• It emerged that the devolved unit has been pumping between Sh8 million and Sh10 million every month in the Kitui Water and Sanitation Company (Kitwasco).
• The expenditure amounts to about Sh120 million annually and over the eight years, the total is approximately Sh960 million.
Image: MUSEMBI NZENGU
The Kitui government is on the spot for injecting close to Sh1 billion into a water company whose ownership is unclear and which faces insolvency.
This even as a Senate watchdog panel ordered the EACC to probe Sh173.9 million non-water loss at the company that has close to Sh500 million debt.
It emerged that the devolved unit has been pumping between Sh8 million and Sh10 million every month in the Kitui Water and Sanitation Company (Kitwasco).
The expenditure amounts to about Sh120 million annually and over the eight years, the total is approximately Sh960 million.
The revelations emerged during the grilling of Governor Julius Malombe by the Senate’s Public Investments and Special Funds Committee over the operation of the utility firm.
Malombe disclosed to the Vihiga Senator Godfrey Osotsi-led panel that the county has been financially supporting the company since 2015.
However, the committee took the governor to task to explain why they were comfortable to spend such amounts yet the county does not fully own the company.
According to a report by the Auditor General for the financial year ending June 2021, the county did not provide details of the subscribers to the company and statement of guarantee as required by the Companies Act, 2015.
Further, no document was provided to show that the ownership of the company changed from limited by guarantee to limited by shares and transferred to the county government as required in the Water Act, 2016.
“That is a lot of money with the kind of accounts we are seeing here coupled with the ownership issues,” Osotsi said.
Defending his administration, Governor Malombe admitted the amounts are huge but asked the committee to see value for the expenditure in that residents are getting water.
The governor told the committee that the county government owns the company through guarantee and not by shares – as is required by law.
However, Osotsi said the county government failed to provide documents showing they own the company.
The county also failed to provide an updated CR12 to show its directors.
“As it is now, we cannot confirm who owns the company until we get the documents because we are a committee of evidence,” Osotsi said.
Kitui Senator Enock Wambua also questioned why the county government has been supporting a company it does not legally own.
“The county government should not be supporting a company they don’t own. You need to fast-track the change of ownership,” Wambua said.
Malombe explained that the county government owns the company through guarantee and not by shares as is required by Water Services Regulatory Board (Wasreb) guidelines.
However, he added that the county government will comply with the requirement by September 30, 2023.
Elgeyo Marakwet Senator William Kisang criticised the governor for only giving the committee futuristic responses without enumerating what has been done to correct the situation.
“So, it means there is nothing you did to solve the ownership issue of the company during your reign between 2013 and 2017?” he posed.
The firm is facing audit queries over Sh240.9 million in trade receivables having risen from Sh200.2 million in 2019, with Sh168.1 million which was outstanding for more than 120 days, implying that their collectability is doubtful.
The statement of financial position of the company also reflects trade and other payables balance of Sh144.4 million, where only Sh54.3 million can be supported leaving Sh90.1 million as unsupported.
Further, trade and other payables balance increased from Sh98.9 million reported in the previous financial year.
“This is indicative of the inability of the company to settle its obligations as and when they arise,” the report read.
According to the report, the firm lost Sh173.9 million in non-revenue water during the period under review after billing only 1,649,346 cubic metres of water out of the 3,626,235 cubic metres produced.
There are also queries over revenue shortfall of Sh20.7 million, and unauthorised over-expenditure of more than Sh14 million.
Further, a new board of directors during the fiscal period revealed that four out of six board members had not met the minimum eligibility criteria set out in the advertisement of having at least a degree in a relevant field.
“We are trying to turn around the company and we have appointed an acting managing director and what we are seeing is encouraging,” Malombe said.
The committee directed total restructuring of the board within 60 days, appointment of a substantive managing director, introduction of performance contracts for all staff as well as ensuring full ownership is transferred within 30 days.