Fenaka's unpaid supplier bills reach MVR 3.51 billion, audit reveals

Fenaka Corporation's outstanding payments to suppliers reached MVR 3.51 billion at the end of 2024, while its total short-term liabilities approached MVR 4 billion, according to the company's 2024 audit report.

The report, released by the Auditor General's Office on Wednesday, also identified deficiencies in Fenaka's financial records, expenditure documentation and asset management systems, raising concerns about the reliability of its financial statements.

The findings come after President Dr Mohamed Muizzu decided to discontinue Fenaka's operations and transfer its responsibilities to State Electric Company Limited (STELCO).

According to the audit, Fenaka recorded MVR 3.51 billion in outstanding payments for goods and services supplied as of 31 December 2024.

This represented an increase of approximately MVR 511 million from the MVR 2.99 billion recorded at the end of 2023.

The company's total outstanding payables to various parties reached MVR 3.59 billion.

However, the Auditor General said the accuracy of the MVR 3.51 billion recorded as supplier payables could not be verified because the company had not provided complete supporting documentation and creditor records.

The audit also identified MVR 226.52 million recorded as advance payments to suppliers in 2024, compared with MVR 170.11 million in 2023. The Auditor General said sufficient evidence had not been provided to verify these balances.

Fenaka recorded a loss of MVR 547 million in 2024, following a loss of MVR 811 million in 2023.

Although the annual loss decreased, the audit raised concerns about the company's financial position.

Fenaka's current liabilities stood at approximately MVR 3.9 billion at the end of 2024, exceeding its current assets by MVR 2.7 billion.

The Auditor General warned that the company's liabilities and expenditure, which exceeded its revenue, raised concerns about its ability to continue operating as a going concern.

The audit also found that Fenaka had failed to record MVR 4.48 million in interest and penalties associated with a Treasury loan obtained from the Ministry of Finance.

The audit identified shortcomings in Fenaka's expenditure records and financial management.

The company recorded MVR 1.44 billion in administrative expenses during 2024. However, supporting documents for MVR 398.46 million of these expenses were not provided to the auditors.

The report also questioned the accuracy of expenditure recorded for fuel and spare parts.

Fenaka reported spending MVR 1.19 billion on diesel and petrol and MVR 71.62 million on spare parts during the year.

However, the Auditor General said sufficient evidence had not been made available to verify these amounts.

The audit also identified weaknesses in Fenaka's accounting procedures for subcontracted projects.

According to the company's financial records, subcontracted projects generated MVR 36.89 million in revenue during 2024, while expenditure on these projects amounted to MVR 357.99 million.

This represents a difference of approximately MVR 321.10 million between recorded expenditure and revenue.

The Auditor General found that Fenaka lacked an adequate system to account for and monitor the financial transactions associated with these projects.

The report raised concerns about the company's ability to maintain accurate records of project expenditure and revenue.

The audit identified differences between Fenaka's fixed asset register and its financial statements.

These included a discrepancy of MVR 7.40 million in the recorded value of fixed assets and a difference of MVR 147.57 million in depreciation.

The Auditor General also said the accuracy of MVR 1.62 billion recorded as work in progress for incomplete projects could not be verified.

These findings raised further concerns about the accuracy of the company's asset valuations and financial reporting.

The Auditor General concluded that the deficiencies in Fenaka's accounting records, supporting documentation and financial management systems prevented the auditors from obtaining sufficient evidence to verify the accuracy of the company's financial statements.

The report called for measures to strengthen Fenaka's financial management, improve record-keeping and address weaknesses in its accounting and asset management systems.

The findings highlight the scale of Fenaka's outstanding financial obligations and unresolved accounting issues as the government proceeds with transferring the company's responsibilities to STELCO.