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Zinwa financial rot exposed

by Staff reporter
3 hrs ago | Views
An external audit conducted by Grant Thornton has raised serious concerns about the financial management at the Zimbabwe National Water Authority (Zinwa), revealing significant irregularities in its reported revenue for the year ending December 31, 2023. The audit, which forms part of Zinwa's 2023 integrated annual report, casts doubt on the accuracy of the reported revenue of ZW$545.9 billion, primarily from the sale of clear and raw water.

This marks the second consecutive year that Zinwa has been flagged for fiscal mismanagement, with auditors pointing to systemic accounting failures that hindered their ability to verify the reported figures. The audit revealed troubling discrepancies, including missing invoices, duplicate invoice numbers, and other issues that undermined the credibility of Zinwa's financial statements.

"During the year ended 31 December 2023, the authority recorded revenue from clear and raw water amounting to ZW$545,931,471,468," the Grant Thornton report stated. "We noted missing invoices, as well as duplicate invoice numbers in the authority's sales invoice listing for clear and raw water. There were no satisfactory auditing procedures that we could perform to obtain reasonable assurance that all clear and raw water sales and corresponding trade receivables were properly recorded."

Grant Thornton's audit concluded that the revenue figures related to water sales were not adequately supported, stating, "We were unable to satisfy ourselves as to the completeness and accuracy of the accounting records relating to clear and raw water sales."

The report also highlighted Zinwa's failure to address corrective actions recommended following similar findings in 2022. Last year, auditors had flagged unreconciled trade payables of ZW$3.9 billion, prompting an internal investigation and disciplinary actions against implicated employees. However, despite these efforts, many of the issues persist, raising concerns about the authority's financial integrity and its ability to operate as a going concern.

"An adverse opinion was issued on the financial statements for the year ended 31 December 2022. The adverse opinion was issued with respect to the unreconciled variances on trade payables, inventory, cash and cash equivalents, and non-compliance with International Financial Reporting Standard (IFRS) 16 - Leases," the report explained.

The auditors noted that Zinwa management had failed to make the necessary adjustments to reconcile the opening balances for trade receivables, trade payables, inventory, cash and cash equivalents, right-of-use assets, and lease liabilities, which contributed to the adverse opinion in the previous year. These unresolved issues have led to the misstatement of income and other financial figures, with auditors emphasizing that the potential impact of these discrepancies could affect the comparability of financial results between the two years.

In the 2023 report, Zinwa's chairperson, Bongile Ndiweni, attributed the audit challenges to the use of an outdated Enterprise Resource Planning (ERP) system, which was implemented in 2011 and no longer meets the authority's evolving operational needs. She explained that the BIQ system needs to be upgraded to handle the complexities of Zinwa's current operations.

Ndiweni also acknowledged the mismatch between revenue inflows and expenditures, noting that while Zinwa had introduced foreign currency-indexed tariffs, most payments (80% of inflows) were processed in US dollars. However, the authority continued to conduct most transactions in local currency, converting the US dollar payments at the prevailing exchange rate, which contributed to liquidity challenges.

Despite these issues, Zinwa reported an inflation-adjusted operating surplus of ZW$301.9 billion in 2023, with inflation-adjusted revenue rising to ZW$577.1 billion from ZW$158.2 billion in 2022. Expenditures also increased significantly due to inflationary pressures, rising to ZW$275.2 billion from ZW$123.4 billion.

Zinwa spokesperson Marjorie Manyonga responded to the audit findings, stating that the authority had rectified the reconciliation gaps pointed out by the auditors. "Whereas the external audit report brought to the attention of the authority areas needing correction, their report does not imply the existence of any risk for revenue leakages, real or potential," Manyonga said. She further noted that remedial actions had been taken to address issues related to invoicing, trade payables, and lease agreements.

However, despite these assurances, the audit highlights ongoing challenges at Zinwa that could undermine confidence in the state-run entity's financial stability, especially in light of recurring issues from the previous year. The situation calls into question the effectiveness of the authority's financial controls and its ability to manage its resources efficiently, particularly in an environment marked by currency fluctuations and inflation.

Source - the independent
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