09-MWSS2013 Part2-Observations and Recommendations

7/25/2019 09-MWSS2013 Part2-Observations and Recommendations

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OBSERVATIONS AND RECOMMENDATIONS

A. INTRODUCTION

1. This Part consists of four sections:

Current Years Audit Observations and Recommendations(B)

MWSS Corporate Office (CO)B.1 MWSS Regulatory Office (RO)B.2 Common to MWSS CO and MWSS ROB.3

Reiteration of Prior Years Audit Observations and Recommendations(C)

MWSS Corporate Office (CO)C.1 MWSS Regulatory Office (RO)C.2 Common to MWSS CO and MWSS ROC.3

Value for Money (VFM) Audit (D)

Unsettled Audit Disallowances, Charges and Suspensions (E)

B. CURRENT YEARS AUDIT FINDINGS AND RECOMMENDATIONS1. MWSS CORPORATE OFFICE (CO)

1. The carrying value of the Property, Plant and Equipment (PPE) at P35.408 billionwas not correctly stated due to non-conduct of revaluation/appraisal since CY 1995.

1.1 For this audit observation, we were guided by the following accounting standardsand COA rule, as follows:

a. PAS 16 under paragraphs 31and 32 states that:

31. After recognition as an asset, an item of property, plant and equipmentwhose fair value can be measured reliably shall be carried at a revaluedamount, xxx. Revaluation shall be made with sufficient regularity to ensure

that the carrying amount does not differ materially from that which would bedetermined using fair value at the balance sheet date.

32. The fair value of land and buildings is usually determined from themarket- based evidence by appraisal that is normally undertaken by

professionally qualified valuers. The fair value of items of plant and equipmentis usually their market value determined by appraisal.


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b. COA Resolution No. 89-17 dated March 17, 1989 provides that:

xxx, the revaluation shall be done by an independent appraiser or expertevery five (5) years (on fixed assets existing as of the end of the fifth year), oreven before the five year period ends, whenever there is a currencydevaluation or price increase which raises price levels (based on the

Consumer Price Index) xxxx

1.2 Note 4 of the Notes to Financial Statements for CY 2013 disclosed that PPE werestated at appraised value based on the appraisal conducted in 1995 by Cuervo

Appraiser Inc. PPE acquired after said appraisal was recorded at cost.

1.3 Considering that the appraisal of assets was recommended in CY 1999 AAR,inquiry on why no appraisal of PPE was conducted revealed that an appraisal wasconducted by Cuervo Appraiser Inc. in CY 2006. However, the appraisalincrements were not recorded/taken up in the books in CY 2007 because of timeconstraints due to the migration to eNGAS.

1.4 Since no appraisal on PPE was recorded in the books for the last 18 years, thecarrying value of the assets as of December 31, 2013 in the amount ofP35,408,365,000 was not correctly stated. The PPE accounts consisted of thefollowing:

Asset Carrying Amount (Net ofDepreciation)

(in Thousand )Building, Plant, Equipment & Transmission Lines 22,678,084Land & Land Improvements 12,444,447Office Furniture & Other Equipment 145,912Transportation Equipment 322,112Total 35,408,365

1.5 We recomm ended and Management agreed to ei ther :

a. Look into the poss ib i l ity of using the repor t on the valuat ion of assets

used in o perat ion by MWSS and i ts Concessionai res and the review

and validation of the Concessionaires Asset Condition Report as ofCY 2010 submit ted by the Consu l tant hi red for the pu rpose and wh ose

repor t was accepted by the Regulatory Off ice; or

b. Immediately con duc t appraisal of al l i ts prop erty, plant and equipm ent

by hi r ing an independent and qu al if ied appraiser or exper t as requi red

un der PAS 16 and COA Resolut io n No. 89-17.

2. The year-end balance ofConstruct ion- in-Progressaccount at P6.401 billion was notcorrectly stated in view of the written information from the Deputy Administrator forEngineering & Operations, which was validated by the Audit Team, that MWSS hadno on-going construction projects as of the end of CY 2013.


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2.1 The Construction-in-Progress (CIP) account should include only the costs ofMWSS on-going projects at the end of the year.

2.2 The Deputy Administrator for Engineering & Operations informed the Audit Team ina letter dated January 21, 2014 that MWSS had no on-going construction projectsas of the end of CY 2013. We found the information from the DA for Engineering &

Operation valid. However, the trial balance showed that the CIP account had abalance of P6,401,373,993 as of December 31, 2013.

2.3 Further review of the subsidiary ledger balance of the CIP account showed that thebalance of P6,401,373,993 pertained to the following transactions, to wit:

2.3.1 The cost of the completed project - Angat Water Utilization and AqueductImprovement Project Phase 2 (AWUAIP) in the amount ofP6,243,877,726.89

Based on the Performance Certificate issued by MWSS on September24, 2013, the contractor of the AWUAIP Phase 2, China International

Water Electric Cooperative (CWE), has fully completed its obligationsunder the Contract and the defects liability period of 365 calendar daysreckoned from project completion on September 10, 2012. As such, thecost of the project should no longer be included in the CIP accountbalance.

In addition, the project was inaugurated on July 2012 and now being usedby the two Concessionaires as water source. The account should havebeen reclassified to an appropriate Property, Plant and Equipmentaccount subject to depreciation expense. This resulted in theunderstatement of the expense (depreciation) and the overstatement ofthe income accounts.

2.3.2 Dormant accounts of P 146,679,150.04

The subsidiary ledger showed that the sub-accounts listed in the tablebelow have been dormant for more than five years and was the beginningbalance of the account when MWSS migrated to the e-NGAS in CY 2007,as follows:

Sub account code Particulars Amount264-01-01-02-01-LBAQ-4A La Mesa/Balara Aqueduct 80,476,040.31

264-01-03-01-MTSP

Consultancy Services forStrengthening in MWSSCapability in Water Supply

Sewerage and SanitationService Provision

50,677,422.49

264-01-01-02-05-ICB-1-4Section B,D,E,F&K

Supply & delivery ci adaptor, cibend reducer

5,002,015.25

264-01-01-01-03-AUX#5 Hydro Electric Power 2,991,854.00

264-02-02-04-03-01-mssp-5secb-9 & b-13

supply 7 delivery of 1 divingequipment & 1 lot inflatablesewer plugs

2,478,439.72

264-01-01-01-08-Fund 77- Supply and delivery of various 1,989,735.17


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AWSOP BOND sizes of Water Meter

264-01-03-04-02-ADB 1379Umiray Angat TransbasinProject-UATP-ADB 1379

1,366,222.87

264-02-02-04-03-02-ELN-0025 units portable hypoclorinationassemblies

959,145.60

264-02-01-06-IS-14 Section Bsupply & delivery of ultrasonicflowmeter

629,319.12

264-01-01-01-11-Fund 77 AwsopBond

Electrical Installation andLighting System-1 unit 75KVAdry type transformer, Threephase 4 wire 480/20 VAC stepdown flr. mounted delta wyetape 15u

108,955.51

Total 146,679,150.04

2.3.3 Interest and guarantee fees paid on foreign loan ADB 2012 Phi for theNew Water Sources Development Project in the total amount ofP8,248,784.59

The above fees should have been charged to the appropriate interest and

other finance charges account, with breakdown shown below:

Sub account code Particulars Amount

264-01-03-03-02-ADB 2012New Water SourcesDevelopment Project (NWSDP)-ADB 2012 (For Allocation)

7,282,557.76

264-01-03-04-02-ADB 2012New Water SourcesDevelopment Project-NWSDP-ADB 2012

(1,267,253.16)

264-01-03-05-02-ADB 2012New Water SourcesDevelopment Project-NWSDP-ADB 2012

2,233,479.99

Total P8,248,784.59

2.3.4 Unreconciled balances of P2,658,331.94 between the General Ledgerand the subsidiary ledger, as shown below.

Account Code Amount264-01-03-04-02-Forex 2,565,452.24264-01-03-07-BC 2,879.70

Total 2,658,331.94

2.4 The failure to transfer costs of the completed CIP in the amount of P6,243,877,727to the appropriate asset account excludes them from the depreciable assetssubject to depreciation charges, thereby causing an understatement in the totalannual depreciation from the time of their completion and overstatement of the

income account.

2.5 In addition, the presence of dormant accounts in the amount P146,679,150,financial expenses of P8,248,784 which should have been charged to theappropriate expenses account and the balance of P2,658,332 for allocation to thecorrect project account may challenge the correctness of the CIP account balanceand affect the accuracy of the amount of the total assets and the retained earningsof MWSS.


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2.6 We recommended and Management agreed to:

a. Require the Contro l lership Div is ion to reclass i fy to the appro pr iateasset account the cost of the completed project ; Recognize

correspon ding depreciat ion on the cost of the project ;

b. Require coordinat ion between the project implementers and theContro l lership Div is ion to ensure the t imely recording of pro jects

com pleted; and

c. Imm ediate ly rev iew th e charges made to the CIP accoun t wh ich aredorm ant and for reconci l ia t ion wi th the General Ledger account and

effect the necessary adjus tments .

2.7 Management informed that the CIP account on completed project will becapitalized in CY 2014.

3. The Cash and cash equivalents in the amount of P2.149 billion was not sufficient tocover the Loans Payable to the Bureau of Treasury (BTr), which have been collectedfrom the concessionaires and all recognized Trust Accounts, totalling P2.583 billionat the end of the year. This is indicative that the funds for remittance to the BTrand that the funds intended for specific purposes were used for other purposes.

3.1 Section 6 of the GAA FY 2013 provides that trust funds shall not be paid out exceptfor the fulfillment of the purpose for which the fund was received. Trust receiptsincludes receipts which are collected or received by department, bureaus andoffices acting as trustee, agent or administrator; which have been received asguaranty for the fulfillment of an obligation; or classified by law, rules andregulations as trust receipts.

3.2 Based on the above definition, trust receipts of MWSS Corporate Office at the endof the year consist of the following:

a. Concession Fees collected from the concessionaires for debt servicing ofloans which have not been paid to the Bureau of Treasury as of yearend;

b. Unremitted share of the MWSS Regulatory Office (RO) from the collectionsfrom the concessionaires (MWSI & MWCI) of the Concession Income forthe Corporate Operating Budget of MWSS Regulatory Office as providedunder Section 11.3 of the Concession Agreement;

c. Receipts held in trust from SM Prime Holdings Inc. and the various financialassistance for watershed programs and other funds withheld fromemployees claims.

3.3 Analysis of the account balances of the MWSS Corporate Office as of December31, 2013 showed that the Cash and cash equivalents in the amount of P2.149billion was not sufficient to cover the Loans Payable to lending institutions and all


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MWSS Board of Trustees policy pronouncements under Board ResolutionNo. 2014-041-CO dated April 24, 2014 which stated that the distributionand allocation of Concession Fees between CO and RO will be inaccordance with their Board approved Corporate Operating Budget forthe calendar year subject to the limit and release schedule stipulated in

Article 11.2 of the Concession Agreement.

3.5 We recomm ended and Management agreed to ef f ic ient ly mon i tor i ts cashf lows to ens ure that funds are disbursed so le ly for the intended purposes

and str ic t ly adhere to the pro vis ion o f Sect ion 6 of the GAA FY 2013.

3.6 In the exit conference, Management informed that the observation could also beattributed to the following:

a. Payment of Dividends in 2010 after the SONA, where the amount paid wasover the required remittance; and

b. When MWSS called on the USD120M Performance bond from Maynilad

which was deposited directly to the BSP, it included the initial collection ofP355M for JBIC Loan. However, the USD120M Performance Bond wasused in the continuous default of Maynilad and for payment for Cost ofborrowings. The said amount was not separated from such collections.

4. MWSS may face the risk of possible lawsuit arising from the lease of MWSSproperty along Katipunan Avenue covered by a Lease Agreement between MWSSand SM Prime Holdings Inc. which the MWSS Board of Trustees declared as nulland void. MWSS received initial deposit of P33.248 million on July 13, 2010.

4.1 Perusal of the submitted documents relative to the lease contract showed that:

4.1.1 Excerpts of Minutes of the September 4, 2009 Special Meeting of theBoard, under Resolution No. 2009-178, and confirmed on September 17,2009, showed that the Board resolved (a) that based on a comparativeanalysis rendered by the Corporate Office as between separate proposalsto lease the 1.4 hectare property of MWSS, they authorize the lease ofsuch property to any party, at the minimum rate of P1,200.00 per squaremeter per annum and (b) resolved to authorize the Administrator to signand execute the lease agreement.

4.1.2 On October 19, 2009 the then MWSS Administrator Diosdado Jose M.Allado requested an opinion from the Office of the Government Corporate

Counsel (OGCC) on (a) whether MWSS has the option to grant the leaseto SM Prime Holdings Inc., pursuant to a Swiss Challenge similar to thoseprovided in the NEDA Joint Venture Guidelines; and (b) on theappropriate procedures for such a Swiss challenge.

4.1.3 The OGCC, in a letter dated October 19, 2009 opined that:


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Considering that the Metropolitan Waterworks Sewerage System(MWSS) would be the lessor in the subject proposal, the applicablelaw is EO 301 dated 26 July 1987. xxx

[i]t appears that what is involved is a negotiated procurement, subjectto the provisos under the above-quoted provisions of Executive Order

No. 301(1987).

In this connection, we note that the request of SM for conducting acompetitive challenge is not required under Executive Order No. 301(1987). Be that as it may, said request is not legally proscribed, and infact, as a measure of prudence, may be undertaken. In this manner,MWSS will have the opportunity to validate the reasonableness of theterms of the lease and the rental rate proposed by SM.

Likewise, the OGCC also provided a simplified and abbreviated Swiss challenge procedure and timeline.

4.1.4 Excerpts from the Minutes of the Committee Meeting of the Board datedFebruary 19, 2010 stated that Resolution No. 2010-029(E) contained thefollowing information-

a. Board Resolution No. 2009-18 dated September 04, 2009authorizing the lease of 1.4 hectares MWSS property, to anyparty, under such terms and conditions beneficial to MWSS, andOGCC Opinion dated October 19, 2009.

b. Approval and confirmation of the proposed lease to SM PrimeHoldings (SM) of the 4.1 hectare MWSS property thru UnsolicitedProposal Mode with Competitive Swiss Challenge;

c. Approval and confirmation of the corresponding procedure andtimelines of the Swiss-Challenge; and

d. Approval and confirmation of the creation of the EvaluationCommittee to appraise the Comparative Proposals.

However, it was noted that the Excerpts from the Minute of theCommittee Meeting, although signed by Ms. Darlina T. Uy, Manager,Legal Services Dept/Board Secretary Designate, were stampedCANCELLED.

4.1.5 A Contract of Lease was entered into by and between the MWSS andSM on May 27, 2010, signed by Atty. Diosdado Jose M. Allado and Mr.Hans T. Sy, for MWSS and SM, respectively. The rate of lease wasP1,200.00 per square meter.

It was noted that the authority invoked for entering into the LeaseContract were Board Resolution Nos. 2008-251 and 2009-178, datedNovember 20, 2008 and September 04, 2009, respectively, when the


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latest Board resolution relating to the lease was Board Resolution No.2010-029(E) dated February 19, 2010, and much earlier than the OGCCOpinion dated October 19, 2009.

4.1.6 MWSS received from SM the amount of P33,248,892.86 on July 13,2010. Mr. Virgilio P. Matel, who was identified as the signatory of the

issued Official Receipt No. 1320987 K also received the check issued bySM. The check was deposited with PNB on the same date under MWSS

Account No. PSA 1165219406000506.

4.1.7 Excerpts from the Minutes of the 4thSpecial Meeting of the Board held onAugust 12, 2010 (Annex 7) under Resolution No. 2010-113 stated that:

Considering that the Lease Agreement covering the 1.4 hectareMWSS property xxxx entered into by the former Administrator with SMPrime Holdings, Inc. is not in compliance with the policies andguidelines set by the xxx (OGCC) in its letter of 19 October 2009 andadopted by the Boards of Trustees under Board Resolution No. 2010-

029 (E) dated 19 February 2010, the Board, RESOLVED, xxx, toDISAVOW any participation therein, and DIRECT Management toreturn the P33,248,892.86 payment made by SM Prime Holdings, Inc.thereto.

Another Excerpt from the same special meeting and on the same datestated that:

RESOLVED, that the purported Lease Agreement covering the 1.4xxx not being in compliance with the policies and guidelines set by theOffice of the Government Counsel (OGCC) in its letter dated 19October 2009 and adopted by the Board of Trustees under Board

Resolution No. 2010-029(E) dated 19 February 2010, be, as it ishereby declared null and void. (emphasis ours)

Both resolutions were certified by Ms. Ma. Lourdes R. Naz, BoardSecretary VI.

4.2 Our audit revealed the following:

4.2.1 In spite of Board Resolution No. 2010-113 dated August 12, 2010 wherethe then Board of Trustees disavowed any participation in the Lease

Agreement and directed Management to return the payments receivedfrom SM, the amount was not returned and still remained with the MWSS

bank account;

4.2.2 The copy of the Board Resolution No. 2010-029(E) dated 19 February2010 submitted to COA was marked CANCELLED. However, there wasno information if the cancellation was properly authorized or anotherBoard Resolution was issued for the cancellation of the previous BoardResolution;


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4.2.3 O.R. No. 1320987 dated July 13, 2010, acknowledging receipt ofpayment from SM, was issued by the Acting Finance Manager, asadmitted by the Collecting Offices upon verbal query by the auditor. Thiswas contrary to the general rule stated in GAAM Vol. I that collection ofrevenues and receipts shall be done by a regularly appointed CollectingOfficer/Treasurer

.4.3 MWSS then replied that:

4.3.1 Check Nos. 0058095 and 0000033962, dated July 13, 2010 and August17, 2010, respectively, in the total amount of P33,248,892.86, wereprepared in an attempt to return the amount paid by SM Prime but weredeclined by SM Prime.

4.3.2 MWSS agreed with our observation that receipt of the then SM paymentby then Acting Finance Manager was contrary to sound internal control,and thus written instruction will be sent to the former Acting FinanceManager to submit a reply directly to the Auditor.

4.3.3 On the issue regarding Board Resolution no. 2010-029 (E) datedFebruary 19, 2010, a copy of the Certification from the Board Secretarywas submitted.

4.3.4 The original accounting entries taking up the payment of SM Prime wereadjusted to reflect the amount received from SM Prime as a credit toOther PayablesTrust Liabilities in the amount of P33,248,892.86.

4.4 As a rejoinder to the above, we requested for the other courses of action taken byManagement after the attempts to return the rental payments including interestswere declined by SM Prime Holdings Inc; and for a copy of the informal written

instruction sent to the former Acting Finance Manager to explain his issuance ofthe O.R. instead of the designated collecting officer.

4.5 In response, Management informed, through a letter dated February 5, 2014, thatthey had filed a complaint at the Office of the Ombudsman against concernedMWSS officials on September 3, 2013. They had furnished the MWSS-OIC-SA ofthe copies of the complaint and their letter dated February 3, 2014 addressed to,the former Acting Finance Manager directing/advising him to comment on the AOMregarding the issuance of the OR.

4.6 On April 2, 2014, the former Acting Finance Manager furnished this Office with acopy of his Counter Affidavit with Motion to Dismiss submitted to the Office of the

Ombudsman.

4.7 The filing of the case against the concerned officials of MWSS in the Office of theOmbudsman is an action of Management to determine any possible liability andaccountability of the persons responsible for the Lease Agreement.

4.8 It is our view that another major concern on this issue is on the Lease Agreementdeclared as null and void by the Board of Trustees with instruction to return the


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payment made by SM Prime Holdings Inc. in the amount of P33,248,892.86 whichSM Prime Holdings Inc. declined. Considering the above, there is therefore the riskthat MWSS may face possible legal action from SM Prime Holdings Inc. if the issueremains unsettled/unresolved.

4.9 We recomm ended that Management immed iately take the best possib le legal

act ion to resolve the issu e on the Lease Agreement w i th SM Pr ime Hold ingsInc.

4.10 During the exit conference, Management informed that the issue was alreadydiscussed with the Office of the Government Corporate Counsel and are lookinginto the possible legal remedies of returning the money that MWSS received fromSM Prime Holdings Inc. and say that the contract is void. If the same is notaccepted, the money will be consigned in court.

5. Accounts Receivable from the Concessionaire MWSI totalling US$55 million orP2.200 billion based on current dollar rate, representing the disputed claim between

MWSS and MWSI arising from MWSIs refusalto pay for the additional COB incurredby the MWSS, remained uncollected.

Had the amount been collected, the loan could have been avoided and paymentstotalling P1.164 billion as of December 31, 2013 could have been used for theimprovements of the Retained Assets of MWSS.

5.1 We gathered the following information from the MWSS Former Finance Managerand confirmed by the present Acting Finance Manager :

5.1.1 Beginning on March 8, 2001, the Maynilad Water Services, Inc. (MWSI)suspended payments of concession fees to MWSS on the grounds of

force majeure.

5.1.2 On December 2002, Maynilad issued a Notice of Termination of theConcession resulting to disputes with MWSS.

5.1.3 When MAYNILAD exited from the DCRA in January 2008, the DisputeCommittee created after the exit was able to establish that there is anadditional Cost of Borrowings payable to MWSS in the amount of$14.79M.

5.1.4 Maynilad offered to pay the recognized Balance of Tranche B (Cost ofBorrowings) as of Jan 16, 2008 amounting to $14.79M as a result of the

reconciliation made by the Committee on Disputed Claim created afterthe Maynilad exited from the Debt & Capital Restructuring Agreement(DCRA) in January 2008.

5.1.5 MWSS rejected the $14.79M offer because of the Quit claim thatMaynilad wanted in exchange.


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5.1.6 From January 2008, MWSS had to shoulder the Cost of Borrowings of theBNP Paribas up to its maturity in March 2011. The advances for saidCost of borrowing reached $44.75M plus the established additional of$14.79M now amounting $55.55M.

5.1.7 The non recovery of the $55.55M from Maynilad resulted jn the shortage

in the total amount needed to fully pay the maturity of BNP Paribas in2011. This led to MWSS availing of a new loan, the P2.25B DBP-LBPClub Deal Arrangement (Floating Bonds).

5.1.8 MWSS asked the opinion of the OGCC relative to the current disputebetween MWSS and Maynilad Water Services regarding the Subscription

Agreement entered into by MWSS with BNP Paribas Securities Services(BNP Paribas) guaranteed by the Republic of the Philippines and theOGCC issued Opinion No. 215 series of 2011 dated October 5, 2011.Paragraph 16 of the OGCC Opinion No. 215 stated that clearly, thedispute between MWSS and Maynilad arose when Maynilad refused topay for the additional COB incurred by MWSS, amounting to

US$55,550,457.21 composed of the following:

a. Reconciled balance of Tranch B Concession Fee as of January16, 2008 amounting to US$14,791,131; and

b. Balance of the COB of the US$150M BNP Paribas loanamounting to US$40,759,325.49

The OGCC opinion concluded that all costs incurred by MWSS forsecuring various loans and funding arrangement to pay for obligationswhich should have been covered by the unpaid concession fees shouldbe charged to Maynilad since these are paid out of government funds

which must be safeguarded with utmost fidelity by MWSS.

5.1.9 MWSS payments for the principal and interest amortization of the loantotaled P1,163,858,844.57 as of December 31, 2013. Breakdown is asfollows:

Year Principal Interest Total2011 241,071,428.58 71,819,196.43 312,890,625.012012 396,085,130.82 74,656,559.38 470,741,690.20

2013 321,428,571.44 58,797,957.92 380,226,529.36

Total 958,585,130.84 205,273,713.73 1,163,858,844.57

5.2 It is our view that the payments in the total amount of P1,163,858,844.57 are to thedisadvantage of MWSS as the funds could have been used to finance theimprovements of the retained assets of MWSS.

5.3 Consider ing the above, we recomm ended that Management take immediatelegal act ion to s et tle the dispute and demand for the payment of the d isputed

claim eq uivalent to $55M or P2.2B from MWSI.


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6.3.1.4 Management informed that the unremitted due to the BIR wasdue to the provision under Article 8 of the Loan Agreementbetween MWSS (borrower) with The Export-Import Bank ofChina (lender), that all payments made by the Borrower shallbe paid in full to the Lender without set-off or counterclaim orretention and free and clear of and without any deduction or

withholding for or on account of any taxes imposed in theRepublic of the Philippines or any charges. In the event theBorrower is required by law to make such deduction orwithholding from any payment hereunder, then the Borrowershall forthwith pay to the Lender such additional amount aswill result in the immediate receipt by the Lender of the fullamount which would have been received hereunder had nosuch deduction or withholding been made. The Borrower shallpromptly forward to the Lender copies of official receipts orother evidence of payment to the relevant taxation or otherauthorities of any tax so deducted or withheld.

6.3.1.5 During the exit conference, the Acting Finance Managerinformed that Management already billed the contractor,China International Water and Electric Company (CIWEC), forthe taxes due in January 2014, but since then they have notresponded to the letter. In this regard, Management iscontemplating on seeking the assistance of the BIR and theDPWH to be able to collect this tax out of the CIWECreceivable from other agencies.

6.3.2 Due to GSIS

6.3.2.1 Breakdown of the unremitted yearend balance of P562,086.88,

is shown below:

Schedule of Due to GSISAs of December 31, 2013Particulars Amount

Unremitted various GSIS accounts at the end of CY 2013 5,930,141.34Accounts with abnormal (debit) balance (5,368,054.46)Total 562,086.88

6.3.2.2 The unremitted accounts at the end of CY 2013 are thefollowing:

Account Title Amount

Social Insurance Premium - PSRegular 406,212.25Social Insurance Premium - PS - Contractual 2,446.14Policy LoanRegular 35,230.94Policy Loan Optional Contractual 1,475.24Emergency Calamity LoanContractual 500.00Salary/ Enhanced Salary LoanRegular 5,455,191.05Educational LoanRegular 4,760.00Emergency Calamity LoanRegular 2,000.00Summer One Month SalaryContractual 188.89


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c. Require the Finance Department to reconci le the accoun ts wi thabnorm al balances and make the necessary adjust ing entr ies to

correct the acco unt b alance in the balance sh eet.

6.5 The Acting Finance Manager explained thatin the process review, it was foundthat posting of the payments were not reflected in the proper account and all

payables were remitted to the concerned office. Adjustments will be taken up in CY2014.

7. Prior years transactions amounting to P28.176 million were recorded only in thecurrent year, resulting in numerous Prior Years adjustments.

7.1 One of the underlying assumptions in the preparation of the financial statements isthe accrual basis of accounting. Under this basis, the effects of transactions andother events are recognized when they occur and they are recorded in theaccounting records and reported in the financial statements when they occur.

7.2 Timeliness is a quality subset of relevance. If accounting information is notpresented in a timely manner, its usefulness to stakeholders is diminished orcompletely eliminated. The quality of timeliness requires the recording of thefinancial transaction in the appropriate accounting period.

7.3 Audit of the charges/credits to the Prior Years Adjustment account disclosedvarious transactions which are considered material omissions in the previousyears transactions. These include the following:

Schedule of Prior Period AdjustmentsAs of December 31, 2013

Particulars Debits CreditsTransactions not recorded in the year incurred/earnedCosts of completed feasibility studies/consultancyservices reclassified to prior years adjustment due tothe non implementation of the civil works component ofthe project

5,558,347.07

Adjustment from Income account 15,837,752.05Payment of CNA Incentive for CY 2012 3,108,223.81

COLA/AA/RA 1616 payments for previous years 3,086,966.36

Adjustments in prior period expenses1,418,294.47

Prior period per diems of members of Board of Trusteesand allowance of DA for Engineering

415,500.00

Correction of prior period depreciation 273,543.59

Payment of consultancy services to Marian Pastor 200,000.00Prior years salary differentials 47,949.54Adjustment of accounts 12,664,392.64Collection of prior period rentals/disallowance 655,567.59Total 29,946,576.89 1,770,703.02


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Account Code AmountCost of living allowance 439-23-02 29,823,714.16Trust fund COLA 439-21 26,209,179.57Trust fund AA 439-09 361,608.82Amelioration allowance 439-23-01 157,896.22Total 95,678,778.93

7.4.4 The payments for the consultancy services of Ms. Marian P. Roces in thetotal amount of P200,000 were not valid for the following reasons:

7.4.4.1 The contract was executed only on November 6, 2013 when theperiod of engagement was from February 2012 to May 2012.The contract should have been executed before the rendition ofservices and not one year and five months after the serviceswere rendered.

7.4.4.2 In one of the Whereas clauses of the Contract for ConsultancyServices it was stated that; while working on the implementationof the foregoing approvals, MWSS discovered that the execution

of the contract to renew/extend the services of the Consultantwas inadvertently overlooked.

The aforementioned statement cannot be given dueconsideration since the approvals being referred to from theDBM and GCG offices were already acted upon on November 5,2012 and October 29, 2012 respectively, by the said offices asdiscussed in paragraphs 7.4.4.3 and 7.4.4.4 below.

Therefore, the preparation of the contract cannot be taken asintended to have a retroactive effect for reason that therenewal/extension of the contract was inadvertently

overlooked. The contract was prepared one year after theapproval by DBM.

Furthermore, there was a letter from Ms Roces dated January 5,2013 addressed to the MWSS Administrator stating hersummary of accomplishments. This document could haveprompted the preparation of the contract.

Given the above information, it is quite difficult to simply acceptthe justification that the contract preparation was overlooked bythe persons responsible for the hiring of the said consultant.

7.4.4.3 The Governance Commission on GOCCs has not decided yeton Ms. Roces engagement on October 29, 2012 contrary towhat was stated in the Contract for Consultancy Services. In theletter dated October 29, 2012 to the Chairman of the Board andthe Administrator of MWSS, the GCG specifically stated that thehiring of Ms. Roces as Principal Consultant for the periodJanuary to May 2012 remained under process and was thesubject of careful review and evaluation by the Commission.


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7.4.4.4 Although the DBM approved the request of MWSS forexemption from the moratorium imposed on the hiring ofconsultants per Circular Letter No. 2011-14 dated December 22,2011, the hiring of Ms Roces should have been in accordancewith the provisions of the IRR of RA 9184.

RA 9184 states that all procurement of the Government, whetherinfrastructure projects, goods and consulting services shall becompetitive and transparent. It also provided that allprocurement shall be done through competitive bidding,however, when it is impractical to implement competitivebidding, the law provides alternative modes of procurementunder certain conditions.

There were no documents attached to prove that the hiring wasa result of the bidding process prescribed in RA 9184 and itsIRR. The documents attached to the voucher were copies ofcontract, approval from DBM, GCG letter dated October 29,

2012 and the letter of Ms. Roces stating her accomplishmentsfor the period.

7.5 These charges to Prior Period Adjustments during the year reduced the RetainedEarnings of MWSS by P28,946,576.89.

7.6 Transactions should therefore be immediately recorded as incurred to ensure thecorrectness of account balances and relevance of financial information.

7.7 We recomm ended and Management agreed to:

a. Require the Contro l lership Div is ion for future t ransact ions to:

i. Coordinate wi th the Engineer ing Department to determinewhether there are other completed feasibi l i ty

studies/cons ul tancy serv ices wi th the civ i l works compo nent of

the project not im plemented; ver ify the accou nt w here the

payments were previously debi ted and prepare necessary

adjust ing entr ies i f n ecessary;

ii. Hencefor th, record al l payments for consul tancy works onresearch or from research phase of an internal project as

expendi tures on the year incurred in accordance wi th PAS 38;

iii. Str ic t ly comp ly wi th the guidel ines issued by the DBM on thepayment of CNA incent ive speci f ica l ly on the charging of

expenses;

iv. Str ic t ly record transact ions as they occur to ensure thataccount balances are co rrect ly stated;


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b. Clari fy /expla in the issues raised on the p ayment of c onsu l tancyservic es to Ms . Marian P. Roces.

7.8 On the above issue on the payment of consultancy services, Managementexplained during the exit conference that it is very clear that what Management didwas curative. Request from DBM and GCG was post facto which was ultimately

approved by the DBM.

7.9 Management also informed that the consultants whose contracts expired onAugust 2013 were no longer renewed and gave assurance that in futureengagements they will follow the bidding process except for highly confidentialpositions.

8. Fifteen pieces of paintings and four brass sculptures acquired during the oldNAWASA with acquisition cost of P69,400 were missing and the accountability ofthe persons responsible have not been settled.

Moreover, all paintings with recorded value of P0. 542 million were not appraised bythe National Museum as required under COA Memo 88-569 and Financial ReportingStandard (FRS) 30, resulting in the undervaluation of the value of the assetsrecorded in the books.

Also, the oil painting by H.R. Ocampo Abstract in Red and Blackand the watercolor painting Rooster by Kiukok, both declared National Artists of thePhilippines, were not registered in the Philippine Registry of Cultural Property of theNational Museum contrary to the IRR of RA 10066.

8.1 Our audit of the account is guided by the following rules and regulations:

8.1.1 Section 3 of PD 374 dated January 10, 1974 known as the CulturalProperties Preservation and Protection Act, which defines works of art aspaintings, sculptures, carvings, jewelery, xxx; works of industrial andcommercial art such as furniture, pottery, ceramics, wrought iron, gold,bronze, silver, wood, xxx in part or in whole;

8.1.2 Section 2 (Scope and Limitations ) of COA Memorandum 88-569 datedAugust 12, 1988 which states that antique property and works of artsshall be appraised by the National Museum; and

8.1.3 Sections 7.2 and 8.2 Rule IV of the Implementing Rules and Regulations(IRR) of RA 10066, an act providing for the protection and conservation of

the National Cultural Heritage, strengthening the National Commission forCulture and Arts (NCCA) and its affiliate cultural agencies, and for otherpurposes, which requires that:

a. Undeclared property not falling under the presumption of ImportantCultural Property, but contains characteristics that will qualify themas such shall be registered in the Philippine Registry of CulturalProperty (Section 7.2).


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b. Works by deceased National Artists shall be considered ImportantCultural Property, unless declared or its presumption removed bythe Commission (Section 8.2).

8.1.4 Financial Reporting Standard (FRS) 30 on Disclosures (par 5-17),Recognition and Measurement (par 18-22) which requires valuation of

heritage assets by any method that is appropriate and relevant.

8.2 The account Furniture and Fixtures as of December 31, 2013 with the followingSubsidiary ledger accounts showed the following book balances:

Schedule of Furniture & FixturesAs of December 31, 2013

SL Account Code AmountBrass 222-01-01 27,800Presidential Bust 222-01-02 16,500Paintings 222-01-03 475,000Paintings 222-01-19 23,000Total 542,300

8.3 The Reconciliation Report of MWSS Art Works revealed that there were 15 piecesof paintings and four pieces of brass sculptures missing under the accountability ofa former MWSS employee. Hereunder are the details of the missing paintings:

List of missing paintings

DESCRIPTION PAINTER DATEYR.

AcquiredAcquisition

cost

Mother & Child on Wood 1 Diego 1980 6/1/1981 3,000.00

Mother & Child on Wood 2 Diego 1980 6/1/1981 3,000.00

White Sack Tiongco 1980 6/1/1981 4,000.00

Disco Daroy 1980 6/1/1981 2,700.00

Tiboli Woman George Bennet 1981 6/1/1981 1,800.00

Floral in Blue Not indicated 1981 6/1/1981 11,000.00

Weaver Diego 1981 6/1/1981 3,000.00

Sunset Alcoseba 1981 6/1/1981 2,000.00

Laro Madrilejos 1981 6/1/1981 2,200.00

Bintana 1 Memeje 1981 6/1/1981 900.00

Bintana 2 Memeje 1981 6/1/1981 900.00

Shanty 1 Malang 1981 6/1/1981 1,600.00

Shanty 2 Malang 1981 6/1/1981 1,600.00

Mag aani Dizon 1981 6/1/1981 7,500.00

Cock Fighting Hugo C. Yonzon 1981 3/13/1981 3,000.00

Man Sitting Rose Arcilla 1981 3/19/1981 7,000.00

Sculpt Lover Rose Arcilla 1981 3/19/1981 2,500.00

Dancer Fernadez Gilho 1981 3/13/1981 4,000.00


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8.4 Perusal of the documents showed that the missing paintings and brass sculptureswere under the accountability of a former MWSS employee who retired in CY1999. He has not been granted clearance from money and property accountability

and that his gratuity pay of P143,965.28 remained unpaid.

8.5 Furthermore, our audit revealed that there were no appraisal and authenticationconducted by the National Museum on the above mentioned works of art ascertified by the Manager, Property Management Department in a letter datedJanuary 14, 2014. The book value recorded in the books remained at itsacquisition cost of P542,300 which dates back to the old NAWASA era (prior to1997). Considering the time that had elapsed, the value of the property recordedin the books may no longer be the relevant amount at the present time.

8.6 We recommended that Management :

a. Hold l iable the off ic ials/emp loyees respon sible for the missing 15pieces of paint ings and four brass sculptures apply ing the measure

of l iabi l i ty exp ressed in Sect ion 105(1) of PD 1445 which reads as

fo l lows:

Every officer accountable for government property shall be liablefor i ts m oney value in case of improp er or unauthor ized use or

misappl icat ion thereof, by himsel f or by any person for w hose

acts h e may be respo nsib le. He shal l l ikewise be l iable for al l

loss es, damages, or deterioration occasion ed by negl igence in

the keeping or us e of the property, whether or no t it be at the time

in his actual custody.

b. Make proper representat ion wi th the Nat ional Museum on thecond uct of app raisal and authent icat ion of al l i ts paint ings and

wo rks of ar ts and the regis t rat ion wi th the Phi l ipp ine Regist ry o f

Cultural Prop erty in com pliance with th e IRR of RA 10066.

8.7 It is our view that the accountability of the person/s liable for the missing paintingsand brass sculptures should be based on the appraised value of the painting andthe brass sculptures; the rationale being that the government shall not suffer forreplacing properties lost thru negligent act of persons accountable/responsible forthe property.

8.8 Management informed that on February 27, 2014, requests for appraisal and

authentication of its paintings and art works and registration of the works of theNational Artists were made and awaiting their positive response on the saidrequest.

Mother And Child Boni Arcilla 1981 3/19/1981 1,500.00

TOTAL 63,200.00


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9. The reimbursement of food and gasoline/toll expenses in the amount of P0.712million by some members of the Board of Trustees lacked sufficient documentationto establish validity of the claims especially those expenses incurred during non-working days amounting to P171,144.

9.1 Our audit of the Representation Expenses of the Board of Trustees is guided by

the following rules and regulations

9.1.1 Section 2.4 of GCG-MC No. 2012-2 dated May 2, 2012 which providesthat:

Reimbursable Expenses Should Not Be Used as a Form ofCompensationSection 12 of E.O. 24 ensures that GOCC Directorsdo not abuse the structure of reimbursements of expenses as ameans to gain indirect compensation by:

a. Making it a matter of policy that expenses of members of theGoverning Board to attend Board and other meetings and

discharge their official duties shall be disbursed directly by theGOCC;

b. The only time that Directors obtain a reimbursement ofexpenses can be:

(1) when due only to the exigency of theservice and subject tothe submission of receipts; and

(2) Limited only to transportation expenses for attendingmeetings; travel expenses for official travels;communications expenses; and for meals during businessmeetings.

9.1.2 COA Circular No. 96-004 dated April 19, 1996 which provides that noreimbursement of the cost of gasoline and oil shall be allowed when aprivate vehicle is used.

9.1.3 COA Circular 2012-001 dated June 14, 2012 enumerated thedocumentary requirements for common government transactions and oneof the general requirements for all types of disbursements is Sufficientand relevant documents to establish validity of claims.

9.2 Representation Expense incurred for the year 2013 amounted to P817,165.00(paid and accruals) broken down as follows:

Particulars AmountFood Expenses during Board Meetings 105,410.36Reimbursable Expenses

Meal Expenses 379,724.19Fuel expenses/ Parking/toll fees 225,987.95Communication 60,855.59Sub total 666,567.73Accrued expenses 45,186.91


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Total reimbursable expenses 711,754.64Total representation expenses 817,165.00

9.3 Our audit revealed the following:

a. Of the total representation expenses of P817,165, claims for

reimbursement of expenses by some members of the Board of Trusteesin the amount of P666,567.73 were only evidenced with official receiptscovering mostly expenses for food, communication, gasoline, parking andtoll fees. The accrual of expenses in the amount of P45,186.91 under JEV2013-12-007445 was supported with only a memorandum from the BoardSecretary submitting to the Finance Department the list of reimbursableexpenses and the summary of accrued expenses for the year.

There was no documentation showing that these reimbursable expenseswere incurred in the performance of official functions required in COACircular 2012-001 which generally requires sufficient and relevantdocuments to establish validity of claim. Of the amount of P711,754.64,

expenses amounting to P171,144 were incurred on non-working days(Saturdays and Sundays). We also noted that a claim for reimbursementwas paid through a credit card of another person and not of the MWSSofficial.

b. In the case of gasoline and toll fees claimed in the amount ofP225,987.95, only the gasoline receipts were submitted without anyinformation on whether the vehicle was a private or government vehicle. Ifthe vehicle is privately owned, Section 3.1.1.8 of COA Circular 96-004dated April 19, 1996 provides that under no circumstances should fuel beissued to privately owned motor vehicles. Moreover, there was no

justification that a board meeting was attended by the Board Member on

the date of the receipt subject of reimbursement.

c. In addition to the reimbursements mentioned above, food expensesduring Board and Committee Meetings at the MWSS were incurred in theamount of P105,410.36.

9.4 Further review of the documents revealed that in some cases, the number of mealsserved during Board Meetings costing P 53,371.50 exceeded the actual number ofattendees based on the attendance sheets submitted by the Board SecretariatOffice.

JEV No.Date of Meeting No. of

foodorders

Paid Amount No. of actual attendees

02-000533 01/09/2013 10 2,310.00 701/10/2013 15 5,775.00 801/24/2013 15 6,600.00 8

02-000988 01/23/2013 10 770.00 701/18/2013 10 1,705.00 8

04-001300 03/01/2013 9 550.00 4


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JEV No.Date of Meeting No. of

foodorders

Paid Amount No. of actual attendees

07-002731 03/07/2013 10 4,600.00 803/14/2013 15 6,900.00 7

07-002841 05/06/2013 10 1,045.00 205/07/2013 12 698.50 305/09/2013 12 3,762.00 905/14/2013 8 1,628.00 305/30/2013 10 2,420.00 7

09-003667 07/03/2013 10 990.00 707/04/2013 10 2,497.00 607/11/2013 15 4,114.00 12

07/15/2013 10 627.00No attendance Sheetsubmitted for the said

date.07/23/2013 10 1,595.00 6

07/25/2013 12 4,785.00 10Total 53,371.50

9.5 It was also noted in the review of the attendance sheets that some attendees haveno signatures and only a check () or present is indicated beside the names.There were no other documents that would show proof of attendance such asminutes of board meetings where the member attended or other relevantdocuments.

9.6 The above observations cast doubt on the validity of the expensesreimbursed/incurred contrary to Section 12 of EO 242 and GCG MemorandumCircular No. 2012-2.

9.7 In COA Decision 2013-130 dated September 18, 2013, it was emphasized thatWhile Official Receipts have been duly submitted; this Commission does not findthe same sufficient to support the validity of the expenditures. The requirement offull documentation is to establish the propriety of the expenses in relation to the

purpose for which the allowance is granted.

9.8 We recommended and Management agreed to:

a. Require the concerned members o f the Board of Trus tees to jus t i fythe reimbursements showing that the same were incurred in

pursu ance wi th Sect ion 12 of EO 24 and/or GCG Memorandum

Circ ular No . 2012-2 dated May 2, 2012;

b. Ensure that hencefor th, expenses of members of the Board ofTrustees shal l be suppor ted wi th just i f icat ion that the

reimbursements were for the purpose of business meet ing as

provided in the above-ment ioned regulat ions;


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c. Str ic t ly com ply wi th COA Circular 96-004 which p rovides that underno c i rcumstances shou ld fuel be issued to pr ivately owned motor

vehicles;

d. Require the Board Secretar iat to ensure that food expenses to beincurred dur ing Board Meet ings are l imi ted to those who are

required/ invi ted to attend and that attendance sheets are dulys igned by the at tendees or sup por ted wi th relevant docum ents that

wo uld show proof of at tendance in the meet ings.

10. Discrepancies between the records of the Board Secretariat and the FinanceDepartment in the number of board meetings attended were noted, hence theaccuracy of the amount of per diems paid to the BOT under account, PersonnelExpenses - Honorarium, totalling P2.877 million was not established.

10.1 GCG Authorization Letter dated July 19, 2013 authorized MWSS to grant the FY2012 PBI to the Appointive Members of its BOT in accordance with the entitlement

scheme provided under Section 2 of GCG Memorandum Circular No. 2012-14.Based on the certification from the Corporate Secretary of total actual annualauthorized per diems received, four members of the BOT were granted PBIequivalent to 90% of their total actual annual authorized per diems.

10.2 Review showed discrepancies on the number of board meetings attended and theamount of per diems received by the BOT between the records of the BoardSecretariat and the Finance Department, summarized as follows:

NameBoardDesignation

Total Number ofMeetings Attended

Difference

Per Diems ReceivedFor CY 2012

DifferencePerFinanceRecord

Per BoardSecretariat Reportto GCG

PerFinanceRecord

Per BoardSecretariatReport toGCG

Ramon B.Alikpala

BoardChairman

32 31 1 432,000 432,000 0

Gerardo A.I.Esquivel

BoardMember(ExOfficio)

27 35 (8) 369,000 384,00015,000

(refunded)

Emmanuel L.Caparas

BoardMember

47 54 (7) 561,000 561,000 0

Benjamin J.Yambao

BoardMember 47 53 (6) 561,000 561,000 0

HermogenesFernando

BoardMember

29 27 2 357,000Not

includedNA

Ma. CeciliaSoriano

BoardMember

43 50 (7) 471,000Not

includedNA

Jose RamonVillarin, S.J.

BoardMember

10 6 4 126,000Not

includedNA


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10.3 Although the above differences did not result in any overpayment to the otherBoard Members, the noted discrepancies cast doubt on the correctness of thenumber of meetings attended and the amount of per diems paid.

10.4 The attendance report is a vital document in the computation of actual per diemsand the allowable Performance Based Incentive of the Board of Trustee by the

GCG and should therefore be prepared with utmost care to ensure that anaccurate report will be submitted.

10.5 We recomm ended and Management agreed to requi re the concerned Off iceto exerc ise di l igence in the repor t ing o f data and that the sam e be val idated

wi th the Finance Department to g et an accurate informat ion.

11. Inconsistencies/differences in the signatures of the workers appearing in the DailyAttendance Sheet, the Payroll Sheet and in the Consolidated Report of Attendancewere observed in the payment of salaries of the 162 workers for the Ipo Watershedreforestation program.

11.1 The disengagement of the Bantay Kalikasan from the Ipo Watershed managementactivities had forced upon MWSS the obligation to manage and secure the 560hectare plantation. Relative to the reforestation program, MWSS hired 162workers, who are members of Peoples Organization who previously reforested thearea, on job order status. The payroll and the supporting documents were preparedand prepared/certified correct by the officers of the Organization andapproved/noted by the concerned MWSS officers

11.2 Our audit of the payrolls for the period January to May 2013 disclosed thefollowing deficiencies:

a. The signatures of nine workers in the Daily Attendance Sheet was in longhandwriting while the one that appears in the Payroll sheet andConsolidated Report of Attendance was the printed name which anyonecan write.

b. Some workers were allowed to affix their thumb marks on the DailyAttendance Sheets having no formal education. However, they were ableto sign the payroll sheets and other documents as follows;

Marcelino Cruz affixed his thumb mark in the Daily Attendance Sheetand Payroll Sheet but signed MC in the Consolidated Report of

Attendance (from January to May 2013)

Romano Cruz signed RC in the Daily Attendance Sheet but affixed histhumb mark in the Payroll sheet and Consolidated Report of Attendance(from January to May 2013)

Romeo Maalat signed Romeo in the Daily Attendance Sheet but affixedhis thumb mark in the Payroll sheet and Consolidated Report of

Attendance for January 2013


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Jimmy Cruz signed his given name Jimmy in the Payroll sheet andConsolidated Report of Attendance but affixed his thumb mark in theDaily Attendance Sheet (January, February & April 2013)

Rogelio Cruz, Jr. signed his given name Rogelio in the DailyAttendance Sheet but affixed his thumb mark in the Consolidated Reportof Attendance and Payroll sheet (From January to April 2013)

Rogelio S.J. Cruz signed in full in the Daily Attendance Sheet but affixedhis thumb mark in the Payroll sheet and Consolidated Report of

Attendance (from January to May 2013)

c. Representatives were allowed to receive the salaries of the workerswithout authorization letters, namely:

Worker Representative Amount of salary Period coveredMichael Coraez Reynaldo Aquino 44,450 January to May 2013.Jun-jun Coraez Romeo San Jose 35,700 January to April 2013

Louie Cruz Mario Cruz 23,400January, March, April &

May 2013)

Benito Temblor Rogelio G Cruz 17,100January, March & April

2013Mario Marcelino Romeo San Jose 29,750 January to May 2013Alwin Lago Christoper Mayo 10,000 April 2013Vicente Rodriguez, Jr. Nenette Rodriguez 7,740 May 2013

d. Absences were not deducted from the salaries of the following workers:

Worker Audit finding AmountDionisio Dejano He did not sign the Daily Attendance Sheet on January 5, 2013. 350

Rogelio S. CruzHe was marked absent on March 28, 2013 in the DailyAttendance Sheet

380

Isagani Cruz He was marked absent on March 24, 2013 in the DailyAttendance Sheet

300

VicenteRodriguez, Jr

He was marked absent on March 24, 2013. 430

Marcelino SanJose

He did not sign the Daily Attendance Sheet on March 12, 2013. 430

Total 1,890

e. On the other hand, Cenon Reyes signed the Daily Attendance Sheet onMay 31, 2013 but the Consolidated Report of Attendance and the Payrollsheet showed that he was not paid the salary of P350 for the day.

f. There was no Daily Attendance Sheet for April 9, 2013 to support the

payment of salaries for that day.

11.3 The above observations put into question how much salaries were actuallyreceived by the workers and if the legitimate workers/payees received the salary.

11.4 We recommended that Management :


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a. Subm it conclus ive proof that the amounts disbursed w ere receivedby the legi t imate workers/payees; and

b. Require the persons who cer t if ied as to the correctness of the dai lyattendance sheet and the payrol l to be held l iable for the

overpayment of s alar ies to workers wh o w ere absent on the dates

men tioned in paragraph 11.2 (d).

11.5 In reply, Management submitted the Identification Cards of the 118 out of the 164Ipo Workers and informed that the other 46 workers were confirmed by theForesters. Refunds in the total amount of P1,890 were made on May 7, 2014 forthe absences of workers not deducted from their salaries.

11.6 As a rejoinder, the Identification Cards of the Ipo workers were not complete andsome did not bear the signatures of the workers. Further, the confirmation by theforesters of the receipt of the 46 workers of the salaries was not acceptable inaudit. Thus, there was no conclusive proof that the amount disbursed was actuallyreceived by the legitimate workers/payees.

12. MWSS CO did not comply with the submission of Contracts/Purchase Orders/LetterOrders (PO/LO) and its supporting documents required under Section 3.1.1 of COACircular No. 2009-001, thus, no timely review of contracts was undertaken by theAuditor.

12.1 COA Circular No. 2009-001 dated February 12, 2009 covering all contracts,purchase orders and the like entered into by any government agency irrespectiveof amount involved, states:

Within five (5) working days from the execution of a contact by the

government or any of its subdivisions, agencies or instrumentalities, includinggovernment owned and controlled corporations and their subsidiaries, a copyof said contracts and each of all the documents shall be furnished to the

Auditor concerned.

12.2 We requested Management, in our letter dated August 3, 2012, to submit allContracts/Purchase/Letter Orders within five days from perfection thereof.However, it was observed that to date, the required submission had not beencomplied with.

12.3 We recomm ended and Management agreed that , hencefor th, al l con tractsand Purchase/Let ter Orders and i ts suppo r t ing docum ents wi l l be subm it ted

in comp liance with COA Circular 2009-001.

13. Disclosure in the Notes to Financial Statements on the detailed breakdown of inputVAT taxes claimed during the year required under BIR Revenue Regulation No. 15-2010 was not complied with. Moreover, the accuracy of the Other Prepaid Expense

Input VAT account balance of P383,771 was not established due to:


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a. discrepancy of P1.941 million between the total debits (Actual Input VAT)during the year and the Input VAT Summary list of Purchases/BIR returnsubmitted to BIR; and

b. non-indication of the carryover balance of input VAT of P2.011 million inthe 1stQuarterly VAT return for CY 2013, hence it appearing that there were

no prepaid tax credits.

13.1 Our audit revealed deficiencies in the required disclosure relative to input VATtaxes and accuracy of the Account Other Prepaid Expense Input VAT, asfollows:

13.1.1 There was no deta i led breakdown on the Input VAT tax andwi thho ld ing taxes paid dur ing the year as requi red und er BIR RR 15-

2010.

a. Revenue Regulation No. 15-2010 which amends Section 2 of RR

21-2002 is quoted hereunder:

xxx the Notes to Financial Statements shall includeinformation on taxes, duties and license fees paid oraccrued during the taxable year, particularly thefollowing:

1. The amount of VAT output tax declared duringthe year xxx;

2. The amount on VAT input taxes claimed brokendown into:

a. Beginning of the year;b. Current years domestic

purchases/payments xxxc. Claims for tax credit/refund and other

adjustments; andd. Balance at the end of the year.

b. Review of the Notes to Financial Statements showed that theReport on Supplementary Information Required under RevenueRegulation No. 15-2010 showed only the taxes and withholdingtaxes paid during the year. There was no detailed breakdown on theInput VAT tax and withholding taxes paid during the year asrequired under BIR RR 15-2010.

13.1.2 Discrepan cy of P1,941,059.50 betw een the total debits (Actual InputVAT) dur ing the year and the Input VAT Summary l is t of

Purchases/BIR return subm it ted to BIR

a. Analysis of the Other Prepaid Expense Input VAT accountrevealed that the total debits (Actual Input VAT) does not tally with


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the amount in the Input VAT per Summary List of Purchases/BIRreturn as shown below:

Input VAT-Actual per SL 20,196,761.88Input VAT-Actual-SLP/Return 22,137,821.38Difference (1,941,059.50)

b. Detailed analysis of the Input VAT account is shown as follows:

2013Per SL

Per Summary List ofPurchases/Returns

January 2,262.85 1,991,466.30February 2,582,850.14 2,682,853.80March 869,018.60 148,316.60April 2,579,313.33 1,477,843.60May 4,606,359.72 1,951,041.08June 192,429.55 192,429.95July 4,668,075.78 4,532,844.47August 2,332,862.12 2,323,764.94September 262,266.42 4,744,578.02

October 358,429.97 1,458,583.57October 0 0November 308,819.49 308,819.49December 1,434,073.91 325,279.55

Total20,196,761.88 22,137,821.38

c. From the foregoing, we may conclude that the Prepaid Input VATrecorded in the books was understated.

13.1.3 The carryov er balance of input VAT of P2,010,647.92 was not sh ownin Line 20A of the 1

stQuarter ly VAT return for CY 2013, henc e, it can

be inferred that there are no prepaid tax c redits.

a. Sec. 110. of the Tax Code provides that

Tax Credits

(A) Creditable Input Taxx x x

(B) Excess Output or Input Tax - If at the end of anytaxable quarter the output tax exceeds the input tax, theexcess shall be paid by the VAT-registered person. Ifthe input tax exceeds the output tax, the excess shall becarried over to the succeeding quarter or quarters:Provided, however, that any input tax attributable to

zero-rated sales by a VAT-registered person may at itsoption be refunded or credited against other internalrevenue taxes, subject to the provisions of Section 112.

b. The Other Prepaid expense - input tax account showeda carryover balance from CY 2012 of P2,010,647.92arrived at as follows:


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Beginning Balance 2,172,952.70

Input Tax Claimed for 4th Quarter-2012 (162,304.78)

Input Tax Carry Over 2,010,647.92

The amount of P2,010,647.92 was not reflected in the 4 thQuarterlyVAT return of 2012 (paid in January 2013) as overpayment or in the1stQuarterly return of 2013 as Input Tax Carried Over from previousperiod. Based on the VAT tax returns filed, it can be inferred thatthere are no prepaid tax credits. However, it appears that the saidtax credit of P2,010,647.92 was not fully applied against the currentyears remittances as shown below:

Beginning Balance per books 2,172,952.70Total Input VAT Actual onpurchases

20,194,761.88

Total Input VAT claimed based onBIR remittances

21,983,943.78

Ending balance per books 383,770.80

c. Likewise, the difference of the debits to Input Tax ofP2,010,647.92 as against reported Input Tax fromSummary List of Purchases has been offset by thebeginning balance of the account.

13.1.4 Def ic iencies in the fi l l ing up of the Quarter ly VAT returns for CY2013 and in the Input VAT Summary l ist of Purch ases/BIR return

submit ted to BIR

a. The 3rd and 4thQuarterly VAT returns (BIR Form 2550Q) containerroneous information as follows:

i. The boxes in the returns which pertain to payments for the3rd and 4th Quarter were marked as payments for the 1stQuarter. It was also observed that item 21P or TotalPurchases from which the Input Tax Credits claimed for the1st Quarter are sourced amounting to P40,188,639.18 alsoappeared on the 3rdand 4thQuarter Returns.

ii. The Net VAT Payable was footed in the Total Available InputTax (Item 22) and Total Allowable Input Tax (Item 24) of the4thQuarter Return

iii. The amount of Total Sales/Receipts (Item 19A) and Total

Current Purchases (Item 21E) in the 4th Quarter return areinclusive of Value Added Tax. The guidelines provide thatthese items shall be exclusive of tax as basis of the 12%VAT footed in Item 19B and 21F respectively.

Description per Return per Guidelines DifferenceTotal Sales/Receipts

48,229,205.16 43,124,290.32 5,174,914.84


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(19A)DomesticPurchases(21E)

19,531,704.40 17,439,021.79 2,092,682.61

13.2 The errors mentioned above made the information indicated in the returnsmisleading. These however, did not involve misapplication of complex tax laws orregulations, but they nonetheless may give rise to significant tax assessments fromthe Bureau of Internal Revenue.

13.3 We also noted that the collection of rental amounting to P137,718.75 from leasedproperties of MWSI was debited to Other Prepaid Expenses-Input Tax. Thisshould have been recorded in Other Prepaid Expenses-Expanded Withholding Taxas this is a creditable withholding tax for rentals (5%) and not Input Tax fromdomestic purchases (12%).

13.4 Based on the aforement ioned observat ions, we recomm ended andManagemen t agreed to:

a. Prepare deta iled breakdown of Input VA T cla imed du r ing the yearsho wing the Input VAT at the beginning of the year ; Inpu t Tax from

Current years domestic purchases/payments; Claim for taxcredi t /refund and other adjustments; and the Input VAT balance at

the end o f the year pursuant to Sect ion 2 of Revenue Regulat ions

15-2010 of th e Bu reau of Internal Revenu e; thereafter, inclu de the

sam e in the Notes to Financial Statements; and

b. Ensu re that al l returns f i led with the BIR are reviewed d i l igent ly toensure that the inform at ion conta ined in the returns are correct ; I f

poss ib le amend the 3rdand 4

thQuarter ly VA T returns to correct

input ted entr ies to avoid assessments f rom the Bureau of Internal

Revenue and henceforth ,

B. CURRENT YEARS AUDIT FINDINGS AND RECOMMENDATIONS

2. MWSS REGULATORY OFFICE (RO)

1. The consultants final report and other deliverables in the consultancy servicescontract for the MWSS Regulatory Office 2013 Rate Rebasing in the total amount ofP61.397 million contracted by MWSS Regulatory Office (RO) and Isla Lipana & Co.Joint Venture with Lahmeyer IDP Consultant, Inc. was not submitted within the six-

month contract period reckoned from the receipt of the Notice to Proceed to theConsultant due to the request of the Regulatory Office for the consultant to dofurther evaluation of the items that were raised/disputed in the arbitration.

1.1 MWSS RO and Isla Lipana & Co. in Joint Venture with Lahmeyer IDP Consultant,Inc. entered into contract for the CY 2013 Rate rebasing consultancy service in thetotal amount of P61,397,288 with a contract duration of six months reckoned from


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the receipt of the Notice to Proceed on March 1, 2013. The deliverables, whichshould be completed/finished by August 31, 2013, consists of the following:

Table of DeliverablesParticulars Timeline

1. Briefings to the RO, CO, the Board Advisory

Committee and the MWSS Board onalternative interpretations of specificprinciples, CA provisions, approaches to thefinancial model, sensitivity analyses, andother financial issues/ treatments that affectthe outcome of tariffs at specific points of theengagement as may be specified orwarranted by urgency.

As required

2. Inception Report which shall include adetailed methodology for the conduct of thethird Rate Rebasing exercise and establishthe basic principles of Rate Rebasing.

10 days from commencement date

3. Monthly Accomplishment Reports1 month from commencement date and every

month thereafter.4. Presentation of issues, proposed resolution

to these issues, proposed policies to beadopted by MWSS for the third RateRebasing exercise concerning these issues.


5. Historical Cash flows 60 days from commencement date6. Report on the ADR arrived at for the third

Rate Rebasing Exercise45 days from commencement date

7. Future Cash flows 90 days from commencement date8. Presentation of the required Sensitivity

Analysis100 days from commencement date

9. Report on final determination of compliancewith RORB requirement and adjusted tariff, ifapplicable


10. Other Items leading to determination ofRebasing Adjustment


11. Rate Rebasing Report 150 days from commencement date12. Additional Requirements 180 days from commencement date

1.2 Review of the contract and supporting documents revealed that there weredocuments not submitted, when required by the COA Technical Audit Specialist inthe initial technical review of the contract dated October 29, 2013. Considering thatthe contract expiry period was on August 31, 2013, the following documents shouldhave been available at the time of review, namely:

a. Statement of Time elapsed, if anyb. Approved time extension and/or suspensions/resumption orders, if any,

including supporting documents; andc. Certificate of Project Completion and Acceptance

1.3 In reply to our audit observation, Management submitted the followinginformation/explanations:

a. The documents mentioned in paragraph B.2.1.2 above have yet to besubmitted. In a letter, noted by the Acting Chief Regulator dated April 15,2014, the Deputy Administrator for Administration and Legal Affairs informed


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that the Regulatory Office considered fair and warranted to move the finalsubmission of the consultants finalreport and other deliverables on or before

April, 30, 2014.

b. In the said letter, it was explained that in the ongoing arbitration cases filed bythe concessionaires, there were series of discussion with the Consultant.

Noting after the discussion that there were a number of key items to beincorporated in the consultants report, the RO requested that they beconsidered in the final version of the documents to be submitted:

Opening Cash Position (OCP) Appropriate Discount Rate (ADR) Future Cashflows (FCF) Water and Wastewater Projects Services Obligations (SOs) Key Performance Indicators/Business Efficiency Measures

(KPIs/BEMs)

c. The RO acknowledged that the consultant has to do further evaluation of theforegoing items that were also raised/disputed in the arbitration. Saidevaluation involves the inclusion of additional or enhanced data whichdefinitely requires additional time that will impact on the deadlines set for thesubmission of their remaining deliverables.

d. Faced with this predicament, and in view of the critical importance of thedocuments in the resolution of the issues also raised in the arbitration, ROconsidered fair and warranted to move the final submission date of theconsultants final report and other deliverables on or before April 30, 2014.

e. A letter dated March 17, 2014 was sent by the RO to the Consultantinforming them of the final submission date of the reports and othercontractual deliverables on or before April 30, 2014.

1.4 Given the above information, the Audit Team inquired during the exit conferencehow the MWSS Regulatory Office was able to come up with the MWSS RegulatoryOffice Resolution Nos. 13-010-CA and 13-009-CA dated September 10, 2013recommending to the MWSS Board of Trustees the rate rebasing determination forMWSI and MWCI for charging years 2013-2017. It was noted that one of whereasclauses stated that given the complexity of the rate rebasing process, theRegulatory Office engaged experts for the economic, financial, accounting, legaland technical aspects of the audit with the footnote that Isla Lipana & Co. in JointVenture with Lahmeyer IDP Consult, Inc. was contracted for the 2013 RateRebasing Consultancy Services.

We noted that the communications on the submission of the deliverables to April30, 2014 due to submission of additional and enhanced data by the Consultant didnot mention whether additional costs will be incurred by MWSS RO. Likewise,there is the question on whether the moving of the submission date is considered a


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time extension which should be properly documented under the procedures in RA9184 and its IRR.

1.5 In the exit conference, the Acting Chief Regulator explained that all the data in rawform that was submitted by the consultants during the Rate Rebasing Exercise wereevaluated processed and were used for purposes of reporting and computation of the

new rate.

He also explained that there are plenty of reports that the consultants have to submitto RO in accordance with the deliverables which include the Rate Rebasing Manual, amanual that is very accurate with other report. The delay for the submission wasattributed to the Arbitration dispute notice filed by the concessionaires. He said that theRO evaluated the issues stipulated in the complaints in terms of form, substance andprocesses. These things are being considered/evaluated in revisiting the raw data andsuggested revisions to the consultants because RO wants to have documentation forthe future Rate Rebasing exercise that are understandable and acceptable. The ROwant it to be the best and make the most out of the contract.

1.6 As a rejoinder, considering the foregoing explanation of the Acting Chief Regulatorthat the non-submission of the deliverables on August 31, 2013 was due to theneed for further evaluation that involves the inclusion of additional or enhanceddata, which definitely requires additional time that will impact on the deadlines setfor the submission of their remaining deliverables, it appears that the deliverablesof the Consultant would include outputs during the arbitration process. Therefore,the same should have been considered in the determination of the contractduration and there would be no issue on the non-submission of final outputs onthe required due date

1.7 We recomm ended that in future simi lar consu l tancy c ontract , Management ,in determining t im etables for del iverables or p roject comp letion shou ld, in

the proc uremen t planning stage, set a real ist ic and reason able t imefram e forcom plet ion to avoid the occurrence of delay in the submiss ion /com plet ion

of the d el iverables.

2. Deficiencies were noted in the consultancy contracts for the following purposes:

a. In the Consultancy services for the 2013 Rate Rebasing in the amount ofP61.597 million, changes in key personnel were not in accordance with theGeneral Conditions/Special Conditions of the contract and Section 33.6 ofIRR of RA 9184 ; and

b. In the contract for the Review and Validation of the Concessionaires AssetCondition Report (ACR) with a contract cost of P21.028 million, the validityof the claim for reimbursable costs was questionable due to (i) issuesraised on the rental of vehicles claimed to have been used for the projectand (ii) the purchase of laptops and cameras for the project were notwarranted.


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2.1 Consul tancy serv ices for the 2013 Rate Rebasing in the amount ofP61,597,388 -

2.1.1 MWSS Regulatory Office and Isla Lipana & Co. in joint venture withLAHMEYER IDP CONSULT entered into a contract for the 2013 RateRebasing exercises for Manila Water Company, Inc. (MWCI) and

Maynilad Water Services inc. (MWSI) with contract cost of P61,597,388.

2.1.2 The breakdown of the contract cost is as follows:

Particulars AmountRemuneration Cost -

Foreign 11,856,425Local 39,990,350

Total remuneration cost 51,846,775Reimbursable cost (subject tosubmission of official receipts)

Housing 1,272,321Transportation 342,857

Local Vehicle rental 235,714Consumable office supplies 171,429Printing & Report reproduction 291,071Communication expenses 107,143Laptop Computers 267,857Meeting expenses 71,429Heavy Duty Colored printed 133,929Computer Software 257,143Total reimbursable costs 3,150,893

Total Project Cost 54,997,668VAT 6,599,720

Grand Total 61,597,388

Payments during the year to Isla Lipana & Co for the 2013 Rate Rebasingare covered by the following reference document and particulars:

Check/DV No. Date Amount430285/143-04/13 April 18, 2013 P2,773,802469741/227-05/13 June 7. 2013 5,478,437469868/414-10/13 October 7, 2013 714,350469910/469-11/13 November 14, 2013 10,956,874469955/516-12/13 December 17, 2013 13,696,093

Total P33,619,556

2.1.3 Audit of the above disbursements showed the following:

2.1.3.1Change in the key personnel of the Consultant was effectedwhich was not in accordance with the provisions of Section39.5 of the General Conditions of the Contract (GCC) andthe Special Conditions of the Contract (SCC) and Section33.6 of IRRRA 9184.

a. A comparison of the Project Organization chart of theConsultant included in the Technical Proposal (Form 10.1)


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and the Project Organization included in the InceptionReport showed a change in the key personnel of theConsultant which was not in accordance with the provisionsof Section 39.5 of the General Conditions of the Contract(GCC) and the Special Conditions of the Contract (SCC)and Section 33.6 of IRRRA 9184.

b. We noted that the proposed Economist (International Staff)in theProject Organization chart of the Consultant includedin the Technical Proposal (Form 10.1was Stuart King whilein the Inception Report the position was occupied by RobertMontgomery. Another Economist Joel Yu (local staff) andan Assistant Lawyer Justine Buduan were also added in theProject Organization as per Inception Report.

c. Section 39.5 of the General Conditions of the Contract ofthe IRR states that:

No changes shall be made in the Key Personnel,except for justifiable reasons beyond the control of theConsultant, as indicated in the SCC, and only uponapproval of the Procuring Entity. If it becomes

justifiable and necessary to replace any of thePersonnel, the Consultant shall forthwith provide as areplacement a person of equivalent or betterqualifications. If the Consultant introduces changes inKey Personnel for reasons other than those mentionedin the SCC, the Consultant shall be liable for theimposition of damages as described in the SCC.

Also, Section 39.5 of the Special Conditions of the Contract

(SCC) of the IRR states that:

The Consultant may change its Key Personnel onlyfor reasons of death, serious illness, incapacity of anindividual Consultant, or until after fifty percent (50%)of the Personnels man-months have been served.

Violators will be fined an amount equal to the refundof he replaced Personnels basic rate, which shouldbe at least fifty percent (50%) of the total basic ratefor the duration of the engagement.

d. We recommended the submiss ion of

jus tif icat ion /exp lan at ion on the necess ity o f chang ingthe key personnel of the Consu l tant as requi red under

Sect ion 39.5 of the GCC , the SCC and Sect ion 33.6 of

IRR of RA 9184.

e. Management submitted the following comments:


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i. The Rate Rebasing process should not be constrictedor bound strictly by the sequence of suggested steps,methodologies and/or personnel assignments/deployments in the technical proposal. In the case,Isla was not only obliged to conduct a financial andtechnical audit on the concessionaries, (historically for

at least five (5) years), but also to make reasonableprojections based on certain assumptions until the endof the CA in 2037.

ii. Significantly, it bears stressing that in its ResolutionNo. 2013-029-RO dated 19 February 2013, theMWSS Board of Trustees (MWSS BOT) as Head ofProcuring Entity (HOPE) authorized the Acting ChiefRegulator to negotiate the terms of the contract withIsla.

iii. The changes which unfolded from ROs side were

discussed with the RR consultants, who expressedserious difficulty in adhering to the original proposal,based on the timelines and original representations,as well as the request of RO, as stated in Islas letterto the Acting Chief Regulator dated 7 March 2013.Mindful of the exacting requirements of the regulatoryaudit during the RR exercise, RO, through the ActingChief Regulator exercising his delegated authority andsound judgment, was constrained to allow thesubstitution of the Economist, Stuart King, with two (2)economists, Robert Montgomery (foreign) and Joel Yu(local).

iv. The Inception Report revealed that the 2013 RR is avery dynamic project, which was implemented in closecooperation and coordination between the RO andIsla. This is clear on pages 7, 55 and 56 of theInception Report.

v. Considering the nature and urgency of the project, Islaintroduced several adjustments, refinements andrevisions in its work plan, including changes in thetimetable and personnel deployment. These were thedirect result of the requests of RO, in order to manage

the exercise and fulfill its requirements, as mandated.

2.1.3.2 Two personnel occupying the positions of NRW Expert(MWSI), Sewerage/Sanitation Expert (MWCI) and CostEngineers 4, 7, 9 and 10, were different from the submittedProject Organization Chart and in the proposed personnel(TFP Form 5) in the Technical Proposal where only onename appeared in the said positions.


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categorically enumerated in Section 39.5 of the GCC and theSCC. It is necessary that the changes in the timetable andpersonnel deployment are properly documented to justify thereplacement of the key personnel.

Moreover, the qualifications of the former key personnel of

the Consultant were among the consideration when thecontract was awarded to the Consultant. It is thereforenecessary that the changes in key personnel were properlydocumented that would prove that the changes are lawful,validly justified and beneficial to the project and to MWSS ingeneral.

2.1.3.3 Management approved the payment for the submission ofthe ADR report without the historical cashflows differentfrom the payment schedules in the contract.

a. The payment for the 2nd progress billing under Check No.

469741 in the amount of P5,478,437.13 was for the 10%remuneration after the submission of the AppropriateDiscount Rate (ADR) report. Section 1 of the contractprovides that contract payment shall be in accordance withthe following schedules:

Deliverables/MilestonesAmount to be Paid (Percent of Contract

Price, PhP)Advance Payment 15%Presentation of issues,proposed resolution to theseissues, proposed policies tobe adopted by MWS for the

third Rate Rebasing exerciseconcerning these issues.

5% less recovery of advance payment

Historical Cashflows:

Detailed Audit Report ofHistorical Cashflows,including disallowances aswell as rewards andpenalties for OPEX andNRW;

Report on current OCPestablished and on theanalysis conducted on OCPssince start of the concession

period

Report on compliance ofconcessionaires with serviceobligations in the preceding


Report on the ADR arrived atfor the third Rate RebasingExercise



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b. Based on the above schedule of deliverables/milestones, thesubmission of the historical cashflows should come firstbefore the report on the ADR.

c. Considering that Management approved the payment for thesubmission of the ADR report without the historical

cashflows, it may be inferred that the said report should notbe considered a deliverable item that would merit thepayment of 20% of the contract price of P61,397,388 whichis equivalent to P12, 279,477.60.

d. We recomm ended that Management submit explanat ionwhy the payment was not in accordance wi th the

payment s chedule stated in the con tract .

e. Management commented that it must be emphasized thatthe determination of ADR rests on data and informationtotally distinct from the utilized or needed for the other

reports and the activities for the former can proceedindependently of the other RR tasks. Hence, the ADR report,as a deliverable, can be logically released ahead of the otherreports-deliverables. In fact, this is exactly what happened RO and the Concessionaries were both able to separatelydetermine ADR, applying economic and financial data thatwas not utilized for the other reports.

f. As our rejoinder, it is our view that logically, the payments ofdeliverables should be in accordance with the paymentsschedules provided for in the contract.

2.1.3.4 The Consulting Services Agreement (Amendment) wasnotarized by a lawyer whose authorization to notarize adocument and practice his profession (PTR) had alreadyexpired on December 31, 2011 and January 8, 2010respectively.

a. The Consulting Services Agreement (Amendment) wasnotarized by a lawyer whose authorization to notarize adocument and practice his profession (PTR) had alreadyexpired in December 31, 2011 and January 8, 2010respectively. The Supreme Court in Nadayag vs.Grage

Documents

09-MWSS2013 Part2-Observations and Recommendations