COA: Deal with Villar-owned water firm caused P8-million revenue decline in Tarlac district

Adrian Ayalin, ABS-CBN News

Posted at Mar 12 2020 09:09 PM

MANILA - The average net income of the Tarlac City water district declined by more than P8 million after it entered into a joint venture agreement (JVA) with Villar-owned PrimeWater Infrastructure Corp., according to a 2019 audit report by the Commission on Audit.

State auditors noted that during the four years of operation of the JVA from 2016 to 2019, the net income of the district was slashed by P8.414 million or 31.08 percent compared to the average net income prior to the JVA for 2011 to 2014.

The auditors said that from 2011 to 2014, the average income of the district was P216.178 million with P189.104 million expenses, or an excess of income over expenses amounting to P27.07 million.

For 2016 to 2019, the average income was only at P68.742 million with expenses amounting to P50.08 million, or an excess of income over expenses amounting to P18.66 million.

“The Joint Venture Selection Committee failed to take into consideration during the negotiation stage with PWIC the projection of higher income in the financial performance which resulted in the decrease in income of the district, thus placed it in an unfavorable position of reduced income in the ensuing years,” the audit report read.

The commission noted that the board of directors and general manager of the water district has agreed to renegotiate and demand an increase in income of the district in the coming years, otherwise make a financial feasibility study or comparative analysis to pre-terminate the JVA and reclaim the operation of the district.

A copy of the audit report addressed to the Tarlac City Water District Board of Directors Chairperson Alexander Pascual was received by the office of the general manager on March 3, 2020.

The audit report also noted that the Value Added Tax being passed on to the concessionaires resulted in higher cost of water bills, despite being mentioned in the JVA that taxes were all necessarily the responsibility of PrimeWater.

The report said that after the JVA, the minimum residential rate of P220 for the first 10 cubic meters became P246.40, with a difference of P26.40 or 12 percent VAT.

“It is the absence of well-defined terms and conditions advantageous to the district concessionaires which brought about the increase of water bills after the JVA,” the report said.

For its part, the board of directors of the water district agreed to revisit the JVA and consider amendments in order to impose upon PrimeWater the responsibility of shouldering the VAT, according to the report.