Economy

How Nairobi water lost Sh10bn via undeclared income, faulty meters

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Nairobi Water Company workers disconnecting illegal water lines in Kiamaiko, Nairobi on March 6, 2023. PHOTO | EVANS HABIL | NMG

The Nairobi Water and Sewerage Company (NSWC) lost over Sh10 billion in the financial year ended June 2022 due to faulty water meters, unreconciled financial statements and unscrupulous allowances paid to its staff, a report has revealed.

Auditor-General Nancy Gathungu says the utility firm, which supplies the commodity to city residents, sold a total of 96,404,533 cubic meters of water during the year under review.

This translated to Sh5.63 billion of income using the rate of Sh58.5 per cubic meter. However, the water firm declared an operating income of Sh4.79 billion leading to an undeclared income of Sh848 million.

Read: Nairobi loses Sh4.8bn in unbilled water use

Ms Gathungu also observes in the report that the water firm failed to declare an extra Sh200 million that was obtained as levy water and sewerage services levy to the customers.

“A review of the billings by the Water Services Regulatory Board (WASREB) revealed that a total of Sh365, 605,090 was charged to the company being levy charges at a rate of four percent in respect to water, sewer and meter rent to customers resulting to approximately expected revenue of Sh9.1 billion and not Sh8.9 billion reflected in the financial statements. This resulted to uncollected or undeclared revenue of approximately Sh200,093,382, has not been explained,” read the auditor general’s report.

During the year under review, the water firm produced 192,787, 851 cubic meters of treated water but its records understated the volume of water produced by indicating it was 178,526, 912 cubic meters.

This, the auditor general observes, led to a loss of Sh834 million as projected revenue. The report also indicates that the water firm lost up to 50 percent of its projected water sales, which is way above the 25 percent of the non-revenue water threshold that is allowed by the Water Services Regulatory Board.

Although the official company records indicate the firm produced 178,526, 912 cubic meters of water only 96,404, 533 cubic meters were billed meaning that it lost a Sh9.8 billion according to the auditor general.

The report notes that the volumes lost are inclusive of the water and sewer charges that at the rate of Sh102.375 per cubic meter.

Ms Gathungu also put the company on the spot for a huge wage bill of Sh6 billion which is 57 percent of its operating income of Sh10 billion which is way above the recommended 35 percent.

The report indicates that the company also increased the salaries and bonuses of its employees despite making losses.

It found that basic salaries rose by Sh51.5 million to Sh3 billion despite a drop of 96 staff members. The auditor notes that no explanation has been provided on the same.

The company made a bonus payment of Sh22 million despite reporting a loss of Sh84.7 million.

“Management did not provide justification for the bonus payment when the company had made a loss,” read the report.

The auditor general’s report for the year ended June 2022 was laid before the Nairobi City County Assembly by Mihango Member of the County Assembly Paul Kados who is also the Deputy Speaker.

The ward representatives are expected to open a probe into the matter.

Read: Homes to face higher sewer, water bills in World Bank deal

This is even as the county executive recently introduced a motion in the county assembly seeking to convert NSWC into a corporation that is under the county executive.

The Nairobi Water and Sewerages Bill 2023 sponsored by nominated MCA Joyce Muthoni seeks to ensure that the water firm is under the control of the county executive led by Nairobi governor Johnson Sakaja.

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