GOVERNMENT auditors have red flagged the financial performance of the Tarlac City Water District based on a finding that its net income dropped an average of P8.415 million each year from 2016 to 2019 or a total of P33.66 million while operating under a joint venture agreement with the Villar-family’s PrimeWater Infrastructure Corp.
In its 2019 audit on Tarlac City WD, the Commission on Audit noted that the agency posted an average net income of P27.074 million each year from 2011 to 2014 or a total of P108.3 million.
While under the JVA, the water district’s income dipped to an average of P18.659 million each year between 2016 and 2019 or a total of only P74.636 million.
The JVA took effect on April 10, 2015. From that month to December 2015, the income soared to P33.079 million but dropped by almost half the following year.
“The (Water) District’s average net income has continuously diminished since it entered into a Joint Venture Agreement (JVA) with Prime Water Infrastructure Corporation, thus, is disadvantageous to the District,” the COA pointed out.
A breakdown of the yearly income of the Tarlac City WD since 2011 showed a sharp decline in its profitability in the last four years.
Before the JVA, it posted excess income over expenses amounting toP17.118 million
(2011); P26.804 million (2012); P34.614 million (2013); and P29.762 million (2014).
Under the JVA with PrimeWater the annual earnings went down to P17.631 million in 2016; P18.201 million (2017); P19.677 million (2018); and P19.128 million (2018).
“Based on the foregoing, the District had substantially incurred losses of P8,414,924.90 due to the decrease in average net income from the joint venture operation as compared to their operation prior to JVA,” the COA said.
Informed of the findings, the Tarlac City WD’s general manager and Board of Directors said they intend to “renegotiate and demand an increase in annual fixed revenue share.”
The COA also recommended that agency officials make a financial feasibility study or comparative analysis to consider pre-terminating the JVA and reclaim its operation.
Likewise earning an adverse citation in the 2019 audit was the PrimeWater’s performance bond of P19.5 million which the COA declared was short by P380.045 million.
Invoking the National Economic and Development Authority’s (NEDA) Revised Guidelines and Procedures for JVAs, the audit team said the PrimeWater, as private sector participant, was required to put up a minimum of 10 percent of its total contribution as surety bond.
“The total contribution of PWIC to the (joint venture) amounted to P3,995,450,000 thus, the required performance bond should be P399,545,000, which when copared to the posted bond of P19,500,000 showed a deficiency of P380,045,000,” the COA said.
It said, because of the shortage, the Tarlac City WD’s interest in the JVA “was not adequately protected.”
“We recommended and the general manager agreed to require the PWIC to submit a performance bond that is in accordance with the NEDA Guidelines,” the COA added.