Auditors cast doubt on WUC�s viability

Isaac Pinielo | Friday October 13, 2017 12:35

The state-owned corporation, which  provides water and wastewater management services, released the statement of comments by its auditors via the Botswana Stock Exchange (BSE) this week.

Partner of Deloitte Botswana, Pragna Naik drew attention to WUC experiencing a significant decrease in revenue for the year under review and incurring a loss of P137.4 million before taking into account the tariff subsidy grant of P388 million received from government.

“This condition indicates that a material uncertainty exists that may cast significant doubt on the corporation’s ability to continue as a going concern,” she said.

WUC explained that the government has committed to provide ongoing financial support in the future aimed at sustaining the corporation in the medium to long term through funding capital projects and implementation of revised tariffs as approved by Cabinet.

A tariff increase was approved for the 2017/2018 financial year effective April  01, 2017.

Naik further drew attention to the issue of the title deed of a certain piece of land and buildings acquired by the corporation from the Department of Water Affairs and the Ministry of Local Government under the water reforms project that has not yet been transferred to the WUC. The corporation anticipates the title to the assets to be transferred in due course.

She noted that the determination of the doubtful debts provision involves a significant amount of judgement and estimation, adding that with the increase in the corporation’s debtor’s book, the level of overdue debt has increased significantly. Accordingly, the auditors identified the adequacy of the doubtful debts provision as a key audit matter as a result of the judgement required to be applied in determining the doubtful debts provision.

The auditors asserted that the corporation has not complied with the requirements of the Water Utilities Corporation Act which requires it to conduct its affairs on sound commercial lines and to produce a net operating income by which a reasonable return can be measured. In the period, WUC incurred an operating loss of P96.4 million before taking into account the tariff subsidy grant received from the government.

According to Deloitte, the corporation’s activities expose it to a variety of financial risks such as market risk, credit risk, and liquidity risk.

“The corporation’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the corporation’s financial performance,” said Deloitte.