56932
GUIDE TO RING-FENCING OF
LOCAL GOVERNMENT-RUN WATER UTILITIES
ACKNOWLEDGMENTS
This report is one of the deliverables under Component 3 of the Small Water Utilities Improvement and Financing (SWIF)
project implemented by the Water and Sanitation Program (WSP). SWIF aims to improve the ability of small utilities to
access increasingly market-based financing in line with the Government of the Philippines' water sector financing
strategy. Component 3, cofinanced by the Public-Private Infrastructure Advisory Facility Sub-National Technical
Assistance, seeks to examine issues surrounding access to market-based financing by small water utilities towards
developing an intervention program, including the ring-fencing of accounts of local government-run water utilities.
This report was prepared by P�yry IDP Consult, Inc. financial specialists Evelyn Orda and Maribelita Cortez,
WSP Philippines Country Team Leader Leila Elvas, and independent consultants and financial specialists
Dr. Anna Maria Mendoza and Stella Maris Salas.
Many people contributed to the development of this report, either as peer reviewers, Technical Working Group members
or as part of the supervision team of WSP. They are:
Peer Reviewers:
Liberty Toledo of the Bureau of Local Government Finance (Department of Finance); Doris Teodoro of Cooperative
Development Authority; Leonora Casi�o, Rene Lorenzo, Estela Penamante, Josephine Ramos, and Ezequiel Serrano of
the Department of the Interior and Local Government; Olga Arceo of the Corporate Affairs Group (Department of
Finance); Clyde Esguerra of the Municipal Development Fund Office (Department of Finance); Ernesto Diaz of Manabat
Sanagustin & Co., CPAs, Maria Susan Cabaltera of Antequera Waterworks System; Ana Marie Ando of San Carlos City
Waterworks Department; Lydia Orial of LGU Guaranty Corporation; Silvestre Barrameda of Local Government Academy;
Ricardo Sua of Local Water Utilities Administration; Belen Juarez and Ma. Isabel Nofuente of National Water Resources
Board; Hope Gerochi and Paul Reddel of the Public-Private Infrastructure Advisory Facility; Fe Timonera of the World
Bank; and Alma Porciuncula and Doreen Erfe from the Philippine Water Revolving Fund Support Program, funded by the
United States Agency for International Development.
Technical Working Group:
Undersecretary Jeremias Paul, Director Charisse Hipolito, and Olga Arceo of Corporate Affairs Group, Department
of Finance.
Water and Sanitation Program:
Almud Weitz, Regional Team Leader, WSP-East Asia and the Pacific Region; Jemima Sy, WSP-EAP Institutional
Development Specialist.
The guidelines were prepared with the assistance of Shiela Dela Torre, WSP Philippines Research Assistant; and
Emma Sacote, WSP Philippines Program Assistant.
Disclaimer:
Water and Sanitation Program (WSP) reports are published to communicate the results of WSP's work to the
development community. Some sources cited may be informal documents that are not readily available. The findings,
interpretations, and conclusions expressed herein are entirely those of the authors and should not be attributed to the
World Bank or its affiliated organizations, or to members of the Board of Executive Directors of the World Bank or the
governments they represent. The World Bank does not guarantee the accuracy of the data included in this work.
The material in this publication is copyrighted. Requests for permission to reproduce portions of this publication should be
sent to wsp@worldbank.org. WSP encourages the dissemination of its work and will normally grant permission promptly.
For more information, please visit www.wsp.org.
GUIDE TO RING-FENCING OF
LOCAL GOVERNMENT-RUN WATER UTILITIES
CONTENTS
What is Ring-Fencing? 1
Why LGUs Need to Ring-Fence Their Water Utility Operations 1
INTRODUCTION Legal Basis 2
Rationale for the Ring-Fencing Guide 3
Organization of the Guide 3
New Government Accounting System Manual for LGUs 4
Basic Features and Policies 4
Special Accounts 6
CONCEPTUAL AND Operational Framework 8
OPERATIONAL Conceptual Framework for Ring-Fencing LGU-Run Water Utilities 8
FRAMEWORK Phase 1 8
Phase 2 (Financially Ring-Fenced) 10
Setting the Operating Framework for Ring-Fencing 11
Ring-Fencing Timetable 11
Affirmation of the LGU's Commitment to Ring-Fencing 13
STEPS IN
Mapping of Systems and Procedures 13
RING-FENCING
Organizational Review and Realignment 17
Step 1. Set up the Books of Accounts for the Water Utility 19
Step 2. Establish the Beginning Balances for the Balance Sheet Accounts 19
Step 3. Determine the Revenues Earned for the Year 30
Step 4. Determine the Expenses for the Year 33
Step 5. Determine Interest Expense and
ACCOUNT Other Financing Charges for the Year 40
RECONSTRUCTION Step 6. Determine the Bad Debts Expense for the Year 42
Step 7. Prepare a Trial Balance 43
Step 8. Prepare the Income Statement 46
Step 9. Determine the Balance of
Retained Earnings Surplus Account for the Year 47
Step 10. Prepare the Balance Sheet 47
Step 11. Prepare the Cash Flow Statement 48
Step 12. Close the Temporary Account Balances 49
ii Guide to Ring-Fencing of Local Government-Run Water Utilities
Definition 50
Scope 50
INTERIM
Organizational Changes and Other Preparations 50
ACCOUNTING AND
Activities During the Transition Stage 51
FINANCIAL
Modifications from LGU Accounting Processes 65
REPORTING
Accounting for Revenues 67
SYSTEM
Accounting for All Costs of the Water Utility 73
Preparation of Ring-Fenced Financial Statements 79
SUPPLEMENTARY SECTIONS
Introduction 83
Chart of Accounts
Chart of Accounts and Description 83
Definition 99
Scope 99
Policy Statements 99
Narrative Procedures 102
Meter Reading 102
Billing and Billing 102
Collections Billing Adjustments 103
Collections 104
Miscellaneous Receipts 106
Service Application 106
Service Disconnection 108
Meter Maintenance 109
Contents iii
FIGURES, EXHIBITS AND FLOW CHARTS
Figure 1: Ring-Fencing Timetable 12 Exhibit 24: Cash Receipts Journal 53
Figure 2: Sample Improved Organizational Exhibit 25: Cash Disbursements Journal 54
Structure 18 Exhibit 26: Check Disbursements Journal 55
Figure 3: Local Government Unit Exhibit 27: General Journal 56
Collection Flow 65 Exhibit 28: General Ledger 57
Figure 4: Local Government Unit Exhibit 29: Subsidiary Ledger 58
Disbursements Flow 66 Exhibit 30: Cashbook--Treasury 59
Exhibit 31: Cashbook--Cash in Bank 60
Exhibit 32: Cashbook--Cash Advances 61
Exhibit 1: General Information Sheet 14 Exhibit 33: Official Receipt 62
Exhibit 2: Activity Analysis Sheet 16 Exhibit 34: Disbursement Voucher 63
Exhibit 3: Inventory Count Sheet 21 Exhibit 35: Journal Entry Voucher 64
Exhibit 4: Property, Plant, and Equipment Exhibit 36: Daily Water Bills Issued 68
and Corresponding Accumulated Exhibit 37: Bill Register 69
Depreciation Accounts 22 Exhibit 38: Report of Collections and
Exhibit 5: Updated Listing of Property, Deposits 71
Plant, and Equipment and Exhibit 39: Service Request Form 74
Depreciation 25 Exhibit 40: Summary of Service Requests 75
Exhibit 6: Property, Plant, and Equipment Exhibit 41: Allocation of Shared
Classified by Funding Source 26 Personal Services 77
Exhibit 7: Property, Plant, and Equipment Exhibit 42: Allocation of Shared MOOE 78
Estimated Useful Lives 27 Exhibit 43: Water Bill 110
Exhibit 8: Guaranty Deposits 29 Exhibit 44: Meter Reading Route 111
Exhibit 9: Summary of Billed Water Sales 30 Exhibit 45: Water Service Record 112
Exhibit 10: Collection Summary 32 Exhibit 46: Water Rates Table 113
Exhibit 11: Dedicated Personal Services 34 Exhibit 47: Collectors' Water Bills
Exhibit 12: Dedicated Personal Services Accountability Report 114
Distributed by Cost Center 35 Exhibit 48: Abstract of Daily Collections 115
Exhibit 13: Shared Personal Services Exhibit 49: Report of Unpaid Water Bills 116
Distributed by Cost Center 36 Exhibit 50: Application for Service
Exhibit 14: Dedicated MOOE Distributed by Connection 117
Cost Center 37 Exhibit 51: Meter Maintenance Order Form 118
Exhibit 15: Shared MOOE for the Exhibit 52: Masterlist of Service
Waterworks Unit 39 Connections 119
Exhibit 16: Distribution of Shared MOOE
Allocated by Cost Center 40
Exhibit 17: Schedule of Loans Payable 41 Flow Chart 1: Meter Reading Procedures 120
Exhibit 18: Aging of Accounts Receivable 42 Flow Chart 2: Billing Procedures 121
Exhibit 19: Allowance for Doubtful Accounts 43 Flow Chart 3: Water Bill Collections:
Exhibit 20: Reconstructed Trial Balance 44 Daily Activities (1) 122
Exhibit 21: Reconstructed Income Statement 46 Flow Chart 4: Water Bill Collections:
Exhibit 22: Reconstructed Balance Sheet 47 Daily Activities (2) 123
Exhibit 23: Reconstructed Cash Flow Flow Chart 5: Water Bill Collections:
Statement 49 Monthly Activities 124
iv Guide to Ring-Fencing of Local Government-Run Water Utilities
ABBREVIATIONS AND ACRONYMS
A/C Account NGAS New Government Accounting System
ACA Additional Compensation Allowance NWRB National Water Resources Board
BIR Bureau of Internal Revenue PERA Personnel Economic Relief Allowance
CDJ Cash Disbursements Journal P Mark if entry has been posted
CKDJ Check Disbursements Journal PhP Philippine Pesos
COA Commission on Audit PIB Productivity Incentive Bonus
CPLC Construction in Progress Ledger Card PPELC Property, Plant and Equipment Ledger
CRJ Cash Receipts Journal Cards
Cu. m. Cubic Meter PPIAF Public-Private Infrastructure Advisory
Facility
DBM Department of Budget and
Management PS Personal Services
DILG Department of the Interior and Qty Quantity
Local Government RAAF Report of Accountability for
DoF Department of Finance Accountable Forms
DV Disbursement Voucher RAAOCO Registry of Appropriations, Allotments,
and Obligation � Capital Outlay
ECC Employees' Compensation
Commission RCD Report of Collections and Deposits
EDF Economic Development Fund RCI Report of Checks Issued
GSIS Government Service Insurance System RD Report of Disbursements
HRD Human Resources Department RPI Registry of Public Infrastructure
IT Information Technology SAAO Status of Appropriation, Allocation,
and Obligation
JEV Journal Entry Voucher
SDC Summary of Daily Collections
LGU Local Government Unit
SRF Service Request Form
m3 Cubic Meter
SWIF Small Water Utilities Improvement and
MBS Monthly Billing Summary
Financing Project
MOOE Maintenance and Other Operating
TO Treasurer's Office
Expenses
WSP Water and Sanitation Program
NGA National Government Agency
WSP�EAP Water and Sanitation Program�East
Asia and the Pacific
Guide to Ring-Fencing of Local Government-Run Water Utilities v
INTRODUCTION
What is Ring-Fencing?
Ring-fencing is a legal or financial arrangement of separating the activities, assets and liabilities, revenues
and costs, and so on, generated by a specific business from the general business of an entity. In the context
of these Guidelines, the water supply operation of the local government is being isolated or `fenced-off' from
its other activities.
Ring-fencing includes the separation of financial accounts, the consolidation of financial accounts across
different products and services within the company and its subsidiaries, the physical and procedural internal
divisions (known as Chinese walls) to contain certain information and activities, the protocols for the
disclosure and exchange of information between internal entities, and the consistent application of rules
for cost/revenue attribution and for an appropriate allocation of common or joint costs, including
overhead costs.
Ring-fencing often denotes that funds set aside for an activity are not spent on anything else, and that
revenues generated by those activities are invested back.
Ring-fencing can be achieved using a range of strategies and techniques, including the creation of a new
entity (corporatization). These Guidelines relate to the technique that is focused on the separation of financial
accounts through the use of a subsidiary accounting system.
Why LGUs Need to Ring-Fence Their Water Utility Operations
LGUs can benefit much from the ring-fencing of their water utility operations. Ring-fencing leads to more
accurate information that can be used for making decisions about resources allocation, management and
operational changes and improvements, and tariffs. Better decisionmaking is expected to lead to better water
supply services for the community.
a. Generating reliable financial reports showing the true performance of the water utility.
The financial operations of an LGU-run utility are centralized within the LGU, and financial performance
results are consolidated and reported along with the other units in the LGUs. While recently there may have
been moves by the Department of Finance (DoF) to enable separate reporting of financial results, the
reporting is still limited and does not enable the reporting of all revenues and expenses of the utility.
Implementing ring-fencing would not only enable the LGU to get more reliable financial reports and,
in fact, generate reports specific to water operations but also support LGUs in overcoming barriers to
increase their revenue generating potentials and serve as an aide in establishing parameters to define
`economic enterprises'.
The accounting system in the LGUs does not provide for the accrual method of recording revenues.
Revenues are recognized when they are collected and not when they are realized. Apart from having an
inaccurate income reported by the utility, the practice does not provide for the automatic monitoring of
collection performance as collections are not usually compared against the receivables, which are normally
1
established under the accrual system. When ring-fencing is implemented, the accrual method will be used.
Collection efficiency will be easily controlled.
There are other units performing supporting activities to the water service provision. Examples are the
revenue collectors under the Treasurer's Office who collect the water bills and the maintenance personnel
who repair the general facilities of the waterworks. These expenses are not currently included in the financial
report of the water utility. The ring-fencing system provides a mechanism to capture all expenses related to
the provision of water supply.
b. Generating information that can be used to determine the appropriate tariff.
The financial statements generated by ring-fenced accounting would provide accurate information about
revenues and expenses, which will provide useful inputs in reviewing the adequacy of tariff as well as
knowing how much subsidy is being provided by the LGU to the utility.
c. Building a financially viable and self-sustaining water utility.
Monitoring and evaluation of the performance of water supply operations can be more meaningful with the
availability of reliable data. More efficient control of expenses can be made. Adequacy of tariff can be
accurately determined. Collection efficiency can be improved. Accountability would be improved because the
results of the actions of water utility staff are known.
Investment needs can be determined with more precision with better and more accurate information from the
ring-fenced system. With this, the water utility will have a basis for requesting that the net income it
generates should be retained to fund these investments.
All these contribute to making the water utility financially viable and sustainable.
Legal Basis
Ring-fencing is possible under existing policies and government accounting procedures. The Local
Government Code of 1991 allows LGUs to create special accounts under the General Fund for public utilities
and economic enterprises, development projects funded by its internal revenue allotment and other special
accounts created by law or ordinance, an excerpt of which follows:
Article Two. Special Accounts
SEC. 313. Special Accounts to be Maintained in the General Fund. Local government units shall maintain
special accounts in the general fund for the following:
(a) Public utilities and other economic enterprises;
(b) Loans, interests, bond issues, and other contributions for specific purposes; and
(c) Development projects funded from the share of the local government unit concerned in the internal
revenue allotment and such other special accounts, which may be created by law or ordinance. Receipts,
transfers, and expenditures involving the foregoing special accounts shall be properly taken up
thereunder. Profits or income derived from the operation of public utilities and other economic
enterprises, after deduction for the cost of improvement, repair and other related expenses of the public
utility or economic enterprise concerned, shall first be applied for the return of the advances or loans
made therefor. Any excess shall form part of the general fund of the local government unit concerned.
This is likewise reiterated in the New Government Accounting System (NGAS). Under Sec. 105 of Chapter 6
(Special Accounts) of the NGAS: "LGUs shall maintain special accounts in the General Fund for public
utilities and other economic enterprises, loans, interests, bond issues, and other contributions for special
purposes. . . ." The special account shall contain receipts/revenues of the program and its annual budget
allocation.
2 Guide to Ring-Fencing of Local Government-Run Water Utilities
Rationale for the Ring-Fencing Guide
The development of the Guide to Ring-Fencing of LGU-Run Water Utilities (Guide) was undertaken to enable
water utilities to generate accurate financial information. The lack of separate financial reports that account
for all income and expenses of a water utility is one of the constraints identified during the rapid assessment
conducted for the SWIF project of the Water and Sanitation Program. Without reliable financial information,
it is difficult for private financing institutions, even government financing institutions, to ascertain the
financial position of a water utility, much less be encouraged to consider extending credit to these LGU
utilities if financial data is lacking.
The preparation of the guide is an offshoot of the Rapid Assessment of Commercial Financing for Small
Utilities and other initiatives recognizing the need for ring-fencing such as the regulatory reform agenda
drawn up during the August 2008 regulatory reform conference, Philippine Water Supply and Sector
Roadmap, Department of the Interior and Local Government's capacity development activities, and the
Philippines Development Forum's Sub-Working Group for Water Supply and Sanitation action agenda.
These initiatives stress the fact that ring-fencing has been recognized as a necessary action not only to
enable water utilities to generate accurate financial information but also as a major utility reform agenda
towards improving service performance and ensuring sustainability of LGU-run utilities.
This Guide has been prepared to provide a simple yet practical manual to LGUs. It has been developed as a
generic guide that is applicable to a typical LGU-run water utility and is flexible enough to adapt to the
varying conditions in a utility.
Organization of the Guide
This Guide is presented in seven sections. The initial sections are:
1. Introduction
2. Conceptual and Operational Framework
3. Steps in Ring-Fencing
4. Account Reconstruction
5. Interim Accounting and Financial Reporting System
Supplementary financial systems that have also been included are:
6. Chart of Accounts
7. Billing and Collections
Section 1 discusses ring-fencing within the context of LGU-run water utilities. Section 2 provides the
conceptual and operational framework and the preparatory steps to implement ring-fencing. Section 3
provides an overview of the steps in ring-fencing. Section 4 discusses detailed procedures on how prior
accounting records are reconstructed to establish the balance sheet and income statement accounts
following the concept of full costs reporting. Section 5 is the ring-fencing system itself that is implemented
until such time that the water utility is fully financially ring-fenced and has its own separate accounting and
financial reporting system.
The supplementary sections in the Guide (Sections 6 and 7) are to be implemented along with Section 5--
even more so when the water utility is already ring-fenced. Section 6 contains the chart of accounts
applicable to LGU-run water utilities conforming to the Commission on Audit's New Government
Accounting System of 2004. Section 7 relates to the billing and collection procedures of a water utility.
Introduction 3
CONCEPTUAL AND
OPERATIONAL FRAMEWORK
New Government Accounting System Manual for LGUs
The ring-fencing of Local Government Unit (LGU) accounts operates within the New Government
Accounting System (NGAS) environment. Presented here are excerpts from The New Government
Accounting System Manual for Local Government Units that support the use of accrual accounting and
special accounts with accompanying subsidiary ledgers and the generation of the standard financial
statements for the water utility.
Basic Features and Policies
Sec. 04. Basic Features and Policies. The NGAS has the following basic features and policies:
a. Accrual Accounting. A modified accrual basis of accounting is used. Under this method, all expenses
shall be recognized when incurred. Income shall be on accrual basis (for example, Share from Internal
Revenue Collections) except for transactions where accrual basis is impractical (for instance, Market Fees)
or when other methods may be required by law.
b. One Fund Concept. This system adopts the one fund concept. Separate fund accounting shall be done
only when specifically required by law or by a donor agency or when otherwise necessitated by
circumstances subject to prior approval of the Commission. As required under Sections 308, 309, and
310 of the Local Government Code, separate books shall be maintained for the General Fund, Special
Education Fund, and Trust Fund.
c. Special Accounts in the General Fund. Special accounts in the General Fund, complete with subsidiary
ledgers, shall be maintained for the following:
1. Public utilities and other economic enterprises;
2. Loans, interests, bonds issued, and other contributions for specific purposes;
3. Development projects funded from the Share in the Internal Revenue Collections; and
4. Such other special accounts, which may be created by law or ordinance.
d. Chart of Accounts and Account Codes. A new coding structure and a new chart of accounts with a
three-digit account numbering system shall be adopted.
e. Books of Accounts. The Books of Accounts are as follows:
1. Journals
� Cash Receipts Journal.
� Cash Disbursements Journal.
� Check Disbursements Journal.
� General Journal.
2. Ledgers
� General Ledger.
� Subsidiary Ledgers, where applicable, for:
4 Guide to Ring-Fencing of Local Government-Run Water Utilities
� Cash;
� Receivables;
� Inventories;
� Investments;
� Property, Plant, and Equipment;
� Liabilities;
� Income; and
� Expenses.
All the above records shall be maintained by the accounting unit of the LGUs. However, treasurers and
disbursing officers shall also maintain their respective cash records, such as:
1. Cashbook--Cash in Treasury.
2. Cashbook--Cash in Bank.
3. Cashbook--Cash Advances.
Treasurers/collectors shall prepare the Report of Collections and Deposits (RCD) daily, and the Report of
Accountability for Accountable Forms (RAAF) monthly.
f. Financial Statements. The following statements shall be prepared:
1. Balance Sheet.
2. Statement of Income and Expenses.
3. Statement of Cash Flows.
Notes to Financial Statements shall accompany the above statements.
g. Trial Balance. The two money-column trial balance shall be used.
h. Financial Expenses. Financial expenses such as bank charges, interest expenses, commitment fees, and
other related expenses shall be separately classified from Maintenance and Other Operating Expenses
(MOOE).
i. Perpetual Inventory of Supplies and Materials. Supplies and materials purchased for the purpose of
inventory shall be recorded using the perpetual inventory system. Regular purchases shall be coursed
through the inventory account and issuances thereof shall be recorded as they take place, except those
purchased out of petty cash fund which shall be for immediate use and not for stock. Such case shall be
charged immediately to the appropriate expense accounts.
j. Valuation of Inventory. Cost of ending inventory of supplies and materials shall be computed using the
moving average method.
k. Maintenance of Supplies and Property, Plant, and Equipment Ledger Cards. The Accounting Unit
shall maintain Supplies Ledger Cards by stock number and Property, Plant, and Equipment Ledger Cards
by category of assets.
l. Construction of Assets. For assets under construction, the Construction Period Theory shall be applied
for costing purposes. Bonus paid to the contractor for completing the work ahead of time shall be added
to the total cost of the project. Liquidated damages charged and paid for by the contractor shall be
deducted from the total cost of the asset. Any related expenses incurred during the construction of the
project--such as license fees, permit fees, clearance fees, and so on--shall be capitalized.
Conceptual and Operational Framework 5
m. Depreciation. The straight-line method of depreciation shall be used. A residual value equivalent to
10 percent of the cost shall be set up and depreciation shall start on the second month after purchase/
completion of the property, plant, and equipment. Public infrastructures shall not be charged any
depreciation.
n. Reclassification of Obsolete and Unserviceable Assets, as well as Assets No Longer Used by the
Agency to `Other Assets' Account. Assets declared by proper authorities as obsolete and unserviceable,
including assets of the agency no longer used, shall be reclassified to `Other Assets' account from the
corresponding inventory and property, plant, and equipment accounts.
o. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall be set up for estimated
uncollectible receivables. This will allow for a fair valuation of receivables. Allowance for Doubtful
Accounts shall be provided only for trade receivables.
p. Elimination of Contingent Accounts. Contingent accounts shall no longer be used. All financial
transactions shall be recorded using the appropriate accounts. Cash shortages and disallowed payments
shall be recorded under receivable accounts `Due from Officers and Employees' and `Receivables--
Disallowances/Charges', as the case may be.
q. Recognition of Liability. Liability shall be recognized at the time goods and services are accepted or
rendered and supplier/creditor bills are received.
r. Interest Accrual. Whenever applicable and appropriate, interest income and/or expense shall be accrued
and recognized in the books of accounts.
s. Accounting for Borrowings and Loans. All borrowings and loans incurred shall be recorded direct to
the appropriate liability accounts.
Special Accounts
Sec. 105. Special Accounts in the General Fund. LGUs shall maintain special accounts in the General
Fund for public utilities and other economic enterprises, loans, interests, bond issues, and other
contributions for specific purposes; and development projects funded from the share of the local government
concerned from the internal revenue collections and development of national wealth and such other special
accounts which may be created by law or ordinance.
Sec. 106. Objectives for the Maintenance of Special Accounts. Accounting procedures for the operation
of the special accounts are adopted in order to:
a. Determine whether the income generated by the public utilities or economic enterprises are sufficient to
meet their respective operating costs.
b. Provide adequate information as to the assets, liabilities, and equity of each special account.
Sec. 107. Special Accounts Subsidiary Ledger. Special accounts shall be maintained through the use of
complete subsidiary ledger. In case the LGU maintains a number of the same economic enterprise, each shall
have its own set of subsidiary ledger (for example: if there are eight markets there will be eight subsidiary
ledgers for the markets).
6 Guide to Ring-Fencing of Local Government-Run Water Utilities
Sec. 108. Subcodes for the Special Accounts. The following shall be the subcodes for the special
accounts:
Special Account Subcode
General Fund 01
Market Operation 02
Slaughterhouse Operation 03
Waterworks System 04
Electric, Light, and Power System 05
Telephone System 06
Toll Roads, Bridges, and Ferries 07
Transportation System 08
Hospital 09
School 10
Sports Center 11
Recreational Center 12
Housing Projects 13
Convention/Conference Center 14
Parking Space 15
Ice Plant 16
Cemetery 17
20% Development Fund 18
80% Share from Energy Sources 19
Share from Development of National Wealth 20
Loans 21
Interests 22
Bond Issues 23
Sec. 109. Profit from Operation. Profits or income derived from the operation of public utilities and other
economic enterprises, after deduction of the cost of improvement, repair and other related expenses of the
public utility or economic enterprises concerned, shall first be applied for the return of the advances or loans
made therefore, any excess shall form part of the general fund of the local government unit concerned.
Sec. 110. Reporting. At the end of the year, a post-closing trial balance shall be prepared for each special
account. Also, the following financial statements shall be prepared:
a. Balance Sheet.
b. Statement of Income and Expenses.
c. Statement of Cash Flows.
Conceptual and Operational Framework 7
Operational Framework
Conceptual Framework for Ring-Fencing LGU-Run Water Utilities
The development of the financial system to ring-fence water utility operations is divided into two phases.
In Phase 1, the water utility has to ring-fence its accounts because they are still part of local government
accounting. When the water utility is able to have its own budget and separate books of accounts, it no
longer needs to ring-fence and has crossed over to Phase 2. These phases are described more fully in the
next sections.
Phase 1
Before ring-fencing, water utility accounts are centrally maintained by the LGU. Some activities related to
water service provision performed by other units or departments are not yet considered as water utility
expenses. Financial reports for the operations of the water utility do not capture all the revenues and costs
attributed to the service provision.
CLASSIFICATION OF EXPENSES
To be able to include all expenses related to water service provision, all operations and maintenance
expenses of the LGU are classified into:
� Personal Services (PS): These costs include salaries, benefits, and other personal service expenses of:
� Staff assigned to the water utility.
� Staff not administratively assigned to the water utility but performing services directly related to water
supply service provision. An example is an employee of the City Treasurer's Office who collects fees of
the water utility.
These costs do not include the PS of staff administratively assigned to the water utility but who are not
performing services related to water supply service provision. An example is a staff member whose
salaries and benefits are budgeted under the water utility but who actually performs work for the
slaughterhouse.
� Maintenance and Other Operating Expenses (MOOE): This includes the cost of materials and supplies and
all other expenses other than PS that are incurred by the Water Utility Division in operating and
maintaining the water supply system. The typical MOOEs of a water utility are:
� Traveling expenses;
� Supplies and materials;
� Utility expenses;
� Communication;
� Rent expenses;
� Representation expenses;
� Transportation and delivery expenses;
� Professional services;
� Repair and maintenance;
� Insurance expenses;
� Bad Debts expense;
� Depreciation; and
� Financial expenses.
This general classification is further broken down into:
� Direct or dedicated expenses are those incurred by the water utility itself.
8 Guide to Ring-Fencing of Local Government-Run Water Utilities
� Indirect or shared expenses are those that contribute to water service provision that are incurred by units
or departments outside of the Water Utility Division. These shared expenses can either be identifiable
shared expenses or not specifically identifiable shared expenses.
o Identifiable shared expenses are those expenses incurred by the LGUs/departments outside of the
Water Utility Division whose benefits can be traced directly to the water utility. These include the cost
of PS and MOOE when another unit or division outside of the water utility undertakes an activity or
task in support of the operations of the utility. The time, effort, and other resources spent in doing the
activity are quantifiable and can be directly identified to a benefit gained by the utility. These are some
illustrations of costs incurred in support of water service are:
- Maintenance of the cleanliness and orderliness of the water utility premises, when these activities
are carried out by a specified number of staff by the Department of Public Services or any
concerned department or unit;
- Repairs and maintenance of the utility plant that are undertaken by the City Engineer's Office; or
- Provision of security services to maintain peace and order in the premises undertaken by the Civil
Security Unit of the Office of the City Mayor or the Philippine National Police.
o Allocable or not directly identifiable shared expenses are those incurred by LGUs/departments to
support operations of other offices or units such as the water utility. They include both PS and MOOE
to support the operations of other units and whose benefits cannot be traced directly against a
particular activity or cost object. The following departments in the LGU are assumed to provide
support services to other departments. The expenses of these departments should be allocated
among the various departments or divisions that benefit from the support services.
- Administrative services (Administrator);
- General services;
- Budgeting services;
- Accounting services;
- Treasury services;
- Auditing services;
- Information services;
- Legal services; and
- Human resources management services.
The water utility may agree with the units/departments on how to allocate the costs. The options below may
be fine-tuned or an entirely different method may be agreed upon.
Option 1. As a percentage of waterworks staff over the total staff of the LGU.
This is estimated by getting the percentage of the waterworks employees over the total employees of the
LGU. This factor is multiplied by the total Personal Services of each of the related LGUs/departments to get
the waterworks share. This is illustrated in Exhibits 11 and 13.
This factor is computed as:
= Total Waterworks Employees
Total LGU Employees
By substituting the figures appearing in the General Information Sheet (Exhibit 1), the factor for the water
utility would be:
= 15 / 149 or 10.06%
This may, however, bloat the assignment of cost to the water utility because of the very loose assumption
used.
Conceptual and Operational Framework 9
Option 2. Based on man-hours.
A more calibrated method of computing the share of the waterworks unit in the costs of the units/
departments that service the waterworks unit is to use man-hours as the cost driver. The waterworks units
can determine or agree on the percentage allocation of the cost based on hours spent by personnel of service
units/departments on waterworks activities. Interviews may be conducted to determine the number of hours
spent by personnel of service units/departments on waterworks activities.
MAJOR ACTIVITIES IN PHASE 1
These are the major activities within Phase 1. These are discussed in detail in the section on Steps in
Ring-Fencing.
a. Preparations for ring-fencing. This involves the affirmation of the LGU's commitment to ring-fencing,
systems and procedures mapping, and doing an organization review and realignment. These are detailed
in the section on Steps in Ring-Fencing.
b. Account reconstruction. This stage is centered on establishing the beginning balances for the financial
statements of the water utility using the full cost method. This is discussed in detail in the section on
Account Reconstruction.
c. Interim accounting procedures. Once prior years' Income Statement and beginning balances of the
Balance Sheet have been reconstructed, the water utility proceeds to capture all costs and expenses
incurred by other units or departments related to water service provision through the interim accounting
procedures (discussed in the section on Interim Accounting and Financial Reporting). It records revenues
based on the total amount of bills issued (accrual method) and not based on collections only (cash basis).
It implements a system of obtaining the cost of services done by other units or departments in the LGU
which are related to water service provision. It maintains a separate set of books of accounts that are kept
parallel with the books of accounts maintained by the Accounting Department/Division. It prepares the
ring-fenced financial statements of the water utility.
d. Other activities. The utility should also work on these to prepare for being corporatized.
� Maintaining its own bank accounts where its collections can be deposited and disbursements can be
paid from.
� Preparing a full budget. The budget for the following year for the ring-fenced operations will need to
consider full cost accounting. It has to include personnel costs, increase in MOOE, and reflect more
realistic revenue levels when it now moves to accrual accounting.
� Work on being able to retain its income to be used for improving services and infrastructure.
Phase 2 (Financially Ring-Fenced)
Phase 2 is when the water utility is already operating viably and is sustainable. It has its own budget, keeps a
separate financial accounting and reporting system, and even maintains its own separate bank account.
Because the financial reporting is already autonomous, it is now automatically ring-fenced.
A water utility can graduate to this stage in several ways. It can be established as a separate legal entity, such
as a local government-owned and controlled corporation with a separate charter. It can also engage in private
sector participation and/or public private partnerships to operate and manage part of all the water utility
operations. It can even convert the water utility and form a water district.
10 Guide to Ring-Fencing of Local Government-Run Water Utilities
The water utility can also remain within the LGU set up but operate like a corporatized entity operating in a
commercial way. Without any change in its legal personality, the water utility can operate like a corporate
entity that is self-sustaining and has the following characteristics:
� Has dedicated staff members or shared staff members as is practicable and economically efficient.
Depending on the utility's funding resources and ability to fully cover its operation and maintenance
costs, the water utility is projected to have personnel for its technical operations (production, distribution,
maintenance, and engineering services such as planning, design, and construction supervision), finance
and administration, human resources management, commercial activities like billing and collection and
customer services.
� Has a separate financial and accounting system that covers all phases from transaction processing and
bookkeeping, to generation of trial balance and preparation of financial reports. This assumes then that
the water utility has its own finance/accounting unit that takes charge of the financial activities of the
utility. It maintains its own books of accounts and prepares regular financial statements that will be
consolidated with the overall LGU financial reports. It also maintains its own bank accounts where
receipts and disbursements are deposited and paid from, respectively.
� Has a full cost budget that considers all the costs of operating and running the water utility, and which is
determined and set based on the utility's ability to generate revenues from its water tariff and not from
what is available from the allocation of the internal revenue allotment and internally generated funds of
the LGU.
� Has the fiscal autonomy to dispose its income as appropriate and retain any surplus for system expansion
and improvement. This will enable the water utility to be a truly sustainable undertaking if it has the
authority to set its own targets and budget. This will also be a strong incentive for the water utility to
perform well given that any surplus is plowed back to the utility for systems improvement and expansion.
Setting the Operating Framework for Ring-Fencing
The first important step that an LGU shall undertake prior to ring-fencing the water utility is to define its
ultimate goals for the water utility and the operating framework with which the goals will be achieved. As
there are no guidelines as yet from relevant government agencies (such as the Department of Finance,
Department of Budget and Management, Department of the Interior and Local Government and/or
Commission on Audit) that require LGUs to ring-fence the operations of economic enterprises, the water
utilities included, there is a wide spectrum from which LGUs could decide on how to ring-fence the
operations of their water utilities. The extent to which the LGU would want the water utility to become
financially viable will determine the pace with which it will undertake ring-fencing as one of the measures
which will help it achieve the goal of financial viability. The timeframe would also depend on the competence
of existing water utility staff, the availability of resources, and the commitment of the LGU head to take
things forward.
Ring-Fencing Timetable
Accounts reconstruction may take three months, after which the transition period begins. This may go on for
at least one year to allow for the preparation of an annual set of ring-fenced financial statements for the water
utility. It may last until the water utility is ready to be corporatized and graduate to Phase 2. Figure 1 shows
what happens over the months (each number represents a month).
Conceptual and Operational Framework 11
Figure 1: Ring-Fencing Timetable
Phase 1 Phase 2
Accounts Transition Economic
Reconstruction Enterprise
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Account Partial ring-fencing of financial operations Water Utility
Reconstruction operating as a full
� Parallel books of accounts maintained blown economic
Income Statement � All costs accounted for, including shared costs enterprise
adjusted based on � Revenues recorded when realized � Has separate
full costs and total � No separate budget yet budget
billed revenues; � Separate record of property, plant and equipment � Excess income
Balance Sheet � Separate bank accounts1 retained in
beginning balances � Financial management guidelines implemented1 waterworks for
set-up � Periodic ring-fenced financial reports prepared operations and
� Business plan prepared improvements
Example: � Implements
Income performance
Statement for contracting
year ended Example: (sets targets to
12-31-08 January to July 2009--backlog improve
performance)
Balance Sheet as August 2009 onwards--routine accounting of all
of 12-31-08 regular and ring-fencing adjusting entries
Cash Flow
Statement for
year ended
12-31-08
1
Needs SB resolution
12 Guide to Ring-Fencing of Local Government-Run Water Utilities
STEPS IN RING-FENCING
Affirmation of the LGU's Commitment to Ring-Fencing
At the time this Guide was compiled, the national government had not issued any directive to make Local
Government Units (LGUs) implement ring-fencing. But if the LGU wants to go ahead and use it, the LGU
chief executive may issue an executive order. This will be needed to ensure collaboration and support among
the different departments that will be affected in the local government.
Another basis to implement ring-fencing would be through a city/municipal ordinance. This alternative is
more sustainable since it is decided by the legislative body of the LGU, and the validity of the ordinance
transcends the term of office of the local chief executive.
Mapping of Systems and Procedures
In this stage, the team responsible for installing the ring-fencing system would like to understand the
existing condition of systems and procedures related to water service provision. This will be useful in the
review of the organization structure and functions (next step). This will also enable the reviewer to see what
and where improvements are needed. This involves the following activities:
� Mapping the work or procedures flow and linkages between the water utility and the other departments or
units of the LGU, utilizing simple flow charting tools.
� Gathering or compiling the forms, report formats, and records that are used and prepared by the water
utility.
� Understanding the various activities that are undertaken in relation to water supply provision and the
organizational set up or structure of the water utility within the LGU.
This activity will involve a visit to the LGU for familiarization with the water utility and to gather the forms and
reports.
Discussed below is a step by step illustration of how the systems mapping may be done:
Step 1: Gather basic information.
This step is to familiarize the team who will install the ring-fencing of accounts about how the water utility
operates. This can be done by asking the utility to fill up a General Information Sheet (Exhibit 1) to get an
overview of the operations of the waterworks unit. This includes basic data such as population, connections,
production data, collection data, personnel, fixed assets, and financial operations. It also contains some
performance indicators such as population served, nonrevenue water, collection efficiency and collection
period, staffing ratio, and operating ratio.
13
Exhibit 1:
GENERAL INFORMATION SHEET
Fill up grey cells only
Name of Waterworks Antequera Waterworks System
Name of Local Government Unit, Province Antequera, Bohol
Year Covered 2007
POPULATION FIXED ASSETS
Total LGU
Population in service area 10,390 Land 10,000,000
Persons per household 6 Buildings 50,000,000
Persons served 9,984 Total for LGU 60,000,000
Population served, % 96%
Office Furniture, Fixtures and Equipment 5,000,000
CONNECTIONS Motor Vehicles 8,000,000
Total for LGU 13,000,000
Total Connections 1,664
Public taps - Waterworks
Residential / Institutional 1,654 Land -
Commercial / Industrial 10 Buildings -
Total used by Waterworks -
Metered Connections - Total 1,664
Public taps - Office Furniture, Fixtures and Equipment
Residential / Institutional 1,654 Motor Vehicles -
Commercial / Industrial 10 Total used by Waterworks -
Unmetered Connections - Total - % of Waterworks
Public taps - Land 0.00%
Residential / Institutional - Buildings 0.00%
Commercial / Industrial -
Office Furniture, Fixtures and Equipment 0.72%
New Connections for the Year 59 Motor Vehicles 0.00%
PRODUCTION REPAIRS & MAINTENANCE
Of Municipal Engineer's Office
Non-revenue water, % 47%
Annual production, cu. m. 504,576 Total LGU
Annual volume billed, cu.m. 269,799 Land -
Buildings
Production Capacity, lps 16 Total -
Ave. Consumption per conn./ month, cu.m. 13.51
Ave. consumption per capita per day, liters 75.06 Office Furniture, Fixtures and Equipment 35,880
Motor Vehicles -
COLLECTIONS Total 35,880
Collection Efficiency, % 107% Total Repairs & Maintenance, Total LGU 35,880
Collection Period, Days 62
Waterworks Share
Total Billings for the year, PhP 1,577,772 Land -
Total Collections for the year, PhP 1,692,919
Unpaid Bills, end of the year, PhP 270,036 Buildings -
Total -
PERSONNEL
Office Furniture, Fixtures and Equipment 257
Staff / 1000 Connections 9.01 Motor Vehicles -
WW Personnel / LGU Personnel, % 9.74% Total 257
Total personnel, Waterworks only 15 Total Repairs & Maintenance, Waterworks 257
Regular 5
Casual 7 REVENUES AND EXPENSES
Job order 3
Operating Ratio 197%
Total personnel, entire LGU 154
Regular 54 Operating Revenues 1,805,449
Casual 70 Operating Expenses 3,563,234
Job order 30
14 Guide to Ring-Fencing of Local Government-Run Water Utilities
Step 2: Conduct an activity analysis of the water utility.
In preparation for account reconstruction and to understand the different work processes in water service
provision, an activity analysis has to be conducted. This step identifies all activities related to the provision of
water supply, whether these are done by and within the waterworks unit or undertaken by other units/
departments in the LGU.
1. Enumerate all activities related to the provision of water supply. Typical activities include:
� Supervision of the waterworks unit.
� Implementation of policies and guidelines include drafting service contracts, orientation of water
connection application, policies on customer service, policies on meter reading, and policies on illegal
connections.
� Inspection and monitoring of compliance to policies and guidelines.
� Daily maintenance and upkeep of facilities.
� Water quality management.
� Repairs and maintenance of facilities.
� Provision of security services to maintain peace and order.
� Processing of application for water service connections.
� Meter reading.
� Billing.
� Collection.
� Customer handling and management.
� Maintenance of customer account records.
� Preparation of collection reports.
� Record keeping and filing of administrative and financial records.
� Processing of financial transactions.
� General accounting and financial reporting.
� Supplies and fixed assets management.
� Budget preparation.
� Budget monitoring.
� Human resource management.
� Personnel records management.
� Other activities including repairs and maintenance, drilling, search for additional/new water sources,
supervision of projects, feasibility studies, disconnection/connection, and customer service.
2. Group the activities into these major functions shown below. These are also referred to as cost centers for
purposes of distributing cost. This step will be helpful in conceptualizing the organization of the
waterworks.
� Operation and supervision include maintenance crew salaries and nonoffice costs.
� Customer accounts functions include office costs, meter reading, and collections.
� General administration and finance includes salaries of the mayor, the engineer, the planning officer,
the health officer, and personnel.
3. Identify the office that performs the activity.
See Exhibit 2 for a sample of how this activity sheet is done.
Step 3: Map the process of key financial and commercial activities:
� Billing and collection.
� Processing of application for new service connections, disconnection, voluntary disconnection, and
reconnection.
Steps in Ring-Fencing 15
Exhibit 2:
16
ACTIVITY ANALYSIS SHEET
Antequera Waterworks System
Activity Analysis Sheet
December 31, 2008
Unit Responsible
Cost Center and Activities Direct Indirect
Waterworks Office of the Municipal Municipal Municipal Municipal Municipal Office of the General
Dept Mayor Engineer's Accountant's Treasurer's Admin. Health Municipal Services
Office Office Office Office Office Planning & Office
Devt Officer
Operation and Supervision
Supervision of Waterworks Unit X X
Implementation of policies and guidelines X X
Inspection and monitoring of compliance
with policies and guidelines X
Planning for waterworks expansion
and improvements X X X X X X
Daily maintenance and upkeep of facilities X
Major and minor repairs of distribution
system and facilities X X
Customer Account Management
Processing of application for water service
connection X
Meter reading X
Billing X
Collection X X
Maintenance of customer accounts records X
Preparation of collection reports X
General and Administration Management
Provision of security services to maintain
peace and order X X
Personnel records management X
Record keeping and filing of administrative
and financial records X X
Processing of financial transactions X X
General accounting and financial reporting X X
Budget preparation X X
Budget monitoring X X
Guide to Ring-Fencing of Local Government-Run Water Utilities
Human resources management X X
Supplies and fixed asset management X X X
� Disbursement and receipts.
� General accounting and financial reporting.
� Fixed asset management.
� Inventory management.
� Budget preparation and monitoring.
Understand how these activities are done, where they start, the steps undertaken, the persons and units or
departments involved in the steps, the forms used and reports generated, and where these reports go.
A simple flow chart may help in illustrating the process.
Step 4: Obtain copies of all financial and commercial operating reports, forms, and records currently
prepared by the water utility and other departments involved in the provision of water supply.
These existing reports will be considered in designing the forms and reports required under a ring-fenced
system.
Step 5: Ask for the following reports and records to be ready for at least the last year, or up to the last two
years. These will be needed during the Accounts Reconstruction stage.
� Billing and collection reports.
� Customer accounts receivables.
� Staffing list and salary schedules.
� Operation and maintenance expense reports.
� Subsidiary records or ledgers for property, plant, and equipment.
� Trial Balance and, if separate financial reports are prepared for the water utility, obtain copies of Income
Statement, Balance Sheet and Cash Flow Statement or similar reports prepared by the LGU.
� Monthly Data Sheet (as prescribed by the National Water Resources Board).
Organizational Review and Realignment
After becoming familiar with the existing procedures of the utility, the next stage is to review how the water
utility is organized. This will help the ring-fencing system team to locate activities for water service provision
that are performed outside the water utility and determine how to properly allocate expenses.
This involves documenting the existing organizational structure, functions, and responsibilities; number of
staff; evaluation of adequacy of current staffing to meet the requirements of a financially ring-fenced water
utility. It also involves developing recommendations to properly align the organizational structure to the
proposed systems and procedures while the water utility is under Phase 1 and moving to Phase 2.
The suggested steps on how to conduct an organizational review and realignment activity are given here.
Step 1: Obtain a copy of the current table of organization or organizational structure. If there is no existing
organization chart, document the structure by listing the key positions and functions in the water utility and
the units/departments that are involved in the operation of the water utility.
Step 2: List the current employees and classify their status into regular, on detail, casual or temporary
employees, or assigned from other departments/units undertaking some tasks for the utility. Verify if there are
available job descriptions and qualification standards. If there is none, document the functions and
responsibilities (regardless of employment status) of all the staff of the water utility and the immediate
supervisor to whom they report or are accountable. In summary, these are the data that would be required:
� Section in the waterworks unit.
Steps in Ring-Fencing 17
� Name of employee.
� Status--regular, on detail, casual, temporary, and so on.
� Position.
� Job description.
� Qualification standards.
Step 3: Given the proposed changes in the financial and commercial operating systems and procedures
under a ring-fenced system, determine the appropriate organizational set up, the corresponding positions
and the number of personnel required.
An example of an organizational structure for a water utility to be ring-fenced is shown in Figure 2.
Step 4: Prepare a functional description of the key sections or units that may initially include:
� Customer account management.
� Operation and maintenance.
� General administration and finance.
There may be a need to realign staff or even hire additional staff based on the new organizational structure.
Training of staff under the new structure may also be required.
In Figure 2, it is suggested that a `Water Board' be constituted that will function similarly to the Board of
Directors of a company. The Board will be involved in decisionmaking and policy-setting on behalf of the
owner of the water utility (that is, the local government). It will supervise the performance of the water
enterprise and its general manager. Since local governments, as owners, are interested not simply in the
viability of the enterprise but also in the provision of water supply as a basic public service, the Water Board
plays a critical balancing role.
Figure 2: Sample Improved Organizational Structure
Mayor
Water Board Supervisor Planning and
Control
Operations and Customer Accounts Administration &
Maintenance Finance
Planning &
Pump Meter Reader Customer Revenue Municipal Control
Electrician Coordinator
Operator 1 1 Accts Clerk 1 Collection Accountant
Officer
Pump Meter Reader Customer Budget Municipal
Operator 2 2 Accts Clerk 2 Officer Engineer
Pump Meter Reader Customer
3 Accts Clerk 3 Treasurer
Operator 3
Legend:
White text: Waterworks units.
Black text: Other LGUs providing support to the waterworks unit.
18 Guide to Ring-Fencing of Local Government-Run Water Utilities
ACCOUNT RECONSTRUCTION
The reconstruction of the financial accounts of the waterworks unit of the Local Government Unit (LGU)
consists of these major steps.
Step 1. Set up the books of accounts for the water utility.
Books of accounts to be established for the water utility are:
� Cash Receipts Journal.
� Cash Disbursements Journal.
� Check Disbursements Journal.
� General Journal.
These are to be posted to:
� General Ledger.
� Subsidiary Ledgers, which include the customers' Water Service Records.
Step 2. Establish the beginning balances for the
Balance Sheet accounts.
Decide on a cut-off date for the beginning balances to be established.
Determine the beginning balances of the Balance Sheet accounts by going through the activities below.
A. Current Assets
The current assets of the water utility consist of:
� Cash
� Cash-Collecting Officer.
� Petty Cash Fund.
� Cash in Bank.
� Receivables
� Accounts Receivable.
� Allowance for Doubtful Accounts.
� Due from Other Funds.
� Other Receivables.
� Inventories
� Office Supplies Inventory.
� Accountable Forms Inventory.
� Gasoline, Oil, and Lubricants Inventory.
� Other Supplies Inventory.
� Spare Parts Inventory.
� Construction Materials Inventory.
19
� Prepayments
� Prepaid Rent.
� Prepaid Insurance.
� Advances to Contractors.
� Other Prepaid Expenses.
1. Determine the balance of the Cash-Collecting Officer, Petty Cash Fund, and Cash in Bank of the water
utility as of the cut-off date.
The balance of the Cash-Collecting Officer of the water utility can be obtained by conducting a count of
the cash on hand on the cut-off date.
The balance of the Petty Cash Fund can be obtained by conducting a petty cash count. At any one time,
the total of the cash on hand and the amount of the petty cash vouchers should always be equal to the
amount of the petty cash fund. This is called the imprest system of handling cash.
The balance of the Cash in Bank of the water utility can be obtained by examining documents such as
savings passbook, bank statements, and certificates of time deposit. If the Cash in Bank is not segregated
by economic enterprise, estimate the amount belonging to the water utility based on interviews with
personnel concerned.
2. Determine the balance of the Receivables of the water utility.
The Receivables accounts of the water utility consist of:
� Accounts Receivable.
� Allowance for Doubtful Accounts.
� Due from Other Funds.
� Other Receivables.
The Accounts Receivable balance may be obtained from the Accounts Receivable Subsidiary Ledgers (called
water service records (Exhibit 45)), by summarizing the balances of the individual customers from the
Accounts Receivable Subsidiary Ledger and getting the total of the individual balances.
The Allowance for Doubtful Accounts represents the amount of receivables from water sales estimated to be
uncollectible. The water utility does not wait to see which customers will not pay. It records a bad debt
expense or doubtful account expense based on estimates developed from past experience.
The balances of the other receivable accounts such as Due from Other Funds and Other Receivables may be
obtained from the various subsidiary ledgers and from billing statements or statements of account.
3. Determine the balances of the various inventory accounts of the water utility.
The inventory accounts of the water utility consist of:
� Office Supplies Inventory.
� Accountable Forms Inventory.
� Gasoline, Oil, and Lubricants Inventory.
� Other Supplies Inventory.
� Spare Parts Inventory.
� Construction Materials Inventory.
20 Guide to Ring-Fencing of Local Government-Run Water Utilities
The balances of the above inventory accounts may be determined by conducting a physical count to
determine the quantities on hand of each item of inventory and the location of each item of inventory.
Prepare an inventory count sheet prior to the count as shown in Exhibit 3.
Exhibit 3:
INVENTORY COUNT SHEET
Antequera Waterworks System
Inventory Count Sheet
As of December 31, 2008
Location:
Type of inventory:
Date counted: Counted by:
Description Date Acquisition Quantity Total cost
acquired cost counted
The information regarding the acquisition date and cost of each inventory item and total cost may be inputted
after the physical count.
B. Property, Plant, and Equipment
In general, there are two parts in doing accounts reconstruction of Property, Plant, and Equipment. The first
part (Steps 1 to 3) involves going through available records. The second part consists of conducting a
physical inventory of all assets used in water operations (Steps 4 to 5). The results of these parts are
reconciled to become the beginning balance of assets for the water utility.
The Property, Plant, and Equipment accounts of a water utility, including the corresponding Accumulated
Depreciation accounts, are shown in Exhibit 4.
Account Reconstruction 21
Exhibit 4:
PROPERTY, PLANT, AND EQUIPMENT AND CORRESPONDING
ACCUMULATED DEPRECIATION ACCOUNTS
Property, Plant, and Equipment Accumulated Depreciation
Land (not subject to depreciation)
Land Improvements Accumulated Depreciation--Land Improvements
Office Buildings Accumulated Depreciation--Office Buildings
Other Structures Accumulated Depreciation--Other Structures
Leasehold Improvements, Land Accumulated Depreciation--Leasehold Improvements, Land
Leasehold Improvements, Buildings Accumulated Depreciation--Leasehold Improvements,
Buildings
Other Leasehold Improvements Accumulated Depreciation--Other Leasehold Improvements
Office Equipment Accumulated Depreciation--Office Equipment
Furniture and Fixtures Accumulated Depreciation--Furniture and Fixtures
IT Equipment and Software Accumulated Depreciation--IT Equipment and Software
Library Books Accumulated Depreciation--Library Books
Machineries Accumulated Depreciation--Machineries
Communication Equipment Accumulated Depreciation--Communication Equipment
Firefighting Equipment and Accessories Accumulated Depreciation--Firefighting Equipment and
Accessories
Medical, Dental, and Laboratory Equipment Accumulated Depreciation--Medical, Dental, and Laboratory
Equipment
Technical and Scientific Equipment Accumulated Depreciation--Technical and Scientific
Equipment
Other Machineries and Equipment Accumulated Depreciation--Other Machineries and
Equipment
Motor Vehicles Accumulated Depreciation--Motor Vehicles
Other Transportation Equipment Accumulated Depreciation--Other Transportation Equipment
Other Property, Plant, and Equipment Accumulated Depreciation--Other Property, Plant, and
Equipment
Artesian Wells, Reservoirs, Accumulated Depreciation--Artesian Wells, Reservoirs,
Pumping Stations, and Conduits Pumping Stations, and Conduits
Other Public Infrastructures Accumulated Depreciation--Other Public Infrastructures
Step 1: Gather these books of accounts/documents that contain information about property, plant, and
equipment:
� Registry of Public Infrastructure (RPI).
� Registry of Appropriation, Allotments and Obligation � Capital Outlay (RAAOCO).
� Property, Plant, and Equipment Ledger Cards (PPELC).
� Construction in Progress Ledger Card (CPLC).
Step 2: Extract from these documents all assets used in the operations of the water utility.
22 Guide to Ring-Fencing of Local Government-Run Water Utilities
List these assets in a spreadsheet containing these data for each asset (see Exhibit 5 for the format):
� Asset description.
� Location.
� Reference or source document.
� Acquisition date.
� Acquisition cost.
� Residual value.
� Cost after residual value.
� Estimated useful life (in years).
� Years in use as of year of financial statements being reconstructed.
� Annual depreciation.
� Accumulated depreciation as of the end of the year of the Balance Sheet being reconstructed.
� Net book value.
For LGU utilities that voluntarily submit to regulation by the National Water Resources Board (NWRB),
it would also be helpful to add the information below on how the acquisition was funded, if they are
available from the source documents. These are needed when calculating the assets entitled to a return on
investment. The information will be taken into consideration when the water utility applies for a tariff increase
(see Exhibit 6).
These are the possible sources of funds for acquiring an asset:
� Through internal cash generation.
� Through grant or donation.
� Through a loan.
� Other funding source.
Step 3: Classify the assets listed above into those that should be capitalized or not, depending on their
amount.
An asset should be capitalized if its useful life is more than one year. Refer to recent Commission on Audit
(COA) guidelines on the minimum amount necessary for an asset to be capitalized.
Step 4: Conduct a physical inventory of all property, plant, and equipment.
Do this by location to ensure that all assets are included in the inventory. Use inventory tags to identify
assets that have already been counted. The inventory tags should contain information such as:
� Inventory control number.
� Location.
� Date of inventory.
� Condition of the asset, if still serviceable or not.
� Signature of the authorized personnel who conducted the inventory.
Summarize the inventory tags, sorted by type of asset. Prepare a separate list of assets identified as
unserviceable during the inventory.
Step 5: Add other property, plant, and equipment taken in the inventory that are not recorded in the books of
accounts of the LGU.
Account Reconstruction 23
Compare the assets in the inventory with the list of assets determined in Step 3. Add assets in the inventory
that can still be used into the list of assets. Note down assets in the list that are in the inventory but are no
longer serviceable. These assets should be retired.1
Step 6: Establish purchase cost or construction cost of unrecorded items.
Determine the cost of each of the added items including the date of acquisition and reference such as
purchase requisition slip, sales invoice and official receipts. If historical cost is not determinable, fair market
value can be used as an alternative.
Step 7: Compute for the depreciation expense and the corresponding accumulated depreciation of
unrecorded items.
The straight-line method of depreciation shall be used and reference can be made to the table of estimated
useful life of property, plant, and equipment (Exhibit 7) in computing for the depreciation.
� Compute the depreciation expense of the property, plant, and equipment (except land and construction in
progress) of the water utility using the straight-line method and based on standard estimated useful life.
The basis for the depreciation is the acquisition cost of the asset reduced by its residual value. This
residual value is 10 percent of the asset cost.
� Construction in Progress is not subject to depreciation until the construction has been completed, after
which the asset is transferred to a regular fixed asset account.
� Journalize and post the depreciation expense for the year in the appropriate ledgers.
Step 8: Prepare journal entries or adjusting entries to take up unrecorded property, plant, and equipment and
their corresponding depreciation.
A debit to the appropriate asset account (refer to Exhibit 4) and a credit to government equity account can be
made as adjusting journal entry to take up unrecorded assets.
Step 9: Post transactions to the general ledger and the subsidiary ledgers.
Posting the transactions to the general and subsidiary ledgers will facilitate the preparation of timely and
accurate financial reports.
Step 10: Post repairs and maintenance information to a property ledger.
Set up a property ledger showing the repairs and maintenance information pertaining to each item of
property, plant, and equipment.
1.
See page 9 on NGAS Section 4, Basic Features and Policies, (n) Reclassification of Obsolete and Unserviceable Assets.
24 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 5:
UPDATED LISTING OF PROPERTY, PLANT, AND EQUIPMENT, AND DEPRECIATION
Antequera Waterworks System
Updated Listing of Property, Plant and Equipment, and Depreciation
December 31, 2008
Particulars Acquisition Acquisition Residual Net cost Estimated Years in Annual Accumulated Depreciation Depreciation Total Net Book
Date Cost Value subject to useful Use as of Depreciation Depreciation Expense Expense Accumulated Value
depreciation Life 2008 2006 2007 2008 Depreciation
(Years)
Account Reconstruction
Buildings and Structures
Pumphouse Tabuan -
Direct Feed 1990 43,052 4,305 38,747 40 18 969 15,499 969 969 17,436 25,616
Pumphouse Bldg. Bungahan 1995 28,863 2,886 25,977 10 13 2,598 25,977 - - 25,977 2,886
Pumphouse Tabuan 1999 375,000 37,500 337,500 40 9 8,438 59,063 8,438 8,438 75,938 299,063
Pumphouse Obujan 2001 25,000 2,500 22,500 10 7 2,250 11,250 2,250 2,250 15,750 9,250
Pumphouse-Tagubas 2001 50,000 5,000 45,000 10 7 4,500 22,500 4,500 4,500 31,500 18,500
Pumphouse-Canomay 2005 25,000 2,500 22,500 10 3 2,250 2,250 2,250 2,250 6,750 18,250
Pumphouse-Sto. Rosario 2008 3,000 300 2,700 5 5 months 540 225 225 2,775
Reservoir
Concrete Ground Res.
Zigzag Tabuan 1962 30,000 3,000 27,000 40 46 675 27,000 - - 27,000 3,000
Intake Box Canhaja 1962 15,000 1,500 13,500 30 46 450 13,500 - - 13,500 1,500
Elevated Reservoir Celing 1996 450,000 45,000 405,000 40 12 10,125 101,250 10,125 10,125 121,500 328,500
Con. Ground Res. Quinapon-an 1999 250,000 25,000 225,000 40 9 5,625 39,375 5,625 5,625 50,625 199,375
Con. Ground Res. Obujan 2001 300,000 30,000 270,000 40 7 6,750 33,750 6,750 6,750 47,250 252,750
Intake Box Aghuban 2003 75,000 7,500 67,500 30 5 2,250 6,750 2,250 2,250 11,250 63,750
Con. Ground Res. Can-omay 2005 315,640 31,564 284,076 40 3 7,102 7,102 7,102 7,102 21,306 294,334
Transmission and Distribution Mains
Transmission Lines # 1 1962 250,000 25,000 225,000 30 46 7,500 225,000 - - 225,000 25,000
Transmission Lines # 2 1998 1,330,176 133,018 1,197,158 30 10 39,905 319,242 39,905 39,905 399,053 931,123
Transmission Lines # 3 2001 1,074,830 107,483 967,347 30 7 32,245 161,224 32,245 32,245 225,714 849,115
Pumping Equipment
Submersible pump-
direct feed 1990 150,000 15,000 135,000 10 18 13,500 135,000 - - 135,000 15,000
Submersible Pump Unit Tagubas 2001 200,000 20,000 180,000 10 7 18,000 90,000 18,000 18,000 126,000 74,000
Submersible pump-Can-omay 2006 190,640 19,064 171,576 10 2 17,158 - 17,158 17,158 34,315 156,325
Submersible Pump-Obujan 2008 65,658 6,566 59,092 10 1 5,909 5,909 5,909 59,749
Submersible Pump Sto. Rosario 2008 15,500 1,550 13,950 10 5 months 1,395 581 581 14,919
Submersible Pump-Celing 2008 113,450 11,345 102,105 10 1 10,211 10,211 10,211 103,240
Other tools, minor machinery and eqpt.
Plumbing Tools 2000 17,219 1,722 15,497 5 8 3,099 15,497 - - 15,497 1,722
Computer Equipment
Computer Set 2007 35,880 3,588 32,292 5 2 6,458 6,458 6,458 12,917 22,963
Water Treatment Equipment
Water Chlorinator 2008 49,950 4,995 44,955 10 6 months 4,496 2,248 2,248 47,702
25
Furniture and Fixtures
Writing Tables 2008 4,335 434 3,902 10 2 months 390 65 65 4,270
Total 5,483,192 548,319 4,934,873 1,311,228 164,024 183,263 1,658,515 3,824,676
Exhibit 6:
PROPERTY, PLANT, AND EQUIPMENT CLASSIFIED BY FUNDING SOURCE
Antequera Waterworks System
Property, Plant, and Equipment Classified by Funding Source
December 31, 2008
Funding Source
Description Year Amount Internal Donation / Loan Other
Acquired Cash Grant Sources
Generation
26 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 7:
PROPERTY, PLANT, AND EQUIPMENT ESTIMATED USEFUL LIVES
Property, plant, and equipment Useful life (years)
Deepwells and pumphouses
Deepwell casing 15
Pump assembly 10
Motor for submersible pump 5
Motor control for deepwell pump 7
Pumphouse-mixed materials 10
Pumphouse-reinforced concrete 40
Booster station
Pumphouse-mixed materials 10
Pumphouse-reinforced concrete 40
Pump assembly 20
Motor for booster and line turbine 5
Motor control for booster station 20
Reservoir
Concrete reservoir 40
Steel overhead tank 25
Steel tank on ground concrete 30
Chlorinating equipment 10
Pipelines
Cast/ductile iron pipes 60
Steel pipes with cement lining 40
Steel pipes cylinder type 20
Asbestos and plastic pipes 30
Flow meters 7
Water meters 7
Service connections 5
Valves and chambers 30
Fire hydrants 20
Building 40
Building improvements 10
Office furniture and fixtures 10
Office equipment 5
Vehicles 5
Tools and equipment 5
Account Reconstruction 27
C. Construction in Progress
� Construction in progress: Artesian wells, reservoirs, pumping stations, and conduits.
� Construction in progress: Other public infrastructures.
Determine the balance in the construction in progress for the year.
� Obtain these payments from the report of obligation of allotment. If not available, try the record of
expenses maintained by the waterworks unit.
� Journalize the disbursements and post to the ledgers.
D. Liabilities
Determine the balances of the current liabilities of the water utility as of the agreed cut-off date.
The current liabilities of the water utility consist of:
� Accounts Payable.
� Notes Payable.
� Interest Payable.
� Due to National Treasury.
� Due to Bureau of Internal Revenue (BIR).
� Due to Government Service Insurance System (GSIS).
� Due to Pag-Ibig.
� Due to PhilHealth.
� Due to Other National Government Agencies (NGAs).
� Guaranty Deposits Payable.
� Other Payables.
The Accounts Payable balance may be obtained from the Accounts Payable Subsidiary Ledger. Summarize
the balances of the individual vendors/suppliers in the Accounts Payable Subsidiary Ledger and get the total.
The Notes Payable balance and the Interest Payable balance may be obtained from an examination of
documents and records such as promissory notes, loan agreements, and amortization schedules.
The balance of the Due to National Treasury account and Due to Other NGAs may be obtained from
supporting documents and records such as memoranda from the National Treasury and other NGAs.
The balances of the following accounts: Due to BIR, Due to GSIS, Due to Pag-Ibig and Due to PhilHealth may
be obtained from the payroll records of employees. The payroll records will provide the basis for computing
the share of the water utility based on the mandated percentages.
The balance of the Guaranty Deposits Payable account may be obtained by reviewing the subsidiary ledger of
each customer to determine the amount of deposits made on water bills and on water meters. Prepare a
schedule showing the amount of guaranty deposits obtained from each customer. Exhibit 8 presents the
format for the Schedule of Guaranty Deposits.
The balance of the Other Payables account can be obtained by reviewing the pertinent supporting
documents such as statements of accounts or billing statements.
28 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 8:
GUARANTY DEPOSITS
Antequera Waterworks System
Schedule of Guaranty Deposits
As of December 31, 2008
Customer name Amount
Total
Prepared by: Verified by:
E. Long-Term Liabilities
Determine the balances of the long-term liabilities of the water utility as of the agreed cut-off date.
The long-term liabilities of the water utility consist of:
� Loans Payable.
� Other Long-Term Liabilities.
The Loans Payable balance may be obtained from an examination of documents and records such as
promissory notes, loan agreements, and amortization schedules.
The balance of the Other Long-Term Liabilities account can be obtained by reviewing the pertinent
supporting documents such as statements of accounts or billing statements.
F. Government Equity
Determine the balance of the government equity account of the water utility as of a given date.
1. Get the sum of all assets and liabilities.
2. The difference between assets and liabilities is to be credited to the Government Equity Account.
After the beginning balances have been established, prepare a journal entry to take up beginning balances
and post in the General Ledger.
Account Reconstruction 29
Step 3. Determine the revenues earned for the year.
Usually, LGUs recognize revenues only when collected. Under the ring-fencing of LGU accounts, the accrual
method of accounting will be used to record water sales revenue. The cash method of accounting will
continue to be used for other operating revenues or business income accounts, like new connection fees and
meter maintenance. Water revenues will be recognized upon issuance of water bills, even if these have not yet
been collected.
1. Determine billed water sales for the year.
The information can be obtained from the Billing Report. If the LGU does not prepare this, the monthly billing
summary (MBS) will need to be compiled, recorded, and summarized to produce the information. This is
illustrated in Exhibit 9.
a. Prepare a journal entry to record Accounts Receivable and Water Sales Revenue.
b. Post in the General Ledger.
Exhibit 9:
SUMMARY OF BILLED WATER SALES
Antequera Waterworks System
Summary of Billed Water Sales
For the year ended December 31, 2008
Month Reference Volume Billed (m3) Amount (PhP)
January MBS 21,326 123,053.00
February MBS 19,522 115,640.00
March MBS 23,403 133,852.00
April MBS 25,301 142,619.00
May MBS 22,432 127,170.00
June MBS 21,449 124,457.00
July MBS 24,824 142,011.00
August MBS 22,961 130,435.00
September MBS 24,942 139,654.00
October MBS 26,031 146,635.00
November MBS 24,060 136,371.00
December MBS 24,248 138,642.00
TOTAL 280,499 1,600,539.00
2. Determine all revenues earned based on collections.
Obtain reports of collections and deposits for the year from the local treasurer's office. If this is not available,
obtain collection reports from the waterworks unit and summarize them by revenue account per month. (See
illustration in Exhibit 10.)
Revenues based on collections consist of:
a. Collection of water bills for prior years. This will only be done for the transition period from cash basis to
accrual basis. Water bills for prior years that have not yet been collected have not yet been recognized as
revenues. So during the transition year, all collection of water bills from prior years is included among
water revenues.
30 Guide to Ring-Fencing of Local Government-Run Water Utilities
This is done by comparing total water bills collected with total water bills issued for the current year. The
excess of collections over current year billings indicate the water bills issued in prior years that will only
be recognized as income during this transition year. This is computed as follows:
Total water bills collected (from Exhibit 10) PhP 1,756,923.69
Less: Total water bills, current year (from Exhibit 9) 1,600,539.00
Excess of water bills collected over water bills issued 156,384.69
Less: Unpaid current year water bill -
Water bills issued in prior years, collected this year PhP 156,384.69
b. Other operating revenues or business income. These are not usually accrued because they only occur
occasionally, such as when there is late payment of bills when fines and penalties are imposed, or when
there is a new connection to be installed. Refer to the Chart of Accounts for the NGAS-recommended
account titles. If the utility wants to use other operating revenue accounts, COA approval has to be
secured first. Refer to Exhibit 10 on how these are presented.
3. Determine the balances of miscellaneous income (nonoperating revenues) accruing to the water
utility.
An example is interest earned on deposits of the water utility. Estimate interest income based on the
prevailing interest rate and the average daily balance of the water utility funds in the bank.
4. Prepare a report of collections and deposits on a monthly or weekly basis.
5. Prepare a journal of collections and deposits on a monthly basis.
6. Post in the appropriate ledgers.
Account Reconstruction 31
32
Exhibit 10:
COLLECTION SUMMARY
Antequera Waterworks System
Collection Summary
For the year ended December 31, 2008
Other Business Revenues
Month Water Installation Reconnect. Tapping Inspection Fines and Other Guarantee Socio- Total
Sales Fee Fee Fee Fee Penalties Operating Deposit Civic
Revenues Fund
January 212,799 275 175 275 275 11,909 2,505 550 22 228,785
February 163,432 50 275 50 50 9,832 2,391 100 4 176,184
March 116,622 75 125 75 75 5,243 2,126 150 6 124,497
April 119,433 150 100 150 150 5,159 2,000 300 12 127,454
May 118,375 100 150 100 100 5,129 2,278 200 8 126,440
June 155,874 150 550 150 150 7,311 2,753 300 12 167,250
July 132,175 150 400 150 150 5,903 2,039 300 12 141,278
August 155,225 225 150 225 225 7,780 2,290 450 18 166,588
September 194,580 225 575 225 225 11,539 3,260 450 18 211,098
October 140,498 325 325 325 325 7,232 1,974 650 26 151,680
November 139,200 150 75 150 150 5,834 2,714 300 12 148,585
December 108,710 125 75 125 125 5,063 1,690 250 10 116,173
TOTAL 1,756,924 2,000 2,975 2,000 2,000 87,934 28,019 4,000 160 1,886,012
Guide to Ring-Fencing of Local Government-Run Water Utilities
Step 4. Determine the expenses for the year.
Expenses of LGUs are classified into:
� Personal Services (PS).
� Maintenance and Other Operating Expenses (MOOE).
And these expenses can either be:
� Dedicated expenses that are incurred by the waterworks unit itself, or
� Shared expenses or indirect expenses that are expenses related to the provision of water supply incurred
by units or departments of the LGU other than the waterworks unit.
See discussions on the classification of expenses from page 8.
1. Determine the amount of dedicated PS and distribute by cost centers.
� List down all the employees of the waterworks unit including those charged under MOOE.
� Based on their functions, classify them according to the appropriate cost center.
� Obtain their salaries and benefits for the year and extend these by cost center.
Exhibits 11 and 12 illustrate how this is done.
Account Reconstruction 33
34
Exhibit 11:
DEDICATED PERSONAL SERVICES
Antequera Waterworks System
Dedicated Personal Services
For the year ended December 31, 2008
Position Title Status of Salary Monthly Annual PERA ACA 13th Mo PIB Pag-Ibig GSIS Phil- ECC Cash Add'l Total
Employment Grade Salary Salary Pay Health Gift Cash
Gift
Waterworks supervisor * permanent c/o
Eng'g 155,597 155,597
Revenue Collection Clerk II permanent 7 7,386 88,632 6,000 18,000 3,693 2,000 886 5,318 525 443 5,000 30,000 116,181
Customer Accounts Clerk casual (MOOE) 2,860 34,320 - 34,320
Customer Accounts Clerk casual (MOOE) 2,860 34,320 34,320
Meter Reader/Maintenance permanent 5 5,617 67,404 6,000 18,000 5,617 2,000 674 4,044 375 337 5,000 30,000 105,749
Meter Reader/Maintenance casual (MOOE) 3,850 46,200 46,200
Meter Reader/Maintenance casual (MOOE) 3,850 46,200 46,200
Plumber permanent 7 7,054 84,648 6,000 18,000 7,054 2,000 846 5,079 525 423 5,000 30,000 117,252
Electrician casual (MOOE) 4,400 52,800 - 52,800
Pump Operator/Maintenance casual (MOOE) 3,850 46,200 46,200
Pump Operator/Maintenance casual (MOOE) 3,850 46,200 46,200
Pump Operator/Maintenance casual (MOOE) 3,850 46,200 46,200
Pump Operator/Maintenance casual (MOOE) 3,850 46,200 46,200
Pump Operator/Maintenance casual (MOOE) 2,860 34,320 34,320
Plumber/Maintenance casual (MOOE) 3,850 46,200 46,200
Total 59,987 719,844 18,000 54,000 16,364 6,000 2,407 14,441 1,425 1,203 15,000 90,000 973,939
* This position is held by a staff of the Engineering Department.
Legend: PERA: Personnel Economic Relief Fund; ACA: Additional Compensation Allowance; PIB: Productivity Incentive Bonus; GSIS: Government Service Insurance System Premium;
ECC: Employees' Compensation Commission Premium.
Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 12:
DEDICATED PERSONAL SERVICES DISTRIBUTED BY COST CENTER
Antequera Waterworks System
Dedicated Personal Services Distributed by Cost Center
For the year ended December 31, 2008
Position Title Total PS Operations Customer General
Cost and Accounts Administration
Maintenance Management and Finance
Waterworks supervisor 155,597 77,798 38,899 38,899
Revenue Collection Clerk II 116,181 116,181
Customer Accounts Clerk 34,320 34,320
Customer Accounts Clerk 34,320 34,320
Meter Reader/Maintenance 105,749 52,875 52,875
Meter Reader/Maintenance 46,200 23,100 23,100
Meter Reader/Maintenance 46,200 23,100 23,100
Plumber (1) 117,252 117,252
Electrician (1) 52,800 52,800
Pump Operator/Maintenance 46,200 46,200
Pump Operator/Maintenance 46,200 46,200
Pump Operator/Maintenance 46,200 46,200
Pump Operator/Maintenance 46,200 46,200
Pump Operator/Maintenance 34,320 34,320
Plumber/Maintenance 46,200 46,200
Total 973,939 612,245 322,795 38,899
2. Determine the shared PS and distribute by cost center.
� Referring to the Activity Analysis Sheet (Exhibit 2), obtain the PS costs of all the LGU units/departments
that perform activities related to water service provision. This includes both the regular employees and
persons employed on job order basis paid under MOOE.
� Compute the share of the waterworks unit in the cost of these related units/departments. See discussions
on classification of expenses from page 8.
3. Determine the dedicated MOOE of the waterworks unit.
� Obtain these expenses from the Registration of Appropriations, Allotments and Obligation. If not
available, try the record of expenses maintained by the waterworks unit.
� Exclude salaries of personnel charged under MOOE because these have already been included in the PS
computation.
� Allocate the MOOE to the appropriate cost center.
This is illustrated in Exhibits 13 and 14.
Account Reconstruction 35
36
Exhibit 13:
SHARED PERSONAL SERVICES DISTRIBUTED BY COST CENTER
Antequera Waterworks System
Shared Personal Services Distributed by Cost Center
For the year ended December 31, 2008
Cost Centers
Name of Office PS Cost of Cost of Job Total Share of Operations Customer Adm. and
Regular Order Personal Waterworks and Account Gen.
Employees Employees Services Maintenance Management Management
a b c=a+b d = c x % share
Office of the Municipal Mayor 1,459,245 199,509 1,658,754 166,989 166,989
Office of the Municipal
Accountant 879,066 95,325 974,391 98,093 98,093
Treasurer's Office 1,310,461 100,000 1,410,461 141,993 70,996 70,996
Budget Office 653,024 26,089 679,112 68,367 68,367
Municipal Health Office 2,420,375 60,000 2,480,375 249,702 249,702
Engineering Department 647,466 65,000 712,466 71,725 71,725
MPDO 712,721 49,960 762,681 76,780 76,780
Total 8,082,358 595,882 8,678,240 873,648 321,427 70,996 481,225
Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 14:
DEDICATED MOOE DISTRIBUTED BY COST CENTER
Antequera Waterworks System
Dedicated MOOE Distributed by Cost Center
For the year ended December 31, 2008
Account Reconstruction
Cost Centers
Account Title Waterworks 20% EDF Total Operations Customer Admin and
and Accounts General
Supervision Management
Traveling Expense 720 - 720
Office Supplies Expense 93,769 - 93,769 37,508 56,261
Gasoline, Oil and Lubricants 150,000 - 150,000 105,000 45,000
Chemical and Filt. Supplies Expenses 8,800 - 8,800 8,800
Maintenance Supplies Expenses 29,695 - 29,695 29,695
Electricity Expense 1,000,000 - 1,000,000 1,000,000
Fidelity Bond Premium 284 - 284 284
Repairs and Maintenance -
Transmission and Distribution Mains 98,215 - 98,215 98,215
Repairs and Maintenance - Reservoir 20,998 301,602 322,600 322,600
Miscellaneous Expenses 13,079 - 13,079 6,540 6,540
TOTAL DIRECT MOOE 1,414,839 301,602 1,716,441 1,608,357 108,085
37
4. Determine the shared MOOE for the waterworks.
� Referring to the Activity Analysis Sheet (Exhibit 2), obtain the MOOE of all the LGU units/departments
that perform activities related to water service provision from the Report of Obligation of Allotment.
� From the total MOOE, deduct the salaries of job order employees because these have already been
included in the PS computation.
� Include only expenses that can be attributed to the provision of water service.
� Compute the share of the waterworks unit in the cost of these related units/departments based on the
agreed allocation with the concerned LGU unit/department (see discussion in section on classification of
expenses from page 8).
Allocate the MOOE to the appropriate cost center based on the Activity Analysis sheet. This is illustrated in
Exhibits 15 and 16.
38 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 15:
SHARED MOOE FOR THE WATERWORKS UNIT
Antequera Waterworks System
Shared MOOE for the Waterworks Unit
For the year ended December 31, 2008
Account Reconstruction
Account Title Office of Office of the Office of the Budget Municipal Municipal Municipal Total Shared
the Mayor Accountant Treasurer Office Health Engineer's Planning Cost *
Office Office and Dev.
Office
Traveling Expense 37,540 40,681 60,037 8,532 39,524 16,045 28,327 230,685 23,223
Training Expenses 57,870 28,760 32,100 19,660 32,575 6,800 16,140 193,905 19,521
Office Supplies
Expense 64,634 50,000 94,610 27,567 30,922 28,587 29,513 325,833 32,802
Gasoline, Oil and
Lubricants - - - - - 325,000 - 325,000 32,718
Electricity Expense 20,000 10,000 10,000 10,000 10,000 10,000 10,000 80,000 8,054
Telephone, Telegraph
and Internet 29,949 - - - - - - 29,949 3,015
Fidelity Bond
Premium 6,000 - 7,980 - - - - 13,980 1,407
Auditing Services - 3,800 3,472 - - - - 7,272 732
Building and
Structures
Maintenance 3,195 3,195 322
Motor Vehicle
Maintenance 138,750 - - - - 247,655 - 386,405 38,900
Other PPE
Maintenance 4,580 500 2,275 - 900 350 13,750 22,355 2,251
Miscellaneous
Expenses 17,925 8,240 3,106 388 600 323 1,995 32,576 3,279
Total 377,247 141,981 213,581 66,146 114,520 637,954 99,725 1,651,155 166,224
39
* Shared costs are a percentage of the total MOOE. The percentage is agreed upon among the other LGU units. In the above example the percentage was based on the number of personnel of the
Waterworks Unit as against the total personnel of the LGU.
Exhibit 16:
DISTRIBUTION OF SHARED MOOE ALLOCATED BY COST CENTER
Antequera Waterworks System
Distribution of Shared MOOE Allocated by Cost Center
For the year ended December 31, 2008
Cost Centers
Account Title Shared Cost Operations Customer General Adm
and Accounts and Finance
Maintenance
Traveling Expense 23,223.32 23,223.32
Training Expenses 19,520.64 19,520.64
Office Supplies Expense 32,801.99 32,801.99
Gasoline, Oil and Lubricants 32,718.12 32,718.12
Chemicals and Filter
Supplies Expenses -
Maintenance Supplies Expenses -
Electricity Expense 8,053.69 8,053.69
Telephone, Telegraph and Internet 3,014.96 1,004.99 1,004.99 1,004.99
Fidelity Bond Premium 1,407.38 1,407.38
Auditing Services 732.11 732.11
Building and Structures
Maintenance 321.64 321.64
Motor Vehicle Maintenance 38,899.83 29,174.87 9,724.96
Other PPE Maintenance 2,250.50 2,250.50
Miscellaneous Expenses 3,279.44 3,279.44
Total 166,223.62 30,179.86 1,004.99 135,038.78
Step 5. Determine interest expense and other financing charges for
the year.
1. Determine loans secured for the year. Prepare the Schedule of Loans Payable (See format in Exhibit 17).
2. Compute the interest expenses for the loans based on the accrued amount appearing in the amortization
schedule. If this schedule is not available, compute the amortization and interest due based on the terms
and conditions of the loan. Use the accrued interest amount, not the amount paid by the LGU.
40 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 17:
SCHEDULE OF LOANS PAYABLE
Loan Account PN No. 9167-Tl08-5024-001
Name of Bank Land Bank of the Philippines
Where Loan was Used Well Drilling
Account Reconstruction
Interest Rate per annum 9.125%
Maturity, in years 7
Grace Period, in years 0
First Disbursement 2008
First Principal Repayment 2009
Total Principal PhP 2,100,000
Annual Amortization PhP 350,000
2006 2009 2010 2011 2012 2013 2014
Opening Balance - 2,100,000 1,750,000 1,400,000 1,050,000 700,000 350,000
Additions 2,100,000 - - - - - -
Amortization - 350,000 350,000 350,000 350,000 350,000 350,000
Loan Balance, End 2,100,000 1,750,000 1,400,000 1,050,000 700,000 350,000 -
Interest Payable, Beginning - - - - - - -
Interest Expense 191,625 159,688 127,750 95,813 63,875 31,938 -
Interest Payment 191,625 159,688 127,750 95,813 63,875 31,938 -
Interest Payable, End - - - - - - -
41
Step 6. Determine the Bad Debts Expense for the year.
The Allowance for Doubtful Accounts represents the amount of trade receivables estimated to be
uncollectible. The water utility does not wait to see which customers will not pay. It records a bad debt
expense based on estimates developed from past experience. There are two basic ways to estimate bad debts
expense:
� Percent of water sales; and
� Aging of accounts receivable.
The percent of water sales method computes bad debts expense as a percentage of net sales.
The aging of accounts receivable method focuses on the actual age of the accounts receivable and
determines a target allowance balance from that age. Review the subsidiary ledger of Accounts Receivable.
Prepare an aging schedule showing the age of each account. This is illustrated in Exhibit 18.
Exhibit 18:
AGING OF ACCOUNTS RECEIVABLE
Antequera Waterworks System
Aging of Accounts Receivable
December 31, 2008
Account No. Customer Consumer Total 30 days 31-60 61-90 Over 90
Name Type Amount days days days
Overdue
16-1-1-0149 Timbal, Abelio Residential 200.00 200.00
12-1-1-0125 Santos, Rafael Residential 540.00 540.00
06-1-1-0149 Pares, Tito Residential 1,538.00
16-1-1-0151 Ferrer, Pillar Residential 439.00 439.00
03-1-1-0034 Manabat, Carlos Residential 315.00 315.00
05-1-1-0038 Chu, Mario Commercial 1,837.00 1,837.00
03-1-1-0089 Quiroz, William Residential 450.00 450.00
Total 5,319.00 200.00 315.00 1,429.00 3,375.00
Prepared by: Noted:
Billing and Posting Clerk Date Waterworks Accountant Date
Based on past experience, estimate the percentage of the amount that will not be collectible for each category
of receivables. See Exhibit 19.
42 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 19:
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Antequera Waterworks System
Allowance for Doubtful Accounts
December 31, 2008
Age Accounts Receivable % Uncollectible Allowance for Doubtful
(PhP) Accounts
30 days 200.00 0% -
31-60 days 315.00 1% 3.15
61-90 days 1,429.00 2% 28.58
Over 90 days 3,375.00 3% 101.25
Total 5,319.00 132.98
Prepare a journal entry taking up the bad debts expense and the allowance for doubtful accounts and post in
the ledgers.
Step 7. Prepare a Trial Balance.
1. Summarize all balances in the General Ledger by preparing the Trial Balance. This is illustrated in
Exhibit 20.
2. Reconcile the balances in the General Ledger with the Subsidiary Ledgers.
3. Extend temporary accounts to the Income Statement columns and permanent accounts to the
Balance Sheet columns.
Account Reconstruction 43
Exhibit 20:
RECONSTRUCTED TRIAL BALANCE
44
Antequera Waterworks System
Trial Balance
December 31, 2008
Beginning Balance 1-1-08 2008 Ending Balances 12-31-08 Income Statement Balance Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 668,007 3,538,973 3,727,537 479,443 479,443
Accounts Receivable 462,162 1,600,539 1,756,924 305,778 305,778
Allowance for Doubtful Accounts 3,058 3,058 3,058
Accountable Forms Inventory 1,042 33,696 34,738 34,738
Property, Plant and Equipment
Furniture and Fixtures 4,335 4,335 4,335
IT Equipment and Software 35,880 35,880 35,880
Other Public Infrastructures (OPI) -
Reservoir 1,735,640 1,735,640 1,735,640
OPI - Structures and Improvements 546,915 51,000 597,915 597,915
OPI - Transmission and
Distribution Mains 2,655,005 2,655,005 2,655,005
OPI - Pumping Equipment 540,640 459,168 999,808 999,808
OPI - Water Treatment Equipment 49,950 49,950 49,950
OPI - Other Tools, Minor Machinery
and Equipment 17,219 17,219 17,219
Accumulated Depreciation
Furniture and Fixtures - 65 65 65
IT Equipment and Software 6,458 6,458 12,917 12,917
Other Public Infrastructures (OPI) -
Reservoir 317,181 40,102 357,283 357,283
OPI - Structures and Improvements 154,944 23,266 178,210 178,210
OPI - Transmission and
Distribution Mains 785,117 79,650 864,767 864,767
OPI - Pumping Equipment 277,315 39,707 317,022 317,022
OPI - Water Treatment Equipment 2,248 2,248 2,248
OPI - Other Tools, Minor
Machinery and Equipment 15,497 15,497 15,497
Const. in Progress - Reservoir 450,073 450,073 450,073
Const. in Progress - Building and
Structures 50,473 50,473 50,473
Const. in Progress - Wells
Development 45,175 45,175 45,175
Const. in Progress - Trans and
Distribution Mains 481,800 481,800 481,800
Const. in Progress - Pumping
Guide to Ring-Fencing of Local Government-Run Water Utilities
Equipment 320,000 320,000 320,000
Beginning Balance 1-1-08 2008 Ending Balances 12-31-08 Income Statement Balance Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Due to Other Funds 242 242 160 160 160
Accounts Payable 20,088 20,088 6,575 6,575 6,575
Due to BIR 5,301 5,301 5,301
Due to GSIS 4,679 4,679 5,232 5,232 5,232
Due to Pag-Ibig 6,930 6,930 13,397 13,397 13,397
Due to PhilHealth 400 400 475 475 475
Account Reconstruction
Other Payables 11,469 11,469 11,469
Loans Payable - Domestic 1,669,961 1,669,961 1,669,961
Government Equity 5,524,141 5,524,141 5,524,141
Retained Earnings 450,483 450,483 450,483
Net Income (Loss) 274,064 274,064
Water Sales Revenue 1,600,539 1,600,539 1,600,539
Fines and Penalties 87,934 87,934 87,934
Other Business Income 40,994 40,994 40,994
Subsidy from Other funds 1,689,633 1,689,633 1,689,633
Personal Services 1,559,816 1,559,816 1,559,816
Travel Expense 23,943 23,943 23,943
Training Expenses - Local 19,521 19,521 19,521
Office Supplies Expense 126,571 126,571 126,571
Gasoline, Oil and Lubricants
Expenses 182,718 182,718 182,718
Chemical and Filt. Supplies
Expenses 8,800 8,800 8,800
Maintenance Supplies Expenses 31,112 31,112 31,112
Electricity Expenses 1,008,054 1,008,054 1,008,054
Communication 3,015 3,015 3,015
Auditing Services 732 732 732
Rep & Maint - Artesian Wells,
Reservoir, Pumping Stations,
Conduits 420,814 420,814 420,814
Rep & Maint - Bldg & Structures 322 322 322
Rep & Maint - Other PPE 2,251 2,251 2,251
Rep & Maint - Motor Vehicle 38,900 38,900 38,900
Fidelity Insurance Premium 1,691 1,691 1,691
Miscellaneous Expenses 30,499 30,499 30,499
Bad Debts Expense 3,058 3,058 3,058
Depreciation Expense 191,497 191,497 191,497
Other MOOE 1,442 1,442 1,442
Interest Expense 38,409 38,409 38,409
45
Total 7,112,993 7,112,993 10,810,686 10,810,686 12,406,878 12,406,878 3,693,165 3,693,165 8,987,778 8,987,778
Step 8. Prepare the Income Statement.
From the figures reflected in the Trial Balance under the Income Statement columns, the reconstructed
Income Statement for the waterworks unit (Exhibit 21) appears, as shown here.
Exhibit 21:
RECONSTRUCTED INCOME STATEMENT
Antequera Waterworks System
Reconstructed Income Statement
For the year ended December 31, 2008
Revenues
Water Sales Revenue 1,600,539.00
Fines and Penalties 87,934.14
Other Business Income 40,993.80
Total Operating Income 1,729,466.94
Operating Expenses
Personal Services 1,559,816.26
Travel Expense 23,943.32
Training Expenses - Local 19,520.64
Office Supplies Expense 126,571.04
Gasoline, Oil and Lubricants Expenses 182,718.12
Chemical and Filt. Supplies Expenses 8,800.00
Maintenance Supplies Expenses 31,111.85
Electricity Expenses 1,008,053.69
Communication 3,014.96
Auditing Services 732.11
Repairs and Maintenance 462,286.45
Fidelity Insurance Premium 1,690.88
Miscellaneous Expenses 30,499.27
Bad Debts Expense 3,057.78
Other MOOE 1,442.48
Total Operating Expenses 3,463,258.85
Net Operating Income / (Loss) (1,733,791.91)
Depreciation Expense 191,496.62
Net Operating Income / (Loss) after Depreciation (1,925,288.53)
Interest Expense 38,409.10
Net Income/ (Loss) (1,963,697.63)
Add: Subsidy from Other Funds 1,689,633.14
Net Income/ (Loss) (274,064.49)
46 Guide to Ring-Fencing of Local Government-Run Water Utilities
Step 9. Determine the balance of Retained Earnings Surplus account
for the year.
This account represents the earnings or losses from the operations of the water utility. For the initial year that
the water utility is preparing the reconstructed income statement, this will be the net income or loss shown in
the reconstructed income statement.
Step 10. Prepare the Balance Sheet.
From the figures reflected in the Trial Balance under the Balance Sheet columns, the reconstructed Balance
Sheet for the Waterworks Unit appears here (Exhibit 22).
Exhibit 22:
RECONSTRUCTED BALANCE SHEET
Antequera Waterworks System
Reconstructed Balance Sheet
December 31, 2008
Assets
Current Assets
Cash 479,442.64
Accounts Receivable 305,777.60
Less: Allowance for Doubtful Accounts (3,057.78)
Net Accounts Receivable 302,719.82
Accountable Forms Inventory 34,737.50
Total Current Assets 816,899.96
Property Plant and Equipment
Furniture and Fixtures 4,335.00
IT Equipment and Software 35,880.00
Other Public Infrastructures (OPI) - Reservoir 1,735,639.79
OPI - Structures and Improvements 597,914.70
OPI - Transmission and Distribution Mains 2,655,005.13
OPI - Pumping Equipment 999,808.22
OPI - Water Treatment Equipment 49,950.00
OPI - Other Tools, Minor Machinery and Eqpt 17,218.88
Property Plant and Equipment, at Cost 6,095,751.72
Less: Accumulated Depreciation 1,748,008.56
Net Property, Plant and Equipment 4,347,743.16
Construction in Progress
Reservoir 450,073.06
Pumphouse 50,472.95
Wells Development 45,175.00
Transmission and Distribution Mains 481,800.00
Installation of Submersible Pump 320,000.00 1,347,521.01
Total Assets 6,512,164.13
Continued on next page
Account Reconstruction 47
Exhibit 22 continued from previous page
Liabilities
Current Liabilities
Due to Other Funds 160.00
Accounts Payable 6,574.84
Due to BIR 5,301.18
Due to GSIS 5,231.90
Due to Pag-Ibig 13,397.16
Due to PhilHealth 475.00
Other Payables 11,469.36
Total Current Liabilities 42,609.44
Loans Payable 1,669,961.00
Total Liabilities 1,712,570.44
Government Equity and Retained Earnings
Government Equity 5,524,141.20
Retained Earnings, beginning (450,483.02)
Net Loss for the Year (274,064.49)
Retained Earnings, end (724,547.51)
Total Government Equity and Retained Earnings 4,799,593.69
Total Liabilities, Government Equity and Retained Earnings 6,512,164.13
Step 11. Prepare the Cash Flow Statement.
Prepare the cash flow statement based on an analysis of the income statement and the balance sheet.
Analyze each item in the income statement and balance sheet to determine which are cash inflows and cash
outflows. Record only the cash inflows and cash outflows in the cash flow statement (see Exhibit 23).
48 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 23:
RECONSTRUCTED CASH FLOW STATEMENT
Antequera Waterworks System
Reconstructed Cash Flow Statement
For the year ended December 31, 2008
Cash Inflows
Cash Flows from Operating Activities
Water Sales Revenue 1,600,539.00
Fines and Penalties 87,934.14
Other Business Income 40,993.80
Sub-total 1,729,466.94
Other Cash Inflow
Due to Other Funds 160.00
Subsidy from Other Funds 1,689,633.14
Collection of Accounts Receivable 156,384.69
Receipt of Loans Payable 1,669,961.00
Sub-total 3,516,138.83
Total Cash Inflows 5,245,605.77
Cash Outflows
Operating Expenses Net of Payables 3,417,751.63
Increase in Accountable Forms Inventory 33,695.75
Increase in Capital Assets 564,453.43
Increase in Construction-in Progress 1,347,521.01
Payment of Accounts Payable 32,339.47
Total Outflows 5,395,761.29
Add: Financing Charges 38,409.10
Total Cash Outflows 5,434,170.39
Net Cash Outflows (188,564.62)
Add: Cash Balance, Beginning 668,007.26
Cash Balance, End 479,442.64
Step 12. Close the temporary account balances.
Close the temporary account balances and transfer the permanent account balances to the succeeding year.
Account Reconstruction 49
INTERIM ACCOUNTING AND
FINANCIAL REPORTING SYSTEM
Definition
The interim accounting and financial reporting system is the process of classifying, recording, and
summarizing all transactions related to the operations of the Local Government Unit's (LGU's) water service
provision, and segregating them from the overall LGU financial reports. The system provides for procedures
for recognizing and recording revenues based on the accrual method and for allocating costs incurred by
other units of the LGU in providing support services to the water utility. This system provides the
environment within which the ring-fencing of the financial reporting for operations of the water utility
operates.
Scope
As discussed in the section on Account Reconstruction, the Income Statement was reconstructed to
simulate the results of operations when revenues are based not on actual collections but upon issuance of
water bills and expenses related to water service provision performed by other LGU units are taken into
account in the water utility's financial reports. Beginning balances for real accounts related to water service
provision were also established.
This reconstruction stage is followed by the transition stage where the interim accounting and financial
reporting system is implemented to produce ring-fenced financial reports. Activities under the transition
stage continue to be done over the years until the water utility becomes fully ring-fenced and its financial
statements become autonomous from the LGU accounts.
Organizational Changes and Other Preparations
During the transition stage, these organizational changes and other preparations are adopted:
1. The water utility has its own office where all staff directly performing services for water service provision
is located.
2. The organizational structure and functions determined during the organizational review and realignment
is followed.
3. The water utility has its own bookkeeper, if warranted.
4. The water utility has its own collection officer.
5. Staff members have been retrained to perform their realigned functions.
6. Collection of water bills and other fees of the water utility are done by the water utility's own collection
officer in the water utility's own office.
7. A system of allocating shared costs is in place.
50 Guide to Ring-Fencing of Local Government-Run Water Utilities
Activities during the Transition Stage
During this transition stage, these activities take place:
1. Parallel set of books of accounts with the LGU are maintained by the accounting unit for all waterworks
transactions. These books are:
� Cash Receipts Journal (Exhibit 24).
� Cash Disbursements Journal (Exhibit 25).
� Check Disbursements Journal (Exhibit 26).
� General Journal (Exhibit 27).
� General Ledger (Exhibit 28).
� Subsidiary Ledgers (Exhibit 29), including Customer's Ledgers (Exhibit 45).
2. Parallel cash books are maintained by treasurers and disbursing officers for all waterworks transactions:
� Cashbook--Cash in Treasury (Exhibit 30).
� Cashbook--Cash in Bank (Exhibit 31).
� Cashbook--Cash Advances (Exhibit 32).
3. A bills register (Exhibit 37) is used to record water bills issued. This is a special journal like the Cash
Receipts Journal, Cash Disbursements Journal and Check Disbursements Journal.
4. To enable the recording of revenues on an accrual basis as well as systematize the recording and
monitoring of collections, the billing and collection system presented in the Billing and Collections
section may be implemented.
5. An additional copy of disbursement vouchers (Exhibit 34) is made for all waterworks-related transactions.
6. Separate official receipts (Exhibit 33) booklets are used for all waterworks collections, such as:
� Water bills.
� New connection fees.
� Fines and penalties.
� Other waterworks receipts.
7. At the end of the month, Journal Entry Vouchers or JEVs (Exhibit 35) are prepared for:
� Water revenues from water bills issued.
� Other revenues.
� Expenses:
� Shared costs--identifiable;
� Shared costs--not specifically identifiable;
� Depreciation; and
� Interest expense.
� Other payments, such as acquisition of property, plant, and equipment.
� Subsidy from the local government.
8. Reconciliation of accounts is done on a monthly basis with the LGU accounts to ensure:
� Completeness of entries captured in the ring-fenced books of accounts.
� Accuracy of amounts.
� Correctness of accounts used.
Interim Accounting and Financial Reporting System 51
9. Monthly ring-fenced financial statements are prepared:
� Income Statement.
� Balance Sheet.
� Cash Flow Statement.
10. At the year's end, JEVs are prepared for:
� Depreciation, including assets classified under the public infrastructure account.
� Allowance for doubtful accounts.
� Interest payable.
11. Other monitoring and evaluation reports are also prepared, such as the financial and operational analysis
reports and aging of accounts receivable.
52 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 24:
CASH RECEIPTS JOURNAL
LGU
Month: ___________, 20___
Date Record Journal Name of Collections Deposits
Collections Entry Collecting Officer Debit Credit Debit Credit
and Voucher Sundry
Sundry
Deposits Number
Number Account P Debit Credit Account P Debit
Code Code
Interim Accounting and Financial Reporting System
Certified correct:
Signature
53
Designation
54
Exhibit 25:
CASH DISBURSEMENTS JOURNAL
LGU
Month: ___________, 20___
Fund: Sheet No.:
Date Reference/ Journal Accountable Officer Credit Debit Sundry Column
Report of Entry Account P Amount
Disb. No. Voucher Code
No. Debit Credit
Certified correct:
Signature
Guide to Ring-Fencing of Local Government-Run Water Utilities
Designation
Exhibit 26:
CHECK DISBURSEMENTS JOURNAL
LGU
Month: ___________, 20___
Fund: Sheet No.:
Bank Name/Account No.
Date Report of Journal Payee Credit Debit Sundry Column
Checks Entry Account P Amount
Issued / Voucher Code
Check No. No. Debit Credit
Interim Accounting and Financial Reporting System
Certified correct:
Signature
55
Designation
Exhibit 27:
GENERAL JOURNAL
LGU
Month: ___________, 20___
Fund: Sheet No.:
Date JEV No. Particulars Account Posting Amount
Code Debit Credit
Certified correct:
Chief Accountant Date
56 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 28:
GENERAL LEDGER
LGU
Fund:
Account Title:
Account Code:
Date Particulars Reference Amount
Debit Credit Balance
Interim Accounting and Financial Reporting System 57
Exhibit 29:
SUBSIDIARY LEDGER
LGU
Fund:
Nature of Account Account Code
Office/Address GL
Contact Person/Number SL
Date Particulars Reference Amount
Debit Credit Balance
58 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 30:
CASHBOOK--TREASURY
LGU
Fund:
Date Particulars Reference Cash in Treasury
Debit Credit Balance
Interim Accounting and Financial Reporting System 59
Exhibit 31:
CASHBOOK--CASH IN BANK
LGU
Bank Account No.: Fund:
Date Particulars Reference Cash in Bank
Debit Credit Balance
60 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 32:
CASHBOOK--CASH ADVANCES
LGU
Bank Account No.: Fund:
Date Particulars Reference Cash Advances
Debit Credit Balance
Interim Accounting and Financial Reporting System 61
Exhibit 33:
OFFICIAL RECEIPT
OFFICIAL RECEIPT
Republic of the Philippines
Accountable Form No. 51
(Revised January 1992) ORIGINAL
Date SC No. 2062884
Agency
Payor
Nature of collection Account code Amount
P
Total P
Amount in words
Cash Drawee bank Number Date
Check
Money order
Received the amount stated above:
Collecting Officer
NOTE: Write the number and date of this receipt at the back of the treasury warrant, check, or money
order received.
62 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 34:
DISBURSEMENT VOUCHER
DISBURSEMENT VOUCHER DV No.
LGU Date
CLASSIFICATION OF DISBURSEMENT
Cash Advance Reimbursement Other Payments
Name of Claimant: ID No./TIN:
Address: Responsibility Center:
Particulars Amount
Amount Due P
A Certified: B Completeness and propriety of C Cash available:
Expenses/Cash Advances supporting documents/previous cash
necessary, lawful and incurred under advance liquidated/existence of
my direct supervision. funds held in trust:
Signature Over Printed Name/Position Signature Over Printed Name/Position Signature Over Printed Name/Position
D Approved For Payment: P___ E Received Payment:
Payment:
Check No. ________________
Bank Name: _______________
Date: _____________________
Signature Over Printed Name/Position Signature Over Printed Name/Position
JEV No.________ Date________
Interim Accounting and Financial Reporting System 63
Exhibit 35:
JOURNAL ENTRY VOUCHER
Republic of the Philippines No.
Municipality of Antequera Bohol
Antequera Waterworks System
Date
JOURNAL ENTRY VOUCHER
Collection Check Disbursement Cash Disbursement Others
Responsibility ACCOUNTING ENTRIES
Center Accounts and Account Reference Amount
Explanation Code Debit Credit
Prepared by: Approved by:
64 Guide to Ring-Fencing of Local Government-Run Water Utilities
Modifications from LGU Accounting Processes
This section discusses the modifications from the general LGU accounting processes to enable the
implementation of the ring-fencing of accounts for the water utility. An overview of the existing LGU
collection and disbursements flow are shown in Figures 3 and 4, respectively.
These modifications are on the following:
� Accounting for Revenues.
� Accounting for Costs.
� Preparation of Financial Reports.
Transactions involving Balance Sheet accounts follow the regular LGU accounting process, except for
property, plant, and equipment accounts classified under the public infrastructure accounts which are
subjected to depreciation under the ring-fencing system.
FIGURE 3: LOCAL GOVERNMENT UNIT COLLECTION FLOW
Revenue collection Liquidating officer/ Municipal/ Municipal/
clerk/Deputized Cashier City treasurer City accountant
collection agent
� Accepts � Accepts � Accepts � Prepares a
payments remittances by remittances from Journal Entry
� Prepares the the revenue the liquidating Voucher (JEV)
daily collection collection clerk/ officer/cashier per report of
report deputized � Posts collections collection and
� Remits collection agent in the Cash Book deposit
collections to � Prepares the � Deposits � Posts JEV
the liquidating report of collections in the entries in the
officer/cashier, collection authorized bank cash receipts
attaching the � Remits � Posts deposits in and deposit
duplicate copy collections to the cash book journal
of official the municipal/ � Prepares the � Posts in the
receipts issued city treasurer report of ledgers
collection and
deposit
� Submits to the
accounting office
copies of:
� Report of
collection and
deposit
� Official receipts
� Bank validated
deposit slips
Interim Accounting and Financial Reporting System 65
FIGURE 4: LOCAL GOVERNMENT UNIT DISBURSEMENTS FLOW
Concerned Municipal/ Municipal/ Municipal/ Municipal/
LGU City City City City
department budget officer accountant mayor treasurer
� Prepares � Certifies to � Certifies to � Approves � Certifies
the the the disbursement funds
disbursement existence of completeness vouchers availability
voucher available of the � Prepares
� Prepares appropriation supporting check for
the � Posts documents payment
obligation obligation of � Checks � Signs check
request appropriation mathematical � Countersigns as a
� Certifies in in the accuracy check as signatory
the corresponding between signatory
obligation registry of supporting
request that appropriation documents
charges to and and the � Posts
appropriation obligation disbursement payments in
are � Prepares voucher the check
necessary, the monthly � Prepares issuance
lawful, and Statement of Journal registry
under the appropriation, Entry � Prepares
department's allotment, Voucher report of
direct and (JEV) per checks
supervision obligation transaction issued
� Attaches the balances � Posts JEV in � Submits to
required the accounting:
supporting disbursements � Report of
documents logbook checks
for payment � Prepares issued
� Certifies that monthly � Paid
supporting journal of disbursement
documents checks vouchers
are valid, issued and
proper, and � Posts supporting
legal transactions documents
in the
ledgers
� Prepares
the financial
reports and
supporting
schedules
� Prepares
bank
reconciliation
66 Guide to Ring-Fencing of Local Government-Run Water Utilities
Accounting for Revenues
The revenue accounts of the water utility consist of:
� Income from waterworks systems.
� Other business income:
� New connection fee;
� Reconnection fee;
� Meter maintenance fee; and
� Other water operating revenues.
� Fines and penalties--business income.
� Nonoperating revenues:
� Subsidy from other funds;
� Income from grants and donations;
� Interest income;
� Dividend income;
� Miscellaneous income;
� Gain/loss on foreign exchange;
� Gain/loss on sale of disposed assets; and
� Gain on sale of securities.
All revenues of the water utility will be recognized at the point of generation. Total of water bills issued will
already be recognized as revenues upon their issuance, and not when they are collected.
1. Income from waterworks systems. This is the major revenue account of the water utility. This account
is used to record all water bills issued to customers for water sold.
These are the steps in recording water bills:
Step 1. Record all water bills issued every day in the form called daily water bills issued (Exhibit 36).
Step 2. Record totals of the daily water bills issued by meter reader in the bill register (Exhibit 37).
Step 3. At the end of the month, prepare a JEV debiting accounts receivable and crediting income from
waterworks system for the total water bills relating to the current month only. (The unpaid bills
as of the previous month have been recorded in the previous months already. Penalties will be
recorded when they are paid.) When water bills are collected, the account to be credited will now
be accounts receivable, instead of the former account of income from waterworks system when
ring-fencing was not yet implemented.
Interim Accounting and Financial Reporting System 67
68
Exhibit 36:
DAILY WATER BILLS ISSUED
Antequera Waterworks System
Municipality of Antequera, Bohol
DAILY WATER BILLS ISSUED
Date: _____________________
Meter Reader : _____________________
Water Customer Customer Name Customer Type Meter Reading (m3) Consumption Water Bill Amount (PhP)
Bill No. Account This Last (m3) This Unpaid Last Penalty Total Water
No. Month Month Month Month Bill Due
Total
Prepared by: Verified and Approved:
Billing and Posting Clerk Waterworks Head
Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 37:
BILL REGISTER
Antequera Waterworks System
Municipality of Antequera, Bohol
BILL REGISTER
For the month of
Date Meter Reader Water Bill Number Number of Consumption Water Bill (PhP)
Name From To Water Bills (m3) This Month Update Last Penalty Total Water
Month Bill Due
Interim Accounting and Financial Reporting System
Total
69
2. Other operating revenues. These are revenues from services related to water provision other than for
sale of water to consumers. Below are the common accounts for water utilities. Should the water utility
have other fees or sources of revenues, these can be classified under `Other Water Operating Revenues'.
� New connection fee.
� Reconnection fee.
� Meter maintenance fee.
� Other water operating revenues.
These revenues should be accrued at the end of the year.
These are the steps in recording other operating revenues:
Step 1. Obtain a copy of the report of collections and deposits (Exhibit 38) from the office of the
treasurer.
Step 2. Identify and summarize daily collections into the cash receipts journal (Exhibit 24), classifying
them by type of revenue.
Step 3. Prepare a JEV for collections of other operating revenues by account classification.
Step 4. Post the JEV to the General Journal.
3. Nonoperating revenues. These revenues are those earned by the water utility but not related to the
provision of water to customers.
Examples are interest earned from bank accounts, dividends and proceeds of disposal of unserviceable
assets.
The steps involved in recording these nonoperating revenues are the same as those for other operating
revenues above.
70 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 38:
REPORT OF COLLECTIONS AND DEPOSITS
Page 1 of 2
REPORT OF COLLECTIONS AND DEPOSITS
LGU
Fund: Date:
Name of Accountable Officer: Report No.:
A. COLLECTIONS
1. For Collectors
Type (Form No.) Official Receipt/Serial No. Amount
From To
2. For Liquidating Officers/Treasurers
Name of Accountable Officer Report No. Amount
B. REMITTANCES/DEPOSITS
Accountable Officer/Bank Reference Amount
Interim Accounting and Financial Reporting System 71
Page 2 of 2
C. ACCOUNTABILITY FOR ACCOUNTABLE FORMS
Name of Form & No. Beginning Balance Receipt Issued Ending Balance
Qty Inclusive Serial Nos Qty Inclusive Serial Nos Qty Inclusive Serial Nos Qty Inclusive Serial Nos
From To From To From To From To
D. SUMMARY OF COLLECTIONS AND REMITTANCES / DEPOSITS
List of Checks:
Beginning Balance ___________ 20 ___ P xxx
Checks No. Payee Amount
Add: Collections
Cash xxx
Check/s xxx xxx
Total
Less: Remittance/Deposit to Cashier/
Treasurer/Depository Bank xxx
Balance P xxx
NOTE: Use additional sheet if necessary.
CERTIFICATION: VERIFICATION AND ACKNOWLEDGMENT:
I hereby certify that the foregoing I hereby certify that the foregoing
report of collections and deposits, and report of collections has been verified and
accountability for accountable forms is true acknowledge receipt of _________________
and correct. (P)__________
Name and Signature Date Name and Signature Date
Accountable Officer Cashier/Treasurer
72 Guide to Ring-Fencing of Local Government-Run Water Utilities
Accounting for All Costs of the Water Utility
All costs that are incurred directly or indirectly by the water utility in the delivery of water supply services to
its clientele should be fully accounted for and reported. These costs include (a) operation and maintenance
expenses; (b) capital costs (depreciation charges); and (c) financing costs (interest charges).
1. Operation and maintenance expenses. As discussed in the section on classification of expenses
(page 8), expenses of LGUs, as well as its water utility, are classified into:
� Personal Services (PS).
� Maintenance and Other Operating Expenses (MOOE).
For purposes of ring-fencing, these are further classified into:
� Dedicated expenses (incurred by the water utility itself).
� Shared expenses, which can be:
� Identifiable shared expenses, or
� Allocable or not directly identifiable shared expenses.
Dedicated expenses are recorded through disbursements vouchers and JEVs. Accruals of expenses at the
end of an accounting period, depreciation, and financing charges are recorded through a JEV.
Shared expenses are expenses that contribute to water service provision that are incurred by units or
departments outside of the water utility division. These expenses can either be directly identified or not.
Directly identifiable shared costs are captured through the service request form (see Exhibit 39) and
summarized monthly into the summary of services requested (Exhibit 40). This summary is then journalized
to record the charging of the expenses to the proper units.
Shared or allocable expenses that are not directly identifiable are captured through the allocation of support
services forms (Exhibit 41 for PS and Exhibit 42 for MOOE) which are prepared monthly. These forms show
how the PS and MOOE expenses of the servicing department/unit are allocated to the departments/units that
benefit from them, including the water utility. A JEV is prepared out of this form which is then recorded in the
General Journal.
See discussions on the classification of expenses starting from page 8.
These are the steps in recording these expenses.
Step 1. Determine the dedicated PS and MOOE for the waterworks unit.
� At the end of the month, obtain copies of all disbursement vouchers with transactions pertaining to the
waterworks unit.
� Prepare a JEV for these dedicated expenses for the waterworks unit.
� Record the JEV in the General Journal.
Step 2. Determine the identifiable shared expenses (both PS and MOOE) for the waterworks unit.
� Summarize the service request forms (Exhibit 39) into the summary of services requested (Exhibit 40).
Expense columns may be changed as appropriate.
� Prepare a JEV for these expenses for the waterworks unit.
� Record the JEV in the General Journal.
Interim Accounting and Financial Reporting System 73
Exhibit 39:
SERVICE REQUEST FORM
Republic of the Philippines
Antequera, Bohol SERVICE REQUEST FORM
Antequera Waterworks System
To: (Servicing Unit) SRF No.
Municipal Health Office 01-001
Description of Service Requested
Testing of 3 water samples for water quality
Requested by: Noted by:
Requesting Waterworks Staff Date Waterworks Head Date
ACTION TAKEN
LABOR
Staff Assigned Staff's Monthly Date Time (HH:MM) Total Charges
Initials Rate (PhP) Performed Start End Total (PhP)
J. Cruz JC 16,000 1-12-07 14:00 15:30 1:30 150.00
Total - Labor 150.00
MATERIALS AND OTHER EXPENSES
Description Quantity Unit Cost Total (PhP)
Test tubes 3 10.00 30.00
Chemicals 1 gm 15.00 15.00
Transportation 55.00
Total - Materials 100.00
Total - Labor and Materials 250.00
Services Approved by: This is to certify that I accept the services rendered
the corresponding charges as shown above.
Head, Servicing Unit Date Head, Waterworks Unit Date
This form documents the request for service or support from other units or offices and contains an
estimate of the cost of labor and materials; it shows the requesting party and the office from which service
is requested. This form should be prenumbered. It is prepared in duplicate with this distribution:
� Copy 1: Water utility files, input for summary.
� Copy 2: Computation of allocable support costs.
74 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 40:
SUMMARY OF SERVICE REQUESTS
Republic of the Philippines
Antequera Waterworks System
Antequera, Bohol
SUMMARY OF SERVICES REQUESTED
For the month ended January 31, 2009
Date SRF No. Description of Service Servicing Unit Total Salaries and Laboratory Transportation Repairs & Security
Completed Wages - supplies and Maintenance Services
Regular Delivery - Office
Expenses Building
12-Jan-09 01-001 Testing of water samples Municipal Health Office 250.00 150.00 45.00 55.00
15-Jan-09 01-002 Hauling of pipes Gen. Services Dept. 1,000.00 1,000.00
Interim Accounting and Financial Reporting System
20-Jan-09 01-003 Fabrication of water meter boxes Gen. Services Dept. 4,000.00 4,000.00
22-Jan-09 01-004 Renovation of payments window Gen. Services Dept. 25,000.00 25,000.00
25-Jan-09 01-005 Security services at water Gen. Services Dept. 20,000.00 20,000.00
treatment plant
Total 50,250.00 4,150.00 45.00 1,055.00 25,000.00 20,000.00
75
Step 3. Determine the not directly identifiable shared PS for the waterworks unit.
� Referring to the activity analysis sheet (Exhibit 2), obtain the PS costs of all the LGU units/departments
that perform activities related to water service provision, both for regular employees and job order
employees paid through the MOOE budget.
� Compute the share of the waterworks unit in the cost of these related units/departments based on the
agreed method of pro-rating the costs. This is illustrated in Exhibit 41.
� Prepare a JEV for these PS expenses for the waterworks unit.
� Record the JEV in the General Journal.
Step 4. Determine the not directly identifiable shared MOOE for the waterworks.
� At the end of the month, referring to the activity analysis sheet (Exhibit 2), obtain the MOOE of all the LGU
units/departments that perform activities related to water service provision from the report of obligation
allotment.
� From their total MOOE, deduct the salaries of job order employees because they have already been
included in the PS computation.
� Include only expenses that can be attributed to the provision of water service.
� Compute the share of the waterworks unit in the MOOE of these related LGU units/departments based on
the agreed allocation of expenses. This is illustrated in Exhibit 42.
� Prepare a JEV for the waterworks unit's share.
� Record the JEV in the General Journal.
76 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 41:
ALLOCATION OF SHARED PERSONAL SERVICES
Antequera Waterworks System
Allocation of Shared Personal Services
For the year ended December 31, 2008
Name of Office PS Cost of Cost of Job Total Personal Share of Cost Centers
Regular Order Services Waterworks Operations Customer Adm. and
Employees Employees and Account Gen.
Maintenance Management Management
a b c=a+b d = c x % share
Office of the Municipal Mayor 1,459,245 199,509 1,658,754 166,989 166,989
Office of the Municipal Accountant 879,066 95,325 974,391 98,093 98,093
Interim Accounting and Financial Reporting System
Treasurer's Office 1,310,461 100,000 1,410,461 141,993 70,996 70,996
Budget Office 653,024 26,089 679,112 68,367 68,367
Municipal Health Office 2,420,375 60,000 2,480,375 249,702 249,702
Engineering Department 647,466 65,000 712,466 71,725 71,725
MPDO 712,721 49,960 762,681 76,780 76,780
Total 8,082,358 595,882 8,678,240 873,648 321,427 70,996 481,225
77
78
Exhibit 42:
ALLOCATION OF SHARED MOOE
Antequera Waterworks System
Allocation of Shared MOOE
For the year ended December 31, 2008
Office of Office of Office of Budget Municipal Municipal Municipal Total Shared
the Mayor the the Office Health Engineer's Planning Cost *
Accountant Treasurer Office Office and Dev.
Office
Traveling Expense 37,540 40,681 60,037 8,532 39,524 16,045 28,327 230,685 23,223
Training Expenses 57,870 28,760 32,00 19,660 32,575 6,800 16,140 193,905 19,521
Office Supplies Expense 64,634 50,000 94,610 27,567 30,922 28,587 29,513 325,833 32,802
Gasoline, Oil and - - - - - 325,000 - 325,000 32,718
Lubricants
Electricity Expense 20,000 10,000 10,000 10,000 10,000 10,000 10,000 80,000 8,054
Telephone, Telegraph 29,949 - - - - - - 29,949 3,015
and Internet
Fidelity Bond Premium 6,000 - 7,980 - - - - 13,980 1,407
Auditing Services - 3,800 3,472 - - - - 7,272 732
Bldg & Structures 3,195 3,195 322
Maintenance
Motor Vehicle Maintenance 138,750 - - - - 247,655 - 386,405 38,900
Other PPE Maintenance 4,580 500 2,275 - 900 350 13,750 22,355 2,251
Miscellaneous Expenses 17,925 8,240 3,106 388 600 323 1,995 32,576 3,279
Total 377,247 141,981 213,581 66,146 14,520 637,954 99,725 1,651,155 166,224
* Shared costs are a percentage of the total MOOE. The percentage is agreed upon among the other LGU units. In the above example the percentage was based on the number of
personnel of the Waterworks Unit as against the total personnel of the LGU.
Guide to Ring-Fencing of Local Government-Run Water Utilities
2. Depreciation charges. Depreciation of property, plant and equipment of the water utility is prepared
periodically, especially at year-end, based on the straight-line method and using the recommended
useful life of assets as prescribed by the National Water Resources Board (see Exhibit 7). Depreciation is
journalized through a JEV and recorded in the General Journal.
3. Financing charges. Financing charges on loans of the water utility include interest expense, service
fees, and other expenses related to a loan of the water utility. For ring-fencing purposes, these are
recorded in the books of the water utility even if the loan was obtained by the local government.
Financing charges should be calculated periodically, especially at year-end, and recorded through a JEV
and posted to the General Journal.
Preparation of Ring-Fenced Financial Statements
1. The accumulated cost and revenues data that are recorded on an accrual basis are reported in the
financial statements which are prepared by the water utility division.
2. The financial statements for the water utility following the interim accounting system are prepared to
enable the accurate reporting of the expenses and revenues of the utility as well as of the assets and
liabilities as of a certain date. The report is not intended to replace the report requirements of the
Commission on Audit, the Department of Finance, and other government regulatory agencies.
3. The following financial statements are prepared by the water utility division within 15 days after the end
of each month:
� Income Statement (see format in Exhibit 21).
� Balance Sheet (see format in Exhibit 22).
� Cash Flow Statement (see format in Exhibit 23).
4. A quarterly aging of accounts receivable (see Exhibit 18) is prepared and submitted to the head of the
water utility, the mayor, and the water board. It is used to monitor collection of past due accounts and to
evaluate the utility's collection efforts.
This step completes the ring-fencing of accounts of an LGU-run water utility. With the preparation of
ring-fenced financial statements, the water utility can now use these data to monitor and improve its
performance and provide monitoring and evaluation reports for its management, to the mayor, the
Sangguniang Bayan, and the water board.
Interim Accounting and Financial Reporting System 79
SUPPLEMENTARY
SECTIONS
The supplementary sections contain references that are not
specific to ring-fencing of accounts but are useful to a water
utility. The chart of accounts contains all the accounts that
may be used by a water utility. The billing and collection
section contains procedures and forms that supplement the
accounting for revenues referred to in this Guide. This
section may also be used by a water utility as a reference
on how to streamline its procedures from meter reading to
billing and collection of water bills and, hopefully, improve
its service to consumers as well as its operations.
CHART OF ACCOUNTS
Introduction
The ring-fenced financial accounting system of Local Government Unit (LGU) water utilities generally follows
the recommended Chart of Accounts under the New Government Accounting System (NGAS) of 2004 as
contained in Commission of Audit (COA) Circular 2004-008, dated September 20, 2004.
The water utility may add other account titles and/or subsidiary accounts, as appropriate, to enable the
accumulation of amounts for these transactions. Permission from the COA will be required before using
these accounts.
1. Additional Account Titles: Public Infrastructure Accounts
The ring-fenced financial accounting system differs from NGAS by depreciating all assets including those
classified under public infrastructure. The related accumulated depreciation and depreciation expenses for
the applicable public infrastructure accounts are inserted in this Chart of Accounts.
2. Subsidiary Account Titles: Other Business Income Accounts
Examples of subsidiary account titles are details of other business income, such as:
� Service connection fees.
� Reconnection fees.
� Meter maintenance fees.
The General Ledger Accounts are grouped under the following major categories and are assigned the
corresponding account codes:
Account code General Ledger account
100 Current Assets
200 Property, Plant, and Equipment
300 Accumulated Depreciation
400 Liabilities
500 Government Equity
600 Income Accounts
700 � 900 Expense Accounts
The detailed Chart of Accounts and their descriptions are presented in the following pages.
Chart of Accounts and Description
The following Chart of Accounts and their descriptions are lifted from the updated New Government
Accounting System for Local Government Units as per COA Circular 2004-008. Accounts not related to
water supply operations have been excluded.
83
Account Account title Normal Description
code balance
BALANCE SHEET
ACCOUNTS
ASSETS
CURRENT ASSETS
Cash
101 Cash in Vault Debit Amount of cash collected by the Treasurer of
the Philippines and the treasurers of Local
Government Units (LGUs) pending deposit
102 Cash-Collecting Officers Debit Amount of collections with the collecting
officers/postmasters/telegraph operators
pending deposit
103 Cash-Disbursing Officers Debit Amount of cash advances granted to
designated regular/special disbursing
officers/postmasters/telegraph operators for
payment of authorized official expenditures
or redemption of postal money orders and
telegraphic transfers subject for liquidation
104 Petty Cash Fund Debit Amount of cash granted to designated petty
cash custodian for payment of authorized
petty or miscellaneous expenses which
cannot be conveniently paid through check
108 Cash--National Treasury, Debit Amount of Notice of Cash Allocation
Modified Disbursements received from the Department of Budget and
System (MDS) Management and/or Notice of Transfer of
Allocation received from the central office/
regional office through which cash is
withdrawn with the issuance of MDS checks
110 Cash--Bangko Sentral Debit Cash in local currency deposited
ng Pilipinas with the Bangko Sentral ng Pilipinas
111 Cash in Bank-- Debit Cash in local currency deposited in current
Local Currency, account with authorized government
Current Account depository banks
112 Cash in Bank-- Debit Cash in local currency deposited in savings
Local Currency, account with authorized government
Savings Account depository banks
113 Cash in Bank-- Debit Cash in local currency placed with
Local Currency, authorized government depository bank for a
Time Deposits specified period of time
Receivables
121 Accounts Receivable Debit Amount due from customers arising from
services rendered, trading/business
transactions or sale of merchandise or
property
301 Allowance for Credit Amount of trade receivables estimated to
Doubtful Accounts be uncollectible
84 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
122 Notes Receivable Debit Amount of promissory notes/time drafts/
trade acceptances/other negotiable short-
term instruments received from trade debtors
123 Due from Officers and
Employees Debit Amount of cash advances granted for travel
and other collectibles from government
agency's officers and employees
144 Due from Other Funds Debit Amount due from other funds maintained by
the agency
149 Other Receivables Debit Amount due from other debtors not falling
under any of the specific receivable accounts
Inventories
155 Office Supplies Inventory Debit Amount of trade receivables estimated to
be uncollectible
156 Accountable Forms Inventory Debit Cost or appropriate value of accountable
forms purchased/acquired/ received for use
in the course of government operation
and/or sale
161 Gasoline, Oil and Lubricants Debit Cost of gasoline, oil and lubricants
Inventory purchased/received for use in government
operations
165 Other Supplies Inventory Debit Cost of supplies purchased/received for use
which cannot be classified under any of the
specific inventory accounts
167 Spare Parts Inventory Debit Cost of spare parts purchased/received for
the repair of government vehicles, aircrafts,
machineries and other equipment
168 Construction Materials Debit Cost of construction materials
Inventory purchased/received for use in the
construction, repair and rehabilitation of
government facilities
Prepayments
177 Prepaid Rent Debit Amount advanced/deposited for lease/
rentals of property, plant and equipment
used in government operations
178 Prepaid Insurance Debit Amount advanced for fidelity bond premiums
of accountable officers and insurance
premiums of insurable government property
179 Prepaid Interest Debit Amount advanced for interest of loans
contracted by the government
181 Advances to Contractors Debit Amount advanced to contractors as
authorized by law
185 Other Prepaid Expenses Debit Amount advanced for other expenses which
are not classified in the specific prepaid
accounts
Chart of Accounts 85
Account Account title Normal Description
code balance
189 Other Current Assets Debit Amount of other assets which cannot be
classified under any of the specific current
assets accounts
Investments
191 Investments in Treasury Bills Debit Amount placed in treasury bills issued by
Bureau of the Treasury
192 Investments in Stocks Debit Amount of authorized investments in stocks
193 Investments in Bonds Debit Amount of authorized investments in bonds
197 Other Investments and Debit Amount placed in other investments and
Marketable Securities marketable securities
PROPERTY, PLANT, AND
EQUIPMENT
Land and Land
Improvements
201 Land Debit Cost/appraised value of acquired land
202 Land Improvements Debit Cost/appraised value of land improvements
which are permanent or capital in nature
302 Accumulated Depreciation-- Credit Cumulative reduction in the value of the land
Land Improvements improvement due to use
Buildings
211 Office Buildings Debit Cost/appraised value of office buildings
constructed/acquired including related
improvements which are permanent or
capital in nature
311 Accumulated Depreciation-- Credit Cumulative reduction in the value of office
Office Buildings buildings due to use
215 Other Structures Debit Cost/appraised value of other structures
constructed/acquired including related
improvements which are permanent or
capital in nature
311 Accumulated Depreciation-- Credit Cumulative reduction in the value of other
Other Structures structures due to use
Leasehold Improvements
218 Leasehold Improvements, Debit Cost/appraised value of improvements made
Land on land under lease
318 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Leasehold Improvements, improvements made on land under lease due
Land to use
219 Leasehold Improvements, Debit Cost/appraised value of improvements made
Buildings on buildings under lease
319 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Leasehold Improvements, improvements made on buildings under
Buildings lease due to use
86 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
220 Other Leasehold Debit Cost/appraised value of improvements made
Improvements on other properties under lease
320 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Other Leasehold improvements made on other properties
Improvements under lease due to use
Office Equipment,
Furniture, and Fixtures
221 Office Equipment Debit Cost/appraised value of office equipment
acquired
321 Accumulated Depreciation-- Credit Cumulative reduction in the value of office
Office Equipment equipment due to use
222 Furniture and Fixtures Debit Cost/appraised value of furniture and
fixtures acquired
322 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Furniture and Fixtures furniture and fixtures due to use
223 IT Equipment and Software Debit Cost/appraised value of IT equipment and
software acquired
323 Accumulated Depreciation-- Credit Cumulative reduction in the value of IT
IT Equipment equipment due to use
224 Library Books Debit Cost/appraised value of library books
acquired
324 Accumulated Depreciation-- Credit Cumulative reduction in the value of library
Library Books books due to use
Machineries and
Equipment
226 Machineries Debit Cost/appraised value of machinery acquired
326 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Machineries machinery due to use
229 Communication Equipment Debit Cost/appraised value of communication
equipment acquired
329 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Communication Equipment communication equipment due to use
231 Firefighting Equipment and Debit Cost/appraised value of firefighting
Accessories equipment and accessories acquired
Accumulated Depreciation-- Credit Cumulative reduction in the value of
Firefighting Equipment and firefighting equipment and accessories due
Accessories to use
233 Medical, Dental, and Debit Cost/appraised value of medical, dental, and
Laboratory Equipment laboratory equipment acquired
333 Accumulated Depreciation-- Credit Cumulative reduction in the value of medical,
Medical, Dental, and dental, and laboratory equipment due to use
Laboratory Equipment
Chart of Accounts 87
Account Account title Normal Description
code balance
236 Technical and Scientific Debit Cost/appraised value of technical and
Equipment scientific equipment acquired
336 Accumulated Depreciation-- Credit Cumulative reduction in the value of
Technical and Scientific technical and scientific equipment due to use
Equipment
240 Other Machineries and Debit Cost/appraised value of other machineries
Equipment and equipment acquired
340 Accumulated Depreciation-- Credit Cumulative reduction in the value of other
Other Machineries and machineries and equipment due to use
Equipment
Transportation Equipment
241 Motor Vehicles Debit Cost/appraised value of motor vehicles
acquired
341 Accumulated Depreciation-- Credit Cumulative reduction in the value of motor
Motor Vehicles vehicles due to use
248 Other Transportation Debit Cost/appraised value of other transportation
Equipment equipment acquired
348 Accumulated Depreciation-- Credit Cumulative reduction in value of other
Other Transportation transportation equipment due to use
Equipment
250 Other Property, Plant, and Debit Cost/appraised value of other property,
Equipment plant, and equipment acquired not falling
under any of the specific property, plant, and
equipment account
350 Accumulated Depreciation-- Credit Cumulative reduction in the value of other
Other Property, Plant, and property, plant, and equipment due to use
Equipment
Public Infrastructures
254 Artesian Wells, Reservoirs, Debit Cost/appraised values of artesian wells,
Pumping Stations, and reservoirs, pumping stations, and conduits
Conduits constructed/acquired
354 Accumulated Depreciation-- Credit Cumulative reduction in the value of artesian
Artesian Wells, Reservoirs, wells, reservoirs, pumping stations, and
Pumping Stations and conduits due to use
Conduits 1
260 Other Public Infrastructures Debit Cost/appraised value of other public
infrastructures constructed/acquired which
cannot be classified under any specific type
of public infrastructures
260 Accumulated Depreciation-- Credit Cumulative reduction in the value of other
Other Public Infrastructures1 public infrastructures constructed/acquired
which cannot be classified under any specific
type of public infrastructures due to use
1.
This account title will require COA approval prior to its use
88 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
Construction in Progress
269 Construction in Progress-- Debit Cost/appraised value of artesian wells,
Artesian Wells, Reservoirs, reservoirs, pumping stations, and conduits
Pumping Stations, and which are still under construction
Conduits
273 Construction in Progress-- Debit Cost/appraised value of other public
Other Public Infrastructures infrastructure projects which are still under
construction
274 Construction in Progress-- Debit Cost/appraised value of upland reforestation
Reforestation--Upland projects which are still under construction
290 Other Assets Debit Cost/appraised value of serviceable assets
not used in operation and those waiting for
disposal
LIABILITIES
CURRENT LIABILITIES
401 Accounts Payable Credit Amount of indebtedness arising from trade/
business
402 Notes Payable Credit Amount of liabilities arising from the
issuance of promissory notes/trade
acceptances and other negotiable short-term
instruments
403 Due to Officers and Credit Amount of liabilities due to officers and
Employees employees of the agency
409 Interest Payable Credit Amount of unpaid charges arising from the
use of borrowed money
411 Due to National Treasury Credit Amount due to the National Treasury
412 Due to BIR Credit Amount of taxes due/amount withheld for
remittance to the Bureau of Internal Revenue
(BIR)
413 Due to GSIS Credit Contributions due/collections received/
amounts withheld for remittance to the
Government Service Insurance System
(GSIS)
414 Due to Pag-Ibig Credit Contributions due/collections received/
amounts withheld for remittance to the
Home Development Mutual Fund
415 Due to PhilHealth Credit Contributions due/collections received/
amounts withheld for remittance to the
Philippine Health Insurance Corporation
416 Due to Other NGAs Credit Amount received from other national
government agencies for the implementation
of specific programs/projects subject to
liquidation
424 Due to Other Funds Credit Amount received/withheld for the account of
other funds
Chart of Accounts 89
Account Account title Normal Description
code balance
426 Guaranty Deposits Payable Credit Liability arising from cash received to
guaranty performance which are refundable
to the depositor
427 Performance/Bidders/Bail Credit Liability arising from the receipt of cash bond
Bonds Payable to guarantee the performance of the
contract/court order
439 Other Payables Credit Other liabilities not falling under any of the
specific liability accounts
LONG-TERM LIABILITIES
444 Loans Payable--Domestic Credit Long-term indebtedness to domestic
creditors covered by a contract/ agreement
445 Loans Payable--Foreign Credit Long-term indebtedness to foreign creditors
covered by a contract/ agreement
450 Other Long-Term Liabilities Credit Other long-term liabilities not falling under
any of the specific long-term liability
accounts
EQUITY
GOVERNMENT EQUITY
501 Government Equity Credit Difference between the assets and the
liabilities of the agency
510 Retained Earnings Credit Cumulative net earnings of the corporation
INTERMEDIATE ACCOUNTS
512 Income and Expense Credit A summary account for all subsidies
Summary received, revenues earned, and expenses
incurred during the year
513 Retained Operating Surplus Credit Net results of agency operation
INCOME STATEMENT
ACCOUNTS
INCOME
639 Income from Waterworks Credit Income from the operation of waterworks
Systems system
648 Other Business Income Credit Income which is not classified under specific
business income accounts
639-01 New Connection Fees2 Credit Income from making new service
connections
639-02 Reconnection Fee2 Credit Income from reconnecting a previously
disconnected connection
639-03 Meter Maintenance Fee2 Credit Income from fees collected from customers
for the routine maintenance of their water
meters
2.
This account title will require COA approval prior to its use.
90 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
648-19 Other Water Operating Credit Income from operations of the
Revenues2 waterworks system which cannot be
classified in the other business income
accounts
649 Fines and Penalties-- Credit Fines and penalties charged to business
Business Income income
657 Subsidy from Other Funds Credit Amount of subsidy received from other funds
661 Dividend Income Credit Cash dividends earned from investments
in stocks
662 Income from Grants and Credit Amount of grants/donations received in cash
Donations or in kind
664 Interest Income Credit Interest on deposits with banks/loans/
investments
678 Miscellaneous Income Credit Income earned which are not classified under
the specific income accounts
681 Gain/Loss on Foreign Credit / Amount of gain/loss in the conversion of
Exchange (FOREX) Debit foreign currencies to local currency
682 Gain/Loss on Sale of Credit / Amount of gain/loss on sale of disposed
Disposed Assets Debit assets
683 Gain/Loss on Sale of Credit / Amount of gain/loss on sale of bonds/
Securities Debit securities
684 Prior Years' Adjustments Credit / Adjustment of prior years' income earned/
Debit expenses incurred
EXPENSES
PERSONAL SERVICES
Salaries and Wages
701 Salaries and Wages--Regular Debit Pay proper of regular government employees
for services rendered
703 Salaries and Wages-- Debit Pay proper of part-time government
Part-time employees for services rendered
704 Salaries and Wages-- Debit Pay proper of substitute government
Substitute employees for services rendered
705 Salaries and Wages--Casual Debit Pay proper of casual government employees
for services rendered
706 Salaries and Wages-- Debit Pay proper of contractual government
Contractual employees for services rendered
707 Salaries and Wages-- Debit Pay proper of emergency government
Emergency employees for services rendered
Other Compensation
711 Personnel Economic Relief Debit Allowance granted to all appointive
Allowance (PERA) government employees
Chart of Accounts 91
Account Account title Normal Description
code balance
712 Additional Compensation Debit Allowance granted to all government
(ADCOM) personnel whether regular/casual on
temporary status/contractual
713 Representation Allowance Debit Allowance granted to authorized officials and
(RA) employees while in the actual performance of
their respective functions
714 Transportation Allowance Debit Allowance granted to authorized officials/
(TA) employees for transportation
715 Clothing/Uniform Allowance Debit Allowance to authorized government
officials/employees for clothing/uniform
716 Subsistence, Laundry and Debit Allowances to authorized government
Quarter Allowance officials/employees for subsistence, laundry
and quarters
717 Productivity Incentive Debit Incentive to authorized government officials/
Allowance employees for good performance
718 Overseas Allowance Debit Allowance to authorized government
officials/employees on foreign assignment
719 Other Bonuses and Debit Other authorized bonuses and allowances to
Allowances government officials/employees which are
not classified under the specific accounts
720 Honoraria Debit Amount due to government officials/
employees in recognition of their expertise,
broad and superior knowledge in specific
fields
721 Hazard Pay Debit Amount due to government officials/
employees assigned in difficult/ dangerous/
strife-torn/embattled areas as certified by
appropriate government body and to those
whose lives are directly exposed to work
conditions which may cause injury/sickness/
death/harmful change in the human
organism
722 Longevity Pay Debit Compensation to government officials and
employees for long services rendered
723 Overtime and Night Pay Debit Compensation to authorized government
employees for working in excess of the
minimum hours
724 Cash Gift Debit Amount granted to government officials and
employees
725 Year End Bonus Debit Christmas bonus to government officials and
employees
Personnel Benefits
Contributions
731 Life and Retirement Debit Government's share in premium
Insurance Contributions contributions to the government service
insurance system
92 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
732 Pag-Ibig Contributions Debit Government's share in premium
contributions to the Home Development
Mutual Fund
733 PhilHealth Contributions Debit Government's share in premium
contributions to health insurance fund with
the Philippine Health Insurance Corporation
734 ECC Contributions Debit Government's share in premium
contributions to the Employees'
Compensation Commission (ECC)
Other Personnel Benefits
738 Pension Benefits--Civilian Debit Amount of pension to government officers
and employees and/or their dependents
740 Retirement Benefits--Civilian Debit Amount of retirement pay to government
officers and employees and/or their
dependents
742 Terminal Leave Benefits Debit Money value of the accumulated leave credits
of government officials and employees
743 Health Workers Benefits Debit Amount of benefits given to health workers
749 Other Personnel Benefits Debit Amount of benefits not classified under the
specific personnel benefits accounts
MAINTENANCE AND
OTHER OPERATING
EXPENSES
Traveling Expenses
751 Traveling Expenses--Local Debit Expenses in the movement of persons within
the country whether employed in the
government or not, such as transportation
and travel per diems, hire of guides, ferriage,
and all other similar expenses
752 Traveling Expenses--Foreign Debit Expenses in the movement of persons
outside the country whether employed in the
government or not such as transportation
and travel per diems, passport processing,
and so on
Training and Scholarship
Expenses
753 Training Expenses Debit Expenses for participation/attendance in
training, conventions and seminars/
workshops. It also includes expenses
incurred related to training, such as
payment of honoraria to lecturers, hand outs,
supplies and materials used, and meals and
snacks
754 Scholarship Expenses Debit Expenses for scholarships granted to
government personnel
Chart of Accounts 93
Account Account title Normal Description
code balance
Supplies and Materials
Expenses
755 Office Supplies Expenses Debit Cost/value of office/janitorial/IT supplies,
and so forth, issued/used
756 Accountable Forms Expenses Debit Cost of accountable forms issued/used
760 Medical, Dental, and Debit Cost of medical, dental and laboratory
Laboratory Supplies supplies used in government operations/
Expenses projects
761 Gasoline, Oil, and Lubricants Debit Cost of gasoline, oil and lubricants
Expenses consumed by government vehicles and other
equipment in connection with government
operations/projects
763 Textbooks and Instructional Debit Cost of books and instructional materials
Materials Expenses distributed to public schools
765 Other Supplies Expenses Debit Cost of other supplies and material not
classified under the specific supplies
expense accounts used in government
operations
Utility Expenses Debit
766 Water Expenses Debit Costs of water consumed in government
operations/projects
767 Electricity Expenses Debit Cost of electricity consumed in government
operations/projects
Communication Expenses
771 Postage and Deliveries Debit Cost of postage/delivery of official forms/
documents/records, and so on
772 Telephone Expenses-- Debit Cost of transmitting messages through
Landline telephone landlines
773 Telephone Expenses--Mobile Debit Cost of transmitting messages through
mobile phones
774 Internet Expenses Debit Cost of transmitting messages through the
internet
775 Cable, Satellite, Telegraph, Debit Cost of transmitting messages through
and Radio Expenses cables/satellites/telegrams/radio services
778 Membership Dues and Debit Membership dues/contributions/fees to
Contributions to professional/recognized organizations
Organizations
780 Advertising Expenses Debit Cost of advertisement in newspapers/
magazines/television/radio/other forms of
media
781 Printing and Binding Debit Cost for the printing/binding of manuscripts/
Expenses documents in government operations/
projects
94 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
782 Rent Expenses Debit Expenses for the use of facilities/equipment,
and so on
783 Representation Expenses Debit Expenses for official meetings/conferences/
entertainments
784 Transportation and Delivery Debit Cost of transporting government inventory/
Expenses property/equipment
785 Storage Expenses Debit Cost of storing government goods/properties
786 Subscriptions Expenses Debit Cost of subscription to library/other reading
materials
787 Survey Expenses Debit Expenses in the conduct of survey of
government property
Professional Services
791 Legal Services Debit Cost of authorized legal services rendered by
private lawyers
792 Auditing Services Debit Cost of services rendered by auditors and
billed by the Commission on Audit
793 Consultancy Services Debit Cost of hiring consultants for special/
technical services not available in the
concerned agency
794 Environment/Sanitary Debit Cost of services for the upkeep of the
Services environment and maintenance of sanitation
795 General Services Debit Expenses for general services such as
carpentry/plumbing/electrical, and so on
796 Janitorial Services Debit Cost of janitorial services under contract
with the government
797 Security Services Debit Cost of security services under contract with
the government
799 Other Professional Services Debit Cost of other professional services
contracted by the agency not classified
under specific professional services
accounts
Repairs and Maintenance
802 Repairs and Maintenance-- Debit Cost of repairing and maintaining land
Land Improvements improvements
811 Repairs and Maintenance-- Debit Cost of repairing and maintaining office
Office Buildings buildings
815 Repairs and Maintenance-- Debit Cost of repairing and maintaining structures
Other Structures other than those classified under specific
maintenance accounts
818 Repairs and Maintenance-- Debit Cost of repairing and maintaining
Leasehold Improvements, improvements on land leased by the
Land government
Chart of Accounts 95
Account Account title Normal Description
code balance
819 Repairs and Maintenance-- Debit Cost of repairing and maintaining
Leasehold Improvements, improvements on buildings leased by the
Buildings government
820 Repairs and Maintenance-- Debit Cost of repairing and maintaining
Other Leasehold improvements other than those classified
Improvements under specific repairs and maintenance--
leasehold improvements accounts
821 Repairs and Maintenance-- Debit Cost of repairing and maintaining office
Office Equipment equipment
822 Repairs and Maintenance-- Debit Cost of repairing and maintaining furniture
Furniture and Fixtures and fixtures
823 Repairs and Maintenance-- Debit Cost of repairing and maintaining IT
IT Equipment and Software equipment and software
826 Repairs and Maintenance-- Debit Cost of repairing and maintaining machinery
Machineries
829 Repairs and Maintenance-- Debit Cost of repairing and maintaining
Communication Equipment communication equipment
831 Repairs and Maintenance-- Debit Cost of repairing and maintaining firefighting
Firefighting Equipment and equipment and accessories
Accessories
833 Repairs and Maintenance-- Debit Cost of repairing and maintaining medical,
Medical, Dental, and dental and laboratory equipment
Laboratory Equipment
836 Repairs and Maintenance-- Debit Cost of repairing and maintaining technical
Technical and Scientific and scientific equipment
Equipment
840 Repairs and Maintenance-- Debit Cost of repairing and maintaining other
Other Machineries and machinery and equipment not specifically
Equipment included in the other accounts
841 Repairs and Maintenance-- Debit Cost of repairing and maintaining motor
Motor Vehicles vehicles
848 Repairs and Maintenance-- Debit Cost of repairing and maintaining other
Other Transportation transportation equipment
Equipment
850 Repairs and Maintenance-- Debit Cost of repairing and maintaining other
Other Property, Plant, and types of property, plant and equipment not
Equipment classified under specific repairs and
maintenance accounts
854 Repairs and Maintenance-- Debit Cost of repairing and maintaining artesian
Artesian Wells, Reservoirs, wells, reservoirs, pumping stations and
Pumping Stations, and conduits
Conduits
860 Repairs and Maintenance-- Debit Cost of repairing and maintaining other
Other Public Infrastructures public infrastructures
96 Guide to Ring-Fencing of Local Government-Run Water Utilities
Account Account title Normal Description
code balance
861 Repairs and Maintenance-- Debit Cost of repairing and maintaining upland
Reforestation--Upland reforestation projects
878 Donations Debit Amount of donations to other levels of
government/individuals/ institutions
884 Miscellaneous Expenses Debit Amount of expenses other than those
classified under specific confidential,
intelligence, and extraordinary expense
accounts
891 Taxes, Duties and Licenses Debit Amount of expenses for taxes, duties, and
licenses
892 Fidelity Bond Premiums Debit Premiums on fidelity bond of accountable
officers
893 Insurance Expenses Debit Premiums for the insurance of government
properties
901 Bad Debts Expense Debit Amount of receivables estimated to be
uncollectible
Depreciation
902 Depreciation--Land Debit Depreciation charges for the period on land
Improvements improvements
911 Depreciation--Office Debit Depreciation charges for the period on office
Buildings buildings
915 Depreciation--Other Debit Depreciation charges for the period on other
Structures structures
916 Depreciation--Artesian Wells, Debit Depreciation charges for the period on
Reservoirs, Pumping artesian wells, reservoirs, pumping stations,
Stations, and Conduits3 and conduits
917 Depreciation--Other Public Debit Depreciation charges for the period on other
Infrastructures3 public infrastructures
918 Depreciation--Leasehold Debit Depreciation charges for the period on
Improvements, Land leasehold improvements, land
919 Depreciation--Leasehold Debit Depreciation charges for the period on
Improvements, Buildings leasehold improvements, buildings
920 Depreciation--Other Debit Depreciation charges for the period on other
Leasehold Improvements leasehold improvements
921 Depreciation--Office Debit Depreciation charges for the period on office
Equipment equipment
922 Depreciation--Furniture and Debit Depreciation charges for the period on
Fixtures furniture and fixtures
923 Depreciation--IT Equipment Debit Depreciation charges for the period on IT
equipment
924 Depreciation--Library Books Debit Depreciation charges for the period on library
books
3.
This account title will require COA approval prior to its use.
Chart of Accounts 97
Account Account title Normal Description
code balance
926 Depreciation--Machineries Debit Depreciation charges for the period on
machinery
929 Depreciation-- Debit Depreciation charges for the period on
Communication Equipment communication equipment
931 Depreciation--Firefighting Debit Depreciation charges for the period on
Equipment and Accessories firefighting equipment and accessories
933 Depreciation--Medical, Debit Depreciation charges for the period on
Dental, and Laboratory medical, dental and laboratory equipment
Equipment
936 Depreciation--Technical and Debit Depreciation charges for the period on
Scientific Equipment technical and scientific equipment
940 Depreciation--Other Debit Depreciation charges for the period on other
Machineries and Equipment machineries and equipment
941 Depreciation--Motor Vehicles Debit Depreciation charges for the period on motor
vehicles
948 Depreciation--Other Debit Depreciation charges for the period on other
Transportation Equipment transportation equipment
950 Depreciation--Other Debit Depreciation charges for the period on other
Property, Plant, and property, plant and equipment
Equipment
951 Obsolescence--IT Software Debit Reduction in the book value of IT software
due to obsolescence/technological
innovation and change in government
policies
961 Loss of Assets Debit Amount of loss suffered by government due
to theft/fortuitous events/calamities/civil
unrest
969 Other Maintenance and Debit Expenses not otherwise classified under the
Operating Expenses specific maintenance and other operating
expense accounts
FINANCIAL EXPENSES
971 Bank Charges Debit Amount charged by a bank for various
services rendered
972 Commitment Fees Debit Amount charged by creditors for
unwithdrawn amount of loans
974 Documentary Stamps Debit Cost of documentary stamp issued/used in
Expenses government transactions
975 Interest Expenses Debit Charges for the use of borrowed money
979 Other Financial Charges Debit Charges which are not classified under the
specific financial expense accounts
98 Guide to Ring-Fencing of Local Government-Run Water Utilities
BILLING AND COLLECTIONS
Definition
This billing and collection system refers to how water consumption by customers is recorded, billed, and
collected. This system was developed for a local government-run (LGU-run) water utility. But it may also be
adopted by a water cooperative, a rural waterworks and sanitation association or a small private water utility.
For an LGU-run water utility, it is assumed that the accrual method of accounting is adopted, where revenues
are recognized at the time of issuance of the water bill, and not upon collection, and where accounts
receivable are recorded for uncollected water bills.
Scope
The billing and collection system covers the procedures for:
� Meter reading.
� Billing of water consumption by consumers.
� Billing adjustments.
� Collection of water bills.
� Collection of other receipts such as guarantee deposits, connection fees, and other miscellaneous fees.
This section also includes procedures on how customer accounts are created, as well as the procedures on
initiating maintenance of water meters and other parts of the waterworks system:
� Service application.
� Service disconnection.
� Meter maintenance.
This Guide also presents the policy statements that would support the implementation of the above
procedures.
Policy Statements
Definition of Responsibilities
The billing activities are carried out initially by the billing/posting clerk and the meter readers. The collection
procedures are undertaken by the bill collectors/cashier and by the billing/posting clerk. The transactions
being carried out under the billing and collection process all pass through the department heads for checking
and proper approval.
All collection activities of the water utility are carried out daily within the treasurer's office (TO). The overall
function pertaining to collections still remains with the TO. The functions of the revenue collection clerks aim
99
to augment the TO's responsibilities as far as collection of water bills is concerned and is not to be construed
as a replacement. The role of the water utility as an economic enterprise is centered in the monitoring of its
daily collections, follow up on delinquent accounts, and in the preparation of daily and monthly reports on
the revenues raised and collected as well as the status or ageing of its accounts receivables.
BASIC FEATURES
METER READING
Ideally, the waterworks' service area should be divided into meter reading zones where each zone covers
about 100 customers, or enough water meters that can be read in one day. There should be enough meter
readers to read all the zones within the working days of the month (excluding Saturdays, Sundays, and
holidays).
Before the meter reader goes around to read meters, water bills are partially filled up with customer's data
such as the name, account number, service address, previous meter reading, and unpaid bills and penalties, if
any. These water bills should be prepared in the sequence of the meter reading route.
As the meter reader reads the water meter, he records the reading on the water bill, computes for the volume
consumed, writes down the peso equivalent of the consumption, and adds any unpaid bills and penalties to
get the total water bill due.
In the course of his rounds, if the meter reader observes any leakages, defective meters, pipes or connections,
he fills up a meter maintenance order form (Exhibit 51) so that appropriate action can be taken by the
technical department. This form may also be used for routine maintenance and testing of installed water
meters and even for disconnection of meters of delinquent accounts.
BILLING
Water bills are filled up in the office with the name, address, customer number, meter number, unpaid water
bill and penalty, and other data except the current meter reading. The meter reader brings these partially filled
up water bills in his rounds. After the meter reader completes the water bills, these are recorded and posted to
the customers' water service record. They are then given to the collector/cashier for collection. Bills that
remain uncollected at the end of the month are returned to the billing/posting clerk where a penalty is added
to the outstanding bill and/or a disconnection notice is prepared.
Complaints on water bills issued are investigated and corrected, if warranted, through the issuance of a
journal voucher correcting the water bill for approval by the department head. The journal voucher is posted
to the General Ledger and to the corresponding customer's water service record.
COLLECTION
The collection of water bills is scheduled on specific dates during the month. Due dates usually remain the
same every month. Payments can be done either at the waterworks system's office or at the TO.
The waterworks should have a policy on delinquent accounts and disconnections. By strictly enforcing this
policy, the waterworks will have a good collection efficiency record, and maintain a good cash balance to pay
current obligations. Usually, a grace period of five days from the due date is tolerated before temporary
disconnection is made. Permanent disconnection is made if the bill remains unpaid for another month.
All accountable officers and employees should be bonded. An official receipt should be issued by the bill
collector/cashier for all collections. All collections are to be turned over to the city TO and to be deposited to
the bank within the next banking day.
100 Guide to Ring-Fencing of Local Government-Run Water Utilities
USE OF CUSTOMER ACCOUNT NUMBER
A customer account number is assigned to each customer indicating the location of the connection,
classification of the customer, meter size, and account number.
The customer account number consists of eight digits (sequenced thus: 00-0-0-0000):
� The first two digits represent the zone number (or barangay).
� The third digit represents the customer classification code (for example, residential, commercial,
institutional, and so on).
� The fourth digit represents the code for the meter size of the connection (for example, 1 for a �-inch
connection, 2 for a �-inch connection, and so on).
� The last four digits represent the customer's number.
Preferably, customers' numbers should be assigned in numerical sequence following the meter reading
route. Vacant lots and houses without service connections are to be provided a reserved number to
maintain the sequence. Account 0001 should be where the meter reader starts and the last number is
where he ends his route for a particular zone.
A master list of service connections (Exhibit 52) can be maintained to keep track of the number of service
connections made to date, and whether they are active or not.
CLASSIFICATION OF SERVICE CONNECTION
The classification of water service connection is basically divided into three groups (a) residential; (b)
commercial; and (c) industrial. The definition of these customer categories vary among utilities but can be
generally defined as:
� Residential usually pertains to private households which consume water for daily household activities
such drinking, washing, cooking, and laundry.
� Commercial usually pertains to establishments where trade or business or professional service is carried
out for profit. This may also include nonresidential or nonindustrial business enterprises and other
establishments where the Government, by notification, declared such establishment as commercial.
The Commercial group could be further subdivided since this may involve diverse firms or
establishments. This group can be categorized as Commercial A, B or C, where:
� Commercial A may include businesses that do not use water as part of their business, such as groceries,
gift shops, photo services, offices, drugstores, wholesale and retail outlets, and furniture shops.
� Commercial B may include businesses where their business uses water in their operations, such as
restaurants, beauty salons, and car washes.
� Commercial C may include apartments where there is only one central meter for all the households
occupying the apartments.
� Industrial pertains to manufacturing or construction firms. This may also include mining, fishing, and
forestry establishments.
There are other forms of selling water to special customers.
� There is wholesale or bulk sale, where water is sold to a customer who resells this water to other
individual consumers within a specified service area.
� There are also sales to institutions like government offices, schools, churches and mosques and
hospitals.
� Another form of water sale is for fire protection. This is a stand-by service that provides large quantities of
water in the transmission lines for use in the event of fire or calamities.
Billing and Collections 101
Narrative Procedures
Meter Reading
See also Flow Chart 1: Meter Reading Procedures.
Responsible staff/unit Activity
Billing/posting clerk 1. Based on the sequence of the meter reading route (Exhibit 44), prepares
water bill (Exhibit 43) in triplicate by filling up these data:
� Address of customer;
� Name of consumer; and
� Customer account number.
2. Retrieves the consumer's water service record (Exhibit 45) and copies
these data into the water bill:
� Meter number;
� Previous month's meter reading;
� Amount of unpaid bills;
� Penalty on unpaid bills, if applicable; and
� Adjustments from previous bill.
3. Fills up the due date for payment of the water bill.
Meter reader 4. Receives the partially filled up water bills from the billing/posting clerk.
Reads the water meter and completes the water bill with these data:
� Current meter reading;
� Volume consumed this period, computed as:
� Current meter reading
� Less: Previous month's meter reading
� Amount due, by finding the equivalent water bill for the volume
consumed in the water rates table (Exhibit 46); and
� Total amount due, by adding the amount due for this month and the
amount of unpaid bills from previous months.
5. Initials the water bill.
6. Gives copy 1 of the water bill to the consumer. If the consumer is not
around, leaves the water bill in a conspicuous place.
7. At the end of the day, hands over to the billing/posting clerk copies 2 and
3 of water bills for water meters that have been read.
Billing
See Flow Chart 2: Billing Procedures.
Responsible staff/unit Activity
Billing/posting clerk 1. Receives copies 2 and 3 of water bills served, from meter readers. Checks
correctness of computation of volume used and amount of water bill due.
2. Summarizes water bills issued in the report of daily water bills issued
(Exhibit 36) in three copies. This report contains these data:
� Customer name, number, and type;
� Meter reading (m3) of current and previous month;
� Volume consumed;
102 Guide to Ring-Fencing of Local Government-Run Water Utilities
Responsible staff/unit Activity
� Amount of water bill for above consumption;
� Unpaid water bill, previous month;
� Penalty charges on bills unpaid as of previous month; and
� Total water bill due.
Then forwards, on a daily basis, this report and corresponding water bills
(copy 2) to the waterworks head.
3. Posts to the corresponding consumer's water service record (Exhibit 45)
the following data from the water bill:
� Meter reading date;
� Water bill number;
� Current reading;
� Consumption this period; and
� Amount due this period.
4. Files copy 3 of water bills numerically and copy 3 of the daily water bills
issued by date.
Waterworks head 5. Receives the daily water bills issued (two copies) and the corresponding
water bills from the billing/posting clerk. Counts the water bills received
and checks with the quantity in the daily water bills issued.
6. Test checks correctness of water bills computation and penalty charges.
A journal entry will be prepared to correct any error. The correction will be
reflected in the succeeding month's water bill, and forwards the
documents to:
� Bookkeeper: Daily water bills issued copy 1; and
� Collector: Daily water bills issued copy 2, and all water bills copy 2.
Bookkeeper 7. Receives from the waterworks head the daily water bills issued copy 1,
records total amount of current water bills for the month in the bill
register, and files the daily billing summaries by date.
Billing Adjustments
These procedures apply to adjustments in water bills because of errors in meter reading and/or computation
of the water bill.
Responsible staff/unit Activity
Billing/posting clerk 1. If there is a complaint on the billed consumption or in the computation of
the water bill, investigates the meter reading and the computation.
2. If the complaint warrants an adjustment of the water bill, brings this to the
attention of the bookkeeper.
Bookkeeper 3. Verifies the complaint and the propriety of an adjustment of the water bill.
4. If warranted, adjusts the water bill by preparing a Journal Entry Voucher,
or JEV (Exhibit 35), in two copies and submits this to the waterworks
head.
Billing and Collections 103
Responsible staff/unit Activity
Waterworks head 5. Reviews the propriety of the adjustment and approves the JEV. Returns
both copies of the JEV and the supporting water bill and complaint
document to the bookkeeper.
Bookkeeper 6. Forwards copy 2 of JEV to the billing/posting clerk, posts the JEV to the
General Ledger, and files the JEV copy 1 with the supporting documents
numerically.
Billing/posting clerk 7. Posts the JEV correcting the customer's water bill in the customer's water
service record based on copy 2, and files the JEV by customer name. The
correction is reflected in the succeeding water bill.
Collections
See also these flow charts:
� Flow Charts 3 and 4: Water Bill Collections: Daily Activities; and
� Flow Chart 5: Water Bill Collections: Monthly Activities.
Responsible staff/unit Activity
Daily Activities
Revenue collection clerk 1. Daily, receives these reports from the waterworks head:
� Daily water bills issued (copy 2); and
� Water bills supporting each daily water bill issued.
Then, checks completeness of water bills listed in the daily water bills
issued, and correctness of amounts.
2. Records total number of water bills received and amount of these bills in
collector's accountability report (two copies), Exhibit 47.
3. Sorts water bills numerically and files these temporarily awaiting their
payment.
4. When a consumer comes to pay, receives copy 1 of the water bill from the
consumer and the corresponding payment. Retrieves copy 2 from the
numerical file.
5. Prepares an official receipt (Exhibit 33) in three copies, indicating these
data in them:
� Date of collection;
� Name of customer;
� Customer account number;
� Amount received;
� Form of payment � cash or check; and
� Check number, if payment is by check.
6. Stamps copies 1 and 2 of the water bill with `PAID', and distributes the
official receipt and water bill as follows:
� Official receipt copy 1: To consumer, together with copy 1 of the water
bill;
104 Guide to Ring-Fencing of Local Government-Run Water Utilities
Responsible staff/unit Activity
� Official receipt copy 2: To the municipal treasurer together with copy 2
of the water bill and abstract of daily collection; and
� Official receipt copy 3: Stub file.
7. At the end of the day, summarizes water bills collected in the abstract of
daily collections (Exhibit 48) in two copies, with the following data:
� Official number;
� Water bill number;
� Customer account number;
� Customer name; and
� Amount received, classified into:
� Current bill;
� Arrears--for consumption, penalties; and
� Other charges.
8. Updates the collector's accountability report for water bills collected.
9. Remits all collections together with the abstract of daily collections
(Exhibit 48) and the matching official receipts (copy 2) to the municipal
treasurer for verification and approval.
Municipal treasurer 10. Checks that total cash received from water bills corresponds to total in
abstract of daily collections.
11. Deposits in the bank account of the waterworks all collections of water
bills together with other nonwater bill collections.
Billing/posting clerk 12. Checks that the total in the abstract and the sum of the amounts in the
official receipt tally. Posts each official Receipt and paid Water Bill to the
corresponding Consumer's Water Service Record.
Monthly Activities
Revenue collection clerk 13. At the end of the month, summarizes water bills not collected in the
report of unpaid bills (Exhibit 49) in three copies.
14. Updates the collector's accountability report for unpaid water bills and
forwards these to the waterworks head:
� Collector's accountability report (copy 1);
� Report of unpaid bills (copy 1); and
� Corresponding unpaid water bills (copy 2);
Then, files these reports by date:
� Collector's accountability report (copy 2); and
� Report of unpaid bills (copy 2).
Waterworks head 15. Files unpaid water bills temporarily by water bill number, for inclusion in
the next batch of water bills to be assigned to the bill collector, together
with the next month's collector's accountability report.
Forwards these to the municipal accountant to control water bills:
� Collector's accountability report (copy 1); and
� Report of unpaid bills (copy 1).
Municipal accountant 16. Checks collector's accountability report (copy 1) to ensure that the ending
balance of the bill collector's accountability is correct.
Billing and Collections 105
Miscellaneous Receipts
Responsible staff/unit Activity
Revenue collection clerk 1. Asks payor for type of payment.
2. Receives payment from customer.
3. Issues official receipt in triplicate, indicating the nature of payment, and
distributes these as follows:
� Copy 1 to the payor;
� Copy 2 to the cashier; and
� Copy 3 into the stub file.
4. Includes the official receipts for this type of payment in the abstract of
daily collections (Exhibit 48).
Service Application
Responsible staff/unit Activity
Customer service clerk 1. Receives service application form (Exhibit 50) from the applicant.
2. Verifies the name and address of the applicant and determines if the
application is for a new connection or from a delinquent customer
applying for a reconnection.
� If application is for an entirely new location, forwards the service
application form to the utility man for the next process. But if the
applicant is not the owner of the property or building where the
service will be installed, asks applicant to first secure approval and
signature of owner of the property or building on the service
application form.
� If application is for reconnection of a previously disconnected line,
asks applicant to settle the unpaid water bill and pay for the
reconnection fee and other charges first.
3. When the above requirements are fulfilled, forwards the service
application form to the utility man for an evaluation and assessment
of the applicant's premises.
Utility man 4. Receives the service application form in three copies from the customer
service clerk.
5. Verifies the distribution system for adequacy of the network to reach and
service the application.
6. If the site cannot be served by the network, fills up the appropriate box in
the service application form
7. If the site is within the network, inspects the site of the service
connection, and the adequacy of the plumbing and other materials of the
applicant.
8. Returns the form to the customer service clerk to inform the applicant
about the status of the application.
106 Guide to Ring-Fencing of Local Government-Run Water Utilities
Responsible staff/unit Activity
Customer service clerk 9. If the proposed site of the connection cannot be served by the network,
informs the applicant about this.
10. If the proposed connection can be installed, writes the amount of fees
and charges that have to be paid by the applicant, as follows:
� Installation fee;
� Meter deposit; and
� Guaranty deposit for future consumption.
11. Gives form to applicant.
Applicant 12. Pays the service connection fees and other charges.
Revenue collection clerk 13. Receives three copies of the service application form (Exhibit 50) from the
applicant.
14. Checks amount of assessment fees indicated in the form.
15. Receives payment from customer and ties up the amount collected with
the amount in the service application form.
16. Issues official receipt in triplicate and distributes these as follows:
� Copy 1 to the payor;
� Copy 2 to the cashier; and
� Copy 3 into the stub file.
17. Writes down the payment details on the service application form:
� Official receipt number;
� Date paid; and
� Amount paid.
18. Includes the official receipts for this type of payment in the abstract of
daily collections (Exhibit 48).
19. Gives the service application form and applicant's copy of the official
receipt to the applicant
Customer service clerk 20. Upon confirmation of payment of the application fees and other charges
by the applicant, forwards the service application form to the water utility
manager for approval of the installation.
Water utility manager 21. Approves and signs the service application.
Utility man 22. Writes down on the form the materials given free by the utility needed to
install the connection.
23. Withdraws these materials from the stock room.
24. Installs the service connection.
25. Fills up the new service connection data portion of the service application
form:
� Water meter brand;
� Water meter serial number;
� Water meter size; and
� Meter reading at the time of installation.
26. After the installation of the new service connection, returns the approved
and fully filled up service application form, in three copies, to the
customer service clerk.
Billing and Collections 107
Responsible staff/unit Activity
Customer service clerk 27. When the new service connection has been installed, assigns the
following to the new connection and writes these on the service
application form:
� Service connection number; and
� Customer account number.
28. Distributes the service application form as follows:
� Copy 1 to the billing/posting clerk, to prepare a new water service
record for the new customer;
� Copy 2 to the bookkeeper, as the basis for recording the materials
used in installing the new connection; and
� Copy 3 is filed based on the service connection number.
Billing/posting clerk 29. Receives copy 1 of the service application form from the customer service
clerk.
30. Creates a new water service record for the new connection.
31. Records the data of the new customer in the master list of service
connections (Exhibit 52).
Bookkeeper 32. Receives copy 2 of the service application form from the customer service
clerk.
33. Accumulates these copies. At the end of the month, creates a journal
entry for the cost of materials used in making new connections.
34. Accounts for the numerical sequence of all accountable forms as
follows:
� Official receipts; and
� Water bills.
Service Disconnection
Responsible staff/unit Activity
Revenue collection clerk 1. Asks payor what the payment is for.
2. Receives payment from customer.
3. Issues official receipt in triplicate, indicating the nature of payment, and
distributes these as follows:
� Copy 1 to the payor;
� Copy 2 to the cashier; and
� Copy 3 into the stub file.
4. Includes the official receipts for this type of payment in the abstract of
daily collections (Exhibit 48).
108 Guide to Ring-Fencing of Local Government-Run Water Utilities
Meter Maintenance
Responsible staff/unit Activity
Meter reader 1. While doing his rounds in meter reading, fills up the meter maintenance
order form (Exhibit 51) in two copies, when he notices instances needing
repair or service.
2. Gives the filled up form to the customer service clerk for disposition of
the service.
Customer service clerk 3. Receives the maintenance order form.
4. Records this in a meter maintenance order logbook as a basis for
monitoring action done on the order.
5. Assigns the meter maintenance order to the utility man.
Utility man 6. Receives the maintenance order from the customer service clerk.
7. Acts on the meter maintenance order.
8. Informs the customer if meter dismounting or replacement is needed and
schedules when this should be done.
9. Dismounts or replaces the meter on the scheduled date.
10. After completion of the order, returns the form to the customer service
clerk to update the entry in the logbook.
Customer service clerk 11. Records the action done on the meter maintenance order.
12. If the action involved the dismounting or replacement of the water meter,
gives copy 2 of the meter maintenance order form to the billing/posting
clerk.
13. Files copy 1 of the meter maintenance order form by number.
Billing/posting clerk 14. Receives copy 2 of the meter maintenance order form for actions
involving the dismounting or replacement of a water meter.
15. Updates the water service record of the concerned customer.
16. Files copy 2 of the meter maintenance order form by date.
Billing and Collections 109
Exhibit 43:
WATER BILL
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
Account Number Meter Serial Number Water Meter Brand Meter Reading Date
16-11-0149 12345 Asahi 1/5/2009
Customer Name
Timbal, Abelio
Customer Address
11 Cabawan St.
Customer Classification Due Date
Public Tap Residential / Institutional Commercial / Industrial 1/20/2009
Our staff came by today to read your water meter and computed your consumption and water bill as
follows:
Consumption
Meter reading this month 1432 cubic meters
Meter reading last month - 1420 cubic meters
Consumption this month = 12 cubic meters
Water bill this month 54 Pesos
Amount Due
Unpaid water bill as of last month * + 100 Pesos
Penalty * + 10 Pesos
TOTAL WATER BILL DUE = 164 Pesos
* If the unpaid water bill last month has been settled, the amount due will only be the water bill for this month.
THIS IS NOT A PROOF OF PAYMENT.
Water Bill Billing Clerk Meter Reader Bill Received by:
No. 201
Distribution: 1 � Customer; 2 � Billing/Posting Clerk; 3 � Stub File
110 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 44:
METER READING ROUTE
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
Zone Address Consumer Name Consumer
Account Number
16 1 Cabawan St. de Jesus, Celia 16-11-0923
16 2 Cabawan St. Casas, Alberto 16-11-0951
16 3 Cabawan St. King, Angela 16-11-0239
16 4 Cabawan St. Lopez, Gabriel 16-11-0395
16 5 Cabawan St. Aquino, Carlos 16-11-0159
16 6 Cabawan St. Castro, Edgar 16-11-0593
16 7 Cabawan St. Jorge, Miguel 16-11-0932
16 8 Cabawan St. Paras, Rogelio 16-11-0403
16 9 Cabawan St. Trinidad, Rafael 16-11-0743
16 10 Cabawan St. Villanueva, Danilo 16-13-0343
16 11 Cabawan St. Timbal, Abelio 16-11-0149
16 95 Cabawan St. Estrella, Geronimo 16-11-0715
Billing and Collections 111
112
Exhibit 45:
WATER SERVICE RECORD
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
Account No: 16-11-0149 Zone 16 Meter Serial No. 12345
Consumer Name: Timbal, Abelio Meter Size 1/2" Meter Brand: Asahi
Address: 11 Cabawan St. Customer Classification: Residential Date Connection Started: 6/15/2000
Date Reference Meter Reading Consumption (m3) Water Bill Penalty, Payment Balance
Amount Other Charges
6/1/2007 1407
7/1/2007 WB 001 1420 13 65.00 65.00
7/20/2007 OR 222 - 20.00 45.00
7/31/2007 56.00 101.00
8/1/2007 OR 312 101.00 -
-
-
-
-
-
-
-
-
-
Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 46:
WATER RATES TABLE
Antequera Waterworks System
Water Rates Table
Effective from January 1, 2000
Consumption (cu.m.) Rate
Residential Institutional Commercial Industrial
Minimum 0-8 cu. m. 37.00 37.00 80.00 80.00
9 42.00 42.00 90.00 90.00
10 47.00 47.00 100.00 100.00
11 52.00 52.00 110.00 110.00
12 57.00 57.00 120.00 120.00
13 62.00 62.00 130.00 130.00
14 67.00 67.00 140.00 140.00
15 72.00 72.00 150.00 150.00
16 77.00 77.00 160.00 160.00
17 82.00 82.00 170.00 170.00
18 87.00 87.00 180.00 180.00
19 92.00 92.00 190.00 190.00
20 97.00 97.00 200.00 200.00
21 103.00 103.00 210.00 210.00
22 109.00 109.00 220.00 220.00
23 115.00 115.00 230.00 230.00
24 121.00 121.00 240.00 240.00
25 127.00 127.00 250.00 250.00
26 133.00 133.00 260.00 260.00
27 139.00 139.00 270.00 270.00
28 145.00 145.00 280.00 280.00
29 151.00 151.00 290.00 290.00
30 157.00 157.00 300.00 300.00
31 164.00 164.00 310.00 310.00
32 171.00 171.00 320.00 320.00
33 178.00 178.00 330.00 330.00
34 185.00 185.00 340.00 340.00
35 192.00 192.00 350.00 350.00
36 199.00 199.00 360.00 360.00
37 206.00 206.00 370.00 370.00
38 213.00 213.00 380.00 380.00
39 220.00 220.00 390.00 390.00
40 227.00 227.00 400.00 400.00
41 235.00 235.00 410.00 410.00
42 243.00 243.00 420.00 420.00
43 251.00 251.00 430.00 430.00
44 259.00 259.00 440.00 440.00
45 267.00 267.00 450.00 450.00
Billing and Collections 113
114
Exhibit 47:
COLLECTORS' WATER BILLS ACCOUNTABILITY REPORT
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
Date Received Collected Returned Balance
No. of Amount Collector's No. of Amount Treasurer 's No. of Amount No. of Amount Accountant's
Bills Initial Bills Initial Bills Bills Initial
2-Jan-09 100 15,000 0 - - 100 15,000
5-Jan-09 95 14,250 13 1,950 - 182 27,300
6-Jan-09 98 14,700 15 2,250 - 265 39,750
7-Jan-09 102 15,300 17 2,550 - 350 52,500
8-Jan-09 97 14,550 16 2,400 - 431 64,650
9-Jan-09 95 14,250 10 1,500 - 516 77,400
12-Jan-09 87 13,050 13 1,950 - 590 88,500
13-Jan-09 78 11,700 12 1,800 - 656 98,400
14-Jan-09 96 14,400 12 1,800 - 740 111,000
15-Jan-09 100 15,000 12 1,800 - 828 124,200
16-Jan-09 102 15,300 755 113,250 - 175 26,250
19-Jan-09 104 15,600 135 20,250 - 144 21,600
20-Jan-09 96 14,400 75 11,250 - 165 24,750
21-Jan-09 97 14,550 64 9,600 - 198 29,700
22-Jan-09 88 13,200 56 8,400 - 230 34,500
23-Jan-09 86 12,900 189 28,350 - 127 19,050
26-Jan-09 106 15,900 69 10,350 - 164 24,600
27-Jan-09 100 15,000 54 8,100 - 210 31,500
28-Jan-09 104 15,600 33 4,950 - 281 42,150
29-Jan-09 97 14,550 45 6,750 - 333 49,950
30-Jan-09 72 10,800 256 38,400 149 22,350 0 -
Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 48:
ABSTRACT OF DAILY COLLECTIONS
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
Billing and Collections
January 9, 2009
Water Bill No. Official Receipt Consumer Amount Current Arrears Penalty Others
Number Account No. Collected
Total Amount Collected
Total Number of Water Bills Collected
Prepared by: Received by:
Bill Collector Municipal Treasurer
115
116
Exhibit 49:
REPORT OF UNPAID WATER BILLS
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
For the month ending: January 31, 2009
Meter Reader Name Zone Number of Consumption Water Bill Water Bill due Penalty and Total Water Bills
Water Bills (m3) this month prev. month Other Charges Due (PhP)
(PhP) (PhP) (PhP)
Cecilo Resabal 1 12 180 4,500.00 1,625.00 1.63 6,126.63
Leonardo Sajetarios 2 20 300 7,500.00 1,750.00 1.75 9,251.75
Allan Poligrates 3 8 120 3,000.00 500.00 0.50 3,500.50
TOTAL 40 600 15,000.00 3,875.00 3.88 18,878.88
Prepared by: Received by:
Bill Collector Waterworks Head
Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 50:
APPLICATION FOR SERVICE CONNECTION
Antequera Water Utility System Application For
Municipality of Antequera, Bohol Service Connection
To Be Filled Up By Applicant
Name of Applicant Telephone No.
Current Address of Applicant Barangay
Address where connection will be installed Make a sketch of the location of the proposed service at the back of this form.
Type of Service Connection If applicant is not the owner of the building or property
where the service connection will be installed,
Residential Commercial accomplish the boxes below.
Institutional Industrial Name of building/property owner
Size of Service Connection Requested Address of building/property owner
1/2" 3/4"
1" Other
I hereby apply for a water service connection as stated above. Telephone number of building/property owner
I understand that the connection will be installed once it is approved
and all charges have been paid by me. I assume responsibility for
the water meter and all water that passes through the connection. I I hereby bind myself to pay any unpaid water
will conform to the rules and regulations prescribed by the Water bills of the occupant in case he vacates the
utility System. premises permanently.
Signature of Date Signature of Date
Applicant Building/Property Owner
To Be Filled Up By The Water Utility System
Investigation of Application Amount of Charges Due
System is Applicant's plumbing Installation fee
installation is Meter deposit
Adequate Available Guaranty deposit
Not adequate Not available for future consumption
Total Amount Due
Paid under OR# Date Paid Amount Paid
Investigated by: Date Charges assessed by Date
Approved for Installation
Water utility Manager
Materials Used New Service Connection Data
Description Qty Unit Amount Service Connection No.
Customer Account No.
Water Meter Serial No.
Water Meter Brand
Water Meter Size
Reading at time of installation
Installed by Date
Total Cost of Materials
Billing and Collections 117
Exhibit 51:
METER MAINTENANCE ORDER FORM
Antequera
Water Utility System
METER MAINTENANCE
Municipality of Antequera, Bohol ORDER
Date prepared Date forwarded to Maintenance Date completed
Department
Customer name Customer account no.
Service address Meter number
Meter brand
Barangay Zone Meter size
Condition of the water meter
Stuck Leak before the meter Leak after the meter Cannot be read--
blurred / dirty
Others (give details)
Action required Submitted by:
Test meter Install meter Repair leakage
Repair meter Dismount meter
Calibrate Others
(give details) Meter reader Date
To be filled up by Maintenance Department
Meter number Meter brand Meter size Meter reading
Meter dismounted
Meter installed
Action done/remarks Maintenance done by
Utility man Date
118 Guide to Ring-Fencing of Local Government-Run Water Utilities
Exhibit 52:
MASTERLIST OF SERVICE CONNECTIONS
Republic of the Philippines
Municipality of Antequera, Bohol
Antequera Waterworks System
Billing and Collections
Page xx
Service Customer Name Service Address Zone Consumer Meter Customer Meter Guaranty Remarks
Connection Category Size Account Deposit Deposit
Number Number
119
FLOW CHART 1: METER READING PROCEDURES
120
Billing/posting clerk Meter reader
1. Based on the sequence of the meter reading 4. Receives the preaddressed water bills from the
route (Exhibit 44), prepares water bill (Exhibit Meter reading Water rates billing/posting clerk. Reads the water meter and
43) in triplicate by filling up these data coming route table completes the water bill with these data:
from the consumer's water service record � Current meter reading;
(Exhibit 45): � Volume consumed this period,
� Address of customer; computed as:
� Name of customer; and Previous month's meter reading
� Customer account number. Less: Current meter reading
� Amount due, by finding the equivalent water
2. Retrieves the consumer's water service record 3 3 bill for the volume consumed in the water
and copies these data into the water bill: 2 2 rates table (Exhibit 46); and
1 1
� Meter number; � Total amount due, by adding the amount due
� Previous month's meter reading; for this month and the amount of unpaid bills
� Amount of unpaid bills; and Water bill Water bill from previous months.
� Penalty on unpaid bills, if applicable.
5. Initials the water bill.
3. Fills up the due date for payment of the water
bill. 6. Gives copy 1 of the water bill to the consumer.
3
2
Water bill that
has been
completed
7. At the end of the day, hands over to the billing/
posting clerk copies 2 and 3 of water bills that have
been completed.
To Flow Chart 2
Legend:
Data flow
Process flow
Guide to Ring-Fencing of Local Government-Run Water Utilities
FLOW CHART 2: BILLING PROCEDURES
Billing/posting clerk Waterworks head Bookkeeper
From Meter Reader (Flow Chart 1)
Billing and Collections
1. Receives copies 2 and 3 of 5. Receives the daily billing
3 water bills served from 2 summary. Counts the water
2 2
meter readers. Checks bills received and checks
2
Water bill correctness of computation with the quantity in the daily
(that has been of volume used and amount billing summary.
completed) Water bill
of water bill due.
6. Test checks correctness of
N
water bills computation and
2. Summarizes water bills penalty charges.
issued in the report called
3 daily water bills issued, and
Water bill
2 forwards this summary and 2 1
the corresponding water 1 1
Daily water bills (copy 2) to the 1
bills issued waterworks head. Daily water
Daily water
bills issued
bills issued
3. Posts to the corresponding
consumer's water service
D record the following data from
the water bill (copy 3):
� Meter reading date; To revenue collection clerk
� Water bill number; (Flow Chart 3)
� Current reading; 7. Records daily water
� Consumption this period; bills issued in the bill
and register and files them
Water service � Amount due this period. Bill register
by date.
records
4. Files copy 3 of water bills Legend:
numerically and copy 3 of the Data flow
daily water bills issued by Process flow
date. N Filed numerically D
D Filed by date
121
FLOW CHART 3: WATER BILL COLLECTIONS: DAILY ACTIVITIES (1)
122
Revenue collection clerk
From Waterworks Head (Flow Chart 2) Legend:
Data flow
1. Receives daily, from the 2 Process flow
2
waterworks head, the daily 2 N Filed numerically
water bills issued and Daily water 2
accompanying water bills copy bills issued
2. Checks completeness of Water bills
number of water bills listed in
the daily water bills issued
report.
2. Records total number of water 3. Sorts water bills numerically and files these awaiting
bills received and amount of 2 payment from consumers.
these bills into the collector's Collector's Water bill
accountability report (two accountability 4. When a consumer comes to pay, receives copy 1 from the
copies). report N consumer and the corresponding payment. Retrieves copy
2 from the numerical file.
8. Updates the collector's From consumer
accountability report for water 1 7. At the end of the day,
bills collected Water bill summarizes water bills
collected in the abstract of
Consumer, after being 2 2 daily collections (Exhibit
stamped 'PAID' Abstract of
Cash 48) in two copies.
Water bill daily
Municipal 'PAID' collections
9. Remits all collections
treasurer
together with the
abstract of daily
collections and the
5. Prepares an official receipt Billing/posting clerk Municipal treasurer
3 matching official
(Exhibit 33) in three copies.
receipts (stub file) to the
Official receipt municipal treasurer for
6. Stamps copies 1 and 2 of Copy 1 to consumer.
Copy 2 to municipal treasurer. verification and
water bill with 'PAID'.
Copy 3 into the stub file. approval.
Guide to Ring-Fencing of Local Government-Run Water Utilities
FLOW CHART 4: WATER BILL COLLECTIONS: DAILY ACTIVITIES (2)
Municipal treasurer Billing/posting clerk
12. Checks that the total in the abstract and the sum of
From bill collector the amounts in the official receipt tally.
Billing and Collections
2 2
Water bills Water bills
2
2
Official Official
10. Checks that total cash
received from water bills receipts receipts
corresponds to total in 2 Water service
abstract of daily Abstract of records
collections. 2 daily
Water bill
collections
1
Collections Abstract of
from Water daily
collections 13. Posts each official receipt
Bills
and paid water bill to the
corresponding consumer's
water service record.
D D C
11. Deposited in bank
together with other
nonwater bill collections.
Legend:
Data flow
Process flow
Comparison of data
D Filed by date
C Filed by consumer name
123
FLOW CHART 5: WATER BILL COLLECTIONS: MONTHLY ACTIVITIES
124
Bill collector Waterworks head Municipal accountant
2
N 2
2
16. Files unpaid water bills, for 17.Checks collector's
Water bills inclusion into the next batch of accountability report (copy 1)
(unpaid) water bills, to be assigned to bill to ensure that the ending
collector together with the next balance of bill collector's
14. At the end of the month, month's collector's accountability accountability is correct
summarizes water bills not report
collected in the report of
unpaid bills (Exhibit 14) in
three copies. 1 2
2 2
15. Updates the collector's 2
accountability report. Report of
unpaid bills Water bills
1
(unpaid)
Report of
1 unpaid bills
Report of
1
2 unpaid bills Collector's
1 accountability
Collector's 1
Collector's report
accountability
accountability
report
report
Legend:
Data flow
Process flow
D Filed by date D D D
N Filed numerically
Guide to Ring-Fencing of Local Government-Run Water Utilities
February 2009
The Water and Sanitation Program (WSP) is a The Public-Private Infrastructure Advisory Facility
multidonor partnership created in 1978 and (PPIAF) is a multidonor technical assistance facility
administered by the World Bank to support poor aimed at helping developing countries improve the
people in obtaining affordable, safe, and quality of their infrastructure through private sector
sustainable access to water and sanitation involvement. PPIAF has its East Asia and Pacific
services. WSP provides technical assistance, regional office in Manila; with Nairobi for East and
facilitates knowledge exchange, and promotes Southern Africa; Dakar for West and Central Africa
evidence-based advancements in sector dialogue. as well as the Middle East and North Africa; and
WSP has offices in 25 countries across Africa, New Delhi for South Asia, Central Asia and
East Asia and the Pacific, Latin America and the Europe. Oversight of PPIAF activities in Latin
Caribbean, South Asia, and in Washington, D.C. America and the Caribbean is managed out of
WSP's donors include Australia, Austria, Canada, PPIAF's headquarters in Washington, D.C. For
Denmark, Finland, France, the Bill and Melinda more information on the facility, please visit
Gates Foundation, Ireland, Luxembourg, www.ppiaf.org
Netherlands, Norway, Sweden, Switzerland,
United Kingdom, United States, and the World
Bank. For more information, please visit
www.wsp.org
Water and Sanitation Program � PPIAF Program Management Unit
East Asia and the Pacific (WSP-EAP) East Asia and Pacific Regional Coordination Office
The World Bank The World Bank
Indonesia Stock Exchange Building Tower II 23rd Floor The Taipan Place
Jl. Jend. Sudirman, Kav. 52-53 F. Ortigas Jr. Road, Ortigas Center
Jakarta, Indonesia 12190 Pasig City, Metro Manila, Philippines
Telephone: +6221 5299 3003 Telephone: +632 637 5855
Email: manilarco@ppiaf.org