BPC liabilities exceed assets by over P1 billion – Auditor General
In her latest report, The Auditor-General, Pulane Letebele has expressed concern that currently, Botswana Power Corporation (BPC)’s liabilities exceed assets by a staggering P1.40 billion.
Known as ‘asset deficiency’, in the business world this is regarded as a sign of financial distress and indicates that a company may be headed for bankruptcy.
According to Letebele, the power utility has continued to incur a loss before tax of P558 million before taking into account the tariff subsidy grant received from the government of P800 million.
She noted that under these circumstances there is growing doubt surrounding the Corporation’s ability to continue.
“The Ministry of Mineral Resources, Green Technology, and Energy Security confirmed that it would continue to facilitate the Corporation’s requests and motivations to the government for cost-efficient tariffs as well as, where necessary, support for the revenue shortfall,” recorded the Auditor General in her report which the 2019 financial year.
The government has for the 2019/2020 financial year, allocated P600 million towards BPC’s tariff support in pursuit of the commitment made.
Meanwhile, the Auditor General pointed out a number of inconsistencies raised by the power utility’s external auditors, PricewaterhouseCoopers (PwC).
The auditors noted that BPC’s Fixed Assets Register included fully depreciated assets, some of which were still in use. This is a direct breach of the International Accounting Standard 16, which provides that useful lives of assets be reviewed at least once every financial year-end.
In response to this, BPC management is said to have indicated that they were planning to institute a whole verification exercise to identify those assets that are in use and those that were not in use and apply corrective measures.
Also, the auditors established that former employees continued to be included in the authorized signatories list of financial institutions such as FNB South Africa, Absa Botswana, Standard Chartered Bank Botswana, and Bank of Botswana.
This is said to have happened despite management instructing the financial institutions to remove the former employees from the list of the signatories.
However, the financial institutions are reported to have acknowledged the error and rectified it even though the management stated that former employees did not have the rights in BPC to effect payment transactions.
The Corporation’s auditors have also noted a repeat finding relating to Morupule B remedial work and liquidated damages.
The auditors noted that, according to management, there was a delay in the shutdown of the first unit because of engineering design and implementation of the remedial works was delayed by more than a year.
The work eventually commenced in July last year and was expected to run for four years, from the shutdown of the first unit to completion of the fourth and final unit.