CEBU CITY, PHILIPPINES — The Metropolitan Cebu Water District (MCWD), a government-owned utility that provides potable water to Metro Cebu, is currently facing significant accountability challenges.
Recently, the Commission on Audit (COA) reported finding billions of pesos in unreconciled property records, unsubmitted inventories, and misstatements related to cash and receivables. Additionally, there are ongoing compliance gaps concerning vehicles, taxes, and social insurance remittances for the year 2024.
PPE accounts unreliable
COA, in its latest annual audit report, said that the Property, Plant, and Equipment (PPE) account is unreliable, because its existence, correctness, and valuation could not be fairly presented, under Philippine Accounting Standard.
MSWD’s PPE has a total cost of ₱7,167,618,015.80 and a net carrying amount of ₱2,844,756,831.16 as of year end 2024.
The most significant oversight was the failure to submit physical inventory reports for personal protective equipment (PPE) valued at ₱4,640,250,725.12.
This includes a net carrying amount of ₱1,976,347,867.74, which comprises land worth ₱895,381,280.91 and core infrastructure, such as transmission and distribution mains valued at ₱3,188,660,025.19, along with water meters amounting to ₱205,600,938.84.
COA underscored that PPE accounts comprise 48 percent of MCWD’s total assets of ₱5,959,154,753.06, making complete physical counts indispensable to verify accuracy, existence, valuation, present condition, and custodianship.
Where reports were submitted, auditors found a difference of ₱569,976,343.34 between the General Ledger and the Report of Physical Count of PPE.
Significant variances appeared in infrastructure assets, buildings and other structures, machinery, transportation equipment, furniture and books, and other PPE.
In various asset classes—including wells, reservoirs, tanks, hydrants, supply structures, treatment facilities, and general plants—some items lacked valuations or quantities in lapsing schedules, which undermined claims of accuracy, existence, and completeness.
COA identified a total of ₱2,492,509,796.78 in unaccounted beginning balances within subsidiary ledgers, along with a ₱384,598,599.60 discrepancy between the lapsing schedule of the Accounting Division and the Property Cards maintained by the Property and Materials Management Department.
The absence of periodic reconciliation weakens controls and hampers timely detection and correction of errors, shortages, or losses, said the state auditors.
Beyond PPE, COA said the accuracy and existence of the inventory account cannot be ascertained due to a ₱66,210,001.74 discrepancy between the General Ledger balance of ₱292,911,174.03 and the physical count of ₱226,701,172.29.
The issue dates back to 2014 and has worsened from an ₱11,731,503.80 variance to ₱66.21 million in 2024.
Reconciliation was complicated by system misalignment: reports were generated by warehouse rather than by inventory type as required, titled as “Inventory of Materials and Supplies” instead of the prescribed Report on the Physical Count of Inventories, and needed ICTD updates to add proper classification columns.
MCWD told auditors it has begun monthly reconciliations, is streamlining system classifications, and will adopt uniform costing and proper RPCI formats, with commitments documented in April 2025.
Unreconciled bank statements
COA also found reconciling items in bank statements were not booked at year end, resulting in a net overstatement of the Cash in Bank account by ₱33,671,488.81.
Management later said ₱33,169,260.55 of that pertained to unreleased checks reclassified back to cash in December 2024, but initially presented as book rather than bank reconciling items; the bank reconciliation was revised accordingly.
The remaining ₱502,228.26 covered debit and credit memos, cancellations of stale checks, and corrections, some adjustments made later on.
COA reiterated that reconciling items should be recognized before the books are closed to ensure fair presentation of liquidity.
Receivables also required correction with the Accounts Receivable — Water Fee showed a ₱13,470,157.58 variance between the General Ledger balance of ?360,463,793.64 and the aging schedule or the detailed list showing how long each customer’s bill has been unpaid of ₱371,610,498.20 maintained by the Commercial Services Department.
COA noted progress from a ₱58.5 million discrepancy in 2022 but said full reconciliation is still needed.
Management outlined structured measures: comprehensive reconciliation of subsidiary ledgers and aging schedules, synchronization of billing, collection, and accounting systems with Information and Communication Technology Department (ICTD ) support, root cause analysis, corrective adjustments, and strengthened internal controls.
Abnormal or negative balances persisted in both asset and liability subsidiary ledgers, totaling ₱245,200.10 and ₱4,167,071.70, respectively. Several have existed since 2017, including Accrued Employees Benefit Payable—negative since 2023 at ₱3,066,380.11 and further negative to ₱3,142,102.93 in 2024.
COA said these conditions contradict sound accounting practice and the honesty and consistency standards mandated while management reported preparing adjusting entries and reviewing prior year transactions, with remaining accounts under reconciliation, as of April 2025.
Discrepancy in loans
COA also flagged a ₱714,999.09 discrepancy between MCWD’s Loans Payable—LWUA ledgers and the Local Water Utilities Administration’s loan confirmation.
The variance traced to December 2019 entries transferring the current portion to the proper account and shifting transactions to a specific sub ledger (LWUA — Salintubig) that did not auto cascade in MCWD’s accounting system, overstating Loans Payable — LWUA by ₱715,000.
Management maintained that the General Ledger carried the correct balance, and said ICTD completed system reconciliation, aligning ledgers in 2025. But COA emphasized that reciprocal borrower lender accounts should align without timing differences or errors.
Compliance lapses extended to foundational requirements, COA said. MCWD has not implemented the Revised Chart of Accounts for government corporations, under COA Circular 2020 002 and LWUA MC 015 17.
The 2024 trial balance was manually converted to RCA for working purposes, but no journal entries were recorded to officially reclassify accounts.
MCWD service vehicles
Even MCWD’s service vehicles were found non compliant, still bearing private plates instead of government markings — a visible reminder of lapses in basic accountability.
The six service vehicles, purchased in 2009, still bore green (private) plates rather than red government plates and lacked the mandated “For Official Use Only” markings and the water district’s name.
The vehicles—five Mitsubishi Strada utility units and one Kia Sportage SUV—cost between ₱1.068 million and ₱1.24 million each and are assigned to the Production Department, the Assistant General Manager for Administration, the Project Management Office, the Assistant General Manager for Finance, and the Legal Department.
LTO records show they have been reclassified as government vehicles upon MCWD’s request, but red plates have not yet been released.
MCWD is committed to continuing formal follow ups and to marking all units as “For Official Use Only” with the agency’s name, per COA circulars.
Tax compliance deficit
Tax compliance also fell short due to the BIR account ending 2024 at ₱35,796,935.74, leaving a residual balance of ₱6,512,500.67 after remittances.
COA’s review of January 2025 returns showed remittances of ₱16,505,747.45, leaving ₱6,336,852.72 deemed unremitted and revealing mismatches between monthly withholding and subsequent remittance—suggesting late or incomplete remittances.
Management explained that ₱3.603 million related to a prior year income tax payable not remittable due to the water district’s income tax exemption; ₱2.381 million covered tax refunds already paid to employees in January 2025; and about ₱528,000 represented reclassifications to be recorded in 2025.
Insurance remittances gaps
Social insurance remittances showed timing and alignment gaps, COA said. For GSIS, MCWD withheld ₱103,388,615.46 and remitted ₱102,410,197.68 in 2024, leaving a year end balance of ₱8,266,294.50 and an over remittance of ₱396,850.00 in January 2025. Management attributed mismatches to GSIS records not reflecting promotions and personnel changes and committed to timely notifications.
For Pag IBIG (HDMF), the year began with ₱418,748.99, saw ?8,987,611.95 in contributions and loan repayments, ?8,740,166.38 in remittances, and closed with ₱666,194.56; December 2024 remittances of ₱771,776.10 were made January 13, 2025.
For PhilHealth, the beginning balance was ₱918,286.65, contributions and repayments totaled ₱17,469,301.62, remittances reached ₱17,284,418.49, and the year end balance stood at ₱1,103,169.78; December remittances of ₱1,470,639.60 were made January 10, 2025.
On Gender and Development (GAD), MCWD appropriated ₱277,941,646.58—equivalent to 5.05 percent of its ₱5,505,969,749.04 corporate budget—but utilized only ₱18,032,244.04 or 6.49 percent of the appropriated GAD funds for programs, projects, and activities, with underutilization stemming from non implementation and partial implementation of planned activities.
Management said capital projects did not meet attribution criteria under the Harmonized GAD Guidelines, some wellness program payments extended into 2025, and scheduling conflicts affected training participation; it committed to improve GAD planning and mainstreaming.
Outstanding audit disallowances aggregated to ₱182,139,298.82 as of December 31, 2024, with no new notices issued or settled during the year.
COA also observed that not all insurable properties were covered by GSIS as of year end; property insurance spending in 2024 totaled ₱4,230,951.94 and was limited to assets mortgaged under a DBP loan.
MCWD’s workforce and obligations reflect the breadth of operations underpinning these accounts. In 2024, the agency paid ₱69,157,173.05 to personnel hired as casuals, job orders, and contract of service—18 casuals and 319 JO/COS staff—for a total of 337 workers.
Management, across findings, acknowledged COA’s recommendations: update and reconcile property records, conduct complete and properly documented physical inventories, adopt the Revised Chart of Accounts, correct vehicle registrations and markings, reconcile tax withholdings and remittances monthly, and align social insurance contributions per law.
In letters, officials outlined measures in coordination with various departments, including system fixes, structured reconciliations, and procedural improvements, with commitments continuing in 2025, as they remain Cebu’s water lifeline.
| Written by Caecent No-ot Magsumbol
