Audit observations and recommendations
Audit findings
Review significant audit observations about Basey Water District’s accounts and operations. Each section includes recommendations communicated to management.
Summary of suspensions, disallowances, and charges
| Particulars | Beginning Balance (Jan 1, 2023) | Issuances | Settlements | Ending Balance |
|---|---|---|---|---|
| Notice of Suspension (NS) | ₱2,000,538.35 | ₱94,560.00 | ₱1,327,828.70 | ₱767,269.65 |
| Notice of Disallowance (ND) | ₱622,482.06 | ₱18,252.20 | ₱3,264.00 | ₱637,470.26 |
| Notice of Charge (NC) | ₱0.00 | ₱0.00 | ₱0.00 | ₱0.00 |
| Total | ₱2,623,020.41 | ₱112,812.20 | ₱1,331,092.70 | ₱1,404,739.91 |
Of the outstanding NSs of P767,269.65, P7,500.00 have no supporting documents due to absence of turn-over reports. Of the outstanding NDs of P637,470.26, P2,000.00 also have no supporting documents. None of the amounts pertain to the present administration.
Status of prior years’ recommendations
| Status | Count |
|---|---|
| Fully Implemented | 10 |
| Partially Implemented | 0 |
| Not Implemented | 16 |
| Total | 26 |
Of the 26 audit recommendations contained in the Annual Audit Reports/Management Letters for CYs CYs 2008-2010, 2013, 2015-2016, 2019, 2021-2022, 10 were fully implemented and 16 were not implemented.
Significant observations and recommendations
7 of the 13 observations are editorially linked to related recommendations in earlier management letters and audit reports. These links do not imply that COA assigned a single status to each current observation.
The accuracy and reliability of the Cash in Bank - LCCA balance of P13,178,704.36 and Cash in Bank - LCSA balance of P14,493.44 as of December 31, 2024 were doubtful due to: (a) non-recognition of various book reconciling items resulting in a net overstatement of P86,944.15; (b) reconciling items without supporting details with a net amount of P228.58; (c) incomplete preparation of Bank Reconciliation Statements for the Special Project Fund and LWUA Joint Account (P10,000.00 and P11,000.00, respectively); and (d) a dormant cash balance of P14,493.44 with the Rural Bank of Basey, Inc. (RBBI), which is under PDIC liquidation since CY 2019.
Recommendations
- Prepare the necessary adjusting journal entries to recognize the identified reconciling items to reflect the correct Cash in Bank - LCCA balance
- Retrieve supporting documents/details of book reconciling items (net P228.58) and lacking bank records for the RBBI balance of P14,493.44, and prepare adjusting entries if deemed appropriate
- Perform regular bank reconciliation of all cash in bank accounts of the BWD
- Make representation with the PDIC and other relevant banking authorities for possible recovery of funds from the RBBI
The existence and accuracy of the PPE accounts with an aggregate carrying value of P10,046,496.09 as of December 31, 2024 were doubtful due to: variances in PPE costs between the GL and RPCPPE of P15,478,215.98; variances in Accumulated Depreciation between the GL and Lapsing Schedule of P5,540,994.57; inclusion of semi-expendable items of P313,165.00 (with related accumulated depreciation of P167,136.00); misclassification of PPE items totaling P3,379,201.03; non-provision of impairment losses under PAS 36; absence of SLs, PCs, PPELCs and CIPLCs; inclusion and non-disposal of unserviceable PPE; and non-recognition of completed projects (variance of P1,730,044.35 between the GL-CIP of P2,376,327.69 and the Report on GPPA of P646,283.34).
Related prior recommendations
- ML CY 2021-2022 par. 14 · ML CY 2020 par. 15Not implemented
- AAR CY 2013-Finding No. 3Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Reconcile the accumulated depreciation variances between the GL and Lapsing Schedule of P5,540,994.57
- Reclassify tangible items below P50,000.00 totaling P313,165.00 to appropriate semi-expendable property accounts
- Reclassify misclassified PPE items totaling P3,379,201.03 together with their accumulated depreciation
- Compute and recognize impairment losses of unserviceable PPEs per PAS 36
- Recognize completed projects upon submission of Certificates of Completion and Statement of Work Accomplished
- Prepare and maintain complete SLs, CIPLCs and PPELCs for PPE and CIP accounts
- Require the Property Officer to prepare and maintain complete Property Cards for all PPE accounts
- Reconcile PPE balances with the Property Unit, conduct complete physical count, prepare RPCPPE, and dispose unserviceable PPE pursuant to the Revised Manual on the Disposal of Government Property
The balance of the Loans Payable - Domestic account of P1,368,277.81 as of December 31, 2024 was doubtful due to an unreconciled difference of P12,327.00 between the agency's records and the LWUA-confirmed balance of P1,380,604.81. The account number is omitted in this presentation under its redaction policy.
Recommendations
- Perform periodic reconciliation of loan records and coordinate with the LWUA Loan Officer to reconcile the P12,327.00 discrepancy and prepare the necessary adjusting entries
- Provide adequate disclosure in the Notes to Financial Statements of the District's loan account with LWUA
The accuracy and reliability of the Inventory accounts totaling P1,074,394.04 as of December 31, 2024 were doubtful due to: non-recognition of expenses for issued semi-expendable items of P522,583.68; non-maintenance of prescribed records/registries/reports for semi-expendable properties; incompleteness of inventory reports and unreliability of supply records; misclassification of P319,331.73 from Other Supplies and Materials Inventory to Supplies and Materials for Water Systems Operations; and inclusion of a negative balance of P2,192.00 in the Chemical and Filtering Supplies Inventory (inconsistent with the P65,132.72 per RPCI, a discrepancy of P62,940.72).
Recommendations
- Prepare adjusting journal entries recognizing issued semi-expendable items totaling P522,583.68
- Correct the misclassification of P319,331.73 from Other Supplies and Materials Inventory to Supplies and Materials for Water Systems Operations
- Prepare and maintain SPLCs and prescribed registries/records (SPC, RegSPI, RSPI) for semi-expendable properties
- Investigate the P2,192.00 negative balance discrepancy against the P65,132.72 per RPCI and reconcile accounting and supply records
- Conduct complete physical count of inventories, issue ICS to end-users, and regularly update Stock Cards, reconciling with the GL and SLCs
- Submit duly accomplished RPCI, RPCSP and IIRUSP within the prescribed period
The Receivables - Disallowances/Charges account balance of P637,470.26 as of December 31, 2024 was overstated by a net amount of P23,188.20 due to erroneous inclusion of disallowances without corresponding Notices of Finality of Decisions (NFDs) and recognition of receipts for their settlement. This also resulted in the overstatement of Retained Earnings/(Deficit) by P38,658.20 and the understatement of Trust Liabilities - Disallowances/Charges by P15,470.00. Only P614,282.06 of NDs were final and executory and unsettled per the REMFED.
Recommendations
- Prepare the proposed journal entry debiting Retained Earnings/(Deficit) P38,658.20, crediting Receivables - Disallowances/Charges P23,188.20 and Trust Liabilities - Disallowances/Charges P15,470.00
- Trace and retrieve supporting documents for unidentified ND settlements of P15,470.00 and prepare necessary adjusting entries
- Enforce the settlement of NDs issued with NFDs in compliance with COA Orders of Execution
The Leave Benefits Payable account balance of P616,757.75 as of December 31, 2024 was understated by a net amount of P142,418.38 due to erroneous computation and recognition of the monetary value of earned leave credits; the correct balance per audit is P759,176.13. The error also overstated Retained Earnings/(Deficit) by the same amount.
Recommendations
- Prepare the adjusting journal entry debiting Retained Earnings/(Deficit) P142,418.38 and crediting Leave Benefits Payable P142,418.38
The accuracy and reliability of the Accounts Receivable account with a net realizable value of P571,021.63 as of December 31, 2024 were doubtful due to: (a) a variance of P180,518.16 between the Aging Schedule of water concessionaires' accounts (P885,744.58) and the Detailed SFPos (P705,226.42); (b) unclear basis for the allowance for impairment of P134,204.79; and (c) non-recognition of December 2024 billed water of P733,168.05 and penalties of P32,853.89, totaling P766,021.94.
Related prior recommendations
- ML CY 2021-2022 par. 12 · ML CY 2020 par. 11Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Prioritize the immediate reconciliation of the P180,518.16 discrepancy in Accounts Receivable between billing and accounting records
- Compute the allowance for impairment based on accurate receivable records, collection experience and identified doubtful accounts
- Prepare the adjusting entry to recognize December 2024 billed water of P733,168.05 and penalties of P32,853.89 and strictly adhere to the accrual basis of accounting
The Advances to Officers and Employees account balance of P291,798.37 as of December 31, 2024 was doubtful due to inclusion of long outstanding cash advances granted to former and existing employees and BODs (aging 1 month to more than 7 years) and absence of supporting details/documents for advances of P68,610.77.
Related prior recommendations
- ML CY 2021-2022 par. 13 · ML CY 2020 par. 12Not implemented
- AAR CY 2008 No. 3 · CY 2009 No. 3 · CY 2010 No. 2Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Require the immediate settlement of unliquidated cash advances from existing employees and members of the BOD
- Enforce settlement by sending demand letters to former employees and BOD members
- Refrain from granting additional cash advances unless previous advances are settled and properly accounted for
- Exert efforts to determine the details of the P68,610.77 advances; otherwise submit a request for write-off for dormant accounts aging ten years or more per COA Circular 2023-008
The Inter-Agency Payables and Other Payables accounts as of December 31, 2024 were reported with negative (abnormal) balances of P38,332.50 and P79,312.24, respectively. This resulted from incorrect recording of premium remittances without initial recognition of the liability (accumulated since CY 2016) and carry-forward balances without supporting documents since CY 2017.
Recommendations
- Formally request records from GSIS, Pag-ibig and PhilHealth to facilitate reconciliation
- Prepare and maintain subsidiary ledgers per employee for withheld and remitted premium contributions and loan repayments, reconciled with the controlling accounts
- Conduct a thorough review to determine the nature of the liabilities and the cause of the negative balances
- Record only claims properly supported with complete documentation, otherwise derecognize unsupported payables
The BWD reduced its NRW rate only slightly from 54.62% in CY 2023 to 53.33% in CY 2024, both beyond the maximum allowable rate of 20% set by LWUA. With unbilled water of 392,616 cubic meters (CY 2024) and 443,093 cubic meters (CY 2023) at a minimum rate of P20.25 per cubic meter, the District had unrealized potential revenues of P7,950,474.00 for CY 2024 and P8,972,633.25 for CY 2023.
Related prior recommendations
- ML CY 2021-2022 par. 15 · ML CY 2020 par. 16 · ML CY 2019 No. 4Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Adopt and implement more effective measures/strategies/activities to reduce water losses to at least the maximum acceptable level of 20% set by LWUA to achieve operational efficiency and increased revenue
Not all insurable assets of BWD were insured with the GSIS for CYs 2023 and 2024. Only P3,517,795.16 (about 19%) of the total insurable PPE of P17,918,626.08 was covered by GSIS insurance, depriving the District of appropriate indemnification in the event of damage or loss due to fire, earthquake, storm or other casualties.
Related prior recommendations
- ML CY 2021-2022 par. 20Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Ensure that all insurable properties of the District are insured with the GSIS to be appropriately indemnified in the event of damage or loss of properties
The BWD was not able to prepare and submit GAD Plans and Budgets (GPBs) and GAD Accomplishment Reports (ARs) for CYs 2023-2024 to LWUA for review, nor allocate and utilize at least 5% of its Corporate Operating Budget (COB) for GAD-related programs, projects and activities, so potential gender-related issues within the sector may not be fully addressed.
Related prior recommendations
- ML CY 2021-2022 par. 17 · ML CY 2020 par. 18Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Assign members of the GAD Focal Point System (GFPS) to formulate plans and budgets for GAD
- Require GFPS members to attend trainings on GAD concepts, laws and gender-responsive planning and budgeting
- Integrate the GAD perspective through attribution in major programs, projects and activities with cost equivalent to at least 5% of the COB
- Regularly prepare and submit GPBs and GAD ARs to LWUA pursuant to PCW Memorandum Circular No. 2016-06
The BWD was unable to implement its DRRM program. Although the District submitted its DRRM Plan covering the four thematic areas, there were no reported implemented DRRM activities for CYs 2023-2024, casting doubt on the District's capability for disaster preparedness, mitigation, response and recovery.
Related prior recommendations
- ML CY 2021-2022 par. 18 · ML CY 2020 par. 19Not implemented
The badges summarize the referenced Part III recommendation rows. Rows with multiple actions use an editorial link, not a COA-assigned status for the current observation.
Recommendations
- Prioritize the implementation of the DRRM program, integrating the District's existing general action plans and aligned with the four thematic areas of DRRM, to enhance resilience and capability to respond to natural and man-made disasters