Report on:

Computerization of the Accounting

Department and Billing Functions of
Qena Water and Wastewater Company,
Egypt

By:

Gorm Rasmussen
(23.07.2007 – 20.08.2007)
 Report on:

Computerization of the Accounting

Department and Billing Functions of Qena
Water and Wastewater Company, Egypt

by Gorm Rasmussen

(23.07.2007 – 20.08.2007)
 PN 2006.2063.3; VN 81087234

Strengthening Provision of Services in Qena and

Promoting Appropriate Rural Sanitation Options

Report on Computerisation of the Accounting

Department and Billing Functions of Qena Water
and Waste Water Company, Egypt

by Gorm Rasmussen

(23.07.2007 – 20.08.2007)

FINAL DRAFT
Computerisation of the accounting department and billing functions at Qena Water and Waste Water Company

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY ....................................................................................... 3

2 ASSESSMENT OF THE PRESENT ACCOUNTING AND BILLING SYSTEM
INCLUDING PROCEDURES AND INTERNAL CONTROL ................................... 4
2.1 THE SEQUENCE OF PURCHASES – ACCOUNTS PAYABLE – DISBURSEMENTS – STOCKS 4
2.2 EXPENDITURE ........................................................................................................................ 6
2.3 SALARIES AND W AGES ......................................................................................................... 6
2.4 FIRST ASSESSMENT OF THE BILLING PROCEDURES ............................................................ 7
2.5 CONCLUSIONS ....................................................................................................................... 9
3 ASSESSMENT OF THE ADVAC FINANCIAL SOFTWARE SYSTEM.................10
4 POLICIES AND PROCEDURES NECESSARY FOR SUCCESSFUL
IMPLEMENTATION OF THE FINANCIAL SYSTEM ............................................11
5 REQUIREMENTS FOR A COMPUTERISED BILLING SYSTEM.........................12
6 TRAINING REQUIREMENTS ..............................................................................14
7 RECOMMENDATIONS ON COMPUTERISATION OF QWWC............................14

Annexes:

Annex 1 – Terms of Reference

Annex 2a – Required features of ADVAC and the billing system
Annex 2b – Confirmation by the supplier
Annex 3 – Recommendations on local short-term experts

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1 EXECUTIVE SUMMARY

The TC project “Strengthening Provision of Services in Qena and Promoting Appropriate

Rural Sanitation Options” aims at supporting Qena Water & Wastewater Company (QWWC)
in improving its utility management and operation, including the provision of decentralized
wastewater services to rural communities. The project is implemented on behalf of GTZ by
RODECO Consulting GmbH in association with GOPA Consultants.

The present report describes the recommendations on the computerisation of the accounting
department and billing functions at QWWC derived by the financial short-term expert (STE)
from July to August 2007.

The Holding Company of Water and Wastewater has recommended the implementation of
the ADVAC financial accounting system for all its subsidiaries. The Holding Company uses
ADVAC itself but only a management and administration unit. An USAID project with the
Holding Company is supposed to facilitate the implementation in the subsidiaries.

The objective of the present assignment was to assess the ADVAC system benefits and
requirements as well as the situation at QWWC with a view to introducing an optimised
ADVAC-based financial management system. The detailed ToR of the assignment are
presented in Annex 1.

In order to become acquainted with the environment where ADVAC should be introduced
and the various modules of this software, the STE carried out interviews with a number of
heads of departments and specialists of QWWC and –together with the project team– paid
visits to Gharbeya Waterworks, the supplier of ADVAC in Tanta, Qena Electricity Company
(who also partially use ADVAC) and the branches of QWWC in Esna and Armant. Thorough
investigations have been made concerning the ADVAC financial accounting system, the
various modules and the billing system. In addition, comprehensive lists of requirements
were prepared and forwarded to the supplier for confirmation.

The financial STE arrived at the following major conclusions (detailed recommendations
adding up to an implementation plan for computerisation are provided in Chapter ‎7):
 The existing procedures, internal control measures, accounting and billing systems at
QWWC are not adequate for billing, collection, preparation of financial statements and
management accounting. An optimisation of these procedures and controls, com-
plemented by computerisation of QWWC, based on a massive training programme, is
one solution to these problems.
 The supplier of the ADVAC system has in writing confirmed that all the requirements
specified by the STE can be met. Thus, the conclusion is that the ADVAC financial
accounting system including accounts payable, accounts receivable, cost centre
accounting, inventory, fixed assets and human resources and payroll and the billing
system can be recommended for acquisition and implementation at QWWC.
 ADVAC and its modules require a powerful and expensive data base with all what
that this implies concerning hardware and available expertise.
 Intensive computer training of the staff of the accounting department and the
customer centres of QWWC is necessary.

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2 ASSESSMENT OF THE PRESENT ACCOUNTING AND BILLING SYSTEM

INCLUDING PROCEDURES AND INTERNAL CONTROL

It should be noted that all records of QWWC and the branches are in the form of manual
books that just recently have been coordinated with reference to the preparation of quarterly
accounts for the Holding Company. The local long-term Financial Adviser is currently working
with the opening balances of the fixed assets and the stocks and the current up-date of these
files.

In order to examine the procedures, paper flows and internal control measures, the pro-
cesses have been divided into the following sequences in line with a practical and generally
accepted approach:
 Purchases – Accounts Payable – Disbursements – Stocks
 Expenditure
 Salaries and wages
 Revenue – Accounts Receivable – Receipts

2.1 The Sequence of Purchases – Accounts Payable – Disbursements –

Stocks

2.1.1 Current procedures

A purchase is initiated by means of a memo to the chairman from the department requesting
purchase of one or more items. This approach with the chairman having to sign all purchase
memos is extremely formalistic and static, leaving only little time for new ideas and develop-
ment and keeping him busier than necessary. In case that the chairman agrees, he signs the
memo and forwards it to the budget department. The head of the budget department then
checks whether there is a budget for the purchase concerned and in the affirmative signs the
memo and sends it to the purchase department.

The purchase department undertakes the procurement. Purchases below EGP 300 are
carried out in the form of direct orders. Above EGP 300, at least three quotations must be
requested and the cheapest proposal selected by an evaluation committee. After the
evaluation and selection of the cheapest offer, the evaluation committee prepares an
evaluation report duly signed by all the members and hands it over to the purchase
department.

Based on this report, the purchase department prepares the standard order form or –in case
of a large and complex purchase– a contract, including three carbon copies, which will be
signed by the chairman and co-signed by the head of the purchase department. These four
documents are then forwarded to the supplier for final conclusion.

The three copies will then be returned duly signed by the supplier and internally distributed
as follows:
 Purchase department (with the supplier’s signature in case of only one)
 Accounting department
 The warehouse
The memo will be transferred to the accounting department.

When the goods arrive at the warehouse (delivered or collected), the shipment is registered
as being in transit. A committee reviews the shipment based on the order form/ contract and

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prepares a report duly signed by the members and three copies. The original goes to the
warehouse keeper with the goods and the three copies to the accounting department, the
warehouse clerk and the purchase department, respectively.

Backlog –if any –is noted in the report. The warehouse keeper prepares an additional report
and four copies with respect to quantity, description, number, name of the supplier, etc. The
original is handed over to the warehouse clerk and the copies distributed to the following
departments:
 Accounting department
 IT department in case of IT equipment
 The warehouse – the warehouse keeper
 Purchase department to close the file
Thereafter, the entries are made in the warehouse book. Withdrawal from the warehouses
requires a requisition form that serves as voucher for the warehouse book.

When the invoice arrives, it is received by the purchase department, where a copy is made
for the file. The original is then sent to the warehouse keeper, who attaches the review
report, the additional report and the purchase order/ contract from his file to this document,
and the internal auditor makes a review before the documents are submitted to the
accounting department.

In the accounting department, the chief accountant makes the entries and posts them in the
journal and signs this document. The entries are subsequently transferred to the creditor
ledger and the warehouse ledger.

The check is signed by the chairman and the chief accountant and the chief accountant
makes the entries in the journal, and subsequently the entries are transferred to the sub-
ledgers (creditor and bank). At the end of the month, the totals of the sub-ledgers are
transferred to the legal journal (containing copies of the entries for tax purposes) and the
general ledger.

The following reconciliation procedures are carried out on a monthly basis:

 Preparation of a trial balance from the general ledger and the sub-ledger (debit =
credit).
 Bank reconciliation. Sub ledger accounts are reconciled with the statements from the
banks. The chief accountant signs the reconciliation and makes entries for bank
charges etc., which are certified by the chief accountant.
 Comparison of the warehouse accounts with the sub-ledger.
 If a discrepancy is discovered, the chief accountant and the internal auditor will in-
vestigate the reasons for it.
The acquisition of fixed assets apart from land and buildings follows the same procedures.

2.1.2 Assessment of the internal control

The procedures concerned are not safe with respect to appropriate internal control. The
immediate findings are as follows:
 No copy of the memo signed by the chairman is filed.
 No general view is provided of what is actually on stock; this might cause superfluous
acquisitions.
 Standard order forms are not pre-numbered, nor are requisitions.

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 No current reconciliation of the various files, for instance sub-ledgers – warehouse

accounts – stock taking – files in the purchase department – memos.
 Bank reconciliation should be performed by a person not responsible for recording
bank transactions.
 The chief accountant should not sign the cheque.
 Complete lack of back-up of important files and documents. In case of a fire or other
calamity, the damages might be irreparable.

2.2 Expenditure

No formal procedures for such transactions have been implemented as no major invoices
covering such costs have been paid. The largest item is undoubtedly electricity but no related
invoices have been received by QWWC up to now. Nevertheless, a few branches have
received electricity bills, which have been signed by the branch manager and forwarded to
the accounting department, who accepted the signed vouchers and paid the invoices.

It is envisaged that invoices for electricity and similar costs will in the future be received by
the accounting department and sent to the branches concerned, where the charges will be
compared to the meters. In case of compliance, the branch manager should sign the invoice
and forward it to the accounting department.

2.3 Salaries and Wages

2.3.1 Current procedures

The administration department is responsible for all issues concerning human resources, and
these tasks are undertaken by three separate functions, namely the human resources
section, the salary section and the recruitment and pension section. All three sections are
located within the headquarters of QWWC at Qena but the human resources section also
has sub-units at all the branches.

The procedures with respect to disbursement of salaries and wages are as follows:
When an applicant for a job has been appointed, he or she hands over the basic documents
to the human resources section in order to establish the file of this employee. When this file
has been set up, the salary will be calculated according to the legislation and signed by the
head of the human resource section. A certain probation period is compulsory before the
employee achieves the status of a permanent staff member.

The employees sign off when they attend and when they leave the premises and based on
these records, the local sub-units of the human resources department prepare summaries
and absence reports that are signed by the managers in charge of the various departments.

On a monthly basis, these documents are forwarded to the central human resources
department, where they are reviewed and –together with basic information such as salary
levels etc.– are handed over to the salary section, where the individual salaries are
calculated.

Lists for each department or branch are prepared, comprising the name of the employee, the
salary and allowances, deductions for absence and the like, deductions for social and health
insurance (31% for salaries and 28% for allowances), stamp duty of 0.0006% and income tax
(minimum 10%, maximum 20%).

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2.3.2 Assessment of internal control

 Due to a lack of internal reconciliation procedures (except the signature of the depart-
ment managers), the existence of “dead workers” (non-existent workers on the
payroll) cannot be fully ruled out.
 The unique personal registration code should be used instead of the name of the
employee to improve tracking of employees, salaries and payments made.

2.4 First Assessment of the billing procedures

2.4.1 Current Procedures

Two branches of QWWC were visited in order to investigate the billing system including the
paper flows and procedures. These branches are located in Armant and Esna and apply the
same system, which seems to be standard for all the sub-units of Qena Water and
Wastewater Company.

With respect to billing and collection the procedures are as follows:

If a resident wants to be connected to the water network, they approach the office of the local
branch and enter into a contract. The contract stipulates the cost of the connection, which
depends on the status of the user (individual household, government institution, others), the
costs of the pipes etc. estimated by the branch office and the cost of the water meter (if
bought and not leased). An invoice covering these costs is issued and when it is paid, a
separate file for the customer is established. Subsequently, the information of customer
number, meter number, address, name and category of customer is entered in the general
file (File No 6). An initial meter reading will be done by an inspector and recorded in File 27.
Thereafter, the resident’s water connection will be active.

The inspector up-dates his control sheet with the information of File No 6 and signs off a
statement declaring that his control sheet has been up-dated. This statement is then filed in
the individual file of the customer.

Thereafter monthly readings are conducted. The results are recorded in File No. 6 and the
charges are calculated consisting of the actual consumption, a meter charge (if the customer
leased the meter instead of buying), invoice charge and diverse items such as renewal of the
meter and the like -if any. Cross-checking of meter readings does not take place. In case the
meter is out of order, the highest reading for the past three months is applied and a
maintenance order is issued. Where there is no meter or it has been out of service for some
time a bill is issued with a flat rate fee per household connection. The current average fee for
QWWC is 3 LE.

Pre-numbered invoices in the form of a book each consisting of three copies will be issued
and handed over to the collector. The collector will present the invoice to the customer and if
the latter pays immediately, he will receive the two copies as receipt of the payment.
Otherwise, the collector leaves the first copy with the customer as an invoice and the
customer must go to the service centre (cashier’s office) of the branch and pay. At the
service centre, the second copy is given to the customer as a receipt, the third copy serving
for control purposes.

The collector prepares a journal of the receipts and hands this document and the money
received over to the cashier, who issues a receipt. An internal auditor reviews the journal
with respect to summations and the invoice number of each receipt. Then, File No 6 is up-
dated by means of the journal.

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The book of pre-numbered invoices is subsequently reconciled with the funds received by
the cashier. The reconciliation is made on the back-side of the book of invoices.

File No 6 is scrutinized on a regular basis in order to detect overdue accounts. In case of lack
of payment, two reminders will be forwarded to the customer. With respect to further steps,
the two branches concerned use different procedures. In Armant, the staff stated that they
disconnected the customer three days after sending the second reminder and took the
customer to court while in Esna, the head of the customer service centre requested guide-
lines concerning disconnection and legal action.

The funds collected and the journal will finally be forwarded to the Commercial Department of
QWWC, where another File No 6 will be up-dated. It should be noted that the Commercial
Department uses a new design of File No. 6 with only records for one year per customer
contrary to the former that contained records for the past two years. The funds are delivered
to the bank and a receipt received.

In the accounting department, only lump sums of the monthly receipts are posted in the sub-
ledgers (cash – customer).

It is estimated that there are currently approximately 425,000 customers of QWWC in total
and approximately 370,000 thereof have been recorded manually. Only in the districts of
Esna and Disha, the manual registration of customers (approximately 55.000) has not yet
been performed although the local branch offices have at least some incomplete records of
their customers to use for billing purposes.

Approximately 80,000 customers of all have branch by branch been computerised in an

Excel model1 comprising the following information by branches:
 The number of the customer
 The name of the customer
 The opening balance at 01.07.2006
 For each month, the date of payment, the number of the receipt and the consumption
during the month concerned
 The closing balance at 30.06.2007

A shortcoming of this model is that the meter number is missing. The preparation and the
data capture of the model are carried out by the IT department but only the manual books
are presently used for the operations.

2.4.2 Assessment of the System, Procedures and Internal Control

Apparently the system is encumbered with at least one weakness: In case the information
concerning a new connection is not entered into File No. 6, no reading and invoicing will take
place and no subsequent payment will be received. Only a physical inspection of all the
connections reconciled with File No. 6 could reveal this mistake.

No regular checks of the sequence of invoices seem to be established. As a result,

embezzlement by removing invoices from the book and collecting the money separately is
possible particularly at the Esna branch, where clear guidelines on collection are lacking. In
any case, the collection after the first reminder should solely be undertaken by the customer
centre and not the collector.

1
The supplier of the ADVAC billing system has confirmed that data in Excel format can be transferred to the
customer base of the said billing system without any problems (Annex 2b)

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Without division of the networks into pressure zones and reconciliation of the mains meter
with the individual ones on a regular basis by a segregated unit, it will not be possible to rule
out the existence of illegal connections, unknown users, erroneous meters and exceptionally
big leakages. It should be noted in this context that the Head of the Commercial Department
is of the opinion that illegal connections are a major problem but that no procedures for
disclosure exist. There is also no procedure to check for erroneous/ false meter readings.

Due to lack of a back-up system, the customer centres are vulnerable in case of fire or other
calamities which could destroy all the basic files and the current data of the month.

Apparently most of the data concerning the collection are available from the Commercial
Department as the work is actually being carried out twice to no avail as back-ups could be
made by photo copying of the pages of File No 6.

Getting reliable figures on the collection rate seems to be virtually impossible. At the branch
in Armant, they claimed that there was no bad debt and the accounts receivable taken over
by the branch in 2006 amounting to EGP 600,000 would be collected fully. In Esna, it was
estimated that 80% of the accounts receivable in arrears would be collected and that 100%
of the current charges were paid on time even though the rate was declining due to lack of a
public and firm policy for disconnection and legal procedures. These figures are a stark
contrast to the commonly assumed collection rate of approximately 35%.

This is at least partly due to the lack of ageing lists of overdue accounts. This means that
receipts from the old debt are mixed up with payments of the current charges as a separation
of these items is not possible with the present manual system.

The Head of the Commercial Department estimates the collection rate to be approximately
50%, however the best estimate is undoubtedly made by the project’s local Financial
Adviser, calculated as a simple average of the collection rates based on rather detailed
reports from the branches of Abu Tish, Qeft and Qus, ending up with a figure of
approximately 44%.

With respect to the collection, efforts are being made to increase the collection rate and
recover the arrears2.

2.5 Conclusions

The conclusion of all the above is that the procedures, internal control measures and the
recording and information systems are not adequate for an organisation like QWWC.

The most serious shortcomings are:

 the income registration system,
 the stock management containing more than 10,000 articles without providing any
general view of the nature of these items (what, where, in which state and quantity),

2
For this purpose adequate facilities are needed in order to make the employees work efficiently. In Armant, the
conditions are reasonable as the office is located in shadow most of the day and is equipped with a sufficient
number of fans. In Esna, however, the situation is different. The offices are located on the Southern and Western
side of the building and not a single fan is available although the temperature reaches 51-52 degrees Centigrade,
making the staff completely in-active. Some curtains and a number of fans could considerably improve this
situation at very low cost. It should in this connection be mentioned that the Head of the Commercial Department
has visited all of the branches in order to assess their needs as there was virtually nothing left after the
separation. Not only are fans needed but in many cases also offices, furniture, shelves, etc. and the educational
level are below the standard. Many of the meter inspectors for instance are almost illiterates.

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 the inadequate registration procedures for the fixed assets with acquisition value of
EGP 773 million,
 the general uncertainty embedded in the procedures and the resulting unreliability of
the figures produced.

The current financial statements can only be produced due to substantial and efficient
assistance by the Financial Adviser, and this input is time limited.

The provision of a suitable computerised financial, stock control and human resource
programmes and associated procedures and training will go a long way in addressing the
deficiencies noted above.

3 ASSESSMENT OF THE ADVAC FINANCIAL SOFTWARE SYSTEM

The Holding Company of Water and Wastewater has decided that all the subsidiaries,
including Qena Water and Waste Water Company, should acquire and implement the
ADVAC accounting software system. The said system is in operation at the Holding
Company, the subsidiaries in Gharbeya, Sharqeya and at the two subsidiaries in Cairo. An
USAID project with the Holding Company has recommended this software and is supposed
to facilitate its implementation at all the entities of the group.

In order to assess the software with reference to optimal implementation at QWWC, the
Team Leader, the Financial Adviser, two IT specialists from QWWC and the financial STE
visited Gharbeya Water Company, where the system was demonstrated by the staff of the
accounting department and the supplier.

At Gharbeya, the financial accounting and the fixed assets module have been implemented
and the payroll system has been customised. The said modules were demonstrated and
worked well. The head of the financial department stated that the system as such was well
functioning but that the corresponding training of the staff was crucial.

A billing system developed by an employee of the Gharbeya Water Company prior to the
introduction of ADVAC and without interface with the accounting system was not found
adequate for QWWC (see chapter ‎5).

It should be noted that the ADVAC software is based on a database platform with all that this
implies in view of advantages in the form of flexibility but that the system requirements with
respect to capacity and other features are of a rather complex nature compared to ordinary
PC-based accounting software. Subsequently, the STE learned that the databases from
Oracle3 and SQL are to be preferred as MS Access cannot handle large amounts of data
without increasing response time.

Unfortunately no demo version of the ADVAC programme was available and only a few of
the features were in English. Moreover, all print outs were in Arabic. The supplier therefore
referred to Qena Electricity Company as a client who uses ADVAC integrated with its billing
system. This information proved to be wrong, however, as only the billing system at this
company is based on ADVAC software whereas the accounting is still carried out by means
of manual books because computerisation of financial accounting had not been considered
urgent.

As the accessible information on ADVAC was not complete and coherent, a fax comprising
all aspects of the required features of ADVAC and the billing system was sent to the supplier
3
The supplier confirmed in writing that Oracle 10g is recommended for ADVAC (Annex 2b).

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(Annex 2a). The reply from the supplier (Annex 2b) confirmed all questions and based on
these answers, the STE can recommend the acquisition and implementation of ADVAC
including the customer billing system.

The price of the basic financial accounting modules of ADVAC including accounts payable
and accounts receivables and the modules for fixed assets, payroll and cost centres is EGP
76,000 plus EGP 3,000 per person for training; the price of the billing system is estimated at
EGP 130,000. Additional cost will incur for licences, etc.

Later, the module for stock control could be acquired but it requires full computerisation of all
the branches and stable lines to the headquarters of QWWC in order to be able to take
advantage of this software.

4 POLICIES AND PROCEDURES NECESSARY FOR SUCCESSFUL

IMPLEMENTATION OF THE FINANCIAL SYSTEM

It has not been possible for the STE to test ADVAC in practice, which means that is hard to
be specific concerning new procedures, but features such as pre-numbered documents,
segregation of duties by means of access and function restricted passwords, current back-up
procedures etc. will need to be applied.

Provided that the outstanding issues can be clarified it is of the utmost importance that
ADVAC is acquired and properly implemented as the present manual systems are not
suitable for adequately and reliably handling the financial management of QWWC.

Procedures and internal control measures should be designed (e.g. by a local expert in
procedures and internal control in collaboration with the QWWC staff), based on the tutoring
which the project’s local Financial Adviser is going to carry out and the weaknesses of the
present systems revealed in this report with reference to segregation of duties, safeguarding
of assets, insurance, risk analysis, pre-numbered vouchers, two independent ways from
cradle to grave of all documents and transactions and regular reconciliation procedures
through the organisation using all files and other sources of information for verification of the
internal control measures.

Questionnaires and flow charts will be valuable tools for the identification of weaknesses in
the internal control and facilitate the learning process.

The most urgent areas for revised procedures and new internal control measures are the
following sequences:
 Purchases – creditors – warehouses – disbursements
 Purchases – creditors – warehouses- fixed assets –disbursements
 Revenue – Accounts Receivable – Receipts
 Expenditures

Unfortunately, computerisation of the warehouses is not eminent as funding for hardware

and connections is not immediately available; it is suggested that an expert in warehouses of
waterworks should examine the stocks first. Improved manual procedures will in any case
increase the reliability of the figures produced.

The procedures and internal control measures linked to the financial accounting, payroll and
human resources, however, should be designed for a computerised environment.

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As elaborated in chapter ‎6 on training, general training in computers and computerised

accounting has to commence immediately in order to prepare the organisation for the new
acquisitions and the implementation of these.

5 REQUIREMENTS FOR A COMPUTERISED BILLING SYSTEM

The stipulated requirements are for accounting purposes only thus not comprising facilities
that may be of importance for the operational units.

As the staff engaged in the customer service functions are not familiar with computers and IT
software, the system has to be as simple as possible while meeting the requirements for
proper administration.

Input:
 Customer number referring to location (branch), category, pressure zone
 Name of the customer
 Address
 Costs of the initial installation
 Approval of the costs of the initial installation and invoicing
 Payment of the initial installation
 Initial reading of the meter (manually captured as well as electronically transferred
from the reading device)
 The number of the meter
 Acceptance of the new connection (protected by a specific password)
 Current readings of the meter (manually captured as well as electronically transferred
from the reading device)
 Other costs (repairs, meter charges etc)
 Initial costs of installations
 At least five different rates
 Different rates structures, for instance progressive rates
 A feature to accept new connections and existing ones operated by the branch
manager
 Receipts
 Complaints from the customers
 Correction of erroneous data, for instance meter readings and initial meter stands,
protected by a special password (administrator function)
 Passwords confined to certain functions, for instance meter reading, invoicing and
receipts in order to facilitate segregation of duties.

Output:
 Monthly charges to each customer specified in accordance with their nature (water,
wastewater, meter charge etc.)
 Monthly invoices to all customers based on the above-mentioned charges
 Transfer of all charges to the relevant accounts of the Unified Accounting System
(water, wastewater, septic tank evacuation, costs of installation, meter charges etc.)
 Account for the use of materials and meters from the warehouses and the cost
centres to the customers’ accounts: print out of invoices, receipts, statements, ageing
lists etc.
 Ageing lists (overdue accounts less than 30 days, less than 60 days, less than 90
days, more than 90 days but less than one year, more than one year)

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 Transfer of receipts and credit notes etc. to the relevant accounts of the Unified
Accounting System.
 Records (history) of the meters
 All customer data and transactions must be kept for at least five years
 Report generator
 Back-up function

System:
 Able to handle at least 600,000 costumers at 14 branches and direct links to the
Headquarters at QWWC.
 Response time (to be defined by the Management)
 ORACLE or SQL data base
 Seamless connection to the ADVAC financial accounting system

In order to assess billing systems in operation, Garbaya Water Company and Qena Electri-
city Company were visited and demonstrated their software.

At Garbaya Water Company, one of the employees had developed a billing system before
ADVAC was introduced but it collapsed twice during the demonstration and hence only some
of the features could be presented. Considering that well tested and ready made billing
systems are available, it is strongly recommended to refrain from the development of an own
software.

At Qena Electricity Company, the ADVAC billing system has been in operation for a couple
of years and the users are very satisfied with it. Out of the approximately 600,000 customers,
around 150,000 were captured on the billing system and no problems had occurred.
Unfortunately, however, the billing system is not connected to any electronic accounting
system: computerisation of financial accounting had not been considered urgent and the
book-keeping is still in the form of manual books. The system is based on an Access
database, which the system administrator did not find adequate due to limited capacity; he
recommended Oracle or SQL.

The system administrator gave the Team Leader, the Financial Adviser and the financial STE
a comprehensive and convincing step-by-step demonstration of the features and possibilities
of the system. The system as a stand-alone device seems to be able to meet project
requirements with respect to data and functionality and seems to be able to handle more
information than the basic requirements for QWWC, for instance the ID numbers of the
customers, civil status, etc. The system administrator also stressed the importance of
thorough staff training.

The STE considers this billing system integrated with the ADVAC financial accounting
system an appropriate solution to the administrative problems of the invoicing and collection
of QWWC combined with comprehensive training. As the supplier has confirmed seamless
integration with the ADVAC financial accounting system and other technical issues, it is
recommended to acquire this software and the necessary training. The implementation plan
for this solution is outlined in Chapter ‎7.

The implementation will take place gradually. The extension of the present project funded by
KfW will select two branches as a pilot project for the improved billing and based on the
experience gained in connection with this project, it is intended to computerise all the
branches.

RODECO - GOPA 13
Computerisation of the accounting department and billing functions at Qena Water and Waste Water Company

6 TRAINING REQUIREMENTS

Even though QWWC has acquired a number of computers and established an IT depart-
ment, most of the staff are completely illiterate with respect to electronic data processing. It is
therefore of the utmost importance that basic computer training4 of the staff of the accounting
department and the costumer centres of the branches is commenced immediately in order to
pave the way for the subsequent implementation of computer based accounting and billing
and the associated specific training.

It is recommended to begin with the accounting department and the costumer centre of the
branch selected for the pilot project. Subsequently, an implementation and training plan
should be designed for the remaining branches based on the experience gained during the
pilot project.

Regarding accounting policies, the Unified Accounting System (the compulsory chart of
accounts), the opening balance of QWWC and the current reporting to the Holding Company,
training and tutoring are being undertaken by the project’s local Financial Adviser and
remarkable results have already been achieved. The training and tutoring will continue until
QWWC staff are able to do it on their own.

The purpose of the training is to make the staff of the accounting department able to parti-
cipate in the design of new and improved procedures in collaboration with the local expert in
procedures and internal control and the Financial Adviser.

The specific training offered by the supplier should be bought in connection with the
contracting of the software.

The procedures and internal control measures must in any case be straightened up and
improved and in connection with the computerisation adjusted to the features of the various
modules, for instance a pre-numbered sequence of purchase orders.

The USAID project with the Holding Company is supposed to facilitate the implementation of
ADVAC with the subsidiaries and the experience gained by this project could be useful to
utilise in connection with the practical training in order to avoid pitfalls and not to repeat
mistakes already made. An additional meeting with the persons in charge of the said project
will be useful in order to learn about the general experience gained and prepare a smooth
implementation. Based on the outcome, a detailed plan could be elaborated in order to
specify the areas where assistance will be needed as the training provided by the supplier
will probably not be sufficient.

7 RECOMMENDATIONS ON COMPUTERISATION OF QWWC

A sensible and realistic step-by-step approach to computerisation of QWWC (headquarters

and branches), taking the level of knowledge and experience and the funds available into
consideration, is as follows:

 Commencement of general computer training of the accounting department of

QWWC, followed by training the staff of the branches employed at the billing
departments and warehouses in order to pave the way for the subsequent specific
computer training.

4
Please compare to the training plan outlined earlier in the course of the project.

RODECO - GOPA 14
Computerisation of the accounting department and billing functions at Qena Water and Waste Water Company

 Recruitment of a local IT/ database expert with reference to verification of and the
suitability of the system log is recommended to examine the requirements of ADVAC
including the billing system with a special view to the hardware available at QWWC
and the capabilities of QWWC’s IT Department with respect to the operation and the
maintenance of a complex database. QWWC, supported by technical assistance from
the project, should check whether the hardware presently in operation at the
Commercial Department is adequate for the installation and application of ADVAC
accounting and billing software and acquire any additional hardware / transmission
systems necessary.
 If the local IT expert confirms the appropriateness of the system prerequisites
(hardware, etc.), the purchase of the ADVAC billing system should be considered,
including training for the pilot project.
 Acquisition of ADVAC financial accounting software including general ledger,
accounts payable, accounts receivable, cost centre accounting, fixed assets and
payroll & human resources, the project accounting module. The requirements outlined
in Annex 2a should be used as technical specifications for the contract with ADVAC.
Moreover, training of eight employees of the accounting department should be
included in the contract. During the training period, the system can be run on the
available MS Access database in order to make the final tests of the functionality
before a powerful and expensive database is purchased.
 The project team leader should monitor the testing of ADVAC, assess the result and
after satisfactory testing oversee the capture of data to the fixed assets module
supervised by the Financial Adviser. He should also facilitate the introduction of the
human resources and payroll module.
 Recruitment of a local specialist in procedures and internal control (profile proposed in
Annex 3) for about one month is recommended to assist the project financial expert in
designing the procedures for the acquisition of fixed assets, for payroll and other
costs with reference to computerisation and improving the present procedures for
other purchases and billing based on the discovered weaknesses as disclosed in
chapter 2 and other shortcomings.
 The priority areas are improvement of the purchase – accounts payable – disburse-
ments – stocks and revenue – accounts receivable – receipts procedures with the
weaknesses detected in Chapter 2 as the points of departure.
 Other issues of interest are adequate cabling (risk of fire) and power supply, response
time, security for full back-up of all the information gathered at the branches, cabling
to the branches and the requirements for speedy and secure transmission of data,
maintenance of the audit trail, the security of the system concerning passwords and
digital signatures (segregation of duties), internal and external hacking, the security of
pre-numbered transactions and the suitability of the system log.
 When all above issues have been resolved satisfactory, the Oracle database should
be purchased.
 The next step will be capture of the data for financial accounting modules under close
supervision of the Financial Adviser including up-dating the fixed assets module with
items of a total acquisition value of EGP 773 million.
 Computerisation of the personnel department and the payroll will be the next task due
to the availability of the software.
 When the financial accounting system is up and running, the pilot project for the billing
system should commence. The opinion of the IT expert should be addressed with

RODECO - GOPA 15
Computerisation of the accounting department and billing functions at Qena Water and Waste Water Company

respect to connections etc. Moreover, the preparation of a comprehensive training

programme is crucial.
 A specialist in the field of warehouses of waterworks should investigate the present
structure of 14 warehouses and more than 10,000 articles with reference to a
rationalisation of the structure, the identification of obsolete stocks and repetitions and
proposals for a purchase policy for spare parts and the stock levels of these items.
Based on the mission report of the warehouse specialist, the stock management
module should be purchased and implemented.
 Training of the pilot customer centre staff should be launched before it is
computerised and goes operational
 When funding for computerisation of all the branches has been made available, the
billing system and the stock management system should be implemented at all these
entities in conjunction with the necessary training.

If implementing all these steps, QWWC will have a fully fledged accounting and financial
management system able to keep track of all income, receipts and disbursements and to
produce reliable financial statements and all other kinds of reports for decision making
purposes.

RODECO - GOPA 16
ANNEX 1 – Terms of Reference

PN /2006.2063.3 VN 81087234

STRENGTHENING PROVISION OF SERVICES IN QENA AND PROMOTING

APPROPRIATE RURAL SANITATION OPTIONS

Terms of Reference

INTERNATIONAL EXPERT IN FINANCIAL SYSTEMS

PROPOSED EXPERT : GORM RASMUSSEN

DURATION OF ASSIGNMENT : 4 WEEKS

DESCRIPTION OF DUTIES :

In close coordination with the project team:

1) Assess the proposed ADVAC financial software system in view of an optimal

introduction of the software in QWWC in terms of skills, procedures and hardware.
2) Identify (and/or propose additional if the need the need arises) policies and
procedures necessary for successful implementation of a financial system with a
focus on meeting project financial objectives.
3) Advise on the training requirements for successful implementation.
4) Assess current accounting systems in QWWC in view of introducing the new ADVAC
software.
5) Do a first rough assessment of billing procedures in QWWC in view of the future
introduction of an IT-based billing system and make suggestions with regard to later
billing.
6) Establish a mission report and discuss the major findings with the TL at the end of the
assignment. The final report shall be submitted to RODECO headquarters within two
weeks after the end of the assignment.
ANNEX 2a - Required features of ADVAC and the billing system

ADVAC Systems LTD

Dear Sirs,

With reference to our pleasant meeting on Thursday 26 July 2007 and the subsequent
correspondence and contact we hereby take the liberty of asking you some additional
questions regarding the ADVAC software and the customer billing system.

The questions concerned are as follows:

- What are the system requirements for ADVAC and the customer billing system ?
- Which database is the most appropriate for the this software ?
- What is the approximate price of the ADVAC financial accounting software including
the modules for cost centre accounting, fixed assets, inventory, payroll and human
resources and the customer billing system and the recommended database?
- An indication of the price for provision of the necessary training to implement the
above-mentioned software and date base properly?
- Can seamless transfer of data between the ADVAC costumer billing system and the
ADVAC financial accounting software be guaranteed?
- In the affirmative how and which accounts of the Unified Accounting System will be
involved in these transactions?
- Do you have any references concerning the practical application of the ADVAC
financial accounting software and the ADVAC customer billing system?
- Regarding the customer billing system is it possible to derive ageing lists of the
entire population and break it down into districts, category of customer etc and
adequate criteria of ageing?
- Is electronic transfer of data feasible with respect to transfer from the mobile readers
carried by the meter inspectors to the ADVAC customer billing system ?
- Is it possible to restrict certain functions of the customer billing system to selected
persons such as approval of applications for connection exclusively for managers
only?
- How can the customers recorded in the customer billing system be selected in
accordance with pre-defined pressure zones?
- As the IT-department of Qena Waterworks are capturing basic information of the
customers in an Excel model, please inform us whether such data can be
transferred smoothly to the ADVAC customer billing system?
- Please inform us about the back-up facilities of the software concerned.

A number of required features appear from the attached annex. Please confirm that these
facilities are available.

It should in this connection be mentioned that the number of customers is at the moment
approximately 425,000 and the number is steadily increasing. Moreover, the number of items
in the warehouses are before write-off and consolidation approximately 10.000 and the
number of accounting transactions on an annual basis are believed to be at the level of
approximately 20,000.
All records are at the moment in the form of manual books and files.

We thank you in anticipation and we are looking forward to your reply. Of particular interest
and of urgent character is information concerning one or more references who use the
ADVAC financial accounting package integrated with the ADVAC customer billing system.

RODECO - GOPA 18
We have in this connection learned that Aswan Electricity Company uses these two facilities.
Are you able to confirm this information and in the affirmative provide us with points of
contact with reference to a site visit. Your prompt reply regarding this issue will be highly
appreciated.

Yours faithfully

Gorm Rasmussen

GENERAL FEATURES

The basic module:

- Financial Accounting
Cashier function
Accounts receivable (integral with the billing system)
Accounts Payable

General features:
- No acceptance of entries not in balance, without voucher number or without text
Unlimited number of annual accounts, items, debtors, creditors, and accounts in
accordance with the Uniformed Accounting System.
Maximum amount…….. ?
Restriction of access and functions by means of passwords
Full integrity and seamless transfer of data to and from all the connected modules based
on the Uniformed Accounting System
Ageing lists of accounts payable and accounts receivable

Cost centre module:

Cross references between all departments, categories, costs, income etc

Inventory module:

- Able to handle at least 10,000 different articles with respect to numbers and in monetary
terms
Division of the warehouse accounts into seven main categories with sub-accounts
Calculation of turn over ratios for each article
Specification of items without movements for more than three years
Integration with the cost centre module concerning the use of goods for the pre-defined
cost centres
Automatic calculations of the stocks with respect to FIFO, LIFO and weighted average
prices
Acquisition prices for all the items of each and every article
Dates of the purchases
Write offs
Book value
Department
Location

RODECO - GOPA 19
Project module:

- Integration with the fixed assets module and the costs centres
Budget, actual, deviations for months, quarters and years

Fixed Asset module:

- Date of acquisition
- Acquisition price
Subsequent additions
Write offs
Accumulated depreciation
Depreciation for the year
Book value
Department
Location

Personnel and payroll module:

- Personnel files
Payroll list for each department derived from the personnel files
Deduction of taxes, social charges and payroll taxes
Integrated with the cost centre module

RODECO - GOPA 20
 ANNEX 2b - Confirmation by the supplier

RODECO Consulting GmbH

Dear, Gorm Rasmussen

With reference to your letter today morning you find below the answers for your
questions:

Our system requirements is listed in attached page

We recommend Oracle 10g as the data base server for our systems
The approximate price for our software including licenses for 5 users and training and
implementation and warranty for one year as following:
The ADVAC Financial Accounting Software including General Ledger, Cost accounting,
Fixed Assets, Projects Under execution, Auditing, Payroll and Human Resources Price is
76000L.E.
The ADVAC Inventory Software including Inventory control, Stock Accounting and
Personnel liabilities Price is 54000L.E.
The ADVAC Customer Billing Software including the customer service and billing price is
130000L.E.
The Data Base price is per user according to the Oracle pricing policy it costs
approximately 25000L.E. per 25 users for the Government sector
The price for provision of the necessary training to implement the above mentioned
software and data base ranges about 3000L.E. per person
We guarantee the seamless transfer of data between our Customer Billing software and
our Financial software
The interface between our systems is user created so, it's simple to include any accounts
to be considered while creations of the transactions.
Attached with our letter a list of the utilities companies that depends on our software
Yes, we can do this from our accounting system by using the analytical codes for these
purposes.
Transferring of data is feasible from the mobile readers to our software with the data
structure needed from the mobile readers supplier
Yes
The customers recorded in the customer billing system can be distributed to there pre-
defined pressure zones according to the complete address of the customer
Yes, our systems accept such data smoothly.
There is different type of backup procedures for data such as:
Hardware Dual server Technique
Hardware RAID technique for hard disks backup
Automatic software backup tasks
Manual backup tasks
We confirm that all of the mentioned features are available.

Yours faithfully

Mosaad A.Halim

RODECO - GOPA 21
Annex 3 – Recommendations on local short-term experts

The STE recommends the following local short-term assignments:

 Local specialist in procedures and internal control (about one month). Optimal quail-
fication:
- A degree in accounting and/ or auditing.
- At least five years of experience with an international accounting company or an
internal auditor with a larger international company or bank.
- Practical experience in the fields of design and evaluation of procedures and
internal control measures with special reference to preparation of flow-charts.
- Practical experience in the fields of computer security and back-up procedures
- Well acquainted with Law No. 203, the Unified Accounting System and other
regulations relevant for the public sector in Egypt.
- Fluent in Arabic and a good command of English.

 Local IT/ database expert to examine the requirements of ADVAC including the billing
system with a special view to the hardware available at QWWC and the capabilities of
QWWC’s IT Department with respect to the operation and the maintenance of a complex
database.

RODECO - GOPA 22