000.00
per month to preclude audit
disallowances.
36
Implementation
AAR CY 2011
4. The district paid its Interim We recommended that Management Partially Implemented
Board of Directors their submit its legal basis for the
financial assistance and cash payment of financial assistance and
gift totaling P141,000.00 cash gift to the Interim Board of
without legal basis. Directors’ or the same shall be
considered as unauthorized and
therefore it should be refunded in
full.
5. Advertising expense We recommended that Management Fully Implemented

amounting to P92,702.72 which observe austerity measures in its
posted an increase by 99% over operation and observe suspension or
last year purposely to advertise reduction of paid media
district’s updates and advertisements.
promotions failed to increase
business service income while We recommended that Management
selection of media producers should establish specific policy and
and agencies failed to show terms of reference when contracting
criteria for the selection. advertising viewership and
exposure when deciding on issues
pertaining to advertisement.
6. Refunds for Accounts We recommended Management to Fully Implemented

Customers’ Deposit-Guaranty instruct the Commercial and .
and Customers’ Deposit Meter Accounting Section to fast track the
amounting to P576, 081.12 and implementation and compliance to
P8,939.37, respectively, were Board Resolution NO. 06 Series of
slow moving indicating low 1998 by making refund of the bill
return/refund to concerned and meter deposit through
water concessioners. deductions from current water bill.
7. Donations to various civic We recommend that Management Fully Implemented

organizations amounting to stop the practice of making
P14, 500.00 were not for public donations and paying solicitations
purpose and were done not in to civic and religious organizations
connection with the district’s as the same cannot be classified for
function and mandate. public purpose and within the
district’s mandate and function.
37
Implementation
8.The collectability of unpaid We recommend that Management Fully Implemented

overdue accounts of inactive set quantified collection targets to
concessionaires amounting to aid future decisions and actions and
P11,481,337.69 as of December to intelligently evaluate
31, 2011 was remote while the effectiveness program.
granting of incentives to
barangays acting as collecting We also recommended to
agents for these accounts failed Management to instill into the
to show significant effect on the Commercial Section the
collection thereof. responsibility to fast track the
updating of the list of
concessionaires with overdue
accounts to ensure records are
reliable.
9.Excess water was found We recommend the Management Partially Implemented

spilled in the irrigation canal at should revisit its pumping and
Nailon Pumping Station during distribution plan for the Tudela area Implemented partially
pump shut down, thus wasted for a possible installation of a by utilizing the
and unutilized with an secondary reservoir with booster present/old reservoir at
estimated foregone income of pumps to utilize the available Upper Centro Tudela.
P7,905,690.80. excess water.
As soon as the
finances of the district
will warrant, a
secondary reservoir
with booster pump
will be
constructed/installed
then.
10. The Cash in Bank current We recommend that the Fully Implemented
account balance of P224,196.83 Management require the Finance
was in accurate by least Officer and Cashier to coordinate
P5,645.09 due to stale check closely so the stale check will be
which remained unadjusted in cancelled and properly adjusted to
the books as of December 31, present an accurate cash account
2011. balance.
11. The hiring of a contractor Submit justifications why payment Fully Implemented
purposely for the shall be allowed in audit when it
upgrading/enhancement of failed to comply with the necessary
38
Implementation
MOWD billing and collection requirement for direct contracting

Program was observed to be and failed to show it was the most
deficient and has not complied economical and efficient contract
with the provision of Section 4 entered into by MOWD.
of RA 9184. The contract
duration failed to set specific Henceforth, procurement of goods
measurable work plans with and services must be undertaken
corresponding time frames from through competitive public bidding.
start to end of contract.
12.Considerable variance We recommend that Management Fully Implemented

between the General Ledger require the Finance Officer to take
and Inventory Report of the appropriate steps to reconcile the
District’s Materials and Supplies Materials Inventory
Supplies Inventory (MSI) account with that of the Property
amounting to P439,600.00 Records and make the necessary
existed, creating doubts on the adjustments in the books.
reliability of their recorded Coordinate with the Supply
balances in the Financial Department to reconcile the costing
Statements in violation of of the inventory accounts relative to
Section 13, 15, 25 to 27 of the the purchases, stock on hand and
Philippine Accounting the stock issuances. Adhere to the
Standards 1. inventory costing method allowed
as prescribed by Philippine
Accounting Standard No. 1.
13. Erroneous recording on the We recommend that the Fully Implemented

transactions of the transfer of Management require the Finance
Assets and Liabilities during Officer to make the appropriate
the separation of the Oroquieta adjustments to correct the balances
Waterworks Subsystem from of the affected accounts in the
Misamis Occidental Water transfer of the assets and liabilities
District were found resulting to to OWS.
understatement of the Net
Income and overstatement of
the Accumulated Depreciation
Accounts amounting to P
14,483,161.55 in defiance to
Section 11 of PD 1445 and
Section 13 & 15 of the
Philippine Accounting
Standards 1.
39
Implementation
14. The procurement of goods We recommend that Management Fully Implemented

and services of the District was should strictly adhere to the
poorly planned for the CY provisions of RA 9184 and it’s IRR
2011; consequently, purchases on the procurement of goods and
of supplies and materials services. The PPMP & APP should
totaling P2,890,109.51 were be prepared as prescribed and it
made in the piecemeal basis shall be enforced to rationalized
contrary to Section 7 of the IRR procurement activities in its annual
of RA 9184. needs.
We recommend further that the

Management should come up with
proper planning of much needed to
be able to avail of discounts for
procurement in bulk on a quarterly
basis.
15.Recorded balance of the We recommend that the Fully Implemented

Other Assets – Non-Current Management require the Finance
Asset held in trust – Officer to make necessary
unclassified UPIS ( code 206 ) adjustment/reclassification using
amounting to P7,739,143.53 the following entry:
and Other Assets – Others (code
279) amounting to P66,136.49, Other Assets-Non-current assets
were misclassified, thus, held for Sale xxx
misleading the users of the
Financial Statements and Other Assets-Non-current assets
creating doubts on its reliability held in Trust xxx
contrary to Section 68A of
Philippine Accounting Other assets-Others xxx
Standards 1.
16. The mobile/cell cards We recommend that mobile/cell Fully Implemented

allowance for the Interim Board cards allowance, prepaid or
Members at P2,500.00 per postpaid, be lowered at a reasonable
month is considered level after careful considerations.
unnecessary, excessive and
exorbitant in defiance to COA
Circular No. 88-5A dated
September 8, 1995.
40
Implementation
17.The District’s purchase 1 We recommend that the District’s Fully Implemented

unit laptop amounting to BAC should follow the provisions
P55,000.00 was deemed on generic procurement and should
excessive and extravagant per be diligently discharge its function
Section 2 of P.D. 1445 and to observe the stipulations of the
Section 3 of the Rules and Procurement law to avoid expenses
Regulations of the prevention tantamount to excessive and
of Irregular, Unnecessary, extravagant on the upcoming
Excessive or Extravagant procurement.
Expenditures or Uses of
Government Funds and
Property as promulgated by
COA Circular 85-55A dated
September 8, 1985.
18.The District’s loan payable We recommend to the Management Fully Implemented

contracted from LWUA was to inquire and exercise due
observed to have been obtained diligence to secure loans from other
and settled at an inefficient and government financial institutions
uneconomical manner in view purposely to buy out their loans
of the high interest rate from LWUA in order to incur lesser
compared to other government interest payments.
financial institutions thereby
affecting the District’s financial
capacity and allowing huge
amount of the District’s fund to
pay interest on loans in
violation of Section 2 of P.D.
1445 and Section 3 of the Rules
and Regulations on the
prevention of Irregular,
Unnecessary, Excessive or
Extravagant Expenditures or
Uses of Government Funds and
Property as defined by COA
Circular 85-55A dated
September 8, 1985.
19.No-revenue water was We recommend that Management

established and spilled out in should advice the Engineering Fully Implemented
the irrigation canal at Nailon Department (i) to orient operators
Pumping Station during shut of the pumping station to close
down due to pressure back flow valves of the main distribution lines
from the reservoir with a during shutdown especially for
ballpark figure of stations connected to reservoirs
41
Implementation
P2,284.793.00 with high pressure heads (ii) to

identify the principal causes of huge
water losses within the parameter
set.
20. Noticeable disbursements We recommend that the Fully Implemented

for branded goods and services Management should strictly adhere
were discovered in the with the provisions of the Generic
District’s procurement for the Procurement Manual and the
CY 2011, thus, detrimental to provisions of the Revised IRR of
the government in violation the RA 9184 relative to the
with the provisions of Generic procurement of generic goods on
Procurement Manual as the upcoming procurements of the
enforced by Section 6 and District including the procurement
Section 18 of the Revised IRR of different services needed in the
of RA 9184. operations. For procurement under
the different alternative mode of
procurements, the District should
satisfy the provisions required in
Rule XV1 (Alternative Methods of
Procurement) of he Revised IRR of
RA 9184.
21.A stub of Official Receipts We recommend that the Fully Implemented

were destroyed by termites due Management require the
to failure of the collecting Accountable Officer concerned to
officer to observe proper immediately notify COA or the
measures in the utilization and concerned Auditor (Internal) on the
safekeeping and has remained occurrence of loss of accountable
unused and unreported in forms as required under Section 151
violation of Section 145 and of COA Circular No. 92-386.
151 of COA Circular No. 92-
386. The District failed also to We also recommend that access to
install control measures to the cabinet drawers or stock room
ensure proper safeguard against where accountable forms were
wastage, loss, and misuse of placed or stored should be limited
receipts in violation of Section only to the accountable officer
32 of COA Circular No. 91-368 concerned. Borrowing of receipts
dated December 31, 1991. from accountable officer to other
district personnel to assist should be
properly authorized, documented
and accounted to facilitate
determination of accountability in
case of loss.
42
Implementation
We also recommend that the Chief,

Commercial Division shall conduct
regular cash examination on the
cash and accounts of the
Accountable Officer for proper
safeguard against wasted, loss, and
misuse of receipts so that errors can
be detected, established and
remedied earlier.
43
PART IV - ANNEXES
44
PART IV - ANNEXES
Annex A - Comparative Amounts of Accounts Receivables Between the

Commercial Division and the Finance Division
Annex B - Unbooked Account Receivables
Annex C - Aging of Receivables
Annex D - Memorandum of Agreement between MOWD and OCWD
Annex E - MOWD Resolution No. 30
Annex F - Schedule on Final Sharing of Loan Balances between MOWD

and OCWD
Annex G - OCWD Resolution No. 38
Annex H - List of Other Assets Held for Sale with Auditor’s List of Other
Assets Held for Sale with Auditor’s Remarks
Annex I - MOWD Resolution No. 081-2003
Annex J - MOWD resolution No. 065-2003
Annex K Consumption Report with Monetary Value

ANNEX "B"
Finding Nos. 2
AAR Page No. 20
Unbooked Accounts Receivable
CY 2012
Commercial Division
Per Susidiary Ledger
Types of Source Total Water Sales Penalty Water Meter Advances No. of
Receivables Receivable Fees (Not included as Receivables) Concessioners
Active Finance 6,420,408.50 6,029,846.09 374,254.85 16,307.56 57,767.50 12140

TWS 836,566.90 780,350.40 51,986.50 4,230.00 - 5357
Inactive Finance 12,163,013.08 11,194,161.97 943,751.11 25,100.00 32,595.34 5357
TWS 1,632,617.08 1,470,052.83 147,360.36 6,740.00 -
TOTAL 21,052,605.56 19,474,411.29 1,517,352.82 52,377.56 90,362.84 22854
1,569,730.38
↓
To Finding No.
P 1,569,730.38 2
Submitted by:
EDWIN GAA CANIOS

State Auditor V
ANNEX "A"
Finding Nos. 1
AAR Page No. 19
Accounts Receivable
CY 2012
Commercial Division
Per Susidiary Ledger
Types of Source Total Water Sales Penalty Water Meter Advances No. of
Receivables Receivable Fees (Not included as Receivables) Concessioners
Active Finance 6,420,408.50 6,029,846.09 374,254.85 16,307.56 57,767.50 12140
TWS 836,566.90 780,350.40 51,986.50 4,230.00 - 5357
Inactive Finance 12,163,013.08 11,194,161.97 943,751.11 25,100.00 32,595.34 5357
TWS 1,632,617.08 1,470,052.83 147,360.36 6,740.00 -
TOTAL 21,052,605.56 19,474,411.29 1,517,352.82 52,377.56 90,362.84 22854
↓
P 1,569,730.38 To Finding No. 1
Recognizing Water sales only:
Per SL 19,474,411.29
Per GL 18,970,206.58 To finding No.1
504,204.71
Adjusted (JEV 13-05-0330) 296,747.90

Difference 207,456.81
Submitted by:
EDWIN GAA CANIOS

State Auditor V
ANNEX "C"
Finding No. 3
AAR Page No.
21

Aging of Accounts Receivable
CY 2012
Total Current 1-30 31-60 61-90 91-120 Over 120
Receivable
Active Finance 6,420,408.50 581,701.89 2,174,141.45 1,465,412.16 365,737.89 309,623.06 1,523,792.05
TWS 836,566.90 - 204,873.53 205,802.10 57,264.16 173,809.15 194,817.96
Inactive Finance 12,163,013.08 756.00 31,858.94 82,136.13 90,558.75 111,839.65 11,845,863.61
TWS 1,632,617.08 - - 1,080.00 2,469.80 12,297.50 1,616,769.78
TOTAL 21,052,605.56 582,457.89 2,410,873.92 1,754,430.39 516,030.60 607,569.36 15,181,243.40
Therefore: Current 5,871,362.16 28% } To Finding No. 3
Arrears 15,181,243.40 72% }
Submitted
by:
EDWIN GAA CANIOS

State Auditor V
ANNEX "F"
Finding No. 4
AAR Page No. 23
Schedule of Loan Balances Between MOWD and OCWD

CY 2010 - 2012
DATE SOURCE MOWD OCWD REMARKS

4.14.2010 MOA Outstanding 169,838,354.06 81,556,099.74 Basis of sharing of the old loan is 70:30 based on number
269,769,314.87 of collections
Arrears 14,253,379.73 4,121,481.34 Based on approved POW for water system
TOTAL 184,091,733.79 85,677,581.08
9.28.10 Resolution No. 30 Outstanding 166,734,411.01 53,087,590.12 Revised based on reconciled record of LWUA on the various
MOWD Arrears 14,253,379.73 4,121,481.34 loan balance as of April 30, 2010
CWS Share 10,001,699.00 -
Cash left for DMB - 300,000.00
TOTAL 190,989,489.74 57,509,071.46
5.14.13 Resolution No. 38

OCWD 57,509,071.46 Acceptance by the OCWD of the loan sharing thru the Reso-
lution of the board
4.6.13 LWUA Loan Report 3,007,079.80 893,601.00 Amount to be paid by OCWD and MOWD per LWUA
computation from April 10 to June 2013
4.6.13 Letter on loan sharing 3412 RL 5,235,569.93 2,143,815.67
after reconciliation 3412 SL 12,647,587.52 5,420,394.65 Sharing at 70:30
from LWUA old loan 3281 RL 1,439,595.24 616,969.39
3281 SL 482,457.40 206,767.46
41820 RL 6,967,158.09 2,985,924.90
4180 SL 8,195,408.31 3,612,317.85
SUBTOTAL 34,967,776.49 14,986,189.92

Project Loan 4-2124 ARC 62,273,884.11 18,007,005.86 Sharng at 77.57% : 22.43%
2124 ARC 16,017,726.33 4,631,653.70
212413 RL 47,058,830.29 13,607,445.71
42468 22,433,910.24 6,486,948.65
SUBTOTAL 147,784,350.97 42,733,053.92
GRAND TOTAL 182,752,127.46 57,719,243.84
Arrearages before 4-2124 ARC 3,032,184.07 876,780.83 Sharing at 77.57% : 22.43%

April 2010 (inclusive 4-2124 BRL 2,615,279.87 756,229.57
of penalties) 4-2124 ARC 7,469,276.11 2,159,802.29
GRAND TOTAL 13,116,740.05 3,792,812.69
OVERALL
TOTAL 195,868,867.51 61,512,056.53 *Amount to be accepted by OCWD
To Finding No. 4
Submitted by:
EDWIN GAA CANIOS

State Auditor V
ANNEX "H"
Finding No. 09
AAR Page No. 28
OTHER ASSETS HELD FOR SALE
Accumulated Net Book Auditor's

Account Title Date Acquired Acquisition Cost
Depreciation Value Remark
Discharge Test Linesw/complete
fittings & flow meter-MOLICAY 1998 173,009.69 124,711.11 48,298.58
Pipelines for transmission inter-
conection to mainline MOLICAY 1998 43,240.00 25,235.37 18,004.68
Concrete cutter-Robin w/ blade 1998 48,617.00 45,063.64 3,553.36
Dewatering Pump Robin 5HP Nov. 05 13,230.00 3,685.50 9,544.50
Dewatering Pump Robin 5HP Robin 3x3 Mar. 05 13,470.00 3,752.32 9,717.68
Pump House w/security fencing &
electrial post-MOLICAY 1998 161,445.80 1,332,744.30 28,701.50
Gas Chlorinator 50 PPD - Bacolod 2006 178,000.00 60,075.00 117,925.00
Gas Chlorinator 50 PPD - Car. 2006 178,000.00 60,075.00 17,925.00
Hypo Chlorinator complete w/ necessary
appurtenances 2006 44,000.00 14,850.00 29,150.00
Power Mixer, 3 phase, 220 volts July 08 55,000.00 11,962.50 43,037.50
Concrete Mixer One Bagger 2004 25,000.00 12,051.45 12,948.55
TOTAL 933,012.49 A
1 Unit Isuzu Tanker Nov. 11 350,000.00 314,494.25 35,505.75
TOTAL 350,000.00 B
Motor Control-100HP 460V MOLICAY -
Oroquieta City WD 1998 157,843.57 113,778.90 44,064.67
Panel Board-MOLICAY -Oroquieta City WD 198 100,188.46 76,811.18 23,377.28
TOTAL 258,032.03 C
5 Units laptop - BOD Jun - 08 136,000.00 127,500.00 42,500.00
170,000.00 ÷ 5 = 34,000.00
deduct: 34,000.00
TOTAL 136,000.00 D
Deep Well - MOLICAY July 2002 3,216,759.00 692,618.57 2,524,140.43
Submersible Motor 100HP 420V 3 phase
w/ complete access - MOLIVAY 1998 338,908.30 244,296.45 94,611.85
Grunfos submersible pump Model SP-215-2
complete w/ access - MOLICAY 1998 332,703.57 239,823.83 92,879.74
Chlorinator - damaged July-00 47,631.00 37,211.74 10,419.26
Gas Chlorinator w/ access - MOLICAY 1998 207,241.20 144,301.28 62,939.92
Toyota Tamaraw OWS-SEB 358 Aug. 06 43,200.00 21,384.00 21,816.00
7 pcs plstic chair 2003 1,225.00 1,171.45 53.55
Transformer w/ electrical transmission 1998 400,000.00 337,142.83 62,857.17
3 units Pipe wrench 14" Dec. 2006 6,996.00 4,827.24 2,168.76
3 units Pipe wrench 12" Dec. 2006 6,135.00 4,417.25 1,717.75
2 pcs. 12" & 14" pipe wrench Nov. 2007 6,475.00 3,593.63 2,881.38
Pipe Wrench 12" & 14" Oct. 09 11,221.16 2,356.44 8,864.72
1 Unit 2HP Condura Aircon Sept. 2007 21,049.20 12,313.78 8,735.42
Canon IR 1210 Photo Copier Mac. 2005 49,000.00 33,075.00 15,925.00
Kodak Easy share Digital cam. 2004 13,483.00 9,101.25 4,381.75
Printer HP Laser Jet May 06 11,600.00 9,570.00 2,030.00
Printer Laser 1020 Nov. 06 13,000.00 9,555.00 3,445.00
5 units laptop - BOD Jun 08 34,000.00 127,500.00 42,500.00
Submersible Pump 100HP - Bac. 2006 1301471.58 340,107.21 961364.37
TOTAL 6,062,099.01 E
GRAND TOTAL 7,739,143.53 To Finding No. 9
Submitted by:
EDWIN GAA CANIOS

State Auditor V

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Republic of the Philippines

August 30, 2013

Engineer Ferdinand D. Revelo

Dear Engr. Revelo:

We are pleased to transmit the Annual Audit Report of Misamis Occidental

The audit was aimed at ascertaining the propriety of financial transactions,

We will appreciate being informed on the actions taken on the recommendations

Very truly yours,

August 30, 2013

We are pleased to transmit the Annual Audit Report (AAR) of Misamis

The audit was aimed at ascertaining the propriety of financial transactions,

Very truly yours,

LYNN S.F. SICANGCO

ANNUAL AUDIT REPORT

MISAMIS OCCIDENTAL WATER DISTRICT

FOR THE YEAR ENDED DECEMBER 31, 2012

Ms. Lynn S. F. Sicangco

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

Very truly yours,

EDWIN GAA CANIOS

The Misamis Occidental Water District (MOWD) is a Government-Owned and/or

Sometime in 2009, the Local Government Unit (LGU) of Oroquieta requested to

On April 15, 2010, a Memorandum of Agreement (MOA) was entered into by

The district is run by a five-member Board of Directors appointed by the City

Engr. Edgardo C. Demayo - Chairman, Interim Board of Directors

Engr. Bede G. Gata - Vice Chairman

Atty. Rebecca A. Barbo - Secretary

Mr. Jorge C. Neri lll - Member

The center of the “State of the Art Water Utilities in Mindanao.”

Misamis Occidental Water District, a non-profit but service oriented entity,

MOWD is committed to provide a 24-hour, safe, adequate, affordable and potable

The District is headed by a General Manager and ably supported by a five-

Target Actual Variance

The Agency’s financial condition is as follows:

Comprehensive audit was conducted on the accounts and operations of the

Independent Auditor’s Report on the Financial Statements

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

Summary of Significant Observations and Recommendations

1. Accounts receivable per general ledger amounted to P 18,970,206.58 while in

We have recommended to management to require the Senior Corporate

3. Aging of Accounts Receivables showed that out of P 21,052,605.56,

We have recommended to management to require the Division Manager -

4. Sharing of loans payable between MOWD and OCWD remained unsolved

We have recommended to management to make representations to the

5. Loan amortizations in arrears amounting to P 8,963,027 as of December 31,

We have recommended that the Senior Corporate Account Analyst of the

6. Due to incomplete filling up of the driver’s trip tickets, verification of the

7. The Agency did not submit copy of perfected government contracts,

We have recommended that management strictly adhere to the requirements

We have recommended to management to stop the practice of requiring the

We have recommended to management to create a disposal team per COA

10. Delivered construction materials amounting to P 8,041,319.35 from LWUA as

We have recommended to management to return the unnecessary

11. Failure to post invitation or request for price quotation of shopping/small

We have recommended that management require the BAC Secretariat to

We have recommended to require the Division Chief - Finance and

We have recommended to management to intensify information and

Compliance with Tax Laws

Implementation of Prior Year’s Audit Recommendations