Special audit of seven state-owned enterprises in the Gambia by Ernst & young LLP- has that revealed during the forensic audit; it was observed that the 2017 Financial Statements National Water and Electricity Corporation (NAWEC) do not fully agreed to the underlying Trial Balance.
“The version of the Balance Sheet provided is also fundamentally flawed in that it does not balance; Total Assets do not equal Total Liabilities plus Equity. The Senior Management acknowledged these inconsistencies and put them down to the draft nature of the Financial Statements,” the auditors disclosed.
According to Ernst & young LLP. NAWEC has been increasingly reliant on externally obtained debt to finance not just its capital expenditure, but also its day to day operations to service its current debt.
“NAWEC’s Fixed Assets’ Net Book Value increased by 32% from 2010 to 2017 to GMD 5.5b (USD 115m), or over 72% of the Total Assets [2]. However, its Total Debt increased by 256% to GMD 9.1b (USD 190m), i.e., 82% of Total Liabilities,” the auditing firms added.
“As a result, since 2011 NAWEC has consistently been in a negative Equity position which means that the company’s Total Labilities have exceeded its Total Assets. Therefore, on the Balance Sheet test, it has been insolvent for seven out of eight years under review.
Almost one third of Fixed Assets are Assets under construction (32%), with the rest being Plant and Machinery (33%), Electricity Network (23%), Water and Sewerage Network (7%), Land and Buildings (3%), Motor Vehicles (1%) and Office Equipment and Furniture (1%),” Ernst & young LLP pointed out.
Ernst & young LLP also said, “Given that NAWEC has high value Assets under construction, an absence of a robust process around the asset reclassification has led to a significantly over-inflated Fixed Assets value. No depreciation has been posted for completed assets for months, and in some cases, years.”
“NAWEC is to perform the reconciliation of the major balances outstanding from each customer to revise its Bad Debt provision to make it more prudent as described above
NAWEC is to replace the existing billing system with a system which produces all the basic reports, including ageing and Trade Receivables breakdown,” Ernst & young LLP noted.