LICENCE ANALYSIS CHECKLIST AND EVALUATION FORM WATER ACT 2016

Name and Address of Water Service Provider:

Murang’a Water and Sanitation Company Limited

P.O. BOX 87-01034

KANDARA

NOWSP APPLICATION CONDITION Minimum RequirementsANALYSIS/ASSESSMENT  BY WASREB 
1.Preliminary details  
           i.        Date received by WASREBDate of receipt· Submitted both in hard and soft copies
          ii.        Certificate of Company RegistrationCopy of certificate*

Number for certificate of incorporation provided in the application form no C123820

To provide a copy.

         iii.   Geo- Referenced Map of Service Area accompanied by “Shape Files”

·        PDF illustration

·        List of sub-locations*

·        Shape files*Mandatory for mapped WSPs (66)

· Not provided. To provide shape files map of service area.
        iv.        Copy of letter to county on application

·        Copy of letter*

·        Share application with the county

·         Letter forwarded to county on 23rd March 2017 but it was in request for renewal of SPA

·   Letter of objection to licensing by the County Government of Murang’a on 7th October 2018

         v.         Period of License (Agreed per category)

To be defined

To be illustrated in Financial Years, recommended 5 years

·         To be determined
Institutional profile   
i. Compliant memorandum and objects of association to WASREB standardsAs per model memorandum of association*

MUSWASCO memorandum and articles of association (MOA) shall be amended to conform to the Water Act 2016, Companies Act 2015.

 

MUWASCO is a company limited by guarantee enlisting various stakeholder institutions as members of the company alongside the county government.

 

MOA shall be amended to specifically provide that:

 

· Company is owned by county government (issue shares to the county secretary, CECM for Finance and CECM Water holding in trust for the county government)

 

·         Assets shall be for the beneficial use of the community served

 

· Company shall only provide water services in the service area prescribed in accordance with standards issued by WASREB

 

· Tariff to be used for water services shall be approved by WASREB in line with Water Act 2016.

 

·  All financial arrangements including pension shall be subject to the standards prevailing in the water sector

 

·  Clause 25 of the amended Memo and articles is compliant with the requirements of directors’ selection. The same to be retained as provided in compliance with sector corporate governance guidelines.

 

·  Board members shall sign a code of conduct and enforceable undertaking according to the template issued by WASREB.

 

· Board of Directors shall conduct board of evaluation annually.

 

·   Memo and articles to embed the succession planning requirements in the governance guidelines of retirement of a third of the members at the third year.

 

·   Only sitting allowances shall be paid to directors and reimbursement for costs incurred to WSP invited meetings.

 

·  Memo and articles to provide that Annual Audits shall be conducted every year by the Auditor General.

 

· Real Assets shall not be disposed off without county approval and notification to WASREB

 

· Company shall conduct recruitment of managing director, management staff and all cadre of staff through competitive process as contemplated by the Constitution and the water sector guidelines.

 

·  Managing Director shall a member of the Board with no voting right.

 

ii. Details of board members meet the governance standards; competence in academic and professional criteria and stakeholder representation; genderInformation sheet on BoD

·  Company to provide CR 7 form duly completed.

 

·  Board competitively recruited as per minutes of AGM held on 9th December 2018.

 

·  Board of directors to ensure compliance with the license conditions, corporate governance standards, tariff conditions among others.

iii. Key executive staff meet competence criteria of LN 137 of 2012 (Level 1, 2 & 3)Profile of key staff·    Key staff meet competence criteria.
iv. Approved Staff Establishment in line with WASREB Standards

Approved Staff Establishment

 

· To provide an approved staff establishment.
 Human Resource Management   
      i. Approved Human resource policy manual in line with WASREB StandardsApproved updated Human resource policy Manual as per model·         HR Policy dated 2015 provided
     ii.        Performance management system

·        PMS in place

·        Evidence of appraisal (implementation)

·  To provide evidence of appraisal implementation reports
    iii.        HIV PolicyHIV Policy·         To develop a detailed HIV policy.
   iv.        Collective Bargaining Agreement in line with WASREB Standards

·      Valid CBA

·      In line with approved tariff

· CBA with Kenya Union of Food and Allied Workers for the period 1st January 2015 for two years not valid.

·  Future CBA to be negotiated in line with tariff conditions and non-discriminative allowances for instance in leave and house allowance

 

    v.        Contracts of employment for Management Staff with clear terms and conditions of service·        Sample Copy of signed contracts for management Staff· To provide signed sample contracts for management staff
   vi.        Contracts of employment for unionisable and other staff with clear terms and conditions of service

· Sample Copy of signed contracts unionisable and other staff

·        Link to CBA

·         To provide signed sample contracts for unionisable staff
  vii.        Approved Organization Structure in Line with WASREB StandardsApproved Organization Structure

· To include asset planning and development function in the structure.

· To elevate the NRW function to level three with requisite skills.

 viii.        Code of Conduct and Ethics for employeesSample Copy of signed code of Conduct and Ethics for employees· To provide signed sample code of conduct.
    ix.  Pension Scheme Arrangements whether DB or DC and Compliance to relevant laws and guidelines (RBA act, Treasury circulars, Scheme roles and deeds)

Evidence of Pension Scheme Arrangements.

Should be a DC scheme.

· The company subscribes to the superannuation fund with Lap trust at 12% employee and 15% employer contribution of the monthly gross salary. Gratuity Is paid at 31% of the basic salary for contracts of at least one year. The company to ensure compliance with the pension rules in line with the Treasury Circular No. 18/2010

· WSP should pay gratuity at the rate of 31% but on pro-rate basis at the end of contract period.

Information on Technical Management   
i. Water sources and abstraction permits (Own Source or Guaranteed Bulk Supply)

· Water sources and valid abstraction permits

·  Bulk supply agreements where applicable

Application form mentions that IRATI and Kayahwe River as sources and that the WSP is in process of acquiring the permit though TANA Water Services Board for IRATI, However, no correspondence was attached. Only correspondence observed was for Effluent discharge permit application to NEMA.

 

To submit valid permits or evidence of application from WRA for each abstraction point.

ii. Scheme summary water

· Total Population in SA and population served

· Production and billed water sources and abstraction volumes

·  Water treatment process

·  Billing and collection amount

·   No. of staff (contract and permanent)

·        O+M cost

·  Personnel, chemical and energy costs

·  Total (registered, active) and metered connections

What was submitted was a listing of sources and capacities.

 

· To present the information in the acceptable framework as provided in this summary form as per the checklist.

·

iii. Scheme summary waste water

· Total Population in SA and population served

·  Volumes of influent to be treated

·   Waste water treatment capacity

·        Billing and collection amount

·   No. of staff (contract and permanent)

·        O+M cost

·  Personnel, chemical and energy costs

·   Total (registered, active) and metered connections

What was submitted was a listing of wastewater treatment plant, design and daily capacities.

 

·   To present the information in the acceptable framework as provided in this summary form as per the checklist.

·

iv. Compliance with WQEMG –last report

·  Latest report for the month preceding the application

·   Check against previously submitted reports

·   Determine compliance

Provided a certificate of analysis of effluent quality which is not what was requested.

· To provide annual Water quality report for the FY 2017/18 in the proper format as per as per schedule 13 of the WASREB guidelines on Water Quality and Effluent monitoring.

· To provide annual Effluent quality report for the FY 2017/18 in the proper format as per as per schedule 14 of the WASREB guidelines on Water Quality and Effluent monitoring.

v. Copy of effluent discharge permitValid effluent discharge permit(s)

Attached the application documents to NEMA received on 11th December 2017.

· To provide progress of this process as it is nearly a year since the application for renewal.

vi. Asset Register – assets owned by WSPCopy of asset register· Provided an asset register as at June 2017.
vii. Asset Register- assets from Local AuthorityCopy of asset register· To indicate which assets in the register provided were from municipality/ provide an updated and comprehensive register containing the totality of any assets from the municipality being utilized by the utility, with their respective current Net Book Values after depreciation.
viii. Asset Register –assets from Water Service BoardCopy of asset registerTo indicate which assets in the register provided were from WSB/provide an updated and comprehensive register containing the totality of all assets from Water Service Board utilized by the utility, with their respective current Net Book Values after depreciation.
ix. Asset maintenance scheduleCopy of asset maintenance schedule· To provide an asset maintenance schedule exclusively for each of the assets from office equipment, machinery, waterworks and transmission/distribution networks and appurtenances as appropriate for 2017/18 with differentiated specific timelines. Ensure to include specific components requiring maintenance.
x. Approved Water Safety PlanYes/No· To develop a Water Safety Plan and implement it as a licence condition in accordance with guidelines to be issued by WASREB.
xi. Signed deed of handover of all assets including new ones during the previous SPA periodCopy signed deed of handover of all assets·         To be provided
xii. Details of planned institutional and infrastructural improvementsReview planning documents (strategic plan, master plan, business plan) to determine adequacy/link to performance targets

Plans provided for in the strategic plan that runs until 2020.

 

The targets beyond this period till 2023 require justification.

 

xiii. Financing PlanA plan to support activities in (xii) above·         To be provided
Information on Commercial Management   
i. Copy of Customer contractCheck against model customer contract

· WSP to provide a customer contract aligned to the model customer contract by WASREB

·

ii. Customer complaint handling procedureCheck against CEG· WSP to develop a customer service policy
iii. Customer Service CharterCheck against minimum service standards·         WSP to provide a customer service charter to include a matrix on all services offered, the associated costs and timelines.
iv. Procurement PolicyApproved procurement policy/or evidence of following PPAD Act 2015· WSP to provide an approved and signed procurement policy aligned to PPAD Act 2015
v. Evidence of Stakeholder ConferenceEvidence of Stakeholder Conference invitation, list of participants, minutes within the last 2 financial years

·  To provide properly written and signed minutes within the last 2 financial years

· Also provide conference invitation, list of participants

vi. Tax compliance certificate/statusCheck validity, validate with iTax

· To submit tax compliance certificate

· To provide evidence of payment of statutory taxes

vii. Most recent two years Auditor General Reports

·        Audit certificate for the 2 years

·        Signed audit reports

· WSP to provide Auditor General’s Reports of 2016/17

·   WSP was qualified on ability to meet current liabilities and customer deposit in Auditor General’s report for 2015/16

viii. Website Information on annual reportCheck website for annual report·         WSP to upload annual reports
ix. Evidence of Biennial Customer Satisfaction SurveyReport within the last 2 years

· WSP to provide a plan to carry out a customer satisfaction survey within the first year of the license period and conduct the same biennial

· To conduct a CIS and regularly update it

x. Adoption of Maji VoiceCheck against MajiVoice list and adoption status (reports)·   MajiVoice to be up-scaled in its usage
xi. Compliance to WASREB’s website requirementsCheck website against WASREB standards

· To develop a website in line with WASREB Website Transparency Guidelines

· Upload customer downloadable forms, service charter, tariff structure

Information on financial management   
i. Proposed / Valid Regular TariffCheck validity on websiteTo begin the tariff application process six months before expiry of the current.
ii. Maintenance Costs / O+MCheck against tariff, audited accounts and WARIS dataSector benchmark is 8-15%
iii. Employee Costs / O+MSector benchmark is below 30%
iv. O+M CoverageThe tariff had projected 144% in 2017/18
v. Quick Ratio (Acid Test ratio)Acceptable limit is >=1
vi. Debtor daysAcceptable is <=90 days
vii. Collection EfficiencyAcceptable is >85% and the WSP should separate current and arrears.
viii. Debt Service Coverage RatioAcceptable Minimum is 1.2 times
ix. Performance GuaranteeYes/No

To have a performance guarantee from a reputable financial institution or deposited with the WASREB. This is to be posted with the WASREB before license is issued. Approved rate for your category of WSP is Kshs. 2,000,000.

 

x. Approved Strategic PlanBoD Approved Strategic Plan· To submit approved Strategic Plan
xi. Specifications of the current billing systemCheck against WASREB standards

· WSP to carry out and submit a self –assessment of the current billing system as per the WASREB minimum billing requirements.

·   To give details of the MFA expenses in FS.

xii. Operational business plan

·        BoD approved Operational business plan

·        Check against WASREB standards

·  To provide an approved business plan
xiii. Approved Disaster Management PlanBoD Approved Disaster Management Plan·    To provide a disaster management plan.
Asset Handover  
i. New water supply asset handed over during last 10 years by source

·        List of assets/projects

·        Hand over certificate(s) for water supply asset(s) handed over

Kiawambeu treatment plant mentioned in the application form but no other details provided

 

· To provide updated water supply projects list with details including the developer, financier, time, and technical details like pipe length, sizes, reservoir capacities and the value of the projects with attached handover/completion certificates.

ii. New waste water assets handed over last 10 years by source

·    List of assets/projects

·   Hand over certificate(s) for waste water asset(s) handed over

Two new ponds for Karie treatment plant mentioned in the application form but no further details provided.

· To provide updated wastewater/sanitation projects list with details, including the developer, financier, time, and technical details like pipe length, sizes, reservoir capacities and the value of the projects with attached handover/completion certificates.

Projected improvement of services in license period  ·
i. Small scale providers in service area –situation described and projected

·        List of SSPs in the SA

·        Link to Main WSP

·        Report of SA mapping exercise

Application form states that there are no SSSPs

 

To provide clarification about Embassy CWP located in Kiangage town in the ‘region of contention’, with whom they had formed an association with in the form of a 3rd party agreement as observed during WASREB mapping exercise.

9.Performance improvements in license period   
a.    Quality of Service  
           i.        Water coverage %Check against 2022 targets and link to NWSS· To combine the two figures for high density and low density and propose one figure for the WSP
          ii.        Drinking Water Quality %100%·         To attain 100% from Y1 onwards
         iii.        Hours of SupplyProgression to acceptable sector benchmarks·         Growth in coverage to consider maintenance of minimum hours of service. The acceptable Sector Benchmark is at least 16 hours per day.
        iv.        Sewerage coverage %Check against 2022 targets and link to NWSS·  To combine the two figures for high density and low density and propose one figure for the WSP. Figures provided to be reviewed.
         v.         Effluent Quality %100%·         To be informed by (iv) above.
b.    Economic Efficiency  
           i.        Personnel Expenditure as % of O+M costs %Compliance to sector benchmarks

· Projection of 20% by Y5 is too ambitious.

·  To target below 45% by the end of Y5.

          ii.        O+M Costs coverage %Progression to full cost recovery· To progress to at least 150% by the end of the period.
         iii.        Revenue Collection Efficiency %Compliance to sector benchmarks· To progress to at least 90% by Y1 and maintain this level throughout the license period. In addition, WSP to ensure there is separation of collections between old debts and current billing.
c.    Operational Sustainability  
           i.        Non-Revenue Water, %Progression to acceptable sector benchmarks

· Proposed trend (<20 by Y5) to ambitious

· WSP to document strategies to realise this target

· To provide NRW reduction plan; indicated as “attached” in application form but not availed.

· To adopt the NRW management standards developed by the regulator.

·         Target 20% by Y5

          ii.        Metering(operational) ratio, %100%· To attain the figure of 100% by Y1 while ensuring that all the meters are functional
         iii.        Staff Productivity, NoProgression to acceptable sector benchmarks

·         WSP to explain the variance

· To remain below 5 throughout the license period.

        iv.        Environmental (source) protectionCheck CSR reports, SP, Go green, renewable energy· WSP to document efforts towards source protection.
v. Governance IndicatorScore for last assessmentAcceptable performance 50%.
vi. Pro-poor AssessmentAcceptable performance 75%.
Other Issues   
           i.        Evidence of Public ConsultationEvidence of Public Consultation invitation, list of participants, minutes for the license applicationTo be carried out before issuance of the license
          ii.        License Fee   to be paidYes/No 0.1% of Annual turnover based on the latest audited accounts.  To be paid on issuance of the license
         iii.        Arrears of Licensee Remuneration to WSBsReconciled amount·         WSP to provide figures as of 30th September 2018 and propose a payment plan for the outstanding amounts.

Date of Evaluation   19th November, 2018

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