OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF TOWN COUNCIL

BUIKWE DISTRICT

FOR THE YEAR ENDED 30TH JUNE 2015

REPORT AND OPINION OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF NKOKONJERU TOWN COUNCIL

FOR THE YEAR ENDED 30TH JUNE 2015

THE RT. HON. SPEAKER OF PARLIAMENT

Introduction I have audited the accompanying financial statements of Nkokonjeru Town Council for the year ended 30th June, 2015. These financial statements comprise the statement of financial position as at 30th June, 2015, statement of financial performance, statement of changes in Equity, cash flow statement together with other accompanying statements, notes and accounting policies.

Management’s Responsibility for the Financial Statements Under Article 164 of the constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Nkokonjeru Town Council. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Governments Financial and Accountability Manual, 2007, and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

Auditor’s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended), Section 87 of the Local Governments Act 1997 (as amended) and Sections 13, 16 and 19 of the National Audit Act, 2008 is to express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements whether due to

2 fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances but not for purposes of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Part “A” of this report sets out my opinion on the financial statements. Part “B” which forms an integral part of this report presents in detail, all the significant audit findings made during the audit which have been brought to the attention of management.

PART “A”

Unqualified Opinion

In my opinion, the financial statements of Nkokonjeru Town Council as at 30th June, 2015 are prepared, in all material respects, in accordance with the Local Governments Financial and Accounting Manual, 2007, Section 51(3) of the Public Finance Management Act, 2015, the Local Governments Financial and Accounting Regulations, 2007 and the Local Governments Act 1997 cap 243 (as amended), of the Laws of Uganda.

John F. S. Muwanga AUDITOR GENERAL

30th November, 2015

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PART "B"

NKOKONJERU TOWN COUNCIL DETAILED REPORT OF THE AUDITOR GENERAL FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2015

1.0 INTRODUCTION In accordance with Article 163(3), of the Constitution of the Republic of Uganda, 1995 (as amended), I am required to audit and report on the public accounts of Uganda that is to say, all public offices including the courts, the central and the local government administrations, universities and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the Nkokonjeru Town Council to enable me report to Parliament.

2.0 AUDIT OBJECTIVES The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. The audit was carried out with regard to the following objectives:- a. To verify whether the financial statements had been prepared in accordance with the requirements of the Local Governments Financial and Accounting Manual 2007 and the Local Governments Financial and Accounting Regulations 2007; and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b. To verify whether all the funds of the entity were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. To verify whether goods and services financed have been procured in accordance with the PPDA Act. d. To evaluate and obtain sufficient understanding of the internal control structure of the entity, assess control risk and identify reportable conditions, including material internal control weaknesses e. To verify whether the management of the funds of the entity was in compliance with the Government of Uganda financial regulations.

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f. To verify whether all the necessary supporting documents, records and accounts had been kept in respect of all activities, and are in agreement with the financial statements presented.

3.0 AUDIT METHODOLOGY

The following audit procedures were undertaken:-

a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements of the entity.

b. Expenditure The payment vouchers of the entity were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation.

c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period.

d. Procurement Reviewed the procurement of goods and services under the various departments during the period under review and reconciled with the approved procurement plan.

e. Fixed Assets Management Reviewed the use and management of the assets of the entity during the Period under review

f. Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluated the overall financial statement presentation.

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4.0 ENTITY FINANCING Nkokonjeru Town Council is financed by grants (Conditional and Unconditional) from Central Government, donations and locally generated revenues from taxes, fees, licenses and charges. During the year, the Town Council received grants totaling to UGX.352,199,019 from Central Government, and UGX.84,271,361 from locally generated revenues. The total revenue of UGX.436,470,380 constituting 94.5% of its approved budget estimates of UGX.461,660,421

5.0 DETAILED AUDIT FINDINGS This section outlines the detailed audit findings, management responses thereof and my recommendations.

5.1 Local Revenue Shortfall Regulation 32 of the Local Governments Financial and Accounting Regulations, 2007 requires Councils to ensure collection of all budgeted revenue in an approved manner and the revenue banked intact in Council accounts. However, out of the budgeted revenue of UGX.102,604,335 only UGX.84,271,361 was realized, leading to a revenue shortfall of UGX.18,332,974 representing 18% of approved budget. The Accounting Officer attributed the shortfall to understaffing of Revenue Enforcement Officers among others.

I advised the Accounting Officer to ensure that Revenue Enforcement Officers are recruited.

SERVICE DELIVERY

5.2 Road Works

5.2.1 Wabiduku-Kasewo Road (2.0km) The Town Council carried out periodic road maintenance of Wabiduku-Kasewo Road measuring 2.0km and works were completed between October to December 2014, at a cost of UGX.24,000,000 under force account. Activities on this road included grading; shaping and light gravelling. Inspections carried out on 18/08/2015 indicated that there

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was insufficient maintenance as vegetation had over grown along most sections of the road, reducing it to a footpath. It was also noted that no offshoots were dug to improve water drainage, as seen in the picture below;

Vegetation along Wabiduku-Kesewo road which is becoming invisible

The Accounting Officer admitted the shortcomings and explained that maintenance had not been regular due to limited resources.

This was attributed to failure to plan for routine maintenance amidst the scarce resources. Lack of routine maintenance will lead to increased maintenance costs in re- opening the road.

5.2.2 Health Centre-Abattoir- Road (1.5km) The Town Council carried out periodic road maintenance on Health Centre-Abattoir- Ngogwe Road measuring 1.5km under force account. Works were completed at a cost of UGX.18,000,000 during the 2nd Quarter. Activities on this road included grading; shaping and gravelling. Inspections carried out on 18th August, 2015 indicated extensive damage on the road, characterized by gullies and uncontrolled runoff water. The road failure was attributed to lack of culverts and off shoots, which led to poor drainage and flooding.

Gullies along Healthcentre-Ngogwe road

Lack of adequate road maintenance reduces the lifespan of the road and increases the costs of maintenance in the long run.

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The Accounting Officer explained that maintenance was not regular due to limited resources/funds allocation from the Uganda Road Fund. The Accounting Officer was advised to plan for routine maintenance to keep the roads in motorable state and rectify the defects for prolonged road life and safety for road users.

5.3 Water Supply Project The Town Council has a water supply Project that supplies piped water to the residents of the Town Council. During the year under review, the following were noted;  There were outstanding arrears for Water bills to the tune of UGX.9,342,852 and UMEME bill of UGX.13,974,112. This prompted UMEME to disconnect the power at the water plant/pump.  All water consumers in the Town Council had no meters implying that consumers were never billed for the water consumed  There were no bulk meters at the intake point (water source) as well as the outlet at the reservoir. Consequently, water produced and consumed was not measured and reconciled  The water distribution system had grown old leading to several leakages. This amounts to un accounted for water  One of the water reservoirs is leaking thus leading to the water loss

The Accounting Officer explained that the system is very costly to be managed by the Town Council due to the aged system and stated that water loss is at 70%. It was further, explained that National Water and Sewerage Corporation had been approached to take over the project but had not received response from the Corporation by the time of audit. I advised the Accounting Officer to follow up the matter with National Water and Sewerage Corporation.

5.4 Understaffing The Town Council has an approved structure of 45 staff. However, out of the approved structure of 45 staff, only 18 positions were filled leaving 27 posts vacant representing 60% as shown in Appendix 1. Understaffing adversely affect service delivery. Management attributed the shortage to

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the ban on recruitment by the Ministry of Public Service. I advised the Accounting Officer to engage the Ministry of Finance, Planning and Economic Development and the Ministry of Public Service to ensure that the vacant posts are filled.

5.5 Lack of Land titles Regulation 58 (4) of the Local Governments Financial and Accounting Regulations 2007, requires the properties and assets of a Local Government to be properly registered, titles issued and valued. It was however, observed that Council did not have land titles for its land and premises as shown in Appendix 2.

Consequently, the Town Council land is exposed to a risk of encroachment and disputes.

The Accounting Officer explained that all the land agreements and land titles were burnt in the fire that gutted the office block and that plans were underway to replace them

I advised the Accounting Officer to expedite the process and ensure that all land titles are secured.

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Appendix 1 Understaffing POST Salary scale Establishment Filled Vacant OFFICE OF THE TOWN CLERK TOWN CLERK (PRINCIPAL TOWNSHIP U2L 1 1 0 OFFICER) PERSONAL SECRETARY U4L 1 0 1 SUB TOTAL 2 1 1 ADMINISTRATION SENIOR ASSISTANT TOWN CLERK U3L 1 0 1 CLERK ASSISTANT U4L 1 0 1 PERSONAL OFFICER U4L 1 0 1 STENOGRAPHER SECRETARY U5L 1 1 0 ASSISTANT RECORDS OFFICER U5L 1 0 1 LAW EFORCEMENT OFFICER U6L 1 1 0 TOWN AGENT U7L 3 2 1 OFFICE TYPIST U7L 1 0 1 LAW EFORCEMENT ASSISTANT U8L 3 0 3 ASKARI U8U 2 0 2 OFFICE ATENDANT U8U 2 1 1 SUB TOTAL 17 5 12

FINANCE AND PLANNING SENOIR TREASURER U3U 1 1 0 ASSISTANT STATISTICAL OFFICER U5U 1 0 1 SENIOR ACCOUNTS ASSISTANT 1 1 0 ASSISTANT TAX OFFICER U6U 1 0 1 ACCOUNTS ASSISTANT U7U 3 2 1 STORES ASSISTANT U7U 1 0 1 OFFICE TYPIST U7U 1 1 0 OFFICE ATENDANT U8U 1 0 1 SUB TOTAL 10 5 5

WORKS TOWN ENGINEER U3U 1 0 1 PHYSICAL PLANNER U4U 1 1 0 ASSISTANT ENGINEERING OFFICER U5U 1 0 1 ASSISTANT WATER OFFICER U5U 1 0 1 DRIVER U8U 2 2 0 PLUMBER U8U 1 0 1

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MACHINE ATTENDANT U8L 1 1 0 SUB TOTAL 8 4 4

PRODUCTION AND MARKETING SENIOR COMMERCIAL OFFICER U3L 1 1 0 ASSISTANT VETERINARY OFFICER U5L 1 0 1 SUB TOTAL 2 1 1

COMMUNITY BASED SERVICES SENOIR COMMUNITY DEVELOPMENT U3L 1 1 0 OFFICER ASSISTANT COMMUNITY DEVELOPMENT U5U 1 0 1 OFFICER SUB TOTAL 2 1 1 INTERNAL AUDIT SENIOR INTERNAL AUDITOR U3U 1 1 0 SUB TOTAL 1 1 0 PUBLIC HEALTH PRINCIPAL HEALTH INSPECTOR U3Sc 1 0 1 HEALTH INSPECTOR U5U 1 0 1 HEALTH ASSISTANT U6U 1 0 1 SUB TOTAL 3 0 3 TOTAL 45 18 27

Appendix 2 Lack of Land titles No Asset Estimated Condition Remarks Value 1 Central Market. Land at 21,500,000 Used by the -No land Title Bukasa Central Market -Buying and selling agreement not available 2 LandLocated at No value It houses the  No land Title Nkonkonjeru Busabaga Water Pump  Buying and selling agreement not available.  Value of the Land is not indicated in the Register 3 Community Center Land 5,000,000 It is used by the -No land Title at Mugulu Road Community -Buying and selling agreement Centre not available. 4 Land for the abbotoir at Not value It is used by the -No land Title Block 243, Plot 148 Abattoir -Buying and selling agreement Located at Mulajje not available. measuring 0.218 -Value of the Land is not Hectares indicated 5 Land at Block 382 plot 1,500,000 Not in use -No land Title 72 at Miyirikiti measuring -Buying and selling agreement 0.6 Hectares not available. The Land Title is

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not available. -The purpose of the Land is not indicated. 6 Land at Block 382 Plot No value Not in use -No land Title 14 Located at Mayirikiti -Buying and selling agreement measuring 0.6 hectares not available.  The purpose of the Land is not indicated. Value of the Land is not indicated in the Register 7 Land at Block 243 Plot No value It is used by the  No land Title 77 Located at Mulajje office Block and  Buying and selling measuring 0.62 hectares the Town Center` agreement not available.  Value of the Land is not indicated in the Register

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