Despite operating loss, Agua SUD turns in ‘favorable’ audit

Growth in the finances of the Agua Special Utility District and new infrastructure contributed to the utility district turning in a “favorable” audit despite operating under a deficit of nearly $1.9 million.

The audit for the fiscal year ending Dec. 31, 2019, was presented to the Agua SUD board of directors Monday by Guillermo Reyna with the Pharr-based Oscar R. Gonzalez, C.P.A. & Associates, P.L.L.C., who praised the report.

“It’s a very favorable report, a good audit,” Reyna told the board, who approved the audit after the presentation. “It’s reflective of the organization’s commitment and leadership in all departments. There were a couple of setbacks in turning in information because of the pandemic but all the departments met the deadline to send us any requested information.”

The audit showed that Agua SUD customers paid more than $9.9 million for water, sewer and related charges last year, according to the audit, this was an increase of $500,000 which Reyna attributed to the utility district’s new rates that went into effect last year and the newly installed smart water meters that provides better accuracy on customer water usage.

Expenses totaled $11.8 million leading to an operating loss of $1.9 million, an increase of $200,000 from last year’s operating deficit.

The 2019 expenses included nearly $4 million in depreciation, which reflects the declining value of infrastructure, equipment and other assets over time.

Despite the loss, Reyna reported to the board $105 million in net assets, a $7 million increase from last year’s audit.

“That’s very good.” Reyna said. “There’s been $22 million in construction that occurred last year and resources used like assistance from the Texas Water Development Board, new bonds secured or refunding of bonds from 2009 that put more money in the banks to pay less interest. Expenditures were in order, as far as budgets were concerned. You watched the budget, made sure things were in line, hired us to render opinions so we have rendered an unmodified opinion: we give you a clean slate.”

Agua SUD General Manager Jose E. “Eddie” Saenz said the utility district was pleased with the findings of the report.

“We had a busy 2019 catching up on a lot of maintenance and capital improvement projects,” Saenz said. “We had borrowed $5 million from the TWDB to take care of the water plants and other projects that created an asset that became part of our net worth, so we increased by that amount.”

Agua SUD attorney Frank Garza also added that documentation for the procurement process helped make the audit favorable compared to previous years.

“We had contracts in place that were identified in the 2018 audit that had historically been in place at Agua since after the receivership that auditors as far back as 2016 where voicing concerns about due to lack of documentation,” Garza said. “Findings in the past never identified illegal procurement, it was just the documentation wasn’t done historically. That’s been remedied now.”

Garza said the utility district remedied the situation by going over several ongoing contracts and either went out for bids for new ones or renegotiated the contracts in place for a different price.

“Management and the finance department documented the process, there’s more transparency,” Garza said. 

Saenz added that the utility district expects to see more savings thanks to newly installed solar panels in the water and sewer plants to reduce electricity costs.