Audit reveals FENAKA owes suppliers MVR 3.5 billion as government moves to shut it down

The 2024 audit report of FENAKA Corporation has revealed that the company's unpaid bills to suppliers have risen to 3.51 billion rufiyaa, and its total short-term debt has climbed to 4 billion rufiyaa. According to the report released yesterday by the Auditor General's Office, the amount owed to suppliers increased by 511 million rufiyaa from the 2.99 billion rufiyaa owed at the end of 2023. The total debt the company owes to various parties has risen to 3.59 billion rufiyaa. The Auditor General said the audit could not confirm the accuracy of the 3.51 billion rufiyaa figure because the details of the amount stated in the financial statement as owed to suppliers, and the documents of the parties to whom the debt is owed, had not been received in full. The report also noted that 226.52 million rufiyaa was recorded as advances paid to suppliers in 2024 and 170.11 million rufiyaa in 2023, but the accuracy of those amounts has also not been confirmed. FENAKA incurred a loss of 547 million rufiyaa in 2024, after a loss of 811 million rufiyaa in 2023. The audit found that the company's current liabilities have risen to 3.9 billion rufiyaa, an amount 2.7 billion rufiyaa greater than its current assets. It also noted that 4.48 million rufiyaa accrued as a penalty and interest in connection with a treasury loan taken from the Ministry of Finance has not been recorded in the company's books. The Auditor General expressed concern in the report over the company's financial ability to run sustainably, given the extremely large debt and expenditure exceeding income. The audit report also detailed major negligence in FENAKA's financial and inventory management. While 1.44 billion rufiyaa was spent as administrative expenses in 2024, proper documentation required for 398.46 million rufiyaa of those expenses was not provided to the audit. Although it was stated that 1.19 billion rufiyaa was spent on diesel and kerosene and 71.62 million rufiyaa on spare parts, evidence to confirm the accuracy of those figures was not obtained. While 36.89 million rufiyaa was received as income from subcontract projects, 357.99 million rufiyaa was spent on those projects, and the company does not have a robust system to check and reconcile these figures. The audit also noted a difference of 7.40 million rufiyaa between the company's fixed asset registry and the value of goods in the financial statement, and a difference of 147.57 million rufiyaa in depreciation. The accuracy of 1.62 billion rufiyaa included as projects not yet completed has also not been confirmed. In connection with these issues, the Auditor General determined that FENAKA's financial figures are not figures that can be trusted and requested in the audit that urgent steps be taken to strengthen the company's financial system. President Mohamed Muizzu has decided to stop FENAKA's operations and has transferred the work the company was doing to STELCO.