Urban Services Improvement Investment Program - Tranche 1

The financial health of key project agencies needs to be thoroughly assessed at project preparation to determine their viability and identify the proper risk mitigation measures. Although a financial management assessment was conducted for the implementing agency, the United Water Supply Company of Georgia Limited Liability Company (UWSCG) during project preparation, the assessment only pointed to a need for training in accounting and reporting, preparing business plans, determining tariffs and procurement. However, the assessment did not review the financial health of UWSCG and did not highlight the fact that UWSCG’s tariff did not recover costs, thus requiring subsidies. With an expansion of the water supply and sanitation systems, losses from operations will increase and greater subsidies from the government will be required. Since no impact assessment on the government’s budget was carried out, the sustainability of subsidies is uncertain.