AuGD raises grave concerns over credibility of NWC’s capital budget

Cites inability to meet financing requirements for internally funded projects

Durrant Pate/ Contributor

There is danger in the National Water Commission (NWC) capital programmes not coming to fruition over weaknesses in project management, capital shortage and ineffectiveness in meeting Key Performance Indicator (KPI) targets for operational efficiency.

The Auditor General’s Department (AuGD) is raising the red flag based on evidence presented from its just-tabled audit evaluating the efficiency and effectiveness of NWC’s management of capital projects. The audit also assessed the NWC’s capital projects’ alignment with the organisation’s budget and strategic objectives.

In its 60-page audit report, which was tabled in the parliament yesterday, the AuGD found, “There are significant concerns regarding the credibility of the NWC’s capital budget. Three mutually reinforcing weaknesses have impaired credibility: (i) a project-selection process that is not documented or applied uniformly; (ii) an internally financed capital budget that is not anchored in a credible cash flow forecast; and (iii) execution and reporting systems that do not capture all categories of capital spend on a timely basis.”

The audit examined how well the NWC planned and managed its capital budget over five years, from April 2019 to March 2024. These capital projects utilise resources to build, repair, and upgrade water pipes, pumping stations, treatment plants, and other water infrastructure. Over that period, NWC planned to spend $44.92 billion on capital projects.

Major audit findings

The AuGD found that expenditure for capital projects was below planned levels over the five-year period FY2019/20 to FY2023/24, attributable to limited financial resources. NWC was unable to meet the financing requirements for internally funded projects, due to ongoing losses, low liquidity and increasing payables for internally financed projects, which rose from $1.5 billion in FY2019/20 to $2.1 billion in FY2023/24.

This was done without corresponding improvements in NWC’s ability to generate adequate financing from its internally generated revenues. Whereas the NWC developed Water Supply Improvement Plans to inform its Capital Investment Plan for 2015 to 2030, there was inconsistent scoring for the prioritisation of capital projects. 

Also, the NWC was not effective in meeting Key Performance Indicator (KPI) targets for Operational Efficiency and, except for FY2022/23. Further, throughout the review period, it was not evident that NWC measured and reported on KPIs for the percentage of the population with access to potable water and sewerage services, critical indicators for assessing progress towards its stated goals. Subsequently, in November 2025, NWC provided data on these KPIs for FY2024/25. 

Six key observations

1. NWC consistently spent less on water infrastructure than it planned. Actual capital spending fell short of the budget in four of the five years. This means planned improvements to water, and sewerage systems may have been delayed. 

2. The budget for internally funded capital projects was not aligned with NWC’s financing capacity. The budget for projects funded from NWC’s own revenues grew from $1.5 billion to $2.9 billion over five years, even though NWC’s financial position did not improve enough to finance these projects. 

3. A US$3.6 million financial management system did not work effectively. NWC spent at least US$3.6 million on a financial management system, with modules that remained partly ineffective due to ongoing system problems. 

4. Non-Submission of Audited Financial Statements and Annual Reports. NWC has not submitted its audited Financial Statements or Annual Reports for four years in a row (FY2021/22 to FY2024/25). 

5. The majority of the contracts ran late. Of 50 contracts reviewed, 29 experienced delays ranging from three to 29 months. NWC did not always use its legal rights to claim compensation when contractors performed poorly 

6. NWC did not meet KPI targets. NWC did not meet critical targets for revenue growth and operational efficiency for FY2019/20 to FY2024/25, except for the revenue growth target for FY2022/23. This could undermine progress towards its strategic objectives and the effective delivery of its Capital Programme.

Recommendations

The AuGD made a number of recommendations in its report, which, if implemented, would re-establish the credibility of NWC’s capital budget and strengthen its delivery of the public services Jamaicans rely on. As a first step, the NWC should immediately develop a robust mechanism for ranking and prioritising capital projects. 

According to the report, “This framework must extend beyond the entity’s current financial constraints, ensuring that all relevant factors are considered when determining project priority. To uphold the principles of good corporate governance and budget credibility, NWC should also enhance its financial reporting framework to ensure transparency, effective oversight, and informed decision-making.”

Another recommendation is the adoption of a Board-approved working-capital and payables-management plan, which would result in the quick ratio restored to ≥ 0.8; payables reduced by 15 per cent relative to FY2023/24. Strengthen contract management by enforcing contractual remedies promptly, including timely decisions on performance bonds, liquidated damages, variation orders and termination where contractors fail to meet obligations.

This measure, the report detailed, could result in 100 per cent of breaches being actioned within 30 days with quarterly enforcement report to the NWC Board.

About NWC’s capital works programme 

NWC’s capital works programme is focused on expanding water service coverage, replacing old infrastructure, improving operational efficiency, meeting health and environmental standards, supporting land development, and maintaining reliable service. However, its impact has been limited by external challenges and rising operational demands. 

Between FY2019/20 and FY2023/24, the NWC budgeted $44.92 billion in capital expenditure to support the maintenance and improvement of its infrastructure. This included expenditures beyond those solely related to potable water and wastewater projects, such as NWC’s island-wide metering programme. 

However, its impact has been limited by external challenges and rising operational demands, prompting NWC to seek financial support through government subventions, commercial loans, and efforts to improve collections.