COA questions BACIWA-PrimeWater deal

The Commission on Audit (COA) has directed the management of Bacolod City Water District (Baciwa) to “seek clarifications and reconciliation” regarding its joint venture agreement (JVA) with PrimeWater Infrastructure Corp. (PrimeWater), which is owned by the Villar family, “to ascertain the legality” of the deal.

In its 2020 audit report that was posted on its website, COA said that the JVA between BACIWA and PrimeWater was contrary to Section 30 (a) of Presidential Decree No. 198, as amended, which explains the right of way of infrastructure, thus, “the interest of the government is not fully secured and protected.”

COA stressed that the JVA was not within the mandate and charter of the district which is in violation of Section 30 (a) of PD No. 198, thereby, “the legality of the contract could not be ascertained.”

The commission also pointed out that there was no feasibility study or business case/pre-feasibility study of the project prepared by the district contrary to the first requirement of Stage Three, or Competitive Challenge, under Section III of Annex B of the Guidelines, thus, it was not ascertained whether entering into a joint venture project is immediate and necessary for BACIWA.

Instead of including the property, plant, and equipment (PPE) of the district as part of its contributions to the JVA, these were leased out to PrimeWater through usufruct payment for the duration of the JV project, which is 25 years.

“Had these assets been included, the total contribution of BACIWA could have exceeded P150 Million and subject to the approval of the National Economic and Development Authority Board of Investment Coordination Committee (ICC) instead of the Board of Directors of BACIWA,” COA pointed out.

COA said, “we recommended that management seek clarifications and reconciliation” on the affected provisions of the JVA and Section 30 (a) of PD No. 198 from the Office of the President, NEDA, Governance Commission for Government-Owned or -Controlled Corporation (GOCC) and Local Water Utilities Administration “to ascertain the legality of the joint venture operation between the district and PrimeWater and to fully secure and protect the interest of the government.”


Citing the observations of its independent auditor’s opinion, COA stressed in its report that the existence and correctness of BACIWA’s property, plant, and equipment with an aggregate acquisition cost of P1,211,221,864 as of December 31, 2020 “cannot be ascertained” due to “non-conduct of physical inventory” contrary to Section 490, Volume 1 of the Government Accounting and Auditing Manual.

Also, the correctness of the Construction in Progress (CIP) accounts amounting to P88,859,078 “could not be ascertained” due to the non-reconciliation of the non-moving accounts amounting to P16,307,740, non-reclassification of the P18,901,636 completed projects from CIP to the appropriate PPE accounts and the non-submission of project status report for CIP accounts totaling P53,649,701.68, thereby, “affecting the fairness of the accounts presentation in the financial statements,” COA stressed on its report.

COA said it recommended to the BACIWA acting general manager to create an inventory committee to conduct the physical inventory of all property, plant, and equipment of the district, as well as to conduct an investigation on the existence of CIP accounts without available records of accountability amounting to P16,307,740.

Lawyer Arnel Jaranilla, director of the COA Regional Satellite Audit Office-Negros Island and Siquijor, in a June 29 transmittal letter addressed to BACIWA board of directors and acting general manager Michael Soliva, said the audit was conducted to ascertain the propriety of financial transactions and compliance of the agency to prescribed laws, rules and regulations.

It was also made to ascertain the accuracy of financial records and reports, as well as the fairness of the presentation of the financial statements, he added.

He also stressed that a qualified opinion was rendered on the fairness of the presentation of the financial statements due to the audit exceptions noted as indicated in the independent auditor’s report.

“We request that the audit observations and recommendations contained in the report be appropriately acted upon and we will appreciate being informed of the actions taken thereon by submitting the duly accomplished Agency Action Plan and Status of Implementation within 60 days upon receipt hereof,” he said in the letter.

PrimeWater took over the operations of BACIWA in November 2020. However, the joint venture agreement displaced 60 workers due to position redundancy.

COA noted on its audit report that due to the JVA, BACIWA is “left with 31 permanent personnel complement which serves as the contract monitoring unit” for the deal.*

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