“S.W.A’s financial performance this year did not improve from last year due to recovery works bought about by cyclone evan. Net loss increased by $0.7M from last year, to $5.5M this financial year”
Fees and allowances for the Directors of the Samoa Water Authority (S.W.A.) increased from $10,902 in 2012 to $93,105 in 2013.
This ninefold surge is reported in the Authority’s latest Annual Report. It comes in the wake of the Finance and Expenditure Committee (F.E.C.) stating in its recent report on the Main Estimates of Receipts and Payments of the Government of Samoa for the financial year ending June 30 2015, that the S.W.A. had been acting illegally with how it has been paying its directors.
The 2012-2013 Annual Report lists seven directors during this financial period.
They are Matatauali’itia Afa Lesa, who serves as the Director; Private Sector Board Members - Gaina Tino, Tiufea Rudolf Meredith, Amiatu Catherine C.L. Faolotoi and Papali’i Dr. Samuelu Petaia; and, Public Sector Board Members – Former
Ministry of Health C.E.O. Palanitina Toelupe and the late Ministry of Natural Resources and Environment C.E.O. Taule’ale’ausumai La’avasa Malua.
The members were appointed on 25 April 2012, for a term of three years.
According to the report: “Directors appointed from Government Corporations and Ministries do not get paid directors fees and meeting sitting allowances as per Cabinet Directive.”
Despite this, the S.W.A. Board managed to rack up quite a costly tally, with the Annual Report providing a basic breakdown of members’ costs.
Directors’ fees and allowances spiked from $2,600 tala in 2012 to $72,472 tala in 2013, overseas travel costs increased year-on-year from $0 tala to $1,292 and ‘other costs’ rose from $5,500 to $18,248 tala.
The report does not elaborate on what the “other costs” were.
What is notable is that while three out of the four listed costs showed a marked surge, meeting expenses for the board decreased from $2,802 tala in 2012 to $1,903 in 2013.
According to a source, the chairperson of a board is paid $6,800 per year in addition to $300 tala per board meeting, while private members are each paid $4,500 annually to sit on a board in addition to $250 tala per board meeting they attend.
In its report on the latest Budget estimates the F.E.C. noted that, the Authority continues to pay the Withholding Taxes of directors, which it says is illegal.
The Chairman of this Committee is, Papali’i Niko Lee Hang.
“The Authority confirmed that a sitting allowance of $250 was paid to each director for their presence at the late General Manager’s funeral, under the authority of the Acting General Manager,” the F.E.C. report reads.
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“The Committee believes that it is illegal.”
The Acting C.E.O. at the time was, Tauiliili Ekiumeni Fauolo.
In addition to the increase in costs for the directors, the Authority itself posted an increased net loss of $778,428 tala from $4,739,601 in 2012 to $5,518,029 in 2013.
“S.W.A’s financial performance this year did not improve from last year due to recovery works brought about by Cyclone Evan,” the Authority’s Annual Report reads.
“Net loss increased by $0.7m from last year, to $5.5m this financial year.
“Operations and maintenance increased by more than $1m so that water supply could be provided 12 days after Cyclone Evan."
“S.W.A. will continue to operate at a loss whilst the tariff is low and whilst our N.R.W. (Non-Revenue Water) levels are high.”
N.R.W. is the difference between the water put into the system and amount the utility, in this case the S.W.A. charges consumers for the water.
The Works, Transport and Environment Committee’s report on S.W.A’s Annual Reports for the financial years ending 2010, 2011 and 2012, tabled in the House earlier this year, revealed the S.W.A.’s N.R.W., or “water loss” as the committee call it, sat at 66 per cent. This means for those years, only 34 per cent of the water that runs through S.W.A. pipes is charged for.
The latest Annual Report shows this figure has increased to 70 per cent – a fact which the Authority’s C.E.O., Seugamaalii Jammie Saena, addressed in a response to an email.
“The S.W.A. has an ongoing programme to replace suspected leaking mains and also to increase its metered customers base to deal with non-revenue water,” she says.
“We have an aggressive campaign to do this within our treated areas such as the Fuluasou, Alaoa and Malololelei treated supply areas."
“There is no accepted norm, we aim to reduce as much as we can within the given time and budget allocated by Government to decrease this volume, that’s why SWA’s tariff remains unchanged till a vast improvement is achieved.”
Despite there being no rule of thumb for acceptable levels of N.R.W., water specialists D.H.I. Solutions say the World Bank recommends that N.R.W. should be less than 25 per cent of the total water produced, while in many countries N.R.W. is up to 60 per cent.
“High levels of N.R.W. are detrimental to the financial viability of water utilities and pose an extra burden on paying customers,” the company reports.
According to Water Utility Infrastructure Management Globally, non-revenue water amounts to an average of 34 per cent of processed water worldwide.
“In other words, 34 per cent of the water that a utility has treated and pumped is not billed."
“The World Bank estimates that non-revenue water costs utilities $14 billion, annually."
“In the United States, reports have shown that the non-revenue water totals between 10 and 30 per cent.” In their Discussion Paper The Challenge of Reducing Non-Revenue Water (NRW) in Developing Countries - written for three international groups including the World Bank Group, Bill Kingdom, Roland Liemberger and Philippe Marin say that N.R.W. is one of the major issues affecting water utilities in the developing world.
“High levels of N.R.W. reflect huge volumes of water being lost through leaks, not being invoiced to customers, or both."
“It seriously affects the financial viability of water utilities through lost revenues and increased operational costs."
“A high N.R.W. level is normally a surrogate for a poorly run water utility that lacks the governance, the autonomy, the accountability, and the technical and managerial skills necessary to provide reliable service to their population."
“The waste of resources resulting from high N.R.W. levels in developing countries is considerable."
“To illustrate this point, the study begins with a global overview of the situation and what it means in terms of foregone services to new consumers and the financial costs to utilities."
“In developing countries, about 45 million cubic meters are lost daily through water leakage in the distribution networks—enough to serve nearly 200 million people."
“Similarly, close to 30 million cubic meters are delivered every day to customers, but are not invoiced because of pilferage, employees’ corruption, and poor metering."
“All this directly affects the capacity of utilities in developing countries to become financially viable and fund necessary expansions of service, especially for the poor.”
The International Water Association says such losses may be caused through leaking and burst pipes, illegal connections and metering inaccuracies, for example.
“The imperative to effectively manage NRW is further heightened due to a rapidly growing and urbanised global population and the impacts of climate change which together put greater demand on scarce water resources,” it reports.
“Furthermore, reducing levels of NRW can contribute to attaining M.D.G. (Millennium Development Goal) target seven to reduce the proportion of people without access to safe drinking water.”
The 2012-2013 Annual Report states the Authority is working hard to get N.R.W. under control to reduce wastage, reduce the costs of production, improve billing and revenue collection and ensure more water is available to customers during the dry seasons.
“However, it needs to be recoginised that our N.R.W. reduction program could extend over five or more years before satisfactory levels are achieved,” the report reads.
“An N.R.W. specialist continues to assist us thorough these important first stages of our N.R.W. reduction program and it is planned that a J.I.C.A. Technical Cooperation Project will take over this key role by mid 2014.”
According to the report as N.R.W. comes under control and the Authority’s service improves, it is expected that tariffs will then be reviewed.
Turning now to S.W.A.’s return of investment, the Authority reports that it has steadily declined since the 2009-2010 end of financial year (see table 11 above).
“All figures are low and well below the Public Bodies benchmark of 7 per cent return on equity, which is clearly unrealistically high,” the report reads.
According to the report the total income amounted to $19.94 million, which came in slightly less than the 2012-2013 total income.
“The waste water service now accounts for about 15 per cent of total income,” it says.
“However, water supply sales revenue decreased by approximately $1.39 million from the previous year mainly because no household bills for Upolu Island were generated in December and January because of Cyclone Evan.
“Water services revenue of $11.1m, commercial customers account for 33 per cent, metered domestic customers account for 59 per cent and eight per cent comes from flat rate customers and other water services.
“The net loss for the year is $5.5 million tala compared with $4.7 million in 2011/2012, a slight increase loss of $778,428.
“Expenses increased for personnel, administration and operations and maintenance due to cyclone recovery work."
“Government reimbursed $1m under Grant."
“All figures still point to the need for S.W.A. to reduce N.R.W., improve revenue collection and review the existing water tariff regardless of the impact of natural disasters.”
In regards to its Cashflow Performance, the Authority’s receipts for the year in questions amounted to $25.5 million.
“A slight increase from last year, $25 million,” the Annual report reads.
“Payments also increased and amounted to $29.8 million due to capital works expenditures under budget support and cyclone recovery.”
Looking at cost recovery, the Report notes that the Authority has managed an annual cost recovery of 67 per cent.
“It should be noted that the current water supply tariff covers Operations and Maintenance only and also excludes and also excludes depreciation, wastewater on the other hand is full cost recovery.”
The Authority’s report on its cost efficiency that water sales decreased by nearly $1.39 million tala compared to the previous year. It again cites Cyclone Evan as a reason for this.
“Reciepts from bills increased during this period by $1.5 million due to more stringent efforts to collect water and wastewater bills."
“Figure 3 (see above) presents the water supply Collection Efficiency for domestic customers from July 2012 to June 2013."
“This is the ratio of water bill payments that is tied to receiving Budget Support funds from (the) European Union and (the) Government of Samoa."
“S.W.A. achieved an average Collection Efficiency of 78 per cent, compared with our target of 72 per cent – a satisfactory result.
“The overall Collection Efficiency for both commercial and domestic customers’ water supply for the financial year was 90 per cent."
“For wastewater alone we achieved a 94 per cent collection efficiency."
“Payments from new payment centres and agencies accounted for 11 per cent of revenue.”
For its Capital Works Program, the S.W.A. reports that Budget Support Financing from the European Union was provided in the amount of $8.366 million tala, on top of $4.07 million tala rolled over from 2011/12, to be expended by the end of June – a total of $12.436 million tala.
“Expenditure is monitored and reported in line with the Water for Life Sector Plan strategies."
“A total of 12.67 million tala was expended during the year on priority investments."
“Tables 12 and 13 (see above) present this expenditure relative to sector strategy and operations division (and) capacity building respectively."
“It is important to note that the improvements made in Key Performance Indicators as a measure of effectiveness of the capital works program.”
Seugamaali’i was sent a subsequent follow-up email with a number of questions regarding the Annual Report. However, they remained unanswered at the time of press.
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