The sustainability of operation and implementation or expansion of projects by the Cagayan de Oro Water District (COWD) “will be hampered” due to its “decreasing net profit trend” since 2018, the Commission on Audit (COA) said.
In its annual audit report, the COA said that in 2022 alone, COWD incurred a net loss of P32 million.
"A Net Loss amounting to P32 million was incurred by the Water District in Calendar Year 2022 falling short by P100.6 million against its projected net profit of P68.6 with a decreasing net profit trend already evident since CY 2018, thus, sustainability of operation and implementation/expansion of projects will be hampered," the COA warned as early as 2022.
Also, in its previous audit report, COA noticed that COWD has an extremely high non-revenue water (NRW) rate, which means that a lot of water is lost in the distribution system before it even reaches customers. In fact, it said that COWD experienced an estimated revenue loss of P765.278 million because of its high NRW.
"The Water District registered an average rate of 50.02 percent as of Dec. 31, 2022 for its NRW rate which is 150.10 percent above the maximum acceptable NRW of 20 percent," the report revealed.
COA also highlighted COWD’s dormant accounts which have been inactive for 10 to 40 years. "Likewise, dormant accounts under Accounts Receivable and Allowance for Impairment Loss Receivables cannot be assessed and verified due to Aging Report limited to more than three months, rendering the accuracy and reliability of the said accounts doubtful," it said.
It also said that the other issues highlighted by the audit team included the payment given to COWD board members for meetings that might not have taken place.
It pointed out that board members were granted reimbursements that did not follow set regulations as there were no written policies and procedures for internal fund transfers, and that transfers of funds from collection banks to general accounts lacked proper board authorization.
Even payments for fuel expenses to Clara Clear Ventures totalling P938,519.56 from Aug. 1 to 28, 2022 were tagged by the audit team because the disbursed funds lacked proper supporting documentation such as trip tickets and fuel consumption reports, it said. Without the pertinent documents, the audit team questioned the "reasonableness of the amount of the fuel expenses," it also said.
Another area of concern was the COWD's delay in granting requests for petty cash disbursements, as these take as long as three months from the date of request, COA said.
The COWD has a P400,000 petty cash fund, and COA said its state auditors found that some were made to common/regular expenses that could have been processed as a regular procurement in a regular basis. In doing so, the COWD failed to avail itself of bulk purchase discounts that hampered operational efficiency.
At the same time, COA expressed concerns on COWD’s lack of sufficient documentation for its property, plant, and equipment. It said its auditors failed to verify the accuracy of these assets valued at P996.91 billion due to the lack of a physical count report.
Also, there were discrepancies in the Construction in Progress-Infrastructure Assets and Buildings and Other Structures accounts of COWD amounting to P201.3 million. COA said that projects worth ₱46.3 million were not properly recognized.
It pointed out that COWD failed “to recognize related asset and expense accounts, thus affecting the accuracy and reliability of accounts presented in the Financial Statements inconsistent with Philippine Accounting Standards.”
Finally, COA raised concerns over the accuracy of the water district’s land account balance of P40.83 million as of Dec. 31, 2022. It flagged three main issues: 23 parcels of land valued at P5.23 million lack titles under the name of COWD; the value of nine landholdings is undetermined; and 12 idle landholdings worth P2.6 million are incorrectly classified as other assets.
Thus, it said, the issues exposed COWD “to possible risks for third-party claims and/or loss of property and affecting the fair presentation of the financial statements.”
COA has suggested that COWD adopt corrective measures and enhancements to internal controls, operational efficiency, and financial reporting.
COWD's corrective measures would be known once COA comes out with its 2023 annual audit report on the water district.