10-MWSS2020 Part2-Observations and Recomm

.
AUDIT OBSERVATIONS AND RECOMMENDATIONS
A. Financial Audit – Corporate Office
Service Concession Assets/Deferred Service Concession Revenue
1. The Service Concession Assets (SCA) and Deferred Service Concession Revenue
with carrying amounts of P157.852 billion and P156.884 billion, respectively, as at
December 31, 2020 are not supported with details and supporting documents, and
the 2019 financial statements are materially misstated due to non-restatement of
the opening balances of net assets/equity accounts which adversely affected the
faithful representation of the said accounts in the financial statements for 2020 and
2019, contrary to International Public Sector Accounting Standards (IPSASs) 1, 3
and 32.
1.1. Paragraph 27 of IPSAS 1 – Presentation of Financial Statements provides that:
Financial statements shall present fairly the financial position, financial

performance and cash flows of an entity. Fair presentation requires the
faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, revenue and expenses set out in IPSASs. The application
of IPSASs, with additional disclosures when necessary, is presumed to
result in financial statements that achieve a fair presentation.
1.2. Paragraphs 24 and 27 of IPSAS 3 – Accounting Policies, Changes in Accounting

Estimates, and Errors provides that:
24. Subject to paragraph 28:
(a) An entity shall account for a change in accounting policy resulting from
the initial application of an IPSAS in accordance with the specific
transitional provisions, if any, in that Standard; and
(b) When an entity changes an accounting policy upon initial application

of an IPSAS that does not include specific transitional provisions applying
to that change, or changes an accounting policy voluntarily, it shall apply
the change retrospectively.
27. Subject to paragraph 28, when a change in accounting policy is

applied retrospectively in accordance with paragraph 24(a) and (b), the
entity shall adjust the opening balance of each affected component of net
assets/equity for the earliest period presented and other comparative
amounts disclosed for each prior period presented as if the new accounting
policy had always been applied.
1.3. Paragraph 9 of IPSAS 32 – Service Concession Arrangements: Grantor provide the

criteria for the recognition and measurement of service concession asset. It states
56
.
that the grantor shall recognize an asset provided by the operator and an upgrade
to an existing asset of the grantor as a service concession asset if:
The grantor controls or regulates what services the operator must provide
with the asset, to whom it must provide them, and at what price; and
The grantor controls, through ownership, beneficial entitlement or

otherwise, any significant residual interest in the asset at the end of the
term of the arrangement.
1.4. In the CY 2019 Annual Audit Report, we observed the non-recognition of the assets
and upgrades to the Service Concession Assets totaling P156.884 billion and we
recommended that Management account for the service concession assets
provided by the Concessionaires and the subsequent costs incurred for the upgrade
of all service concession assets, and recognize the same in the MWSS books under
the cost model.
1.5. In compliance with the said recommendations, the Management in CY 2020

recognized the Service Concession Assets amounting to P194.872 billion and
Accumulated Depreciation amounting to P37.020 billion, as follows:
Accumulated
Service Concession Asset Gross Amount Net Book Value
Depreciation
Sewer Systems P 23,716,603,818.00 P 4,149,368,389.00 P 19,567,235,429.00
Water Supply Systems 110,334,357,414.00 31,095,727,956.00 79,238,629,458.00
Buildings and Other Structures 6,414,024,485.00 1,775,237,458.00 4,638,787,027.00
Service Concession-Land 4,261,617,195.19 - 4,261,617,195.19
Other Service Concession Assets 50,145,537,434.00 - 50,145,537,434.00
Total P 194,872,140,346.19 P 37,020,333,803.00 P 157,851,806,543.19
1.6. Also, the related liability thru the Deferred Service Concession Revenue account
was recognized amounting to P156.884 billion.
1.7. However, instead of restating the opening balances of the prior periods presented,
MWSS erroneously recognized the SCA and the Deferred Service Concession
Revenue in CY 2020 which has an adverse impact on the comparability of the
financial statements.
1.8. In the CY 2018 Annual Audit Report of MWSS, it was provided in its Statement of
Compliance and Basis of Preparation of Financial Statements that the consolidated
financial statements have been prepared in compliance with the Philippine Public
Sector Accounting Standards (PPSAS) prescribed by the Commission on Audit
through COA Resolution No. 2014-003 dated January 24, 2014. This was the first-
time adoption by MWSS of the IPSAS, since MWSS is adopting PFRS prior to 2018.
1.9. To validate the accounting entries taken up in 2020, the audit team requested in
writing the following pertinent reports and documents however, these were not
submitted by Management.
57
.
a. Confirmed detailed balances of the Service Concession Assets in the books

of the concessionaires as of December 31, 2020;
b. Annual Reports of the Manila Water Company, Inc. (MWCI) and Maynilad
Water Services, Inc. (MWSI) for CY 2020;
c. Copy of the MWSS detailed plan for adoption of IPSAS 32 for the 3-year
transitional relief period;
d. Copy of the Manual of Policy for the adoption of IPSAS 32;
e. Summary of major additions and improvements to the SCA for CY 2019
and 2020;
f. Summary of unserviceable properties turned over to the MWSS for CYs
2019 and 2020; and
g. Copy of concessionaires’ Manual of Procedures or Policies on turned-over
of unserviceable properties or retirements to the MWSS.
1.10. In the absence of details and supporting documents on the initial recognition and
measurement of SCA in 2020, the entries made are without basis. Also, as required
by IPSAS 3, the opening balance of each affected component of net assets/equity
for the earliest prior period presented should be adjusted, hence, the 2019 financial
statements should have been restated to recognize the effect of the adoption of
IPSAS 32.
1.11. The necessary details and documents in order to establish the validity and reliability
of the reported balances and adjustments made were not submitted as of date of
completion of audit.
1.12. In effect, the faithful representation of the SCA, Deferred Service Concession
Revenue and other affected accounts was not established contrary to paragraph
27 of IPSAS 1 and the 2019 financial statements are materially misstated due to
non-restatement of the opening balances of the affected components of net
assets/equity contrary to IPSAS 3.
1.13. We recommended that Management:
a. Require the Finance Department to submit the following pertinent

reports and records requested to substantiate the initial recognition of
SCA and Deferred Service Concession Revenue:
1. Confirmed detailed balances of the SCA in the books of the

concessionaires as of December 31, 2020;
2. MWSS Detailed Plan for the adoption of IPSAS 32 for the 3-year
transitional relief period;
3. Manual of Policy for the adoption of IPSAS 32;
4. Summary of major additions and improvements to the SCA for CYs
2019 and 2020;
5. Summary of unserviceable properties turned over to the MWSS for
CYs 2019 and 2020; and
6. Copy of concessionaires’ Manual of Procedures or Policies on
turned-over of unserviceable properties or retirements to the MWSS;
58
.
b. Require the Finance Department to restate the opening balances of net

assets/equity accounts in the prior period financial statements
presented on comparative basis with the current year financial
statements and provide the required disclosure on the adoption of
IPSAS 32; and
c. Require the Finance Department to perform a thorough analysis and

validation of the Service Concession Assets and regularly monitor the
subsequent events affecting the PPE accounts, upgrade on existing
assets, impairment and depreciation of the SCA, including the General
Administrative Equipment (GAE).
1.14. On June 18, 2021, Management submitted copies of the Comparative Audited
Financial Statements for CYs 2020 and 2019 of MWSI and MWCI.
1.15. Management added that MWSS thru the Finance Department is in coordination with
the Concessionaires for their provision of a summary and details of
additions/deductions to Service Concession Assets, as well as the amortization of
the Deferred Service Concession Revenue for CY 2020.
1.16. Further, they commented that in relation to the Manual of Policy for the adoption of
IPSAS 32, MWSS, created an Inventory Committee to perform full inventory of
MWSS Assets and Service Concession Assets, in coordination with the
Concessionaires to which timetable and schedule of activities will be undertaken.
1.17. As a rejoinder relative to the sufficiency of the information presented on the

submitted Audited Financial Statements of the Concessionaires, we contend
otherwise, since the audit team cannot verify the correctness of information on the
detailed composition of the Service Concession Assets presented in the Notes to
the Financial Statements for CY 2020 which were described as derived from the
Audited Financial Statements of the concessionaires as these information cannot
be traced to the Audited Financial Statements.
1.18. We maintained our position for the Finance Department to reverse the entries made
in CY 2020 and submit the necessary documents before the initial recognition of
the SCA and the Deferred Service Concession Revenue.
Property, Plant and Equipment
2. The following errors and deficiencies in the Property, Plant and Equipment (PPE)
account with carrying amount of P20.437 billion cast doubt on the faithful
representation of the transactions affecting PPE and related accounts, caused by
the lapses in the monitoring of assets and resulted to material misstatements
adversely affecting the fair presentation of the said account in the financial
statements, and the deterioration, loss, and wastage of MWSS properties contrary
to the pertinent provisions of IPSASs. 1, 17 and 21, Section 111 of Presidential
Decree No. 1445, COA Circular No. 80-124 and MWSS-CO Memorandum Circular
No. 2020-03:
59
.
a. Incomplete Physical Inventory and Non-submission of Physical Inventory

Report (PIR) for CYs 2019 and 2020;
b. Absence of certificates of titles and other proofs of ownership of land assets

totaling P4.668 billion;
c. Non-provision of impairment losses for the inexistent, dilapidated, non-

operational and/or abandoned Office Building and Other structures with
carrying amount of P5.117 billion;
d. Unreconciled variance amounting to P3.248 billion between the CY 2018

Physical Inventory Report and the accounting records;
e. Unsupported adjustment amounting to P39.032 million relative to the sale of

land to Silhoutte Trading in CY 1983;
f. Non-adjustment of the CIP account amounting to P156.551 million for the

completed projects;
g. Various MWSS properties were occupied by private individuals or taken back

by the donors;
h. Several deep wells (DWs) can no longer be located;
i. Upgrading works were left unfinished and various deficiencies were noted
during inventory-taking and inspection;
j. Various deep wells (DWs) were observed to be temporarily suspended due to

water qualities, non-operational and abandoned but not yet dismantled;
k. Non-submission of the Inventory Report of Unserviceable Properties for the

disposal of unserviceable motor vehicles amounting to P78.025 million; and
l. Discrepancies in the deep wells were noted between the record/list of

inventory items of MWSS CO as against the record/list of the MWCI
2.1. Paragraph 27 of IPSAS 1 provides that –

assets, liabilities, revenue and expenses set out in IPSASs. xxx.
2.2. Under paragraph 21 of IPSAS 17, Infrastructure assets meet the definition of
property, plant and equipment and should be accounted for in accordance with this
60
.
Standard. Also, under paragraph 36 thereof, the cost of a self-constructed asset is

determined using the same principles as for an acquired asset.
2.3. The recognition and subsequent measurement criteria of PPE is governed by

Sections 14 and 43 of IPSAS 17, respectively, which provide that:
The cost of an item of property, plant and equipment shall be recognized

as an asset if, and only if:
(a) It is probable that future economic benefits or service potential

associated with the item will flow to the entity; and
(b) The cost or fair value of the item can be measured reliably. xxx
After recognition as an asset, an item of property, plant and equipment shall

be carried at its cost less any accumulated depreciation and any
accumulated impairment losses.
2.4. Paragraph 26 of IPSAS 21 – Impairment of Non-Cash Generating Assets provides

that:
An entity shall assess at each reporting date whether there is any

indication that an asset may be impaired. If any such indication exists, the
entity shall estimate the recoverable service amount of the asset.
2.5. Section 102 of PD 1445 – Primary and Secondary Responsibility states that:
1. The Head of any agency of the government is immediately and primarily

responsible for all government funds and property pertaining to his
agency.
2. Persons entrusted with the possession or custody of the funds or

property under the agency head shall be immediately responsible to him,
without prejudice to the liability of either party to the government.
2.6. Under Section 111 of P.D. 1445, it imposes upon the government agency the proper
keeping of the accounts in such detail as is necessary to meet the needs of the
agency and at the same time be adequate to furnish the information needed by
fiscal or control agencies of the government and to observe the highest standards
of honesty, objectivity and consistency in the keeping of accounts to safeguard
against inaccurate or misleading information.
2.7. COA Circular No. 80-124 dated January 18, 1980 mandates every agency to
conduct its physical inventory of fixed assets at least once a year as of December
31. It also provides that:
Physical inventory-taking being an indispensable procedure for checking

the integrity of property custodianship has to be regularly enforced and that
the inventory reports shall be submitted to the Auditor not later than January
61
.
31 of each year, unless extended by the Chairman upon prior request of

the concerned head of agency concerned..
2.8. MWSS-CO issued Memorandum Circular 2020-03 dated January 8, 2020 providing
its agency-specific guidelines which laid down the procedures on the disposals of
unserviceable assets with an objective of ensuring systematic and timely disposal
of government properties to avoid further deterioration of its value. It also specifies
the responsibilities of the personnel involved in the process.
2.9. The MWSS, as a public utility agency is mandated to ensure an uninterrupted and
adequate supply and distribution of potable water for domestic and other purposes
to its consumers at just and equitable rates. The following Property, Plant and
Equipment (PPE) items have been the backbone of its assets, summary of the
details is shown below, except for the Service Concession Assets (SCA):
Balance
Account Additions Depreciation Net Book Value
12/31/20
Land P 13,421,611,542 0 0 P 13,421,611,542
Building & Other
2,618,641,593 0 (84,703,830) 2,533,937,763
Structures
Machinery and
54,246,930 2,459,048 (3,626,681) 53,079,297
Equipment
Transportation
17,753,397 0 (2,859,279) 14,894,118
Equipment
Furnitures, Fixture &
881,646 93,931 (52,084) 923,493
Books
Construction Progress 3,838,482,300 573,936,659 0 4,412,418,959
Heritage Assets 4,000 0 0 4,000
Total P 19,951,621,408 P 576,489,638 P (91,241,874) P 20,436,869,172
2.10. In the review of transactions related to the above PPE items for CY 2020, we
observed the following errors/deficiencies:
a. Incomplete Physical Inventory and non-submission of Report (PIR) for

CYs 2019 and CY 2020
1. During CY 2018, we noted several errors and deficiencies in the PPE

account based on the submitted Physical Inventory Report of the
Management. However, despite the audit recommendations in CY 2018, we
noted that MWSS failed to submit the required Physical Inventory Report for
CYs 2019 and 2020.
2. The Management admitted that it has not completed the inspection and
inventory of all the items of PPE due to the recurring problems on manpower
limitation in the conduct of complete and continuous physical inspection and
inventory of the items of PPE.
3. In the reply of Asset Management Department (AMD) dated June 16, 2020,
they commented that the CY 2019 Physical Inventory Report is currently
being reviewed and finalized for submission to COA by the end of July 2020
62
.
as additional inputs were incorporated to the said report relative to the MOA
between MWSS and Land Registration Authority (LRA) on land title.
However, in the recent inquiry with the AMD, it was admitted that it has not
completed the CYs 2019 and 2020 Inventory Reports.
4. Also, a request was made to submit the CY 2020 Property Inventory Form
on all insurable assets, properties and interests of the MWSS in compliance
with COA Circular No. 2018-002 dated May 31, 2017, however, to date no
such report was received.
b. Absence of certificate of titles and other proofs of ownership of land

assets totaling P4.668 billion;
1. Upon review of the descriptions and details of each item in the Lapsing
Schedule of the PPE for CY 2020 and based on the inspection of certificate
of titles during CY 2018, the land assets totaling P4.668 billion do not have
title numbers and/or with missing titles.
2. On the 175 land assets which include the 71 parcels of land which were
reported to have missing titles, the Management explained that it has two
remedies available, namely: (1) Administrative process and (2) Judicial
process.
3. They added that the Administrative process is commenced by application of

patent through the DENR after conduct of surveys and approval of
subdivision plan. Once the patent is obtained, it shall be the basis for the
issuance of the Original Certificate of Title (OCT) in the name of MWSS. The
judicial process on the other hand is commenced by a petition before the
court for the original registration. The court order in the land registration
proceedings authorizes the LRA to issue the decree of registration in favor
of MWSS.
4. As explained by the Management, the missing land titles were actually in the
name of original private land owners upon whom the MWSS purchased the
lots. The sale of the lots were annotated in the land titles however, it was not
transferred in the name of MWSS because the mother title cannot be
located.
5. Also, for the missing land titles not found in the vault, MWSS stated that it
will check and update actions taken relative to the petition for reconstitution
or the re-issuance of the owners duplicate copy of Transfer Certificate of
Title. However, upon inquiry, no such update as to the reconstitution or
reissuance of duplicate TCTs were available.
6. During the inspection of titles, it was noted that there were 23 land titles
under the custody of MWSS that were not recorded in the books. The
Management said that some were already recorded in the old inventory list
of the former Property Management Department but not taken up by the
Finance Department. Both departments will evaluate and reconcile each lot
to come up with a reconciled report. The AMD also informed that they have
63
.
already forwarded the documents to the Finance Department. However, the

Finance Department said that reconciliation is still on-going.
7. In addition, according to the Management, if the lands are without land titles
reflected therein the tax declaration number issued by the Assessor’s Office
where the property is located including the approved cadastral plan number,
these lands can be counted as lots without land titles and not as missing
titles. The Bureau of Lands has already issued an approved plan in favor of
MWSS. However, a relocation plan has to be prepared by the MWSS which
has to be examined by the LRA before a decree can be issued for the titling
of the said properties.
8. The Audit Team requested for a detailed report on the status of the lands, its
classification in the books and the LRA registry numbers for all the lands
owned and controlled by the MWSS however, there was no report submitted.
The Audit Team also asked copies of newly issued titles together with the
pending applications for registration for issuance of certificate of titles
however, only those right of way acquisitions or expropriated lots for the
NCWS – Kaliwa Dam Project were submitted.
9. As reasoned out by the Management, the hindrances confronting the slow

movement of titling real estate properties involves several activities that are
inter-connected with each other and the performance and accomplishment
of each activity is dependent on the outcome of each titling task without
which the same could not be completed. It added that the Estate and
Property Division will request the Management for the creation of Task
Force-Titling or the hiring of 2 Geodetic Engineers. Their work will focus
primarily on the lands without titles wherein MWSS ownership is based only
on the tax declaration issued by the Assessor’s Office where the assets are
located.
10. It must be emphasized that the Transfer Certificate of Title (TCT) is the best
proof of ownership of a piece of land. Thus, MWSS must secure certificate
of title as the best evidence of its claim of ownership of its landholdings
which comprises the substantial portion of its PPE. Further, Deeds of
Donation over the Right of Way (ROW) and title to the lots used for the deep
well operations which will support the rights over the real property were not
kept or not in the possession of the MWSS.
11. In addition, examination of the list of the deep well pumping station submitted
for inspection disclosed that some of these properties have no TCTs or
Deeds of Donation and Acceptance (DODA). Out of the nine items
inventoried, only five have data as to the title number, while the remaining
four in the list indicated “No TCT”.
12. In the Inspection Report prepared by the Physical Inventory Team as of

October 16, 2019, scanned copies of the mentioned TCTs with
memorandum of encumbrances were submitted. However, there were no
DODA or any private deeds or instruments that will prove the conveyance of
64
.
real rights between the donor and the donee. Thus, we cannot establish that
the real properties were indeed donated.
13. For the remaining properties, the AMD cannot commit to produce the other
titles or/and deed of donation allegedly because there was no proper
turnover of the documents and records from the previous officers in charge
of the subject properties.
14. The MWSS CO does not have any copy of title evidencing real rights over
the following properties.
Location
Tivoli Royale Subd. Batasan, Balara, Quezon City
Road 10, Brgy. Plaza, Pag-asa, Quezon City
Sto. Cristo ES, Nueva Vizcaya St. Bago Bantay, Quezon City
P. Burgos St. Escopa, Project 4, Quezon City
Josephine Bracken corner JP Rizal St., Project 4, Quezon City
Temple Drive, Green Meadows Subd., Quezon City.
Lot 12, Block 11, Green Meadows Subd., Quezon City
Hillside Loop cor. Hillside Drive, Blue Ridge Subd. Quezon City
Poolside, Nathan Road cor Derby St. White Plains Subd., Quezon
City
Queensville cor. Kingsville St., White Plains Subd., Quezon City
Riverdale cor. Astoria St., St. Ignatius Village, Quezon City
Jackson St., Don Antonio, Royale Subd., Quezon City
15. Most of these items/PPEs inventoried were recorded in the books of MWSS
by virtue of donation from private entities when the operations of deep wells
were taken over by the government. However, no copies of the MOA or
DODA were presented. Hence, it was challenging for the MWSS to
determine the extent of the right to use the properties, the area and
boundaries involved, and the conditions or undertakings attached to the
donation.
16. As per the latest Agency Action Plan and Status of Implementation (AAPSI)
submitted on May 13, 2021, the AMD is currently coordinating with the
Concessionaires to resolve these issues.
c. Non-provision of impairment losses for the inexistent, dilapidated, non-

operational and/or abandoned Office Building and Other structures
amounting to P5.117 billion;
1. Based on the available CY 2018 Physical Inventory Report, it was revealed

that there were items that were inexistent/missing, dilapidated, non-
operational and/or abandoned Office Building and various Other Structures
with carrying amount of P5.117 billion. Hence, the PPE account of P20.437
billion is materially misstated.
65
.
Status No. of Items Net Book Value

Office Buildings
Not existing 66 786,911
Dilapidated 10 807,646
Total 76 1,594,557
Other Structures
Not existing 298 72,767,484
Abandoned 17 272,318,035
Dilapidated 8 1,428,496
Non-operational 105 4,768,464,000
Total 428 5,114,978,015
Grand total 5,116,572,572
2. In the CY 2019 Annual Audit Report (AAR), we recommended that

Management explain the various PPE items that were not located and/or
missing. In its reply, the AMD together with the Inventory Committee has
been exerting efforts to verify the status of all MWSS property and
equipment, including those that could not be located/missing. However, the
Management has no action in CY 2020 for the noted exception.
3. In addition, we noted that MWSS did not provide for impairment losses in
view of the result of the physical inspection. MWSS should
assess/evaluate the noted exceptions which are factors or indicators of
impairment of an asset. The Management should provide an allowance for
impairment losses to reflect the correct recoverable amount of the assets.
4. Paragraph 34 of IPSAS 21 further provides that:
If there is an indication that an asset may be impaired, this may

indicate that (a) the remaining useful life, (b) the depreciation
(amortization) method, or (c) the residual value for the asset
needs to be reviewed and adjusted in accordance with the
IPSAS applicable to the asset, even if no impairment loss is
recognized for the asset.
d. Unreconciled variance amounting to P3.248 billion between the Physical

Inventory Report and the Accounting Records
1. In CY 2018, we noted an unreconciled variance of P3.248 billion between

the Inventory Reports and the accounting records that remained
unexplained and unresolved as of December 31, 2020.
2. Notably, after verification of the journal entries in CY 2020, there were

neither reclassification nor reconciliation made in order to effect changes
made between the two reports. Thus, the unreconciled variance adversely
affected the reliability of the PPE account.
3. Also, it is worthy to note that on July 8, 2019, the MWSS CO issued Office
Order No. 2019-172 directing the offices concerned to properly reconcile
the accounting and inventory records not later than December 31, 2019 and
66
.
for the inventory committee to submit the final report on or before January
20, 2020 to the Administrator for approval duly noted by the COA Auditor.
However, according to the Management, this was not achieved due to the
manpower constraints to perform the inspection, appraisal and
reconciliation of records.
4. For CY 2020, according to the AMD, the same problem continues which is
lack of personnel to perform the monitoring and detailed updates on the
items for the office buildings and other structures. This was aggravated by
the limited actual office hours brought about by the series of lockdowns and
work rotations during the pandemic period.
5. To date, no subsequent compliance was submitted by the AMD on the

status of implementation of the prior years’ audit recommendation relative
to this observation.
e. The adjustment amounting to P39.032 million relative to the sale of land

to Silhoutte Trading in CY 1983 remained unsupported
The validity of adjustments made in dropping the land sold to Silhouette Trading
in CY 1983 from the books of accounts was not established/validated due to
inadequate documentation, discussed as follows:
1. Partial reconciliation showed a difference of 29.252 million sq. m. between

the accounting records and the Appraisal Report in CY 1976. Management
mentioned that there were typographical errors in the encoding of the Land
area resulting to the overstatement of the accounting records, as
summarized below:
Area per Area per
Discrepancy
Subsidiary Ledger No. books Appraisal Report
(sq.m.)
(sq.m.) (sq.m.)
201-01-01-13-36069A 25,402,840 254,028 25,148,812
201-01-01-13-36069E 3,743,320 37,433 3,705,887
201-01-01-13-36069F 363,360 3,634 359,726
201-01-01-13-36069G 37,920 380 37,540
Total 29,547,440 295,475 29,251,965
2. However, the claims of the management were not supported with valid proof
of the correctness of the land area which can be determined thru survey of
the land and/or copies of titles or tax declaration. In addition, an adjustment
of P39.032 million was effected by debiting Retained Earnings and crediting
Land per JEV No. 2014-12-004950.
3. The Land Registration Authority, in its letter dated March 8, 2018, advised
the MWSS to request the assistance of the DENR–Land Management
Bureau (LMB) on the actual area of the land under TCT No. 36069 since
the Consolidation-Subdivision Plan PCS-13 and Marinquina Estate which
pertains to the subject land were DENR-LMB approved plans.
67
.
4. However, to date, no subsequent compliance was submitted by the AMD to

this Office on the status of implementation of the prior years’ audit
recommendation related to this observation.
f. Non-adjustment of the Construction in Progress (CIP) account amounting

to P156.551 million for the completed projects
1. In the CY 2020 Report of Completed Projects, we noted that five (5)

completed projects with accumulated cost of P156.551 million remained
recorded in the CIP account instead of the appropriate infrastructure asset
account, contrary to paragraph 27 of IPSAS 1, as shown below:
Balance as of
Project Name
12/31/20
Angat Water Supply Optimization Project 82,574,731
1. Umiray Angat Transbasin Project 10,002,973
2. Manila Second Sewerage Project 2,478,439
3. New Water Sources Development Project 10,817,117
4. Manila Third Sewerage Project 50,677,422
Total P 156,550,682
2. There are five MWSS projects that were already completed between CY
2002 to CY 2009, but are still recorded in the accounting records as CIP
Verification of the journal vouchers for CY 2020 transactions showed no
related entries to support the credit to the CIP account. No disclosures were
made to reflect the reclassification of the accounts. Moreover, these CIP
accounts were not supported with subsidiary ledgers.
3. Based on the submitted Reports on Programs, Projects and Activities

(PPAs), these projects were already completed and operational. Therefore,
the Management should recognize the proper PPE accounts and provide
the corresponding depreciation expense.
4. According to Finance Department (FD), it cannot act upon the

reclassification pending the complete submission of documents from the
Engineering Department to support the reclassification. The Engineering
Department on the other hand raised that it has already forwarded the
pertinent documents to the FD for proper action.
5. In effect, the PPE account did not reflect the true nature of the assets and
the corresponding depreciation expense were not recognized in the books
resulting to misstatement by undetermined amounts.
g. Various MWSS properties were occupied by private individuals or taken

back by the donors.
1. Based on the Inspection Report prepared by the Physical Inventory Team

as of October 16, 2019, permanent structures were built on the MWSS
property and these structures were made as dwellings with some portions
leased to others, thus, depriving the MWSS of its right to use the facility.
68
.
Deep wells constructed in the LGU-donated lots or on a privately-owned

donated lot were already decommissioned and possession is restored to
the donor without proper documentation.
2. The other properties have no detailed descriptions which made it difficult or

impossible to identify what is included in the specific asset account.
Consequently, the MWSS has to rely on the identification and declaration
made by the concessionaires.
3. As per the latest AAPSI submitted on May 13, 2021, Management

commented that they have been exerting efforts to verify the status of all
MWSS property and equipment, including those that could not be located
or were reported as missing.
h. Several deep wells (DWs) can no longer be located
1. In the CY 2019 ocular inspection conducted by AMD and witnessed by the

Audit team, it was noted that several deep well pumping stations cannot be
located due to either it was covered with debris from on-going construction
within the premises or a structure was already built on top of the site.
 In P. Burgos corner Circumferential Road, San Roque Antipolo City,

Rizal, the deep well site was covered with debris of rocks and soil coming
from the on-going private construction at corners P. Burgos and
Circumferential Road, hence, it can no longer be located.
 In Road to Teresa Street, Cainta, Rizal, a cemented structure that

houses a small videoke leisure corner and sari-sari store storage was
built on top of the deep well site. Thus, the deep well cannot be located
anymore.
 The deep well pumping station located at the back of Felix Memorial High
School, now the One Cainta Municipal Hospital, cannot be traced
anymore as the said pumping station is being used as storage/bodega
for the said hospital.
 In Esguerra Street Barangay, San Juan, Taytay, Rizal, the pump station
is now being used as the terminal station of Taytay – Crossing Terminal
and Office Jeepney Operators and Drivers Association (TAC-JODA) and
a canteen/eatery was built on the other side of the terminal station.
 In Gruar Subdivision, Barangay Sto. Domingo, Cainta, Rizal, the three

deep well pumping stations which were no longer operational has already
been demolished.
 The deep well pump located at Gloria and Irma Street Marick
Subdivision, Barangay Sto. Domingo, Cainta, Rizal, is no longer
operational and has already been demolished.
69
.
 In Barangay Dolores, Taytay, Rizal, a certification was issued by the

Secretary of Barangay Dolores, Taytay, Rizal, stating that the deep well
pump along Sumulong St. besides Fire Station and St. John the Baptist
Church is no longer operational and has already been demolished.
 In San Juan L. Santos corner A. Bonifacio Ave., Barangay San Juan,

Taytay, Rizal, the deep well pumping station was already demolished.
 In J. P. Rizal Street, Sitio Bangiad, Taytay, Rizal, the deep well pumping
station located at J.P. Rizal Street, Sitio Bangiad, Taytay was already
demolished. The remarks column of the inventory list shows “MWSS
verbal agreement only.” Such remark was not clear even to the inventory
team.
2. In addition, the Management did not provide a schedule of these deep wells
with reported balances.
i. Upgrading works were left unfinished and various deficiencies were noted
during inventory-taking and inspection
1. In the CY 2019 ocular inspection, it was noted that in San Fabian, Cainta,
Rizal, the upgrading appurtenance of the deep well pump located at St.
Robles Subdivision was left unfinished, hence, it has already deteriorated,
and the deep well pump casing was missing as it was allegedly stolen.
2. It was noted that although there was a signage/standee displayed as

“Project under Construction” which inform the public at large that the area
is restricted, however, there is still risk of theft and pilferage considering
the laxity in security of the area.
3. It was also noted that the Monitoring Control Pump voltage is still for
rehabilitation and no updating was made thereon.
4. The Management should ensure that government properties are properly

monitored to avoid any deterioration, loss or wastage of assets.
j. Various deep wells (DWs) were observed to be temporarily suspended

due to water qualities, non-operational and abandoned but not yet
dismantled.
1. Based on the Inspection Report prepared by the Physical Inventory Team

as of October 16, 2019, eight deep wells were temporarily suspended due
to water qualities, non-operational and abandoned but not yet dismantled.
2. According to the management, the noted observations will be subject to

reconciliation with the concessionaires.
k. Non-submission of the Inventory Report of Unserviceable Properties for

the disposal of unserviceable motor vehicles amounting to P107.552
70
.
million and the remaining unserviceable properties as of December 31,

2020
1. In the CY 2016 AAR, we noted a discrepancy of P29.527 million on the

disposal/sale of various unserviceable motor vehicles and other
transportation equipment between the Report of the AMD and the
accounting records. The AMD reported unserviceable General and
Administrative Equipment (GAEs) amounting to P107.552 million that
have been disposed while the accounting records showed P78.025 million.
2. We recommended that Management submit the necessary report,

however, there was no compliance by the MWSS since CY 2017.
3. The propriety and validity of these items cannot be ascertained due to the
non-submission of the Inventory of Unserviceable Properties during the
year. The non-submission of the Inventory Report of Unserviceable
Properties prevented the Audit Team from verification of the correctness
of the remaining book values/salvage values.
l. Discrepancies in the list of deep wells between the records of MWSS CO

and MWCI.
1. During the CY 2019 inventory and inspection in Cainta and Taytay, Rizal,
copy of the list of PPEs with their locations was provided by the
concessionaire. It shows the 23 deep well pumping stations in the province
of Rizal. On the other hand, inventory list submitted by the MWSS-CO
consists only of 11 turned-over deep wells, hence a discrepancy of 12 items.
2. The demolished Esguerra Compound deep well pump station located at

Esguerra Street Brgy. San Juan, Taytay was not included in the inventory
list of AMD.
3. The Lunsad deep well pump station located at Duavit Street, Barangay
Lunsad, Binangonan was not included in the inventory list of AMD and
presumed as a private deep well pump since it is not listed in the MWCI.
4. There was no information or record from AMD for the Isagani deep well
pumping station located at Taytay, Rizal and hence, the deep well pumping
station cannot be located.
5. As per the latest AAPSI submitted on May 13, 2021, there was no
reconciliation submitted for the noted discrepancies. The AMD is currently
coordinating with Concessionaires to resolve these issues.
2.11. We recommended and Management agreed to require the AMD and the
Finance Department to:
a. AMD to conduct complete annual physical inventory and submit the CY

2020 Physical Inventory Report (PIR) and Inspection and Inventory of
71
.
Unserviceable Properties (IIRUP) with identification and description of

turned-over GAEs from the concessionaires and with analysis and
reconciliation with the Accounting records;
b. AMD to account and secure the land titles in MWSS’s name and institute
procedures on proper safekeeping and custody of the land titles and
determine the ownership of the 23 land titles under the custody of MWSS
that were not recorded in the books;
c. Finance Department to provide allowance for impairment losses to reflect

the recoverable amount of the inexistent, dilapidated, non-operational
and/or abandoned Office Building and Other structures with carrying
amount of P5.117 billion;
d. AMD to provide status of inspection of the reported non-operational and

abandoned properties and prepare a Management plan for the disposal of
these unserviceable properties through public auction or other modes of
divestment as may be warranted after duly complying with prior inspection
and appraisal procedures laid down under MWSS-CO Memo Circular 2020-
003, including the turned over GAE;
e. Finance Department and AMD to address the causes of the P3.248 billion
unreconciled variance in CY 2018 and account for the status and
developments after conducting the Inventory for CY 2020;
f. Finance Department to submit the supporting documents for the

adjustment made amounting to P39.032 million pertaining to the land
derecognized in the books upon sale to Silhouette Trading, reconcile the
discrepancies noted, and make the necessary adjustments, if warranted;
g. Finance Department to reclassify the cost of completed projects to the

appropriate PPE accounts and recognize the related depreciation expense
reckoned from the date that the assets became operational;
h. AMD to confer with the Legal Department on MWSS rights over the
properties occupied by private individuals or taken back by donors to
determine the appropriate action to enforce its rights against the
unlawful/unauthorized use of the said properties or the proper accounting
treatment of said properties;
i. AMD and Finance Department to identify the decommissioned and

abandoned deep wells with the structures thereon and determine the
carrying amount of said properties for the recognition of impairment loss
in the books as warranted;
j. AMD to conduct investigation on the unfinished upgrading of the deep well

appurtenances in San Fabian St. Robles Subdivision, Cainta, Rizal and
identify who shall be made liable for the unfinished work which resulted to
the deterioration of the appurtenance and for the missing pump casing;
72
.
k. AMD to address and resolve the cause or causes of the temporary

stoppage of the deep well operation by regular communication and
coordination with the concessionaires;
l. AMD to submit the Report on the Inventory of Unserviceable Properties

disposed in 2016 amounting to P107.552 million and the remaining
unserviceable properties as of December 31, 2020;
m. Finance Department to review the records pertaining to the sale of

unserviceable GAE with discrepancies amounting to P29.527 million,
reconcile the pertinent records and make the necessary adjustments; and
n. AMD to: (i) explain the discrepancies of the recorded PPE items (deep well
pumping stations and appurtenances etc.) as against the inventory list of
the concessionaire MWCI; (ii) prepare the correct and updated record of
MWSS (iii) formulate an overall strategy relative to the deep wells that have
already ceased operations; (iv) install security measures in the areas
where the deep well operations were stopped, suspended or abandoned,
in order to protect and safeguard the remaining properties including the
deep well appurtenances; and (v) recover the salvage value of the metal
pipes, equipment and other items for disposal.
Receivables
3. The collectability of the receivables carried in the books at P4.255 billion is doubtful
due to the dormancy of the accounts and may not reflect the reasonable
recoverable amounts due to the absence of assessment and regular monitoring of
the accounts, hence the balance is materially misstated as of December 31, 2020,
and may affect generation of additional funds for operations contrary to paragraph
22 of IPSAS 26, COA Circular No. 2016-005 and the 1997 Concession Agreement.
3.1 Paragraph 22 of IPSAS 26 – Impairment of Cash-Generating Assets provides that:

indication that an asset may be impaired. If any such indication exists,
the entity shall estimate the recoverable amount of the asset.
3.2 Sections 6.1, 7.1 and 7.4 of COA Circular No. 2016-005 on the Guidelines and
Procedures on the write-off of Dormant Receivable Accounts provides that, All
government entities shall conduct regular monitoring and analysis of receivable
accounts to ensure that these are collected when these become due and
demandable xxx and that:
The Accountant shall:
7.1 Conduct regular and periodic verification, analysis, and validation of

the existence of the receivables, xxx.
73
.
3.3 Section 6.4(a) of the 1997 Concession Agreement provides that:
(a) Not later than 14 days prior to the date on which any scheduled payment
of principal, interest, fees or other amount is due under an MWSS Loan,
MWSS shall notify the Concessionaire in writing of the total amount due on
that payment date and of the Peso equivalent thereof (the “Peso
Equivalent”) calculated at the then prevailing exchange rate. Not later than
one business day to each such payment date, the Concessionaire shall
remit to such account as MWSS shall instruct an amount, in Pesos,
exclusive of any penalties or default interest charges not attributable to a
late payment of the Concession Fee by the Concessionaire xxx
3.4 The Dormant Receivables accounts amounting to P4.255 billion are broken down
as follows:
Particulars Amount
Disputed Claims against MWSI P 4,048,079,993.91
Receivable – Water/Sewer account 1,116,986,530.01
Allowance for Impairment losses (1,116,986,530.01)
Guarantee deposits from Customers 148,295,641.43
Receivables from Concessionaires 52,440,462.31
Inter-Agency Receivable 5,004,784.03
Inactive Raw Water Accounts 1,518,685.63
Total P 4,255,339,567.31
a. Disputed claims against MWSI amounting to P4.048 billion
Particulars Amount
Cost of Borrowing
MWSI-Borrowing Cost-BNP PARIBAS-US$150M- P 3,776,336,730.46
Interest
MWSI-Borrowing Cost-BNP PARIBAS-US$150M- 176,328,836.38
Withholding Tax
MWSI-Borrowing Cost-BNP PARIBAS-US$150M- 167,860.76
Others
Interest/Penalty on Unpaid Borrowing Cost 95,246,566.31
Total P 4,048,079,993.91
1. Based on Management’s representation, on March 8, 2001, due to

financial difficulties, MWSI suspended payment of concession fees. From
March 2001 to July 2001, MWSS used its own funds to meet the maturing
obligations of MWSI. Thereafter, from July 2001 to 2006, MWSS had to
obtain a number of loans from various banks and financial institutions to
meet its maturing obligations and expenses which the (unpaid) concession
fees from MWSI were supposed to cover.
2. Despite continuous negotiations, several disputes between MWSI and

MWSS led the former to issue a “Notice of Early Termination of the
Concession” on December 9, 2002. On January 7, 2003, MWSS arbitration
proceedings were commenced and on November 7, 2003, the Appeals
Panel for Major Disputes ruled that (1) there was no MWSS or
Concessionaire Event of Termination under Article 10 of the Concession
Agreement (CA), (2) the parties should continue to perform their
74
.
obligations under the CA until the expiration thereof, and (3) MWSS may
draw on the USD120 million Performance Bond. The Arbitration Order
became final on November 22, 2003.
3. During the pendency of the corporate rehabilitation proceedings, and prior

to the drawing on the $120.000 million Performance Bond, MWSS had to
seek funding from other sources to meet its maturing obligations and
operating expenses. As a result, on March 16, 2004, MWSS with the
Republic as Guarantor, and BNP Paribas, entered into a Subscription
Agreement wherein BNP Paribas agreed to subscribe to the MWSS-BNP
Notes.
4. MWSS asked the opinion of the OGCC relative to the current dispute
between MWSS and MWSI regarding the Subscription Agreement entered
into by MWSS with BNP Paribas Securities Services. The OGCC issued
Opinion No. 215 series of 2011 dated October 5, 2011, paragraph 16 of
which stated that the dispute between MWSS and MWSI arose when
MWSI refused to pay for the additional Corporate Operating Budget (COB)
incurred by MWSS. The OGCC opinion stated that all costs incurred by
MWSS for securing various loans and funding arrangement to pay for its
obligations which should have been covered by the unpaid concession
fees should be charged to Maynilad or MWSI since these are paid out of
government funds which must be safeguarded with utmost fidelity by
MWSS.
5. The disputed claims consists of the cost of borrowing including the

principal, interest and finance charges such as bank conversions,
documentary stamps, cable charges and penalties.
6. Also, according to the Management, MWSS is still pursuing the disputed

claims on the cost of borrowings from MWSI relative to the BNP Paribas
loan. However, copies of the supporting legal documents that were
requested were not submitted to us. Management has not made an
assessment of the recoverable amount of claims against the MWSI as
basis for the recognition of impairment loss for 2020.
b. Receivable – Water/Sewer accounts totaling P1.117 billion
1. The receivables amounting to P1.117 billion represents the accounts from

water service customers prior to MWSS’ privatization in 1997. Details of
these accounts were not established since there were no available account
summary of customers and subsidiary ledgers except for the voluminous
collection stubs safely kept at the MWSS storage room. This account was
provided with 100% allowance for impairment losses.
c. Guarantee deposits from MWSI and MWCI totaling P148.296 million
1. MWSS recognized Guarantee Deposits due from the Concessionaires

totaling P148.296 million as of December 31, 2020, as follows:
75
.
Guarantee Deposit Claim

MWSI P 82,712,511.65
MWCI 65,583,129.78
Total P 148,295,641.43
2. Guarantee deposits are customer deposit prior to the privatization of

MWSS. The amounts were withheld by the two concessionaires from the
collection of accounts receivable from water and sewer services of MWSS
at the onset of the privatization where the two concessionaires were
authorized to collect.
3. Based on management’s representation, MWSS and the two

concessionaires went into reconciliation to arrive at the amount of
guarantee deposit to be refunded to MWSS. On May 11, 2011, the MWSS
Administrator requested from the MWCI the refund of guarantee deposits
which was deducted from the collections of the MWSS customers
receivables covering the period August 1997, including the 2.91 per cent
interest, with a grand total of P9.902 million. In view thereof, on November
30, 2011, MWCI paid the amount of P6.627 million. Likewise, on June 6,
2014, MWSS also requested MWSI for the refund of guarantee deposits
of P30.198 million. The amount of P12.284 million was paid in August
2017.
4. We requested for Management comments regarding the status of the

subject claims, however, there was no response received from them.
5. We would like to emphasize that Section 6.4(a) of the Concession

Agreement should have been strictly imposed to the Concessionaires in
order to collect the fees due to the government. The non-collection of these
receivables affected the generation of funds for operations.
d. Receivables from Concessionaires amounting to P52.440 million remained

uncollected despite maturity of the loans in the previous years.
1. Accounts Receivable from Concessionaires – Debt Service account has a

balance of P52.440 million representing Principal, Interest and Guarantee
Fee on loans despite maturity of the said loans in the previous years.
Details are as follows:
Loan No. Maturity Loan MWCI MWSI Total

ADB 986 2014 Principal P 5,362,830.67 P 20,327,520.29 P 25,690,350.96
Interest 20,094,260.85 546,080.90 20,640,341.75
Guarantee 4,751,993.07 12,975.85 4,764,968.92
Fee
Sub-total 30,209,084.59 20,886,577.04 51,095,661.63
ADB 2013 Interest 2,550.18 0 2,550.18
2012 Guarantee 13,903.35 0 13,903.35
Fee
Sub-total 16,453.53 0 16,453.53
ADB 947 2012 Interest 20,545.71 0 20,545.71
Sub-total 20,545.71 0 20,545.71
2016 Interest 397,269.73 0 397,269.73
76
.
Loan No. Maturity Loan MWCI MWSI Total

IBRD Guarantee 27,427.90 0 27,427.90
4019 Fee
Sub-total 424,697.63 0 424,697.63
IBRD 2009 Guarantee 883,103.81 0 883,103.81
3124 Fee
Sub-total 883,103.81 0 883,103.81
Total P 31,553,885.27 P 20,886,577.04 P 52,440,462.31
2. Since the loans pertaining to the outstanding receivables already matured,

all payments thereof should be due and demandable from the two
Concessionaires.
3. We requested the Management to submit actions taken for the noted

exception, but none was received as of date of completion of audit.
4. Similarly, Section 6.4(a) of the Concession Agreement should have been

strictly imposed to the Concessionaires in order to collect the fees due to
the government.
e. Dormant Inter-agency receivables amounting to P5.005 million
1. Analysis of the Inter-agency receivables account showed uncollected

receivables from various government agencies totaling P5.005 million
which remained dormant in the books for more than ten (10) years, details
is shown below:
Name Amount
DPWH - Office Rental P 1,209,411.05
DPWH – Others 2,654,086.44
PRRC - Office Rental 391,343.40
PRRC – Electricity 443,799.01
Due from NGA- DBM Procurement Service 11,344.50
Due from GOCCs - Ninoy Aquino International 4,195.56
Airport (NAIA)
Due from GOCCs - Dormant Accounts 277,580.40
City of Manila 13,023.67
Total P 5,004,784.03
2. The nature and purpose of the above accounts could not be determined
due to unavailability of historical data to support their existence. Inquiry
with Management revealed that they are not familiar with the accounts and
no actions were made to collect these receivables. No impairment loss
was provided on these accounts for 2020.
f. Inactive Raw Water Accounts totaling P1.519 million
1. Raw Water accounts arise from the sale of service water to areas not
covered by the service of MWSI.
77
.
2. Analysis of the account disclosed that receivables totaling P1.519 million

from the eight (8) inactive Raw Water customers remained outstanding for
several years.
3. Collection of receivables is an agency responsibility since Management is

expected to exert effort to recover/collect the said receivables being
legitimate income and source of funds of the Agency and failure to collect
will result in loss to government.
4. Verification disclosed that no collection was made on the above

outstanding accounts during the year. No impairment loss was provided
on said accounts for 2020.
3.5 We noted that these dormant receivables amounting to P4.255 billion, except for
the Water/Sewer accounts, were not provided with impairment losses in order to
reflect the estimated recoverable amounts.
3.6 In addition, inquiry with Management revealed that the dormant receivables totaling
P4.255 billion were not collected and/or no actions were taken to collect the
receivable accounts in CY 2020. Also, Management has not made an assessment
of the estimated recoverable amount from these dormant accounts as basis for the
recognition of impairment loss.
3.7 We recommended and the Finance Department agreed to:
a. Provide allowance for impairment losses on the dormant receivables to

reflect the recoverable amounts;
b. Analyze the dormant receivable accounts to determine if they are

qualified for write-off under COA Circular No. 2016-005 and accordingly,
request for authority to write-off from the Commission on Audit;
c. Submit an updated report on the arbitration of the disputed claims with

MWSI amounting to P4.048 billion together with all the supporting legal
documents;
d. Formulate a schedule of payment for the Guarantee Deposits and Debt

Service, and impose the collection of the amounts due from the
Concessionaires;
e. Analyze and reconcile the receivable account from the two
Concessionaires and if a shortfall of collection is found, immediately
enforce collection of the amount advanced by the MWSS to pay the
matured loans; and
f. Send demand letters on the Receivables from government agencies and

Inactive Raw Water customers amounting to P5.005 million and P1.519
million, respectively.
78
.
4. The Lease Receivables account is overstated by P15.514 million due to the

recognition of the account despite non-renewal of lease contracts which affected
the faithful presentation of the Receivables account and contrary to IPSAS 1.
In addition, the non-collection of rental payments amounting to P47.026 million

affected the generation of MWSS funds and contrary to Sections. 4 and 102 of
Presidential Decree No. 1445.
4.1 Paragraph 27 of IPSAS 1 discusses the requirement of faithful representation to

wit:

performance, and cash flows of an entity. Fair presentation requires the
faithful representation of the effects of transactions, other events, and
assets, liabilities, revenue, and expenses set out in IPSAS. The application
of IPSAS, with additional disclosures when necessary, is presumed to
4.2 Section 4(4) of PD 1445 states that, fiscal responsibility shall, to the greatest
extent, be shared by all those exercising authority over the financial affairs,
transactions, and operations of the government agency.
4.3 Section 102 of PD 1445 – Primary and Secondary Responsibility states that:
1. The Head of any agency of the government is immediately and primarily

agency.

4.4 Confirmations were sent to four government agencies for the leased properties, of
which, only two agencies submitted their replies. The results of confirmation
showed a variance totaling P15.514 million between the book balances and
lessee’s records, as shown below:
Name Balance per Book Confirmed Discrepancy
Balance
NLRC 790,707.98 1,396,692.81 P 605,984.83
LWUA 15,082,291.07 174,002.67 14,908,288.40
Total 15,872,999.05 1,570,695.48 P 15,514,273.23
4.5 The noted discrepancies were due to the non-renewal of MWSS of the Contract of
Lease Agreements, hence, affecting the accuracy of the reported balance of
P15.873 million.
4.6 In addition, the non-collection of rental payments amounting to P47.026 million due
to the non-renewal of Contract of Lease Agreement affected the generation of
MWSS funds, as follows:
79
.
Particulars Amount
LWUA P 14,775,969.03
SC 32,250,000.00
Total P 47,025,969.03
a. LWUA - P14.776 million
1. LWUA’s unpaid rentals for the leased area of 10,238.68 sqm within MWSS
Complex amounted to P14.776 million. The lease contract of the said leased
area expired on July 31, 2019. Per MWSS Board Resolution No. 2019-164-
CO dated October 10, 2019, MWSS increased the monthly rental charges
of LWUA for the building and parking spaces from P24,889.00 to
P892,599.59. However, the renewal of the lease contract is still in process.
2. Inquiry with Finance Department disclosed that billing statements were sent
monthly for the unpaid rents, however, LWUA still pays the old rental rate of
P24,889.00. In addition, inquiry with AMD revealed that the lease contract
between MWSS and LWUA is not yet perfected due to the non-signing of
the latter of the lease contract which includes the said unpaid rentals.
According to AMD, LWUA appealed to MWSS for a lower rate and forwarded
this appeal to the Board of Trustees, however, the Board recommend to first
verify the financial status of LWUA before considering the request.
3. The unpaid rental fees of LWUA for the increase of the rental rate has
accumulated to P14.776 million for the period August 2019 to December
2020, details shown below:
New Monthly Rental fee P 892,599.59
Multiply by: Unpaid month
(August 2019 to December 2020) 17
Total 15,174,193.03
Less: Payments made (Old rate) 398,224.00
(24,889.00 x 16 months)
Total Unpaid rent P 14,775,969.03
b. SC - P32.250 million
1. The unpaid rentals from the Supreme Court (SC) of the Philippines
amounting to P32.250 million is computed as follows:
Monthly Rental fee P 750,000.00

Multiply by: Unpaid month
(May 29, 2017 to December 28, 2020) 43
Total Unpaid rent P 32,250,000.00
2. SC leased the property of MWSS located at Arroceros, Manila for their office
use with monthly rental of P750,000.00. Review of the account revealed that
the SC’s last payment for the rental fee was on July 2017 for the period April
29 – May 28, 2017. We noted that the Lease Contract between MWSS and
SC expired on May 28, 2017 and that the SC has an accumulated unpaid
rent of P32.250 million which is equivalent to 43 months rental from May 29,
2017 to December 28, 2020.
80
.
3. Further inquiry disclosed that SC still occupy the leased building and billing
statements were continuously sent for their unpaid rents, however, no
payments were received. On the expired lease contract with SC,
Management added that pending the renewal of the lease contract, the SC
negotiates for the renovation of the building roofing which to date, the
proposed design for the renovation is still on going. Moreover, inquiry with
AMD disclosed that the renewal of the lease contract with SC is in process.
4. The gaps in the enforcement of collection of rentals and prompt renewal of

the lease contracts resulted in the accumulation of receivables from said
government agencies.
4.7 We recommended and Management agreed that:
a. Finance Department to provide the correcting entries for the noted

misstatements in the Lease Receivables account amounting to P15.514
million; and
b. Office of the Administrator to make representations with the management

of LWUA and SC for the renewal of the Contract of Lease and payment of
rental fees totaling P47.026 million for the lease of MWSS properties.
Unreconciled/Unverified Accounts
5. Assets and liabilities amounting to P574.475 million and P884.548 million,

respectively, included in various assets and liabilities accounts in the financial
statements as of December 31, 2020 were unaccounted and undocumented, hence,
the faithful representation of the related accounts was not established contrary to
IPSASs. 1 and 21, Conceptual Framework for General Purpose Financial Reporting
by Public Sector Entities and Sections 1 and 2 of Executive Order No. 87, series of
2019.
5.1 Paragraph 27, IPSAS I provides that financial statements shall present fairly the
financial position, financial performance and cash flows of an entity. Fair
presentation requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for
assets, liabilities, revenue and expenses set out in IPSASs. The application of
IPSASs, with additional disclosures when necessary, is presumed to result in
financial statements that achieve a fair presentation.
5.2 Paragraph 3.10 of the Conceptual Framework for General Purpose Financial
Reporting by Public Sector Entities provides the definition of faithful representation
as one of the qualitative characteristics of information to be presented in the
Financial Statements:
To be useful in financial reporting, information must be a faithful

representation of the economic and other phenomena that it purports
81
.
to represent. Faithful representation is attained when the depiction of the

phenomenon is complete, neutral, and free from material error. Information
that faithfully represents an economic or other phenomenon depicts the
substance of the underlying transaction, other event, activity or
circumstance which is not necessarily always the same as its legal form.
(emphasis supplied)
5.3 Paragraph 26 of IPSAS 21 – Impairment of Non-Cash-Generating Assets provides

that:

5.4 Sections 1 and 2 of Executive Order No. 87, series of 2019, provides that:
Section 1. Reversion of Documented Accounts Payable. All documented

accounts payable for fiscal year 2016 and years prior thereto shall be reverted to
the Accumulated Surplus or Deficit of the General Fund, or the Cumulative Result
of Operations of the National Government. Henceforth, all documented accounts
payable which remain outstanding for at least two years, for which no actual
administrative or judicial claim has been filed, shall be subject to automatic
reversion.
Section 2. Treatment of Undocumented Accounts Payable. All accounts payable

which are undocumented or not covered by perfected contracts on record,
regardless of the year in which they were incurred, shall automatically be
reverted. The recording of undocumented accounts payable in the books of
accounts of agencies shall be strictly prohibited.
5.5 As of December 31, 2020, MWSS-CO has total assets of P216.735 billion and total
liabilities of P169.298 billion. However, the reported accounts in the CY 2020
financial statements include accounts tagged as Unreconciled/Unverified Asset
accounts amounting to P574.475 million which is equivalent to 0.27% of the Total
Assets and Unreconciled/Unverified Liability accounts amounting to P884.548
million, equivalent to 0.52% of the Total Liabilities.
5.6 The CY 2020 Notes to Financial Statements disclosed that these

Unreconciled/Unverified account balances refer to the carryforward balances of prior
years and mostly from the transactions before the privatization in 1997.
5.7 In our validation of these items, we noted that these Unreconciled/Unverified

accounts were not supported with subsidiary ledgers and documents. In addition,
these accounts remained the same for several years. The year-end account
balances for the four-year period showed that the management did not reconcile nor
verify the accounts, as follows:
82
.
Balance as Balance as of Balance as of Balance as of

Account
of CY2017 CY2018 CY2019 CY2020
Asset Accounts
Loans and Receivable Accounts P 21,596,858.00 P 21,596,858.00 P 21,596,858.00 P 21,596,858.00
Other Receivables 1,108,354.00 1,108,354.00 1,108,354.00 1,108,354.00
Prepayments 96,513,125.00 96,513,125.00 96,513,125.00 96,513,125.00
Other Current Assets 17,813,593.00 17,813,593.00 17,813,593.00 17,813,593.00
Property, Plant and Equipment, net 457,018,739.00 457,018,739.00 457,018,739.00 457,018,739.00
Other Non-Current Assets (19,575,783.00) (19,575,783.00) (19,575,783.00) (19,575,783.00)
Total Unreconciled Assets P 574,474,886.00 P 574,474,886.00 P 574,474,886.00 P 574,474,886.00
Liability Accounts
Financial Liabilities 533,802,867.00 533,802,867.00 533,802,867.00 533,802,867.00
Trust Liabilities 171,961,336.00 171,961,336.00 171,961,336.00 171,961,336.00
Other Payables 156,151,332.00 156,151,332.00 156,151,332.00 156,151,332.00
Deferred Credits 22,632,720.00 22,632,720.00 22,632,720.00 22,632,720.00
Total Unreconciled Liabilities P 884,548,255.00 P 884,548,255.00 P 884,548,255.00 P 884,548,255.00
5.8 According to the Finance Department, there were no adjusting entries made in the
books. They explained that the difficulty in finding the supporting documents and
lack of manpower caused the non-reconciliation of the accounts.
5.9 However, as early as CY 2016, the Management commented that it planned to hire
contract service personnel to augment their workforce to assist in the verification
and reconciliation of the balances. However, to date no positive and significant
results have been reported.
5.10 The unaccounted and undocumented assets totaling P574.475 million were not
provided with impairment loss resulting to misstatement by undetermined amount.
On the other hand, unaccounted and undocumented liabilities totaling P884.548
million were not reverted to Accumulated Surplus/Deficit account resulting to
overstatement of recorded liabilities by P884.548 million.
5.11 We recommended that the Finance Department provide allowance for

impairment loss on the unaccounted and undocumented assets reported at
P574.475 million and revert back the unaccounted and undocumented
liabilities totaling P884.548 million to Accumulated Surplus/Deficit account.
5.12 The Management commented that considering that most of the amounts are carried
over balances since the inception of the eNGAS, and that the employees who used
to handle the accounts and their reconciliation have already retired and no turnover
of documents were made, the current personnel handling the accounts have
difficulties in conducting the reconciliation and analysis. However, they shall exert
effort to gather supporting documents and evidence to support the balances and
cleaning of the accounts.
83
.
Other Assets
6. The existence and validity of the Other Assets account amounting to P225.001
million cannot be ascertained due to the dormancy of the account and non-
submission of supporting documents, hence did not reflect the reasonable
recoverable amounts, that affected the faithful representation of the asset accounts
contrary to IPSASs 1 and 21.
6.1 Paragraph 27 of IPSAS 1– Presentation of Financial Statements provides that:

6.2 Paragraph 7 of the same IPSAS defines assets as resources controlled by an entity
as a result of past events and from which future economic benefits or service
potential are expected to flow to the entity. The Framework sets forth the criteria for
asset recognition which consist of the probability of future economic benefits and
the reliability of measurement of an item in the Statement of Financial Position.
6.3 Paragraphs 22 of IPSAS 26 – Impairment of Cash-Generating Assets and

paragraph 26 of IPSAS 21 – Impairment of Non-Cash Generating Assets provides
that:

entity shall estimate the recoverable amount of the asset.

6.4 In our examination of the Other Assets account, we noted that the total amount of
P225.001 million was non-moving or dormant for several years, as follows:
Particulars Balance as of 12/31/20

Dormant Accounts P688,359,478.57
Allowance for Impairment (519,000,421.20)
Non-operational Assets 38,816,036.36
Garnished Accounts 10,613,511.99
Research and Development 6,212,055.00
TOTAL P225,000,660.72
84
.
6.5 According to the Management, when the agency started to implement the e-NGAS
software in CY 2007, the above subject accounts were recognized as Other Assets
in the accounting system. However, the migration to the automated system was
implemented without proper validation or physical inventory taking of the tangible
assets.
6.6 Composition of the affected accounts as of December 31, 2020, are as follows:
a. Dormant Accounts, net – P169.359 million
Particulars Reference Amount

Customers Account for Write-off 290-05-04 P 525,703,918.74
Accounts Receivable Under Government 290-05-10 85,519,514.71
Litigation
Restoration Works 290-05-03 29,054,312.65
Returned Dishonored Checks 290-05-12 17,586,551.27
Cash-Collecting Officers 290-05-13 5,747,157.91
Due from Local Government 290-05-07 4,272,542.89
Due from National Government 290-05-06 3,575,826.62
Claims from Accountable Officers for Cash 290-05-11 3,509,305.72
Shortage
Deposits for the exercise of an option to 290-05-01 1,092,093.00
buy/lease
Unaccounted/Unliquidated Cash Advance 290-05-09 875,350.67
Performance Deposits 290-05-02 306,102.07
Expropriation 290-05-08 258,987.62
Others (various old accounts) 290-05-05 10,857,814.70
TOTAL P 688,359,478.57
Allowance for Impairment losses 519,000,421.20
NET TOTAL P 169,359,057.37
b. Non-Operational Assets – P38.816 million

Pipes 99-990-02-01 P 525,703,918.74
Structures and Improvement 99-990-02-07 85,519,514.71
Distribution, Reservoir and Standpipes 99-990-02-04 29,054,312.65
Buildings and Improvement 99-990-02-05 17,586,551.27
Wells and Facilities 99-990-02-06 5,747,157.91
NET TOTAL P 169,359,057.37
c. Garnished Accounts – P10.614 million

Isabelo Ong Const. Inc/CIAC No.04-96 Civil
Case No.91-148(Wholesale Commodity and 290-04-01 P 328,373.13
Exch. Inc)
Philippine Infrastructures Inc. c/o Sheriff E. 290-04-04 1,062,650.58
Santos
A.M. Oreta& Co. Inc. c/o Sheriff Mercedes S. 290-04-06 6,949,023.49
85
.

Gatmaytan Vs. MWSS/CIAC Case MP/06-97
Isabelo Ong Const. Inc, vs. MWSS 290-04-07 2,273,464.79
/CIACNo.16-97
TOTAL P 10,613,511.99
d. Research and Development – P6.212 million
Technical Assistance 290-03-02-01 P 4,445,570.25

Evaluation/Review of Laiban Dam Project 290-03-04-04-01 349,720.05
Review of Loan Documents 290-03-03-01-01 20,000.00
Salary & Int'l. Fare (for Consultancy Services as 290-03-01-01-01 877,660.92
Dam Expert from Nov. 14-20, 2002)
Hotel Accommodation & Other Expenses of the
Consultant, from Nov. 15-19, 2002 (Charged 290-03-01-01-02 13,152.00
from His Credit Card)
Reimbursement of Other Expenses of the
Consultant), from Nov. 15-19, 2002 (Charged 290-03-01-01-03 4,416.00
from His Credit Card)
Salary & Int'l Fare of the Consultant, for the
Initial Safety Assessment of Angat Dam Per 290-03-01-01-04 183,600.00
November 2002
Salary & Airfare for the Consultant, for Initial
Safety Assessment of Angat Dam & Carbon 290-03-01-01-05 317,935.55
Dating of Soil & Rock Samples
Adjustment of Salary & Airfare of the Consultant,
for the Initial Safety Assessment & Carbon 290-03-01-01-06 0.61
Dating of Soil & Rock
TOTAL P 6,212,055.38
6.7 We have requested the concerned Departments to provide us the necessary

information and supporting documents in order to establish the existence and
validity of the subject accounts. However, the Management was not able to submit
the requested information and documents necessary for our validation of accounts.
The management explained that they have initially tried searching the supporting
documents into the storage rooms. Likewise, they also stated that they are looking
forward to exert effort to locate the documents. However, this has not been
prioritized yet due to the pandemic crisis and the implementation of alternative work
arrangements.
6.8 In addition, we also requested the management to submit the Manual of Policy and
any future plans or actions for these dormant accounts. However, the Management
said that, there is no manual of policy being implemented as regards these dormant
accounts.
6.9 Hence, the Management should provide impairment losses for these dormant
accounts to reflect the reasonable recoverable amounts for faithful representation
of accounts.
86
.
6.10 We recommended that Management:
a. Require the Finance Department to provide allowance for impairment

losses to reflect the reasonable recoverable amounts;
b. Require the Finance Department to submit to the Commission on Audit a

request for write-off of the dormant accounts, if the said accounts qualify
for write-off;
c. Require the Legal Department to provide status of claims under

government litigation, claims from AOs for cash shortage and garnished
accounts; and
d. Require the Legal Department to identify all the persons liable for the
necessary legal action of MWSS to recover its claims.
6.11 Management commented that considering that most of the amounts are carried
over balances since the inception of the eNGAS, and that the employees who used
to handle the accounts and their reconciliation have already retired and no turnover
of documents were made, the current personnel handling the accounts have
difficulties in conducting the reconciliation and analysis. However, they shall exert
effort to gather supporting documents and evidences to support the balances and
cleaning of the accounts.
Cash in Bank
7. Unreconciled variance amounting to P101.362 million between the book and bank
balances of Cash in Bank account reported in the financial statements at P3.105
billion, due to non-preparation of Bank Reconciliation Statements (BRS) casts
doubt on the validity and accuracy of the account balance contrary to paragraph
27 of IPSAS 1, COA Circular No. 2020-02, and Sections 74 and 122 of Presidential
Decree (PD) No. 1445.
7.1 Paragraph 27 of IPSAS 1 discusses the requirement of faithful representation to

wit:

result in financial statements that achieve a fair presentation. (emphasis
ours)
87
.
7.2 Section 74 and 122 of P.D. 1445 provides that:
Section 74. Monthly reports of depositories to agency head. At the close of

each month, depositories shall report to the agency head, in such from as
he may direct, the condition of the agency account standing on their books.
The head of the agency shall see to it that a reconciliation is made between
the balance shown in the reports and the balance found in the books of the
agency.
Section 122. Submission of reports. Whenever deemed necessary in the

exigencies of the service, the Commission may under regulations issued
by it require the agency heads, chief accountants, budget officers, cashiers,
disbursing officers, administrative or personnel officers, and other
responsible officials of the various agencies to submit trial balances,
physical inventory reports, current plantilla of personnel, and such other
reports as may be necessary for the exercise of its functions. (2) Failure on
the part of the officials concerned to submit the documents and reports
mentioned herein shall automatically cause the suspension of payment of
their salaries until they shall have complied with the requirements of the
Commission. xxx.
7.3 Audit of Cash in Bank account revealed the following discrepancies between the
book and bank records, as shown below:
Account Name Balance per Book Balance per Bank Variance

Local Current Account - LBP P 21,693,957.23 P 122,784,124.49 P 101,090,167.26
Local Current Account- PNB (10,388.31) 0 10,388.31
– Corporate Office
Local Current Account - PNB (211,307.69) 0 211,307.69
– Main Fund
Local Savings Account - PNB 16,474.15 0 16,474.15
Corporate Office
Local Savings Account - PNB 33,257.75 0 33,257.75
Main Fund
Total P 21,521,993.13 P 122,784,124.49 P 101,361,595.16
7.4 LBP account discrepancy - P101.090 million
The Finance Department submitted only three (3) LBP current accounts. They
explained that they are still securing credit and debit memos of the LBP current
account.
7.5 PNB account discrepancy – P271,427.90
All the PNB accounts were closed in CY 2015 in compliance with DOF Circular Nos.
001-2015 and 002-2015. However, MWSS still reported the PNB accounts in the
books with negative balances, net amounting to P171,964.10, as shown below:
Account Name Type Book Balance Total

Local Current Account- PNB – Combo P (10,388.31)
P 6,085.84
Corporate Office Account
88
.
Account Name Type Book Balance Total

Local Savings Account - Corporate 16,474.15
Office
Local Current Account - PNB – Main Combo (211,307.69)
Fund Account (178,049.94)
Local Savings Account - Main Fund 33,257.75
Total PNB Balance P (171,964.10) P (171,964.10)
7.6 Explanation have been requested from the Management of the above recorded
balances of four PNB accounts in the books, but no explanation was received yet.
7.7 On March 11, 2021, we have requested the management for the submission of the
Bank Reconciliation Statements. However, the Management has not submitted the
Bank Reconciliation Statements for CY 2020 of the following bank accounts totaling
P159.576 million:
Bank and Type of Account Balance per Book

LBP - Current Account P 21,693,957.23
DBP - Savings Account 137,892,313.56
LBP - Savings Account (managed by BTr) 109,136.03
LBP – Savings Account (Foreign currency) 38,490.91
PNB – Current Account (10,388.31)
PNB – Savings account 16,474.15
PNB – Current Account (211,307.69)
PNB – Savings Account 33,257.75
BSP account (managed by BTr) 14,153.82
Total P 159,576,087.45
7.8 The verification of the noted discrepancies on the reported cash balances could not
be done due to the non-preparation and non-submission of Bank Reconciliation
Statements of the Management.
7.9 In addition, we would like to emphasize that this is a reiterated audit observation.
Inquiry with Finance Department revealed that they usually prepare and submit only
four LBP current/checking accounts as per turn-over by the previous personnel
handling the preparation of the BRS.
7.10 BRS are only submitted by Finance Department upon request of the Audit Team,
which is not in compliance with Section 74 of P.D. 1445 wherein at the close of each
month, reconciliation should be made. BRS of the Agency’s current and savings
accounts should be prepared and submitted on a monthly basis.
7.11 The conduct of periodic bank reconciliation is an indispensable tool of a sound

internal control system over cash and cash equivalents as it will help not only in the
identification and detection of errors/discrepancies between the book and bank
balance and to come up with the correct book balance, but it also aids in the
prevention and detection of fraud.
7.12 These material variances noted between the bank and book balances of the Cash
in Bank account which remained unreconciled affected the fair presentation of the
89
.
account and other affected accounts in the financial statements as necessary

adjustments were not taken up in the books.
7.13 We recommended and Management agreed that Finance Department prepare

and submit the periodic bank reconciliation statements for all the bank
accounts and take up the necessary adjustments on the variances noted,
including the closed PNB accounts with net amount of P171,964.10 to arrive
at the correct balance of the Cash in Bank account.
7.14 For LBP account discrepancies, the Management commented a thorough BRS is
being done for the unrecorded collections and disbursements per books of accounts
vis-à-vis bank balances and that prospectively, they will adhere to submit BRS on
a monthly basis.
7.15 For PNB account discrepancies, the Management commented that these accounts
were already closed in CY 2015 in compliance with DOF Circular Nos. 001-2015
and 002-2015. However, due to lack of supporting documents over the years to
substantiate such closure, the PNB negative balances are still intact with MWSS
books of accounts. Further, coordination with PNB will be done for the needed
supporting documents for the account reconciliation and dropping off in the books.
8. Cash in Bank is overstated by P62.831 million due to the Management’s practice

of recognition of Cash in bank – Foreign Currency Savings Account for the ODA
loan availments under Direct Payment Procedure mode which affected the fair
presentation of the account in the financial statements contrary to IPSAS 1 and
COA Circular 2020-02.
8.1 COA Circular 2020-02 dated January 28, 2020 prescribes the adoption of the
Revised Chart of Accounts (RCAs) for Government Corporations (GC) where Item
2.1 provides for the implementing guidelines that the GC shall recognize their
transactions in accordance with the updated RCA prescribed therein. Also, Annex
C provides for the description of the updated accounts including the description of
Cash in Bank, Foreign Currency Savings Account, as follows:
This account is debited to recognize deposits of cash in foreign currency in

a savings account with Authorized Government Depository Bank
(AGDB), including credit advices/memoranda received from AGDBs.
This account is credited for withdrawals of cash from AGDBs including debit
advices/memoranda received from AGDBs. (emphasis ours)
8.2 Audit of the year-end balance of Cash in Bank – Foreign Currency, Savings Account
revealed a discrepancy of P62.831 million. The subsidiary ledger for Angat Water
Transmission Improvement Project (AWTIP) presented a year-end balance of
P62.831 million. However, verification with the Management revealed that there
was no physical bank account being maintained for the cash proceeds of the loan
availment from the ADB yet MWSS concurrently records cash transactions.
90
.
8.3 Review of the AWTIP account revealed that the account is being used in recording
loan drawdowns/receipt of loan proceeds from Asian Development Bank (ADB) and
progress billings for the projects, even if there was no actual cash received by
MWSS from ADB under a Direct Payment Procedure.
8.4 In our walkthrough test, we noted that the loan availment is in a form of Direct
Payment Procedure. Upon receipt of MWSS of the Statement of Account (SOA) or
Billing Statement from the Contractor/Supplier, MWSS will request the ADB/China
Eximbank to pay the amount due directly to the Contractor/Supplier. MWSS will
then prepare and submit a Withdrawal Application (WA) to ADB/China Eximbank.
8.5 Upon receipt and verification of the WA from MWSS, the ADB/China Eximbank will
directly credit the loan drawdown to the account of the Contractor/Supplier and will
issue a Notice of Disbursement to MWSS.
8.6 MWSS, upon its receipt of the Notice of Disbursement from the ADB/China
Eximbank, will recognize the loan proceeds and subsequently recognize the
Construction in Progress (CIP) Account.
8.7 However, we noted that MWSS used the Cash in bank – Foreign Currency
Savings Account as a suspense/temporary account in its recognition of the
progress billings and drawdown of loans even if there was no actual cash received
by MWSS.
8.8 Illustrative entries made by Finance Department are as follows:
Debit Credit
Cash in bank – Foreign Currency, Savings Account XXX
Loans payable – Foreign XXX
To record loan drawdowns or receipts
Construction in Progress – Agency Assets XXX

Cash in bank – Foreign Currency, Savings Account XXX
To record progress billing
8.9 Inquiry with the management disclosed that the recognition of suspense account
cash in bank – foreign, savings account, is being done for ease of monitoring of
transactions related to the loan availment and payments to the contractor, thus
there should be corresponding cash in and out in loans receipts and loan
disbursement.
8.10 This practice of recognizing Cash in bank accounts, wherein there was no actual
cash receipts, resulted to misleading financial information and affected the fair
presentation of the financial statements.
8.11 Further verification revealed that the reported year-end balance of P62.831 million
of the AWTIP account was due to the late recording of progress billing/payment
to the contractor/supplier. They added that they are waiting for the remittance of
the Concessionaire for the VAT portion of the billing before recording the progress
billing/payment. Nevertheless, this year-end balance of the AWTIP account
amounting to P62.831 million formed part of the Cash and Cash Equivalents in
91
.
the financial statements even if there is no such actual cash in bank being
maintained by MWSS resulting to overstatement of the total assets contrary to
IPSAS 1 on fair presentation of the the results of transactions.
8.12 We recommended and Management agreed that Finance Department:
a. Take up the necessary adjustments to correct the misstatement

amounting to P62.831 million; and
b. Stop the practice of recording cash in bank for the ODA loan availments
under Direct Payment Procedure mode.
8.13 The Finance Department fully acknowledged the result of the audit. They
commented that instead of using the Cash in Bank Foreign Currency Savings
Account, they conform with the pro-forma entries suggested for non-cash
availment of loan proceeds as provided in the Guidelines on the Audit of Foreign
Assisted Projects (GAFAP) under COA Memorandum No. 2015-004 dated March
10, 2015.
Deferred Credits
9. Other Deferred Credits account was overstated by P31.808 million caused by the
following errors affecting the Liability account and contrary to IPSASs 1, 3 and 9:
a. Recognition of Other Deferred Credits amounting to P16.583 million

instead of Sales from Scrap materials;
b. Recognition of Other Deferred Credits amounting to P1.386 million instead
of Sales from Bidding documents;
c. Recognition of Other Deferred Credits amounting to P620,053 instead of
Trust Liabilities – Customers’ Deposit Payable; and
d. Recognition of Other Deferred Credits amounting to P13.219 million
instead of Deposits
9.1 IPSAS 1, paragraph 27 provides that financial statements shall present fairly the
IPSASs, with additional disclosures, when necessary, is presumed to result in
9.2 IPSAS 1, paragraph 48 - Offsetting states that assets and liabilities, and revenue
and expenses, shall not be offset unless required or permitted by an IPSAS. It is
important that assets and liabilities, and revenue and expenses, are reported
separately. Offsetting in the statement of financial performance or the statement of
financial position, except when offsetting reflects the substance of the transaction
or other event, detracts from the ability of users both to understand the transactions,
92
.
other events and conditions that have occurred and to assess the entity’s future
cash flows.
9.3 Revenue from Exchange Transactions, as defined under paragraph 11 of IPSAS 9,

are transactions in which one entity receives assets or services, or has liabilities
extinguished, and directly gives approximately equal value (primarily in the form of
cash, goods, services, or use of assets) to another entity in exchange.
9.4 Paragraph 28 of IPSAS 9 states that revenue from the sale of goods shall be
recognized when all of the following conditions have been satisfied:
a. The entity has transferred to the purchaser the significant risks and rewards of
ownership of the goods;
b. The entity retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
c. The amount of revenue can be measured reliably;
d. It is probable that the economic benefits or service potential associated with
the transaction will flow to the entity; and
e. The costs incurred or to be incurred in respect of the transaction can be
measured reliably.
9.5 COA Circular 2020-02 dated January 28, 2020 prescribes the adoption of the
Revised Chart of Accounts (RCAs) for Government Corporations (GC) where Item
2.1 provides for the implementing guidelines that the GC shall recognize their
transactions in accordance with the updated RCA prescribed therein. Also, Annex
C provides for the description of the updated accounts including the description of
the Customers’ Deposit Payable to wit:
This account is credited to recognize the receipt of cash deposits from

customers for goods/services to be delivered and property to be leased.
This account is debited upon application of the deposit to the cost of the
goods/services delivered and of the damages to the leased property, upon
refund of the cash receipts, and/or adjustments.
9.6 Analysis of the account balances from CY 2019 to CY 2020 are shown below:
Increase
Particulars 2020 2019
(Decrease)
Other Deferred Credits

Deferred Credits to 59,167,165 54,611,273 4,555,892
Income
Disposal/Public Auction (a) 35,699,020 35,804,104 (105,084)
Rental of MWSS 30,724,507 13,994,589 16,729,918
Properties
Cost of Lot Housing (d) 13,219,098 13,219,098 -
Miscellaneous – Others (c) 8,441,962 263,843 8,178,119
Interest 8,423,623 8,423,623 -
BID Documents (b) 833,023 290,172 542,851
Amount withheld for 192,820 25,705 167,115
damages
Other Deferred Credits - 12,623,799 (12,623,799)
Total 156,701,218 139,256,206 17,445,012
93
.
9.7 Examination of the accounts disclosed the following errors and deficiencies in the
recognition of the Deferred Credits amounting to P31.808 million, as follows:
a. Cash receipts from the sale of scrap materials amounting to P16.583

million remained recorded in the books as Other Deferred Credits
account instead of revenue.
1. Receipt of proceeds from the sale of scrap materials amounting to P16.583

million was recorded as Other Deferred Credits as follows:
Amount credited
Particulars SL Code to Other Deferred Credits
Metalbank, Inc. 455-01-02-439 P 1,071,428.59
Disposal of Assets 455-01-10-01 82,079.26
Undistributed Collection-
Disposed Construction
Materials 455-02-02-03 14,869,335.80
Undistributed Collection-
Disposed/Loss of fixed
asset /equipment 455-02-02-04 560,267.87
Total P 16,583,111.52
2. Upon examination of the related transactions, the sale of scrap materials

falls within the scope of revenue recognition under paragraph 28 IPSAS 9,
hence should be recognized as revenue instead of Other Deferred Credits.
3. Management explained that the Finance Department expects to complete

first the documentations regarding the disposal to be submitted by the Asset
Management Department (AMD)/Disposal Committee to support the closing
of sold PPE from the books. With the cash received from disposal, the
department temporarily recognized the Other Deferred Credits. Then, upon
completion of the documents, the department will derecognize the Other
Deferred Credits and recognize the corresponding gain or loss.
4. The said practice does not conform to IPSAS 9 on the recognition of revenue
from exchange transactions which resulted in the understatement of
revenue and overstatement of other deferred credits, a liability account, by
P16.583 million. Essentially, the effect of the transaction was not properly
presented in the financial statements.
5. Assessing the company’s practice on recognizing the Other Deferred
Credits account for the sale of scrap materials, it may affect the fair
presentation of the income statement and this might mislead the users of
the financial statements on the true income of the company. Also, crediting
the Other Deferred Credits account for this transaction will be construed as
unearned revenue until earned (goods given/service rendered); which, in
this case, does not conform with IPSAS 9 – Revenue from Exchange
Transactions.
b. Proceeds from the sale of bidding documents totaling P1.386 million was
erroneously recorded in the books as Other Deferred Credits account
despite the non-refundable nature of the cash receipts.
94
.
1. Analysis of the subsidiary ledger of the Other Deferred Credits account

revealed that the amounts of P542,851.01 and P843,741.17 during the CYs
2020 and 2019, respectively, representing proceeds from sale of bidding
documents were recognized as Other Deferred Credits instead of
miscellaneous income.
Particulars SL Code 2020 2019

Contractor A 455-01-10 P 44,642.86 P 0.00
Sale of Bid Documents –
Procurement 455-01-10 498,208.15 843,741.17
Total P 542,851.01 P 843,741.17
2. Management explained that the receipt from sale of bid documents is being
lodged to Other Deferred Credits account since the expenses relating to the
bidding (meals expenses for BAC and TWG meetings and honoraria for
BAC, BAC Sec and TWG members) are being deducted from the receipts.
3. The Other Deferred Credits is closed to Income or Retained Earnings as

soon as the related expenditures relating to the bidding process have been
deducted already. Assessing the above-mentioned practice of recognition,
this offsetting of accounts is not permitted under IPSAS 1.
4. Notwithstanding Management’s explanation, the said practice does not

conform to IPSAS 1 considering that the nature of the transaction is receipt
of income and not incurrence of liability.
c. Cash receipts from bonds amounting to P620,053 were recognized as

Other Deferred Credits instead of Trust Liabilities – Customers’ Deposit
Payable
1. The use of various MWSS properties including, but not limited to, Carriedo
space, rooftop, multi-purpose hall, and other leased areas, requires the
payment of cash bond. It represents the security which shall compensate in
case of damages after the lease of MWSS properties. Cash bond is returned
to the lessee upon completion of actual use of the property.
2. Audit of CY 2020 balance of Other Deferred Credits disclosed that the

amount of P620,053.77 pertains to transactions involving payment of cash
bond for the lease of MWSS property. The transactions clearly fall under
the description of the Customers’ Deposit Payable account.
3. Management acknowledges that their entry of cash bonds to Other Deferred

Credits is a misclassification. They will consider reclassifying the cash bonds
to a more appropriate account.
d. Cost of Lot for Housing with year-end balance of P13.219 million pertains
to undistributed collections received from former and present
employees, and non-MWSS employees.
95
.
1. The Cost of Lot for Housing with year-end balance of P13.219 million
pertains to the undistributed collections received from payors who are
former and present employees, and non-MWSS employees. It was learned
that since 2007, only P252,000 was refunded to the payors of lot for housing
project.
2. We have previously recommended that Management determine who among

the payors actually availed of the housing project in order to reduce the
undistributed collections totaling P13.219 million under the Deferred Credits
account and adjust to its proper account.
3. However, we noted that there was no action or compliance for the noted
exception. As per Management representation, thru the Agency Action Plan
and Status of Implementation submitted to this Office on May 7, 2021, the
implementation is on-going since the accounts are being reconciled. Further
inquiry was made to the Management however no response was received
yet.
4. The noted misstatements in the Other Deferred Credits account amounting

to P13.219 million affects the reported balances of the liability and revenue
accounts and the fair presentation of the said accounts in the financial
statements.
9.8 We recommended that the Finance Department:
a. Provide the correcting entries for the misstatements in the Other Deferred
Credits account amounting to P31.808 million and stop the practice of
recording the receipts of proceeds from sale of scrap materials as Other
Deferred Credits, instead, record the same by closing the related PPE
account and corresponding accumulated depreciation, and gain or loss
on sale;
b. Establish a source document for the monitoring of the PPE/scrap

materials sold for proper dropping of the accounts;
c. Record the proceeds from sale of bid documents as Miscellaneous

Income and take up expenses related to bidding as a separate journal
entry from the sale of bid documents to correctly reflect the substance of
the transaction;
d. Record the receipt of cash bonds as Customer’s Deposit Payable

account; and
e. Review the records pertaining to the housing project to determine who

among the payors actually availed of the housing project in order to
adjust the undistributed collections totaling P13.219 million to the proper
accounts.
9.9 Management concurred with the recommendation to stop the practice of recognition
of Deferred Credits for receipts of proceeds from the sale of PPE/scrap materials, .
96
.
However, the Finance Department found it as the most practical way in order to
recognize in the books of accounts the receipt of cash. Despite their desire to
comply with the proper accounting treatment for the collection, absence of the
required documents for the dropping of disposed assets prevents them from doing
so. Further, as regards the recommendation to ensure that the amount of the actual
proceeds from sale of scrap materials are correctly reported in the books, the
Finance Department believes that all cash receipts are correctly reported as
received from the hauler/buyer.
9.10 We contend otherwise, because in the Manual of Disposal of Government Property,

one of the requisites prior to the disposal is the preparation of the Inventory &
Inspection Report, Report of Waste Materials or Invoice Receipt for Property, to
which, identification of the assets recorded in the books is needed prior to the actual
disposal.
9.11 Management has concurred with the other audit recommendations.
Restricted Fund
10. The Other Assets – Restricted Fund is understated by P12.734 million due to non-
monitoring and non-reconciliation of the account which affected the fair
presentation of the financial statements contrary to IPSAS 1 and Section 111 of
Presidential Decree No. 1445.
10.1 IPSAS I, paragraph 27 provides that financial statements shall present fairly the
10.2 Section 111(1) of P.D. 1445 on the keeping of accounts, which provides –
The accounts of an agency shall be kept in such detail as is necessary to

meet the needs of the agency and at the same time be adequate to furnish
the information needed by fiscal or control agencies of the government.
10.3 The Other Assets – Restricted Fund account has a year-end balance of P503.520
million composed of the following:
Account
Account Name Amount
Code
197-01 Special Reserve Fund P 431,789,263
197-03-01 SM Prime Holdings, Inc. 37,560,096
197-03-02 Bulacan Bulk Water Supply Project 10,114,327
197-03-03 Angat Dam Dyke Strengthening Project 24,056,384
Total P 503,520,070
97
.
10.4 Confirmation reply from the Bureau of Treasury (BTr) for the balance of Special
Reserve Fund revealed a discrepancy of P12.734 million, as shown below:
Account Name Balance per Book Balance per BTr/LBP Discrepancy

Special Reserve Fund P 431,789,263 P 444,523,445 P 12,734,182
10.5 Inquiry from Finance Department disclosed that the variance was due to the
adjustment made by BTr on the revaluation gain/loss on the account but they are
still coordinating with BTr on the nature of the adjustments made.
10.6 The noted discrepancies in the Other Assets – Restricted Fund and MWSS’ non-
reconciliation resulted to the understatement of the account by P12.734 million and
affected the fair presentation of the financial statements contrary with IPSAS 1 and
Section 111 of Presidential Decree No. 1455.
10.7 We recommended and Management agreed that Finance Department take up

the necessary adjustments to correct the understatement of the reported
balances of the Restricted Fund by P12.734 million.
Other Payables
11. Dormant accounts amounting to P60.658 million and abnormal balances

amounting to P2.048 million cast doubt on the reliability of the reported Other
Payables accounts, thus, affecting the fair presentation of the accounts in the
financial statements contrary to IPSAS 1.
11.1 Paragraph 27 of IPSAS 1 provides that:

11.2 Analytical procedures and inquiries were made on the audit of subsidiary ledgers,
general ledgers and schedules of Other Payables accounts generated from the e-
NGAS. Audit revealed that there are numerous subsidiary ledgers of Other
Payables with debit balances as of year-end amounting to P2.048 million.
11.3 We have noted 39 remaining debit balances at year-end which unnecessarily

reduced the balance of other payables, thus cast doubt on the validity and
accuracy of the said account. These negative balances are to be analyzed for
adjustment or reclassification to proper accounts.
11.4 More so, verification of the subsidiary records revealed that there are accounts
which remained outstanding for five (5) years amounting to P60.658 million. This
98
.
amount consist of numerous payees with subsidiary records totaling 635

accounts.
11.5 Management is already aware of the accounts presented in other payables,

although based on the foregoing concerns, it will check and validate the amounts
for CY 2020 and shall take proper action for reconciliation and tracing if the
obligations still exist.
11.6 We recommended and Management agreed that Finance Department

analyze and review the validity of all recorded payables from various payees
that remained outstanding for 5 years amounting to P60.658 million, for
proper adjustment; and review the subsidiary accounts with abnormal
balances and accordingly, take up the necessary adjustments.
Sinking Fund
12. Non-submission of the supporting documents for the closure of the bank account
and derecognition in the books of the Angat Sinking Fund Reserve in the amount
of P29.510 million intended for the Angat Serial Bonds raised doubt on the faithful
representation of the account contrary to PD No. 1445 and Section 11 of CY 2020
General Appropriations Act (GAA).
12.1 Section 4(4) of PD 1445 states that, “Fiscal responsibility shall, to the greatest
extent, be shared by all those exercising authority over the financial affairs,
transactions, and operations of the government agency.” (emphasis supplied)
12.2 Section 102 of PD 1445 – Primary and Secondary Responsibility states that:
1. The head of any agency of the government is immediately and primarily

agency.

12.3 Section 11 of the GAA for FY 2020 – Transparency of Public Funds provides that:
xxx
In like manner, departments, bureaus, offices, and instrumentalities of the

National Government, including Constitutional Offices enjoying fiscal
autonomy and SUCs and GOCCs shall post on their respective official
websites information relating to public funds deposited, maintained,
and invested by them with any banking or financial institution which
shall include, but not limited to the following: (i) name of the banking or
financial institution/s where public funds are deposited, maintained or
invested; (ii) specific income or fund sources; (iii) legal basis for depositing,
99
.
maintaining or investing said income/fund source/s with the bank/s or

financial institution/s; (iv) allowable uses/purposes of the income or fund;
(v) monthly balances of each account or fund; and (vi) such other
pertinent information as may be reasonably required to be posted by the
agency concerned on its website. (emphasis supplied)
12.4 On December 12, 1989, a Sinking Fund was set-up in connection with the
issuance of the MWSS Angat Serial Bonds which matured on April 30, 2002. The
fund is being managed by Bangko Sentral ng Pilipinas and later on transferred to
the Bureau of the Treasury (BTr) on June 30, 1995.
12.5 On April 30, 2002, the Angat Sinking Fund Reserve in the amount of P27.814
million with value dated August 26, 2003, were fully redeemed by MWSS and the
amount was transferred by BTr to MWSS Current Account 244-500163-8 with
PNB MWSS Branch which was recorded under JEV No. 05-11-28010 dated
October 7, 2003.
12.6 However, validation of the Cash in Bank account with PNB thru confirmation
disclosed that MWSS has no active account anymore with the PNB. Discrepancies
in the book records as against the bank confirmation was raised in an earlier Audit
Observation Memorandum to which explanation has been requested from the
Management of the above recorded balances of four (4) PNB accounts in the
books, but no explanation was received yet.
12.7 Further, there were noted interest earned on the MWSS Angat Sinking Fund for
the 4th Quarter of 2003 and 3rd Quarter of 2004 totaling P77,321.51 despite the
maturity date of the Fund on April 30, 2002, details of interest earned is shown
below:
Particulars JEV Date JEV Number Debit Amount

To take up interest earned on MWSS 01/13/2004 05-506/03 P 22,050.40
Sinking Fund with BTr for the 4th Qtr. of
2003 dated November 12, 2003
To adjust the overstatement on the 02/02/2004 05-516/03 (11,581.15)
estimated amount of interest earned for
the 4th Qtr. of 2003 per BTr letter dated
January 15, 2004
To take up interest earned on MWSS 10/11/2004 05-/04 66,852.26
Sinking for the 3rd Qtr. of 2004 per BTr
letter dated October 7, 2004
Total P 77,321.51
12.8 In CYs 2014 and 2015 Annual Audit Reports (AARs), we recommended that
Management require the Finance Department to immediately reconcile the sinking
fund transactions with the BTr due to the BTr’s consistent confirmation on the non-
existence of the fund in their books.
12.9 On December 28, 2016, the Sinking Fund account of P29.510 million was
derecognized in the books per JEV-2016-12-004219, leaving zero balance of the
Sinking Fund account. Entries made are as follows:
100
.
Retained Earnings 29,510,406

Sinking Fund 29,510,406
12.10 However, the attached documents were insufficient to support the derecognition
of the account despite our prior audit recommendation to reconcile with BTr. It can
be deduced that Management merely prepared an adjusting entry to tally its
records with the BTr without supporting documents and proper reconciliation with
BTr.
12.11 In CY 2016 AAR, due to the derecognition of the sinking fund account in the books
without proper reconciliation with BTR and non-submission of supporting
documents, it was recommended that the Finance Department (a) explain the
interest earned of P77,321.51 even after the redemption date of the MWSS Angat
Sinking Fund and the remittance of the remaining balance of the Fund by the BTr;
(b) reverse the entries made under JEV-2016-12-004219 (i) pending reconciliation
of the Sinking Fund Reserve balance with BTr; and (ii) submission of copies of
bank statements on PNB Current account 244-500163-8 maintained by MWSS
with PNB MWSS Branch.
12.12 To date, no compliance was made by MWSS of the above audit recommendation
and no explanation was submitted on our inquiry with Management regarding the
derecognition of the sinking fund account in CY 2016.

immediately reverse the derecognition entries made for the Sinking Fund
and submit the supporting documents for the closure of the Angat Sinking
Fund Reserve amounting to P29.510 million.
12.14 The Management further commented that they will seek assistance from the BTr
to provide the required supporting documents and/or any reconciliation as
applicable.
Investment in Stock
13. Unaccounted Certificates of Stock amounting to P2.045 million casts doubt on the
validity of the Investment in Stocks of the same amount, thus, affecting the faithful
representation of the account contrary to IPSAS 1 and Section 111 of Presidential
Decree No. 1445.
13.1 Paragraph 27 of IPSAS 1 – Presentation of Financial Statements discusses the

requirement of faithful representation to wit:

101
.
13.2 Section 111 of Presidential Decree No. 1445 states that:
(1) The accounts of an agency shall be kept in such detail as is necessary

to meet the needs of the agency and at the same time be adequate to
furnish the information needed by fiscal or control agencies of the
government.
(2) The highest standards of honesty, objectivity and consistency shall be

observed in the keeping of accounts to safeguard against inaccurate
or misleading information.
13.3 Investment in Stocks account are the investments of MWSS CO in publicly listed
companies in which they acquired shares of stocks to earn dividend income from
the company. Some of the shares that the MWSS CO acquired are PLDT and
MERALCO.
13.4 The books of MWSS CO presented the CY 2020 and CY 2019 ending balances
and it shows that there was no movement throughout the year:
Investment in Stocks CY 2020 CY 2019

PLDT (1,850 shares) P 372,650 P 372,650
MERALCO (64,894 shares) 2,151,518 2,151,518
TOTAL P 2,524,168 P 2,524,168
13.5 Management submitted the original copies of PLDT and MERALCO stocks
certificates for validation and inspection. Upon inspection of the certificates, we
have noted unaccounted stock certificates amounting to P2.045 million as follows:
Investment in Original Stock

Per books Unaccounted
Stocks Certificates
PLDT P 298,500 P 372,650 P 74,150
MERALCO 180,400 2,151,518 1,971,118
TOTAL P 478,900 P 2,524,168 P 2,045,268
13.6 Therefore, the book balance of the Investment in PLDT amounting to P74,150 and
Investment in MERALCO amounting to P1.971 million were not supported with
stock certificates. The management informed us that the documents transmitted
to us are the only stock certificates that are available to them.
13.7 The absence of stock certificates of investments amounting to P2.045 million casts
doubt on the validity of the year-end balance of the account.
13.8 We recommended and Management agreed that Finance Department make

representations with PLDT and MERALCO to verify and reconcile the correct
102
.
balance of their investment and secure copies of stock certificates

amounting to P2.045 million.
Due from Officers and Employees and Other Receivables
14. The Receivable-Disallowance/Charges account is understated by P27.313 million

due to non-recognition of Notices of Disallowance with issued Notices of Finality
of Decision (NFD) and the Due from Officers and Employees is overstated by
P26.504 million contrary to Section 22.6 of COA Circular No. 2009-06, Rules and
Regulations on Settlement of Accounts (RRSA), thus with net understatement of
the Receivable account by P809,970.00.
14.1 Section 22.6 of COA Circular No. 2009-006 dated September 15, 2009 provides
that:
The Chief Accountant shall, on the basis of the NFD, record in the books of
accounts, the disallowance and/or charge as receivable.
14.2 During CY 2020, Notices of Finality of Decision (Annex A) were issued to the
following Notices of Disallowances after the lapse of six (6) months from the date
of issuance of the NDs without appeal filed by the Management:
ND No. ND Amount Balance

December 31, 2020
2019-03-05 (PYs) – MPLP P 27,855,701.21 P 26,503,504.91
2019-02-05 (18) - Meals 809,970.00 809,970.00
Total P 28,665,671.21 P 27,313,474.91
14.3 However, we noted that the subject NDs with issued NFDs were not recognized
as Receivables-Disallowances/Charges account. Instead, the disallowances were
classified as Due from Officers and Employees account for the MPLP while the
ND for Meals were not recognized in the books.
14.4 The Management informed that they were not aware that the NDs with issued
NFDs should be classified as Receivables-Disallowances/Charges.
14.5 We emphasized to the Management that the NFD is a written notification that a
decision of the Commission on Audit has become final and executory and that the
same should be recorded under Receivables-Disallowances/Charges account to
recognize the amount due from persons liable for monitoring and recovery by
Management as provided in COA Circular No. 2009-006. Failure to effect the NFD
in the books of accounts understated Receivables-Disallowance/Charge by
P27.313 million which is the actual nature of the receivables.
14.6 We recommended and Management agreed that Finance Department:
a. Reclassify the Due from Officers and Employees with outstanding

balances of P26.504 million to Receivables- Disallowances/Charges; and
103
.
b. Recognize additional Receivables-Disallowances/Charges amounting to

P809,970.00 relative to the NFD issued for the Meal Allowance.
14.7 The Management commented that the subject NDs will be taken up in the books
in CY 2021.
15. The negative balance totaling P8.235 million in the Due from Officers and
Employees account reduce the balance of the account and casts doubt on the
validity of the balance at year end amounting to P36.171 million, thus, affecting the
faithful representation of the account contrary to IPSAS 1 and COA Circular No.
2016-005.
Likewise, various employees were continuously deducted monthly amortization

totaling P1.278 million as of December 31 2020 despite having negative balances.
15.1 IPSAS 1, Paragraph 27 provides that financial statements shall present fairly the
presentation requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, revenue and expenses set out in IPSASs. The
application of IPSASs, with additional disclosures when necessary, is presumed
to result in financial statements that achieve a fair presentation.
15.2 Section 7 of COA Circular 2016-005, states that:
The Accountant shall:
7.1 Conduct regular and periodic verification, analysis, and validation

of the existence of the receivables, unliquidated cash advances, and
fund transfers, and determine the concerned debtors, accountable officers
(Regular and Special Disbursing Officers, Collecting Officers, Cashiers)
and the source and implementing government entities concerned.
(emphasis ours)
15.3 Audit of the Due from Officers and Employees account revealed that 181
subsidiary accounts have negative balances totaling P8.235 million as of
December 31, 2020. This is due to the non-verification of the accounts for
subsequent adjustment.
15.4 Moreover, out of the 181 accounts with negative balances, we noted that there
were nine (9) individual subsidiary ledger accounts that were continuously
deducted with loan amortization despite having negative beginning balances at
the start of year 2020.
15.5 Inquiry from the Finance Department on the negative balances in the Due from
Officers and Employees disclosed that they have a separate book for the above
receivables, however, reconciliation and verification of the receivables were not
immediately conducted due to the retirement of the personnel maintaining the
104
.
books without the proper turnover/endorsement of all the pending works for
reconciliation.
15.6 Section 7 of COA Circular 2016-005 prescribed the periodic verification, analysis
and validation of the existence of the receivable account to ensure that all
receivables are correctly recorded in the books.
15.7 The non-verification of the accounts for proper adjustment resulted to

accumulation of unadjusted negative balances that affected the fair presentation
of the Due from Officers and Employees account.

prepare the necessary adjusting journal entries to correct the abnormal
balances and to regularly analyze and monitor the Due from Officers and
Employees account.
15.9 The Management commented that the housing and car loans are being reconciled
by the concerned personnel and adjustments will be duly taken up in the books if
warranted.
Statutory Contributions
16. Non-accrual of MWSS share for the contributions to GSIS, Pag-IBIG and PhilHealth
amounting to P742,143, P11,900 and P75,374, respectively, due to the non-
inclusion of the items in the accrual list for adjustment resulted to the
understatement of expense and liability accounts by P829,417.19, contrary to
IPSAS 1.
16.1 Paragraph 1 of IPSAS 1 – Presentation of Financial Statements provides that:
The objective of this Standard is to prescribe the manner in which

general purpose financial statements should be presented to ensure
comparability both with the entity’s financial statements of previous
periods and with the financial statements of other entities. To achieve
this objective, this Standard sets out overall considerations for the
presentation of financial statements, guidance for their structure, and
minimum requirements for the content of financial statements prepared
under the accrual basis of accounting. The recognition, measurement
and disclosure of specific transactions and other events are dealt with
in other IPSASs
16.2 MWSS, in its significant accounting policies as presented in the Notes to the
Financial Statements, use the accrual basis of accounting, to wit:
3.1 Basis of Accounting
The consolidated financial statements are prepared on an accrual

basis in accordance with the IPSASs.
105
.
16.3 Verification of the balance of Due to GSIS, Pag-IBIG and PhilHealth as of

December 31, 2020 revealed that Employer (ER) share totaling P829,417.19 was
not recorded in the books of accounts. MWSS did not record accrual for ER share
at year end. The ER Share as reported in the Schedule of Remittance are as
follows:
Schedule ER Share
Due to GSIS P 742,143.12
Due to Pag-Ibig 11,900.00
Due to Philhealth 75,374.07
Total P 829,417.19
16.4 The existing accounting practice of MWSS on the withholding and remittance of
mandatory contributions pertains only to the Employee share. The Employer (ER)
Share is not being accrued on the month the salaries were incurred, and only
records the ER share upon remittance.
16.5 The Finance Department issued a memo as part of the financial statement closing
process for the list of accruals to have full grasp on the transactions for CY 2020.
However, confirmation with the management revealed that the accrual for ER
share is not included as part of the accrual list.

include the recognition of employer share as part of year-end accruals.
17. The validity of the withholding of government statutory contributions under the
accounts Due to GSIS, PhilHealth and Pag-IBIG amounting to P722,010 was not
ascertained due to the non-submission of the Journal Entry Vouchers (JEVs)
contrary to IPSAS 1, COA Circular No. 2012-001 and PD No. 1445.
17.1 COA Circular No. 2012-001 dated June 12, 2021 reiterates the fundamental
principles governing the financial transactions and operations of any government
agency as stated in Section 4 of PD No. 1445:
xxx
6. Claims against government funds should be supported with complete

documentation.
17.2 Section 43 of PD No.1445 provides the powers, functions, and duties of the
auditors as representative of this Commission. One of the functions enumerated
is that the auditor shall have the custody, and be responsible for the safekeeping
and preservation of paid expense vouchers, journal vouchers, and other similar
documents together with their respective supporting papers.
17.3 Section 122 thereof provides for the authority of this Commission to cause the
submission of reports, to wit:
Whenever deemed necessary in the exigencies of the service, the

Commission may under regulations issued by it require the agency
106
.
heads, chief accountants, budget officers, cashiers, disbursing officers,

administrative or personnel officers, and other responsible officials of the
various agencies to submit trial balances, physical inventory reports,
current plantilla of personnel, and such other reports as may be
necessary for the exercise of its functions.
17.4 Audit revealed that the JEVs on the withholding of employees’ share on the
government statutory contributions to GSIS, PhilHealth and Pag-IBIG for
December 2020 amounting to P722,010 were not yet submitted to this Office.
17.5 On various occasions, we have requested the submission of the required

documents for our CY 2020 year-end audit . The non-submission of the subject
documents precluded the validation of the accounts and determination of the
propriety of accounting entries and correctness of computation.
17.6 Further, it is emphasized that claims against the government funds should be
supported with complete documentation, otherwise, the same are subject of audit
suspension and/or disallowance.

immediately submit the JEVs of the statutory contributions amounting to
P722,010 for our validation.
18. Discrepancies amounting to P4.510 million between the amount of taxes withheld
on salaries and remitted. Also, abnormal balances amounting to P42,408 in the
subsidiary ledgers (SL) and discrepancies amounting to P85,780 between the
general ledgers (GL) and remittance schedules were noted in the statutory
accounts - GSIS, PhilHealth, and Pag-IBIG due to the non-reconciliation of
accounts and cast doubt on the validity and accuracy of the accounts contrary to
IPSAS No. 1.
18.1 Paragraph 27 of IPSAS 1 – Presentation of Financial Statements provides that:

assets, liabilities, revenue and expenses set out in IPSASs. The
application of IPSASs, with additional disclosures when necessary, is
presumed to result in financial statements that achieve a fair
presentation
18.2 Audit of taxes withheld from salaries and remitted disclosed that the total amount
of taxes withheld per schedule for CY 2020 amounted to P15.282 million while the
total amount of taxes remitted per BIR returns amounted to P19.792 million or a
discrepancy of P4.510 million.
Month Withheld Remitted Variance

January 1,097,855.49 1,475,705.96 377,850.47
February 1,080,785.32 1,455,780.15 374,994.83
March 1,290,851.32 1,738,032.59 447,181.27
107
.
Month Withheld Remitted Variance

April 957,628.25 1,378,164.69 420,536.44
May 969,475.18 1,459,233.43 489,758.25
June 978,041.50 1,391,542.28 413,500.78
July 977,726.21 1,345,278.04 367,551.83
August 1,023,542.71 1,366,968.55 343,425.84
September 1,074,586.79 1,340,350.26 265,763.47
October 1,013,412.53 1,446,904.23 433,491.70
November 1,927,945.89 2,526,054.31 598,108.42
December 2,889,725.47 2,867,906.21 (21,819.26)
Total 15,281,576.66 19,791,920.70 4,510,344.04
18.3 In addition, audit of the liability account Due to GSIS, PhilHealth and Pag-IBIG
revealed that there were abnormal or negative balances as per ending balance of
employees’ SL as of December 31, 2020 amounting to P26,963.15, P13,396.47
and P2,048.65, respectively.
Subsidiary ledgers No. Employees Amounts

Due to GSIS 24 P (26,963.15)
Due to PhilHealth 31 (13,396.47)
Due to Pag-IBIG 3 (2,048.65)
Total P (42,408.27)
18.4 Inquiry was made and Management commented that the negative balances on
the employees’ subsidiary ledgers will be subject to reconciliation.
18.5 Also, discrepancies were noted upon examination of the ending balances for the
month of December 2020, between the total amount withheld per General Ledger
and the total withheld per Schedule of Remittance submitted by the HRD, as
follows:
Withheld
December 2020 General Ledger Schedule of Discrepancy
Remittance
Due to GSIS P 574,815.18 P 548,057.34 P 26,757.84
Due to PhilHealth 77,865.10 75,372.64 2,492.46
Due to Pag-IBIG 69,329.66 12,800.00 56,529.66
Total P 722,009.94 P 636,229.98 P 85,779.96
18.6 The total amount withheld from employees’ salary for GSIS, Philhealth and Pag-
IBIG contribution for the month of December amounted to P722,009.94 while the
total amount reported in the Schedule as provided by the HR Department
submitted to this office was P636,229.98 or a discrepancy of P85,779.96.
18.7 Moreover, the remittances for the month of December cannot be validated due to
lack of transactions recorded in eNGAS
Remittances
December 2020 General Ledger Schedule of Remittance
Due to GSIS No record P 1,290,200.46
Due to PhilHealth No record 150,746.71
Due to Pag-IBIG No record 24,700
Total P 1,465,647.17
108
.
18.8 It can be inferred from the above tables that there were discrepancies in the
withholding of employees’ contribution as recorded in the books compared to the
schedule submitted to this Office.
18.9 Inquiry with the Management disclosed that they also observed the unusual
difference recorded in the books and commented that reconciliation and
necessary adjustment will be made if necessary.

reconcile the abnormal balances of subsidiary ledgers and the difference
noted between the General Ledger and the Schedule of remittance of
employees for GSIS, Philhealth and Pag-ibig; and Reconcile the
discrepancies noted between taxes withheld from salaries and remitted.
B. Financial Audit – Regulatory Office
Restricted Fund
19. The restricted fund amounting to P103.774 million intended for the payment of
future arbitrations was recorded as non-current asset contrary to paragraph 76 (d)
of IPSAS 1, thus affecting the fair presentation of the account in the financial
statements.
19.1 Paragraph 76 of IPSAS 1 states that “An asset shall be classified as current when it
satisfies any of the following criteria:
(a) It is expected to be realized in, or is held for sale or consumption in, the
entity’s normal operating cycle;
(b) It is held primarily for the purpose of being traded;
(c) It is expected to be realized within twelve months after the reporting
date; or
(d) It is cash or a cash equivalent (as defined in IPSAS 2), unless it is
restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting date.
All other assets shall be classified as non-current.
19.2 The restricted accounts of MWSS-RO are funded as follows:
Amount
Date Reference Description Transferred
02/02/2017 PO02-002-17 Set-up of Restricted Fund for P61,000,000.00
Arbitration sourced from LBP
Regular Checking Account
02/02/2017 PO02-006-17 Set-up of Restricted Fund for 15,075,652.06
Arbitration reclassified from
117-LBP$ to Restricted Fund
109
.
Amount
Date Reference Description Transferred
(290) - $302,796.90 @
P49.788, 182 days
05/02/2019 PO05-001-19 Set-up of Restricted Fund for 25,000,000.00
Arbitration sourced from LBP
Regular Checking Account
19.3 As of December 31, 2020, the Restricted Fund account has a balance of P103.774
million. Upon request, the subsidiary ledger was not submitted. However, based on
the confirmation received from the Land Bank of the Philippines, the balance of
P103.774 million is composed of the following:
Balance as of
Description December 31, 2020
1 High Yield Savings Account P 25,390,163.94
2 High Yield Savings Account 63,384,748.06
3 High Yield Savings Account (Dollar Deposit) 14,998,808.20
TOTAL P 103,773,720.20
19.4 As per inquiry from Management, the restricted fund was established solely for
future arbitrations. This is pursuant to Resolution No. 2016-038-RO decided during
the Sixth Regular Meeting of the Board held on March 31, 2016.
19.5 The resolution stated that the financial impact of an arbitration case that the
Concessionaires filed before the Appeals Panel against MWSS for disputing a water
rate adjustment determined by the latter resulted in a remarkable increase in the
budgetary requirement of the Regulatory Office on that given year.
19.6 Included in the resolution were the actual expenses during past year’s arbitration
proceedings, as follows:
Cost in
Particulars Year Concessionaire Million
Pesos
Major Dispute – Extraordinary Price Adjustment 1999 MWCI 23.14
(EPA)
Minor Dispute – cease and Desist Order; Special 2003 MWSI 7.23
Transitory Mechanism & Accelerated EPA
Major Dispute – Event of Termination 2003 MWSI 98.77
Major Dispute – Rate Rebasing 2013 MWCI & MWSI 63.03
19.7 Indicated also in the said resolution is the fact that under Board Resolution 2015-
013-RO, the MWSS Board, recognizing the need to maintain Reserved Fund,
approved the inclusion in the RO CY 2015 Budget, an initial appropriation of P25
million with the intention to build-up the Funds up to P100 million level.
19.8 The resolution also provides guidelines for proper management and utilization of
the account.
110
.
19.9 We understand the intention of the management for setting aside funds for future
arbitrations, however, the classification of the funds as a non-current asset does
not meet the criteria set under IPSAS 1. Moreover, COA Circular No. 2020-02
dated January 28, 2020 provides the definition of Restricted Fund, as follows:
Restricted Fund is the amount restricted by government corporations for

authorized long-term plans except for liquidation of long-term debt.
As of December 31, 2020, there was no liability yet to be liquidated.
19.10 We recommended and Management agreed that Accounting Section

reclassify the restricted fund amounting to P103.774 million from Restricted
Fund account to Cash and Cash Equivalents.
Cash in Bank
20. Cash in Bank accounts included closed accounts of PNB Regular and PNB Motor
Vehicle Financing Program (MVFP) / Multi-Purpose Loan Program (MPLP) accounts
totaling P1.271 million due to non-reconciliation of the Cash in Bank accounts
which casts doubt on the validity of the Cash in Bank contrary to paragraph 27 of
IPSAS 1.
20.1 Paragraph 27 of IPSAS 1 provides that “Financial statements shall present fairly the
financial statements that achieve a fair presentation.”
20.2 Moreover, Section 74 of P.D. 1445 states that at the close of each month,
depositories shall report to the agency head, in such form as he may direct, the
condition of the agency account standing on their books. The head of the agency
shall see to it that a reconciliation is made between the balance shown in the reports
and the balance found in the books of the agency.
20.3 As of December 31, 2020, MWSS RO includes in its Cash in Bank balance the
following PNB Regular and MVFP accounts:
Remaining
Unreconciled
Account Name Account Code Balance
Cash CIB-LC, C/A- PNB Regular 111-PNB1 P 1,242,351.30
Cash CIB-LC, C/A- PNB MVFP 111-PNB2 28,622.45
TOTAL P 1,270,973.75
20.4 Verification of the cash accounts revealed that these PNB accounts were closed and
transferred to the LBP account on April 7, 2016.
111
.
20.5 On January 20, 2017, a confirmation reply from PNB was received and the reply
came with a remark “Nothing to Report”. In addition, the latest Confirmation Reply
from PNB which was received on February 3, 2020 showed “NA” remarks.
20.6 As of the date of transfer, there were unreconciled balances in the total amount of
P1.271 million between the balances per books and the actual bank balances.
Since then, the Management continued reporting the unreconciled balances as
PNB Regular and MVFP accounts in the financial statements.
20.7 These unreconciled balances have been the subject of audit observations in the
CYs 2018 and 2019 Annual Audit Reports. To date, the audit recommendations to
comply with Section 74 of PD 1445 to analyze and verify the unreconciled balance,
then make the necessary adjusting entries were not yet implemented.
20.8 In view of the foregoing, we can say that the non-reconciliation and non-adjustment
of cash in bank accounts raised doubt on the correctness of the cash in bank
balance at year-end.
20.9 We reiterated our previous years’ recommendation for the Accounting

Section to reconcile the cash in bank accounts and prepare the necessary
adjusting journal entries.
20.10 The Management explained that there were series of reconciliation done during
2016-2018 and they managed to reduce the amount as to how much it is now
based on the available data. The problems are the 1997 to 2006 data, during those
years, the Accounting Department uses manual processing of Disbursement
Vouchers and the generation of reports. Thus, according to the Management, there
were no backups found in the system.
20.11 The Management pointed out that the reports, working papers, and source
documents were already transmitted to the COA for post audit. The Management
further explained that they have only four (4) personnel in the accounting and with
the present work arrangements due to the pandemic, it is hard for them to reconcile
the accounts of more than 15 years old and perform their daily tasks at the same
time, further hiring a Contract of Service (COS) staff solely for that purpose is
uneconomical.
20.12 As a rejoinder, the documents submitted by the Management in our Office are
available upon request, the copies of the documents can be provided by the
Commission following the requirements stated in COA Circular 2013-006.
However, to date, there were no requests received from the Management. We
maintain our position that Management require the Accounting Section to exert
more effort to reconcile the balance and make the necessary adjusting entry to
present fairly the cash account in the financial statements.
112
.
Due from Officers and Employees
21. Lack of monitoring and appropriate action on the Notices of Disallowance (ND) with
issued Notices of Finality of Decision (NFD) amounting to P78.509 million resulted
to non-recovery of amounts due from persons liable for the said NDs contrary to
Section 2.1 and Annex C of COA Circular No. 2020-002 and Section 7 of COA
Circular No. 2009-006.
21.1 Section 2.1 of COA Circular No. 2020-002 dated January 28, 2020 states that The
Government Corporations (GCs) shall recognize their transactions in accordance
with the updated Revised Chart of Accounts (RCA) prescribed herein.
21.2 Annex C of this said Circular provides the description of all the accounts:
Receivables-Disallowances/Charges under “Other Receivables” with RCA

Code “10399010.”- This account is debited to recognize the amount of
disallowances/charges in audit due from public/private individuals/entities
which have become final and executory. This account is credited for
settlement of disallowances/charges, and/or adjustments.
21.3 Section 7 of COA Circular No. 2009-006 dated September 15, 2009 re: Rules and
Regulations on Settlement of Accounts (RRSA) enumerates the responsibilities of
agency heads and accountants:
7.1 Responsibility of the Agency Head
xxx
7.1.3 He shall enforce the COA Order of Execution (COE) by requiring the
withholding of salaries or other compensation due the person liable in
satisfaction of the disallowance or charge.
7.1.4 He shall ensure that all employees who are retiring or transferring to
other agencies shall first settle the disallowances and charges for
which they are liable.
7.2 Responsibility of the Agency Accountant
xxx...
e) the subsidiary ledgers/records are maintained and properly

updated for each official/employee determined to be
liable/responsible for the amount disallowed/charged/suspended
21.4 We noted that the management recognized the account “Due from Officers and
Employees – Others” amounting to P78.509 million pertaining to 48 NDs with issued
NFD.
113
.
21.5 The Commission Secretariat of the Commission Proper Adjudication and Secretariat
Support Services Sector (CPASSSS), Commission on Audit, issued an NFD dated
January 24, 2017 pertaining to COA Decision No. 2015-040 dated January 30, 2015
which affirmed COA Corporate Government Sector Cluster-B Decision No. 2012-
002 dated June 19, 2012 sustaining 48 Notices of Disallowance on the payment of
allowances, bonuses, incentives and other benefits to the officials, employees, and
members of the Board of Trustees of the MWSS-RO, in the total amount of P82.242
million.
21.6 The NFD was received by this Office on February 9, 2017 and was then served thru
personal service and registered mail to persons liable still employed by MWSS-RO
and to those who are no longer connected with the Management.
21.7 The subject COA Decision was resolved as closed and terminated by the Supreme
Court En Banc in a Resolution (Entry of Judgment) dated July 26, 2016 with G.R.
No. 224240.
21.8 Further, on December 28, 2016, a COA Order of Execution (COE) was issued by
Legal Services Sector, Office of the General Counsel, Commission on Audit, which
modified the amount from P82.242 million to P78.509 million. However, the COE
was inadvertently transmitted to the MWSS Corporate Office on January 12, 2017.
The matter was rectified on February 7, 2017 thru a transmittal by the MWSS
Corporate Office to the MWSS Regulatory Office which urged expedient action
thereon.
21.9 In January 2018, the MWSS-RO recognized the entire amount as Due from
Officers and Employees account instead of the Receivables-
Disallowances/Charges account.
21.10 We have requested the Management to submit an explanation on the non-

collection or non-execution of the COA Order of Execution, however, to date, there
was no response submitted to our Office. There were no collections made for the
subject disallowances. Furthermore, it was noted that several employees who were
identified as persons liable under the said disallowances have already been
separated from the Agency without the settlement of their accounts.
21.11 The Management also lacks the Manual of Policy for the collection of NDs that are
final and executory which hindered the prompt recovery from the persons liable.
21.12 As per inquiry from Management, it is due to the absence of any indication on the
individual liability in the subject NDs that they were not able to specify an amount
to be imposed to the retiring/separating employees, who are likewise identified
among the persons liable. They could not find a legal basis to withhold their
terminal pay. They maintain that they do not know how to implement the COE.
21.13 This inaction on the part of Management is tantamount to the patent disregard of
the Order of the Commission.
114
.
21.14 Common sense and exercise of due diligence would compel the withholding of the
terminal pay of recipient employees for an amount that is equivalent to the amount
they had actually received pursuant to the principles of unjust enrichment and
solutio indebiti.
21.15 We recommended that Management require:
a. Accounting Section to maintain and submit the subsidiary records of the

persons liable for the subject NFD amounting to P78.509 million;
b. Accounting Section to reclassify the Due from Officers and Employees

account amounting to P78.509 million to Receivables –
Disallowances/Charges account;
c. Administration Department to formulate a policy on the settlement of

disallowances with issued NFDs; and
d. The Chief Regulator and the Cashier to cause the immediate recovery of
the disallowances with issued NFD.
21.16 The Management agreed to comply with our audit recommendations. However,
the COE does not indicate the specific liabilities of the individuals in the NDs.
Likewise, the COE lacked the necessary documents in support of the same. In this
regard, the Management requests for the Audit Team to provide the complete
breakdown of the amounts due from the employees pursuant to the NDs.
21.17 Upon detailed analysis of the COE, we have noted that the amounts indicated per
COE are the same amounts that were indicated in the initial NDs issued by this
Office. Likewise, the NDs initially issued have information as to the individual
liabilities of the Payees that the Management can rely upon.
Due from Officers and Employees
22. The Due from Officers and Employees account totaling P1.301 million is not
supported by subsidiary records casting doubt on the validity and accuracy of the
account and may result to non-collection of government funds contrary to IPSAS
1, Presidential Decree No. 1445 and COA Circular No. 2016-005.
22.1 COA Circular No. 2016-005 dated December 19, 2016 prescribes the guidelines and
procedures in reconciling and cleaning the books of accounts of National
Government Agencies (NGAs), Local Government Units (LGUs) and Government-
Owned and Controlled Corporations (GOCCs) of dormant receivable accounts,
unliquidated cash advances and fund transfer for fair presentation of accounts in the
financial statements. Section 6.1 of the aforementioned circular states that:
All government entities shall conduct regular monitoring and analysis of

receivable accounts to ensure that these are collected when these become
due and demandable… x x x.
115
.
22.2 Paragraph 27 of IPSAS 1 provides that “Financial statements shall present fairly the
financial statements that achieve a fair presentation.”
22.3 Section 114 of P.D. 1445 states that:
Section 114 The general ledger.
1. The government accounting system shall be on a double entry basis with

a general ledger in which all financial transactions are recorded.
2. Subsidiary records shall be kept where necessary.
22.4 Also, Section 111 thereof indicates the responsibility of the agencies in the
maintenance of accounts, to wit:
Section 111. Keeping of accounts
1. The accounts of an agency shall be kept in such detail as is necessary

to meet the needs of the agency and at the same time be adequate to
furnish the information needed by fiscal or control agencies of the
government… x x x.
22.5 Verification of the accounts of MWSS-RO for CY 2020 revealed that the subsidiary
records for the following receivable accounts amounting to P1.301 million were not
maintained:
Balance as of
December 31, 2020
Account Name without subsidiary records
Due from Officers and Employees – Health Insurance P 942,839.94
Due from OE – MVFP Insurance 75,614.55
Other Receivables 283,004.27
TOTAL P 1,301,458.76
22.6 As per inquiry with the Chief Corporate Accountant, specific details as to the amount
and name of the debtors were not maintained in their Peachtree Accounting System.
Majority of these amounts were recorded before the establishment of this system.
22.7 The continued inaction of the management to establish and maintain subsidiary
ledgers for various receivable accounts precluded the validation of these accounts
and deprived the government of additional funds that could be utilized.
116
.
22.8 We reiterated our recommendation for:
a. Finance Section to analyze and reconcile the subject receivables

accounts amounting to P1.301 million;
b. Accounting Section to maintain subsidiary records of all the receivable

accounts; and
c. Administration Department to formulate a policy/guideline for the

collection of dormant accounts.
22.9 The MWSS RO remains steadfast in its efforts to reconcile the subject receivables
accounts amounting to P1.301 million, as recommended by the COA. However, the
MWSS RO Finance Section lacks the manpower to create a separate subsidiary
ledger that will monitor all accounts receivable on a per transaction basis.
Nevertheless, we are hoping to resolve this deficiency through the approval and
subsequent implementation of our proposed Rationalization Plan.
22.10 As a rejoinder, we retain our recommendation that the Accounting Section maintain
and submit the subsidiary records as required under Section 114 of P.D. 1445.
Moreover, the accounts of an agency shall be kept in such detail as is necessary to
meet the needs of the agency and at the same time be adequate to furnish the
information needed by fiscal or control agencies of the government.
C. Other Audit Observations – Corporate Office
New Centennial Water Sources – Kaliwa Dam Project
23. MWSS proceeded with the implementation of the New Centennial Water Source
Kaliwa Dam Project (NCWS KDP) despite the non-completion of the application of
the necessary permits from the government agencies that may result to the
cancellation of the Environmental Compliance Certificate (ECC) pursuant to the
conditions and restrictions of the Department of Environment and Natural
Resources (DENR).
DENR Conditions for the issuance of the ECC includes the following:
With the issuance of this ECC, you are expected to implement measures
presented in the EIS intended to protect and mitigate the project’s adverse
impacts on community health, welfare and environment. However, you may
proceed with the project implementation only after securing
necessary permits from other pertinent Government agencies.
Environmental considerations shall be incorporated in all phases and
aspects of the Project. xxx
117
.
ENVIRONMENTAL MANAGEMENT CONDITIONS
All commitments, appropriate mitigating/enhancement measures and

monitoring requirements contained in the approved EIS particularly in
the Environmental Management and Monitoring Plan (EMP/EMoP)
shall be instituted and strictly implemented by the proponent
throughout the project implementation including the following:
1. Conduct an effective Information, Education and Communication (IEC)

Program xxx
A report of program implementation shall be submitted to EMB

Central Office (EMB-CO) as part of the second-semester
Compliance Monitoring Report;
2. Submit a duly signed Memorandum of Agreement (MOA) with the

Local Government Units (LGUs) for the Social Development
Program six (6) months upon receipt of this Certificate;
3. Implement a Comprehensive Social Development Program (SDP),

Ancestral Domain and Cultural Heritage Sustainable Development Plan
(ADCHSDP) and Cultural Heritage Protection Plan (CHPP). The
ADCHSDP and CHPP shall be updated semiannually in consultation
with the National Commission on Indigenous Peoples (NCIP). Submit a
separate report together with the CMR to the EMB-CO and copy
furnished EMB Region IV A on a semi-annual basis;
4. Submit NCIP approved Indigenous Peoples Development Plan to

the EMB-CO at least one (1) year prior to the start of project
construction/implementation;
5. Establishment of a reforestation and carbon sink program using

endemic/indigenous species to offset greenhouse gas (GHG) emissions
of the project in line with the DENR’s thrust for GHG emissions reduction
programs. The program shall be submitted for approval to EMB-CO
within 6 months from receipt of this Certificate. Copy of the
approved reforestation program shall be furnished to EMB Region
IV A;
xxx
6. Submit detailed waste management program xxx to EMB-CO and EMB

Region IV A within six (6) months prior to project implementation. Proof
of implementation shall be submitted together with the CMR.
7. Conduct and submit actual inventory and assessment of

threatened species that may be affected during clearing operations
including maps showing the project location relative to the protected
area boundaries and management zones, location of observed
threatened species; land cover map indicating the various habitat types
118
.
and location of management zones relative to the area for vegetation

prior to the conduct of the Detailed Engineering Design (DED);
8. Develop an Integrated Watershed Management Plan (IWMP) in

coordination with the DENR Region IVA and the Protected Area
Management Board (PAMB) and submit the same within six (6) months
prior to project implementation to EMB-CO. Proof of IWMP
implementation shall be submitted together with the CMR.
xxx
GENERAL CONDITIONS
18. The plant operations shall conform with the provisions of

environmental laws regulations and their Implementing Rules and
Regulations xxx
19.1 A readily available and replenishable Environmental Guarantee Fund

(EGF) to cover the following expenses:
xxx
19.2 Establish a Multipartite Monitoring Team (MMT) in accordance with

DAO 2017-15 and DAO 2018-18. The MMT shall primarily oversee
the compliance of the proponent with the Environmental
Management Plan/Environmental Monitoring Plan as well as the
conditions of its ECC;
xxx
The amount and mechanics of the EGF, EMF, and the establishment of
the MMT shall be determined by EMB-CO and the proponent in
coordination with EMB Region IVA through a Memorandum of
Agreement (MOA) which shall be submitted at least 1 year prior to
project construction/implementation.
20. Creation of an Environmental Unit (EU) within 60 days from receipt

of this Certificate that shall competently handle the environment-
related aspects of the project.
RESTRICTIONS
22. No Activity shall commence until the proponent satisfied the

following conditions:
a. Compliance to the requirements of the National Integrated Protected

Areas System Act as Amended (RA 7586 as amended by RA 11038)
and other relevant rules and issuances;
119
.
b. Necessary certifications from the National Commission on Indigenous

Peoples (NCIP) prior to project implementation;
c. Disposal sites of excavated materials have been identified, duly

covered by agreement/s and have been permitted in accordance with
the law. Proof of compliance shall be filed with the Regional Office
having jurisdiction over the disposal area and shall be without prejudice
to environmental safeguards that may be prescribed as warranted. xxx
23.1 Article 9 of the Preferential Buyer’s Loan Agreement provides that:
9.1 This Agreement shall become effective upon the satisfaction of

the following conditions:
xxx
(2) The Lender has received certified true copy of the
Environmental Compliance Certificate issued by the
authorized governmental agency of the Borrower’s Country.
(emphasis supplied)
23.2 The contract between MWSS and China Energy Engineering Corporation, Ltd.
(CEEC), further provides that its effectivity is
x xx contingent upon the effectivity of the loan agreement for the

project and that no liability shall attach on the part of the MWSS in
case the loan agreement is not perfected or declared effective.
(emphasis supplied)
23.3 Section 3.1.1 of COA Circular 2009-001 dated February 12, 2009 provides that:
Within five (5) working days from the execution of a contract by the
government or any of its subdivisions, agencies or instrumentalities,
including government-owned and 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 agency concerned. xxx
23.4 On November 20, 2018, MWSS and the Export-Import Bank of China (China
Eximbank) entered into a Preferential Buyer’s Credit Loan Agreement for a loan
facility in the aggregate principal amount not exceeding US$211.215 million for the
implementation of NCWS KDP. The Loan Agreement provided that one of the
conditions for its effectivity is a certified true copy of the Environmental Compliance
Certificate (ECC) issued by the authorized governmental agency of the Borrower’s
Country.
23.5 MWSS applied for the required ECC before the DENR and on October 11, 2019
obtained ECC-CO-1907-001 for the implementation of the Project.
23.6 On November 13, 2019, MWSS issued a Notice to Proceed to China Energy
Engineering Corporation, Ltd. (CEEC) requiring the latter to commence work on
the project. On even date, MWSS and CEEC entered into a Contract Agreement
120
.
for the execution and completion of the NCWS KDP, with a provision that the
effectivity of the contract is contingent upon the effectivity of the loan agreement
for the project.
23.7 On November 26, 2019, MWSS paid Management fees amounting to P32.446
million to China Eximbank and on March 20, 2020, MWSS availed P1.544 billion
from the loan facility.
23.8 Based on the submitted CY 2020 Report on Projects, Programs and Activities
(RPPA), MWSS reported that the Detailed Engineering and Design (DED) Phase
of the Project was 92.67% complete.
23.9 In view of MWSS implementation of NCWS KDP, the audit team requested from
MWSS to submit documents showing compliance to the conditions and restrictions
of the DENR thru the ECC. However, on May 20, 2021, Management simply
provided a checklist or a Compliance Monitoring Report (CMR) without any
supporting documents (e.g. permits) to show compliance to the ECC.
23.10 It bears mention that the DENR explicitly provided in the issued ECC that MWSS
may only proceed with the project implementation after securing the necessary
permits from pertinent government agencies and that MWSS should incorporate
the environmental considerations in all the phases and aspects of the NCWS KDP.
23.11 In the Commercial Contract, the definition of the Contract and the Works were
provided as follows:
The Contract is the contract between the Procuring Entity and the
Contractor to execute, complete and maintain the Works.
xxx
The Works consists of complete design, construction, and the

commissioning of a dam along Kaliwa River xxx (emphasis
supplied)
23.12 It can be gleaned from the above provisions of the Commercial Contract that the
cited project implementation in the ECC pertains to the Works described in the
contract which includes the Detailed Engineering and Design and Construction of
the NCWS KDP.
23.13 Important to note is that the application of MWSS for the ECC necessary for the
implementation of the NCWS KDP is without qualification. As such, project
implementation as cited in the ECC refers to the entirety of the activities involved
consisting of (1) Detailed Engineering and Design and (2) Construction. Clearly,
there are various conditions and restrictions MWSS needs to hurdle before any
semblance of project implementation can be initiated the least of which is the
Detailed Engineering and Design which to date is almost done.
23.14 In our last year’s finding, we recommended that Management prioritize the
completion of the requirements including the conditions and restrictions set forth in
the ECC. Management in its reply, explained that the term “project
121
.
implementation” as used in the certificate and during the EIA Process is considered
to mean the “project construction”, which is the second stage of the project (with
the project under a two-phase Design-and-Build Scheme) to be commenced only
once the Notice to Commence Construction (NTCC) is issued and that the
interpretation is self-evident in the 21 conditions and 4 restrictions in the ECC.
23.15 Management also informed that they have yet to begin construction activities and
that the Project is still in its Design Phase, with detailed engineering design
activities on-going including the FPIC activities, in coordination with the NCIP.
23.16 One of the environmental conditions of DENR is for MWSS to conduct and submit
actual inventory and assessment of threatened species that may be affected during
clearing operations including maps showing the project location relative to the
protected area boundaries and management zones, location of observed
threatened species; land cover map indicating the various habitat types and
location of management zones relative to the area for vegetation prior to the
conduct of Detailed Engineering and Design (DED).
23.17 In addition, the DENR imposed restrictions to MWSS and explicitly provided that
no activity shall commence until the satisfaction of the following conditions:
a. Compliance to the requirements of the National Integrated

Protected Areas System Act as Amended (RA 7586 as amended by
RA 11038) and other relevant rules and issuances;
b. Necessary certifications from the National Commission on

Indigenous Peoples (NCIP) prior to project implementation;
c. Disposal sites of excavated materials have been identified, duly

covered by agreement/s and have been permitted in accordance
with the law. Proof of compliance shall be filed with the Regional
Office having jurisdiction over the disposal area and shall be without
prejudice to environmental safeguards that may be prescribed as
warranted. Likewise, a copy of which shall form of the requirement
under Condition 7 hereof; and
d. The appropriate instrument(s) (e.g. lease agreement, deed of

absolute sale, etc.) shall be secured.
23.18 The ECC is a conditional certificate, where MWSS needs to comply 21 conditions
and 4 restrictions that are subject to the approval/evaluation of DENR. The possible
cancellation of the ECC, if violations thereof are with merit, will affect the effectivity
of the Loan Agreement with China Eximbank and the Commercial Contract with
CEEC.
23.19 Further, MWSS has not submitted the duly authenticated copies of the Compliance
Monitoring Report, DENR correspondences and the following pertinent reports as
required by the DENR upon receipt of the ECC:
122
.
a. Memorandum of Agreement (MOA) with the Local Government Units (LGUs)

for the Social Development Program (within 6 months upon receipt of ECC);
b. Copy of the approved reforestation program (within 6 months from receipt of
ECC);
c. Copy of the creation of an Environmental Unit (EU) required to be submitted
to DENR (within 60 days from receipt of the ECC).
23.20 Finally, we recognized the importance of this Project to the government with the
objective of ensuring water security and increasing the raw water supply to meet
future potable water demand of Metro Manila and reduce dependence on the Angat
Dam. However, MWSS should also comply with all the conditions and restrictions
of the DENR for the implementation of the Project, in order to protect and mitigate
the Project’s adverse impacts on community health, welfare and the environment.
23.21 We recommended that Engineering and Technical Operations Group secure

the necessary permits as required by the DENR for the implementation of
NCWS KDP and the submission of the Compliance Monitoring Report
together with the supporting documents.
Management commented that it had submitted the following to the EMB :
a. A Compliance Monitoring Report for (January – June 2020) be submitted to

EMB Central Office (EMB-CO) as part of the second semester;
b. Draft of Integrated Development Plan;
c. Reforestation and Carbon Sink Program;
d. Detailed Waste Management Plan;
e. Inventory Assessment of Threatened Species;
f. Integrated Kaliwa Watershed Management Plan;
g. Creation of Environmental Unit
23.22 However, the Compliance Monitoring Report was not supported with the complete
documents (necessary permits) and all the submitted documents are in
photocopied forms.
23.23 We maintain our position that MWSS secure the necessary permits and submit the
duly authenticated copies of the Compliance Monitoring Report and its supporting
documents to establish proper compliance with the requirements of the DENR.
Angat Dam Dyke Strengthening Project (ADDSP) Fund
24. Failure to return the remaining Angat Dam Dyke Strengthening Project (ADDSP)
Fund amounting to P24.056 million to the National Government (NG) and non-
submission of the ADDSP Fund reportorial requirements to Department of Budget
and Management (DBM) and Department of Public Works and Highways (DPWH)
for the funds transferred to National Power Corporation (NPC) and Provincial
Government of Bulacan (PGB) totaling P529.550 million have impaired the
accountability for public funds contrary to the provisions of the Memorandum of
123
.
Agreement between MWSS and NPC and PGB and pertinent provisions of the 2020
General Appropriations Act (GAA).
24.1 Sections 10 and 11 of the General Provisions of General Appropriations Act (GAA)
for FY 2020 provides that:
Reversion, closure, and Transfer of Balances of Special Accounts,

Fiduciary or Trust Funds, Revolving Funds, and Unauthorized Accounts.
Departments, bureaus, offices, and instrumentalities of the National
Government, including Constitutional Offices enjoying fiscal autonomy and
SUCs are mandated to close and revert all balances of Special Accounts,
Fiduciary or Trust Funds, and Revolving Funds to the General Fund in any
of the following instances: (i.) when there is no legal basis for its creation;
(ii) when their terms have expired; or (iii) when they are no longer
necessary for the attainment of the purposes for which funds were
established. (emphasis ours)
xxx
Said agencies shall likewise transfer to the National Treasury all balances
of unauthorized accounts with any banking institution. Unauthorized
accounts shall refer to cash accounts balances maintained by agencies
without legal basis or those while legally authorized are maintained outside
of the National Treasury in violation of law.
In like manner, departments, bureaus, offices, and instrumentalities of the

National Government, including Constitutional Offices enjoying fiscal
autonomy and SUCs and GOCCs shall post on their respective official
websites information relating to public funds deposited, maintained, and
invested by them with any banking or financial institution which shall
include, but not limited to the following: (i) name of the banking or financial
institution/s where public funds are deposited, maintained or invested; (ii)
specific income or fund sources; (iii) legal basis for depositing, maintaining
or investing said income/fund source/s with the bank/s or financial
institution/s; (iv) allowable uses/purposes of the income or fund; (v) monthly
balances of each account or fund; and (vi) such other pertinent information
as may be reasonably required to be posted by the agency concerned on
its website”
24.2 The Memorandum of Agreement (MOA) between MWSS and NPC and PGB
relative to the implementation of ADDSP laid the responsibilities of the MWSS
which include, among others, that:
The MWSS shall:

xxx
a. Monitor the implementation of the Package 2/Package 4 of ADDSP
through its Engineering Department.
b. Provide and submit to DBM copies of the project monitoring, financial
accomplishment and liquidation reports that the NPC/PGB submits to
MWSS pursuant to this MOA.
124
.
c. Submit to DPWH and DBM the Monthly Physical and Financial

Accomplishment Report submitted by NPC/PGB. xxx
24.3 The ADDSP is one of the MWSS projects to rehabilitate Angat dam and dyke to
ensure its stability and safety to withstand the potential risk posed by possible
seismic activity associated with the West Valley Fault. The MWSS received the
amount of P553.300 million from the Bureau of the Treasury on April 29, 2015
under Special Allotment Release Order (SARO) No. F-12-01569 and NCA No.
NCA-BMB-F-12-0025139 to finance Contract Packages 2 and 4 of the ADDSP, as
follows:
Contract Cost
Implementing Agency Description
Package (in million)
2 National Power Instrumentation (Flood Forecasting P 260.910
Corporation (NPC) and Warning System on Dam
Operation)
4 Provincial Government of Flood Control Protection Works 292.390
Bulacan (PGB) (downstream of Angat)
Total P 553.300
24.4 MWSS executed a Memorandum of Agreement (MOA) with the Implementing

Agencies namely, PGB on March 22, 2016 and NPC on May 3, 2016 for the subject
transfer of fund and its implementation.
24.5 Accordingly, the MWSS transferred P292.390 million to the PGB and P237.160
million to the NPC. The remaining ADDSP fund amounting to P23.750 million is
held-in-trust by MWSS under LBP time deposit.
24.6 Considering that the ADDSP has already been completed, MWSS should have
required the Implementing Agencies to submit the liquidation and accomplishment
reports as agreed upon and subsequently, submit the accomplishment reports of
NPC and PGB to DPWH and DBM.
24.7 Inquiry with the Engineering Department disclosed that only the NPC submits
accomplishment reports to MWSS and said that they already sent letter to the PGB
requesting submission of said reports, however, to date, no submission was
received. They added that the reports submitted by NPC have not been transmitted
to the DPWH and DBM, hence, not compliant with the provisions of the MOA.
24.8 In addition, inquiry with the Management disclosed that to date, the ADDSP fund
is still in the custody of MWSS in the amount of P24.560 million, the increase was
due to the accumulation of interest income through the years.
24.9 In its letter dated February 26, 2020, MWSS requested from DBM the use of the
unutilized balance of P23.750 million to cover the reimbursement to the Public-
Private Partnership (PPP) Center for the cost of project development of the New
Centennial Water Source – Kaliwa Dam Project due to the completion of the
ADDSP.
125
.
24.10 However, the DBM in its reply dated December 16, 2020, denied the request of
MWSS to use the unutilized fund of P23.750 million for the reimbursement because
the purpose indicated in the issued SARO and NCA is different from the requested
activity. As such, the said fund should revert to the Bureau of the Treasury.
24.11 In addition, DBM mentioned that MWSS was not able to submit budget proposal
for FY 2020 for the reimbursement in view of the late submission by the PPP of
documents evidencing the expenses. While FY 2021 General Appropriations Bill
has been approved and waiting for the signature of the President of the Philippines,
the DBM recommended that MWSS to properly include the request of
reimbursement in the FY 2022 budget proposal observing the usual budgeting
rules and regulation.
24.12 The non-submission of the accomplishment and liquidation reports hinders the
National Government to account the disbursement of ADDSP fund by the
Implementing Agencies and to monitor the status of implementation of the project.
24.13 We recommended and Management agreed to require:
a. Finance Department to immediately return the remaining ADDSP fund

to the NG amounting to P23.750 million including interest earned;
b. Engineering and Technical Operations Group to immediately send a

demand letter to PGB for the submission of the Liquidation Reports and
Accomplishment Reports of the ADDSP Funds amounting to P292.390
million; and
c. Engineering and Technical Operations Group to immediately submit the

reportorial requirements of DBM and DPWH for the ADDSP Fund
amounting to P529.550 million.
Advances to Contractors
25. Non-monitoring of the Advances to Contractors resulted to the non-recoupment of

the advances totaling P278.402 million contrary to RA No. 9184.
25.1 Paragraph 5.3 Annex E, of the RIRR of RA No. 9184 provides that:
The procuring entity shall deduct the following from the certified gross
amounts to be paid to the contractor as progress payment:
a) Cumulative value of the work previously certified and paid for.

b) Portion of the advance payment to be recouped for the month.
c) Retention money in accordance with the condition of contract.
d) Amount to cover third party liabilities
e) Amount to cover uncorrected discovered defects in the works.
126
.
25.2 Records showed that out of the total accumulated balances of the contractors for
CY 2020 amounting to P2.150 billion, P278.402 million or 12.95% of the account
balance remained unrecouped/dormant since January 2013 consisting of
mobilization costs amounting to P292.304 million and negative balances for
prepaid material cost of P13.901 million. It should be noted that the projects
undertaken by the contractors were already finished several years ago, hence the
advances should have been recovered already.
25.3 This has been raised in the prior years’ Annual Audit Reports, but until now, the
said amount has not been recovered. The management explained that the
responsible employees who processed these Contractors payments have already
been separated and/or retired from service.
25.4 They added that they have exerted efforts to bill some of the contractors whose
addresses were traced from the internet and former records and they will continue
to give their best effort to trace not only the contractors but also the people who
may have knowledge of these unresolved issues.
25.5 However, upon verification with the books, there was no adjustment made to
reconcile the dormant accounts as of CY 2020.
25.6 Inquiry was made to the management for the dormant accounts but they are not
aware of the observation since it was handled by previous managers. Also
validation of the Agency Action Plan and Status Implementation (AAPSI) from CYs
2018 to 2020 revealed that this observation was not included in the reports. Since
then, no action was taken for the dormant accounts up to CY 2020.
25.7 Non-monitoring of these Advances to Contractors resulted to the non-recoupment

of advance payments which should have been deducted from payments to the
contractors concerned.
25.8 We recommended and Management agreed to require:
a. Legal Services Department to send demand letters to all contractors with

outstanding balances; and
b. Finance Department to analyze the advances to contractors account,

determine the causes of the negative balances, and take up the
necessary adjustments to reflect the correct and accurate book
balances.
25.9 Management commented that efforts will be exerted to send billings to contractors
who can still be traced or located and subsequently, legal action will be undertaken
by the Legal Services Department. Also, reconciliation will be made for the
negative balance of Advances to Contractors.
127
.
Cash Advances
26. Cash Advances amounting to P10.207 million were granted to employees despite
unliquidated/unsettled previous cash advances contrary to Section 89 of P.D. 1445.
26.1 Section 89 of Presidential Decree 1445 provides the limitations on cash advance,
to wit:
No cash advance shall be given unless for a legally authorized specific

purpose. A cash advance shall be reported on and liquidated as soon as
the purpose for which it was given has been served. No additional cash
advance shall be allowed to any official or employee unless the previous
cash advance given to him is first settled or a proper accounting thereof is
made.
26.2 Audit of the Cash Disbursing Officer accounts for CY 2020 disclosed that there
were cash advances granted to Special Disbursing Officers (SDO) despite having
unliquidated/unsettled previous cash advances.
26.3 Inquiry with Management revealed that for the cash advance of SDO 1 of Finance
Department, they admitted that overlapping of the cash advances were made due
to the pandemic and urgency of the purpose of the account. For SDO 2 of Finance
Department cash advances, Management explained that they have the same
purpose for the two cash advances which are for the MWSS Anniversary
celebration.
26.4 Verification showed that the cash advances were indeed for MWSS Anniversary
celebration, however, they have different activities. The first cash advance of
P354,000 pertains to MWSS Anniversary celebration in their Office, whereas the
second cash advance of P74,800 pertains to tree planting activities, hence, the
grant of cash advance to SDO 2 of Finance Department overlapped.
26.5 The grant of additional cash advances to SDOs despite having outstanding cash
advances may result to possible improper use of the public funds contrary to
Section 89 of PD 1445. The overlapping of cash advances could have been
avoided if the Management, as a policy, required the submission of the Certification
from Accountant that previous cash advances have been liquidated and accounted
for in the books, as required in Section 1.1 of COA Circular No. 2012-001 dated
June 14, 2012.
26.6 We recommended and Management agreed that Finance Department require

the Accountant to issue a Certificate that the previous cash advances have
been liquidated and accounted for in the books in compliance with Section
1.1 of COA Circular No. 2012-001, to ensure that Special Disbursing Officers
are granted cash advances only after the liquidation or settlement of their
previous cash advances in compliance with Section 89 of P.D. 1445.
128
.
26.7 The Management further commented that an internal policy which includes
requiring the issuance of Certification as recommended will be designed and
proposed for approval to strengthen the controls relative to cash advances
Customers’ Deposit
27. Cash receipts from bonds amounting to P620,053.77 were not refunded to the
lessees even after the lease term contrary to the Contract of Lease.
27.1 Contract of Lease in the form of Statement of Account signed by MWSS and the
lessee includes a footnote to wit:
A security deposit of Php xxx shall be paid in cash upon signing of the
contract. The said deposit shall answer for whatever damages that maybe
incurred arising from the use of the facility. The deposit shall be refunded
after the inspection provided there is no loss or damages incurred.
(emphasis ours)
27.2 Analysis of the subsidiary ledger disclosed that there are cash bonds reported
under Other Deferred Credits account, despite the expiration of the lease term.
Particulars 2020 2019 Total

Collected P 625,929.01 P 26,124.76 P 652,053.77
Less: Refunded 30,500.00 1,500.00 32,000.00
Not refunded P 595,429.01 P 24,624.76 P 620,053.77
27.3 The Management explained that the amounts pertaining to cash bond outstanding
under the Other Deferred Credits account are the lessee’s choice not to withdrew
the bonds, even if the actual use of the property is completed, for the utilization on
their future rentals.
27.4 Further verification with the Finance Department disclosed that they haven’t
established a policy with regards to proper action to be taken if the purpose of the
deposit has already been served. The Finance Department has raised this concern
verbally to Operations Support Department who is in charge of the rentals of
MWSS properties.
27.5 MWSS is not compliant with the Contract of Lease and lacks policy for the receipt
and refund of cash bonds.

immediately refund the cash bonds to the lessees amounting to P620,053.77
in accordance with the contract of lease.
129
.
Gender and Development - Corporate Office
28. The CY 2020 GAD Plan and Budget (GPB) of P10.753 million or 0.22 per cent of the
DBM – approved Corporate Operating Budget (COB) of P4.938 billion is way below
the required minimum five per cent (5%) or P246.899 million and prevented the
attainment of the GAD objectives contrary to PCW-NEDA-DBM Joint Circular No.
2012-01.
Likewise, non-implementation of the GAD activities and unutilized GAD Budget

amounting to P10.692 million or 99.44% of the total GAD budget did not conform to
PCW Memorandum Circular No. 2020-03 dated April 27, 2020.
28.1 Item 6.1 of PCW-NEDA-DBM Joint Circular No. 2012-01 states that:
At least five percent 5% of the total agency budget appropriations

authorized under the annual GAA shall correspond to activities supporting
GAD plans and programs. The GAD budget shall be drawn from the
agency’s maintenance and other operating expenses (MOOE), capital
outlay (CO) and personal services (PS). It is understood that the GAD
budget does not constitute an additional budget over an agency’s total
budget appropriations.
28.2 Section 4.1 of PCW Memorandum Circular No. 2020-03 dated April 27, 2020
provides that:
All national government agencies and instrumentalities are enjoined to

review and revise, as necessary, their FY 2020 Gender and Development
Plan and Budget to implement measures to address gender issues and
concerns arising from the unequal status of their women and men
stakeholders due to the COVID-19 situation. Such measures should be in
line with their respective agency mandates, Republic Act No. 9710 or the
Magna Carta of Women and the Bayanihan to Heal As One Act.
28.3 Also, Section 4.5 of the same Memorandum Circular states that:
Agencies, whether with an endorsed or unendorsed GPB, shall reflect all

changes made in the original FY 2020 GPB (e.g.,
cancellation/postponement of a GAD activity due to the Enhanced
Community Quarantine or implementation of a new GAD activity to respond
to the COVID-19 situation) in their GAD Accomplishment Report (GAD AR).
Agencies shall also fill-out Column 10 of the GAD AR form to indicate
deviations from the identified GAD activities and targets, if applicable
28.4 We noted that the CY 2020 GAD GPB of MWSS amounting to P10.753 million is
only 0.22 per cent of the approved COB amounting to P 4.938 billion which is way
below the minimum required five per cent (5%) or P246.899 million pursuant to
PCW-NEDA-DBM Joint Circular No. 2012-01.
130
.
28.5 In addition, we noted that the Annual Budget of MWSS CO posted in the PCW Tool
presented an amount of P215.000 million. However, the amount submitted is
contrary to the approved budget for GAD which is P10.753 million only.
28.6 Inquiry was made with Management but they did not give a direct response as to
why the budget has always been below the minimum threshold as prescribed by
PCW-NEDA-DBM Joint Circular No. 2012-01. Also, the Management cannot
provide the reason for the basis of the submitted MWSS CO budget amounting to
P215.000 million.
28.7 Paragraph 1.2.2.1 of Memo PCW Memorandum Circular 2020-05 dated

September 11, 2020 provides that:
GPBs that do not meet the minimum 5% requirement shall not be reviewed
nor endorsed by PCW.
28.8 Summary of the GAD Actual Results for CY 2020 submitted to PCW with details of
the total utilization of the budget and status of implementation of each activity is
presented below.
Approved Actual Unexpended

GAD Programs and Projects (PAPs) Actual Results Remarks
Budget Cost Balance
Participation in different 5 female and 2 male attended 142,400.00 18,500.00 123,900.00 Partially
programs/symposium/training/seminars a webinar series on Gender- Implemented
featuring women's rights contribution in Based violence
conservation and management of
domestic water supply
Gender Equality and Women 2 Male and 4 female have 308,000.00 5,196.00 302,804.00 Not
Empowerment Training focusing on the attended a Webinar Training Implemented
women and men's rights including those on using GMEF Tool and
undertaken in project planning, programs HGDG
and projects of MWSS like New
Centennial Watersource Kaliwa Dam
Project, Operational Umiray-Angat
Transbasin Project, Ipo Watershed, Angat
Watershed and La Mesa Watershed
Engagement of Indigenous People The imposition of Community 145,200.00 0 145,200.00 Not

(Dumagats) in watershed reforestation Quarantine Lockdowns Implemented
under the Annual Million Tree Challenge affected the schedules and
to define the role of men and women in the the utilization of funds were
conservation and protection of our forest used as Covid-Response
using/adopting the HGDG tool. Emergency Fund remitted to
the DOF.
Bantay Gubat Programs for GAD The imposition of Community 153,000.00 0 153,000.00 Not
Orientation for 2 days-60 male and 50 Quarantine Lockdowns Implemented
female participants in the Bantay Gubat affected the schedules and
Program for GAD Orientation for 2 days. the utilization of funds were
used as Covid-Response
Emergency Fund remitted to
the DOF.
131
.

Budget Cost Balance
Provision of Livelihood training programs The imposition of Community 144,100.00 0 144,100.00 Not
for Bantay-Gubat personnel (Handcrafts Quarantine Lockdowns Implemented
of Novel Items e.g. Bamboo ashtray, etc.) affected the schedules and
the utilization of funds were
the DOF.
Gender sensitivity training, GAD The imposition of Community 326,336.00 0 326,336.00 Not
orientation on responsiveness training Quarantine Lockdowns Implemented
and solo parenting seminar for MWSS-CO affected the schedules and
officials and employees the utilization of funds were
the DOF.
Training/Seminar on leadership for All employees and personnel 1,275,000.00 36,781.61 1,238,218.39 Partially
executives/managerial/second level have attended the training Implemented
supervisor. discussion
Construction of a Multi-Purpose Gender The imposition of Community 4,580,000.00 0 4,580,000.00 Not

and Development Office with complete Quarantine Lockdowns Implemented
facilities intended for Women, Children, affected the schedules and
Elderly and Persons with Disabilities the utilization of funds were
needs in accordance with standards and used as Covid-Response
requirements. Emergency Fund remitted to
the DOF.
Management and Maintenance of The imposition of Community 380,000.00 0 380,000.00 Not

GAD-MWSS page in the MWSS Quarantine Lockdowns Implemented
Website affected the schedules and
the DOF.
Conduct of Gender and Development The imposition of Community 830,000.00 0 830,000.00 Not
Planning and Budgeting Sessions Quarantine Lockdowns Implemented
affected the schedules and
the DOF.
Participation in Women's Month The imposition of Community 1,180,000.00 0 1,180,000.00 Not

Celebration Activities and programs Quarantine Lockdowns Implemented
through: (i) GAD-initiated reforestation affected the schedules and
project participated in by male and female the utilization of funds were
employees, (ii) Participation in GAD- used as Covid-Response
related activities of partner offices and Emergency Fund remitted to
organizations, (iii) Conduct of seminar- the DOF.
forum on women empowerment(iv) Film
showing of PCW-endorsed movies for
MWSS-CO employees, (v) distribution of
flyers brochures on various GAD
advocacy laws i.e. the MCW 9710,
RA9262, RA7877, RA9208, RA8353 and
(vi) celebration of the World Water Day
132
.

Budget Cost Balance
together with MWSS Concessionaires and
Stakeholders
Establishment of Child Development The imposition of Community 1,100,000.00 0 1,100,000.00 Not

Center/Area for MWSS-CO officials and Quarantine Lockdowns Implemented
employees affected the schedules and
the DOF.
Conduct of Anti-VAWC Activity in The imposition of Community 94,380.00 0 94,380.00 Not

observance of the 18-day Campaign to Quarantine Lockdowns Implemented
end VAW (e.g. forum, orientation affected the schedules and
sessions among others) the utilization of funds were
the DOF.
Conduct training/orientation in relation The imposition of Community 94,380.00 0 94,380.00 Not

to RA 7877 (Anti-Sexual Harassment Quarantine Lockdowns Implemented
Act of 1995) affected the schedules and
the DOF.
TOTAL 10,752,796.00 60,477.61 10,692,318.39
28.9 The above table disclosed that out of the allotted amount of P10.753 million,
P60,477.61 was expended to the GAD activities, which is merely 0.56 per cent of
the GPB.
Total MWSS GAD Budget GAD Utilized Percentage

Budget Allocated Percentage Portion Utilized
P4,937,986,000 P10,752,796.00 0.22% P60,477.61 0.56%
28.10 Inquiries with management revealed that it was not prioritized and continued due
to the COVID-19 situation. Nevertheless they still complied with the completion of
GPB and AR in compliance with the PCW.
28.11 Also, MWSS explained in their accomplishment report that the schedules of
implementation of the activities were greatly affected by the imposition of the
community quarantine lockdowns. The report was submitted to the PCW and was
finalized on March 15, 2021.
28.12 The very reason of the PCW Memorandum Circular is for the agency to align their
GPB to the pandemic situation. PCW even provided an example such as
cancellation/postponement of a GAD activity due to the Enhanced Community
Quarantine or implementation of a new GAD activity to respond to the COVID-19
situation.
28.13 It can be inferred from the above table that MWSS did not revise the GPB contrary
to the provisions of Section 4.1 of PCW MC No. 2020-03 to adjust their activities
133
.
in order to address the gender issues on COVID-19 situation. Review of the GPB
disclosed that the 14 activities submitted to PCW in CY 2019 were not revised in
order to comply with the said Memorandum Circular.
28.14 The Management also stated in the accomplishment report that the utilization of
funds for the unimplemented activities were used as Covid-Response Emergency
Fund and remitted to the Department of Finance (DOF).
28.15 However, in our examination of the documents, we noted that there was no
remittance of fund to DOF that is intended for the COVID Response. Request was
made for the details and supporting documents on the remittances made to the
DOF for the unexpended GAD activities, however, no submission was made yet.
28.16 Meanwhile, on April 27, 2021 the PCW have noted in their review of
accomplishment report that the COVID-19 situation severely affected the
implementation of the agency’s proposed GAD activities for CY 2020. The PCW
recommended that the unimplemented activities be calibrated in line with the new
normal and may be considered for implementation in the agency’s CY 2021 GPB
and succeeding GPBs.
28.17 PCW further recommended that MWSS CO participate in GAD webinar sessions
on gender and gender analysis tools, such as those conducted by PCW and other
training institutions offering similar programs.
28.18 PCW also encouraged the agency to attribute its flagship programs to GAD using
the Harmonized Gender and Development Guidelines (HGDG) tool. Activities that
engage indigenous cultural communities on the implementation, management and
Monitoring and Evaluation of watershed programs and services were also
recommended to integrate a gender perspective.
28.19 More so, paragraph 1.2.1.3 of PCW MC No. 2020-05 dated September 11, 2020
on the Preparation and Online Submission of Fiscal Year (FY) 2021 Gender and
Development (GAD) Plans and Budgets provides that:
Agencies shall prioritize addressing gender issues brought about by the

COVID-19 pandemic that are within their respective mandates as part of
their FY 2021 GPB. xxx
As such, in addition to direct GAD activities, agencies are highly

encouraged to use the Harmonized Gender and Development Guidelines
(HGDG) tool to ensure the gender-responsiveness of PAPs to be
implemented in response to the COVID-19 pandemic and the “new normal”
28.20 We recommended that Management thru the Human Resources Department:
a. Allocate the minimum required 5% of the total Corporate Operating

Budget for GAD Plan and Budget in compliance with Section 6.1 of
the PCW-NEDA-DBM Joint Circular No. 2012-01;
134
.
b. Submit the basis for the indicated budget of P215.000 million

submitted to PCW as against the total COB of P4.938 billion;
c. Explain the statement in the Accomplishment Report that MWSS

remitted funds to DOF for use as Covid-Response Emergency Fund
and submit supporting document;
d. Maximize the utilization of the GAD funds through the implementation

of GAD-related programs and projects which address gender and
development issues in order to attain the objective for which the
funds were provided; and
e. Comply with the PCW recommendations for the unimplemented GAD

activities in CY 2020 to be considered in the agency’s CY 2021 GPB
and succeeding GPBs in compliance with PCW MC No. 2020-05; and
f. Require the Heads of the Implementing Departments to ensure that

GAD projects are implemented and regularly assess the gender
responsiveness of the programs and projects of the agency.
28.21 In the recommendation letter B, the Finance Department thru the Budget Services
Chief submitted the breakdown of the P215 million agency budget submitted to the
PCW. However, as per verification, no reconciliation was made on the total COB
of P4.938 billion
28.22 In the recommendation letter C, the HRD commented that the budget for Gender
and Development (GAD) Programs and Projects was realigned as Covid-
Response Emergency Fund and this was the one remitted to the Department of
Finance (DOF). However, they were informed that the remitted amount is for the
advance payment of the FY 2020 dividends and not for the COVID-Response
Emergency Fund. Further, they tried to amend the 2020 GAD Accomplishment
Report but it can only be submitted once since this has been uploaded to the
Gender Mainstreaming Monitoring System (GMMS) of the Philippine Commission
on Women (PCW). They sincerely apologize for the confusion cause and rest
assured that they will coordinate with the Finance Department from time to time to
avoid this kind of situation in the future.
28.23 For all other recommendations, the Management has concurred.
D. Other Audit Observations – Regulatory Office
Advances to UP-National Engineering Center
29. Cash Advances granted to UP National Engineering (UP NEC) amounting to P4.932
million intended for the Public Assessment of Water Services Project (PAWS)
remained unliquidated contrary to Section 5.4 of COA Circular No. 94-013 dated
December 13, 1994 resulting to possible wastage of public funds.
135
.
Amount Debited
Date Description (Credited)
09/20/2011 UP Nat'l Engineering Center - Payment of P 3,252,137.00
Public Assessment of Water Service
(PAWS) P2 Year 5
02/15/2012 UP Nat'l Engineering Center - Payment of 2,678,999.15
Public assessment of Water Service
(PAWS) Phase 2 Year 5 balance
05/17/2017 Refund of 50% of unexpended cash (998,883.52)
advance
Balance as of December 31, 2021 P 4,932,252.63
29.1 Section 5.4 of COA Circular No. 94-013 dated December 13, 1994 states one of the
responsibilities of the Source Agencies over funds transferred to Implementing
Agencies (IA), as follows:
Require the IA to submit the reports and furnish the IA with a copy of the
journal voucher taking up the expenditures. Upon receipt of the copy of
the Certificate of Settlement and Balances (CSB) and the Credit Notice
(CN) issued by the IA Auditor, the Accountant shall draw a journal
voucher restoring back the amount previously credited for any
disallowance. He shall furnish the IA with a copy of the JV;
29.2 Also, 4.9 of COA Circular No. 94-013 dated December 13, 1994 states that “The
Implementing Agency shall return to the SA any unused balance upon completion
of the project.”
29.3 This is a reiteration of a previous audit observation in the CYs 2013 to 2019 Annual
Audit Reports.
29.4 The MWSS-RO transferred the amounts of P3.252 million and P2.679 million to the
UP Diliman National Engineering Center intended for the PAWS project for Phase 2
of Year 5 in September 2011 and February 2012, respectively.
29.5 In the Agency Action Plan and Status of Implementation (AAPSI) submitted by
MWSS-RO in August 2017 (the same AAPSI was resubmitted in February 2018),
the Management informed that a demand letter was sent to UP-NEC on March 20,
2017, for the refund of the P2.070 million, including P36,323.10 from unexpended
funds for Phase 2 of Year 3.
29.6 In their March 24, 2017 reply, the UP-NEC acknowledged the demand letter and
granted the release of half of the total undisputed unexpended budget or P1.035
million, while the remaining half will be released upon clearance from the UP-COA
of their Financial Report. The MWSS-RO received the amount of P1.035 million on
May 17, 2017. The amount of P36,323.10 was applied to the unexpended funds for
Phase 2 of Year 3, while the remaining P998,883.52 was applied to the Phase 2 of
Year 5 funds.
29.7 On January 29, 2018, MWSS-RO sent another demand letter to UP-NEC for the
remittance of the remaining 50% of the undisputed unexpended budget in the
136
.
amount of P1.035 million. Furthermore, Management sent a demand letter on

December 12, 2018 through the UP Chancellor to compel remittance of the said
amount.
29.8 However, as of this writing, there is still no response from the UP Chancellor and the
liquidation of the expenses were not submitted to MWSS-RO.
29.9 The Management said that they will coordinate with the UP-Accounting Office for
the verification of the recorded expenses as charged to the PAWS budget per their
approved disbursements and to record the same in the books of the Regulatory
Office.
29.10 We likewise sent a confirmation letter via e-mail to the UP Accounting Office thru
COA – UP Diliman last May 6, 2021, but we still haven’t received any reply.
29.11 As per inquiry from Management, they have been in constant coordination with the
Office of the Chancellor and the UP-NEC through telephone calls. On February 24,
2020, the former Project Engineer of the PAWS Project has agreed to help the UP-
NEC in the completion of the full liquidation report and coordinate with the UP
Accounting Office for the verification. To date, there is still no update regarding the
liquidation of the cash advance. Moreover, Management informed that there is
already a liquidation report by UP-NEC; however, Management is still requiring for
the certification from COA-UP that the liquidation is correct.
29.12 We recommended that Administration Department make a final demand to

UP NEC for the immediate submission of the Liquidation Report of the funds
transferred to them.
29.13 Management commented that they are in continuous communication with the UP-
NEC with regard to the status of the refund of the unexpended balance and rest
assured that the MWSS RO is exerting all its efforts to close its pending items with
the Commission on Audit.
29.14 The Management likewise stated that they are already in possession of the
liquidation report of the UP-NEC and that they are also coordinating with the UP
Accounting Office for the verification of the recorded expenses. The Management
is already in the process of recording said expenses in its books of accounts.
29.15 Lastly, the Management will send a letter to UP-NEC, through UP Diliman
Chancellor, to demand the immediate return/refund of the outstanding balance of
the report.
29.16 As a rejoinder, we request submission of the liquidation report including

attachments upon recording in the books of MWSS-RO, and copies of
communication with UP.
137
.
Other Assets
30. Unserviceable assets totaling P1.095 million remained undisposed contrary to

Section 79 of Presidential Decree (PD) 1445 resulting to further deterioration of the
assets.
30.1 Section 79 of PD 1445, otherwise known as the Government Auditing Code of the
Philippines, provides the responsibility of the agency over the destruction or sale of
unserviceable property, to wit:
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. If found to be
valuable, it may be sold at public auction to the highest bidder under the
supervision of the proper committee an 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.
30.2 DBM NBC No. 425 dated January 28, 1992, also known as the Manual on the
Disposal of Government Property provides that disposal proceedings should be
immediately initiated to avoid further deterioration of the property and consequent
depreciation in its value. A systematic and timely disposal will yield benefits in terms
of, among others, a higher appraised value and by enabling storage areas available
for other purposes.
30.3 As of December 31, 2020, the MWSS-RO has recognized unserviceable assets
totaling P1.095 million over which the management lack policies regarding its
monitoring and disposal.
30.4 As per inquiry, the Management committed to pursue the disposal of unserviceable
assets within the year prior to their transfer to the new MWSS-RO building.
30.5 The non-disposal of the unserviceable assets may result to the further deterioration
of the assets which occupy space within the premises, thus incurring additional
expenses to retain them.
30.6 We recommended and Administration department agreed to expedite the

disposal of unserviceable assets amounting to P1.095 million in compliance
with Section 79 of PD 1445 and DBM NBC No. 425.
138
.
Receivables
31. The non-monitoring and non-collection of Receivables from three (3)

separated/retired officers/employees totaling P1.091 million may result to losses to
the government and contrary to Section 6.1 of COA Circular No. 2016-005.
31.1 COA Circular No. 2016-005 dated December 19, 2016 prescribes the guidelines and
procedures in reconciling and cleaning the books of accounts of National
Government Agencies (NGAs), Local Government Units (LGUs) and Government-
Owned and Controlled Corporations (GOCCs) of dormant receivable accounts,
unliquidated cash advances and fund transfer for fair presentation of accounts in the
financial statements. Section 6.1 of the aforementioned circular states that:
All government entities shall conduct regular monitoring and analysis of

receivable accounts to ensure that these are collected when these become
due and demandable… x x x. (emphasis ours)
31.2 As of year ended December 31, 2020, the balance of the outstanding loans to
separated/retired officers/employees for Motor Vehicle Loans remained at P1.091
million. Details are as follows:
Balance as of
Date December 31,
Debtor Granted Loan Amount Payments 2020
Separated Employee 1 03/29/1999 P 500,000.00 P 55,478.86 P 444,521.14
Separated Employee 2 04/23/1999 800,000.00 203,235.44 596,764.56
Separated Employee 3 06/18/2001 800,000.00 750,076.44 49,923.56
TOTAL P2,100,000.00 P1,008,790.74 P1,091,209.26
31.3 Verification showed that Management sent demand letters dated May 22, 2017 to
the three (3) former employees for the settlement of their outstanding obligations to
the MWSS-RO.
31.4 In CY 2017, Separated Employee 3 with outstanding obligation of P299,923.56 paid

the amount of P250,000.00.
31.5 However, from CY 2018 to present, there were no further collections nor demand
for payment. Per our inquiry with Management, they reasoned out that they do not
have available information about these persons and that they were not receiving any
response from their previous demands.
31.6 The Management should be mindful of the remedies that the Agency may avail as
an unpaid creditor to protect its right to recover the unpaid balances of the debtors.
The non-recovery of the receivables is tantamount to wastage or losses of public
funds, thereby depriving the government of funds intended for public purposes.
31.7 We reiterated our recommendation and Administration department agreed to

take the appropriate legal action to recover the unpaid receivables from the
separated/retired employees in order to protect its interest and recover public
funds.
139
.
Property, Plant and Equipment
32. Deficiencies in identification/tagging of PPE contrary to Sections 5.6 and 5.7 of

COA Circular No. 2020-006 resulted to difficulty in identification of PPE items
during the physical inventory taking.
32.1 COA Circular No. 2020-006 dated January 31, 2020 provides the Guidelines and
Procedures in the Conduct of Physical Count of PPE. Section 5.6 states that:
Each government agency shall adopt a uniform property identification

system for PPE wherein a unique Property Number shall be assigned for
each PPE item, using the following numbering system:
The codes for the PPE sub-major account group and General Ledger
account correspond to those provided in the Revised Chart of Accounts
prescribed under the Accounting Manuals of the respective Sectors
(National, Local and Corporate).
Additional digits may be used for serial number and location/office, as

necessary.
32.2 Section 5.7 of the same circular stated the contents of the property tag to be used,
to wit:
For easy identification, the Property Number shall be prominently shown in

the property sticker, in addition to the following vital information on the PPE
item:
a. Description of the property
b. Model Number
c. Serial Number
d. Acquisition Date/Cost
e. Person Accountable
f. Space for the validation/signature of the Inventory Committee
32.3 Also, Section 6.2.5 of the same Circular states that:
All PPE items counted shall be tagged with new property stickers containing
the information provided under Paragraph 5.7 of this Circular.
140
.
32.4 This Office received the Agency’s Physical Inventory Report of PPE for CY 2020 last
February 17, 2020 conducted by the Property Department headed by the Senior
Property Officer during the last few weeks of December 2020. During our sampling
for the verification of existence and accuracy of PPE items indicated in the Physical
Inventory Report, we have noted that the Agency have not applied the prescribed
format of the property codes and property tags/stickers. The current property tag
used by the agency only includes:
a. Property code (not updated)

b. Description of the property; and
c. Space for the validation/signature of the Inventory Committee
32.5 As per inquiry, the Management admitted that they were not aware of the new
circular issued by COA concerning the inventory taking.
32.6 The suggested format for the property codes and tags shall aid the agency in
performing a more efficient and accurate inventory taking of PPE which would
likewise result to more reliable financial information pertaining to PPE.
32.7 We recommended and Administration department agreed to adopt the format

of the property code and identification tags as provided under Sections 5.6
and 5.7 and COA Circular No. 2020-006 dated January 31, 2020.
Inter-Agency Payables
33. MWSS RO’s non-monitoring and non-reconciliation of the withheld taxes and
mandatory contributions to Government Service Insurance System (GSIS),
Philippine Health Insurance Corporation (PhilHealth), and Home Development
Mutual Fund (Pag-IBIG) resulted to variances in the remittances, thus, exposing the
agency to possible penalties/interest that maybe imposed, and contrary to Section
80 of the National Internal Revenue Code (NIRC), Implementing Rules and
Regulations of Republic Act No. 8291, HDMF Circular No. 275 and PhilHealth
Circular No. 2019-009
33.1 Analysis of the Due to BIR, Due to GSIS, Due to Pag-IBIG, and Due to PhilHealth
accounts showed the following over and under remittances as of December 31,
2020:
Agency Amount
Due to BIR P 279,832.43
Due to GSIS 97,665.30
Due to Pag-IBIG (Employee Share) 4,000.00
Due to PhilHealth 725.00
Under Remittances P 382,222.73
Due to BIR – Final Vat P (5,320.88)
Due to Pag-IBIG – Government Share (4,000.00)
Due to PhilHealth – Employee Share (2,689.87)
Over Remittances P (12,010.75)
Net Under Remittances P 370,211.98
141
.
33.2 As per inquiry from Management, most of the negative balances and the recurring
balances were amounts that are dormant long before the current Chief Corporate
Accountant assumed his position.
33.3 The non-monitoring and non-reconciliation of the taxes and mandatory contributions
will expose the agency to possible interest and/or penalties that may be imposed by
the agencies concerned.
33.4 We recommended and Accounting Section agreed to analyze and reconcile

the under/over remittances and take the appropriate actions to comply with
applicable BIR, GSIS, Pag-IBIG, and PhilHealth regulations pertaining to
collection and remittance of withheld amounts.
33.5 The Management commented that majority of the under remittance noted under Due
to BIR account pertains to tax refunds. Furthermore, the under remittance noted
under the Due to GSIS account pertains to the amounts withheld by the MWSS-RO
from the newly hired employees which are yet to be billed by the GSIS. As to the
other amounts noted, the Management commits to comply with the
recommendations to reconcile the under/over remittances and take the appropriate
actions.
Gender and Development-Regulatory Office
34. The Agency’s GAD Budget was unutilized by P9.544 million or 76.04% of the total
budget due to non-revision of the GAD Programs and Projects contrary to PCW
Memorandum Circular No. 2020-03 dated April 27, 2020.
34.1 Section 4.1 of PCW Memorandum Circular No. 2020-03 dated April 27, 2020
provides that:
All national government agencies and instrumentalities are enjoined to

review and revise, as necessary, their FY 2020 Gender and Development
Plan and Budget to implement measures to address gender issues and
concerns arising from the unequal status of their women and men
stakeholders due to the COVID-19 situation. Such measures should be in
line with their respective agency mandates, Republic Act No. 9710 or the
Magna Carta of Women and the Bayanihan To Heal As One Act.
34.2 Also, Section 4.5 of the same Memorandum Circular states that:
Agencies, whether with an endorsed or unendorsed GPB, shall reflect all

changes made in the original FY 2020 GPB (e.g.,
cancellation/postponement of a GAD activity due to the Enhanced
Community Quarantine or implementation of a new GAD activity to respond
to the COVID-19 situation) in their GAD Accomplishment Report (GAD AR).
Agencies shall also fill-out Column 10 of the GAD AR form to indicate
deviations from the identified GAD activities and targets, if applicable
142
.
34.3 The COB of MWSS-RO for CY 2020 was P235.339 million. The amount of P12.552
million, representing 5.33 per cent of the COB, had been allocated for GAD Plan
and Budget (GPB) for CY 2020 and was approved by the Philippine Commission for
Women (PCW) on September 21, 2020.
34.4 However, only P3.008 million was actually utilized, leaving a balance of P9.544
million at year-end which is 76.04% of the total GAD Fund.
34.5 A summary of the budgeted and actual expenses for GAD-related activities is shown
in the table below:
GAD Activity Budget Actual Cost

To integrate gender elements into the existing P 3,750,000.00 P 0.00
monitoring forms that will capture water and
wastewater-related issues of women and LGBTQ
customers, specifically the effects of water and
wastewater quality on their socio-economic activities
Conduct public consultations/gender-responsive 1,872,500.00 376,156.80
campus awareness drive to include collection of
relevant SDD, gender analysis and integrate gender
perspective in identifying strategies to address identified
gender issues.
Participation/attendance in different activities/ 1,492,828.10 186,279.33
programs/film showings/art workshops/
symposia/trainings/ seminars featuring women's roles
Conduct of Anti-VAWC activities in observance of the 1,563,366.40 1,131,426.00
18-day Campaign to End VAW (Film showing or play,
art workshop, seminars/trainings, symposium, RO IEC
materials contest among others)
Conduct of Annual Family Day Activity with the aim of 250,000.00 230,061.87
promoting responsible parenthood and family planning,
non-sexist child rearing, and shared parenting and
family responsibility
Conduct of regular GAD meetings and planning 764,013.00 224,674.32
sessions
Include Gender Sensitivity Training in the MANCOPM 10,000.00 0.00
Planning and include GAD executive briefing/or GAD
updates in MANCOM Meetings
Conduct training on GAD Awareness (GST, GA, and 300,000.00 42,087.84
GPB) for new GFPS, key staff or project implementers.
And MWSS RO Talents conducting the public
consultation/gender-responsive campus awareness
drive. As suggested by PCW, engage a GAD
Practitioner to assist in the process of gender issue
identification, and strategies to address these issues.
143
.
GAD Activity Budget Actual Cost

Integration of GAD knowledge products in the 200,000.00 0.00
Knowledge Management (KM) System
Conduct in-house training on GST for management and 275,000.00 141,519.40
staff (new employees and COS) who have not attended
GST yet
Conduct basic/refresher and deepening sessions on 250,000.00 187,347.36
HGDG to integrate GAD perspectives in developing
PAPs and attribute GAD budget (three 3-day seminar)
Conduct training on collecting/generating SDD and 200,000.00 0.00
developing/maintaining GAD database
Training in Anti-SH Code (RA No. 7877, VAW, and Safe 200,000.00 183,646.09
Safes Act (RA No. 11313))
Conduct of capacity building workshop/deepening 200,000.00 0.00
sessions using HGDG toolkit for the GFPS and program
implementers
Include GAD Accomplishment Report in MANCOM 5,000.00 5,000.00
meetings
Consultation with internal clients on the activities to be 27,000.00 0.00
conducted through GAD during general assemblies, etc.
Provide materials for the lactation room to be built in the 10,000.00 0.00
new MWSS RO building
Conduct training of trainors (TOT) for GFPS on GA, 200,000.00 0.00
GMEF and GPB
Conduct of sessions to prepare GAD-specific 275,000.00 0.00
Information Education Communication (IEC) materials
for RO and to review agency IEC materials to assess
gender sensitivity and use of gender-fair language
Conduct of GAD Year-End Assessment of GAD 700,000.00 294,349.57
accomplishments and development of GAD
Agenda/Strategic Framework
Formulate and issue internal guidelines/policies on 2,000.00 0.00
gender mainstreaming efforts, GAD mandates,
development of GAD agenda/framework, integration of
GAD perspectives in strategic plans and PAPs, SH,
VAWC, CODI, etc.
Formulate GAD Agenda or GAD Strategic Framework 5,000.00 5,000.00
which integrates GAD perspective
TOTAL P 12,551,707.50 P 3,007,548.58
34.6 The MWSS-RO’s annual GAD Accomplishment Report showed that GAD activities
and fund utilization were not maximized since only a meager amount of the fund
allocation was utilized.
34.7 As per inquiry, the Management was not able to utilize the budget due to the
restrictions set by the Government of the Philippines in response to the COVID-19
Pandemic.
144
.
34.8 We would like to emphasize that PCW Memorandum Circular No. 2020-03 allowed
the revision of GAD projects in view of the limitations set by the pandemic.
34.9 However, the Management was not able to prepare a revised GPB to address the
issue. Per inquiry with the Management, the GPB was only endorsed by PCW on
September 21, 2020, hence, they were not able to revise.
34.10 This is a reiteration of prior years’ observation. Recurring non-compliance to the

mandatory requirement as well as poor utilization of the GAD budget may
contribute to the delay in the implementation of gender mainstreaming which is
highly encouraged by the PCW.
34.11 In addition, paragraph 1.2.1.3 of PCW MC No. 2020-05 dated September 11, 2020
on the Preparation and Online Submission of Fiscal Year (FY) 2021 Gender and
Development (GAD) Plans and Budgets provides that:
Agencies shall prioritize addressing gender issues brought about by the

COVID-19 pandemic that are within their respective mandates as part of
their FY 2021 GPB. xxx
As such, in addition to direct GAD activities, agencies are highly

encouraged to use the Harmonized Gender and Development Guidelines
(HGDG) tool to ensure the gender-responsiveness of PAPs to be
implemented in response to the COVID-19 pandemic and the “new normal”.
34.12 We recommended and Administration Department agreed to comply with

GAD budget allocation as mandated, and work on the full implementation of
the programmed projects and activities in the succeeding years to ensure
attainment of the goals specified in the GAD plan.
E. Compliance with Tax Laws
35. For MWSS Corporate Office, discrepancies were noted between the amount of taxes
withheld on salaries and amount remitted. The total amount of taxes withheld per
schedule for CY 2020 amounted to P15.282 million while the total amount of taxes
remitted per BIR returns amounted to P19.792 million or a discrepancy of P4.510 million.
In view of this, reconciliation by the Finance Department of the discrepancies noted was
recommended.
36. For MWSS Regulatory Office, all income taxes withheld on salaries for January to
November 2020 totaling P11.375 million were remitted in CY 2020 while income taxes
withheld in December 2020 amounting to P531,705.55 was remitted on January 11, 2021.
However, there are dormant amounts that remained unremitted.
145
.
F. Compliance with Rules on the Government Mandatory Deductions
37. For MWSS Regulatory Office the amounts of P10.393 million, P0.722 million, and P0.937
million withheld from employees for their GSIS, Pag-IBIG, and PhilHealth contributions,
respectively, from January to November 2020 were all remitted in CY 2020, while the
December 2020 GSIS, Pag-IBIG, and PhilHealth contributions amounting to P0.767
million, P61,785.92 and P102,778.74, respectively, were remitted on January 08, 2021.
However, there are dormant amounts that remained unremitted.
38. For MWSS Corporate Office, the validity of the remittances made to GSIS, PhilHealth
and Pag-IBIG amounting to P722,010 cannot be ascertained due to the non-submission
of the Disbursement Vouchers. In addition, there were abnormal balances amounting to
P42,408 in the subsidiary ledgers (SL) and discrepancies amounting to P85,780 between
the general ledgers (GL) and remittance schedules in the accounts Due to GSIS,
PhilHealth, and Pag-IBIG due to the non-reconciliation, thus, casting doubt on the validity
and accuracy of the accounts.
G. Status of Audit Suspensions, Disallowances and Charges
As of December 31, 2020, although there were no unsettled suspension nor charges, the total
unsettled disallowances of MWSS-Corporate Office and MWSS-Regulatory Office amounted
to P359.968 million and P246.704 million, respectively.
A summary of audit disallowances issued for transactions ending December 31, 2020 is
shown below:
Beginning Ending Balance

Audit Action Balance Issued Settled December 31,
January 1, 2020 2020
MWSS – Corporate Office
Suspensions 0 0 0 0
Disallowances 359,512,025 838,047 382,143 359,967,929
Charges 0 0 0 0
Sub-total 359,512,025 838,047 382,143 359,967,929
MWSS – Regulatory Office
Suspensions 0 0 0
Disallowances 249,687,575 1,326,562 4,310,089 246,704,048
Charges 0 0 0 0
Sub-total 249,687,575 1,326,562 4,310,089 246,704,048
Grand Total 609,199,600 2,164,609 4,692,232 606,671,977
Details showing the status of audit disallowances for transactions of the MWSS Corporate Office
and Regulatory Office are presented in Annex 1 of this report.
146

10-MWSS2020 Part2-Observations and Recomm

Uploaded by

Copyright:

Available Formats

10-MWSS2020 Part2-Observations and Recomm

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

10-MWSS2020 Part2-Observations and Recomm

Uploaded by

Copyright:

Available Formats

.

AUDIT OBSERVATIONS AND RECOMMENDATIONS

A. Financial Audit – Corporate Office

Service Concession Assets/Deferred Service Concession Revenue

1.1. Paragraph 27 of IPSAS 1 – Presentation of Financial Statements provides that:

Financial statements shall present fairly the financial position, financial

1.2. Paragraphs 24 and 27 of IPSAS 3 – Accounting Policies, Changes in Accounting

24. Subject to paragraph 28:

(b) When an entity changes an accounting policy upon initial application

27. Subject to paragraph 28, when a change in accounting policy is

1.3. Paragraph 9 of IPSAS 32 – Service Concession Arrangements: Grantor provide the

The grantor controls, through ownership, beneficial entitlement or

1.5. In compliance with the said recommendations, the Management in CY 2020

a. Confirmed detailed balances of the Service Concession Assets in the books

1.13. We recommended that Management:

a. Require the Finance Department to submit the following pertinent

1. Confirmed detailed balances of the SCA in the books of the

b. Require the Finance Department to restate the opening balances of net

c. Require the Finance Department to perform a thorough analysis and

1.17. As a rejoinder relative to the sufficiency of the information presented on the

Property, Plant and Equipment

a. Incomplete Physical Inventory and Non-submission of Physical Inventory

b. Absence of certificates of titles and other proofs of ownership of land assets

c. Non-provision of impairment losses for the inexistent, dilapidated, non-

d. Unreconciled variance amounting to P3.248 billion between the CY 2018

e. Unsupported adjustment amounting to P39.032 million relative to the sale of

f. Non-adjustment of the CIP account amounting to P156.551 million for the

g. Various MWSS properties were occupied by private individuals or taken back

h. Several deep wells (DWs) can no longer be located;

j. Various deep wells (DWs) were observed to be temporarily suspended due to

k. Non-submission of the Inventory Report of Unserviceable Properties for the

l. Discrepancies in the deep wells were noted between the record/list of

2.1. Paragraph 27 of IPSAS 1 provides that –

Financial statements shall present fairly the financial position, financial

Standard. Also, under paragraph 36 thereof, the cost of a self-constructed asset is

2.3. The recognition and subsequent measurement criteria of PPE is governed by

The cost of an item of property, plant and equipment shall be recognized

(a) It is probable that future economic benefits or service potential

After recognition as an asset, an item of property, plant and equipment shall

2.4. Paragraph 26 of IPSAS 21 – Impairment of Non-Cash Generating Assets provides

An entity shall assess at each reporting date whether there is any

1. The Head of any agency of the government is immediately and primarily

2. Persons entrusted with the possession or custody of the funds or

Physical inventory-taking being an indispensable procedure for checking

31 of each year, unless extended by the Chairman upon prior request of

a. Incomplete Physical Inventory and non-submission of Report (PIR) for

1. During CY 2018, we noted several errors and deficiencies in the PPE

b. Absence of certificate of titles and other proofs of ownership of land

3. They added that the Administrative process is commenced by application of

already forwarded the documents to the Finance Department. However, the

9. As reasoned out by the Management, the hindrances confronting the slow

12. In the Inspection Report prepared by the Physical Inventory Team as of

c. Non-provision of impairment losses for the inexistent, dilapidated, non-

1. Based on the available CY 2018 Physical Inventory Report, it was revealed

Status No. of Items Net Book Value

2. In the CY 2019 Annual Audit Report (AAR), we recommended that

4. Paragraph 34 of IPSAS 21 further provides that:

If there is an indication that an asset may be impaired, this may

d. Unreconciled variance amounting to P3.248 billion between the Physical

1. In CY 2018, we noted an unreconciled variance of P3.248 billion between