THE Auditor General’s report has revealed that Nkana Water and Sewerage Company (NWSC) Limited incurred losses of K37,970,000 in 2017 and K33,888,000 in 2018 due to high administration expenses, bringing the cumulative amount to nearly K72 million over two years.
According to the Auditor General’s report on the accounts of water and sanitation companies for the financial year ending December 31, 2018, the high administration expenses accounted for 92 per cent and 95 per cent of the turnover for 2017 and 2018, respectively.
“As can be seen from the Statements of Comprehensive Income, the Company incurred losses of K37,970,000 in 2017 and K33,888,000 in 2018. The losses were attributed to high administration expenses, which accounted for 92 per cent and 95 per cent of the turnover for 2017 and 2018, respectively,” the report read.
It further revealed that Nkana Water operated with a negative working capital of K151.1 million in 2017 and K119.5 million in 2018, indicating that the company had challenges meeting its short-term obligations as it took 274 days in 2017 and 166 days in 2018 to pay its trade payables.
“The current ratio measures the ability of an entity to meet its current financial obligations using its current assets. It is determined by comparing current assets against current liabilities. The NWASCO recommended current ratio for the sector is a minimum of 1:1. During the period under review, the current ratio for the company was 0.4 in 2017 and 0.6 in 2018, which were below the recommended ratio. As a result of the poor ratios, the company had challenges to meet its short-term obligations as and when they fell due. Further, analysis of the current assets and liabilities showed that the company operated with a negative working capital of K151,129,000 in 2017 and K119,540,000 in 2018. The negative working capital indicates the challenges of the company to meet its short-term financial obligations. In this regard, it was observed that the company took 274 days in 2017 and 166 days in 2018 to pay its trade payables,” the report read.
The utility was also reported to have been inefficient in its debt recovery as receivable days for the period under review increased from 255 days in 2017 to 282 days in 2018.
“According to the Company’s Debt Management Policy No. 10, the company will withdraw service to a customer when there is default in settlement of bills for a period of 14 days and above. It was observed that the company was not efficient in collecting receivables from its clients as the receivable days for the period under review increased from 255 days in 2017 to 282 days in 2018. Further analysis of the receivables revealed that an amount of K184,436 was owed by members of staff and had been outstanding for periods ranging from one to 60 months,” it read.
“Collection efficiency is a proportion of the total billed amounts against actual collections. Billed amounts in this regard refers to the revenue that a utility company expects from the provision of water and sanitation services and excludes charges like reconnection fees, penalties and meter charges. The acceptable NWASCO benchmark for collection efficiency is 85 per cent. The company failed to meet the benchmark as it only achieved 69 per cent in 2017 and 72 per cent in 2018.”
And the utility wastefully spent K434,411 on a procurement module that was later abandoned because it failed to meet the requirements of users even after conducting detailed scoping and agreeing to specific system requirements between the supplier and the company.
“On 12th December, 2013, NWSC engaged Advance Net Pty Limited a South-African based company to supply and deliver a SUNFLOW procurement module at a total cost of K314,237. The scope of works included supply of 33 sunflow licences, documentation and development of procurement process by the supplier, administrator training in South Africa for IT/Procurement Super Users and End user training in Kitwe and deployment (Go live). As at 31st August, 2019, the supplier had been paid amounts totalling K434,411 comprising the contract sum of K314,237 and associated license fees of K120,174. It was, however, observed that the system was never used as it failed to meet the requirements of users, even after conducting detailed scoping and agreeing to specific system requirements between the supplier and the company. As at 31st December, 2019, the sunflow procurement module had been abandoned rendering the expenditure of K434,411 wasteful,” read the report.