Agua SUD board approves ‘clean’ audit for 2020

The Agua Special Utility District board approved a “clean” audit on Monday.

Oscar R. Gonzalez & Associates of Pharr, which audited the utility district, issued an unmodified opinion — a “clean” audit — after reviewing financial records for the 2020 fiscal year.

While he was pleased with the unmodified opinion, board President Homer Tijerina said he believed certain projects deserved more scrutiny from auditors.

“I think they should have done a little bit better job on certain things,” Tijerina said.

Gonzalez walked the utility board through the audit, which is called a Comprehensive Annual Financial Report, during a meeting on Monday afternoon.

Members of the utility board voted 4-0 to accept the audit report. Director Lloyd Loya, Director Cesar Rodriguez Jr. and Director Adolfo Arriaga didn’t attend the meeting.

 

During the audit process, a team of certified public accountants met with Agua SUD management and reviewed financial statements.

The audit provides a basic assurance that financial statements comply with accounting principles and don’t include any major problems. The process isn’t designed to detect fraud or pass judgment on business decisions.

Agua SUD had about $10.6 million in operating revenue during 2020, which included water charges, sewer charges and other income. Agua SUD had nearly $12.3 million in operating expenses.

The largest expense, however, was depreciation — the estimated amount that various assets declined in value as they aged.

Agua SUD had nearly $4.5 million in depreciation expenses during 2020. Without depreciation, Agua SUD had a $2.8 million operating profit.

The utility district also reported operating deficits in 2016, 2017, 2018 and 2019, all thanks to depreciation.

Ricky Longoria, a partner at McAllen-based accounting firm Burton, McCumber & Longoria, warned the Agua SUD board about operating deficits in May 2018.

“I would ask you all, just as you move forward, to pay attention to those numbers because that is what I consider to be your bread and butter, right? You all bill for your services for water and sewer. And there is a cost associated with providing that service,” Longoria said. “And so, ideally, it would seem to me that you would want that to be break-even or positive, right?”

Tijerina, who became the utility board president after the November 2020 election, said operating deficits based on depreciation aren’t a cause for concern.

“If you remove the depreciation, we’re in the black,” Tijerina said.

Agua SUD tracks depreciation and keeps tabs on important assets, including pumps and other equipment, Tijerina said. All equipment and infrastructure will eventually be replaced or repaired.

“I don’t see it as a problem,” Tijerina said. “But it’s something we have to keep track of.”

The Comprehensive Annual Financial Report also listed compensation for key personnel.

General Manager Jose E. “Eddie” Saenz earned $210,000 during 2020, according to the audit. Saenz earned nearly $2.2 million in 2019, when he also performed nearly $2 million in engineering services for Agua SUD.

Agua SUD paid $76,300 to Emigdio “Milo” Salinas, the district engineer, according to the audit. Salinas also received more than $150,000 in additional compensation for work on Agua SUD projects.

Attorney Frank Garza, who represented Agua SUD from 2016 to 2020, earned nearly $233,000.

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