Kenya: Auditor-General raises the alarm over power firm’s books

AUDITOR General Edward Ouko has raised concern over Kenya Power’s level of debt provisioning and adherence to debt covenants, issuing a qualified opinion to the results for the financial year ended June 2018.

Kenya Power management, which also restated the 2017 books, confirmed receiving the qualified opinion to an investor who wanted to know the kind of opinion the auditor had given to their books. Acting CEO Jared Othieno said that the auditor general was not satisfied with the level of provisioning and also the fact that the company had sunk into negative working capital, against the requirements the firm has set with some of the creditors. “Were the accounts qualified? Yes they were. It relates mostly to the borrowing covenants .Some of these loans we have, the covenant is that we should maintain a cash ratio of 1:1,” the chief executive said.

A 1:1 cash ratio means that a company has exactly the same amount of current liabilities as it does cash and cash equivalents to pay off those debts. But in the case of Kenya Power, current liabilities exceeded current assets by Sh51.67 billion.

Mr Othieno explained that the application of International Financial Reporting Standard (IFRS) 9 saw it make provisioning for all debts that are unpaid for more than 30 days yet the company’s history is that most bills get paid after 58 days on average. A qualified opinion states that the financial statements of a client are fairly presented, except for specified issues.-StarndadMedia