AN external audit by Grant Thornton has uncovered significant financial irregularities at the Zimbabwe National Water Authority (Zinwa), casting doubt on the accuracy of its reported revenue of ZW$545,9 billion for the year ended December 31, 2023.
This marks the second consecutive year that the state-run entity has been flagged for fiscal mismanagement.
The audit, detailed in Zinwa’s 2023 integrated annual report, pointed to systemic accounting failures that prevented verification of revenue figures, particularly from the sale of clear and raw water.
Grant Thornton found missing invoices, duplicate invoice numbers, and other discrepancies that undermined confidence in Zinwa’s financial reporting.
“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 reads in part.
“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.”
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Grant Thornton said revenue figures relating to water sales were not satisfactory.
“We were unable to satisfy ourselves as to the completeness and accuracy of the accounting records relating to clear and raw water sales,” it further states.
“Consequently, we could not determine whether any adjustments relating to revenue and the corresponding trade receivables in the financial statements were necessary.”
The report also highlighted Zinwa’s failure to implement corrective measures recommended in 2022, leading to a recurrence of similar financial discrepancies.
Last year, auditors flagged unreconciled trade payables of ZW$3,9 billion, triggering an internal investigation and disciplinary actions against implicated employees.
However, Grant Thornton observed that many of these issues remain unresolved, casting further doubt on Zinwa’s status 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,” Grant Thornton said in the report.
“Management has not restated the opening balances for trade receivables, trade payables, inventory, cash and cash equivalents, right of use assets and lease liabilities to resolve the matters, which resulted in the adverse audit opinion in the prior period in accordance with the requirements of the International Accounting Standard (IAS) 8 — Accounting Policies.”
Grant Thornton also said due to accounting flaws, Zinwa management “misstated” income.
“As no retrospective adjustments in terms of the International Accounting Standard (IAS) 8 — Accounting Policies, Changes in Accounting Estimates and Errors have been made, the corresponding amounts for trade payables, inventory, cash and cash equivalents, right of use assets and lease liabilities on the statement of financial position and costs of production, depreciation, net finance income and, administration expenses on the statement of profit or loss and other comprehensive income are materially misstated,” it said.
“Our audit opinion is, therefore, modified due to the possible impact of this matter on comparability of the prior year and current year amounts.”
In the 2023 annual report, Zinwa’s chairperson Bongile Ndiweni attributed the adverse opinion to challenges arising from the entity’s utilisation of an outdated Enterprise Resource Planning (ERP) system.
“The ERP that Zinwa uses, BIQ, was first introduced in 2011. The needs of the authority and complexity of its operations have evolved over time and the BIQ system needs to be upgraded to meet the new needs,” she said.
Ndiweni also noted that though Zinwa had introduced foreign currency-indexed tariffs, most payments, accounting for 80% inflows, were processed in United States (US) dollars.
“Although the introduction of USD tariffs provided some stability, Zinwa continued to transact primarily in local currency, converting the USD tariffs at the prevailing RBZ (Reserve Bank of Zimbabwe) rate at the time of billing,” she said.
“The authority’s consumers paid for water predominantly, in local currency with USD transactions contributing only 20% of collections for Zinwa. This led to a mismatch between revenue inflows and expenditures, as many suppliers invoiced in USD, thereby creating liquidity challenges.”
During the period under review, Zinwa posted an inflation adjusted operating surplus of ZW$301,9 billion, with inflation adjusted revenue increasing to ZW$577,1 billion.
Revenue figures in 2022 stood at ZW$158,2 billion.
“The authority’s inflation adjusted expenditure rose to ZW$275,2 billion from ZW$123,4 billion due to increased costs of goods and services arising from the inflationary pressures experienced in 2023,” the report reads.
Zinwa spokesperson Marjorie Manyonga told the Independent that the reconciliation gaps that were pointed out by the auditors had since been rectified.
“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,” she said.
“The matters raised by the auditors in the 2022 external audit report have since been rectified, with the auditors acknowledging as much in the 2023 report.”
The authority has also taken remedial action to address other matters, including reviewing and refining the invoice listing module, engaging creditors for purposes of aligning and doing confirmations on trade payables and regularisation of lease agreements.
l When the 2022 and 2023 Zinwa financial reports were compiled, the exchange rate stood at US$1:ZW$684,33 and
US$1:ZW$6 104 respectively.
