STATE AUDIT OFFICE
- Press Release -
Skopje, 14 September 2023
59% drinking water loss and difficult billing
The quantity of produced water significantly differs from the quantity on invoiced water, i.e. non-revenue water is around 59%, and PUC Vodovod Bitola has not signed contracts on rights and obligations with 74% of service users, which causes more difficult billing
SAO conducted audit on the financial statements together with compliance audit on the PUC Vodovod Bitola for 2022.
Auditors identified shortcomings, irregularities and inconsistencies of different nature and expressed adverse opinion on the reality and objectivity of the financial statements for 2022 and adverse opinion on the compliance with legal regulations.
It was ascertained that the public utility company has not taken enough measures and activities to analyze the situation, to adopt and implement plans to minimize and eliminate the causes that contribute to water loss in the water supply system, and to implement measures for active control of water loss.
In 2022, water production amounts to 14.581.566 m3 and, compared to 2021 it shows an increase of 0.80% (14.465.172 m3), while revenue/ invoiced water in 2022 is 5.984.569 m3, which is a decrease of 1% compared to 2021 (6.052.710 m3).
With the inspection of the method for determining revenue and collection of claims from supply and delivery of water, auditors ascertained that from 2018 until 2022, the amount of produced water significantly deviates from the amount of invoiced water, i.e., the percentage of non-revenue water shows a cyclical decrease and increase, but it remains around 59%.
Fluctuation of produced, revenue and non-revenue water 2018-2020
Except for tracking water loss, the public enterprise has not adopted planning documents and clear measures that will contribute to reduction on water loss, and as a result, the PUC has less realized revenue, less calculated VAT and less calculated water fee, which are all revenues of the Budget of the Republic North Macedonia.
The audit concluded that out of 41.812 water users, until the day of reporting on the audit the PUC Vodovod Bitola has not entered into agreements for regulation of mutual rights and obligations with 74% of them (30.838 service users), which could impede the billing of services rendered as well as the realization of rights and obligations of the service providers and users.
The financial statements of PUC Vodovod Bitola present revenue from sale of goods (products) and services in the amount of 222 million denars, as well as claims based on drinking water supply and services and connection to the water supply network of about 221 million denars (approximately 3.6 million euros). The auditors were not able to confirm the reliability, accuracy and completeness of the presented revenue.
Part of the revenue is realized at prices that are not approved by the competent authorities - appropriate supporting documentation for confirming the basis, reality and objectivity of the revenue is lacking, interest is not calculated for late payment of invoices, discounts are approved without consent of the founder and the managing board, and there are no control activities in the process, which has an effect on the accuracy and completeness of the realized revenue.
For part of the performed construction works and the interim certificates, the audit was not provided with supporting documentation (construction book, construction diaries) for confirming the period, type and quantity of performed works. Approved projects for reconstruction, approvals for construction and approvals for use issued by a competent authority were also not provided in accordance with the Law on Construction for construction and reconstruction of a water supply network and installation carried out by the public company in its own name and at its own expense, for which revenue has been declared and increase of the value of construction facilities in amount of approximately 107.000 euros.
The audit identified irregularities in the manner of managing and recording supplies due to absence of an act for regulating procurement, receipt and issuance of raw materials, materials, spare parts and small inventory, inadequate planning of the actual need for supplies, and unnecessary spending on purchase of excessive supplies that may become obsolete or lose their quality.
Namely, from the total supplies of raw materials and materials, which amount to about 1.3 million euros, supplies amounting to about 346.000 euros or 27% were purchased before 2018 and it is possible that they have no use value, i.e. they are technologically obsolete. The largest amount of the mentioned supplies have water meters in the amount of about 187.000 euros.
Certain raw materials and materials are being constantly procured each year since 2018, even tough until the day of the audit, they have not been issued. Such is the case of the water meters – the supply of water meters at the end of 2022 amounts to approximately 434.000 euros, i.e. it has increased by 132%. In 2022, 55% of total supplies amounting to 695.000 euros have not changed.
The auditors ascertained unregulated property rights in the Real Estate Cadastre Agency for part of the land and construction facilities, which impacts the parameters in the formation of the price of tariffs for water services, in accordance with the Methodology for determining tariffs for water services, approved by the Energy and Water Services Regulatory Commission, and based on official data from the accounting records of the public enterprise.
The auditors ascertained registered land with a value of about 1.4 million euros, which originates from past years, without supporting documentation and secured title deeds.
Construction facilities valued at around 4.2 million euros, of which approximately 2 million euros or 47% are infrastructure facilities (the water supply network), are not recorded in the Cadastre of infrastructure facilities. For the rest of the construction facilities valued around 2.2 million euros, it was ascertained that for 46% or about 1 million euros, PUC Vodovod Bitola does not possess title deeds.
The public enterprise has a title deed for a construction object – apartment/weekend house in Pretor, which is not recorded in the material records, but it is recorded in the accounting records with a value of 65 denars.
Weaknesses in the application of the Law on Public Procurement were also identified, as well as irrational spending of public funds. Namely, from 2018 to 2022, four simplified procedures for public procurement of consulting services for maintenance and development of SCADA system were carried out in the amount of about 79.000 euros, for which the PUC has paid about 66.000 euros (around 28.000 euros in 2022).
With the performed inspection of the contracts, ledgers and financial documentation, it was ascertained that the procurement in question - consulting services for maintenance and development of SCADA system was not carried out with these procedures, but procurement of new SCADA system. In the accounting records, the purchase is recorded as costs for maintenance services, i.e. it is not recorded as an asset - software. This software is not put into use, it is not complete, it is not functional, the company has no economic benefit and still uses the old SCADA system.
To overcome and improve ascertained shortcomings, the auditors made recommendations for measures and activities to be taken by the competent persons and authorities.
Press contact:
Albiona Mustafa Muhajiri +389 72228 203 [email protected]
Mijalche Durgutov +389 70 358 486 [email protected]
Martin Duvniak +389 75 268 517 [email protected]