Senators demand probe at Gusii Water and Sanitation Company over ‘graft’ 

Kisii Governor Simba Arati (left) and Gusii Water and Sanitation Company Managing Director Lucy Wahito

Kisii Governor Simba Arati (left) and Gusii Water and Sanitation Company Managing Director Lucy Wahito field questions from members of the Senate County Public Investments and Special Funds Committee at the Kenyatta International Convention Centre on March 29, 2023. 

Photo credit: Lucy Wanjiru | Nation Media Group

A Senate watchdog committee has called on the anti-graft agency to investigate the possible theft of millions of shillings at the Gusii Water and Sanitation Company.

The senators gave the Ethics and Anti-Corruption Commission (EACC) seven days to submit a preliminary report on the probe targeting senior officials at the utility firm.

The County Public Investments and Special Funds Committee which is chaired by Mr Godfrey Osotsi (Vihiga) was alarmed by the misuse of funds at the utility firm during the tenure of former Governor James Ongwae.

“The committee directs EACC to launch investigations and submit a preliminary report within seven days. In the report, you must tell us the time frame [within which] you [intend to] complete the investigations,” said Mr Osotsi.

In an audit report for the financial year ended June 2019, the water firm was fingered for declaring Sh40.6 million in agency fees without providing supporting documents for verification.

The amount included Sh25.3 million owed to the Lake Victoria South Water Services Board (LVSWSB), Sh9.9 million to Water Services Regulatory Board and Sh5.3 million to Water Resources Management Authority.

The company is accused of exaggerating agency fees by Sh8.5 million by declaring Sh29.3 million as an outstanding special account fee due to LVSWSB, although the fee was Sh20.8 million. The company incurred an operating loss of Sh6.3 million during the financial year ended June 2019, with another Sh10.2 million in the previous fiscal year.

The audit report also indicated that the operating loss continued to deplete the retained earnings from negative Sh9.7 million in 2018 to Sh16 million in 2019.

In the financial year ended June 2020, the loss stood at Sh21.7 million, depleting the retained earnings to Sh37.7 million. With regard to non-revenue water, the firm could not account for 836,507 cubic metres produced during the financial year under review from the 1.8 million cubic metres produced, representing 46 per cent of the volume. This resulted in a Sh61.3 million loss.

This increased to Sh90.8 million in the following financial year and Sh74.1 million in the financial year ended June 2021.

Wage bill

On the wage bill, the company spent Sh78.7 million on the compensation of employees, constituting about 69 per cent of the total revenue in contravention of provisions of regulation 25(1) of the Public Finance Management Act that limits expenditure on wages to no more than 35 per cent of the total revenue for the year.

Further, the company was fingered for recruiting staff without advertising for the positions either internally or externally as is required by law. The positions included two commercial officers and an information and communication technology officer, an internal auditor, an assistant technical manager, and a geographic information system officer.

In the financial year ended June 2020, the firm spent Sh60.1 million on administration costs where Sh4.6 million went to directors’ emoluments. However, a review of the board of directors' minutes revealed that three out of five full board meetings were held in the same quarter, going against the requirement of one meeting per quarter.

The company was also on the spot over failure to remit statutory deductions amounting to Sh14.6 million during the year under review.

Appearing before the committee, Governor Simba Arati threw his predecessor under the bus, agreeing with most of the auditor’s observations. 

The firm’s managing director, Ms Lucy Wahito, admitted that the auditor’s observations on budgetary control and performance were true. She said the financial distress at the firm was due to huge losses from non-revenue water resulting from physical losses due to dilapidated infrastructure and commercial losses from the billing system.

“We have taken some measures to address the situation including installation of new billing software to address non-revenue water losses and [a hiring freeze] to minimise the wage bill,” said Governor Arati.


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