Audit report reveals Water Company in Murang’a made losses in 2019

Murang’a Monday July 3, 2023

by Anita Omwenga

The County Assembly of Murang’a has established that a local water-bottling company made losses in the financial year ending June 2019.

In a report tabled on the floor of the House by Alex Makau Ndunda, chairperson of Public Investments and Accounts committee on Audited financial statements for Fort Beverage Industries Limited (FBIL) for the year ended 30 June 2019, it was revealed that under revenue reserves, the company made a loss of Sh2,345,884 after analysis of the accounts by the Auditor General.

“This report covers the operations of FBIL and it was prepared by the committee after analysis of the report by the Auditor General,” said Makau adding that the company had now made a total of Sh.7, 185,881 in losses in two year consecutively.

During the investigations, the committee discovered that FBIL failed to provide an audit query on unsupported trade and other payable, undisclosed share capital, budget performance and irregular procurement of production and maintained materials.

“The main issues for investigation and determination were the various audit queries contained in the report of the Auditor General on the financial operations of FBIL for the financial year 2018/2019,” said Ithanga MCA Makau.  

The principal activity of FBIL is to produce and sell bottled water. It envisages commercial operations for profits to be re-invested to the parent company, Murang’a Water and Sanitation Company (MUWASCO), to improve affordability of piped water across the distribution area in the county.

Makau observed that FBIL failed to meet its principal mission, which was to make returns that would be reinvested in the parent company MUWASCO for provision of affordable piped water and instead made losses that ate into the parent company.

“The company’s dependence on MUWASCO disadvantaged the people of Murang'a since money meant for provision of water went to fund the operations of the company,” he said.

According to the report, the Managing Director’s (MD) response on behalf of company management said the company had in the year 2019 not penetrated the market and that currently it is doing well and it is expected to break even.

In addition, the MD said that the sales have improved from Sh5. 2 million to currently anticipated Sh.20 million by June this year.

“The company did not realize its approved budget sales in the audited year due to stiff competition in the market where some bottled water companies sold water at cut throat prices,” read part of the report.

Gaichanjiru MCA Mr. John Munyua while supporting the motion said the report written by the Auditor general is truthful and that FBIL management failed to provide the necessary documents to address the various audit queries.

“The auditor's opinion for the financial year ending 2019 was qualified in that although the record books were well displayed they were issues raised. These issues nonetheless were not pervasive,” said Munyua, vice chair of the public investments and accounts committee

Kahumbu MCA Mr. Isaac Chefman while supporting the motion urged the MCAs to support the bill saying that it was their duty to offer oversight on the activities in the county. 

“The committee is dedicated to diligently carry out an ex post scrutiny of the budgets of the county executives, county agencies and county investment entities and the subsidies thereof,” he said.

The report recommended the board of management of FBIL should formulate a strategy to ensure that they yield returns to avoid dependence on the parent company.

The recommendations further state that in future, the company should ensure that their expenditure is below their sales and ensure that the personnel cost is within the stipulated ration of 35 percent as per the WASREB Regulation.

The assembly called on the Water and Sanitation CEC to give policy guidelines on budgeting, procurement, personnel emoluments and other operational matters to all Water and Sanitation Companies and their subsidiaries therefore to ensure prudent use of public resources.

The MCAs when adopting the report took into account the responses given by Fort Industries management, challenges faced by the company during formation and the impact of the subsidiary to the parent company (MUWASCO) and the community at large.

Courtesy ; K. N. A