The Commission on Audit flagged the Tabuelan and Medellin water districts for incorrectly recording P400,000 each in DENR earthquake-repair grants as income rather than liabilities under Due to NGAs.
Auditors noted both government-owned water districts failed to liquidate the funds because repairs had not been completed, leaving financial statements for the period ending Dec. 31, 2025, misstated.
Both water districts acknowledged accounting errors caused by staff unawareness of regulations and submitted journal entry vouchers in April 2026 to record the P400,000 liabilities properly.
THE Commission on Audit (COA) flagged the Tabuelan and Medellin water districts for their incorrect accounting of P400,000 in government financial assistance each.
The funds were intended to repair and rehabilitate water pipelines and related facilities damaged by the magnitude 6.9 earthquake on Sept. 30, 2025.
In its 2025 audit reports, COA found that the Medellin Water District recorded the P400,000 grant from the Department of Environment and Natural Resources (DENR) under Assistance from National Government Agencies (NGAs) instead of Due to NGAs. Meanwhile, the Tabuelan Water District recorded its grant under Income from Grants and Donations in Cash instead of Due to NGAs.
Both water districts are government-owned and controlled corporations established under Presidential Decree 198, or the Provincial Water Utilities Act of 1973, as amended.
The City of Bogo experienced a magnitude 6.9 earthquake on Sept. 30, 2025. Medellin and Tabuelan, located in northern Cebu, were among the local government units affected by the tremor.
Tabuelan findings
The Tabuelan Water District received its P400,000 grant from the DENR on Dec. 19 for the repair and rehabilitation of earthquake-damaged water pipes and related facilities.
The memorandum of agreement (MOA) between the DENR and Tabuelan classified the assistance as a “grant subject to liquidation.” However, Tabuelan recorded the grant as Income from Grants and Donations in Cash instead of Due to NGAs.
“However, upon receipt of the grant, the water district credited Income from Grants and Donations in Cash (old account name for Donations in Cash) instead of Due to NGAs,” COA said.
The district’s accounting processor told auditors that no liquidation had been submitted to the DENR because no disbursement had been made as of the audit date.
“Inquiry with the Accounting Processor disclosed that no liquidation had been submitted to DENR since no disbursement had been made as of the audit date,” COA added.
She explained that grants and donations were usually recorded directly as income because she was unaware of the applicable accounting rules. She was also unaware that COA Circular 2020-002 requires grants and donations to be presented separately under the updated Revised Chart of Accounts for government corporations.
State auditors said the incorrect recording overstated the income account for Donations in Cash and understated the Due to NGAs liability account by P400,000. This affected the fair presentation of Tabuelan’s financial statements as of Dec. 31.
Accounting adjustments
Auditors recommended that the district recognize the grant as a liability by debiting Retained Earnings and crediting Due to NGAs by P400,000 because its books had already been closed.
The accounting processor and general manager confirmed during the exit conference that an adjusting entry had been made. The audit team subsequently received Journal Entry Voucher 2026-1047A dated April 6, 2026.
COA also recommended that management closely monitor project implementation and direct the accountant to ensure compliance with the liquidation requirements stipulated in the agreement with the DENR.
Medellin findings
In a separate report, the Medellin Water District received the P400,000 assistance on Dec. 22. Its MOA with the DENR specified that the grant was subject to liquidation.
“Considering that the financial assistance was granted subject to liquidation pursuant to the terms and conditions of the MOA, the amount received did not immediately qualify for recognition as income,” state auditors said in the district’s second audit report.
Instead, the funds should have been recorded as Due to NGAs until the corresponding liquidation and settlement requirements were met, COA said.
The district’s senior accounting processor told auditors that the grant had not yet been liquidated because materials for the project had only recently been delivered. She noted that additional materials were still needed to complete the repair and rehabilitation works.
The processor also said she was initially unaware of the MOA with the DENR. She said the transaction had been recorded based solely on the deposit slip transmitted by the general manager.
District operations
COA said the incorrect recording overstated the Assistance from NGAs account and understated the Due to NGAs account by P400,000. This affected the fair presentation of the district’s financial statements as of Dec. 31.
Management agreed to recognize the liability through a proposed adjusting entry debiting Retained Earnings and crediting Due to NGAs by P400,000 because the books had already been closed.
The senior accounting processor prepared the proposed entry under Journal Entry Voucher 2026-04-0312 dated April 22 and submitted it to the audit team on the same date.
COA also recommended that management closely monitor project implementation and ensure compliance with the liquidation requirements in the agreement with the DENR.
The Medellin Water District was formed in March 2019 through Municipal Resolution 2019-544 dated March 20, 2019. The Local Water Utilities Administration issued it a Conditional Certificate of Conformance on July 15, 2019 and categorized it as a Category D water district effective Oct. 1, 2019.
It began operations on April 1, 2020, and serves seven of Medellin’s 19 barangays. As of Dec. 31, it had eight regular employees, one coterminous employee and 23 job order (JO) workers. It is headed by General Manager Joel Cayasan.
The Tabuelan Water District received its Certificate of Conformance from the Local Water Utilities Administration on Dec. 4, 2007 and was categorized as a Category D water district effective March 2012.
As of Dec. 31, it had 40 workers, including eight regular employees, one coterminous employee and 31 JO workers. It is headed by General Manager Edric Luyao. / CDF