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Uganda National Roads Authority

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Uganda National Roads Authority THE REPUBLIC OF UGANDA UGANDA NATIONAL ROADS AUTHORITY REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ROAD SECTOR SUPPORT PROJECT 4 (RSSP– 4) KIGUMBA – MASINDI – HOIMA – KABWOYA ROAD PROJECT ADF LOAN – PROJECT ID NO P-UG-DB0-021 FOR THE YEAR ENDED 3OTH JUNE 2017 OFFICE OF THE AUDITOR GENERAL UGANDA TABLE OF CONTENTS Opinion ............................................................................................................... 2 Basis for Opinion .................................................................................................. 2 Key Audit Matters ................................................................................................ 3 Other Matter ........................................................................................................ 6 Management’s Responsibility for the financial Statements ..................................... 10 Auditor’s Responsibilities for the Audit of the Financial Statements ........................ 10 Other Reporting Requirements ............................................................................ 12 1 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ROAD SECTOR SUPPORT PROJECT (RSSP 4) ADF LOAN-PROJECT ID NO P-UG-DB0-021 FOR THE YEAR ENDED 30TH JUNE 2017 THE RT. HON. SPEAKER OF PARLIAMENT REPORT ON THE FINANCIAL STATEMENTS Opinion I have audited the accompanying financial statements of the Road Sector Support Project 4 (upgrading of the Kigumba – Masindi – Hoima – Kabwoya Road Project) for the year ended 30th June 2017. The financial statements comprise of; statement of receipts and payments; statements of fund balance and notes to the financial statements including a summary of significant accounting policies adopted. In my opinion, the financial statements present fairly in all material respects Uganda National Roads Authority – RSSP 4 statement of receipts and expenditure, and statement of fund balance for the year ended 30th June 2017 in accordance with the terms and conditions of the ADF funding agreement and the cash basis of accounting under section 8 of the financial statements. Basis for Opinion I conducted my audit in accordance with International Standards on Auditing (ISAs).My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of Project Management in accordance with the Constitution of the Republic of Uganda (1995) as amended, the National Audit Act 2008, the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Uganda, and I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 2 Key Audit Matters Key audit matters are those matters that, in my professional judgment, are of most significance in my audit of the financial statements of the period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined the matter described below as a key audit matter to be communicated in my report; Compensation to the Project Affected People (PAPs) Section 42 of The Land Act (1998) empowers the Government to acquire land for public interest in exchange for compensation of owners or tenant’s compensation based upon Market Value of land plus disturbance allowance. Section 42 (7) b of the Land Act, 1998 states that no person from whom land is to be acquired shall be required to vacate that land until he/she has received compensation awarded to or agreed by them. Section 5.02 (b) of the conditions of the loan agreement between the Republic of Uganda and the African Development Fund, required the borrower to provide evidence, in form and substance acceptable to the fund, confirming that prior to commencement of construction on any section of any lot of the civil works, all Project Affected Persons have been compensated and/or resettled with respect to the relevant section of the relevant lot in accordance with the Resettlement Action Plan (RAP) and any updates to the RAP as well as the Works and Compensation Schedule’. Good practice also requires that after the change of ownership the land should be registered in the name of Uganda Land Commission. Government has on several occasions attributed delayed construction projects, low funds absorption and fraudulent activities on the land acquisition process, that is; identification of land owners (Ownership), valuation of land, payments to owners and final acquisition of the compensated land (titling). The Government of Uganda has been implementing a number of infrastructure development projects across sectors. The Government of Uganda (GoU) received financing support from the African Development Bank (AfDB) to implement the Road Sector Support Project 4 (RSSP4). RSSP4 comprises of among other components the upgrading from gravel to bitumen standard of the Kigumba – Masindi – Hoima – Kabwoya Road (135km) and consulting services for technical and financial audits; compensation and resettlement. Before implementing this project, and in accordance with the laws of Uganda, Government has to acquire land rights by valuation of project affected persons (PAP) land, compensating the project affected persons and finally demarcation of the right of way. 3 The area was identified during the risk assessment of the Project, at the preliminary stage of the planning, as a significant service delivery point, directly impacting on its mandate and an area of high stakeholder concern on the operational efficiency of the Project. I designed specific programmes for execution to ascertain whether all valuations are done in accordance with the applicable law, regulations and best practice, ascertain whether the compensation process is fair, just and complete, ascertain whether the persons compensated are the bonafide owners of the land and establish procedures and action taken after compensations of PAPs. I obtained and examined the requirements of the loan Agreement especially section 5.02b, obtained and reviewed information relating to the status of compensation to the PAPS, interviewed some of the affected PAPS who had not been compensated, obtained and reviewed the contract that UNRA signed with surveyors for land acquisition consultancy and visited the site to establish the status of work done under the contract. I noted concerns on land acquisition as outlined below; Poor land acquisition consultancy services contract UNRA signed a land Acquisition and Consultancy Services agreement with two consultancy firms for 15 months first and then 24 months second phase after start of civil works. I noted that the contract expired and yet the consultant’s staffs were still on site. UNRA has also decided to terminate the contract due to failure to deliver. I also noted that there was no professional indemnity insurance for UGX.659,797,590 and UNRA proceeded to pay UGX 32,867,177 which raises concerns of value for money given that UNRA staff are performing duties for which a consultant has been contracted to perform and has contributed to delay in start of the civil works. As a result of this there is a risk of legal action against UNRA by the firm for terminating of the second phase of the contract and a social risk of confusing the PAPs on the eligible person to deal with. Management explained that they are taking action to address the concern by terminating and appraising the consultant. Delayed payment to Project Affected People (PAPs) I noted that Five Hundred Twenty Five (525) PAPs worth an estimated Uganda Shillings Two Billion Three Hundred Fourteen Million One Hundred Sixty Six Thousand Five 4 Hundred Ninety Six (UGX.2,314,166,596) had not been compensated by the time of the audit contrary to section 5.02 (b) of the loan agreement that requires UNRA to compensate and/or resettle all Project Affected Persons prior to commencement of construction on any section of any lot of the civil works. Non-settlement of PAPs’ claims before commencement of construction exposes the project to a risk of the Donors withdrawal of funding and litigation costs by the PAP’s. Various reasons were put forward for this and Management indicated that they had taken action to address the issue by involving their staff in the compensation activities and making arrangements to deposit the money in courts for cases of a legal nature. Signed transfer forms for titled properties before payment I noted that PAPS with titled properties sign transfer forms and surrender their titles before receipt of compensation. All the transfer forms reviewed did not indicate the transferee and the size of the land to be transferred. This is in addition to signing UNRA’s Transfer (Assignment) Form C for untitled plots which is also an explicit acknowledgement of receipt of compensation by the Project Affected Person (PAP). Project affected persons titles had not been returned to them by the time of the audit as the process of subdivision and transfer had not been completed. I also noted lax security arrangement at the offices of the land consultant (Stanfield) where there were no security guards and the land purchase agreements and titles
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