GOVERNMENT auditors have warned that the plummeting income of the city of San Fernando Water District (CSFWD) in Pampanga could put at risk its ability to continue operations.
According to the audit team, CSFWD posted a yearly average net income of P21,223,920 from 2013 to 2016 based on earnings of P273.6 million and expenses of P252.37 million.
But since the water district entered into a joint venture agreement (JVA) with Primewater Infrastructure Corporation which took effect on December 16, 2016, its average annual net income has shrunk to P8.12 million.
This is based on average income of P71.82 million less average expenses of P63.7 million for the years 2017 to 2021.
“Analysis of the financial performance of the District before and after the JV activity still showed a material decrease in the Net Income of the District amounting to ₱13,106,048 or a decrease of 61.74 per cent,” the Commission on Audit said in its report released last February 23.
The audit team noted that the water district’s income increased last year from P12.28 million in 2020 to P14.06 million but this was attributable to a reduction in expenses from P40.17 million to P38.87 million year on year and “cannot be traced to any effect of the joint venture.”
The COA said the managements of the CSFWD and Primewater have agreed to its recommendation to review the provisions of the joint venture agreement specifically those concerning the fixed revenue share of the water district.
Unless this share is increased, auditors made a projection that revenues will further drop in the next four years because the P500,000 fixed revenue share yearly is lower than the loan payments of P542,187 in 2022, P535,160 in 2023, P566,335 in 2024, and P549,426 in 2025.
“Considering the decrease in share in the profit/revenue from the Joint Venture in the succeeding years and the increase in expenses due to inflation and other factors, the District may continuously incur diminishing net income or may even lead to net loss,” the COA warned.
It said these projections should have been factored in by the Joint Venture Selection Committee during its negotiations with Primewater.
“Taking into consideration the trend of decreasing Net Income since it entered into JVA, may lead to questions like whether the JV activity is indispensable or beneficial to the District,” the COA warned.
