THE Auditor General has revealed that over K1.9 million of the sanitation surcharge collected by Lukanga Water and Sewerage Company (LgWSC) meant for sanitation extension projects was used for other unrelated purposes.
And the Auditor General has revealed that fuel worth K156,986 was drawn by motor vehicles that are not on the company fleet during the period under review.
According to the Auditor General’s report on the accounts of Water and Sanitation companies for the financial year ending December 31, 2018, the utility collected a total of K2,490,458 as sanitation surcharge, but only spent a sum of K533,650 on network rehabilitation.
“In 2007, NWASCO introduced a sanitation surcharge in order to contribute to the efforts government was making through infrastructure funding to the water sector. The sanitation surcharge forms part of the tariff structure and accounts for up to a maximum of five per cent of the monthly water bill. The revenue collections from the sanitation surcharge are ring-fenced so as to ensure that the funds are used on sanitation extension projects approved by NWASCO. The company was awarded the right to levy the customers the sanitation charge in 2015 at the rate of 2.5 per cent. A review of the billing and revenue collection information revealed that amounts totalling K2,490,458 had been collected as of November, 2019. The following were observed: Failure to open bank account. Contrary to the guidelines, the Company did not maintain a sanitation surcharge bank account into which the collected funds were to be deposited. Misapplication of Funds. Out of the total amount of K2,490,458 collected, the Company only spent a sum of K533,650 on network rehabilitation, while the balance of K1,956,808 was applied on unrelated activities,” the report revealed.
It also disclosed that Lukanga Water recorded a cumulative loss of over K44.8 million to leakages and commercial losses.
“Non-Revenue Water (NRW) is the difference between the quantity of treated water distributed in the network and quantity of water actually billed. NRW consists of technical (leakages) and commercial losses (illegal connections, unbilled customers, wastage on un-metred customers’ premises). According to NWASCO, the accepted level of NRW is from 20 per cent to 25 per cent of the quantity of treated water distributed in the network. However, during the period under review, the Company’s NRW was 52 per cent in 2017 and 51 per cent in 2018 against the recommended benchmark of 20 per cent to 25 per cent. This resulted in a cumulative revenue loss of K44,811,764,” it read.
“Profitability. Although the Company’s turnover increased from K41,743,481 in 2017 to K49,922,912 in 2018, the Company incurred losses of K2,349,034 in 2017 and K1,823,233 in 2018. This was attributed to the failure to keep total expenses below the total income.”
And the Auditor General revealed that fuel worth K156,986 was drawn by motor vehicles that were not on the company fleet during the period under review.
“Fuel Drawn by Motor Vehicles Not on Company Fleet. During the period under review, fuel costing K156,986 involving 443 transactions was drawn by motor vehicles, which were not among the fleet owned by the Company without authority. Although management in their responses stated that the use of private vehicles was in line with their transport policy and that approvals were granted by the Managing Director or heads of departments, management did not avail documentary evidence to show that the drawing of fuel by private vehicles had prior approvals,” it revealed.
The report further disclosed that 47 payment vouchers in amounts totalling over K1.8 million processed during the period under review were not availed for audit
“Missing Payment Vouchers. Contrary to Chapter 8.6.1 of the LgWSC accounting and procedures manual, which states that all payments must have a payment voucher, 47 payment vouchers in amounts totalling K1,815,029 processed during the period under review were not availed for audit. As a result, it could not be ascertained whether payment processes were followed and transactions properly authorised,” the report read.
Meanwhile, the water utility was also found to be owing the Zambia Revenue Authority (ZRA) amounts totalling over K15.5 million in unremitted statutory obligations as at December 31, 2019.
“Unremitted Statutory Obligations. As at 31st December, 2018, LgWSC owed the ZRA amounts totalling K15,537,858 in unremitted statutory obligations, thus risking being charged penalties, contrary to the Income Tax Act Chapter 323 of the laws of Zambia. As at 31st December, 2019, the amounts had not been remitted,” read the report.