Coops: COWD highly profitable but grossly mismanaged
Mike Banos
October 12, 2008
This was the gist of a presentation made Thursday, October 2, 2008 by Isagani Daba, vice chairman of the First Community Credit Cooperative (FICCO) and chief operating officer of CLIMBS (Coop Life Insurance & Mutual Benefits Services) during an 'Investors Forum' hosted by the Cooperative Development Authority Region X (CDA-X) and Cooperative Development Council of Cagayan de Oro (CDCC) at a local restaurant.
Citing audit reports of the Commission on Audit on the financial statements of the COWD for the years 2005 and 2006, Daba made the disclosure to the forum participants who included members of the academe, local government, regional line agencies, business, workers, women, urban poor, cooperatives, landless associations, hospitals, non-government organizations and private citizens.
Daba said the COA report shows COWD had a reported net income of P15 million in 2005 from a gross revenue of P349 million. In 2006, net income rose to almost P50 million from a gross revenue of P490 million.
"In simple terms, for every P 1.00 of water bill we pay, COWD earned 4.5 centavos in 2005 and 10.2 centavos in 2006," Daba said. "These are clear proofs that as a public utility monopoly dealing in basic necessity, COWD is highly profitable."
While he acknowledged the performance indicators for the two years as "great", Daba said they could have been much better since the COA audit report labelled some P130 million of COWD's disbursements for 2005 and P105 million in 2006 as "without legal basis".
"Again, in simple terms, for every P 1.00 we paid for water in 2005, 37 centavos were spent without legal basis; in 2006, the amount was 21.5 centavos."
Included in the amounts disallowed by the COA report (copies of which he showed to those present) were travel per diems of up to P4,500/day (vs. a maximum allowable P800/day) and benefits received by each member of the COWD Board of Directors amounting to P718,000 in 2005 and P930,000 in 2006 (compared to maximum allowable of P20,000 per month or P240,000 per year).
Again citing the COA audit report dated Nov. 20, 2006 and signed by Helen A. Pialogo, State Auditor V, Regional Cluster Director, Cluster III-Public Utilities, Corporate Government Sector-Region X, Daba disclosed that the benefits received by each member of the COWD Board of Directors included a year end incentive of P100,800; service incentive of P84,000; anniversary productivity of P 33,600; grocery allowance of P 30,000 and financial assistance of P 20,000.
"COWD even gave P 720,000 to a retiring board member," he added.
Daba also cited other "indicators of inefficiency" by the present COWD management such as unaccounted water (also known as 'systems loss') of 43% in 2005 and 46% in 2006, amounting to P41 million; procurement of materials without bidding (P15 million in 2005, P8 million in 2006.
He also questioned why COWD was paying bulk water supplier Rio Verde Water Consortium Inc. P10.45 per cubic meter when it was producing water for only P2.11 per cubic meter in 2006. However, due to the 46% systems loss for that year, the cost went up to almost P4.00 per cu.m.
Daba also cited other "governance issues" with the present COWD which he said buttresses the case for a shift to a consumer-owned and controlled cooperative.
"At least 60% of the water consumers of CDO belong to the grassroots -- those who have less in life," Daba said. "Is it not unfair that only a few people are enjoying perks (without legal basis) at the expense of the majority? Why is this blatantly unjust social condition allowed to continue?"
The coop official said COWD was started in 1973 with a P44 million seed money from the coffers of the Cagayan de Oro City Government which made it people's money.
Even if it is a separate entity (government-owned-and-controlled-corporation or GOCC), Daba said the COWD is supposed to observe guidelines, rules and regulations of the Local Water Utilities Administration (LWUA), Department of Budget and Management and the Commission on Audit.
"Yet the COWD leadership disregards those rules," Daba said.
"The biggest argument why COWD should be converted into a coop is anchored on governance," Daba stressed. "Successful coops in Northern Mindanao trace their success to good governance."
He cited the case of FICCO which is the biggest community type coop in the country; the biggest coop in terms of capital, membership; a majority owner of 2 coop banks and the third biggest stakeholder of CLIMBS.
"FICCO's net worth is easily three times that of the COWD," Daba noted. "Yet, its board of directors receives honorium/benefits which are less than five percent of what the COWD BOD receive."
FICCO directors travel per diem is pegged at P500/day and are not entitled to perks like the year end incentive, service incentive or grocery allowance. Nor are they entitled to a lump sum amount when they exit the board.
"Because of the culture of volunteerism, of controlling costs and expenses, coops can deliver quality service at minimal costs," Daba said. "Thus a COWD cooperative could result in lower water bills to the consumers."
On top of this, its consumer members would earn dividends on their capital, as well as a patronage refund in case the coop turns a profit.
If the present COWD is a coop, with its net income of P 49.6 million, it could have paid dividend of at least 15% and patronage refund of 7%.
Daba said the great difference between a cooperative and a corporation is the difference between Stewardship and Opportunism.
"Coop leaderss in Cagayan de Oro are mere stewards of the resources entrusted to them by their members. And that they are in their positions to serve the members and not to enjoy the monetary perks with or without legal basis."
To enable the water consumers to convert the COWD into a cooperative, Daba said they would have to undertake a Capital Build Up (CBU) through voluntary contribution tagged on to consumers' regular water bills. Daba estimates the coop could raise P88.452 million per year, P442.26-M after 5 years and P884.52-M after 10 years.
If the CBU proves successful, COWD could easily pay its outstanding long term loans amounting to P1-billion based on the study group's evaluation of the COWD's 2005 and 2006 financial statements.
Asked about the cooperativization initiative, Ladele Sagrado, COWD spokesperson said "The LWUA-Water district concept articulated in Presidential degree 198 is founded on self reliance. A water district is expected to operate and expand using its own resources derived from appropriate water rates. And COWD as a GOCC has never wavered from pursuing its mandate and P.D. 198 to be a very good framework for addressing the issue of safe and adequate water supply."
"We are mere implementers of the law and the law is that water districts should operate as a GOCC. If someone asks us our opinion on their advocacy, we've always said they have the right and freedom to do what they see they should do. But as for us, we don't see the need for the change and structure because we believe it's government's primordial function to provide the essential needs including water."
30 -
Print
Email
