Business & Tourism
State utility corporation in shambles, audit reveals
Fenaka Corporation’s performance audit exposed mismanagement and questionable hiring practices.
A performance audit of the state utility corporation has exposed mismanagement, inefficiency and questionable hiring practices.
Fenaka Corporation, which provides electricity to more than 150 islands, made an annual profit only once since it was established in 2012.
“For the first three years after the company was formed, the fiscal outlook of the company did not strengthen at an acceptable rate. Expenses are higher than income and the company has not been operating at a profit,” an audit report published last week observed.
“Inventory holding period is increasing annually and the company’s debt is at more than half its capital.”
The audit found that Fenaka faced a revenue shortfall due to the failure to recover subsidies and collect unpaid electricity fees.
Some MVR143 million (US$9 million) from subsidies was not recovered as of October 2016 and MVR114 million was owed from electricity bills as of December 2017.
In 2016, Fenaka was mired in a corruption scandal. The former managing director resigned after it emerged that Fenaka was owed US$1.1 million from a speedboat company that was paid MVR17.8 million to buy dollars.
Aside from the foreign exchange scam, a previous audit also uncovered corrupt fuel supply and procurement deals that cost millions in losses.
– Stalled projects and lack of oversight –
The performance audit found that a majority of Fenaka projects were stalled or behind schedule, most of which were subcontracted to third parties.
Nine out of 16 projects subcontracted during the audit period were not completed on time. There were no records to show whether the company took any action against contractors who missed deadlines.
Fenaka failed to monitor the status of projects. Daily logs were not filed by staff, weekly reports were not prepared by contractors and senior officials from the head office failed to produce inspection reports after monthly trips to islands.
There are no records that show how much of an MVR373 million water project started in 2011 was completed.
The audit criticised the government for continuing to award contracts to Fenaka despite its lack of resources.
The law was broken when Fenaka was awarded projects without a public tender or bidding projects, it suggested, and the company went on to earn a profit through subcontracting.
A sewage project on the island of Buruni in Thaa atoll was subcontracted for MVR16.7 million, almost half the price Fenaka was paid by the government.
Fenaka also breached the agreement with the government by failing to seek permission before subcontracting work worth more than one percent of the project, a legal requirement by public finance rules.
Five other projects were subcontracted for a profit. In two other cases, the company breached agreements.
Fenaka told auditors the company had to subcontract the projects because “it lacked resources and the cost of delaying basic services to people would be higher.”
The audit office recommended open bidding processes instead of handing out entire projects to third parties.
The audit also identified dubious hiring practices. Some 105 staff were hired without vacancy announcements between May 2014 and March 2015. Out of these, more than half were members of one unnamed political party.
“This office believes that if staff are hired as stated above without announcing a vacancy and interviewing candidates, there is a chance of misusing the position.”
Other issues flagged in the report included the lack of a standard operating procedure to handle power cuts. which were dealt with by the island office, regional office or main office.
Fenaka also lacked an internal control system to handle important documents, meaning many documents were misplaced or lost.