A damning report by Auditor-General Nancy Gathungu has exposed gross mismanagement at the Nairobi City Water and Sewerage Company Limited, leaving the utility firm saddled with debts exceeding Sh5 billion.
The report further revealed that the company is losing at least Sh8.57 billion in water that is produced but not billed to customers.
Despite operating at a loss, the firm spends more than Sh3.26 billion annually on bloated staff costs, a strain it can barely afford.
The audit report for the financial year ending June 30, 2024, showed that the firm had a negative working capital of over Sh3.4 billion, with liabilities surpassing its assets.
Auditor-General Gathungu declared the company technically insolvent, blaming collusion and laxity among senior staff for the dire situation.
These revelations came to light during a Senate County Public Investments and Special Funds Committee meeting on Monday, where senators reviewed the audit findings.
Appearing before the committee chaired by Vihiga Senator Godfrey Osotsi, Nairobi Governor Johnson Sakaja struggled to explain the level of mismanagement uncovered at the county-owned utility.
The report indicated that the water company produced 185.8 million cubic meters of water during the year, but only billed 90.3 million cubic meters.
The remaining 95.4 million cubic meters—classified as non-revenue water—resulted in a staggering Sh8.57 billion loss, which accounts for more than 78 percent of the company’s operating revenue of Sh10.94 billion.
The audit also flagged staff for estimating water bills for 15,320 customers for six consecutive months, instead of obtaining actual meter readings. Additionally, 23,384 accounts were billed a total of Sh344.4 million but made no payments—yet continued to receive water services.
Even more puzzling, 10,192 active accounts did not receive any bills at all for the entire year but remained operational. The auditor questioned how this was possible.
Governor Sakaja defended the practice, saying some customers are allowed to self-read and submit their readings via SMS due to accessibility issues. Nairobi Water Managing Director Nahashon Muguna said staff are often denied access, attacked, or chased by dogs when trying to read meters.
Nairobi Senator Edwin Sifuna dismissed the explanation, asking, “With all the force we’ve seen City Hall enforcement officers use to break into properties, what are these places you’re unable to access for six consecutive months?”
Nominated Senator Hamida Kibwana questioned whether any measures had been taken against non-compliant customers, including service disconnection.
Governor Sakaja attempted to downplay the concern, stating the 15,320 affected accounts represented just 6 percent of the total 250,000 accounts.
Elgeyo Marakwet Senator William Kisang asked why the company had not adopted smart meters to allow remote monitoring and disconnections. Muguna argued that the cost of smart meter installation is too high to justify.
Governor Sakaja supported his MD, adding that the cost-benefit ratio must be considered before adopting new technology.
“You cannot run away from technology. It may be costly at first but will be beneficial in the long run,” said Senator Osotsi.
Meanwhile, the company’s staffing costs remain unsustainable. Nairobi Water spends Sh7.1 billion—about 65 percent of its revenue on its 2,930 employees. This number rivals or exceeds the total staff in many counties: Lamu has 1,675 staff, Vihiga 3,305, and Kilifi 4,297.
This wage bill far exceeds the 35 percent revenue cap set under Regulation 25(1)(b) of the Public Finance Management Act, 2015. If the company had complied, staff costs would have totalled Sh3.83 billion—saving Sh3.26 billion.
Despite the financial crisis, the report says the company has made little effort to recover debts. It is owed Sh10.93 billion, of which Sh7.3 billion has remained unpaid for over 16 months—well past the 120-day limit for recovery.
Ms Gathungu warned that the firm’s financial health continues to deteriorate. Negative working capital rose from Sh2.78 billion in the previous financial year to Sh3.49 billion.
“The company is technically insolvent and may not be able to meet its current obligations as and when they fall due,” the report concluded.
