Office of the Auditor General

THE REPUBLIC OF UGANDA

OFFICE OF THE AUDITOR GENERAL

ANNUAL REPORT OF THE AUDITOR GENERAL FOR THE YEAR ENDED 30TH JUNE 2014

VOLUME 2 CENTRAL GOVERNMENT

Table Of Contents List Of Acronyms And Abreviations ...... viii

1.0 Introduction ...... 1

2.0 Report And Opinion Of The Auditor General On The Government Of Uganda Consolidated Financial Statements For The Year Ended 30th June, 2014 ...... 38

Accountability Sector...... 55

3.0 Treasury Operations ...... 55

4.0 Ministry Of Finance, Planning And Economic Development ...... 62

5.0 Department Of Ethics And Integrity ...... 87

Works And Transport Sector ...... 90

6.0 Ministry Of Works And Transport ...... 90

Justice Law And Order Sector ...... 120

7.0 Ministry Of Justice And Constitutional Affairs ...... 120

8.0 Jlos, Law And Order Sector Secretariat ...... 140

9.0 Ministry Of Internal Affairs ...... 177

10.0 Uganda Police Force ...... 188

11.0 Uganda Prisons Services ...... 214

12.0 Judiciary Department ...... 223

13.0 Department Of Public Prosecutions ...... 240

14.0 National Citizenship And Immigration Control ...... 242

Public Sector Management ...... 268

15.0 Ministry Of Local Government ...... 268

16.0 Office Of The Prime Minister...... 332

17.0 Ministry Of Public Service ...... 349

Security Sector ...... 355

18.0 Ministry Of Defence...... 355

19.0 Office Of The President ...... 366

20.0 State House ...... 369 iii

Agriculture Sector ...... 371

21.0 Ministry Of Agriculture, Animal Industry And Fisheries ...... 371

22.0 Nationalagricultural Advisory Services (Naads) ...... 406

23.0 National Agricultural Research Organisation (Naro) ...... 422

Energy Sector ...... 441

24.0 Ministry Of Energy And Mineral Development ...... 441

Health Sector...... 472

25.0 Ministry Of Health ...... 472

26.0 Uganda Blood Transfusion Services ...... 509

27.0 Butabika Mental Referral Hospital ...... 516

28.0 Uganda Cancer Institute ...... 518

29.0 Uganda Heart Institute ...... 524

30.0 Mulago Referral Hospital Complex ...... 526

31.0 Arua Regional Referral Hospital ...... 544

32.0 Mbale Regional Referral Hospital ...... 546

33.0 Kabale Regional Referral Hospital ...... 549

34.0 Lira Regional Referral Hospital ...... 551

35.0 Gulu Regional Referral Hospital ...... 552

36.0 Mbarara Regional Referral Hospital ...... 554

37.0 Fort Portal Regional Referral Hospital ...... 555

38.0 Jinja Regional Referral Hospital ...... 557

39.0 Soroti Regional Referral Hospital ...... 560

40.0 Masaka Regional Referral Hospital ...... 561

41.0 Mubende Regional Referral Hospital ...... 563

42.0 Moroto Regional Referral Hospital ...... 564

43.0 Hoima Regional Referral Hospital ...... 566

44.0 China-Uganda Friendship Hospital Naguru ...... 568

Education Sector ...... 573

45.0 Ministry Of Education And Sports ...... 573

46.0 Makerere University ...... 591

47.0 Makerere University Business School ...... 612

48.0 Uganda Management Institute ...... 615

49.0 Mbarara University Of Science And Technology ...... 618

50.0 Kyambogo University ...... 622

51.0 Busitema University ...... 650

52.0 Gulu University ...... 653

Gender And Labour Sector ...... 658

53.0 Ministry Of Gender, Labour And Social Development ...... 658

Water And Environment Sector ...... 672

54.0 Ministry Of Water And Enviroment ...... 672

55.0 Ministry Of Trade, Industry And Cooperatives ...... 705

56.0 Ministry Of Tourism Wildlife And Antiquities ...... 716

Land Sector ...... 721

57.0 Ministry Of Lands, Housing And Urban Development ...... 721

Information And Communication Sector ...... 745

58.0 Ministry Of Information And Communications Technology ...... 745

Public Administration Sector ...... 749

59.0 Ministry Of Foreign Affairs ...... 749

60.0 East African Community Affairs ...... 752

Social Sector ...... 753

61.0 Ministry Of Gender, Labour And Social Development ...... 753

Missions ...... 762

62.0 Uganda Embassy, Abu Dhabi ...... 762

63.0 Uganda High Commission, Abuja ...... 762

64.0 Uganda, Embassy Addis Ababa ...... 768

65.0 Ankara Embassy ...... 771

66.0 Uganda, Embassy Beijing ...... 772

67.0 Uganda Embassy, Berlin ...... 773

68.0 Uganda Embassy Brussels ...... 776

69.0 Uganda High Commission, Bujumbura...... 782

70.0 Uganda Embassy, Cairo ...... 784

71.0 Uganda High Commission, Canberra ...... 802

72.0 Uganda Embassy, Copenhagen ...... 806

73.0 Uganda High Commission, Dar Es Salaam ...... 808

74.0 Uganda High Commission, Washington ...... 810

75.0 The Permanent Mission Of The Republic Of Uganda To The United Nations And Other International Organizations In Geneva ...... 812

76.0 Uganda Permanent Mission To The United Nations, New York ...... 819

77.0 Uganda Consulate, Guangzhou, China ...... 820

78.0 Uganda Embassy Juba ...... 821

79.0 Uganda Embassy, Khartoum ...... 823

80.0 Uganda High Commission, Kigali ...... 824

81.0 Uganda Embassy, Kinshasa ...... 828

82.0 Uganda High Commission, London ...... 836

83.0 Uganda Embassy, Moscow ...... 838

84.0 Uganda High Commission, Nairobi ...... 840

85.0 Uganda High Commission, New Delhi ...... 842

86.0 Uganda High Commission, Ottawa ...... 843

87.0 Uganda Embassy, Paris ...... 845

88.0 Uganda High Commission, Pretoria ...... 850

89.0 Uganda Embassy, Rome ...... 853

90.0 Uganda Embassy Tokyo ...... 859

91.0 Uganda Embassy, Tripoli ...... 861

92.0 Uganda High Commission, Tehran ...... 862

93.0 Uganda Embassy In Riyadh ...... 864

94.0 Uganda Embassy In Mogadishu ...... 865

vii

LIST OF ACRONYMS AND ABREVIATIONS

AIDS Acquired Immune Deficiency Syndrome

ART Anti-Retroviral Therapy

BFP Budget Framework Paper BOU Bank of Uganda BTC Belgium Technical Cooperation

CAES College of Agriculture and Environment Sciences

CAO Chief Administrative Officer

CDC Center for Disease Control

CEDAT College of Engineering Design Art and Technology

CEES College of Education and External Studies

CEMAS Computerized Education Management and Accounting System CHOGM Commonwealth Heads of Governments Meeting CHS College of Health Sciences

CHUSS College of Humanities and Social Sciences

CIID Criminal Intelligence and Investigations Department

COBAMS College of Business and Management Sciences

COCIS College of Computing and Information Sciences

COMESA Common Market for Eastern & Southern Africa CONAS College of Natural Sciences

COVAB College of Veterinary Medicine and BioSecurity

CUFH China Uganda Friendship Hospital

DHO District Health Officer

DSCs District Service Commissions EAC East African Community ED Executive Director

viii

EFT Electronic Funds Transfer

ESAAG East and Southern African Association of Accountant Generals ESC Education Service Commission FAR Fixed Asset Register

FIEFOC Farm Income Enhancement and Forest Conservation

FOC Faculty of Commerce FY Financial Year GoU Government of Uganda

HC Health Centre

HIV Human Immunodeficiency Virus

HSC Health Service Commission HSC Health Service Commission

IAS International Accounting Standards

ICGR International Conference for Great Lakes Region ICT Information and Communications Technology ICT Information Communication Technology IFMS Integrated Financial Management System

ITFC Institute of Tropical Forest Conservation

JCRC Joint Clinical Research Center

JLOS Justice, Law and Order Sector JMS Joint Medical stores

KCCA Kampala Capital City Authority KYU Kyambogo University L.T.C ward Lymphoma Treatment Centre

LANs Local Area Networks LC Letter of Credit LCs Letters Of Credit

M&E/MIS Monitoring & Evaluation/Management Information System ix

MDAs Ministries, Departments and Agencies MEACA Ministry of East African Affairs MFPED Ministry of Finance Planning And Economic Development

MICT Ministry of Information and Communications Technology MKCCAP Mulago Kampala Capital City Authority Project

MNRH Mulago National Referral Hospital

MoES Ministry of Education and Sports MoFA Ministry of Foreign Affairs MoFPED Ministry of Finance, Planning and Economic Development MoGLSD Ministry of Gender, Labour & Social Development MoH Ministry of Health

MoLHUD Ministry of Lands, Housing and Urban Development

MoTWA Ministry of Tourism Wildlife and Antiquities MOU Memorandum of Understanding MTIC Ministry of Trade, Industry and Cooperatives

MUBS Makerere University Business School MUECCA (A) Makerere University Establishment of Constituent College Order Amended

MUK Makerere University MUST Mbarara University of Science and Technology

MWE Ministry of Water and Environment

NBI National Backbone Infrastructure NCBS National College of Business Studies

NDA National Drug Authority

NHIS National Health Insurance Scheme

NMS National Medical Stores NTC National Teachers College NTR Non Tax Revenue NWSC National Water and Sewerage Corporation

OAG Office of the Auditor General

OPD Out Patients Departments

PAC Public Accounts Committee PAYE Pay As You Earn PFAA Public Finance and Accountability Act PFAR Public Finance and Accountability Regulation PIC Planning Investment Committee PPDA Public Procurement & Disposal of Assets PPS Private Patients Services

PS Permanent Secretary

PS/ST Permanent Secretary/Secretary to the treasury

PSC Public Service Commission PSU Pharmaceutical Society of Uganda

PWD People With Disability S.T.C ward Solid Tumor Centre ward

TAI Treasury Accounting Instruction UAC Uganda AIDS Commission

UBTS Uganda Blood Transfusion Services

UCI Uganda Cancer Institute

UGX Uganda Shillings UHI Uganda Heart Institute ULC Uganda Land Commission ULC Uganda Land Commission UNHRO Uganda National Health Research Organisation UNICEF United Nations International Children's Emergency Fund

URA Uganda Revenue Authority

USD United States Dollar

WAN Wide Area Network WRS Warehouse Receipt System

xii

1.0 INTRODUCTION

I am required by Article 163(3) of the Constitution of the Republic of Uganda and Section 13 and 19 of the National Audit Act 2008 to audit and report on the Public Accounts of Uganda and of all public offices including the Courts, the Central and Local Government Administrations, Universities and Public Institutions of like nature and any Public Corporations or other bodies established by an Act of Parliament.

Under Article 163 (4) of the Constitution, I am also required to submit to Parliament by 31st March annually a Report of the Accounts audited by me for the year immediately preceding. I am therefore, issuing this report in accordance with the above provisions.

This is Volume two of my Annual Report to Parliament and it covers financial audits carried out on Central Government Ministries, Departments, Agencies, Universities and Uganda Missions abroad.

In this introduction, I give an overview of the financial audit work carried out, status of completion of the audits, summary of the audit opinions issued on the financial statements of the entities audited and a summary of the key audit findings arising from the audit.

Section 2 presents my findings and audit opinion on Government of Uganda Consolidated Financial Statements including major observations.

Section 3 contains the detailed audit findings on each entity audited.

STATUS OF COMPLETION OF AUDITS

Financial Audits

A total of 107 entities comprising of Ministries, Agencies, Commissions, Departments, Uganda Missions abroad, Public Universities, Referral Hospitals and the Consolidated Government of Uganda Financial Statements, were audited during the year ended 30th June 2014. Accordingly, separate audit reports were issued for each of them. 1

Out of the 107 entities audited, 75 entities had unqualified opinions, and 32 had qualified opinions. Included in 107 are 17 entities that are contained in Volume 6. The basis used to arrive at the audit opinion is described in the separate reports issued on individual entities. The table below summarises the types of audit opinions issued on each of the entities audited:- No Entity Category Sector Opinion

1 Uganda Consolidated Fund MDA Accountability Qualified 2 Treasury Operations MDA Accountability Qualified 3 Directorate Of Ethics and MDA Accountability Qualified Integrity 4 Ministry of Education And MDA Education Qualified Sports 5 Makerere University MDA Education Qualified 6 Kyambogo University MDA Education Qualified 7 Gulu University MDA Education Qualified 8 Ministry Of Energy And MDA Energy Qualified Mineral Development 9 Ministry of Health MDA Health Qualified 10 Arua Regional Referral MDA Health Qualified Hospital 11 Lira Regional Referral MDA Health Qualified Hospital 12 Gulu Regional Referral MDA Health Qualified Hospital 13 China-Uganda Friendship MDA Health Qualified Hospital Naguru 14 Uganda Cancer Institute MDA Health Qualified 15 Ministry of Information And MDA ICT Qualified Communications Technology

No Entity Category Sector Opinion

16 Ministry of Justice and MDA JLOS Qualified Constitutional Affairs 17 Ministry of Internal Affairs MDA JLOS Qualified 18 Uganda Prisons Services MDA JLOS Qualified 19 Directorate of Public MDA JLOS Qualified Prosecutions 20 National Citizenship and MDA JLOS Qualified Immigration Control 21 Office of the Prime Minister MDA PSM Qualified 22 Ministry of Public Service MDA PSM Qualified 23 Ministry of Lands, Housing MDA Lands & Housing Qualified And Urban Development 24 Ministry of Local MDA PSM Qualified Government 25 Ministry of Foreign Affairs MDA Public Sec Admin Qualified 26 Uganda Embassy, MDA Public Sec Admin Qualified Khartoum 27 Ministry of Trade, Industry MDA Trade & Tourism Qualified And Cooperatives 28 Ministry of Water And MDA Water & Environment Qualified Environment 29 Electoral Commission Commission Administration Qualified 30 Public Service Commission Commission PSM Qualified 31 Local Government Finance Commission PSM Qualified Commission 32 Uganda National Roads SA / SE Works Qualified Authority 33 Ministry Of Finance, MDA Accountability Unqualified Planning and Economic Development 3

No Entity Category Sector Opinion

34 Ministry Of Agriculture, MDA Agriculture Unqualified Animal Industry And Fisheries 35 National Agricultural MDA Agriculture Unqualified Research Organisation (NARO) 36 Makerere University MDA Education Unqualified Business School 37 Uganda Management MDA Education Unqualified Institute 38 Mbarara University of MDA Education Unqualified Science And Technology 39 Busitema University MDA Education Unqualified 40 Ministry of Gender Labour MDA Social Development Unqualified and Social Development 41 Butabika Mental Referral MDA Health Unqualified Hospital 42 Mulago Referral Hospital MDA Health Unqualified Complex 43 Mbale Regional Referral MDA Health Unqualified Hospital 44 Kabale Regional Referral MDA Health Unqualified Hospital 45 Mbarara Regional Referral MDA Health Unqualified Hospital 46 Fort Portal Regional MDA Health Unqualified Referral Hospital 47 Jinja Regional Referral MDA Health Unqualified Hospital

No Entity Category Sector Opinion

48 Soroti Regional Referral MDA Health Unqualified Hospital 49 Masaka Regional Referral MDA Health Unqualified Hospital 50 Mubende Regional Referral MDA Health Unqualified Hospital 51 Moroto Regional Referral MDA Health Unqualified Hospital 52 Hoima Regional Referral MDA Health Unqualified Hospital 53 Uganda Blood Transfusion MDA Health Unqualified Services 54 Uganda Heart Institute MDA Health Unqualified 55 Uganda Police Force MDA JLOS Unqualified 56 Judiciary Department MDA JLOS Unqualified 57 East African Community MDA Public Sec Admin Unqualified Affairs 58 Uganda Embassy, ABU MDA Public Sec Admin Unqualified DHABI 59 Uganda High Commission, MDA Public Sec Admin Unqualified Abuja 60 Uganda, Embassy Addis MDA Public Sec Admin Unqualified Ababa 61 Ankara Embassy MDA Public Sec Admin Unqualified 62 Ganda, Embassy Beijing MDA Public Sec Admin Unqualified 63 Uganda Embassy, Berlin MDA Public Sec Admin Unqualified 64 Uganda Embassy Brussels MDA Public Sec Admin Unqualified 65 Uganda High Commission, MDA Public Sec Admin Unqualified Bujumbura

No Entity Category Sector Opinion

66 Uganda Embassy, Cairo MDA Public Sec Admin Unqualified 67 Uganda High Commission, MDA Public Sec Admin Unqualified Canberra 68 Uganda Embassy, MDA Public Sec Admin Unqualified Copenhagen 69 Uganda High Commission, MDA Public Sec Admin Unqualified Washington 70 Uganda Embassy Tehran MDA Public Sec Admin Unqualified 71 Uganda Embassy Dar-salam MDA Public Sec Admin Unqualified 72 The Permanent Mission Of MDA Public Sec Admin Unqualified The Republic Of Uganda To UN 73 Nations and Other MDA Public Sec Admin Unqualified International Organizations In 74 Uganda Consulate, MDA Public Sec Admin Unqualified Guangzhou, China 75 Uganda Embassy Juba MDA Public Sec Admin Unqualified 76 Uganda High Commission, MDA Public Sec Admin Unqualified Kigali 77 Uganda Embassy, Kinshasa MDA Public Sec Admin Unqualified 78 Uganda High Commission, MDA Public Sec Admin Unqualified London 79 Uganda Embassy, Moscow MDA Public Sec Admin Unqualified 80 Uganda High Commission, MDA Public Sec Admin Unqualified Nairobi 81 Uganda High Commission, MDA Public Sec Admin Unqualified New Delhi 82 Uganda High Commission, MDA Public Sec Admin Unqualified Ottawa

No Entity Category Sector Opinion

83 Uganda Embassy, Paris MDA Public Sec Admin Unqualified 84 Uganda High Commission, MDA Public Sec Admin Unqualified Pretoria 85 Uganda Embassy, Rome MDA Public Sec Admin Unqualified 86 Uganda Embassy Tokyo MDA Public Sec Admin Unqualified 87 Uganda Embassy, Tripoli MDA Public Sec Admin Unqualified 88 Ministry of Defence MDA Security Unqualified 89 Office of the President MDA Security Unqualified 90 State House MDA Security Unqualified 91 Ministry of Tourism Wildlife MDA Trade & Tourism Unqualified And Antiquities 92 Ministry of Works And MDA Works & Transport Unqualified Transport 93 Equal Opportunities SA/SE Accountability Unqualified Commission 94 Education Service Commission Education Unqualified Commission 95 Uganda Aids Commission Commission Health Unqualified 96 Health Service Commission Commission Health Unqualified 97 Uganda Human Rights Commission JLOS Unqualified Commission 98 Judicial Service Commission Commission JLOS Unqualified 99 Uganda Law Reform Commission JLOS Unqualified Commission 100 Uganda Registration SA /SE JLOS Unqualified Services Bureau 101 Uganda Land Commission Commission Lands & Housing Unqualified 102 Parliamentary Commission Commission Legislature Unqualified

No Entity Category Sector Opinion

103 Parliamentary Pension SA / SE Legislature Unqualified Scheme 104 Kampala Capital City SA / SE PSM Unqualified Authority 105 The Uganda Road Fund SA /SE Works Unqualified 106 Embassy of Uganda in MDA Public Sec Admin Unqualified Mogadishu 107 Uganda Embassy In Riyadh MDA Public Sec Admin Unqualified

The table and graphs below provide a breakdown of the types of opinions issued:- Types of Opinions issued since 2010 by numbers and percentage:-

Types of Year ending 30th June Opinions

2010 % 2011 % 2012 % 2013 % 2014 % Unqualified 40 40 61 59 47 45 60 58 75 70 Qualified 58 57 41 40 51 47 39 38 32 30 Disclaimer 3 3 1 1 7 7 4 4 0 0 Adverse 0 0 0 0 0 1 0 0 0 0

Figure showing the types of opinions issued for 2013/2014:-

Figure showing Trends of Types of Opinions Issued since 30th June 2010:-

Figure showing comparision of types of opinions issued since 30th June 2010:-

Special Audits

During the period under review, I undertook two special Audits of; Kyambogo University and Uganda Government Payroll, which were completed and the highlights of these reports have been included in this Volume.

1.2 KEY FINDINGS CENTRAL GOVERNMENT ONE

CENTRAL GOVERNMENT ISSUES

Government has undertaken various PFM reforms which have led to improvements in public financial management notably the management of the payroll and the Treasury Single Account among others. However, Government continues to have challenges which require attention. The key findings below indicate selected areas of concern which require Government intervention.

1.2.1 Contingency Provisions for court awards

During the year, contingent liabilities in respect of cases before court under the Ministry of Justice and Constitutional Affairs rose from UGX.2.2 trillion in the previous year to UGX.4.3 trillion during the year under review implying an increase of 95%. Besides, the Accounting Officers explained that the provision excludes those that intend to sue Government. This situation is untenable and likely to create an additional burden on the public resources. There is need for Government to examine the issue further with a view to establishing the likely causes in order to facilitate Government to arrive at a sustainable solution.

1.2.2 Court Awards and Compensations Unsettled Court awards and compensations have continued to accumulate over the years rising from 54bn in 2012 to 164bn in July 2013 and 442Bn in 2014 and yet Government does not seem to have adequate budget provision for these obligations. For the period 2012 to 2014 only UGX.13bn was budgeted for. The consequence of this state of affairs has led to interest payments for non-settlement amounting to

UGX.60bn. The Accounting Officer attributes this to inadequate provision of funds to clear the arrears. I advised management to continue liaising with Parliament and Ministry of Finance, Planning and Economic Development to ensure that these accumulated arrears of compensation are cleared.

1.2.3. Irregular Payments – Loss, Likely loss and Nugatory Expenditure A review of payment certificates revealed irregularities related to payments for works not executed, payments for defective works and payments that could have been avoided with better procurement planning and contract management. The likely losses will crystallize into losses unless management takes measures to have them recovered. The irregular payments noted for the projects were likely losses (UGX.45,315,967,993, USD.1,848,205 and Euro.68,558), losses ( UGX.300,279,163 and Euro.66,698) and nugatory expenditure (UGX.2,464,934,174 and USD.3,663,761).

1.2.4. Under absorption of Government Funds Projects failed to absorb funds totaling to UGX.217,393,823,773 and Government entities returned unspent balances of UGX.9,412,704,745 to the Consolidated Fund indicating partial service delivery. Most affected service delivery areas were road constructions, agro processing, household income improvement, health and education services. The low absorption capacity was attributed to inefficiencies in the management of procurements, delayed accountability, incompetence by contractors, inadequate planning among others. In the circumstances, service delivery is undermined.

I advised management to review the causes and develop strategies to ensure timely implementation of projects and programs.

1.2.5 Pension liabilities

Outstanding Pension liabilities under the Ministry of Public Service increased by UGX.81,245,706,749 (326.2%) during the year under review. This is an indication that the ministry‟s rate of accumulation of pension arrears is significantly high, which might not be sustained by Government.

Further, it was noted that a total of 19,135 pensioners who had attained the maximum pensionable period of 15 years were still on the ministry‟s payroll and earning monthly pension yet they had not furnished the ministry with life certificates. As such, a total of UGX.12,727,686,849 paid in respect of their monthly pensions during the year under review could not be supported in the absence of life certificates.

1.2.6 Comprehensive payroll verification On the request of Accounting Officers, a total of 15,021 records were deleted from the payroll for various reasons which included: death, retirement and/or abscondment. Government incurred a total of UGX.39,183,937,122 on these employees in respect of the wage bill from July, 2013 up to the respective periods the individual employees were deleted from the payroll in the FY 2013/14 alone.

It was also noted that, as a result of the mandatory validation and biometric data capture exercise for government employees, a total of 8,589 employees have not been accounted for by 130 entities/votes, although they remain on the government payroll. These employees are being paid a monthly total of UGX.4,563,318,131 which translates into UGX.54,759,817,572 per annum. There is need for Government to make a follow up on the matter to ensure the affected employees are verified or deleted.

1.2.7 Congested Prisons Uganda Prisons Services has experienced an increase in the prisoners‟ population since the merger and takeover of 174 Local Administrations 12

Prisons in 2006, from a daily average of 19,179 prisoners in 2006 to 41,516 by June 2014. According to management, the available capacity is only 16,040 prisoners. As a consequence, some of the prisons had capacities of over 500%. With the current prisoner numbers, there has been a strain on the facilities, staff and food. The Accounting Officer attributes this to failure to match the growing prisoner population to the facilities. These facilities have not been increased to match the numbers. There is need for government to look into the matter with a view to providing additional resources to support the Uganda Prisons.

1.2.8 Inadequate Facilitation of Government Analytical Labs The Directorate of Government Analytical Laboratories is mandated to provide scientific advisory and analytical services to government departments responsible for administration of Justice and the general public. However, the directorate is inadequately facilitated as evidenced with inadequate infrastructure, limited funding and under staffing. As such, the department was only able to respond to 52.5% of court sermons and resolved 35% of the cases received. Not only does the government stand to lose cases as a result but also the inadequacies delay timely justice. There is need to facilitate the government facility with adequate resources.

1.2.9 Settlement of Electricity Bills Government entered into an agreement with UMEME in which the latter was required to offset Government bills that remained outstanding for a period of more than 60 days. Total Government debt as at 31st January 2013 amounts to UGX.62.7bn. I noted that there are no regular reconciliations on the escrow account taking into account moneys that MDAs have paid. The Accounting Officers attributed this to lack of information regarding payments from the Escrow Account to enable them undertake the reconciliations. There is need for Government to undertake reconciliation to avoid any eventual over payments.

1.2.10 Land Matters As reported in my previous year audit findings, land matters have again remained an issue featuring in my current year audit report. A number of instances have been noted where Government entities have continued to lose out on land to encroachers.

This is notably seen with NARO, Ministry of Agriculture and Fisheries Uganda Police and Universities. The challenge these entities are facing result from inadequate resources to have their land surveyed, titled and secured. Further, I noted that the Uganda Land Commission which is mandated to hold Government Land in trust does not have an updated register of all the land it holds in trust for Government. There is a need to address land issues in Government Institutions.

1.2.11 Redundant Teachers SACCO Fund During the year, the Government offered to contribute UGX.25bn to the teachers‟ SACCO fund over a five year period with the objective of enabling teachers access affordable credit financing. UGX.4,317,423,564 was released to Micro Finance Support Centre during the year under review. The funds have not been accessed by the intended beneficiary teachers because the fund management had become a source of conflict between UNATU and the Ministry. Unless the disagreement surrounding the fund management is resolved, the intended objective will not be achieved.

1.2.12 Non-Retention of NTR by UCIC According to section 3 of the Uganda Citizenship and Immigration Control Act, NTR collected by the entity should be retained and treated as appropriation in Aid. To the contrary, UGX.68,778,391,313 collected in respect was automatically remitted to the Consolidated Fund contrary to the UCIC Act. It is noted that due to inadequate funding the entity has not been able to operate as envisaged. Due to these inadequacies, the processing of passports takes on average 30 days as opposed to an 14

ideal time of 8 days. Further, it was observed that one officer handles 80 passport applications per day instead of 50 applications in an ideal situation.

Management attributed this to inadequate staffing, lack of interconnectivity passport issuing system and infrastructure. There is need for Government to consider additional resources for the entity.

1.2.13 Delayed Contracts It was observed that a number of Government contracts/projects for a total of UGX.39,642,990,522, Us$.1,930,524 and Euros.512,288 that had been ongoing or were started during the financial year lagged behind schedule or demonstrated signs of failure. It was also noted that a number of these contracts/projects had exceeded their completion dates while others had been abandoned. These delays ranged between three months and three years. The delays in contract execution were attributed to insufficient funding and inadequate supervision of contract implementation by the responsible entities. This may have resulted into losses to Government and failure to achieve the intended objectives of the procurements/contracts.

There is need for closer supervision of these projects to ensure timely service delivery.

1.2.14 Payables/domestic arrears The total value of payables/domestic arrears increased by UGX.138.166 billion (approximately 12%) from UGX.1.127 trillion in the financial year 2012/2013 to UGX.1.265 trillion in the year 2013/2014. The trend shows a steady increase in the payables figures, which indicates that the current approaches to address the problem are not effectively working. The debt figure may become unmanageable as it appears to be spiralling out of control.

There is need to revisit the current approaches of arrears management with a view to reducing the growth in domestic arrears.

1.2.15 Mining/Exploration Licences Section 105 of the Mining act 203 provides for payment of any royalty assessed to be settled within 30 days. It was observed that 174 companies whose licences had expired defaulted on arrears of royalties amounting to UGX.850,240,000. Further, 17 licence holders had not provided the required records and audited financial statements to the Ministry of Energy. There was no follow up by management on defaulters for purposes of compliance. There is need for the Ministry to closely follow up licence holders to avoid losses to government.

1.2.16 Audit of Kyambogo University A special audit was undertaken for the University and it was noted among other findings that a total of 10,486 students were admitted by Kyambogo University without making applications. This was found to be irregular. The University needs to strengthen controls relating to administration of students to the University.

1.3.0 GENERAL FINDINGS

1.3.1 DELAYED CONTRACTS

It was observed that a number of Government contracts/projects for a total of UGX. 39,642,990,522, Us$.1,930,524 and Euros 512,288 that had been ongoing or were started during the financial year lagged behind schedule or demonstrated signs of failure. It was noted that a number of these contracts/projects had exceeded their completion dates while others had been abandoned. The delays were between 3 months and 3 years. The delays in contract execution were attributed to insufficient funding and inadequate supervision of contract

implementation by the responsible entities. This may have resulted into losses to Government and failure to achieve the intended objectives of the procurements/contracts. Table 1 below refers.

Table 1 Delayed contracts Entity Contract (UGX) USD $s Euros Time delayed Justice Law Construction of the Law 3,977,880,902 0 0 over 15 and Order Development Centre months Sector Auditorium projects Construction works of 436,445,468 0 0 Over regional laboratory in 6years Gulu Construction Regional 535,191,985 0 0 Over 3 Laboratory in Mbarara years Procurement of Liquid 0 786,595 0 Over Chromatography Tandem 9months Mass Spectrometer (LCTMS)

Construction of Makindye 910,209,442 0 0 Over 2 Family Court and ½ years Uganda Construction of Nateete 2,358,000,000 0 0 Over Police divisional headquarters 3years Force Construction of Buliisa 450,000,000 0 0 Over 1 Police station year Construction of 4 4,324,964,501 0 0 Over storeyed classroom block 3years ,Kabalye Police Training School

Uganda Construction of a twin 618,909,737 0 0 6months Prisons ward at Ruimi Prisons Services Farm

construction of a cotton 149,982,339 0 0 Delayed store at Mubuku prison 2months farm even after the extension date of January 2015

Entity Contract (UGX) USD $s Euros Time delayed Community construct Agro Processing 227,594,063 0 0 Delayed Agriculture facilities in the three sub- by over Infrastruct counties of; Nagongera (2 3years ure rice hullers), Merikit (2 and the Improveme rice hullers) and project nt Prog.I Nabuyoga (1 maize mill closed in and 2 rice hullers) all in December Tororo District 2014.

CAIIP Community access road 428,915,399 0 0 The works Prog.II under Batch B Agwata were Atidi-Kachung road in abandone Agwata Sub County in d after Dokolo District 12months delay Ministry Of Renovation of Ministry's 144,214,834 0 0 Over Agriculture, premises in Entebbe 1year Animal Industry And Fisheries supply of tractors 0 0 34,336 ATAAS delivery of project 0 0 Over 1 (Grant) EU, vehicles 1,109,593 and ½ WB and years Danida Uganda Construction of new 21,324,058,054 0 Over 1 Manageme classroom block and 0 and ½ nt Institute office block. years

Rehabilitation of hostel 2,543,323,798 0 0 Over 1 and ½ years Ministry of Consultancy Services for 1,213,300,000 0 0 Over Water And Feasibility Studies, 3months Environme Detailed Designs and nt Construction Supervision of Water Supply Systems Under Lot3: for Namulonge-Kiwenda- Busiika and Kiwoko, Butalanga and Rehabilitation of Katuugo and Improvement of Kakooge and Migeera Water Supply Systems

Entity Contract (UGX) USD $s Euros Time delayed Consultancy Services for 0 0 512,288 Over Feasibility Studies and 3months Detailed Designs Under Lot2: for Busaana Kayunga,Kabembe-Kalagi- Naggalama and Kakunyu- Kiyindi and Construction Supervision for Rehabilitation of Buvuma TOTAL 39,642,990,522 1,930,524 512,288

1.3.2 Mischarged Expenditure Expenditures from various entities totalling to UGX. 51,728,901,102 were charged on items which do not reflect the nature of the expenditure. Such a practice impacts on the credibility of the financial statements, since the figures reported therein do not reflect true amounts expended on the affected expenditure items. I however noted an improvement over the last three years where mischarged expenditures have been reducing from UGX.256,976,089,113 in the FY 2011/2012 to UGX.97,896,448,777 in 2012/2013 and UGX. 51,728,901,102 in 2013/2014. Over the three years, the mischarges have reduced by 86%. There is still need for accounting officers to enforce strict adherence to the provisions regarding reallocation of funds. Table 2 and 3 below refers.

Table 2 Mischarged Expenditure 2011/2012 2012/2013 2013/2014 Mischarged Expenditures 256,976,089,113 97,896,448,777 51,728,901,102 Percentages Reduction 0 % 62 % 86 % From 2011/12

Mischarged Expenditure for the last three Financial years 300,000,000,000

250,000,000,000

200,000,000,000

150,000,000,000 Amount (shs) 100,000,000,000

50,000,000,000

- 2011/2012 2012/2013 2013/2014

Table 3 Mischarged Expenditures Entity Amount Mischarged – UGX Accountability Sector Ministry Of Finance, Planning and Economic Development 2,208,201,055 Department Of Ethics and Integrity 275,372,736 Works and Transport Sector Ministry of Works And Transport 48,153,093 Uganda National Roads Authority 3,501,412,812 Ministry of Justice and Constitutional Affairs 615,047,805 Ministry of Internal Affairs 421,104,192 Uganda Police Force 132,090,477 Uganda Prisons Services 637,537,384 JLOS SECTOR Judiciary Department 423,909,500 Judicial Service Commission 86,527,567 Uganda Law Reform Commission 77,415,412 DPP 454,431,122 Uganda Registration Services Bureau - Operations 239,197,478 National Citizenship And Immigration Control 5,906,786,217 Public Sector Management Ministry of Local Government 2,497,433,465 Office of the Prime Minister 5,564,282,629

Entity Amount Mischarged – UGX Ministry of Public Service 1,721,329,414 Public Service Commission 512,592,443 Local Government Finance Commission 241,919,355 Ministry of Gender, Labour and Social Development 66,982,475 Expanding Social Protection (2013) 11,976,000 Agriculture Sector National Agricultural Research Organisation (NARO) 206,704,980 Energy Sector Ministry of Energy And Mineral Development 3,038,506,327 Land Sector Ministry of Lands, Housing And Urban Development 543,519,621 Ministry of Trade, Industry And Cooperatives 592,962,823 Ministry of Tourism Wildlife And Antiquities 115,112,418 WATER SECTOR Ministry of Water and Environment 1,545,058,115 NEMA 942,053,402 MISSIONS Uganda Embassy Brussels 150,514,718 HEALTH SECTOR Ministry of Health 2,644,401,389 Uganda Blood Transfusion Services 27,880,704 Uganda Cancer Institute 656,275,672 Butabika Hospital 74,863,427 Mulago Hospital Complex 1,756,710,500 Education Sector Ministry of Education and Sports 11,841,989,175 Makerere University 969,917,237 Kyambogo University 978,727,963 Total 51,728,901,102

1.3.3 UNACCOUNTED FOR FUNDS A total of UGX.85,785,457,670, US$.530,861, EURO137,327 inform of advances to staff, payments to service providers, cash withdrawals, imprest, remittances to Districts, borrowings for carrying out activities in various entities remained unaccounted for by the time of audit contrary to the Public Finance and Accounting Regulations. Table 4 below refers.Delays in accounting for funds may encourage 21 falsification of documents. I advised management to adhere to the provisions in the Public Finance and Accountability Regulations.

Table 4 Unaccounted for Funds Entity UGX US$ EURO Ministry Of Finance, Planning 1,619,879,097 and Economic Development Strengthening Evidence Based 74,903,000 Decision Making II-MOFPED Transport Sector Development 23,632,667 Project SDR 120,000,000 Judicial Service Commission 95,350,296 Uganda Law Reform 63,000,000 Commission Ministry of Local Government 137,542,000 District lively hood support 183,219,506 Programme Northern Uganda Social Action 58,826,655,271 Fund Uganda Good Governance 109,402,538 (UGOGO) Programme Public Service Commission 21,760,585 Kampala Capital City Authority 74,547,100 Parliamentary Commission 27,401,000 NAADS secretariat 8,460,120,471 Ministry Of Energy And Mineral 122,889,501 Development Energy for Rural 455,000 Transformation II Project – Private Sector Foundation Uganda (PSFU) Component Ministry of Gender, Labour and 25,000,000 Social Development Ministry of Health 121,360,800 East African Public Health 31,377,000 Laboratories Networking Project (EAPHLNP) Uganda Health Systems 27,007,487 Strengthening Project (UHSSP) Uganda Global Fund to Fight 518,614 Aids, Tuberculosis and Malaria Project - MALARIA COMPONENT ROUND 7 Arua Regional Referral Hospital 359,130,640 Mbale Regional Referral 23,526,000 Hospital Lira Regional Referral Hospital 106,394,580 Gulu Regional Referral Hospital 219,224,118

Entity UGX US$ EURO Mbarara Regional Referral 10,164,220 Hospital Soroti Regional Referral 23,466,678 Hospital Hoima Regional Referral 12,520,753 Hospital China-Uganda Friendship 1,500,129,768 Hospital Naguru Ministry of Education And 873,759,757 Sports Ministry of Public service 302,018,445 Ministry of Education and 10,008,317,486 Sports Universal Post Primary Education and Training (UPPET) Project Makerere University 308,857,850 Economic Policy Research 62,020,000 Centre (EPRC) Norwegian Programme for 12,247 Capacity Development in Higher Education and Research for Development (NORHED) Funded Projects Adaptation of small scale biogas 137,327 digesters for use in rural households in sub- Saharan Africa Project Mbarara University of Science 17,407,000 And Technology Kyambogo University 588,454,804 Gulu University 728,758,584 Ministry of Water And 202,890,333 Environment Lake Victoria Environmental 30,758,200 Management Project Phase II (LVEMP II) Water and Sanitation 19,417,500 Development Facility - East (WSDF-E) Ministry of Trade, Industry And 215,110,206 Cooperatives Uganda High Commission, 13,748,041 Bujumbura Uganda Embassy, Cairo 52,625,621 Uganda Embassy, Kinshasa 61,253,767 85,785,457,670 530,861 137,327

1.3.4 Un-Accounted for Taxes During the year under review, seven MDAs did not account for taxes amounting to UGX.2,524,676,637 contrary to the requirements of the Income Tax Act 1997 (as amended). These un-accounted for taxes included UGX.1,965,825,158 relating to un-remitted tax deductions from payments made to suppliers and UGX.558,851,479 un-deducted tax from eligible payments. Table 5 and 6 refer. The failure to deduct and remit taxes directly impacts on collections by the Uganda Revenue Authority. I advised Accounting Officers to comply with the tax law. Table 5 Un-remitted taxes Entity Amount Health Service Commission 17,945,553 Mulago Referral Hospital Complex 1,867,853,563 Makerere University 43,131,990 Busitema University 36,894,052 Total 1,965,825,158

Table 6 Un-Deducted taxes Entity Amount Local Government Finance 72,542,866 Commission Lira Regional Referral Hospital 29,094,551 Makerere University 457,214,062 Total 558,851,479 Grand Total 2,524,676,637

1.3.5 Outstanding Commitments It was noted that a number of government entities have continued to enter into commitments beyond the available funds. This is contrary to the commitment control system which requires the accounting officer to commit Government within the provided funds. The total amount of domestic arrears has continued to increase over the years to UGX.1.274 trillion, as illustrated in the table 7 and graph below:-

Table 7: domestic arrears for the last three years Details Amounts (UGX)

2011/2012 2012/2013 2013/14 Domestic 763,186,161,377 1,127,241,181,530 1,274,539,269,438 arrears

Graph 1: showing the increase in domestic arrears

I have advised that Treasury needs to come up with a strategy on how it intends to address the problem of the increasing domestic arrears.

Table Domestic arrears details Ministry/Department Amount Office of the President 11,182,915,772 State House 529,849,725 Office of the Prime Minister 28,666,752 Ministry of Defence 81,928,017,200 Ministry of Public Service 1,187,512,043 Ministry of Foreign Affairs 32,395,526,489 Ministry of Justice and Constitutional Affairs 442,173,233,469 Ministry of Finance, Planning and Economic 74,273,703,301 Ministry of Internal Affairs 1,347,504,072

Ministry/Department Amount Ministry of Agriculture, Animal Industry and 13,412,965 Fisheries Ministry of Local Government 26,491,610 Ministry of Lands, and Environment 9,786,954,419 Ministry of Education and Sports 1,608,017,001 Ministry of Health 10,815,916,944 Ministry of Trade, Industry and Cooperatives 4,373,220,288 Ministry of Works, Housing and Communication 137,149,140 Ministry of Energy and Minerals 11,369,575,619 Ministry of Gender, Labour and Social Development 4,773,792,282 Ministry of Water & Environment 3,002,380,703 Ministry of Communication & ICT 1,251,589,543 Ministry of East African Affairs 3,104,636,201 Judiciary 7,884,204,435 Electoral Commission 8,139,451,273 Inspectorate of Government 66,789,517 Law Reform Commission 486,899,069 Uganda Human Rights Commission 10,398,832 Uganda Aids Commission 231,162,155 Uganda Industrial Research Institution 10,495,093 Directorate of Ethics & Integrity 269,736,264 Uganda National Roads Authority 376,619,216,212 Uganda Heart Institute 405,417,044 Uganda Tourism Board 252,420 Uganda Road Fund 113,721,073 UGANDA REGISTRATION SERVICES BURREAU 14,894,636,149 NATIONAL CITIZENSHIP & IMM CTRL 39,750,123,409 KCCA 9,806,247,065 EQUAL OPPORTUNITIES COMMISSION 2,948,596 Accountant Generals office 49,732,652 Education Service Commission 18,489,607 Directorate of Public Prosecutions 898,836,756 Health Service Commission 75,489,633 National Agricultural Research Organisation 743,038,883 Uganda Police 46,702,959,156 Uganda Prisons 46,597,708,858 Public Service Commission 73,540,596 Local Government Finance Commission 17,525,048 National Environment Management Institute 446,656

Ministry/Department Amount Uganda Blood Transfusion Service 35,195,800 NAADS 450,484,312 UNBS 514,191 Uganda Lands Commission 7,163,296,958 ESO 3,072,785,870 Mulago Hospital Complex 8,901,380,582 Butabika Hospital 2,689,244 Arua Hospital 42,038,550 Gulu Hospital 1,478,683,569 Hoima Hospital 24,198,822 Jinja Hospital 821,384,282 Kabale Hospital 13,329,254 Masaka Hospital 88,937,450 Mbale Hospital 266,412,236 Soroti Hospital 164,195,808 Lira Hospital 3,144,629 Mbarara Regional Hospital 979,056,740 Naguru Referral hospital 15,440,299 Uganda Mission , New York 372,744,046 Uganda High Commission in the United Kingdom 22,343,922 Uganda High Commission in India 136,735,355 Uganda High Commission in Egypt 156,458,196 Uganda High Commission in Kenya 41,344,046 Uganda High Commission in Nigeria 1,963,510 Uganda High Commission in South Africa 34,456,347 Uganda Embassy in the United States 35,737,665 Uganda Embassy in Ethiopia 437,876,327 Uganda Embassy in China 398,313,217 Uganda Embassy in Rwanda 1,035,112 Uganda Embassy in Belgium 37,729,811 Uganda Embassy in Italy 7,367,626 Uganda Embassy in DRC 131,225,090 Uganda Embassy in France 1,441,784 Uganda Embassy in Russia 8,599,658 Uganda Embassy in Australia 11,197,141 GRAND TOTAL 1,274,539,269,438

1.3.6 Budget performance Budget shortfall

I noted that sixteen MDAs budgeted to receive UGX.1,945,157,932,133, out of which UGX.750,336,029,473 was received translating into a 39% out-turn for the financial year. This left a funding gap of UGX.1,194,926,969,786 (61%). Details are in the table 8 below: Failure to release the budgeted funds to the MDAs affected implementation of the planned activities which affects fulfilment of their mandates in the long run. I advised Accounting Officers to take up this matter with the relevant authorities to ensure all the budgeted funds are released so as to accomplish planned activities.

Table 8 Budget shortfall Entity Budget Received (UGX) Shortfall (UGX) %age of (UGX) shortfall Department of 5,404,295,598 5,219,309,500 184,986,098 3.4 Ethics and integrity Ministry of Internal 10,916,219,910 10,734,020,200 182,199,710 1.6 Affairs National Agriculture 41,867,739,709 35,027,197,017 6,840,542,692 16.3 Research Organization Statements of 9,737,388,600 3,136,178,649 6,601,209,951 67.7 Quality Infrastructure and Standards Programme (QUISP) Vegetable Oil 35,215,199,674 22,737,879,128 12,477,320,546 35.4 Development Project (VODP), Phase II Inspectorate Of 34,209,254,859 34,128,691,768 80,563,091 0.23 Government- IGG Ministry of Lands, 17,277,762,153 15,256,559,842 2,021,202,311 11.7 Housing and Urban Development Ministry of Energy 1,305,566,104,201 189,656,857,225 1,115,909,246,976 85 And Mineral Development President‟s Office 73,619,648,221 73,561,071,202 58,577,019 0.079 Ministry of Tourism, 13,612,395,000 12,309,697,806 1,302,697,194 9.5 Wildlife and Antiquities Uganda Export 5,916,691,307 1,459,163,507 4,457,527,800 73.3 Promotions Board China-Uganda 9,548,296,000 7,187,921,785 2,360,374,215 24.7 28

Entity Budget Received (UGX) Shortfall (UGX) %age of (UGX) shortfall Friendship Hospital, Naguru Ministry of Justice 60,643,372,903 57,225,590,343 3,417,782,560 5.6 and Constitutional Affairs Ministry of Work 119,061,202,859 91,677,910,743 27,383,292,116 23 and Transport Ministry Of 197,562,361,139 186,558,729,377 11,003,631,762 6 Education And Sports Ministry Of 5,000,000,000 4,459,251,381 540,748,619 10.4 Education And Sports- Muni University Totals. 1,945,157,932,133 750,336,029,473 1,194,821,902,660

1.3.7 Under absorption of Government Funds Government entities returned unspent balances of UGX.9,412,704,745 to the consolidated Fund and Projects failed to absorb funds totalling to UGX.217,393,823,773 indicating partial service delivery. Most affected service delivery areas were road constructions, agro processing, household income improvement, and health and education services. The low absorption was attributed to inefficiencies in the management of procurements, delayed accountability, incompetence by contractors, poor planning among others. In the circumstances, service delivery is undermined.

I advised management to review the causes and develop strategies to ensure these Projects/Programmes are implemented timely. The table 9 below refers.

Table 9: Under absorption of Government Funds Entity Amount (UGX) Ministry Of Finance, Planning and Economic Development 4,279,076,501 SIDA support to Competitiveness Investment climate project 46,176,200 Rural Financial Services Project 25,871,247 FINMAP 9,245,168,202 DFID/DANIDA Support IGG 397,123,848 Directorate Of Ethics and Integrity 16,141,555 29

Entity Amount (UGX) Justice Law and Order Sector 31,311,690,369 Ministry of Justice and Constitutional Affairs 626,612,306 Judicial Service Commission 11,686,514 Ministry of Local Government 206,455,619 CAIIP Prog. II 49,863,220,272 CAIIP Prog. III 42,765,790,733 Market and Agriculture Trade Improvement project 20,900,695,536 District lively hood support programme 661,108,818 Office of the Prime Minister 1,598,871,722 Ministry of Public Service 1,019,906,494 PUBLI SECTOR REFORM PROGRAMME 262,479,735 Public Service Commission 22,834,248 Parliamentary Commission 283,243,030 State House 166,980,339 Ministry Of Agriculture, Animal Industry And Fisheries 83,070,501 NAADS secretariat 374,488,912 Vegetable Oil Development Project 2 6,240,584,580 East African Agricultural Productivity program (EAAPP) 9,426,703,017 ATAAS (Grant) EU, WB and Danida 26,287,401,192 Electricity Sector Development Project (ESDP) 758,679,600 Ministry of Health 112,014,076 Global Fund HSS 1,106,657,333 Global Fund Malaria Round 4 119,652,304 Uganda Blood Transfusion Services 503,763 Health Service Commission 45,460,306 Butabika Mental Referral Hospital 323,725,696 Uganda Cancer Institute 13,001,287 Uganda Heart Institute 1,621,796 Mbale Regional Referral Hospital 2,737,071 Fort Portal Regional Referral Hospital 124,615,088 Education Service Commission 47,607,960 Lake Victoria Environmental Management-Project Phase II 3,533,295,929 District Commercial Officers Services Support Project 3,804,561,600 TRACE 101,446,800 Ministry of Lands, Housing And Urban Development 50,123,067 Leveraging Municipal Infrastructure Improvement 315,127,600 Investments( LMIII) Project Transforming Settlements of the Urban Poor in Uganda 433,195,201 (TSUPU) Uganda Land Commission 995,000 Ministry of Information And Communications Technology 60,509,764 Ministry of Foreign Affairs 65,593,054 East African Community Affairs 11,425,154

Entity Amount (UGX) National council of Children 124,449,360 Ministry of Tourism, Wildlife and Antiquities 20,929,857 Uganda High Commission, Washington 10,248,222 Uganda Consulate, Guangzhou, China 66,487,046 Uganda Embassy, Tripoli 15,778,349 TOTAL 217,393,823,773

1.3.8 WASTEFUL/NUGATORY EXPENDITURE

Good practice requires Accounting officers to reduce cases of apparent waste, extravagant administration or failure to achieve value for money due to management‟s laxity in the conduct of operations, however I noted wasteful expenditure to the tune of UGX 7,478,849,806.and USD 3,663,761. These arose as a result of interest on late payments, parking fees for grounded vehicles, delayed handover of sites, court settlements among others. Table 10 below refers. This affected the implementation of activities in the MDA‟s and on the overall service delivery.

I advised management to adhere to the contract arrangements with a view of avoiding such expenses.

Table 10 Wasteful/Nugatory Expenditure Entity Amount (UGX) USD Ministry of Works And Transport 726,882,420 Uganda National Roads Authority 2,464,934,174 3,663,761 Ministry of Health 2,143,173,980 Uganda Aids Commission 12,766,000 Uganda Cancer Institute 448,408,158 China-Uganda Friendship Hospital, Naguru 8,054,900 Ministry of Water And Environment 1,120,908,971 Uganda Embassy, ABU DHABI 2,048,822 Ministry of Local Government 404,788,822 Mbale Regional Referral Hospital 146,883,559 TOTAL 7,478,849,806 3,663,761

1.3.9 ADVANCES TO STAFF PERSONAL ACCOUNTS:

A number of accounting officers advanced a total sum of UGX.12,014,225,502 to their staff, through their individual personal accounts. Table 11 below refers. I noted a reduction of 26% as compared to the previous year amount of UGX.16,284,144,090. Although there has been an improvement/decline in absolute terms, I advised the accounting officers to avoid the practice as it is contrary to regulations, highly risky and exposes government funds to loss since accounting officers have no control over individual‟s bank accounts. Management was advised to adhere to the regulations.

Table 11 Advances to Staff Personal Accounts Entity Amount Directorate Of Public Prosecutions 68,730,000 Office of the Prime Minister 3,607,259,014 Local Government Finance Commission 241,922,320 Parliamentary Commission 3,429,105,022 Ministry of Health 15,644,667 Ministry of Local Government 4,623,642,146 Uganda Health Systems Strengthening Project (UHSSP) 10,515,333 Mbarara University of Science And Technology 17,407,000 TOTAL 12,014,225,502

1.3.10 UN-AUTHORISED/EXCESS EXPENDITURE

An analysis of budget estimates and the actual expenditure of ministries, departments and agencies revealed unauthorized/excess expenditure to the tune of UGX. 24,946,031,342 mostly by foreign missions, universities and the energy fund contrary to Section 17 and section 9 (5) of the PFAA, 2003. Table 12 below refers. There was no authority in form of approved re-allocation or Virement warrants obtained to incur over expenditure. Management was advised to adhere to the relevant sections of the law.

Table 12 Un-Authorised/Excess Expenditure Entity Amount Energy Fund 10,432,195,553 Makerere University 4,037,303,551 Makerere University Business School 1,936,187,681

Entity Amount Mbarara University of Science And Technology 713,736,286 Kyambogo University 5,135,749,119 National Youth Council 51,750,000 Uganda, Embassy Addis Ababa 142,915,235 Uganda Embassy Brussels 390,437,807 Uganda High Commission, Canberra 41,160,736 Uganda Embassy Juba 1,282,122,285 Uganda High Commission, London 461,037,361 Uganda Embassy New York 321,435,728 TOTAL 24,946,031,342

1.3.11IRREGULARITIES IN PROCUREMENTS

I noted that a number of entities conducted procurements worth UGX.7,404,413,312 and US$.34,336 that violated the provisions of the procurement law and its regulations. Table 13 below refers. The violations were mainly in form of delays, un-planned procurements, use of non-prequalified suppliers, un-accomplished procurements, un-authorised direct procurements, non-delivery of four tractors and insufficient procurement records.

I advised Accounting Officer to always adhere to the provisions of the procurement laws and regulations.

Table 13 Procurement Irregularity Entity Procurement Amount Irregularity Ministry of Works And  Delays in the procurement evaluation process Nil Transport Ministry of Local  Pre-qualified framework contracts Nil Government Ministry of Gender,  Non-Disposal of Obsolete Assets Nil Labour and Social Development Office of the President  Procurements not in the entity`s procurement 64,037,000 plan Ministry Of Trade,  Un implemented activities in the procurement 1,866,080,000 Industry And plan Cooperatives  Un supported procurement 45,900,000 Ministry Of  Un planned procurement 59,659,384 Agriculture, Animal  Incomplete renovation works 144,214,834 Industry And  Delayed Supply of 4 tractors US$.34,336 Fisheries Butabika Mental  Un authorised additional funding above 83,169,990 Referral Hospital contractual figures 33

Entity Procurement Amount Irregularity Uganda Cancer  Irregular Amendment of contract 2,197,609,659 Institute Mulago Referral  Direct Procurements ( Non Use of Prequalified 504,358,000 Hospital Complex Service providers)  Irregular Procurements  Procurement of Parking Management Services 128,956,377 (unplanned and No records) Ministry of Education  Delayed Procurement Process Nil And Sports Makerere University  Contract not cleared by the Solicitor General 152,707,104 Business School Gulu University  Direct Procurements 34,444,000 Ministry of Water And  Delays in the procurement evaluation process Nil Environment Ministry of Trade,  Un implemented activities in the procurement 1,866,080,000 Industry And plan Cooperatives  Un supported procurement 45,900,000 Ministry of Foreign  Failure to submit progress Reports on Waivers Nil Affairs and Deviations Given by PPDA Uganda High  Non Compliance with the PPDA Act regulations Nil Commission, Abuja Uganda Embassy,  Absence of a Procurement Plan Nil Cairo  Absence of Evaluation Committee  Botched Renovation of the Official Residence Nil  Procurement of Office Laptops ( lack of technical Nil specification and evaluation report)  Redesigning of the Chancery Reception ( lack of evaluation committee report) Nil Uganda High  Lack of procurement files 62,567,529 Commission, Canberra Uganda Embassy,  Lack of a procurement plan Nil Copenhagen Uganda Embassy,  Irregular Procurements 116,645,135 Darla salaam Uganda Embassy,  Lack of a list of prequalified suppliers 32,084,300 Tehran

1.3.12 Outstanding Receivables UGX. 136,620,085,336

During the review, it was noted that receivables worth UGX. 136,620,085,336 had not been received by the various Ministries, Departments and Agencies and were therefore still outstanding as at 30th June 2014 as summarized in table 14 below: There is a risk that the activities for which these receivables were appropriated were not carried out and this could have affected the implementation of planned activities. I explained to the Accounting Officers that there seems to be laxity in following up of the receivables and ensuring their recovery. I advised management to expedite the recovery process and have all the receivables recovered. Table 14 Outstanding Receivables

ENTITY AMOUNT Butabika Hospital 41,705,859 CAIIP Prog.II 672,139,959 CAIIP Prog.III 599,242,578 F/ Portal Hospital 7,775,000 Inspectorate of Government 62,170,000 Judiciary Department 203,791,671 Masaka Hospital 67,000,000 Mbale Hospital 2,625,000 Ministry of Energy And Mineral Development 3,968,646,755 Ministry of Foreign Affairs 3,343,140,729 Ministry of Health 696,865,456 Ministry of Information and Communications Technology 3,452,442 Ministry of Internal Affairs 9,600,417 Ministry of Public Service 18,600,628 Ministry of Water & Environment 7,464,502,592 Ministry of Works & Transport 6,283,365,438 Moroto Regional Hospital 1,000,000 Mubende Regional Hospital 215,408,183 Naguru Hospital 62,039,827 National Citizenship and Immigration 8,628,412,000 National Planning Authority 3,648,966 Public Procurement and Disposal of Assets Authority 181,348,048 State House 590,200,000 Uganda Blood Transfusion Service 124,356,004 Uganda Embassy in Belgium 82,653,340 Uganda Embassy in Berlin 233,199,891 Uganda Embassy in Burundi 3,966,456 Uganda Embassy in Canberra 13,366,531 Uganda Embassy in China 5,776,157 Uganda Embassy in Denmark 76,729,177 Uganda Embassy in Guangzhou 43,187,644 Uganda Embassy in Japan 274,164 Uganda Embassy in Moscow 46,827,823 Uganda Embassy in Rwanda 116,929,199 Uganda Embassy in Saudi Arabia 3,676,677 Uganda Embassy in The Us 327,593,565 Uganda Embassy in UAE Dubai 420,133,538 Uganda Heart Institute 4,169,069 Uganda High Commission In India 14,203,221 Uganda High Commission In Kenya 44,644,765 Uganda High Commission In South Africa 7,585,007 Uganda Investment Authority 7,415,815,646 Uganda Mission At The Un, New York 646,745,100 Uganda Police 3,759,853,523 Uganda Prisons 2,437,182,189 Kampala Capital City Authority 72,258,023,654 Local Government Finance Commission 52,575,575 Uganda Aids Commission 2,178,305 35

ENTITY AMOUNT Uganda Human Rights Commission 162,418,338 Uganda Land Commission 150,000,000 Uganda National Roads Authority 4,945,982,553 Uganda Registration Services Bureau - Liquidation Acc‟t 8,177,490,354 Uganda Registration Services Bureau - Operations 2,998,910 Uganda Road Fund 1,860,291,838 Local Government Finance Commission 52,575,575 TOTAL 136,620,085,336

1.3.13 Staff shortages

Section 15(9) of the Standing Orders, 2010 mandates the Ministry of Public Service to determine the structure, terms and conditions of service in Government entities. Good strategic planning also requires an entity to carry out human resource planning to ensure that an adequate number of qualified staff is in place to carry out the operational activities of an entity so as to enable her achieve strategic objectives. A review of the staffing structures of various MDAs however revealed a number of vacant posts in a number of entities. The Table 15 below refers: Inadequate staffing affects the timely implementation of the Ministry's activities. It may adversely impact on the entities in the achievement of its strategic objectives.

I advised Accounting Officers to make concerted efforts in liaising with all stakeholders to ensure that vacant posts are filled to enable the Ministry adequately deliver on its mandate. Table 15 Staff shortages Entity Approved Filled Vacant % shortfall Min of Ethics and 59 46 14 24 Integrity Min of ICT 93 76 17 18 Min of Internal Affairs 35 Min of Lands 839 343 486 59 Min of Gender Labour 609 276 333 55 and Social Development Mulago Hospital 1477 1290 187 12 DPP - - 31 - Judiciary - - 297 - Min of Tourism 43 Uganda Management 219 182 37 17 Institute. Makerere University. 2780 1484 1296 46 36

Entity Approved Filled Vacant % shortfall MAAIF:-Department of 21 Crop Protection Min of Justice and 10 Constitutional Affairs. Min of Works  East African Civil 76 54 22 29 Aviation Academy. 70 46 25 32  Kireka Division of Material Testing Arua Regional Referral 354 301 53 15 Hospital Moroto Regional Referral 386 153 233 60 Hospital Soroti Regional Referral 344 259 85 25 Hospital Fort Portal Regional 421 310 111 26 Referral Hospital Hoima Regional Referral 401 209 192 45 Hospital Jinja Regional Referral 417 364 47 11 Hospital Kabale Regional Referral 350 227 123 35 Hospital Mbale Regional Referral 2 Hospital (PDU) Mbarara Regional 620 437 183 30 Referral Hospital Butabika Hospital 433 346 87 20 Uganda Blood 116 98 16 14 Transfusion Service Kyambogo University 1550 830 720 46 Judicial Service 10 Commission. Uganda Road Fund 31 22 9 29 Parliamentary 485 403 80 16.5 Commission. Uganda Aids Commission 84 56 28 33 Health Service 63 51 12 19 Commission

2.0 REPORT AND OPINION OF THE AUDITOR GENERAL ON THE GOVERNMENT OF UGANDA CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2014

THE RT. HON. SPEAKER OF PARLIAMENT

I am mandated by Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended), to audit and report on the public accounts of Uganda and of all public offices, including the courts, the central and local government administrations, universities and public institutions of like nature, and any public corporation or other bodies or organizations established by an Act of Parliament.

I have audited the accompanying consolidated financial statements of Government of Uganda for the year ended 30th June 2014. These financial statements comprise of the Statement of Financial Position as at 30th June 2014, 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 8 of the Public Finance and Accountability Act (PFAA), 2003, the Accounting Officers are accountable to Parliament for the funds and resources of the Votes/Entities under their control. The Accountant General is also responsible for the preparation and fair presentation of Consolidated Financial Statements in accordance with the requirements of the Financial Reporting Guide, 2008, 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) and Sections 13 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 of Supreme Audit Institutions (ISSAIs). Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing audit procedures to obtain audit 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 risks of material misstatement of the financial statements whether due to 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 qualified 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” Basis for Qualified Opinion  Un supported budget movement - UGX.264,546,614,000 In the Ministerial Policy Statement, management of Treasury Operations requested for UGX.224billion to cater for external debt principal payments. However, this figure was revised upwards to UGX.470,546,614,000 in the approved budget estimates. I was not

39 provided with the required documentation to provide justification and basis for the upward revision of UGX.264,546,614,000.

 Mischarge of Expenditure – UGX.49,972,190,602 A review of the expenditures revealed that various entities charged wrong expenditure codes to the tune of UGX.49,972,190,602. This practice undermines the budgeting process and the intentions of the appropriating authority as funds are not fully utilised for the intended purposes. The practice also leads to financial misreporting.

 Unaccounted for Advances A total of UGX.84,323,243,109, advanced to staff to carry out activities in various entities remained un-accounted for by the time of audit, contrary to the Public Finance and Accounting Regulations. Delays in accounting for funds may encourage misappropriation.

Qualified Opinion In my opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, the consolidated financial statements of Government of Uganda for the year ended 30th June 2014 are prepared, in all material respects, in accordance with the Financial Reporting Guide, 2008 and section 31(6) of the Public Finance and Accountability Act, 2003, of the Laws of Uganda.

Emphasis of Matter Without qualifying my opinion further, attention is drawn to the following additional matters which are also included in part B of this report and my annual report to Parliament.

 Contingent Liabilities - UGX.4,384,339,987,635 As disclosed in in the statement of contingent liabilities, Government contingent liabilities are reported at UGX.4,384,339,987,635 up from UGX.2,275,442,213,858 the previous year. The trend appears unsustainable in the event that a significant percentage crystallizes into liabilities.

 Classified Expenditure

As disclosed in note 7, a total of UGX.426,439,648,203 relates to classified expenditure. In compliance with Regulation 12 of the Public Finance and Accountability (Classified Expenditure) Regulations 2003, this expenditure was audited separately and a separate audit report issued.

John F.S. Muwanga AUDITOR GENERAL

KAMPALA

27th March, 2015

PART "B"

DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA CONSOLIDATED FUND ACCOUNT FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2014

This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof.

2.1 INTRODUCTION

Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended) requires me to audit and report on the public accounts of Uganda and all public offices including the courts, the central and 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 Government of Uganda Consolidated Financial Statements to enable me report to Parliament.

2.2 BACKGROUND INFORMATION

Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 8 of the Public Finance and Accountability Act, 2003, the Accounting Officers are accountable to Parliament for the funds and resources of the Votes/Entities under their control. The Accountant General is appointed as the Accounting Officer and Receiver of Revenue for the Consolidated Fund. He is responsible for establishing and maintaining a system of Internal Controls designed to provide reasonable assurance that the transactions recorded are within the authority and properly record the use of all public funds by the Government of the Republic of Uganda. Accordingly, the Accountant General is responsible for the preparation and fair presentation of Consolidated Financial Statements in accordance with the requirements of the Public Finance and Accountability Act, 2003, and the modified cash basis of accounting.

The accompanying Government of Uganda consolidated financial statements provide a record of the Governments‟ financial performance for the year 2013/14

and the financial position of the consolidated fund as at 30th June 2014, in accordance with the Public Finance and Accountability Act, 2003.

2.3 AUDIT SCOPE

The audit was carried out in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and accordingly included a review of the accounting records and agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish whether;

a. The consolidated financial statements have been prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures of government for the year and of the consolidated financial position of the Consolidated Fund as at the end of the year.

b. All funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided.

c. Management was in compliance with the Government of Uganda financial regulations.

d. To evaluate and obtain a sufficient understanding of the internal control structure of the department, assess control risk and identify reportable conditions, including material internal control weaknesses.

e. All necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the consolidated financial statements presented.

2.4 AUDIT PROCEDURES PERFORMED

The following audit procedures were undertaken:-

a. Revenue

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

b. Expenditure

The entity payment vouchers 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 audited.

d. Entity 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 evaluating the overall financial statement presentation.

2.5 FINDINGS

2.5.1 Budget Performance During the year under review, government realised domestic revenue amounting to UGX.8,558,164,372,769 out of the projected amount of UGX.8,760,700,000,000, representing a 98% performance. A total of UGX.468,539,890,855 was also realised from grants.

Further noted was that although a total of UGX.11,909,327,199,837 was appropriated for utilization by MDAs, government released a sum of UGX.9,951,405,146,965 to the MDAs to cater for their planned activities. This represents 84% of the approved budget as summarized in the table below. Table showing Budget Performance by Classification

Summary Approved Actual Released (Ugx) Performance Estimates (Ugx) Percen tage Ministries 4,082,118,540,426 2,829,005,115,553 69% Agencies 5,600,222,403,447 4,965,527,511,837 89% Referral Hospitals 128,334,797,129 110,399,214,895 86% Embassies abroad 89,508,388,833 88,628,155,914 99% District Councils 1,885,871,113,747 1,837,334,896,715 97%

Urban/municipal 123,271,956,255 120,510,252,051 98% Councils Totals 9,951,405,146,965 84% 11,909,327,199,837

2.6 SUPPLEMENTARY EXPENDITURE - UGX.56,133,336,950

Article 156(2) of the Constitution of the Republic Government 1995 (as amended) prescribes that if in respect of any financial year it is found that the amount appropriated for any purpose under the Appropriation Act is insufficient or that a need has arisen for expenditure for a purpose for which no amount has been appropriated by the Act, a supplementary estimate showing the sums required or spent shall be laid down before Parliament and in the case of excess expenditure, within four months after the money is spent.

Section 12 (1) of the Budget Act 2001 stipulates that total supplementary expenditure that requires additional resources over and above what is appropriated by Parliament shall not exceed 3% of the total approved budget for that financial year without prior approval of Parliament.

I noted during a detailed analysis of the supplementary expenditure that an excess of UGX.56,133,336,950, which is 0.4% above the approved 3% as per the Budget Act, was spent without prior approval by parliament. However, the provision in the Budget Act appears not to be in harmony with the provision in the Constitution with regard to approval of a supplementary expenditure. I have accordingly advised government to seek a legal interpretation of the above provisions so as to have them harmonised.

2.7 Payment of Gross Tax for Ineligible Items

In a letter dated 25th June, 2013, referenced TPD 167/238/19 from the Minister of State for Finance to the Commissioner General, Uganda Revenue Authority (URA), Government committed itself to support the Agriculture Sector, in particular the textile sub sector, by paying Value Added Tax (VAT) and Import duty on raw materials imported for manufacturing textiles, and VAT on the supply of manufactured textiles. This was subject to the condition that the raw materials 45

would exclusively be used to manufacture textiles. The interventions would make locally manufactured textiles cheaper and, thus promoting the growing of crops that provide fiber.

I noted that the Ministry of Finance, Planning, and Economic Development paid a sum of UGX.653,893,113 in taxes, on behalf of private companies in relation to the goods which were not raw materials used in the manufacturing of textiles. These included items such as already woven and printed Polyester bed sheet materials. This practice undermines the intentions of Government, due to the fact that imported textile materials eventually become cheaper and suffocate the demand for locally manufactured textiles. This negatively impacts on the demand for agriculture produce.

I advised Management to always keenly observe the conditions set by Government before approving such tax payments, and to consider initiating recovery measures of the amounts irregularly expended.

2.8 Contingent liabilities - UGX.4,384,339,987,635

A contingent liability is a possible cash outflow whose occurrence is dependent on an event which is not in the control of an organization. Including figures as contingent liabilities implies that management‟s assessment shows a possibility of a cash outflow in a near future.

During the year under review, the balance for contingent liabilities increased from UGX.2,275,442,213,858 as at 30th June, 2013, to UGX.4,384,339,987,635 as at 30th June, 2014, representing a 93% increment. This is an equivalent of 54% of the tax revenue collected by URA during the year under review. It was further noted that out of the reported amount, 98% was arising from legal proceedings against Government under the Ministry of Justice and Constitutional Affairs. In the event that all these liabilities crystalize, Government will be required to use close to 50% of its annual budget to meet these liabilities, which is likely to adversely affect implementation of other government programmes.

In response, management explained that mitigation against accumulation of such contingent liabilities requires Government wide responsibility and effort. I concurred with this explanation and accordingly advised Government to look into this matter so as to arrive at a sustainable solution.

2.9 Payroll Management

The Government of Uganda has been implementing a centralized payroll payment process which has been characterized by numerous weaknesses. Under this process, most Accounting Officers perceived their role within the payroll payment process as implementing the assignment on behalf of Ministry of Public Service (MoPS), but without full responsibility and accountability on what happens in the process. In addition, MoPS did not have adequate resources to manage a centralized payroll process. This resulted into delayed payments, inclusion of ghost employees on the payroll, delays in staff accessing the Government payroll and repeated removal and reinstatement of staff on the payroll. Details of these findings are contained in my report on the comprehensive audit of the Government payroll issued in February 2015.

During the year under review, a reform to decentralize the payroll payment process was initiated. Under the new decentralized salary payment process, individual votes are required to upload, process and pay salaries from their votes‟ respective salary accounts in BoU. The Accounting Officers are therefore fully responsible for their payrolls including the timing of monthly salary payments. The new arrangement has had significant improvements in the management of the payroll payment process, especially in the areas of timely payment, exclusion of ghosts, prompt inclusion on the payroll of newly appointed staff and fully assigning payroll responsibility to Accounting Officers.

While the principle of decentralised management has had its merits, the lack of adequate controls supported by a strengthened payroll monitoring system, poses a risk to the management of the decentralised model. The decentralised payroll process without clear controls at the different Votes may in the long run just transfer the same payroll challenges to the Votes. Besides, at the time of the

audit, each Accounting Officer processed payroll data using the IPPS from which a payroll was generated monthly. This was then transferred to the IFMS, IPPS interface in „plain text format‟ and then manually uploaded into the IFMS for payment. However, the „plain text format‟ used in this process is not a secure format and is open to uncontrolled modification, which, if changes were made, could go undetected due to the absence of any form of change log.

In response, management acknowledged that upload of files is open to modifications but the Accounting Officers are required to run an invoice register and reconcile it with the payroll before approval of invoices. I advised Treasury and MoPS management, to implement a software mechanism, which enables the movement of encrypted payment related data from the IPPS to the IFMS.

2.10 Unauthorized Receipt of grants by MDAs

Section 57 of the Public Finance and Accountability Act, 2003, states that, “Any grants made to the Government shall be received by the Minister (Minister for Finance) on behalf of Government and shall be paid into and form part of the Consolidated Fund or a special fund established for a specific purpose”. Ideally, the Ministries, Departments and Agencies (MDA‟s) are expected to identify project needs for donor support and come up with proposals through the Sector Working Groups. The development committee at MOFPED then conducts a feasibility study of the project proposal and thereafter identifies Development Partners for funding. Once the source of funding is identified, an MoU between the Minister for Finance and the Development partner is signed. The grants are then entered in the Ministry of Finance‟s Debt Management and Financial analysis System (DMFAS) for onward monitoring and reporting.

Comparison of notifications from Bank of Uganda sent to MOFPED relating to funds received from Development Partners and total grants reported in the DMFAS revealed that grants worth USD.15,322,575 received in Bank of Uganda by various government Ministries, Departments and Agencies were not in the DMFAS. In addition, grants worth USD.98,052,299 received from various Development

Partners for various research initiatives by Makerere University over a three year period were not found on the system.

Management explained that they did not have any documentation pertaining to the said funds and that only grants with agreements or MoUs that involved MoFPED were included in the system. This may imply that funds were solicited on behalf of GoU without involvement of the Minister responsible for Finance, and are therefore unknown to the Ministry. This creates risks of: double financing by both GoU and donors; abuse of funds by recipients; uninformed allocation of GoU funds and the risk of using GoU funded activities to account for donor funds and/or vice versa. It also implies that the total of Grants reported in the consolidated financial statements is understated and misleading. I advised government to put in place a mechanism to track all grants received on its behalf and accordingly monitor their performance.

2.11 The Treasury Single Account With effect from 1st October 2013, Government of Uganda (GoU) introduced a Treasury Single Account (TSA) in which all government cash balances are aggregated into a set of linked accounts. The primary objective of the TSA was to ensure management of GoU aggregate cash balances in order to: Minimize transaction costs during budget execution; Ensure efficient control and monitoring of funds released to various Government agencies; and better coordination between fiscal and monetary policy implementation initiatives of government.

The operations of the TSA over the period under review were analysed, and it was noted that despite having challenges in the transition period, the implementation has been largely successful. It was noted that: the arrangement has led to the closure of a number of redundant accounts, which could have been avenues for misuse of funds; it has greatly improved treasury cash management; as at 30th June, 2014, cash is only available to entities which can absorb it; and it is envisaged that in subsequent years, borrowing from the domestic market will be greatly reduced.

However, I noted that the TSA is heavily dependent on strong budget controls on the IFMS given that invoice funding is from a basket. At the moment, paid transactions can still be presented as voided on the system and this creates extra budgetary funds. In addition, budget journals can still be used to bypass all other controls available in the budget revision process. I advised the Accountant General to further strengthen the system and manual controls regarding budget revision so as to harness all the benefits of a Treasury Single Account.

2.12 Payables Audit reviewed the status of payables (domestic arrears) as at 30th June, 2014 and noted that despite adopting the commitment control system, the total value of payables increased by UGX.138.166 billion (approximately 12%) from UGX.1.127 trillion in the financial year 2012/2013 to UGX.1.265 trillion in the year 2013/2014. This is further illustrated in the table and graph below;

Table 1: domestic arrears for the last four years Financial 2010/2011 2011/2012 2012/2013 2013/2014 Year Amounts 473,654,629,150 763,186,161,377 1,127,241,181,530 1,265,406,925,415 (Ugx)

Trend of Payables Position 1,400,000,000

1,200,000,000

1,000,000,000

800,000,000

Ugx Ugx ('000) - 600,000,000 Amounts - Ugx ('000)

400,000,000 Amount 200,000,000

0 2010/2011 2011/2012 2012/2013 2013/2014 Financial Year

The current status shows a steady increase in the payables figures, which indicates that the current approaches to address the problem are not effectively working. The debt figure may become unmanageable as it appears to be spiraling out of control.

In response, various Accounting Officers explained that the Commitment Control System cannot control certain types of expenditures such as the contractual obligations of rent, wage and contributions to International Organizations. This is further complicated by the budget credibility issues whereby certain Accounting Officers may not budget adequately for some of the known expenditures. Sometimes even when they budget adequately, in cases where budgets are cut to finance supplementary budgets, arrears can be created.

I have advised that Treasury needs to evaluate the current approach that is being utilized to control domestic arrears and consider making improvements in order to reverse the spiraling trend.

2.13 Mischarge of Expenditure - UGX.49,972,190,602 Expenditure amounting UGX.49,972,190,602 by several votes in respect of various activities was charged wrongly to item codes meant for other activities resulting in misstatement of amounts expended on the affected item codes. These were done without authority from Permanent Secretary/Secretary to Treasury (PS/ST). Mischarges impact on the credibility of the financial statements, since the figures reported therein do not reflect true amounts expended on the affected expenditure items.

There is need for Accounting Officers to streamline budgeting processes and to enforce strict adherence to the provisions regarding reallocation of funds.

Table showing entities that had mischarged expenditure Entity AMOUNT MISCHARGED - UGX Accountability Sector Ministry Of Finance, Planning and Economic Development 2,208,201,055

Department Of Ethics and Integrity 275,372,736 Works and Transport Sector Ministry of Works And Transport 48,153,093 Uganda National Roads Authority 3,501,412,812 Ministry of Justice and Constitutional Affairs 615,047,805 Ministry of Internal Affairs 421,104,192 Uganda Police Force 132,090,477 Uganda Prisons Services 637,537,384 JLOS SECTOR Judiciary Department 423,909,500 Judicial Service Commission 86,527,567 Uganda Law Reform Commission 77,415,412 DPP 454,431,122 Uganda Registration Services Bureau - Operations 239,197,478 National Citizenship And Immigration Control 5,906,786,217 Public Sector Management Ministry of Local Government 2,497,433,465 Office of the Prime Minister 5,564,282,629 Ministry of Public Service 1,721,329,414 Public Service Commission 512,592,443 Local Government Finance Commission 241,919,355 Ministry of Gender, Labour and Social Development 66,982,475 Expanding Social Protection (2013) 11,976,000 Agriculture Sector National Agricultural Research Organisation (NARO) 206,704,980 Energy Sector Ministry of Energy And Mineral Development 3,038,506,327 Land Sector Ministry of Lands, Housing And Urban Development 543,519,621 Ministry of Trade, Industry And Cooperatives 592,962,823 Ministry of Tourism Wildlife And Antiquities 115,112,418 WATER SECTOR Ministry of Water and Environment 1,545,058,115 NEMA 942,053,402 MISSIONS Uganda Embassy Brussels 150,514,718 HEALTH SECTOR Ministry of Health 2,644,401,389

Uganda Blood Transfusion Services 27,880,704 Uganda Cancer Institute 656,275,672 Butabika Hospital 74,863,427 Education Sector Ministry of Education and Sports 11,841,989,175 Makerere University 969,917,237 Kyambogo University 978,727,963 Total 49,972,190,602

2.14 Unaccounted for Funds

A sum of UGX.84,323,243,109, remained unaccounted for at the end of the year. This comprised of funds advanced to staff to carry out various activities in various Ministries, Departments and Agencies. This is contrary to the Public Finance and Accountability Regulations which require all such advances to be accounted for within 60 days on completion of the related activity. Delayed accountability for funds may lead to falsification of accountability documents.

I advised the Accounting Officers to adhere to Regulations by ensuring that before another amount is advanced, a previous one ought to be fully accounted for.

Table showing unaccounted for advances Entity AMOUNT - UGX

Ministry Of Finance, Planning and Economic Development 1,619,879,097 Strengthening Evidence Based Decision Making II-MOFPED 74,903,000 Transport Sector Development Project SDR 120,000,000 23,632,667 Judicial Service Commission 95,350,296 Uganda Law Reform Commission 63,000,000 Ministry of Local Government 137,542,000 District lively hood support Programme 183,219,506 Northern Uganda Social Action Fund 58,826,655,271 Uganda Good Governance (UGOGO) Programme 109,402,538 Public Service Commission 21,760,585 Kampala Capital City Authority 74,547,100 Parliamentary Commission 27,401,000 NAADS secretariat 8,460,120,471 Ministry Of Energy And Mineral Development 122,889,501 Energy for Rural Transformation II Project – Private Sector 455,000 Foundation Uganda (PSFU) Component 53

Entity AMOUNT - UGX

Ministry of Gender, Labour and Social Development 25,000,000 Ministry of Health 121,360,800 East African Public Health Laboratories Networking Project 31,377,000 (EAPHLNP) Uganda Health Systems Strengthening Project (UHSSP) 27,007,487 Arua Regional Referral Hospital 359,130,640 Mbale Regional Referral Hospital 23,526,000 Lira Regional Referral Hospital 106,394,580 Gulu Regional Referral Hospital 219,224,118 Mbarara Regional Referral Hospital 10,164,220 Soroti Regional Referral Hospital 23,466,678 Hoima Regional Referral Hospital 12,520,753 China-Uganda Friendship Hospital Naguru 1,500,129,768 Ministry of Education and Sports 873,759,757 Ministry of Education and Sports Universal Post Primary 10,008,317,486 Education and Training (UPPET) Project Makerere University 308,857,850 Economic Policy Research Centre (EPRC) 62,020,000 Mbarara University of Science And Technology 17,407,000 Kyambogo University 570,497,304 Gulu University 728,758,584 Ministry of Water And Environment 202,890,333 Lake Victoria Environmental Management Project Phase II 30,758,200 (LVEMP II) Water and Sanitation Development Facility - East (WSDF-E) 19,417,500 Ministry of Trade, Industry And Cooperatives 215,110,206 Uganda High Commission, Bujumbura 13,748,041 Uganda Embassy, Cairo 52,625,621 Uganda Embassy, Kinshasa 61,253,767 Ministry of Public Service 302,018,445 TOTAL 84,323,243,109

ACCOUNTABILITY SECTOR

3.0 TREASURY OPERATIONS

3.1 Un supported budget movement

It was noted that in the ministerial policy statement submitted to Parliament for the year under review, management requested for UGX.224billion to cater for External Debt Principal Payments. It was however noted that, in the approved budget estimates, a total of UGX.470,546,614,000 was allocated for external debt principal repayments. I was not provided with the required documentation to support the upward revision of UGX.264,546,614,000.

It was further noted that of the approved amount, a total of UGX.329,197,200,187 representing 70% of the external debt budget, was vired to other expenditure items. Management explained that while it is true that external debt amortization was UGX.224bn, they had factored in domestic debt interest to allow for any interest shortfall. However, it should be noted that domestic debt interest was budgeted for elsewhere to a tune of UGX.860bn. This is an indicator of weaknesses in the budget formulation which undermines the credibility of the budgeting processes.

I have advised Management to strengthen its budgeting processes so as to arrive at realistic estimates. Management is further requested to provide the basis for the above budget revisions as well as virements. 3.2 Payments in respect of Mandamus Orders

It was noted that Parliament did not appropriate funds for expenditure on item 282104, in respect to payments for third party compensations under the Treasury Operations Vote. However, management made virements from external debt payments to the tune of UGX.87,992,164,680 to cater for third party compensations. The following observations have been noted;

a) The force of Mandamus orders I noted that the mandate to settle court awards is vested with the Ministry of Justice and Constitutional Affairs and the line item was provided for as a statutory 55 charge on the Consolidated Fund. During the year under review, the Ministry of Justice and Constitutional Affairs paid domestic arrears amounting to UGX.8,561,690,269 in respect of Court Awards and compensations. The payment of UGX.87,628,710,396 to several beneficiaries by the Ministry of Finance Planning and Economic Development under mandamas orders creates a distortion within the established payment frameworks.

The Accounting Officer explained that authority to effect the payments was communicated in a letter Ref. MA/57/012/M and dated 13th June 2013 by the Attorney General to the Minister of Finance, Planning and Economic Development. I advised management that the issue of mandate be resolved to ensure conformance with set laws. b) Disregard of MoUs Due to cash flow constraints, Memoranda of Understanding (MoUs) were entered by MOFPED with the representatives of the would-be beneficiaries to spread the payments over a longer period without attracting extra interest. However, there were instances of payments by the Ministry of Finance, Planning and Economic Development, beyond the agreed installments. This trend needs to be checked if any benefits are to be reaped from signing the MOU‟s.

Table showing payments not in in line with payment plans as per MoUs

Court case Amount agreed Amount paid - Amounts that could on in MoU - Ugx Ugx have been paid in later years - Ugx C/S No.22/2001 4,808,185,200 8,488,185,200 3,680,000,000 C/S No.16/2009 10,349,786,849 15,700,289,135 5,350,502,286 C/S No.469/2004 618,610,131 1,136,370,000 517,759,869 Total 15,776,582,180 25,324,844,335 9,548,262,155

c) Unreliable balances

As a result of uncoordinated operations/payments, the balances being reported by the Solicitor General have not fully taken into account payments made by the

Ministry of Finance, Planning and Economic Development; details of variances are shown below; Table showing reported balances Court case Amount Amount Paid Expected Balance per Over statement Award by Balan MOJCA - Ugx ed - MOFP ce - - Ugx Ugx ED - Ugx 21,294,000,000 8,488,185,200 12,805,814,800 21,294,000,000 8,488,185,200 C/S Ugx C/SNo.22/2001 6,018,427,774 3,171,794,441 2,846,633,333 4,200,000,000 1,353,366,667 C/SNo.98/2008 44,760,128,000 15,700,289,135 29,059,838,865 35,000,000,000 5,940,161,135 TotalNo.16/2009 15,781,7 13,002 Under the circumstances, the cross vote payments will affect the validity of the reported outstanding balances of court awards and compensations and may eventually lead to overpayments. Besides, the reported payables both under MOJCA and in the Consolidated Accounts were overstated by Ugx.15,781,713,002, as a result of failure to reconcile the payments in question.

 Non deduction of taxes In accordance with Section 61 of the Income Tax Act, Cap.340 a compensation payment derived by a person takes the character of the item that is compensated. I noted that except for payments to one law firm, no taxes from interest earned, legal fees, and compensation for loss of business were withheld from the other payments as required by Sections 118 and 120 of the Income Tax Act. This could be attributed to the fact that the Ministry of Finance did not have details of the breakdown of outstanding amounts.

I have advised that whereas the letter from the Solicitor General sets out responsibility, it is imperative that accounting mechanisms are put in place to ensure that transactions are captured in both entities to reflect the correct position. In addition, the Accounting Officer is advised to ensure compliance with the provisions under the Income Tax Act, with regard to deduction of withholding taxes, while effecting such payments.

3.3 Domestic Investment

A sum of UGX.1,928,989,607,673 is reported as the net worth for domestic investments. I reviewed the accompanying schedule and noted that Entities with a

total net worth of UGX.249,298,051,082, had their net worth unchanged for the financial years ending 30th June, 2013 and 30th June, 2014 as shown in the table below. However I was not provided with evidence to confirm this position. It is highly unlikely that such investments remained static for the two years. In the absence of evidence to support this position, there is a risk that the balance for domestic investments is misstated.

Table showing entities with unchanged Net worth ENTERPRISE HISTORICAL Net worth as at - UGX COST - UGX 30/6/2013 30/6/2014 GOVT. PARASTATALS ( 100 % HOLDING) Post Bank Uganda Ltd 7,999,998,200 13,972,130,667 13,972,130,667 Uganda Electricity Transmission Co Ltd 61,229,404,597 (8,998,569,000) (8,998,569,000) Amber House 5,000,000,000 22,898,824,358 22,898,824,358 Uganda Printing and Publishing Corporation 3,542,271,000 7,305,996,584 7,305,996,584 Posta Uganda 19,487,176,000 22,428,287,000 22,428,287,000 National Medical Stores 12,932,830,091 22,447,283,000 22,447,283,000 Uganda Railways Corporation 39,989,832,000 73,721,730,000 73,721,730,000 National Enterprises 42,336,083 21,507,069,815 21,507,069,815 Corp Uganda Crane Industries Ltd. 16,280,574,639 247,363,838 247,363,838 175,530,116,262 175,530,116,262 MINORITY SHAREHOLDING (LESS THAN 50% HOLDING ) Phoenix logistics (31/07/08) 5,097,599,190 2,333,706,820 2,333,706,820 Kinyara Sugar Works Ltd 3,000,456,160 66,818,850,000 66,818,850,000 LAP textiles Limited 2,405,378,000 2,405,378,000 2,405,378,000 71,557,934,820 71,557,934,820 PREFERENCE SHARES Good Africa Coffee (20/06/08) 2,210,000,000 2,210,000,000 2,210,000,000 2,210,000,000 2,210,000,000 249,298,051,082 249,298,051,082

3.4 Un recognized Investment in M/S Victoria International Airways Ltd

In a letter dated 12th July, 2006 referenced EDP.73/100/01, the then Minister for Finance requested the Solicitor General to make a capital injection of USD.250,000 58

into M/S Victoria International Airways Ltd (VIA Uganda) for purchase of shares in the same company by the Government of Uganda. The funds were to be obtained from the proceeds from the liquidation of the defunct Uganda Airlines Corporation, in which the Registrar General was appointed as the official receiver. The Solicitor General accordingly effected this payment, as per his letter to the Minister, referenced ADM/11/158/01, dated 25th July 2006.

However, I noted that this investment is not reflected in the Treasury books of account. There is no information pertaining to dividends (if any) that have been remitted to GoU ever since the investment was undertaken and no record of government representation on the Board of Directors. In the circumstances, there is risk of Government losing this investment to the private owners of the airline. Besides, the decision to acquire shares in a private company doing the same business from which the Government was divesting at the time appears not to have been properly evaluated.

In response, management explained that they did not have any information pertaining to this investment. I have advised management to follow up this matter and secure a share certificate for the investment, recognize it in the books of account and obtain board representation.

3.5 Performance of loans

A review of the loan disbursements revealed that several loans appeared to be performing poorly, with some nearing expiry, while others reached the closing date without fully disbursing. Details are shown below; Table showing performance of some loans Creditor Project Name Curren Loan Disbursed % Date Signed Closing cy Amount Disbur Date sed ADF Road Sector AFU 72,940,000 - 0% 11/12/13 30/6/18 Support project 4 BADEA Urban Markets & USD 10,000,000 44,645 0% 16-Jul-09 30-Mar-15 Agric Products GOVT. OF 132 KV Double EUR 15,000,000 0% 24 - Oct - 13 24-Oct-17 GERMANY Circuit Tr. Line - IDB CAIIP III IDI 5,210,000 0% 14 - Jun -12 31-Dec-16

OPEC FUND Energy Dev't & USD 10,000,000 0% 29 - Jan - 13 31-Dec-16 Acces Expansion - SAUDI Rural SAR 41,250,000 0% 13 - Oct - 11 30-Oct-14 ARABIA Electrification - 59

Creditor Project Name Curren Loan Disbursed % Date Signed Closing cy Amount Disbur Date sed FUND Project ADF Supp. to Higher AFU 67,000,000 882,987.25 1% 5-Jul-13 30-Jun-18 Education(HEST BADEA Rural USD 10,000,000 51,770 1% 22-Jul-10 30-Sep-14 Electrification Project BADEA Nakaseke USD 5,000,000 101,723 2% 28-Jun-11 30-Jun-14 Technical Institute IDB Specialized IDI 14,080,000 321,843.84 2% 4-Apr-12 30-Jun-16 Mater. & Neonatal IDB National Educ IDI 9,010,000 225,285.04 3% 30-Jun-11 31-Dec-15 Sup. Phase II IDB Rural Income & IDI 6,600,000 310,045.00 5% 22-Feb-10 30-Jun-14 Employment IDB IDB-SMALL IDI 7,000,000 391,999.32 6% 22-Dec-08 31-Dec-14 BRIDGES IN N.&NE UGA IDA Water Mgt & SDR 87,100,000 6,425,496.65 7% 22-May-13 31-Dec-18 Dev't Project BADEA Line Of Credit- USD 4,500,000 615,523.70 14% 12-May-09 31-Mar-15 UDBL JICA Electric Grids of JPY 5,406,000,00 890,333,539 16% 26-Mar-10 1-Dec-17 Nile Equator 0 ADF 3rd Community AFU 40,000,000 6,978,800.48 17% 10-Jun-11 31-Dec-16 Agric Infrastruc BADEA N.NE Bridges USD 7,000,000 1,177,910.09 17% 20-Oct-05 31-Dec-14

KUWAIT KUWAIT FUND KWD 3,000,000 816,785.78 27% 22-Sep-10 30-Jun-15 FUND FOR UDBL IDB National IDI 8,660,000 2,437,451.14 28% 24-Jun-10 31-Dec-14 Education Support OPEC FUND Vocational USD 22,950,000 6,611,023.34 29% 23-Mar-10 31-Dec-14 Education Project ADF Kampala AFU 35,000,000 10,587,456.20 30% 11-May-09 31-Dec-14 Sanitation Program 1 ADF Interconnect Nile AFU 7,590,000 2,362,395.70 31% 13-May-09 31-Dec-14 Elect Grids IDA 2nd L.Victoria SDR 17,600,000 8,571,811.09 49% 29-Oct-09 31-Dec-14 Enviro Mgt Proj ADF Mbarara Nkenda AFU 52,510,000 29,767,184.98 57% 13-May-09 31-Dec-14 Power Lines JICA Bujagali JPY 3,484,000,00 1,990,709.71 57% 30-Oct-07 21-Mar-15 Interconnection 0 Proj.

Such low levels of performance undermine the attainment of planned development targets and renders commitment charges paid in respect of undisbursed funds nugatory.

Management explained that poor Loan performance is attributed to both internal (GoU) and External (Creditor) factors. The major internal factors include

60 procurement challenges, compensation of third parties and lack of Land titles for Large Infrastructure Projects. The main external factor is lack of legal and regulatory framework to enable implementation of some Loans from the Islamic development Bank. Government is fast tracking the Financial Institutions Act amendment, to enable Islamic/Shariah Banking to operate. I have advised government to identify and resolve any bottlenecks hindering the smooth implementation of the above projects as well as explore ways of expediting the processes so as to improve on service delivery.

4.0 MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT

4.1 Mischarge of expenditure

The Government Chart of Accounts defines the nature of expenditures for each item code. The intention is to facilitate better and consistent classification of financial transactions and also track budget performance per item. A review of records for the year under audit revealed that UGX.2,208,201,055 was charged on items which do not reflect the nature of the expenditure incurred. This constituted of 0.9% total expenditure for the Ministry. Mischarge of expenditure impacts on the credibility of the financial statements since the figures reported therein do not reflect true amounts expended on the respective items. It further impacts on the appropriateness of the future budgets since the reported actual figures are misleading.

Management explained that this was a result of the difference between Chart of Accounts classification of expenditure items and Output Budgeting Tool (OBT). While the newly passed Public Finance Act is based on outputs, the chart of accounts has not been aligned to the new budgeting methodology.

I advised management to liaise with Treasury to align the chart of accounts to the budgeting tool for appropriate reporting.

4.2 Un-supported Gross Tax payments

Gross tax payments made to URA are expected to be made against commitment forms properly supported with import documentation and tax assessments. A review of the underlying documentations revealed that UGX.1,114,667,735 was not supported with import taxation documentation and URA tax assessments. In the above circumstances, I was unable to confirm that the gross tax payments were eligible.

I advised management to always ensure that payments from the gross tax account are properly supported, otherwise funds are recoverable.

4.3 Gross Tax Payments for Non-Qualifying Items

As part of Government support to the Agriculture Sector value chain and in particular the Textile sub-sector, Government was meant to pay VAT on imported raw materials for the manufacturers of textiles. A review of a sample of payments for import taxes on behalf of the textile beneficiary companies revealed that the beneficiary company imported finished textiles (Bales 100 % polyester printed fabric) worth UGX.1,659,611,200 and UGX.144 million was for goods described as polyester bed sheets. This is contrary to the purpose for which the incentive was established. Importation of printed fabric and bed sheets materials will not benefit the local cotton farmers as had been intended. Ideally, to support the agricultural sector, beneficiary companies ought to have been procuring all the cotton ginned/produced in the country and not bringing in printed fabric. It was therefore irregular for the Ministry to make such payments on these finished products without carrying out due diligence.

I advised management to restrict tax payments to only raw materials as per Government policy for the textile sub-sector. Management should initiate recovery measures for all payments made in respect of semi and finished products (bed sheets and printed fabric).

4.4 Un-supported tax payments for clearance of textile materials

According to the circular ref: EDP 81/137/05 by the Accounting Officer it was indicated that for a company to qualify for the incentive of exemption of VAT /import duty in the textile industry, they needed to present PAYE and NSSF returns for verification of the minimal number of employees required, an investment license from Uganda Investment Authority, among other requirements. However, it was noted that UGX.980,735,024 was paid to URA in relation to taxes for textile imports without proof that the above requirements had been fulfilled.

There is a risk that the objective of setting the above conditions was not achieved and that the beneficiaries did not qualify.

I advised management to ensure that all beneficiary companies always provide the required information as verified and cleared prior to making payments for the incentives.

4.5 AGRICULTURE CREDIT FACILITY (ACF)

The Agricultural Credit Facility (ACF) was set up in 2009 by Government in partnership with commercial banks, Credit Institutions and Uganda Development Bank (the Participating Financial Institutions (PFIs) with the aim of providing medium and long term loans to projects engaged in agriculture and agro- processing on more favourable terms than usually available from Financial Institutions. During the year, a sum of UGX.30bn was deposited by the Ministry of Finance, Planning and Economic Development onto the ACF Escrow account for onward remittance to the Bank of Uganda Capital Account. The memorandum of Understanding (MOU) and progress report for the period ending September 2014 from Bank of Uganda were reviewed and the following noted:

a) Non-utilization of Agricultural Credit Facility The escrow account held by the Accountant General‟s office in BoU closed with the UGX.30 billion because these funds had not been transferred to the ACF capital account as at 30th June 2014. The ACF capital account is an account where funds released are held for onward disbursement to the Participating Financial Institutions (PFIs). It was noted that a sum of UGX.16,507 million was held on the ACF capital account un-utilized at the year-end. This implies that a total of UGX.46.507 billion released for the ACF activities remained idle on the two accounts during the year. The objective for which the funds were appropriated and released may not be achieved.

Management explained that Bank of Uganda (BoU) disburses funds to the Participating Financial Institutions (PFIs) with respect to only approved eligible projects whose pace of flow depends on the PFIs. This project conception had little input from BOU as a stakeholder but during implementation a number of 64 challenges existed that required a revision of the implementation policy and MOU to ensure that there is adequate absorption of the funds.

I advised management to expedite the revision of the policy and MoU to address the implementation challenges. b) ACF GoU contribution

According to the financing MoU, Government was supposed to contribute UGX.30 billion annually and the Participating Financial Institutions (PFIs) were to match the GoU contribution thereby creating a revolving pool of loanable fund amounting to UGX.60 billion for eight years.

A review of Bank of Uganda Report for the period ending September 2014 revealed that capitalization of the fund by Government should have grown to UGX.150 billion to date. However, government has to date remitted only UGX.93bn to cover disbursements and commitments made since inception leaving a shortfall of UGX.57 billion. Since Government is not fully meeting its stated requirements as per the MoU sustainability of the facility may be tampered. Management explained that although Government has not fully remitted the budgetary allocations, BoU has not run out of funds for onward disbursement to PFIs in respect of eligible borrowers. The slow pace of disbursements was due to low absorption caused by failure by beneficiaries to meet the criteria for obtaining the loan i.e. the criteria‟s put in place for one to obtain the loan were marked as stringent for the targeted/potential borrowers as opposed to the currently benefiting high level farmers.

I advised the Accounting Officer to renew the criteria in place and ensure that the pace of absorption is improved. In the meantime GoU contributions should be matched with the MoU for implementation as agreed. c) Potential Loss of ACF borrowed funds

BoU report revealed that six projects that accessed farmer and agro processors loans amounting to UGX.2,122,193,576 were classified as delinquent and been forwarded to Bank of Uganda for writing off. Table below refers:

PFI Project Amount (UGX) KCB Formula Feeds Ltd 1,314,411,429 KCB Pearl Mixed Farm 392,857,142 Tropical Bank Ltd Tom O‟lalobo 325,000,000 Centenary Rural Dev‟t Soroti Diary Ltd 48,019,341 DFCU Lira Integrated School 23,654,500 DFCU Bunya SACCO 18,251,164 Total 2,122,193,576

Unless adequate recovery measures are taken, Government risks losing the above funds or even more if the current low recovery rate continues. It appears that the appraisal by PFIs to ascertain viability, feasibility and eligibility by PFIs as one of their roles was not properly undertaken.

Management should liaise with BoU to compel the PFIs to ensure proper due diligence is done prior to issuing loans to save Government from losing money due to the poor loan portfolio management on the part of the PFIs.

4.6 Un-supported utility payments

Section 181 of the TAI requires all vouchers to contain full particulars of each service or goods and be accompanied by such supporting documents as may be required so as to enable them to be checked without reference to any other documents. However, it was noted that UGX.415,192,655 paid to National Water and Sewerage Corporation was not supported with tax invoices and acknowledgement receipts. I was therefore unable to ascertain that the payments were actually made to the utility company.

I advised management to make a follow up of the acknowledgements with NWSC.

4.7 Budget Performance Review

Analysis of budget performance indicated that some planned activities were not fully performed despite the entity receiving 97% of its budget. 66

 Output 140301 – Accounting and Financial Management Policy, coordination and monitoring Under this activity, it had been planned to conduct (12) audits of foreign missions and (2) IT audits. However, only one mission audit was achieved and no IT reviews were conducted.

Management explained that because of resource constraints, this activity was dropped. The IT audits were not carried out because of inadequate capacity. The Ministry is now undergoing restructuring to provide for IT auditing.

I advised management to expedite capacity building undertakings and have the audits carried out.

 Output 140156 Lottery Services It had been planned to collect UGX.2bn from the National Lottery as government share on the Lottery collections. However, it was noted that only UGX.0.08bn was collected leading to a shortfall of UGX.1.92bn. It had also been planned to procure an electronic monitoring system to monitor Lotteries, Gaming and Pool Betting for enhanced monitoring of revenue generation by URA and the Lottery Board. This too was not achieved.

Management explained that this was due to loopholes in the prevailing law that illegal operators exploited to set up illegal lotteries that were in direct competition with the National Lottery (NL). This curtailed the National Lottery collection. Regulations have since been put in place to strengthen the weak law. Meanwhile illegal Lotteries are being phased out.

Funds for the electronic monitoring system were not provided and the system could not be procured. This procurement had been budgeted for UGX.400m. The procurement has been included among unfunded activities for the Ministry BFP of 2015/16.

I advised management to secure the resources and have the electronic Monitoring System in place. I also advised management to address the weaknesses in the current law to guide the operations of National Lottery Board.

 Output: 140103 - Capitalization of Financial Institutions The Ministry had planned to disburse a total of UGX.16 billion as Graduate Venture Capital during the year however no disbursements were made. Failure to achieve all planned activities may negatively affect the Ministry performance and achievement of its strategic objectives.

Management explained that the funding for Graduate Venture Capital was transferred to Ministry of Gender by Parliament when approving the final budget for FY 2013/14.

4.8 ENTERPRISE UGANDA: Funding gap

Enterprise Uganda (EU) is a public entity duly registered and constituted according to the Laws of Uganda with the objectives among others to work with Government to promote Government policies, directives and programmes. EU envisages Micro, Small and Medium Scale Enterprises (MSMEs) as important vehicles for expanding production, providing self-employment and generally enhancing economic growth in the country. This is in line with the government objective of enhancing the quality and availability of gainful employment and uplifting the standards of living in households.

During the year, EU had budgeted to receive Government support of UGX.2,410,000,000 but only UGX.2,199,375,000 was released which is 91.26% leading to a budget shortfall of UGX.210,625,000. Despite the shortfall in Government releases, audit appreciates that most of the planned activities were achieved. I noted that during the year, EU had planned to train a total of 5,000 participants both rural and urban households and equip them with skills to start small enterprises. However, it was noted that 4,768 (95.36%) were trained in the districts of Wakiso, Tororo, Kayunga and Kiruhura. 322 intended participants were not trained. I urged management to liaise with the

Ministry of Finance, Planning and Economic Development to source for sufficient funding to meet its budget plans. This was attributed to the funding gap.

4.9 RURAL FINANCIAL SERVICES PROGRAMME

The Rural Financial Services Programme (RFSP) supports the Rural Financial Services Strategy (RFSS) which is one of the pillars of the Prosperity for All (PFA) vision of government, which aims at ensuring that every economically active Ugandan earns some basic income, through production, marketing and agro- processing of products. This programme ended in December, 2014 and a review of the activities for the financial year 2013/2014, revealed the following:

a) Lack of proof of ownership of motor cycles The Government through RFSP put in place rural development strategy and availed funds to be used to equip SACCOs with kits which include money safes, filing cabinets, bicycles, salaries for staff and office rent. Under this arrangement through a grant, 188 motor cycles were distributed to SACCOs to facilitate them in form of transport. Accordingly, RFSP officials were paid allowances worth UGX.10,480,000 to enable verification of transfer of ownership of these motor cycles from UCSCU to beneficiary SACCOS. However, it was noted that by the time of audit (December, 2014), only (36) motor cycles had been transferred to the SACCOS leaving with the balance still in the names of UCSCU. Delay in transfer of ownership may result in costs to UCSCU in case accidents or other eventualities happen.

Management attributed the delay to lack of Tax Identification Numbers by SACCOS but RFSP has guided them on how to register with URA.

I advised RFSP management to expedite the transfer process.

b) Assets - Verification of assets provided to support SACCOs During the closure of the project, management of RFSP carried out verification of the assets register to validate data for update. At the end of the exercise, a verification report was produced. The following was observed from the report:

 Oribicin SACCO

Oribicin SACCO had been reportedly closed because of failure to pay back loans worth UGX.78,000,000 which was borrowed by the former SACCO Chairman who also later passed on. However, it was noted that there was no documentation to indicate the status of the assets such as money safe, filing cabinets and bicycles. The possibility of recovery of these assets appears remote.

 Gulu Municipal and Bufunjo SACCOs

The asset verifications report also indicates that Gulu and Bufunjo SACCOs had been closed because of mismanagement of funds by their respective Boards and management; although this was not quantified. It was noted that the where about of the motor cycle for Bufunjo and the kits for Gulu municipal SACCO were yet to be established. There is a possibility that they could have been stolen or being used for non-SACCO related activities.

Management explained that both cases have been forwarded to the department of Cooperatives, and the respective District Cooperative offices to revamp or turn around the activities of the SACCOs. It is only after the turnaround activities have failed that the SACCOs will be liquidated.

I advised management of RFSP to provide a clear status report regarding the assets of the above SACCOs. c) Un-sustainable strategy of strengthening of the Apex Institutions By the closure of the RFSP project, Uganda Cooperative Savings and Credit Union Limited UCSCU), the implementing partner had established (15) regional offices in the four regions of the country as had been targeted. However, it was noted that with the project support coming to an end, UCSCU downscaled the regional offices from (15) to (4) (Northern, Western, Eastern and Central). Only a few field liaison officers were employed in the rest of the regions for increased efficiency in the utilization of resources.

Under this arrangement, there is a risk that UCSCU may not provide services to the SACCOs on a sustainable basis. 70

Management explained that Government has made provisions for providing additional technical and financial support to UCSCU in order to ensure that UCSCU becomes sustainable in the next five years, as per the revised UCSCU business plan. This commitment is contained in the Loan agreement and Aide Memoirs signed between IFAD/GOU.

The outcome of the above commitment is awaited.

4.10 THE POPULATION SECRETARIAT (POPSEC)

The population secretariat (POPSEC) is a semi-autonomous department under Ministry of Finance Planning and Economic Development (MOFPED) established under The National Population Act, 2014 responsible for the implementation of the policy decisions of the National Population Council and promote the integration of population factors in development planning at the national and lower levels in accordance with the agreed frame work under the National Development Plan.

The following observations were made.

a) Lack of National Population Council The population Secretariat (POPSEC) developed a five year National Population Action Plan (NPAP) in 2010 giving National Population Council the key role of providing strategic direction. Consequently, Parliament passed the National Population Council Act on July 23rd 2013 and assented by H.E. the President on January, 6th 2014. However, it was noted that the National Population Council had not been established at the time of writing this report. This may negatively affect policy formulation and strategic guide on the implementation of the objectives of POPSEC.

Management explained that POPSEC was advised by the First Parliamentary Counsel that the Act will be operational after full registration.

I urged management to liaise with the responsible authorities to ensure that the National Population Council is urgently established.

4.11 TAX APPEAL TRIBUNAL

a) Un-resolved tax disputes The tribunal had planned to resolve 100 tax disputes countrywide during the year but only 90 cases were resolved leaving a balance of 10 tax disputes outstanding at the year-end.

The registrar Tax Tribunal explained that the 10 outstanding disputes were filed towards the end of the financial year and could not be completed before the year end. These cases have however been carried forward.

I urged management to always ensure that planned targets are attained and timely.

b) Failure to conduct planned circuit sessions According to the annual budget performance, the tribunal had planned to conduct circuit sessions (regional case hearings) in the regions of Mbale, Gulu, Mbarara and Arua. The objective of conducting circuit sessions was to take tribunal sittings to the regional offices to encourage and enable up-country tax payers lodge and have their cases arbitrated upon within the respective localities. The circuit sessions were not conducted.

Management explained that full circuits could not be held due to a shortfall in funding. The outstanding upcountry disputes were carried forward.

I advised management to ensure that the implications for failure to conduct the above activity are properly highlighted in the next budget to enable its funding.

4.12 NON-PERFORMING ASSETS RECOVERY TRUST (NPART)

a) Stalling of the Winding up Bill The Non-Performing Assets Recovery Trust Act (NPART) was enacted on 10th October 1994 and was to run for a period of (3) years. However, it was noted that

72 the NPART Act has been extended by Parliamentary resolutions for a number of times, the last extension being the period ending 9th October 2007.

In view of the above, it was noted that the Act has served its purpose and it was time to wind-up the trust and repeal the Act. However, it was noted that passing of the bill (winding up) appears to have stalled since October, 2007.

This in turn has delayed the achievement of the winding-up bill of repealing of the NPART Act, winding up of the affairs of the Trust, The Sinking Fund and the Tribunal and transfer to Government of all assets.

Government continues to spend money on NPART without any legal basis as its mandate has long expired without any further renewals. For instance, a total of UGX.249,999,999 was released during the year out of which UGX.141,905,060 (56.76%) was spent on employee costs alone.

Management explained that the bill was presented to the committee of the cabinet which made recommendation for the Ministry‟s action. The Act has been edited and ready for submission to the cabinet.

I urged management to continue liaising with the relevant authorities to expedite the passing of the bill. b) Un-spent balance not returned to Treasury Section 19(1) of the Public Finance and Accountability Act provides that any unspent balance at the close of the year shall be repaid to the consolidated fund. According to the cashbook presented for audit, NPART had un-spent balance of UGX.20,032,804 at the year-end which was not returned to the UCF as required by the regulation.

Management explained that the instruction to transfer the funds was bounced by BoU and the matter has been forwarded to Accountant General to direct BoU to return the money to the UCF.

The outcome of the above management action is awaited.

4.13 PRESIDENTIAL INITIATIVE ON BANANA INDUSTRIAL DEVELOPMENT

(PIBID)

a) Failure to return un-spent funds to the Consolidated Fund According to the Internal Audit and Inspectorate report for financial year 2013/2014, PIBID project had un-spent funds to a tune of UGX.4,259,043,697 as at 30th June, 2014. However, the amount was not returned to the Consolidated Fund account as required. The funds were retained and utilized during the year without authority from the Accountant General and the Permanent Secretary/Secretary to the Treasury.

Management explained that the funds were meant to pay for machinery for the Banana Plant from an International Company based on Germany whose contract had not been finalised by close of the year. The contract was only signed on 10th July 2014 and request to hold money was made to PS/ST on 11th July, 2014. However, no response was received. The funds were finally spent in the subsequent year 2014/15.

b) Doubtful fuel consumption UGX. 90,018,707 spent on fuel was not supported by fuel requisition vouchers indicating the purpose, motor vehicle movement log book justifying fuel usage and activity reports confirming occurrence. In the above circumstances, the expenditures appear doubtful.

Management explained that all payments for fuel are effected through a fuel company. Noted variances during the reconciliation are effectively adjusted and reflected in the subsequent remittances.

As a way forward, management explained that it will always ensure that the reconciliations are regularly and timely done as this will easily enable identification of discrepancies and allow a fast correction of anomalies.

4.14 IRISH AID SUPPORT TO GENDER & EQUITY BUDGETING (EDUCATION

SECTOR AND KARAMOJA SUB-REGION)

(a) General Standards of Accounting and Internal Control Systems

It was noted that management had complied in all material respects with the financing agreement and GoU financial regulations except for the following matter:

i) Retention and expenditure of funds after suspension of the project As at 17th July 2013, the project had total available funds of UGX.65,571,546 composed of un-spent project funds worth UGX.30,384,506 and UGX.35,187,040 refunded to the bank account being funds for activities not undertaken.

In July 2013 the donors suspended project funding following the financial scandal at Office of the Prime Minister. It was noted that the funds were retained and spent after the suspension period. The authority from the development partners to retain and spend these funds was not sought.

Although management explained that the funds were spent because the development partners did not object to the continued payment of project staff salaries from the available balance, I was not provided with communication to this effect.

I advised management to always seek authority prior to spending project balances after closure of the projects.

4.15 FINANCIAL MANAGEMENT AND ACCOUNTABILITY PROGRAMME

(FINMAP)

(a) Compliance with programme financing agreement and government financial regulations

The Programme complied with the covenants with Programme agreement and Government Financial Regulations except for the following matters;

i) Statutory Deductions

It was noted that there were instances where withholding taxes were not deducted from some payments made to suppliers of goods and services yet these suppliers were not exempted from withholding tax. Examples of such payments were as follows;

Company Name Amount Withholding Tax Comments UGX UGX Inline Print 9,524,567 571,474 Tax not withheld Services Hotel Brovad 70,692,000 4,241,520 Tax not withheld Com Events Coalition 34,080,000 2,044,800 “ Adventcity Ltd 7,265,440 435,926 “ Innovative Furniture Ltd 10,576,001 634,560 “ Kabu General Agencies 18,940,000 1,136,400 “ Total 9,064,680

Non compliance with all the provisions of the Income Tax Act could lead to heavy penalties and interest being imposed on the project by the relevant authorities.

Management explained that there was an oversight especially because the IFMS did not deduct automatically. The providers in question were still working with FINMAP and the taxes would be recovered from the next payments.

I advised management to ensure that all the provisions of the tax laws were complied with in order to avoid associated penalties and interest. ii) Delayed project activities

My review of the project budget for the year indicated a number of project activities that were not carried out as planned by the end of the year. These include the following: 76

Code Activity Delayed activities‟ Management response Budget ( UGX) 1.1.1.2 Training of users of 55,323,360 The IMEM was not yet IMEM finalized and hence training could not be programmed. 1.2.1.2 Conduct consultative A more comprehensive stakeholder internal study to analyze the workshops and current tax system with a disseminate final 91,310,400 view towards generating report analyzing revenue enhancement national revenue measures for FY 14/15 was base conducted instead, and a report has been compiled and disseminated. 2.1.1.1 Undertake The procurement process for consultancy for the 107,424,000 the consultancy to develop automation of the the OBT was delayed system following a decision to fund and procure the activity through the mainstream GoU budget and procurement modalities respectively 2.3.1.1 Undertake The review of the GoU/MTEF consultancy for the 134,280,000 was placed on hold pending review of the further policy guidance by GoU/MTEF top management on how to proceed 3.1.1.3 Procure IFMIS audit 1,074,240,000 The procurement was held tools and conduct back by the delays in the security related finalization of the security training audit and its attendant recommendations.

Code Activity Delayed activities‟ Management response Budget ( UGX) 3.1.4.1 Undertake a 174,606,970 It was resolved that the consultancy to development of the non- develop noncurrent current assets module be assets module of included in a (subsequent) IFMIS: conduct contract with Oracle for post related user training IFMS upgrade technical and change support. management sessions 3.1.5.1 Set up the system 268,560,000 The activity was put on hold application: conduct pending the successful ICT trainings, and upgrade of the IFMS to procure licenses version 12.

3.1.6.6 Disaster recovery site 18,595,094 Un-anticipated delays in the set up and tested procurement process, arising in large part from delayed disbursement of funds by development partners. 4.1.1.2 Conduct monitoring 27,574,000 This was due to operational of implementation of delays in the RAM, hot and cold commencement of the RAM reviews training. 4.1.1.1 Acquire forensic tools 490,226,738 Un-anticipated delays in the for the Unit‟s lab procurement process, arising in large part from delayed disbursement of funds by development partners. 4.1.4.1 Acquire ERA licenses 136,294,200 Un-anticipated delays in the for 30 staff procurement process, arising in large part from delayed disbursement of funds by development partners.

Code Activity Delayed activities‟ Management response Budget ( UGX) 4.1.5.1 Conduct training for 14,502,240 Un-anticipated delays in the 30 internal audit procurement of the staff software. 4.1.6.1 Conduct hands on 120,852,000 The activity was re- training for IA staff programmed to the next FY. in Quality Assurance 4.1.7.1 Undertake Quality 120,852,000 The activity was re- Assurance reviews programmed to the next FY. and specialized training for supervision and inspection staff. 5.1.1.2 Conduct pilot of 268,560,000 None of the bidders were Alternative Energy identified to have the Sources for IFMIS in requisite experience and LGs competence for the activity, which has now been postponed to next FY. 5.1.1.8 Conduct post 338,385,600 Un-anticipated delays in the implementation processing of the funds for change management the activity. sessions at 26 Tier 2 sites +6 Tier 1 rollout undertaken 5.1.1.9 Conduct basic ICT 295,416,000 Un-anticipated delays in the trainings for new processing of the funds for users at the IFMIS the activity. LG sites at 26 Tier 2 sites +6 Tier 1 rollout

Code Activity Delayed activities‟ Management response Budget ( UGX) 5.1.3.1 Engage consultancy 4,748,140,800 Un-anticipated delays in the to roll out IFMIS Tier procurement process, arising 2 solution to 13 LG in large part from delayed sites disbursement of funds by development partners. 5.1.4.1 Review the LG Act to 40,284,000 Un-anticipated delays in the clarify the procurement process, arising jurisdiction of in large part from delayed parliament and the disbursement of funds by LGPAC development partners.

Code Activity Delayed activities‟ Management response Budget ( UGX) 5.1.4.3b Conduct capacity 24,170,400 Un-anticipated delays in the assessment for processing of the funds for LGPACs targeting the activity arising in large Conduct capacity part from delayed assessment for the disbursement of funds by LGPACs targeting development partners.. committee members and support staff, Design capacity building programme (task force) 6.1.2.3A PFM Advisor 241,704,000 A decision was taken not to recruited (by 1 Jan proceed until further notice. 2014) 6.1.3.1 Undertake take 107,424,000 This activity was placed on consultancy for the hold following a policy road map for the directive that this activity integration of would be led (under FINMAP Accounting and III) by the new department Budgeting systems. of MIS in the Accountant General's Office (AGO), in collaboration with NITAU. 6.1.2.2 Acquire and 61,768,800 disseminate IEC There were no related materials to enhance activities that were initiated staff capacity and by the component public awareness on accountability. 6.1.3.1 Commission studies, 93,996,000 benchmarks and There were no related reviews of PFM activities that were initiated implementation by the component

Total 9,245,168,202 81

Code Activity Delayed activities‟ Management response Budget ( UGX) 3.1.5.1 Set up the system 268,560,000 The activity was put on hold application: conduct pending the successful ICT trainings, and upgrade of the IFMS to procure licenses version 12. 3.1.6.6 Disaster recovery site 18,595,094 Un-anticipated delays in the set up and tested procurement process, arising in large part from delayed disbursement of funds by development partners. Conduct monitoring 27,574,000 This was due to operational 4.1.1.2 of implementation of delays in the RAM, hot and cold commencement of the RAM reviews training. 4.1.1.1 Acquire forensic tools 490,226,738 Un-anticipated delays in the for the Unit‟s lab procurement process, arising in large part from delayed disbursement of funds by development partners. 4.1.4.1 Acquire ERA licenses 136,294,200 Un-anticipated delays in the for 30 staff procurement process, arising in large part from delayed disbursement of funds by development partners. Conduct training for 14,502,240 Un-anticipated delays in the 4.1.5.1 30 internal audit procurement of the staff software. Conduct hands on 120,852,000 The activity was re- 4.1.6.1 training for IA staff programmed to the next FY. in Quality Assurance

Code Activity Delayed activities‟ Management response Budget ( UGX) 4.1.7.1 Undertake Quality 120,852,000 The activity was re- Assurance reviews programmed to the next FY. and specialized training for supervision and inspection staff. 5.1.1.2 Conduct pilot of 268,560,000 None of the bidders were Alternative Energy identified to have the Sources for IFMIS in requisite experience and LGs competence for the activity, which has now been postponed to next FY. 5.1.1.8 Conduct post 338,385,600 Un-anticipated delays in the implementation processing of the funds for change management the activity. sessions at 26 Tier 2 sites +6 Tier 1 rollout undertaken 5.1.1.9 Conduct basic ICT 295,416,000 Un-anticipated delays in the trainings for new processing of the funds for users at the IFMIS the activity. LG sites at 26 Tier 2 sites +6 Tier 1 rollout 5.1.3.1 Engage consultancy 4,748,140,800 Un-anticipated delays in the to roll out IFMIS Tier procurement process, arising 2 solution to 13 LG in large part from delayed sites disbursement of funds by development partners.

Code Activity Delayed activities‟ Management response Budget ( UGX) 5.1.4.1 Review the LG Act to 40,284,000 Un-anticipated delays in the clarify the procurement process, arising jurisdiction of in large part from delayed parliament and the disbursement of funds by LGPAC development partners.

5.1.4.2 Conduct capacity 67,140,000 Un-anticipated delays in the building for procurement process, arising members of the in large part from delayed LGPACs and their disbursement of funds by support staff on development partners. LGPAC 5.1.4.3a Conduct capacity 123,537,600 Un-anticipated delays in the assessment for the procurement process, arising LGPACs targeting in large part from delayed committee members disbursement of funds by and support staff, development partners. Design capacity building programme 5.1.4.3b Conduct capacity 24,170,400 Un-anticipated delays in the assessment for processing of the funds for LGPACs targeting the activity arising in large Conduct capacity part from delayed assessment for the disbursement of funds by LGPACs targeting development partners.. committee members and support staff, Design capacity building programme (task force) 6.1.2.3A PFM Advisor 241,704,000 A decision was taken not to recruited (by 1 Jan proceed until further notice. 2014)

Code Activity Delayed activities‟ Management response Budget ( UGX) 6.1.3.1 Undertake take 107,424,000 This activity was placed on consultancy for the hold following a policy road map for the directive that this activity integration of would be led (under FINMAP Accounting and III) by the new department Budgeting systems. of MIS in the Accountant General's Office (AGO), in collaboration with NITAU. 6.1.2.2 Acquire and 61,768,800 disseminate IEC There were no related materials to enhance activities that were initiated staff capacity and by the component public awareness on accountability. 6.1.3.1 Commission studies, 93,996,000 There were no related benchmarks and activities that were initiated reviews of PFM by the component implementation Total 9,245,168,202

Unless project activities are carried out as planned, the intended purpose of the project may not be achieved.

I advised management to endeavor to set project milestone and deliverables for specific periods so as to track project performance and progress.

(b) General Standard of Accounting and Internal Control A review was carried out on the programme system of financial management and it was noted that management had instituted adequate controls to manage programme resources.

4.16 SIDA SUPPORT TO COMPETITIVENESS INVESTMENT CLIMATE

STRATEGY (CICS) PROJECT

(a) Compliance with the SIDA/GOU Financing Agreement Provisions and GOU Financial Regulations It was noted that management complied with the covenants contained in the financing agreement and Government of Uganda Financial Regulations except for the following instance:

i) Lack of authorization to spend UGX.47,010,645 Article 4 Section 5 of the agreement required that funds transferred to Uganda for purposes of a project and not utilized by 30th June 2013 shall be repaid to Sweden within three months of that date. It was noted that out of the balance carried forward from the previous (UGX.47,010,645) UGX.46,176,200 was spent without seeking for authority/objection from donors contrary to the financing agreement. I explained to management that this was a deviation that may result in poor donor relations in case there is need to engage in other future financing agreements.

Management explained that the funds were already committed towards SIDA – CICS Secretariat activities. After payment of the activities a balance of UGX.834,445 was left on the account which balance will be returned to the development partners as per the agreement.

I advised the project coordinator to ensure compliance with financing agreement with regard to authority for retention and expenditure of un-spent balance after the project closure.

(b) General Standard of Accounting and Internal Control A review of the following areas was carried out:-  Accounting system and policies.  Book keeping.  Management and control of both bank and cash accounts.  Purchases and payments.  Fixed assets management.

It was noted that management‟s control structure environment, accounting system and policies and control procedures were generally adequate to ensure prudent use of, and accountability in the project.

4.17 RURAL FINANCIAL SERVICES PROJECT (a) Delayed implementation of field activities

While the annual work plan and budget for the closure period activities was finalised on 14 June 2013 and approval for the same obtained from IFAD through a no –objection notice on 4 July 2013, the program closure activities were scheduled to have been completed and paid for by 31 December 2013. I noted that there were some program activities totalling UGX.25,871,247 that were not fully completed by the end of the year and were therefore carried forward to 2014. These include external audit costs, vehicle maintenance costs, validation and field work costs.

The delay in completing project activities had a spill over effect on other closure activities like the finalisation of program reports. This may have resulted into a diversion of funds to other uses other than those for which the funds were approved.

Management explained that almost all programme activities were carried out and closed off. Those that were not closed off were contractual in nature and were not settled in time due to the shortcoming in the system.

I advised management to ensure that in future program activities are implemented on a timely basis.

5.0 DIRECTORATE OF ETHICS AND INTEGRITY 5.1 Mischarged Expenditure-UGX.275,372,736 The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Directorate‟s expenditures revealed that the entity charged 87

wrong expenditure codes to a tune of UGX.275,372,736. The practice is contrary to the intentions of the appropriating authority and leads to incorrect financial reporting.

The Accounting Officer attributed this to inadequate budget on some codes and yet work had to proceed. Management also attributed the problem to the de- linkage between IFMS and output budgeting.

I advised management to undertake realistic budget and whenever necessary request for reallocations or virements, as provided for under the TAI. I also advised management to contact the Accountant General to resolve the de-linkage.

5.2 Funding gap-UGX.181,598,834

According to the statement of appropriation account based on services voted by Parliament, the Directorate had budgeted to receive transfers from treasury worth UGX.5,404,295,598 however, UGX.5,219,309,500 was received, creating a funding gap of UGX.184,986,098. The shortfall directly affected the settlement of outstanding commitments of UGX.265,071,856 brought forward from the prior year.

The Accounting Officer explained that the PS/ST had been requested to provide explanation for the funding gap but no response had been received. I advised management to continue liaising with Treasury for purposes of ensuring that the appropriated resources are released.

5.3 Vacant positions

A review of the Directorate approved structure/establishment indicated that whereas 59 posts were approved, only 46 had been filled by the year-end leaving 14 vacant posts unfilled. The most affected departments were the information center and the legal department as indicated in the table below.

Post Tile Approved Filled Vacant Salary Legal Department

Commissioner Legal Services 1 0 1 UIE Legal Officer 2 0 2 U4 Information Center Principal Information Scientist 1 0 1 U2 Communications Officer 1 0 1 U3 Information Scientist 3 2 1 U4

Lack of such essential staff may negatively impact on the entity's service delivery.

The Accounting Officer explained that the delay in recruitments was caused by lack of the Public Service Commission in place, but the requests have now been submitted to the commission for action.

I advised management to liaise with the responsible authorities and ensure that the key vacant posts are urgently filled.

WORKS AND TRANSPORT SECTOR

6.0 MINISTRY OF WORKS AND TRANSPORT

6.1 Payment of Consolidated allowances- UGX.2,444,859,353

During the year, a total of UGX.2,444,859,353 was paid out in gross consolidated allowances to staff contrary to the requirements of Public Service Standing Orders. I noted that there was no authority to pay such allowances on top of salary already paid. In the circumstances, I could not confirm the regularity of the quarterly consolidated allowances.

In response, the accounting officer explained that payments were effected to motivate staff since their salaries were considered very low.

I advised the accounting officer to seek authority from ministry of public service or have if officially regularized.

6.2 Mischarge of Expenditure

Expenditure totaling to UGX.48,153,093 was inappropriately charged on budget lines to fund activities that were not planned and without authority. I explained to management that mischarge of expenditure translates into misrepresentation of expenditure balances in the financial statements. The practice is also not in line with the intentions of the appropriating authority.

In response, the Accounting Officer acknowledged that challenges exist in matching GoU budgeting principles that are driven by Output Based objectives, Public Finance Management best practices and generally acceptable accounting principles.

I advised management to liaise with the Accountant General with a view of streamlining the budget process and also ensure that sufficient funds are allocated to key account areas. Should there be need for reallocation, authority for the virement should be sought before any reallocations are undertaken.

6.3 Budget Performance

a) Funding Gap During the review, I noted that the Ministry budgeted to receive UGX.119,061,202,859 out of which a sum of UGX.91,677,910,743 was received translating into a 77% out-turn for the financial year. This left a funding gap of UGX.27,383,292,116. The gap affected the implementation of planned activities for year as summarized below;

Departments Planned activities not completed /Directorate Transport  32 bus operator licenses not processed; 10% Bus routes not monitored. Regulation

 Coordination office for aircraft accident investigations not established.

 Capacity of the Air Transport Regulation division to regulate the aviation not developed.

Transport  Procurement of rehabilitation and upgrade of railway wagon ferry MV Pamba not done; services and

infrastructure  Progress on the upgrade Kampala Kasese railway line delayed.

 No progress on the New Ferry to replace Kabalega –Opening Southern Route.

Departments Planned activities not completed /Directorate Construction  9 reports on materials testing, quality control and research on construction materials not produced. standards and quality  Compliance to set engineering standards 49 MDAs not fully monitored. assurance

 Environment and social impact assessment reports on two Development projects prepared not done;

 The National Building Review Board (NBRB) was not appointed and the secretariat not established.

 Contractor for the outstanding Phase 2 works at Kyabazinga‟s Palace not fully paid.

 Procurement of Moisture testing filed equipment and Mobile Lab testing equipment not done.

 Environmental Audits on on-going projects not conducted.

 Training of 40 Local Government staff in RAMPS not conducted. District, urban  Computerized Vehicle Maintenance management system (CVMMS) not developed. and community  85 drivers not tested and certified. access roads  4 supervision vehicles for the Regional Mechanical Workshops of Bugembe, Mbarara, Gulu, including Chief Mechanical workshop not procured.

 Rehabilitation of selected office blocks and workshop facilities of Gulu, Mbarara, and Bugembe Regional Mechanical Workshops not achieved. Policy,  The planned 127 staff were not recruited. planning and  Monitor the 20,000 km of the National Roads network in 72 support Districts not accomplished. services  Consultant to carry out a study for the establishment of a Maritime was not achieved;

 Consultant to develop boat building standards not procured.

Failure to release the budgeted funds to the Ministry affected implementation of the planned activities which affects fulfilment of the ministry‟s mandate in the long run.

I advised management to ensure that the matter is always followed up during the year with the Ministry of Finance, Planning and Economic Development to ensure all the budgeted funds are released to the Ministry.

6.4 Grounded motor vehicles

Inspection of Works premises revealed that the Ministry had 105 grounded motor vehicles in different locations. Out of the 105; ten (10) vehicles were in private locations as shown below;

S/No. Reg. No Make / Type Location 1 UR0182 14oktober Wheel Loader Bwanda Covent Masaka 2 UG0822W Caterpillar Wheel Loader Kapchorwa T.C 3 UG790W Mitsubishi Dumper Truck Kira T.C 4 UG791W Mitsubishi Dumper Truck Kira T.C 5 UG0805W Sakai Pneumatic Roller Kira T.C 6 UG0836W Bomag Vibro Roller Kira T.C 7 UW0865 Bomag Pneumatic Roller Kira T.C 8 UW0173 Ford Bitumen Truck Kira T.C 9 UG0787W Caterpillar Wheel Loader Sunset Garage- Mengo 10 UG0035W Nissan Pick Up URRU

I noted that most of the vehicles have been grounded for more than 4 years and some were in a very bad shape as reflected in the sample pictures taken in the photographs below;

Grounded Vehicle at MELTEC- Other vehicle Parts loaded A grounded car packed Mbale on a grounded vehicle at under a shade of a Kireka Materials testing building at transport Licensing Board grounds.

The grounded vehicles continue to deteriorate in their economic value due to depreciation arising from the long stay without maintenance. In response, the Accounting Officer explained that vehicles were relocated and lined for boarding off.

I advised management to expedite the boarding process with a view to avoiding further deterioration of the vehicles.

6.5 Inspection

As part of the audit, inspection and audit of the Ministry upcountry stations and other operational areas including the Institutions under the control of the Ministry were carried out and below are the findings;

a) Mbarara Regional Mechanical Workshop

i. Grounded Tractors Physical inspection of the mechanical workshop showed that there were three tractors belonging to different districts as shown in the table and picture below;

Tractor Details Date received in Owner district workshop LG0002-42 Tractor Massey Ferguson 28/07/2010 Rukungiri District LG0020-21 Tractor Massey Ferguson 04/02/2010 Kisoro District LG0045-62 Tractor Massey Ferguson 01/06/2011 Isingiro District

The three tractors in the workshop belonging to the 3 districts stated above.

I noted that the tractors have been in the garage for over three years and their long stay in the garage could have hampered the work at the districts. Besides, there was no proper explanation why the tractors were not repaired and taken back to their respective districts. Some parts of the tractors were found disjointed.

In response, management explained that the tractors have been in the garage for over 3 years but this arose from Uganda Road Fund (URF) failure to fund the Regional Mechanical Workshops (RMWs). Some repairs have been done but once the necessary funds are secured, the major repairs will be carried out.

I advised management to expeditiously repair the tractors and have them taken back to the respective districts for use. ii. Office sharing I noted that the Mbarara Mechanical Workshop regional offices were housed in two office blocks that belong to Ministry of Works. The block has four office rooms of which two are occupied by Ministry of works and the other two by Ministry of Local Government. The lower office block has 12 office rooms. 5 rooms were occupied by Ministry of works; Diary Development Authority occupied 4 rooms while Ministry of Agriculture occupied 3 office rooms. The following was noted;

 There was no evidence of Memorandum of Understanding or tenancy agreements signed between the Ministry of Works and other Government Agencies/ Ministries. I could therefore not get the terms and conditions of occupancy which translates into loss of NTR to Government. 95

 It was not clear how other services in the blocks such as power, water, security, office cleaning and compound maintenance were handled among the occupants.  Interview with Workshop management showed that the building was renovated by the Ministry of Local Government under un-clear terms. I could not establish how much was paid for the service and under what terms the Ministry of Local Government did the repairs.

In the circumstances, I could not rule out the possibility of loss of revenue.

In response, the Accounting officer explained that the arrangement of sharing between MAAIF, MoLG and MoWT has been in place since 1989. The Ministry is formalizing the relationship with the two entities through a memorandum of understanding. This will cover extensively on sharing and payment of power, water, security, office cleaning and compound maintenance.

I advised the accounting officer to ensure the terms of occupancy are clearly defined. Management was also advised to expedite the MoU arrangements streamlining use of government structure. b) East African Civil Aviation Academy i. The Academy Legal Status The East African Civil Aviation Academy (EACAA) is a centre of excellence in aviation training for the region that was revived by the East African community whose awards are recognized by the education regulations all over the world. EACAA was established in September 1971 as the East Africa Civil Aviation Flying School of excellence under the Directorate of Civil Aviation (DCA) of the East African Community (EAC), with Government of Uganda, EAC and the United Nations Development Programme and the International Civil Aviation Organization UNDP/ICAO as the main contributors. While GoU upgraded the Soroti Airfield runway from grass surface to asphalt, EAC financed the construction of the school buildings, staff housing and navigation facilities as well as providing the administration staff and some technical personnel like counterpart instructors, Air

96 traffic controllers and Meteorologists. East African Airways provided the bulk of counterpart flying and engineering instructors.

During the audit, it was observed that the Institution operates more like a department under MoWT, headed by a director who reports to the Permanent Secretary. I noted there was no legal framework that supports the operations of the Academy under Ministry of Works.

The academy did not produce final accounts. I noted that there is no reporting frame work/basis that is well defined for independent preparation of final accounts as the legal frame work is no clear. In the circumstances, I could not appraise fully the operational results of the Academy.

In response; the Accounting Officer explained that the Ministry is discussing with Public Service to operationalize the Academy operations and its possibilities of becoming autonomous.

The outcome of the above commitment is awaited. ii. Staffing gaps A review of the Academy staffing structure as at 1st November 2014 revealed that the Academy had 76 approved positions. However, out of the approved posts, only 54 (71%) positions were filled leaving 22 posts (29%) not filled. Specifically, I noted the following issues under the two departments. iii. Flying School Department The three top most positions of Chief Flying Instructor, Principal Flying Instructor and the Senior Flying Instructor were not filled which puts the operations of the school at risk of failing to achieve its mandate. iv. Works and Estates Section The Position of Senior Assistant Engineering Officer (Civil) was not filled. The unfilled post is too critical that a gap could have negative effects on the entity‟s service delivery.

In response, management explained that the existence of vacancies in the technical posts was mainly due to challenges in attracting suitable candidates owing to the poor remuneration offered by the Academy compared to the market. The low salary was also a cause for the high turnover however effective 1st July 2014, the salaries of the technical staff were enhanced and a new salary structure for the technical staff of the academy was issued.

I advised management to continue following up the matter with the relevant authorities to ensure the posts are filled for improved service delivery as the legal status of the academy is being resolved. v. Grounded aeroplanes Inspection of the aeroplanes revealed that out of eight aeroplanes that the academy had only two (5X-UAN and 5x LWE) were operational. The other six were grounded as shown as in the table below;

S/N Registration number Reason for being grounded. 1 5X-ELG Engine overhaul. 2 5X –CEA Engine overhaul 3 5X-UWD Major Frame overhaul. 4 5X –VIC Accident that damaged the tail part 5 5X-KYO Engine problem and propeller. 6 5X-SRI As a result of getting an accident.

I explained to management that the grounded aeroplanes negatively impact on the operations of the Academy. There is a risk that if maintenance of these planes is not given priority assets may deteriorate further.

I advised management to plan and have all the aeroplanes repaired so that they are put back to use. c) Gulu Regional Mechanical Work Shop

The following was noted during the inspection of the workshop; i. Shared offices and Workshop Yard between Gulu Regional Mechanical Workshop and UNRA - Gulu Station During the review, I noted that the Gulu regional mechanical office premises are shared by both Gulu Regional Mechanical Workshop and UNRA-Gulu Station and the following anomalies were noted;  There was no evidence of Memorandum of understanding signed between the two entities for co-existence in the same premises.  Although the two entities each had its own water meters and electricity meters, the service bay and the parking yard were still shared. I explained to management that the shared service bay could cause inconvenience in case both entities have repair works at the same time.  Both of the two entities‟ grounded and running vehicles were mixed up in the parking yard with no demarcations and as a result the park yard space was getting congested.  It was not clear as to which entity was responsible for maintenance of the shared parking yard and the security of the premises.

I explained to management that there is a possibility of duplicate payments for the same services leading to loss of Government funds.

In response, management explained that a draft Memorandum of Understanding to clear the misunderstanding was prepared and forwarded to Solicitor General for advised.

The outcome of management effort is awaited. d) Kireka Division of Materials Testing And Research

The Division of Materials Testing and research falls under the department of Construction Standards and Quality Management in the Directorate of Engineering and Works, in the Ministry. The division is mandated to provide technical (engineering) services to the entire Construction Industry in the Country; through among others testing of construction materials to ascertain their suitability and 99 compliance to standards, offering advisory services on quality of construction materials, and conducting research on construction materials and technologies. Inspection of the division premises revealed the following; i. Inadequate Funding During the year, the division had budget estimates of UGX.4,275,651,000 for both wages and non- wages, however, a review of the Ministry‟s performance for year, showed that UGX.2,805,233,000 (66%) was spent on wages and official activities of the Division. Funds totalling to UGX.1,470,418,000 were not released to the division hence crippling the activities of the division. I noted that this affected mainly monitoring and development of policies, guidelines and strategies. I explained to management that in view of the growing construction industry in Uganda, there is need for increased monitoring and development of standard guidelines/policies to enhance quality of construction materials.

In response, the accounting officer explained that during the year, the budget was partially funded by MOFPED and recurrent activities were therefore scaled down to fit within the funds released.

I advised the Accounting Officer to liaise with Ministry of Finance Planning and Economic Development and ensure funds releases are improved to allow the entity to enforce monitoring for enhanced quality of standards. ii. Staffing Gaps At the time of inspection (December 2014), the division had 46 (68%) vacancies filled and 25 (32%) unfilled against the approved establishment of the division of 70 vacancies. I noted that some of the unfilled vacancies were senior positions that included the two Principal Engineers. I explained to management that staffing gaps of this magnitude impacts negatively on the operations and activities of the Ministry. There is a risk that the Unit could fail to attain its mandate.

In response, management explained that all the posts were cleared by Ministry of Public Service for filling; and the vacant posts were finally advertised.

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Management anticipates that in 2015 the ten (10) Civil Engineers will be recruited and absorbed in the division.

I await the outcome of management‟s commitment. iii. Lack of Essential Laboratory Facilities/Equipment I noted that at the division, vital equipment and chemicals were lacking for its effective laboratory and field operations. Interview with management showed that the unavailable equipment and chemicals included;  Set of drilling rig for geotechnical investigations;  Digital steel testing equipment for testing steel products;  Geo- physical soil testing equipment for foundation soil investigations;  Assorted structural integrity testing equipment (non – destructive tests)  Road pavement condition survey equipment and  Assorted chemical reagents.

I explained to management that lack of essential equipment and chemicals is a serious hindrance to the attainment of the Ministry mandate and its objectives.

In response, management explained that the procurement of essential laboratory equipment and chemicals is always limited by lack of adequate funds in the budget. Once the funds are available, the position will improve. Other possible means of re-tooling the laboratories is being pursued e.g. through support from Development Partner.

I advised management to take up the matter with Ministry of Finance for adequate funding so as to purchase the necessary equipment and chemicals. I urge management to continue pursuing the development partners for funding. iv. Inadequate transport equipment

The division has got six upcountry laboratories at Arua, Gulu, Mbale, Jinja, Mbarara, and Fort portal. However, inspection of the four (4) available vehicles allocated to the division showed that only one pickup was in fair running condition while the others were constantly breaking down and grounded. I explained to

101 management that inadequate transport could affect execution of field activities of the division.

In response, the accounting officer explained that the Ministry acquired new Vehicles from which one was allocated to the Department and indicated that the process of rationalizing the usage of the available fleet of Vehicles is on-going.

I await the outcome of the above commitment. v. Lack of Monitoring and Supervision from the Ministry Head quarter During the review, I noted that the Division hardly receives any team from head Office to carry out supervision and monitoring of the division activities. I explained to management that frequent monitoring and supervision of the activities carried out at the division would enhance productivity of the division.

In response, the accounting officer explained that monitoring and supervision mechanisms have been put in place to ensure proper coordination of all activities in the Ministry which include holding regular meetings, reporting, and spot checking of departmental activities and operations.

I advised management to implement the supervision and monitoring mechanisms put in place for effective service delivery. vi. Laboratory equipment not labeled Physical inspection of the division laboratories revealed that the chemical containers and laboratory apparatus and equipment were not labelled for quick identification, safe custody and to avoid a mix up of materials. There is a risk of using a wrong chemical on an experiment that could easily produce inaccurate and unproductive test results. Besides, the equipment may easily get lost through theft.

In their response, management explained that all laboratory equipment have serial numbers and the equipment details are usually recorded and kept as part of the store‟s records at the time of receipt/acquisition. Chemicals and Reagents normally

102 have labels on their containers for ease of identification. However management acknowledged that unique marking of the laboratory facilities would reinforce the record keeping system which is hoped to be undertaken when funds are secured.

I await the outcome of management‟s commitment. e) Inspection of Okokorio And Agule Ferry Landing Sites on Lake

Bisina

Okokorio and Agule Ferry Landing sites are located on Lake Bisina in Katakwi and in Kumi Districts respectively. MOWT contracted two (2) Local companies to construct the Landing sites. A consultant was also procured to supervise the construction of both sites on behalf of the Ministry.

The funding for the above works was from the Prime Minister‟s office in 2008. In last year‟s audit; it was noted that while the Pontoon ferry was delivered at CME (Ministry or Works and Transport) at a cost of Euros.1,502,000 and a consultant engaged, the construction works for the landing sites and approach roads had not commenced by end of the year and this resulted in UGX.5,245,466,352 to lie idle on the deposit account.

During the financial year under review; a total of UGX.2,844,237,389 was paid for the construction of landing sites and UGX.2,401,228,963 was committed awaiting the consultants advise. Below is a summary of inspection findings; f) Inspection of Okokorio ferry landing site - Katakwi district The contract price for the construction works was agreed at UGX.2,230,878,835. The contract commencement date was 3rd April 2013 and at the close of the Financial Year, the Ministry had paid three (3) Interim Payment Certificates totalling to UGX.1,094,248,185. During inspection of the landing site on the 17th of October, 2014 I noted the following;

(i) The project was behind schedule as the scheduled completion date had been set for 2nd January 2014. There was no evidence that the liquidated damages was being charged. 103

(ii) The contract conditions require that the site Engineer prepares the Site Diary which details the dairy activities carried out on the site. The site Diary is signed by the Site Engineer and is certified by the Resident Engineer who is a permanent representative of the Ministry of Works and Transport on Site. However, I noted that the hard copy of the site Diary that is required to be certified by the Resident Engineer was not prepared. This short coming raised doubt on the Interim Payment Certificates (IPC) that were raised by the Resident Engineer and eventually paid by the Ministry.

(iii) The Consulting firm that is responsible for supervision of the construction did not have a permanent staff on site.

(iv) The site Engineer confirmed that whenever he comes up with technical challenges or technical issues to consult, he rings the Resident Engineer who is based in Kampala and who sends the Clerk of Works that issue out instructions to the site Engineer on site. The Clerk of Works last issued instructions to the Site Engineer on the 6th October, 2014 a sign of inadequate supervision.

There is a risk that the contractor could do shoddy work due to inadequate supervision and works may be delayed. Delayed works come with challenges that range from increased costs and supervision.

In response, management explained that the delay was due to flooding in the project area which necessitated the review of the design to cater for low and high level docking. These are compensation events which will be evaluated when the final account is prepared and if found necessary liquidated damages will be charged. Management further explained that the poor performance of the consultant led to shoddy works and accordingly the Ministry has withheld payment to the consultant pending further evaluation. The Ministry instructed the contractor to correct defects at his own cost. Management has also constituted an in-house team to complete the works.

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I advised management to increase its supervision role and ensure that the defects are corrected within the agreed timelines. g) Inspection of the landing site- General findings: i. The Docking area Inspection of the docking areas showed that the activity was coming to a completion except for the access road to the docking area that was not yet completed as per the picture below:

Incomplete access road to the docking area

The construction of the ferry has delayed.

In response, management explained that the Ministry team has been constituted to complete the outstanding works and the assembling of the ferry has already been directed to begin at the Site.

I urged management to monitor the construction works closely and ensure the works are concluded. ii. Poorly constructed sideways of access road to the docking area The sideways of the access road to the docking area were not dug to the bed of the Lake. The work was on-going and the sideways were being supported by the installed Gabions. There is a possibility that the Access road will be washed away. See the pictures below;

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Poorly constructed sideways of access Road

Incomplete parking yard above. The Completed passengers shade. parking yard should be covered with stabilized Mar rum

In response, management explained that the contractor has been instructed to correct all the observed defects. On the issue of covering the parking area, the Ministry has put in place the team to complete outstanding works which will include laying of pavers on the stabilized surface, fencing of the area, gabion works and handrails. The outcome of the above commitment is awaited. iii. Failure to implement the original plan of the Okokorio ferry landing site Review of the plan of the Okokorio Ferry Landing site showed that some activities included in the original plan were excluded from the contract. These included; the servants‟ quarters residence, the Administration Block and the Water treatment Plant which were all not built. I explained to management in case the above essential activities are not done, this will affect operations of the ferry services in future.

In response, management explained that at the time of contract packaging, the items were found non-essential and were not included in the Bills of Quantities. However the passenger shade has been re-modelled to include an office as well as residence. Furthermore; it was explained that rain water harvesting facility was put in place to provide adequate water for domestic use.

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I advised Management to revisit the contract and ensure that the activities agreed on be undertaken. h) Inspection of Agule Ferry Landing Site on Lake Bisina in Kumi district The MOWT contracted a Local company to construct Agule Ferry Landing site at a contract price of UGX.1,653,530,183. The contract commencement date was 1st Sept.2012 and the planned completion date was set for 31st May 2013. At the close of the Financial year, the Ministry had paid five (5) Interim Payment Certificates totaling to UGX.1,452,564,020.The Landing site was inspected on 17th Oct, 2014 and below are the findings;

(i) The contractor is behind schedule by more than 2 years and at the time of audit; there was no evidence that liquidated damages were being charged.

(ii) The construction procedures and guidelines require that the site Engineer should prepare the Site Diary which details the dairy activities carried out on site. The site Diary is signed by the Site Engineer and is certified by the Resident Engineer who is a permanent representative of the Ministry on Site. However, the Site Manager never had a copy of the site Diary that should have been certified by the Resident Engineer. He claimed it was with the Site Engineer who was not at the site. This short coming raised doubt on the Interim Payment Certificates (IPC) that were raised by the Resident Engineer and eventually paid by the Ministry.

(iii) A review of the Visitors book and interview with the Site Manager revealed that the Resident Engineer representing the consultant last visited the Site on 02nd November 2013, in the presence of an Engineer representing the Ministry of Works. There was no evidence that the contract for the supervising consultant was terminated. There is a risk that the resident engineer could have abandoned the site and hence shoddy work could easily go undetected and the contractor paid all his dues.

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In response, management acknowledged that the project was behind schedule mainly due to flooding in the project area which necessitated the review of the design to cater for low and high level docking. These are compensation events which will be evaluated when the final account is prepared and if found necessary, liquidated damages will be charged. Management admitted that the performance of a Consultant was not satisfactory and stated that the Ministry has withheld payment to the consultant pending further evaluation. An in-house team to complete the works has now been constituted.

I await the outcome of management‟s commitment. i) Inspection of the landing site - General Findings; i. Lack of a sign post

The Contractor has not yet installed a sign post as evidence that it is the company constructing the site, and indicating that the Consulting firm and the Ministry are funding the construction. ii. Lack of an office at the construction site The contractor does not have an office at the site. iii. Completed Docking Area

Inside view of the completed passenger shade. Completed six stances latrine The inside part of the passenger shade was The six stance latrine was completed but completed but seats in the middle of the lacked the handles along the carriage shade were not constructed. way to the latrine.

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Incomplete parking yard.

The parking yard is supposed to be covered with stabilized mar rum that is not yet done

In response management explained that the seats in the middle of the shade and the handles along the carriage way will be fixed as extra works. I advised management to ensure the remaining works is completed to ensure safety of passengers.

iv. Failure to implement the original plan of the ferry landing site. A review of the plan of the Agule Ferry Landing site showed that some activities included in the original Plan were excluded from the Contract. These included the servants‟ quarters residence, the Administration Block and the Water treatment Plant that had not been constructed. There is a risk that the essential activities not undertaken may affect operations of the ferry services when it begins operations.

In response, management explained that at the time of contract packaging, the items were found non-essential and were not included in the Bills of Quantities. However the passenger shade has been re-modelled to include an office as well as residence. Furthermore; rain water harvesting facility was put in place to provide adequate water for domestic use.

I advised management to ensure all the above issues are handled to avoid ferry service interruptions.

6.6 Transport Licensing Board (TLB) Operations

a) Review of Performance - In land water Transport Vessels

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One of the functions of the transport licensing Board (TLB) is to carry out Inspection and licensing of Inland Water Transport Vessels under the Inland Water Control Act (1939) and to conduct periodic Inland Water Transport Vessel inspection and licensing at the various landing sites on the lakes and navigable sections of River Nile. A review of this function showed that a smaller number of vessels were licensed compared to the available operating vessels during the year which translates into failure to collect revenue from the operating vessels. There was no evidence that all the vessels were licensed as there was no data base for all the operating vessels.

There is a possibility that unworthy vessels may continue plying water routes endangering the lives and properties of sailors.

In response, management explained that the number of vessels inspected and licensed was lower than those plying different inland waterways. This has been caused by a number of factors listed below;

 Capacity gaps due to ceiling of required personnel; the Ministry has engaged Ministry of Public Service to address the gap during the restructuring exercise.  The e-Tax platform is not very convenient for boat owners to pay for their licences. Most landing sites where these boats are found have no banking facilities or reliable internet.  Most of these landing sites are remote areas with poor network coverage which makes it hard to use the e-tax platform.

Management further explained that though enforcement by use of patrol is sometimes insufficient; this option will be improved through coordination.

I advised management to ensure all the functions of the TLB are implemented. b) Limited Storage Space for Important Data Traffic and Road Safety Act section 71 (2) requires that; the Board shall furnish to the Minister once in every year a list of routes and packages of routes covering the whole of Uganda, selected and assembled so as to provide transport services to meet reasonable passenger demand and which will be reasonably efficient and 110 economic either as listed singly or otherwise for both large and small prospective operators. However during the review, I noted that the Board has data relating to statistics for granted routes for buses that is manually stored and bulky but has got limited storage space. I explained to management that there is a possibility of data getting misplaced and or mixed up causing unnecessary delays in retrieving of data needed for operations.

In their response, management acknowledged that most data on granted routes for buses is still manually kept but indicated the Ministry will initiate a procurement for a consultant to design a software package that stores all these records including records for all Passenger Vehicles Inspected and Licensed. Procurement of computers to be used by this software is in advanced stages. The Ministry has also put in place a Transport Data Management System to store all the data for the sector.

I await the outcome of management‟s commitment. c) Lack of adequate Office space for Operations Physical inspection of the TLB offices showed that the Board has limited space compared to the nature of operations that requires attending to the general public most of the time. I noted that the Board has various sections each carrying out a specific activity however; there is limited space for operations such as inspection of long vehicles like Buses. Below is a picture of clients waiting to be served and TLB offices clearly reflecting the shortage of space.

Main Block Office at TLB which TLB clients waiting outside due to limited accommodates office of the Secretary to space inside the assessment office the Board, Accounts Section, and the reception.

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Despite the challenge; I noted that the Office of the Prime Minister (OPM) stores some food relief in one of the oldest structures behind the TLB offices that further congests the premises occupying the limited space where other vehicles for inspection would be packed. It was not clear under which terms the OPM uses such a store and besides, the structure is too old and does not seem to be fit for storing food and or valuables. I explained to management that limited space for buses creates a bad image and doubt as to whether thorough tests are carried out. I also explained to management that Limited space may easily accelerate inefficiencies.

Management responded that indeed the office space at TLB was insufficient however, construction is on-going for a new office block which will also act as a Maritime Administration block. The Ministry has also written to the OPM to relocate their store in order to provide more space for vehicle inspection. The procurement of a firm to provide motor vehicle inspection services is in advanced stages which will also relieve the problem of lack of space for vehicle inspection.

I advised management to plan and address the above challenge for enhanced efficiency. d) Lack of reliable vehicles for field activities Physical inspection of vehicles used by TLB while carrying out field operations revealed that the current fleet of vehicles used by the Board was not mechanically sound and this hinders the major field activities such as inspection and licensing of passenger Service Vehicles (PSVs), monitoring bus operations and safety sensitization campaigns for both water and road transport. There is a risk that such poorly maintained vehicles could cause accidents while carrying out field work.

Management explained that that at the time of audit inspection, vehicles allocated to TLB were in a bad condition hindering TLB activities however, the Ministry has

112 since allocated a brand new pick up as part of the general pool and also initiated procurement for the repair of the existing vehicles.

Management action on the matter is awaited. e) Review of Computerized Driving Permits operations As part of the review, the computerized driving permits project was inspected focusing on the effectiveness of the process of acquiring a driving permit and the control environment. One activity of Printing and Issuing of Driving Permits to establish the effectiveness of internal controls regarding printing and issuing was sampled and the following limitations were noted; a) Lack of Data Recovery Center b) Lack of Computerized Archive c) Lack of an efficient interface between URA and Face Technologies Ltd.

There is a risk that in case of fire or any disaster the available data could get destroyed. The ministry has not backed up the data to date.

In response, management explained that the Ministry has finalized the procurement to establish a Data Recovery Centre and the related works have commenced. For the computerized archive, it was explained this was due to the fact that partly some functions both administration and management of driving permits were done by URA. The files were therefore sent from URA to MoWT and thereby forming a backlog at the registry. The process of computerizing the archives has been budgeted for in the financial year 2015/16.

I advised management to work out modalities of establishing a Data Recovery Center to ensure issuance of driving permits is not hugely interrupted due to unforeseen challenges at the main facility. f) Lack of Water Transport Standards/operational guidelines/policy The Inland Water Control Act (1939) Section 3 requires that every person applying for a license for the carriage of passengers or goods by ship shall submit to the Board; particulars of the type or types and numbers of ships to be used, 113

particulars of the construction, motive power and cargo capacity of every such ship, the total number of crew to be carried in every such ship, the number of passengers every such ship is intended to carry, the places between which the ships are intended to be navigated and the services to be provided by the ships.

However during the review; I noted that the Ministry has no standards/guidelines in place to guide the operations of the water transport. I explained to management that lack of standards could lead to unforeseeable challenges including loss of lives and revenue to Government.

Management explained that Uganda is a member of the International Maritime Organization (IMO) and as such is required to follow standards and guidelines issued by the IMO such as the International Convention on the Safety of Life at Sea (SOLAS) and the International Convention on Marine Pollution. Management indicated that it will come up with standards and guidelines to guide the user.

I advised management to ensure standards/policy guidelines are put in place to guide transport operations on water.

6.7 EAST AFRICA TRADE AND TRANSPORT FACILITATION PROJECT (EATTFP)

(a) Compliance With The Financing Agreement And Government Of Uganda Provisions

Project Management complied in all material respects with the provisions in the agreement and GoU regulations except in the following matter;

(i) Unreleased Budgeted Project Funds (IDA & GOU) Analysis of budget for the year showed that the Project expected funding from IDA and GOU to a tune UGX.894,846,000 and UGX.11,910,000,000 respectively. However, I noted that only UGX.14,227,175,761 was received from IDA and UGX.2,357,076,832 from GOU translating into 45% performance of the total budgeted funds for the year as summarised in the schedule below;

Details Budgeted Actual Receipts Variance Remarks Amount

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IDA Funds 24,894,846,000 14,227,175,761 10,667,670,239 43% of funds not applied for due to the low rate of absorption. GOU funds 11,910,000,000 2,357,076,832 9,552,923,168 80% of the budget not funded. Total 36,759,845,000 16,584,252,593 20,220,593,407

Funds totalling to UGX.9,552,923,168 (26 % of the total budget) from GOU was not released to the project. Low absorption capacity coupled with the non-release of funds from GOU affects implementation of the planned activities and could lead to unnecessary project extension costs.

Management explained that the unreleased funds from GOU had been budgeted for taxes that were finally waived by Ministry of Finance as at 30th June 2014 while the slow disbursement of funds from IDA was a result of delayed completion of works for Malaba OSBP and Mukono Railway ICD (Inland customs Department).

I advised management to take up the matter with appropriate authorities for purposes of obtaining adequate funding and enforce monitoring to ensure project activities are completed as scheduled.

(b) General Standard Of Accounting And Internal Control

A review of the project financial management system was carried out and it was observed that management had instituted adequate controls to manage project resources.

(i) Inspection of construction works at One Stop Border Posts (OSBP) I inspected four OSBPs at Katuna, Mutukula, Mirama, Busia, Malaba and Mukono ICD was carried out between the 24th August and 5th September 2014.

It was noted that works at all the OSBPs and Mukono Railway ICD were behind schedule despite several requests to have the project extended. 115

Specific observations at each inspection site are as below:

BUSIA OSBP The construction of Busia OSBP at a contract sum of UGX.15,898,641,294 was for a period of 12 months. Works commenced on 29th August 2013 and was to be completed on 28th August, 2014. At the time of inspection, the agreed time period had expired and the construction works were far behind schedule. At the time of reporting, the progress of works was estimated at 60% and the contractor had provisionally been given the extension up to end of December 2014. Such delays have an effect on project performance.

In response, management explained that some major works could not commence due to the need to keep the border operational. Management further indicated that there was a funding challenge for extra works which were omitted at the bidding stage yet the works were essential for OSBP operations. These include purchase and installation of fire-fighting equipment, Generator and Stabilizer, borehole, relocation of the national fiber optic cable, and extension of truck parking yard. The cost variation to cater for the above extra works was estimated at about UGX.2 billion and that TMEA was soliciting for the funds.

I advised management to liaise with the PS/ST and IDA on the matter and have the extra works urgently funded to avoid any delays and costs associated with project extension.

MALABA OSBP The construction of Malaba OSBP was agreed at a contract sum of UGX.15,708,759,579 to be completed within 12 months effective 29th August 2013. The expected date of completion was scheduled to 28th August, 2014 however, this period had expired before completion of works. At the time of inspection, works were estimated at 75% completion. As at the time of reporting, I noted that management had not secured a “No Objection” for the project extension from the IDA. Non completion is likely to extend the project life further. 116

In their response, management explained that the Contractor‟s performance was affected by delayed relocation of URA customs office and delayed construction of exit road by UNRA. The Ministry applied for an extension of the IDA credit in March 2014 however, the extension has not been secured. Management has continued to work with the contractor to achieve practical completion of major works by the credit closure date of 30th September 2014. Presently, the average physical progress of works at Malaba is estimated at 94% and full completion will be achieved by end of November 2014.

I advised management to seek for an extension and have the construction finalized.

MUTUKULA OSBP The construction of Mutukula OSBP commenced on 6th September 2013 at a contract sum of UGX.18,793,900,201. The expected date of completion was 5th September 2014, however, at the time of inspection, the expected date had expired yet a substantial amount of work had not been done. Delayed completion of works has greatly affected the performance of the project.

Management explained that the contractor‟s underperformance was a result of partial site possession by the contractor due to land disputes with Project Affected Persons which caused a design review/alteration in the project area; delayed relocation of Government border agencies (Immigration and Police); additional excavations due to marshy soil; and less mobilization by the contractor.

However, the above issues have been resolved and the average physical progress of works was presently at 60% completion. The contract was also extended to 2nd December 2014 to enable the contractor complete all outstanding works.

I advised management to monitor the contractor closely and ensure that the works are completed within the extended timelines.

KATUNA OSBP The construction of Katuna OSBP at a contract sum of UGX.8,951,277,750 commencement on 13th June 2014 and was estimated to be completed on 13th

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June, 2015. At the time of inspection, the contractor had completed demolishing of the existing structures preparing the site for construction works to commence. It was evident that works may not be completed at the set period.

I advised management to ensure close monitoring so that the project is completed on schedule.

MIRAMA HILLS OSBP The Construction of OSBP at Mirama Hills at a contract sum of US $ 7,817,703.32 commenced on 4th July 2013 and the revised completion date had been set for 19th September 2014. At the time of inspection, the extension had expired and the physical progress of works achieved was estimated at 70%. Delayed completion of works affects border post operations and could lead to unnecessary project extension costs.

Management explained that the slow progress was attributed to the Supervision Consultant who is based in Nairobi where decisions and instructions are taken; contract administration differences with former Project Architect which caused delays in procurement of materials and processing of documents/payments; additional scope due to demolitions and bulk excavations; heavy rains in South Western Uganda and low mobilization by the Contractor. Management indicated that the above issues have now been resolved and the average physical progress of works had reached 80%. Consequently, the contractor was given up to end of December to complete all outstanding works. The contractor has also been served a notice to charge liquidated damages.

I advised management to enforce the provisions of the contracts and ensure that the contractor speeds up the works at the border posts to avoid escalation of contract costs.

MUKONO ICD The Construction of proposed Railway Inland Container Depot (ICD) at Mukono by an international construction company at a contract sum of US $ 8,688,120,112 commenced on 10th December 2012 and was expected to be completed on 10th December 2013 but was later revised to 9th June 2014. At the time of inspection, 118 the constructions were estimated at 50% completion way below expected performance. As explained earlier, delays are likely to affect the project performance and time extensions.

Management explained that the contractor‟s underperformance was caused by among others; partial site possession due to disputes between Uganda Railways Corporation (URC) and Mukono District Council over the ownership of existing warehouses that was later resolved in July 2014; death of the Contractor`s site engineer in December 2013; and increased scope of works on the office block and container platform.

However, all the above challenges were resolved and extension sought from the financiers to the end of December 2014 and the average physical progress of ICD works was presently estimated at 85% completion. It was further indicated that the contractor has been served with a notice to charge liquidated damages.

I advised management to increase suspension and monitoring with a view of having the construction completed within the extended time period.

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JUSTICE LAW AND ORDER SECTOR

7.0 MINISTRY OF JUSTICE AND CONSTITUTIONAL AFFAIRS

7.1 Mischarge of Expenditure – UGX.615,047,805

The Parliament of Uganda appropriates funds annually in accordance with the needs of each MDA. This appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account and MTEF codes.

A review of the Ministry‟s payments revealed that there were mischarges under various codes during the year under review, totalling to UGX.615,047,805. These payments were made without requisite authority. The practice undermines the budgeting process and the intentions of the appropriating authority. The practice also leads to financial misreporting.

The Accounting Officer explained that the practice is regrettable, and they are working towards eliminating it.

I advised the Accounting Officer to streamline the budgeting process and ensure that funds are allocated to budget lines in accordance with priorities. Any reallocations should be undertaken in accordance with the regulations.

7.2 Outstanding Commitments – UGX.442,173,233,469

The Ministry of Justice and Constitutional Affairs had accumulated outstanding commitments totaling UGX.442,173,233,469 as at 30th June 2014. The outstanding commitments comprised of court awards and compensations UGX 440,484,898,505, unpaid rent, UGX 976,958,385, withholding tax UGX 11,998,536 and other obligations UGX 699,378,043.

The outstanding commitments position rose from UGX.164,163,005,576 at the end of the previous year to UGX.442,173,233,469 at the end of the current financial year, (169% increase). It is important that government examines the causes of these losses with an objective of minimizing them. 120

It was further noted that there are delays in settling claims which are likely to lead to the accumulation of unpaid Court awards and compensations and other claims to unmanageable amounts. The delayed payments may also lead to penalties in interest and other related charges.

The Accounting Officer explained that the cause of the accumulation is due to inadequate funding and lack of instructions from line Ministries when they have committed the offence. The Accounting Officer promised to meet the Ministry of Finance, Planning and Economic Development to discuss the minimization of accumulation of Court awards and also avoid delays in payment. The Accounting Officer also suggested other alternatives such as devising means of settling court awards, holding meetings and conducting workshops with some of the entities concerning their obligations, as well as advocating for transfer of settlement of liabilities to the responsible MDAs.

I urged the Accounting Officer to continue with dialoguing with a view of minimizing court awards and compensations.

7.3 Court awards and compensations

a) Rise in Contingent Liabilities – UGX.4,295,304,082,625 During the year, contingent liabilities rose from UGX.541,554,003,100 to UGX.4,295,304,082,625 as per the Statement of Contingent Liabilities as at 30th June 2014. This indicates a 693% increase in this category of liabilities. This situation is untenable and likely to create an additional burden on the public resources.

The Accounting Officer explained that the contingent liabilities include only the filed suits and excludes intentions to sue. He further explained that the figure of UGX.4,295,304,082,625 provided in the contingent liabilities is for the most probable cases that may be lost. There is need for Government to examine the issue further with a view to establishing the likely causes in order to facilitate Government to arrive at a sustainable solution.

121 b) Budgeting for Court Awards and Compensations I noted that whereas the Court awards and compensations have continued to accumulate over the years, budget allocations and releases have not improved to cover the obligations. The table below shows the Court awards and compensations at the end of each year, subsequent budgets and releases made to settle the obligations: No Financial Outstanding Approved Amount Paid Year From Amount at start Budgeted (UGX.) of Year (UGX.) Amount Year (UGX.) 1 1st July 2012 54,009,997,832 4,346,998,000 20,746,165,234 2 1st July 2013 82,342,100,818 4,346,998,000 5,361,160,000 3 1st July 2014 164,163,101,576 4,347,324,000 8,500,551,991

From the analysis, it is clear that insufficient funds have been budgeted and released to cover the outstanding amount over the years. This has partly caused the accumulation of the arrears.

The Accounting Officer explained that this matter has remained a relentless challenge to the Ministry, as the Ministry of Finance, Planning and Economic Development over years has not taken into consideration the existence of two distinct provisions in MTEF ceiling of Court Awards and Compensations that is current and the arrears. He further explained that the unsettled amounts will continue to accumulate if sufficient provisions are not made.

I advised that in the budget preparation process and provisions in MTEF ceilings on Court Awards and Compensations, consideration should be made to provide for Current and Arrears of Court Awards and Compensations. I also advised that Management should continue liaising with Parliament and MoFPED to ensure that these cumulative arrears of compensations are cleared. c) Accumulation of interest on Court awards and compensations – UGX.60,396,783,924

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According to Section 26(2) of the Civil Procedures Act Cap 71, court may in the decree order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit.

I noted that in several court cases ruled against Government, court awarded interest ranging from 6%-25% and even up to 40% in some cases, per annum on the court awards.

It was observed that as a result of government‟s failure to pay these court awards on time, interest of UGX.60,396,783,924 has accumulated over time and in some of the cases interest is now greater that the principal award. At the current rate of payment it would be difficult for government to extinguish the total outstanding debt in court awards.

The Accounting Officer explained that budget ceilings are set and no amount of negotiations with MOFPED have borne additional funds.

I advised the Accounting Officer to ensure that adequate planning is made to promptly settle payments related to these cases to avoid interest charges and other related charges that may arise therefrom. d) Failure to document guidelines for payment of court awards and compensations An interview with management and a review of documentation revealed that the Ministry established a committee on compensations, out of court settlement and court awards. The Committee sits every quarter to determine which cases to prioritize for payment.

I noted that whereas the Committee has been in existence for some years now, it is not supported by any documentation or clear approval from management. I also noted that there are no documented guidelines on the payment of Court awards and compensations.

In the absence of documented guidelines it becomes difficult to establish whether the settlements were done in a transparent manner. 123

I further noted that the criteria for priority of payment of court awards and compensations are not documented. As a result of undocumented payment guidelines, there is a payment backlog and aging out of claims is becoming difficult. For instance, there are claimants who have never received any payment dating as early as year 1999, yet those awarded by court in recent years are being cleared.

The Accounting Officer explained that the committee to manage court awards and compensations looks at the funds available and distributes them accordingly. The criteria used include; First in first out, Mandamus cases, High interest rates, Human rights cases, and Medical grounds.

I advised the Accounting Officer that the internal guidelines for management of court awards and compensations should be documented and followed. e) Management of Court Awards and Compensation Files (i) Inadequate Records Management It was observed that the records management of Court awards and compensations is inadequate because the Ministry‟s case management filling system is still a manual one. MoJCA works with case and advice request files that require tracing, quick movement and action which is not possible in the manual system. For example it is not possible to identify cases with high interest charges. It was also noted that MOJCA cannot easily ascertain the number of claims that have been cleared and those outstanding at a given time. As the Directorate of Civil litigation has pending cases for a long time, tracing the documentation from manual records can be cumbersome and subject to abuse.

The Accounting Officer explained that the Ministry is in the process of securing a service provider to computerize the system.

I advised the Accounting Officer to expedite the process of computerizing records so as to improve information flow and protection.

(ii) Ledger Card Management: 124

During the audit of court awards and compensations, a sample of files was reviewed to ascertain whether the amounts reported on the ledger cards actually tallied with the outstanding amounts awarded in the cases. The following were observed about the ledger cards;

(a) Lack of ledger cards: It was observed that certain files lacked ledger cards contrary to best practice. This is risky because one cannot easily ascertain how much money has been paid and how much is outstanding. It also raises questions of figures raised in the final accounts as payments made and outstanding balances. Examples of the cases with missing cards are; Benon Turyamureeba & 132 Others Vs Attorney General Misc. Application 440/2005 and Capt. Samuel Nsubuga & Others Vs. AG CS. 547/2007.

The Accounting Officer explained that some files do not have ledger cards because some of the required information is not readily available on the file.

I advised the Accounting officer to ensure that the files are updated and the ledger cards opened.

(b) Ledger cards are not properly updated: Best practice dictates that while maintaining a ledger card, it should be opened on the date of award and the amounts awarded indicated, subsequently, when payments are made, they should be entered onto the card with their corresponding dates indicated and at the end of the year. The ledger cards should be updated to get the figure outstanding as at the close of the year. During the audit of the files, it was observed that the ledger cards were not properly updated. On some files, when payments were made, they were not reflected on the ledger cards. It was further noted that all the cards were not updated at each year end while on other cards, the opening figure was not that awarded but a figure “brought forward”. This raises doubt about the figures reported in the final accounts as outstanding especially for awards that earn interest.

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Furthermore, computations were carried out on some files and outstanding figures compared to what was reported on the ledger cards and major differences were observed. Of the five files sampled the total difference was UGX.1,769,667,605. There is a risk of failure to track payments made on various cases.

The Accounting Officer explained that they are constantly improving the use of Ledger cards and ensuring that they are updated. He also explained that they will be phasing them out as they move towards computerization.

I wait the result of management efforts on improving the custody of the information.

(c) Ledger cards lacking serial numbers: It was also observed that certain ledger cards were not serially numbered. This is risky because a ledger card can be plucked out and replaced with another without anyone noticing. Furthermore, it was observed that there are two types of ledger cards that are used. This is risky too because having two sets of source documents can be misleading as they can be tampered with or manipulated.

The Accounting Officer explained that the ledger cards that are not serially numbered (ledger sheets) were first used when the Ministry had just embarked on opening up ledgers on every compensation/ court awards file but management later realized that this type of ledger cards were not appropriate as they seemed to be weak and also lacked numbers. Management stopped their use and resolved that serialized ledger cards instead be procured and the ledgers sheets which were already on files be phased out slowly as the files continue to be updated by replacing them with serialized ledger cards which is ongoing.

I advised the Accounting Officer to ensure that the ledger cards are serialized.

(iii) Inadequate filing and mix up of records For every case handled by MOJCA, a file is opened on which all documentation related to the case is kept. I observed however that some files contained

126 documents relating to other cases, and some files were missing key documents. For example the documents of Mugwere Yekosofati Vs. AG HCCS 28/2007 were misfiled in Administrator General Vs. Bwanika James & Others SCCA No.7/2003. Improper filing of documents may lead to loss of cases.

The Ministry should ensure that all documents are properly filed on their respective files.

(iv) Poor information flow To maintain and enhance internal operations of an organization, information must flow both vertically and horizontally, hence the need to maintain designated places for easy access and retrieval.

However, it was observed that many files are kept in state attorneys‟ offices instead of the Civil Registry and in many instances; they are not well protected from outsiders. Furthermore, files relating to completed cases are delayed to be approved, thus resulting into understatement of payables in financial Statements. Failure to get hold of the pertinent information will mean that the liabilities in the Financial Statements will be understated.

Management appreciated the observation. I advised that all concluded cases should be forwarded to the Director, Civil Litigation who in turn forwards them to higher authorities for approval and for capture in the database.

(v) Access to Registries The Ministry of Justice operates both security and open registries. Inside the said registries, important and confidential records are kept. It is in this regard that access to these registries should be restricted to authorized personnel to avoid any likely compromise on the information contained in the files (being accessed by unauthorized people).

However, observation indicates that any person can easily access the registries, particularly the Civil Litigation Registry. This statement is confirmed by people we

127 found seated on the chairs where the staff who man the registry are supposed to be. Worse still, there are times when the registry is left open without a single staff with outsiders standing by the entrance. There is danger in leaving the registry unattended by staff because the non-staff can easily access information on the files which could result into loss of cases wince the other party‟s lawyers may access information that may disadvantage the Government‟s defence.

The Accounting Officer noted the observation and pledged to ensure that the registries are properly manned and a circular to this effect has been issued.

I advised the Accounting Officer that the Ministry‟s registries should be manned in such a way that no unauthorized person is allowed to have access to them. I also advised that no registry should be left open when all the staff in charge are out so as to avoid strangers getting access to vital information. Staff manning the registries should ensure that the registry is not left unattended. f) Lack of Follow up on Cases Won by Government A review of the sampled cases revealed that a total of over 50 cases have been won by Government, with an estimated claimable amount of UGX.32,101,000,000. The Attorney General is commended for this achievement and for a saving of UGX.100,892,976,730 on the cases won.

However, I also noted cases where the Attorney General was awarded costs and other payments by court, the costs had not been recovered, by the time of the audit. Management attributed the failure to recover/enforce court awards to lack of resources for initiating recovery/execution proceedings. Government continues to lose non-tax revenue in the won cases which could be used to offset outstanding court awards.

The Accounting Officer responded that they followed up on cases won and some money has been sent to the Treasury. The Accounting Officer further explained that in the case of costs, Courts have said they are not entitled to instruction fees.

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In the near future, they intend to engage executioners/court bailiffs with authority from the Chief Registrar and MOFPED.

I advised the Accounting Officer to put in place a clear follow up mechanism to ensure recovery of monies due to Government.

7.4 Staffing Gaps in the Directorate of Civil Litigation

It was noted that the Directorate has thirty technical staff under the director. Three Commissioners, Seven Principal State Attorneys, five Senior State Attorneys and fifteen State Attorneys. However, as per the staffing structure, the Directorate is supposed to have a total number of forty lawyers. The available number of staff is inadequate to handle over five thousand existing files and the ever increasing number of cases arising out of continued litigation against Government.

The understaffing causes fatigue and deteriorating morale for the current staff and creates case backlogs.

The Accounting Officer explained that the approved structure for Directorate of Civil Litigation provides for twenty five Legal Staff and twenty one are filled. A submission was made to Public Service Commission on 27th November, 2014 for filling of the three vacant posts of Senior State Attorney. The Accounting Officer further explained that they expect the number of staff to increase when the proposed structure is approved.

I advised the Accounting Officer to follow up with the relevant authorities to ensure adequate staffing of the Directorate.

7.5 Failure by the Attorney General to file a defence

I observed that in some cases, the Attorney General did not file a defence or failed to appear and defend cases filed against Government. The Government loses funds in these cases that have not been defended by the Attorney General. Failure to defend Government leads to loss of cases and eventually loss of public funds.

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The Accounting Officer explained that they sometimes delay to get instructions, for example, in the case of Fuelex (U) Ltd Vs AG HCCS 825 of 2007. He also explained in some instances they are unable to go to Court because of matters beyond their control.

I advised the Accounting Officer to ensure adequate planning and scheduling of available staff resources to ensure that cases are attended to.

7.6 Payment of procurement claims arising from breach of contracts by other Line Ministries According to Section 59 (2) of the Public Procurement and Disposal of Public Assets Act, 2003, a procurement or disposal shall only be initiated or continued on the confirmation that funding, in the full amount over the required period, is available or will be made available at the time the contract commitment is made.

However, I observed that some Ministries enter into contracts and later breach the terms of the contract by failing to pay the contractors or service providers who sue the Attorney General in his representative capacity as the chief legal officer of government. These Ministries are unresponsive when called upon to assist the Attorney General to defend their actions and as a result the Attorney Generals loses these cases which escalates the outstanding payments on court awards. The table below contains sampled cases:

Case File Judgment Decratal Interest Balance Ministry Date Sum Outstanding (UGX.) (UGX.) (UGX.)

New World 23/7/2014 147,200,000 147,200,000 Ministry of Services Ltd vs Defense AG CS 650/2013 Prime 07/06/2010 1,322,098,06 718,454,817 1,967,851,47 Ministry of Constructors Ltd 2 6 Water Vs. AG HCCS 55/08

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Case File Judgment Decratal Interest Balance Ministry Date Sum Outstanding (UGX.) (UGX.) (UGX.)

Combined 20/03/2009 176,791,511 176,791,511 Ministry of Services Limited Water Vs. Attorney General HCCS 657 of 2003

There is laxity by Government Ministries in aiding the Attorney General‟s chambers to efficiently perform his role.

The Accounting Officer agreed with the observation, and explained that the Ministry has communicated to MDAs about the consequences of not meeting their obligations.

I advised that each Ministry should bear the legal costs arising from breach of contract to reduce laxity in providing Defence in cases against Government.

7.7 Irregular Compensation to Lowi Roadways Ltd Whenever the Ministry receives any compensation issues, be it relating to movable chattels or land, the final decision arrived at as to how much should be paid to the complainant, should be based on the advice of experts in pertinent fields. As far as land is concerned, the advice of the Chief Government Valuer is paramount while that of the Chief Mechanical Engineer (Ministry of Works) comes into play concerning motor vehicles.

It was noted that a payment of UGX.1,959,485,948 was made to a Law Firm on behalf of a client for loss of Buses destroyed in an ambush by Kony rebels and the attendant loss of earnings. Instead of soliciting competent advice and assistance of pertinent experts in the areas mentioned, the Ministry went ahead and paid the sum of money based on the advice of a Principal State Attorney who lacks the knowledge and skills of the Chief Mechanical Engineer. The resulting amount arrived at is likely to have been misstated and probably caused financial loss to Government.

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The Accounting Officer responded that the vehicles were bombed and the Attorney General used his discretion to determine the values for compensation.

I advised that determination of the amount payable to claimants in compensation issues should be arrived at by involving Government technical officers.

7.8 Fuelex (U) Limited vs. AG HCCS 825 of 2007 The Plaintiffs sued the Attorney General for recovery of UGX.59,801,899 being amounts wrongly deducted as Withholding Tax (WHT) from the payments for fuel supplied to the Ministry of defence, interest thereon, general damages and costs of the suit. Court entered a default judgment and awarded 59,801,899 as WHT wrongly withheld, costs at the rate of 25% from 24th October 2007 until full payment and costs of the suit.

A detailed review of the case noted the following:-  The Attorney General did not appear and defend and as a result Government was not effectively represented.  The court ordered that the defendant may recover the monies paid to the plaintiff from URA in lieu of the monies refunded. The money has not yet been recovered from URA.  To date, the decree has not been satisfied yet the decretal sum and costs continue to accrue interest which as at 30/6/2014 had accumulated to the tune of about UGX.114,261,333. The outstanding balance as reflected on the ledger card now stands at UGX.182,218,133.

There is a risk that Government will lose more funds in interest in case the amount remains outstanding.

The Accounting Officer responded that efforts will be made to contact MOFPED for necessary funding and as soon as it releases the funds, they will have the amount settled.

I advised the Accounting Officer to follow up with MOFPED to have the amount settled expeditiously. 132

7.9 Delays by the Chief Government Valuer to issue valuation reports In the process of handling compensations and court awards, MOJCA is required to determine the value of property for which the claimant seeks compensation. In doing this, the Ministry calls and relies on Government agencies such as the Chief Government valuer or Chief Mechanical Engineer with the relevant expertise in the matter. I however observed that in some of the cases, the Chief Government valuer delayed to provide the Attorney General with a valuation report, despite constant reminders. Details are shown in the table below:

S/No. Case File No Date when the Date when request was made valuation report was issued

2. Metropolitan properties Ltd Vs. 12th August 2013 13th Dec 2013 Attorney General CS 102/2009. 3. Mbuya Blocks Limited Vs. AG 11th May 2010 25th March 2011 and 2 Ors HCCS No. 293/2005

There is a risk that a delay by the Chief Government Valuer to issue valuation reports can result into reliance by court on the plaintiff‟s valuation which can inevitably lead to loss of colossal sums of money by Government. The Accounting Officer suggested that the Chief Government Valuer be advised to make timely valuations and send the reports.

I advised the Accounting Officer to make regular follow up with the Chief Government Valuer.

7.10 Human Resource and Strategic management issues

a) Delayed restructuring processes

Good strategic planning requires an entity to carry out human resource planning to ensure that adequate number of qualified staff is in place to carry out the operational activities of an entity so as to enable her achieve strategic objectives. Section15(A-a) of the Standing Orders, 2010 mandates the Ministry of Public

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Service to determine the structure, terms and conditions of service in Government entities.

A review of the Ministry‟s Strategic Investment Plan (2012/13-2016/17) revealed that management of the Ministry came up with a proposed macro organization structure that would enable her to fulfil its mandate. The Ministry of Public Service has in the past few years been restructuring MDAs including MoJCA. The process has however been slow implying that the proposed macro organization structure is not yet approved by the Ministry of Public Service. Consequently, all MoJCA Directorates are operating below the required staffing levels and this has been rated as a high risk in the Ministry‟s Strategic Investment Plan. As noted in the previous year audit report, unless the proposed macro organization structure is approved and operationalized, implementation of Ministry‟s strategic plan may be negatively affected.

The Accounting Officer explained that the restructuring exercise is awaiting the issue of a certificate of financial implications from the Ministry of Finance, Planning and Economic Development.

I advised the Accounting Officer to follow up the approval of the proposed macro organization structure by dialoguing with the Ministry of Public Service, Cabinet and Ministry of Finance Planning and Economic Development, to enable the Ministry deliver on her mandate. b) Staffing gaps in the existing organization structure Despite the fact that the proposed macro organization structure has not been approved as noted in para.7.4.1 above, various posts in the existing organization structure have remained vacant. These include key posts of: Commissioner Civil Litigation (Institutions); Commissioner Legal Drafting (LG); Administrator General, Principal Personal Secretaries, Principal State Attorney and Principal Accountant.

A review of the Ministry‟s ministerial policy statement revealed that this situation was mainly attributed to the current freeze on recruitment and the wage bill constraints which prevented the recruitment of more staff. Lack of staff in vital

134 positions of the organization affects the performance and overall achievement of organization‟s goals and objectives. The existing members of staff may be overworked leading to staff demotivation and staff turnover.

The Accounting Officer explained that they are in the process of filling the vacant posts.

I advised the Accounting Officer to continue liaising with the Ministries responsible and have the gaps filled. c) Failure to Approve Centre for Alternative Dispute Resolution (CADRE) by Ministry of Public Service The Arbitration and Conciliation Act, 2000 (Cap.4) is an amendment of the laws relating to Domestic Arbitration, International Commercial Arbitration, Enforcement of Foreign arbitral awards and to define the law relating to conciliation. The Act establishes the Centre for Arbitration and Dispute Resolution (CADRE). The role of CADRE is to promote arbitration and alternative dispute resolution to decongest the Commercial Court and to create a conducive business environment for promotion of business to attract investments.

The Ministry of Justice together with the JLOS Sector Secretariat and the Ministry of Public Service (MoPS) finalized the institutional arrangements of establishing CADRE in accordance with the Arbitration and Reconciliation Act Cap. 4 and this was approved by the CADRE Council. The organizational structure was then submitted to the MoPS for approval but to date nothing has been done. Failure to approve CADRE body defeats the good intention of formulating it and loss of the intended benefits.

The Accounting Officer responded that the Hon. Attorney General wrote to the 1st Deputy Prime Minister and the Minister of Public Service requesting for his intervention to have this matter finally resolved.

I advised management to continue liaising with the responsible authorities and ensure that CADRE is approved to allow its operation.

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7.11 Delays in Settlement of Commitments

Best practice requires that once a commitment is entered into, there is need to ensure that funds are available to settle the commitment upon delivery of goods and services. Regulation 105(1) of the PPDA Regulations, 2003 also requires a procuring and disposal entity not to initiate any procurement proceedings or activities for which funds are neither available nor adequate.

A review of the accounting records revealed that commitments totaling to UGX.629,235,292 settled during the year were prompted by notices of intention to sue or signing consent agreements between the Ministry and the service providers as a result of delayed settlement. It was further noted that some of the payments related to the previous years.

Delayed settlement of creditors can result into the following:  Double payments as a result of failure to differentiate paid invoices from unpaid ones over time.  Budgetary indiscipline as a result of incurring expenditure in the periods to which it does not relate.  Legal suits against the Ministry and loss of trust by the service providers.

The Accounting Officer explained that delays in settlement of commitments are occasioned by the inadequate budget received by the Ministry and emergencies that the Ministry is bound to comply with.

I advised the Accounting Officer to always liaise with the relevant authorities for adequate funding.

7.12 Land and Fleet management

a) Lack of Land titles for Regional Offices

While the Ministry has made improvements by acquiring regional Offices in Mbarara, Gulu, Mbale and Arua, at the time of writing of this report, there was no evidence of ownership of this property in form of land titles. There is a risk of loss

136 of valuable property to other claimants or encroachers. Karamoja office which is opening soon faces a similar problem.

The Accounting Officer responded that Ministry is in advanced stages of securing the said land titles.

I await the results of management efforts. b) Un-disposed of vehicles Treasury Accounting Instructions Section 816 requires a Government entity to maintain an operating records/register for each vehicle to record its history, performance, servicing, overheads and repairs among other things, in sufficient details for periodic assessments to be made of its performance compared to its cost of up keep. Once the vehicle is not cost effective, it should be boarded off.

A review of the Board of Survey Report dated 18th July, 2013, revealed that an adhoc Board of Survey which sat on 14th June 2013 and resolved to boarded off 8 unserviceable vehicles. However, by the time of writing this report, the said vehicles had not been disposed off. Most of the vehicles are parked in the Ministry‟s parking yard thus wasting the valuable space. Failure to dispose of the grounded vehicles can also result into:  storage costs especially those vehicles kept in garages;  Loss in value of the vehicles due to depreciation;  Theft of vehicle parts and vandalism of idle vehicles in the garages. The Accounting Officer explained that the process of disposal delayed due to the need to ensure that the process was transparently done. The process is now on course and the vehicles are expected to be boarded off soon.

I advised management to expedite this disposal process to prevent the vehicles from further deterioration. c) Vehicle repairs and maintenance

The Ministry sends its fleet to prequalified garages for routine repairs and maintenance. Under normal circumstances, each vehicle is supposed to have a 137

ledger maintained for it by the transport officer and another by accounts section for the purpose of knowing which vehicle frequents the garage. Similarly, all the repairs invoices should be endorsed by the transport officer indicating that the repairs were actually carried out. On the contrary, during the year the procedures indicated above were not undertaken.

I advised the Accounting Officer to increase the vehicle monitoring and supervision roles and have the required process started and finally implemented.

7.13 Budget performance

The Ministry‟s approved recurrent budget for the year amounted to UGX.60,643,372,903. However, by the close of the financial year, UGX.57,225,590,343 had been received (representing about 94.4% of the budget) leading to a shortfall of UGX.3,384,225,686. The shortfall in the releases partly affected implementation of planned activities. While some planned activities were partially implemented or others were not implemented at all. The table below refers:

Planned Key Expected Output Actual output Variance Activity Administrator General-Estates Registration and Inspection Issuing 350 land 350 land transfers 159 land transfers 241 land transfers not transfers to be issued. to be issued. issued. (68%) under performance Apply to Court to 25 letters of 1 letters of 24 letters of grant 25 letters of administration administration administration not applied administration applied for applied for for (96%) under performance 200 Estates to be 200 Estates filed for 34 Estates filed 166 Estates not filed for filed for winding up winding up for winding up winding up. (83%) under absorption. wind up 80 Estates 80 Estates wound 34 Estates wound 46 Estates not wound up up up (57.5%) under performance Law Council Holding 60 60 disciplinary 53 disciplinary 07 meetings not held disciplinary committee committee (12%) under performance committee meetings meetings held and meetings held and 90 cases not and conclude at least 150 cases and 60 cases concluded (60%) under 150 cases concluded. concluded. absorption.

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The Accounting Officer explained that there were several reasons why the institution failed to achieve the targets. Among these were the irreconcilable differences among land and property beneficiaries who were disagreeing on the distribution, missing land titles and bureaucracies in the land office. There were also numerous adjournments due to absence of parties in respect of cases handled by the law Council.

I advised the Accounting Officer to plan adequately and ensure that all planned activities for which funds are released are completed to enable the Ministry deliver its mandate.

7.14 Capital Development Budget

During the process of budgeting, the Ministry is supposed to make estimates of financial resources to be expended in carrying out planned activities in a given period (a financial year in case of MDAs). The budgeted expenditure includes both Recurrent and Development.

It was noted that the Ministry of Justice has no provision for Capital Development budget. The lack of the said budget has rendered the Ministry unable to meet its Capital Development obligations. It was noted that what appears as an approved budget under Capital Development are donor funds which are channeled through MOJCA to JLOS. Lack of Capital Development has forced the Ministry to use some of its meager resources to purchase fixed assets such as office equipment and furniture, which results into mischarge since no money is provided in the budget estimates.

The Accounting Officer explained that they have raised this concern severally but are still awaiting the Ministry of Finance, Planning and Economic Development to provide the required funding.

I urged management to keep liaising with the relevant stakeholders for funding.

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8.0 JLOS, LAW AND ORDER SECTOR SECRETARIAT

8.1 JLOS SECRETARIAT AND GENERAL OBSERVATIONS

(a) Budget performance

During the year, the Justice, Law and Order Sector (JLOS) Secretariat received a total of UGX.62,359,810,419 to facilitate operations of the various JLOS components. At the beginning of the year, the Secretariat also had unspent balance totaling UGX.19,603,254,264. The total available funds for spending for the year amounted to UGX.81,841,588,727.

UGX.50,529,898,358 was subsequently spent during the year by the various implementing agencies leaving a balance of UGX.31,311,690,369 unspent. The table below shows the opening and closing balances as well as expenditures by various entities during the year.

Adjustment Opening Total Funding Expenditure Closing Bal. No Institution to Opening Receipts Balance (JLOS) Available UGX UGX Balance Uganda Law 1 124,450 - 605,520,100 605,584,600 305,551,600 300,033,000 Society Uganda Law 2 17,490,404 0 1,772,605,000 1,790,094,000 1,549,207,000 240,887,000 Reform Comm.

3 Local Government 26,197,000 70,969,000 412,825,000 509,991,000 412,050,000 97,941,000

Law Development 4 3,925,472 - 1,944,560,000 1,948,485,472 1,763,562,885 184,922,587 Centre Tax Appeals 5 88,727,706 - 367,403,000 456,130,706 388,755,095 67,375,611 Tribunal Directorate of 5 14,119,108 - 3,611,000,000 3,625,119,108 3,172,618,418 452,500,690 Public Prosecution Uganda Reg. 7 648,436,381 7,837,000 932,300,000 1,588,573,381 743,215,955 845,357,426 Serv. Bureau Ministry of 8 362,268,010 - 3,571,787,034 3,934,055,044 3,880,839,977 53,215,067 Internal Affairs Uganda Police 9 1,742,461,000 80,538,000 4,155,067,000 5,978,066,000 3,683,370,000 2,294,696,000 Force Uganda Prisons 10 1,727,128,658 - 5,827,765,000 7,554,893,658 5,529,465,894 2,025,427,764 Services Judicial Service 11 3,154 1,387,596,000 1,387,599,000 1,212,374,000 175,225,000 Commission

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Adjustment Opening Total Funding Expenditure Closing Bal. No Institution to Opening Receipts Balance (JLOS) Available UGX UGX Balance Min. of Gender, 12 Labour & Social 566,746,713 - 759,832,000 1,326,578,713 1,184,326,000 142,252,713 Dev‟t

13 Judiciary 977,014,855 -9,855 9,651,325,400 10,628,330,400 7,175,472,474 3,452,857,926

Administrator 14 General Public 121,221,795 - 576,644,000 697,865,795 572,142,768 125,723,027 Trustee Uganda Human 15 Rights 70,422,757 1,010,000 963,007,243 1,034,440,000 548,060,000 486,380,000 Commission Min. of Justice & 16 1,917,431 -1,917,431 1,372,000,000 1,372,000,000 1,365,596,545 6,403,455 Const. Affairs Secretariat 17 6,405,083,230 268,162,485 9,306,938,190 15,443,858,935 9,234,376,101 6,209,482,834 (Donner)

18 Secretariat (IFMS) 3,392,177 -3,392,177 3,072,075,970 3,072,075,970 3,044,601,261 27,474,709

Nat Citizenship & 19 Immigration 1,630,547,244 - 1,616,293,756 3,246,841,000 1,372,042,000 1,874,799,000 Control

20 MOJCA (CBL) 205,301,589 -8,286,500 1,943,010,174 2,140,025,263 2,112,837,544 27,187,719

21 JLOS House Acc 4,990,725,130 - 8,092,000,000 13,082,725,130 861,177,289 12,221,547,841

Taxes on 22 Machinery, - - 418,255,552 418,255,552 418,255,552 - Furniture & Veh. - Grand Total 19,603,254,264 62,359,810,419 81,841,588,727 50,529,898,358 31,311,690,369 121,412,890

I explained to management that failure to utilize the available funds implies that planned activities were partially or not implemented. This may lead to failure by the management to attain the programme objectives.

Management explained that the out of the unspent balance, UGX.12,221,547,841 was earmarked for the construction of the JLOS House and the balance was committed to on-going construction works both at the JLOS headquarters, and at the participating JLOS institutions.

I advised Management to properly supervise the on-going works with a view of concluding the activities within the agreed timelines.

(b) Shortfall in the Budget Releases 141

A comparison of the approved JLOS budget and work plan for the 2013/14 with funds released for the financial year revealed shortfalls in funding to the tune of UGX.1,222,161,000. The table below shows funding shortfalls for the three participating JLOS institutions:

No Institution Budget (UGX) Releases (UGX) Shortfall (UGX)

1 Uganda 1,186,465,000 963,007,000 223,458,000 Human Rights Commission

2 Uganda Police 4,530,385,000 4,154,917,000 375,468,000

3 Uganda Prisons 6,451,000,000 5,827,765,000 623,235,000 Services

Total 12,167,850,000 10,945,689,000 1,222,161,000

Shortfall in funding impacts negatively on the implementation of planned activities under Programme. Management explained that the Sector experienced the shortfall because the Secretariat did not receive the fourth quarter funding planned for the year.

Management was advised to liaise with the relevant stakeholders to ensure adequate funding for implementation of planned activities.

The Secretariat had a total of UGX.18,557,638,979 available for implementation of activities, out of which UGX.11,124,870,437 (60%) was spent, leaving a balance of UGX.7,432,768,542. A review of Secretariat records indicated that some planned and funded activities were partially or not implemented at all. These include among others; construction of new Justice Centers; procurement and supply of furniture to up country Justice Centers and electronic media outreach programmes.

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I explained to management that non-implementation of the activities also hinders the Programme from achieving its intended objectives.

Management explained that most of the activities referred to are now on-going the delay was due to the need to adhere to the government commitment control guidelines and ensure that procurement processes are adhered to as per the PPDA law.

Management is advised to make plans and budgets cautiously and realistically and ensure that activities are implemented in accordance with the approved plans.

(d) Field inspections at Bulambuli Police Station

Field inspections were carried out in the district of Bulambuli to verify the construction works that were on-going. The findings are below:

Construction of police station A contract for construction of Bulambuli Police Station was awarded to a local company at a contract price of UGX.474,426,916. Out of the contracted amount, UGX.191,938,718 had been paid at the time of audit. The contract period was agreed to be two years and completion date was scheduled at the end of the 2012/2013 financial year. Field inspections revealed that the works were still incomplete (approximately up to 70% of the works had been completed). The building had stayed for one and a half years without any progress in construction works, implying that the works had been abandoned. The inspection also revealed the following;  There was no furniture supplied yet furniture had been budgeted for in the year under review.  Cracked and wet ceiling was observed at the balcony due to inadequately placed gutter outlets thus damaging the walls and ceiling.  Perforated walls were noted due to capillarity. According the BOQ, damp proof course known as Pluvex or other equally and approved damp proof course weighing not less than 0.5 Kg per meter was to be used to avoid wet environment that weakens the walls due to capillarity.

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 Poor quality flush doors of which one for juvenile cell is already damaged. According to the BOQ, 45mm thick solid flush doors overall sizes 850x2075mm were to be fitted. However, low quality thin solid flush doors were installed.  Male cell copings had not been completed.  The team observed that the Police Station waiting room was already serving as store for produce-maize, questioning its use for the intended purpose.

See pictures below:

Front and rear views of Bulambuli Police Headquarter

Perforated wall due to capillarity

Waiting room used for store purposes Water tank not installed, weak tank stands noted

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Spoilt poor quality flush door Rusting sink in the wash room

The delays in completion of the Project and the related defects deny beneficiaries of the intended services.

Management explained that the completion of the Project is behind schedule, and that on a number of occasions the contractor had been warned of the slow pace of completion. Several meetings have been held with the contractor but with little progress seen. Right now options for sourcing a sub-contractor to finish the remaining works are being explored. The defects observed in Bulambuli will be corrected by the contractor before handing over.

I await the results of management commitment on the matter.

8.2 MINISTRY OF GENDER, LABOUR AND SOCIAL DEVELOPMENT (MOGLSD)

(a) Budget performance During the year, a total of UGX. 759,832,000 was released for the implementation of the MoGLSD-JLOS activities against the approved budget of UGX.906,600,000. A total of UGX.1,326,578,713 was available for JLOS activities under the Ministry for the financial year 2013/2014 (UGX 566,746,713 brought forward from the previous year and UGX.759,832,000 released in the current year). UGX.1,184,326,000 was utilized leaving a balance of UGX.142,252,713 at the end of the financial year, indicating an absorption capacity of 89%. The planned activities not implemented included the review of Probation function/Probation Act and the development of management guidelines for remand homes and rehabilitation centres.

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The slow implementation of the planned activities has a negative effect on the objectives of the project.

Management explained that the funds were committed and the activities were on- going. The draft reports for the two consultancy works have been submitted to the Ministry and were being reviewed by senior stake holders for in-depth input.

I advised Management to expedite the implementation of activities to enable finalisation of the activities within the agreed timelines.

8.3 LAW DEVELOPMENT CENTRE (LDC)

(a) Budget performance During the year, a total of UGX.1,948,485,472 was available for approved JLOS activities. Out of this amount, UGX.1,763,562,885 (77%) was expensed leaving a balance of UGX.184,922,587. It was noted that some planned activities were not implemented. The table below refers:

Code Activity/Planned Actual out Puts Variance Budgeted/ Amount Remarks Out Put Released Spent Funds 000‟s 000‟s 2.1.1.26 Complete Auditorium has been 700,000 700,000 Not achieved construction of LDC roofed. Internal works although Auditorium of tiling, Air funds had conditioning are still been released on going. 2.1.1.51 1 Recording Procurement process I recording 80,000 0 Not achieved equipment has been completed equipment not waiting for delivery of procured the recording equipment 2.5.2.2 Women cell Procurement process Not achieved 100,000 0 Not achieved completed, contract signed , work slated to begin by 1st Sept 2014

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Under absorption of funds in the period in which they are planned does not only lead to overspill of activities to the next planning periods but also the implementation of the activities may be affected due to increased prices.

Management explained that the unspent balance of UGX.184,922,587 was meant for activities that had not yet been done but whose procurement process had already been completed. The activities were still on-going and are about to be completed.

I advised management to ensure follow up of project activities to enable timely attainment of Programme objectives.

(b) Stalled Construction of the Law Development Centre Auditorium In a bid to alleviate the shortage of lecture rooms at the Centre, management with funding from the Justice Law and Order sector, the Ministry of Finance (GOU) and the Centre‟s non tax revenue, contracted a local company to construct a befitting auditorium at the centre at a contract sum of UGX.3,977,880,902. It was envisaged that the auditorium would accommodate up to 1000 students as well as provide office space for some staff. The Contract period was agreed to start on 30th May 2012 and end on 11th June 2013.

It was however noted that the completion of the auditorium has delayed by over 15 months (as of 6th October 2014). It was also noted that the auditorium was commissioned for use on 4th April 2014, despite it being incomplete.

The pictures below show the current state of the auditorium:

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Ceiling without Gypsum Plaster Board

Un-tiled floor without seats and other fittings

Figure 1 Uninstalled electrical fittings

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Unfinished compound

The delay in the completion of the auditorium has led to the failure by management to address the issue of shortage of lecture rooms at the Centre. The delay may also lead to increased construction costs due to inflation and other related costs.

Management explained that the contractor submitted variations in respect of air conditioning, auditorium chairs, and extra works in respect of the pagolar and landscaping in 2013. The variations and extra works were referred to Ministry of Works and Transport for a technical opinion. The report from the Ministry is being awaited.

I advised Management to follow up with Ministry of Works and ensure that the auditorium is completed.

8.4 MINISTRY OF INTERNAL AFFAIRS (MOIA)

(a) Budget performance During the year, a total of UUGX.3,571,787,034 was released for the implementation of JLOS activities under the Ministry against the approved budget of UGX.3,361,660,000. A total of UGX.3,934,055,044 was available for JLOS activities for the financial year 2013/2014 (UGX.362,268,010 brought forward from the previous year and UGX.3,571,787,034 released in the year under review). Records availed indicate that almost all the funds were utilized, leaving only a 149 balance of UGX.53,000,000. It was however noted that some activities worth UGX.963,000,000 were not implemented, as shown in the table below:

Specific Activities Total Release (UGX) Study on implementation of community service and its impact 50,000,000 in Uganda - 12 years after inception Set up wide area network to link departments 21,000,000 Consultancy to design a database for storage of data on vital 5,000,000 government installations / information and management of explosives Specialized Camera 5,000,000 Laptops for field data capture 6,000,000 Heavy duty Photocopier (multi-purpose) - to reduce Cs 15,000,000 forms/photocopying costs LCD projector 7,000,000 Vehicle for Monitoring and inspection 120,000,000 Procure saloon motor vehicle for transporting Forensic experts 120,000,000 to attend courts outside Kampala Procure LC/MS to increase success rate of analytical forensic 400,000,000 examinations in explosives, chemical war agents, food additives, plant and animal poisons Carry out counter terrorism awareness programs by GSO 50,000,000 Benchmark on international best practices in Namibia on 29,000,000 managing recidivism by NCS Procure personal protective equipment for incidence response 30,000,000

Finalization of the Client Charter (MIA/F&A) 50,000,000 Motorcycles for NFP (2012/13) 55,000,000 Total 963,000,000

Failure to implement planned activities has a negative effect on the objectives of the programme.

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Management explained that by the time of audit, the activities were still under implementation.

I advised Management to ensure that planned activities are implemented timely in accordance with approved work plans.

(b) Delayed construction works of regional laboratory in Gulu During the year, the Ministry paid UGX.30,409,733 to a local company for the construction of Gulu Regional Government Laboratory. This was a 4th payment to the contractor bringing the total payments to UGX.236.330,768 out the contract sum of UGX.436,445,468. A contract signed between the Ministry and the contractor was not availed for audit and there was no proof that the Ministry owns the land on which the laboratory is being constructed. Scanty information obtained indicated the following:  The contract was entered into on 28th January 2008 and was to be executed within 22 calendar weeks commencing on 22nd February, 2008. The completion date was scheduled for 28th July, 2008.  The scope of works comprised construction of a single block laboratory building including associated electro-mechanical installations and external works.  The Ministry was to appoint a project manager responsible for monitoring and supervising the works.

On 16th April 2012, three years and nine month after the expected completion date, MOWT staff visited the construction site and made the following observations:

 Construction works had not been completed 277 weeks past the date of completion.  The contractor had submitted a claim of UGX.104,651,368 which included items of work not fully completed like the ceiling, painting of internal walls, doors and windows, electrical installations and external walls.  The amount due to the contractor according to the Ministry‟s assessment/valuation report (valuation No.3) was UGX.30,409,733. This

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however could not be substantiated as the valuation certificate was not on file and besides, a contract management file was not availed for review.  The contractor carried out extra works without any authorization as required by the contact.  There was no evidence that the title had been secured.

On inquiry about the status of the laboratory, I was informed that the laboratory had been plastered but the contractor abandoned the site. Instead of terminating the contract due to failure to complete the project, the Ministry went ahead and paid UGX.30,409,733 to the contractor on 30th October 2013. Failure to complete the project impacts on the service delivery and undermines the objectives of the project. It is likely that by the time the contract is resumed, the cost to completion will have increased leading to loss of public funds.

Management explained that this contract met a lot of challenges and the work could not continue. The contract is now under review following the approval by PPDA. Management is in the process of securing another contactor.

Management was advised to establish the loss as a result of abandonment of the site by the former contractor and accordingly evoke the necessary provisions in the contract. Management was also advised to expedite the process of securing another contractor in accordance with the PPDA Act.

(c) Delayed completion of the Regional Laboratory in Mbarara On 31st May 2009, the Ministry entered into a contract with a local company for the construction of a regional laboratory in Mbarara at a contract price of UGX.454,015,728. The contract price was revised twice upwards by UGX.81,176,257 (which is 17.9%) to arrive at UGX.535,191,985 (first by UGX.16,705,437 and then by UGX. 64,470,820). To date the Ministry has paid a total of UGX.514,775,133 to the contractor leaving a balance of only UGX.20,416,852. The project management file was not availed, however, review of the scanty information available revealed the following:

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 The construction which begun on 21st May 2011 was to take a duration of 22 calendar weeks to be completed by 19th November 2011. Despite the project completion date having been extended twice to 31st December 2012, the construction was completed on 16th October 2013, 4 years and 5 months of signing the contract, and it took nearly a year for the building to be handed over to the Ministry.  The land title for the land on which the laboratory was constructed was not availed for audit review.

The project objectives have not been achieved in this regard and this could have also led to extra costs on supervision and material price changes. Management explained that the Regional Laboratory construction was subsequently completed and the building was handed over to the Ministry. They further explained that the Land Title is being processed and the Ministry is in touch with Uganda Land Commission and Mbarara District Land Board.

I advised Management to ensure that projects are closely monitored and completed in a timely manner to achieve the intended objectives and avoid nugatory expenditure associated with implementation delays.

(d) Delayed Procurement of Liquid Chromatography Tandem Mass Spectrometer (LCTMS) On 12th June, 2014, the Ministry entered into a contract with a local company to supply Liquid Chromatography Tandem Mass Spectrometer, for use by the Directorate of Government Analytical Laboratory at contract sum of USD 786,594.66. I noted that the equipment which had been budgeted for at UGX.500,000,000 was estimated to cost UGX.1,600,000,000 when initiating the procurement.

Subsequently the contract was awarded at USD.786,594.66 (approximately UGX.2,084,475,849) which was above the estimated price. According to the payment terms, 80% (approximately UGX.1,667,580,679) of the contract price was to be paid on delivery but only UGX.400, 000,000 was released for the procurement. It was not explained why the Ministry entered into a contract when 153 it did not have enough funds contrary to PPDA regulations, and how it would raise the total 80% of the contract price in case the equipment is delivered. Under the circumstances, there is a likelihood of breach of contract by the Ministry which may attract penalties.

In addition to the entity entering into a contract with limited funds the contract did not contain a time frame. There was no evidence that the estimated value of the equipment was based on the market price or on results of enquiry from the manufacturers of the equipment. Lack of this analysis posed a risk of exaggeration of the estimated price.

Management explained that the Ministry entered into the contract when they did not have enough funds, but JLOS headquarters made a commitment to avail the funds in the financial years 2014/15 and 2015/16.

I advised management to always carry out market surveys to make more accurate cost estimates, and to always make a commitment when funds are available to settle the resultant obligation. I also urged management to ensure that the contractual agreements are finalised and supply is undertaken as agreed.

(e) Electronic Data Management System for the NGO Board During the year, a local company was contracted by the Ministry to develop of an Electronic Data Management System (EDMS) for the NGO Board at a contract price of UGX.237,048,420. According to the terms of payment, 15% of the contract price was to be paid to the company upon submission of an acceptable inception report and 20% on submission of an acceptable design of an EDMS with appropriate security architecture.

The Ministry subsequently paid the contractor UGX.35,557,263 being 15% of the contract price upon submission of the inception report. However, I was not provided with evidence that the inception report was discussed and found acceptable to warrant the payment as provided for in the contract. Similarly, 20% of the contract price worth UGX.47,409,684 was paid for the design of the EDMS, but there was no evidence that the design was submitted and found appropriate

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before payment would be effected. I was also not provided with approval as granted by NITAU.

In the absence of the inception report and the design of the EDMS, I could not verify that the payments were appropriately made. In the circumstance, the system may not have been sufficiently developed to serve the intended purpose.

I advised management to review the agreed contractual terms and follow the terms to conclusion. I also advised management to follow up with NITAU to ascertain whether the EDMS is appropriate to serve the intended purpose.

8.5 UGANDA LAW SOCIETY (ULS)

(a) Budget performance During the year, a total of UGX.605,584,600 was available to ULS to finance planned JLOS activities against the budgeted amount of UGX.580,000,000. Out of the releases, only UGX.305,551,600 was utilized while UGX.300,033,000 remained unutilized at the close of the year. The funds remained on account even after the close of the year. The delay or failure to implement planned activities denies beneficiaries of the intended benefits. Non-implementation of the activities also hinders the Programme from achieving its intended objectives.

Management explained that the unspent funds were a contribution towards the construction of the ULS Resource Centre. The activity was not undertaken because a number of steps needed to be completed before construction could begin. The steps included but were not limited to retaining services of a Consulting Firm and Project Manager to carry out the pre-construction, actual construction and post construction process, preparation of detailed designs and site plans, and ground plans.

I advised Management to make plans and budgets cautiously and realistically and ensure that activities are implemented in accordance with the approved plans.

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8.6 MINISTRY OF LOCAL GOVERNMENT (MOLG)

(a) Budget performance A total of UGX.509,991,000 was available for approved JLOS activities for the 2013/14 financial year. However, only UGX.412,050,000 was utilized (representing 81% absorption) leaving unutilized balance of UGX.97,941,000. A review of the project's performance as per the performance report revealed that some planned activities had not been done, while others remained incomplete. The table below refers:

Planned Approved Actual Actual Expected Actual output Remarks Key Budget amount Expenditure Output Activity (UGX Released (UGX 000) 000) (UGX 000) OUTCOME 2. ACCESS TO JLOS SERVICES ENHANCED 2.3.3.5 42,000 41,500 16,460 6,000 copies of 1,071 copies of There was Printing and LCC Regulations LCC Regulations 17.8% distribution Printed and Printed and 294 absorption 6000 copies distributed. copies capacity to of LCC distributed. print and Regulations 27% to distribute the printed copies. 2.3.3.6 20,000 20,000 14,718 6000 copies of 1100 copies of There was Printing and Module on Local Module on Local 18.3% distribution Administration Administration absorption 6000 copies of Justice of Justice capacity to of Module on Printed and Printed and 128 print and Local distributed. distributed. 11.6% to Administratio distribute the n of Justice. printed copies. Sub Total 62,000 61,500 31,178

The slow implementation of the planned activities indicates that there is no proper coordination between those responsible for approval of the activities and the implementers.

Management explained that the cause was due to delayed procurements which have now been concluded. I advised Management to carry out adequate planning and to requisition for only those funds that can be put to proper use during the financial year. Funds should be released to the entity based on realistic plans and budgets.

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8.7 UGANDA HUMAN RIGHTS COMMISSION (UHRC)

(a) Budget Performance The Commission had budgeted for UGX.1,186,465,000 to be able to implement the outlined activities under JLOS Programme. However, only UGX.963,007,000 was received resulting into a budget shortfall of UGX.223,458,000. Further, during the year, a total of UGX.1,034,440,000 was available for implementation of approved JLOS activities (including the balance brought forward from the previous year of UGX.70,422,000 and a refunded amount of UGX.1,011,000) but, only UGX.548,060,000 was spent resulting into an absorption of only 53%. UGX.486,380,000 remained unutilized by year end. As a consequence some planned and funded activities were partially or not implemented at all. These included; printing of popular version of universal periodic review of Uganda which was rolled over from the previous year registered only 30.8% performance, conducting a documentation of human rights violations in the country particularly in the Acholi Sub region and, the procurement and delivery of the civic education van intended for conducting Constitutional education.

Management acknowledged the slow implementation of activities and pledged to make improvements in the future.

I advised management to prepare realistic budgets for Programme activities and ensure commitment in execution of activities to enable attainment of Programme objectives.

8.8 JUDICIAL SERVICE COMMISSION (JSC)

(a) Budget Performance The approved work plan and budget for the period 2013/14 indicated funding for the JSC of UGX.1,464,606,000, out of which UGX.1,387,599,000 was received. Out of UGX.1,387,599,000 received, UGX.1,212,374,000 was utilized (representing 87.4% of the funds received) leaving unspent balance UGX.175,225,000. A review of the Programme‟s performance revealed that execution of various key planned activities for which funds had been released remained incomplete or were not fully achieved. These included; investigation trips; Disciplinary Committee Meetings,

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Development of an automated data base management system and development of recruitment, discipline and training of judicial officers. Inadequate implementation of the planned activities, affects the timely achievement of the programme objectives.

Management explained that the above mentioned activities were still on-going by the time of audit since all the related funds were earlier committed.

I advised Management to ensure that there is commitment in execution of Programme activities to enable timely attainment of its objectives.

8.9 UGANDA REGISTRATION SERVICES BUREAU (URSB)

(a) Budget Performance The Bureau had budgeted for UGX.847,286,000 to implement activities under JLOS Programme and UGX.845,425,000 was received. The entity also received an additional 86,875,000 from the Secretariat. Out of the total amount received only UGX.179,823,000 was utilized, resulting into only 21% absorption. A comparison of the entity‟s performance with the previous year also showed that the Bureau has not been performing well and little improvement has been realized. The table below refers: Year Budgeted amount Funds Spent (UGX) Absorption Rate Released (UGX) 2012/2013 855,250,000 360,354,000 42% 2013/2014 845,425,000 179,823,000 21%

This does not only lead to spill-overs of activities of the preceding periods which in turn affect the implementation of future work plans but also the implementation of the activities may be affected due to increase in prices and other factors beyond management control.

Management explained that delayed procurements and adjustments in the work plans affected the planned activities which were not anticipated yet they were

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inevitable. Management regretted the position and indicated that they have since stepped up the Policy Planning Unit and Procurement and Disposal Unit (PDU) to ensure adequate coordination of work plan activities so that funds are utilized on the planned activities in a timely manner.

I await the results of management efforts.

8.10 UGANDA POLICE FORCE (UPF)

(a) Budget performance During the year, UUGX.4,155,067,000 (92%) was released to the Uganda Police Force to finance planned JLOS activities against the approved budget of UGX.4,530,385,000. The entity also had a balance of UGX.1,742,461,000 brought forward from the previous year and UGX.80,538,000 refunds bringing total funds available for expenditure to UGX.5,978,066,000. Out of the available funds, UGX.3,683,370,000 was utilized leaving the balance of UGX..2,294,696,000. Out of the un utilized funds, UGX.1,259,250,000 (78%) represents the planned activities which were not implemented at all. Details of activities that were not implemented are shown below:

Planned activity Amount released (UGX) Construct a police station at Koboko 500,000,000 Provide support to forensics service (SOCO) with 250,000,000 50sets Procure heavy duty photocopier 10,000,000 Induct 500PPCs into CID 15,000,000 Train 50 personnel (SOCO) in scenes of crime 30,000,000 management Train 200 officers in first responders course 30,000,000 Train 100 officers in Homicide Investigations 40,000,000 Procure 50 speed guns 80,000,000 Induct 50 dog handlers 7,200,000 Stationery (50 counter books, 50 pens, 30 cm rulers, 3,500,000 50 canine officers manuals, 5 reams of paper 159

Planned activity Amount released (UGX) Protective clothing 3,250,000 Basic trainee handling equipment (1metre leash and 66,000,000 choke) Construct 10 canine units 65,000,000 Establish Human Rights committees in 5 regions 38,000,000 (Mbarara, Gulu, Hoima, Jinja & Masaka) Procure motor vehicles for use in Democratic 120,000,000 policing and human rights observance in 5 Regions Glass Door filing cabinet 1,300,000 Total 1,259,250,000

Delayed or non-implementation of planned activities may lead to failure by the management to attain the programme objectives.

Management explained that the activities were not implemented due to various reasons including; change of plan from construction of Police station at Koboko to Kyenjojo, failure of supplier to deliver the forensics equipment, and shortage of training space to train 500 PPCs into CIDs. The authority to divert some of the funds into other activities also partly caused the delay to implement the planned activities on time.

I advised Management to ensure that adequate planning is undertaken to allow utilization of funds and in a timely manner.

(b) Under-utilization of un spent balances brought forward At the beginning of the financial year under review, UPF had unspent balance of UGX.1,742,461,000 which was brought forward from the previous years. During the year, only UGX.1,140,987,000 representing 65% was spent leaving a balance of UGX.601,474,000 unutilized. Details are below:

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Period Amount b/f Amount spent Closing Balance (Opening during 2013/14 (UGX.) balance) 2011/2012 924,478,000 595,579,000 328,899,000 2012/2013 817,983,000 545,408,000 272,575,000 Total 1,742,461,000 1,140,987,000 601,474,000

A further review of the records revealed that vital activities such as the procurement of the Automated Fingerprint Information System (AFIS) machine for forensic investigations, and the training of 2,500 police officers which activities relate to the previous period were not implemented. Details for brought forward activities not implemented at all are as indicated in the table below:

Activity Amount (UGX) Procurement AFIS machine 167,397,000 Recruit 2500 police officers 100,000,000 Procure patrol vehicles (balance 83,424,375 remained) Refund of letter of credit 80,000,000 Total 430,821,375

The delay or failure to implement planned activities denies beneficiaries of the intended services. Non-implementation of the activities also hinders the Programme from achieving its intended objectives.

Management explained that the Automated Finger Print Information System (AFIS) was initially budgeted for at UGX 3.0bn and JLOS Secretariat agreed to fund it in 3 years with an approved budget of UGX 1.0bn in the FY 2012/2013. However, only UGX.500m was released to fund the first component of the AFIS (i.e Crime Records Management System (CRMS)). The system was procured at UGX.343m leaving a balance of UGX.167m. Because of the need to create linkages and widen coverage to the entire country, another feasibility study was conducted which was

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costed at UGX.18bn. This was presented to the JLOS technical committee for funding but was declined considering the small Sector budget.

I advised Management to make realistic plans and budgets cautiously and realistically and ensure that activities are implemented in accordance with the approved plans. Management was further advised to engage the various stakeholders to plan for the funding of the AFIS.

(c) Use of Force Account During the audit, it was established that Force Account was used in the completion of Kira Police Station at UGX.158,215,376, fencing Nagalama Dog Breeding Center at UGX.49,337,235 and erecting of uniports at Busunju Police Barracks at UGX.291,120,239 among others. Although the supplies used were procured in accordance with the PPDA Act, there was no evidence that the direct, indirect and overhead costs of using Force account were determined to be less than what a contractor would demand, or that these were emergency situations and as such there was no contractor willing to execute the assignment to warrant use of Force account. In the absence of proper costing of the works to be carried out, I could not ascertain whether the use of Force account was necessary and cost effective.

Management regretted the omission of not carrying out the cost benefit analysis on a case by case basis. They further explained that the decision for in-house construction has always been educated by cost comparisons based on unit rates obtained from similar projects that were tendered out. They also explained that UPF has come up with a new construction policy to address amongst others the issue of in-house construction.

I await the results of management efforts.

8.11 UGANDA PRISONS SERVICES (UPS)

(a) Budget performance During the year, a total of UGX.5,827,765,000 (90.3%) was released for the implementation of Uganda Prisons Service JLOS activities against the approved budget of UGX.6,451,000,000. The entity had a balance of UGX.1,727,128,658

162 brought forward from last year bringing the total amount available for expenditure to UGX.7,554,893,658. A review of the project's performance revealed that out of the available funds, only UGX.5,529,465,894 was utilized leaving the balance of UGX.2,025,427,764 unutilized. Various planned activities were not implemented, while others remained incomplete, implying inadequate performance. The table below shows some of the activities that were not implemented:

Funds Approved Released FY Funds Un spent % Specific activities Budget 2013/14 Spent Balance Performance Construction of 21 reception center at Isingiro. 400,000,000 370,000,000 76,779,640 293,220,360 Construction of 1 reception center at Kalong. 400,000,000 380,000,000 3,800,000 376,200,000 NIL Construction of

reception center at Amuru. 400,000,000 360,000,000 - 360,000,000 Reconstruction, expansion and modification of Ndorwa Prison and 1 staff quarters 500,000,000 440,000,000 3,260,000 436,740,000 NIL Renovation at Tororo Prison 320,000,000 320,000,000 - 320,000,000

Total 2,020,000,000 1,870,000,000 83,839,640 1,786,160,360

Slow activity implementation was exhibited mostly in construction works. By the time of inspection (August 2014), construction especially of UPS prisons at Tororo, Ndorwa, Kabong and Isingiro was either far behind schedule or had not started at all. The slow implementation of the planned activities is an indication of lack of coordination between those responsible for approval of the activities, and the

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implementers. The delay or failure to implement planned activities denies beneficiaries of the intended services.

Management explained that the activities were not implemented due to various reasons including; change in allocation of construction sites by the district authority for example in Amuru and Kaabong, inaccessibility of some locations for example Isingiro situated on a hill top and the works being undertaken in prisons limiting contractor working time for example; Tororo.

I advised Management to carry out adequate planning to requisition for only those funds that can be put to proper use during the financial year. Funds should be released to the entity based on realistic plans and budgets.

8.12 JUDICIARY

(a) Budget performance During the year, a total of UGX.9,651,325,400 was released for the implementation of the Judiciary JLOS activities against the approved budget of UGX.9,222,000,000 (inclusive of a special release of UGX.810,000,000). A review of the project's performance revealed that out of the available funds for expenditure amounting to UGX.10,628,330,400 (including the brought forward amount of UGX.977,005,000), only UGX.7,175,472,474 was spent (68%) leaving the balance of UGX.3,452,857,926 unutilized. Various planned activities were not implemented, while others remained incomplete, a sign of inadequate performance. It was also noted that in some instances, the awarded contract values exceeded the available funding. The table below refers: Planned Key Activity Available Contractor Contract Remarks funding Value (UGX) 2.1.1.1 2,057,965,000 BMK 1,479,014,000 Activity Completion of delayed construction works, Hebron 1,089,776,000 equipping and furnishing Investment of Kabale and Mitiyana courts Double cabins to 240,000,000 Victoria 240,000,000 Activity facilitate Chief Motors delayed

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Planned Key Activity Available Contractor Contract Remarks funding Value (UGX) Magistrates for locus visiting Double cabins for 240,000,000 Victoria 240,000,000 Activity selected G1 Magistrates Motors delayed in hard to reach areas (Bundibugyo, Kisoro, Buhweju, Buliisa and Bukwo [choose 2]) 2.1.1.44 230,000,000 International 230,000,000 Activity Acquire Court Recording Business delayed equipment for Kabale, Solutions Soroti and Masaka High Courts, Civil Divisions (2) and one (1) for each of the Chief Magistrates Court at the High Court Circuit Headquarters 2,815,465,000 3,278,790,000

The slow implementation of the planned activities is an indication of lack of coordination between those responsible for approval of the activities, and the implementers. Non-implementation of activities in the planned periods does not only affect the performance of preceding work plans but also leads to increased costs due to increases in prices.

Management explained that the implementation period of the activities mentioned did not proceed according to the stipulated time and that the delay was due to the long procurement procedures. Management further indicated that they have put in efforts to expedite the implementation of the activities.

I await the results of the management efforts.

(b) Case Backlog performance The Judiciary undertook to reduce a proportion of case backlogs at various levels. A total of UGX.2,200,000,000 was budgeted under JLOS for the reduction of case backlog of which UGX.1,890,000,000 was released for the activity during the year. It was also noted that the sector has been allocating funds in the past years for 165 the reduction of back log cases in the judicial system. In the past two years a total of UGX.4,555,569,754 was spent on this item. However, it has been noted that case backlogs are instead increasing rather than going down. Even with the appointment of over 20 Judges to the Supreme Court, Court of appeal and the High Court this has helped little to reduce the case backlog. Details of the trend are in the table below:

Court Cases b/f Filed Disposed Pending Backlog Growth Rate 2012/2013 Supreme Court 45 40 12 73 62.2% Increase Court of appeal 3,622 1,060 226 4,456 23.0% Increase High Court 33,492 20,758 13,640 40,610 21.3% Increase Chief Magistrate Court 81,360 67,717 62,717 85,963 5.7% Increase Magistrate Grade 1 7.7% Increase 23,677 48,985 47,171 25,888 Magistrate Grade 11 4,978 8.5% Increase 10,982 10,558 5,402 OVERALL 147,174 149,542 134,324 162,392 10.3 Increase

2013/2014

Supreme Court 73 74 82 65 11% Reducing Court of appeal 4,456 1,251 891 4,816 8.1% Increase High Court 40,610 24,739 17,485 47,864 17.9% Increase Chief Magistrate Court 85,963 64,511 65,676 84,798 1.4 Reducing Magistrate Grade 1 25,888 48,645 46,481 28,052 8.4% Increase Magistrate Grade 11 5,402 13,204 12,979 5,627 4.2% Increase Overall 162,392 152,424 143,594 5,627 5.4% Increase

The objective of reducing case backlog in the judicial system is therefore not being achieved.

Management explained that the recruitment of more Judges and additional funding has increased case disposal. However due to increased sensitization and awareness of the public, the Judicial system has realized increased case filing. This has led to an increase in the number of cases filed and the need for increased funding and manpower.

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I advised management to liaise with the relevant authority with a view of soliciting for more funding and manpower in the Judiciary.

(c) Delayed construction of Makindye Family Court In the period 2010/2011, the Judiciary undertook to construct Makindye Family Court and a contract of UGX.910,209,442 was signed with a local company in August 2012. In accordance with the terms of the contract, work was to start within 14 days after the signing of the contract and was to be completed within a year after the start of the project. A visit to the site in September 2013, one year after contract commencement revealed that works had not been completed as shown in the picture below:

Stalled Makindye Court civil works in September 2013

A subsequent field inspection to the site on 12th September 2014 (one year later) revealed that the works were still incomplete and behind schedule. A few workers were at site fixing tiles and face bricks and doors. The structure is shown in the picture below:

Delayed Construction at Makindye Court as at 12-09-2014

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Review of records revealed that a total of UGX.300,000,000 was allocated by the JLOS Secretariat in the period 2010/2011 for the construction of the Family Court and no further funds have been provided in the work plans for completion of the court in subsequent years. It was however noted that a total of UGX.694,892,782 has been paid to the contractor from JLOS funds to complete the Court leaving an outstanding amount of UGX.215,316,660.

Failure to include spill-over works in work plans and budgets of the subsequent periods causes difficulty in securing funds for the pending works, and may lead to diversions or incomplete works. The work is now behind schedule by over 12 months. The works should have been completed by August 2013. Delays in construction works affect achievement of Project objectives.

Management explained that the performance of the contractor has been below expectations and on several occasions the Judiciary has been warning the contractor to finish the project on agreed time. Currently, the building is at finishing level with a few electrical and final fittings work remaining for the building to be completed. Due to the delay the contractor extended the performance bond for one year and has also provided a new work schedule to have the building completed by March 2015.

I advised Management to ensure that spill-over constructions and other works in progress are catered for in the subsequent budgeting period for appropriate allocation of funds.

8.13 DIRECTORATE OF CITIZENSHIP AND IMMIGRATION CONTROL (DCIC)

(a) Budget performance During the year, a total of UGX.1,626,293,756 was provided for the implementation of the DCIC-JLOS activities against the approved budget of UGX.1,728,008,000. A total of UGX.3,256,841,000 was available for spending (including UGX.1,630,547,244 brought forward from the previous year). However, only UGX.1,372,042,000 (42%) was utilized leaving a balance of

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UGX.1,884,799,000 unutilized at the end of the financial year. Several planned and funded activities were not implemented as indicated in the table below:

No Planned activity Amount Amount Remarks released spent (UGX) (UGX) 1 Automate and link work processes 0 No work done 153,000,000 2 Interconnect borders with headquarter and 0 No work done regional offices (PISCES) 69,960,000 3 Procure security equipment(fraud 0 No work done detectors, security stamps) 100,000,000 4 Construct Ngom Oromo and Ntoroko border 0 No work done posts 420,000,000 5 Construct staff accommodation at Mpondwe 0 No work done and Oraba 140,000,000 6 Build ramps & modify counters at border 0 No work done posts 46,472,000 7 Procure 3 Electronic billboards for 0 No work done immigration information at Entebbe Airport 30,000,000 8 Not identified 0 No work done 30,000,000 9 Construction of Goli Border post 0 No work done 39,550,000 10 Decongest Registries 0 No work done 81,550,000 11 Construction of Atiak Border post 0 No work done 50,000,000 12 Automation of business processes 16,195 7% works 241,000,000 done 13 Develop and print operating procedures 0 No work done manual 15,350 14 Ethics code in place, complaints system 70,000 0 No work done established

The slow implementation of the planned activities has negative effect on the achievement of the objectives of the project. Failure to implement the brought 169 forward activities may imply that such activities are no longer vital to Project objectives and the unspent balances should be returned to the Secretariat and appropriated for other urgent activities.

Management acknowledged the observation and explained that the delay was caused by the vigorous procurement process. Most of the procurements are at the level of contract award.

I advised management to ensure that the procurement process is expeditiously concluded and have the activities implemented in accordance with work plans.

(b) Delayed production of the Directorate Strategic plan UGX.49,739,700 was paid to a local company towards producing an inception report on the preparation of the Directorate Strategic Investment plan and its associated Information Communication Technology (ICT) and Monitoring and Evaluation (M & E) frameworks. According to the agreement signed in December, 2013 between the Directorate and the consultant, the execution of the contract was to commence on 4th March, 2014 and end on 14th June, 2014.

However, by the time of audit (five months after the end of the contract period), the consultant had not furnished the directorate with the deliverables specified in the agreement. The delayed completion of the plan inhibits the smooth implementation of the Directorate strategic objectives.

Management responded that the Directorate stopped the consultant from executing the contract after the contractor had produced an inception report because management had wanted to review the composition of the committee first. However, after the composition of the committee had been reviewed and the work on the SIP has now resumed.

I await the results of the management efforts.

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I carried out field inspections at the border posts and noted that management did not obtain land titles for the land before commencing the construction of the border posts. The affected posts include Bunagana, Kizinga and Kyanika. There is a risk that the ownership of the land on which the border posts are constructed can be contested. I advised Management to follow up the ownership of the land.

(ii) Inadequate workmanship at Bunagana Border Post The regional offices were constructed under a contract signed on 11th July, 2011 for a sum of UGX.188,845,241. The contract was to be executed within six months with effect from 18th July 2011. The building was completed and handed over to the directorate for occupation. The audit inspection carried out on 14th August 2014 revealed that although the construction had been done and completed, there was evidence of inadequate workmanship and use of inferior materials, as detailed below:

 The toilet seat (water closet) and cistern were not properly installed leading to flooding of the toilet room and those adjoining it during the flushing of the toilet.  Whereas the agreement required the contractor to fix seven thick flash doors, the contractor instead fixed semi-solid flash doors which are weaker and cheaper than thick flash doors specified in the contract. Semi-solid flash door which are easily damaged by both water and sunshine, were fixed both inside and at the behind entrances (exterior) of the building where they are exposed to rain and sunshine. It was not explained how the contractor could be allowed to fix inferior doors when the project was managed by an engineer who also worked as a project manager.

 The doors were fitted without fixing a mosquito mesh on the ventilator. The immigration officer had improvised for a mosquito mesh by fixing a steel vent grill which is ideally meant for metallic (steel casement) windows and doors. The improvised mosquito mesh (steel grill) has not served the purpose of a mosquito mesh as mosquitoes freely pass through the grills.

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 It was observed that the plaster on the walls was failing. The cause of this could be use of lower ratios of cement: lime: sand than those specified in the bill of quantities of 1:2:9 for the first coat and 1:1:6 for the second coat. This depicts inadequate supervision by the contract manager.

The photos below refer:

Figure 2: Bunagana Border Post office block.

Figure-2: Door without mosquito mesh. Figure-3: Improvised mosquito mesh.

Figure-4: Swollen and peeling Plaster off the walls

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Management regretted the error and indicated that a plan is under way to rectify the defects when funds are made available.

I advised management to always monitor/supervise the works before and after the handover to avoid such uncalled for eventualities. In the meantime, I await management efforts in rectifying the defects.

8.14 DIRECTORATE OF PUBLIC PROSECUTIONS (DPP)

(a) Budget Performance During the year, a total of UGX.3,611,000,000 was released by the Ministry of Justice as budgeted to finance planned JLOS activities. Out of UGX.3,611,000,000 released, UGX.3,172,618,418 was utilized leaving a balance of UGX.452,500,690 unspent (including UGX.14,119,108 brought forward from the previous year). As a result, various planned activities were not implemented as detailed in the table below:

No Specific activities Total Remarks releases 1 Open and resource 8 new DEPP Not implemented stations 200,000,000 2 Carry out major renovation of 3 DPP Not implemented buildings in F/Portal, Mbale and Masaka 200,000,000 (Lira) 3 Construct Guard house and toilets in 3 Not implemented existing DPP offices in Paidha Moyo 60,000,000 and Adjumani 4 Construct and furnish 1new DPP office Not implemented in Kapchorwa 400,000,000 5 Procure & install solar equipment in 3 Not implemented stations in Nakapiripirit, Arua and 123,000,000 Paidha 6 Preparation of anti-corruption Not implemented witnesses 100,000,000

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The failure to implement planned activities is an indication of lack of Management‟s commitment to Programme implementation, which hinders the programme from achieving its intended objectives.

Management explained that the activities were not implemented due to various reasons including; lack of adequate staff and accommodation to resource the proposed opening of the new offices, procurement challenges for example on construction of guards houses and toilets of offices in Paidha, Moyo and Adjumani, and interruption from external parties for example the court order of the anti- corruption court on preparation of anti-corruption witnesses.

I advised Management to carry out adequate planning and to requisition for only those funds that can be put to proper use during the financial year. Funds should be released to the entity based on realistic plans and budgets.

8.15 UGANDA LAW REFORM COMMISSION (ULRC)

(a) Budget Performance The approved work plan and revised budget for the period 2013/14 indicated funding for the Uganda Law Reform Commission activities of UGX.1,790,094,000. During the year, UGX.1,772,605,000 was received by the entity for funding of the JLOS activities. However, although the Commission got almost all the required funds, only UGX.1,549,207,000 was utilized representing 87% leaving an unspent balance of UGX.240,887,000 (including a brought forward balance of UGX.17,490,404 from the previous year). A review of the Commission‟s performance report revealed that execution of some key activities for which funds had been released remained incomplete. Details are as in the table below:

Planned Key Approved Actual Funds un- Expected Actual Remarks Activity Budget amount utilized Output output (UGX Released (UGX) (UGX) OUTCOME 2. ACCESS TO JLOS SERVICES ENHANCED

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Planned Key Approved Actual Funds un- Expected Actual Remarks Activity Budget amount utilized Output output (UGX Released (UGX) (UGX) Study to 5,000,000 5,000,000 5,000,000 Printed Nil Though funds review the published were released Prisons Act, report on there was 1.1.1.17 Publish Prisons Act. 100% under the study report absorption

1.5.1.9 Printing 100,000,000 100,000,000 72,816,000 The funds are No Copies not of 200 statutory not sufficient Copies printed yet hard copies of and not printed. 100M was the Revised economically released on Edition feasible to this item as print only 200 planned. 72% copies. under absorption 1.5.1.11 15,000,000 15,000,000 15,000,000 Draft Manual Nil Nil absorption Print the as the money Drafting Manual was released but not expensed on this item

Failure to implement planned activities affects the timely achievement of the programme objectives.

Management explained that the activities were not implemented due to various reasons, for example; printing could not be done because the principal laws had not been finalized. In the course of revision, it was discovered that many issues, including conversion of fines and penalties into currency points needed more consultation. Additionally the enabling law to authorize publication of the revised laws of Uganda has not yet been passed by Parliament. It was realized that the Commission was not the competent authority to issue the legislative drafting manual. Accordingly there are consultations with the 1st Parliamentary Counsel on

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the way forward. Those issues affected timely implementation of the planned activities.

8.16 MINISTRY OF JUSTICE AND CONSTITUTIONAL AFFAIRS

(a) Construction of Mini-JLOS Centre Moroto JLOS Center/House Moroto was constructed and completed and commissioned on 14/02/2014 by Hon. Justice Steven Kavuma then Ag. Chief Justice and H.E. Alphans Hennekens, Ambassador, Royal Netherlands Embassy. Refer to photos below:

Mini JLOS centre Moroto It was however noted on inspection that the House has remained un-occupied. It has not been occupied apart from Prisons department with inadequately furnished office of the Resident Prisons Officer (RPO). It has electricity and running water without furniture and curtains. Offices for JLOS Secretariat were still empty. The House also has an extension for Directorate of Citizenship and Immigration and Government Analytical Laboratory and Community Service but all this remained unoccupied with no furniture and curtains.

Underutilization of the building undermines the intensions of the Programme.

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Management explained that efforts are underway to have all JLOS institutions occupy the building. The delay was caused by lack of funds to procure the required furniture and other office equipment.

Management efforts on the matter are awaited.

9.0 MINISTRY OF INTERNAL AFFAIRS

9.1 Mischarged expenditure

The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. However, it was noted that the Ministry charged wrong expenditure codes to a tune of UGX.421,104,192 without authority from PS/ST. This constituted 15% of the entity total expenditure. The practice of mischarge of expenditure undermines the importance of the budgeting process and leads to misreporting.

The Accounting Officer attributed this to lack of sufficient funds on the respective budget items/account codes as well as the emergencies that come at short notice. He further explained that they will continue to request MoFPED for adequate funding as well as increased ceilings for consumptive arrears in accordance with Ministry operational experiences.

I advised the Accounting Officer to continue liaising with MOFPED to streamline the budget process and ensure that sufficient funds are allocated to each account. Authority should be sought before any reallocations are made.

9.2 Outstanding Payables

UGX.1,356,915,300 remained outstanding in payables at the end of the financial year. The outstanding payables comprised of grants payable to RESCA of UGX.1,317,292,748 and Umeme bills worth UGX.39,622,552. I explained to 177

management that accumulation of domestic arrears is in contravention of the commitment control system.

Management attributed the outstanding payables to inadequate funding.

I advised Management to adhere to the commitment control system and liaise with the relevant stakeholders to solicit for funding and have the outstanding obligations settled.

9.3 Lack of certificates of title for Government land

The Ministry possesses various pieces of land in different parts of the country in which Government has invested as shown in the table below. I was however not availed with certificates of land title to verify ownership. Lack of ownership poses a risk of loss of the land and developments thereon.

Location Plot No. Occupied by Jinja Road Plot 75 Ministry Headquarters Directorate of Government Lourdel Road; Kampala Plot 2-4 Analytical Laboratories Regional Government Laboratory - Lyadda Road; Mbale Plot 15-35 Mbale Regional Government Laboratory in Kitunzi Road; Mbarara Plot 7 Mbarara Regional laboratory-Gulu (Under Princess road; Gulu Plot 4 C construction)

The Accounting Officer responded that efforts of pursuing Titles for all Ministry land from Uganda Land Commission are in the process.

I advised the Accounting Officer to prioritize surveying of the Ministry land and secure the titles to avoid any loss.

9.4 Staffing gaps

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It was noted that the Ministry has 35 vacant posts. These include key posts of: Principal Internal Auditor, two members of Amnesty Commission, DRT Member, Commissioner-DGAL, Assistant Commissioner-DGAL, Principal Government Analysts-DGAL, Senior Government Analysts-DGAL, Senior Lab. Technicians-DGAL, and the Probation and Welfare Officer. The Table below refers:

PROGRAMME AFFECTED APPROVED VACANT POST/TITLE POSTS Finance & Principal Internal 1 1 Administration Auditor (F&A) Drivers 7 1 Amnesty Members of 6 2 Commission (AC) Commission DRT Member 7 1 Accounts Assistant 1 1 Stores Assistant 1 1 Drivers 12 2 Office Attendants 2 1 Directorate of Commissioners 2 1 Government Asst. Commissioner 2 1 Analytical Principal Govt. 8 4 Laboratories Analyst (DGAL) Senior Govt. 11 6 Analyst Senior. Lab. 5 4 Technicians Personal Secretary 3 1 Steno. Secretary 2 1 Laboratory Assistant 9 1 Stores Assistant 2 1 Office Attendant 9 1 National Probation & Welfare 9 3

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PROGRAMME AFFECTED APPROVED VACANT POST/TITLE POSTS Community Service Officer (NCS) Non-Governmental Stenographer 1 1 Organization Board (NGO) GRAND TOTAL 35 According to the Ministerial Policy Statement 2014/15, management plans to recruit only three staff to fill the posts of one Laboratory Assistant and three Probation Officers without considering the most affected and technical Directorate of Government Analytical Laboratories. Inadequate staffing affects the timely implementation of the Ministry's activities.

The Accounting Officer explained that the recruitment process could not be undertaken because of the limited resources availed by the Ministry of Finance, Planning and Economic Development. It has therefore become difficult to recruit when the wage for the un-filled positions is not provided for in the budget. I advised the Accounting Officer to make concerted efforts in liaising with all stakeholders to ensure that vacant posts are filled to enable the Ministry adequately deliver on its mandate.

9.5 Lack of an IT strategic plan

The Ministry has made substantial investment in IT Equipment including procurement of computers, Laptops, Servers, Network racks etc. However, the Ministry does not have an IT Strategy/Plan to ensure that these facilities and data captured therein are safeguarded and protected and also to ensure continuity in operation in case any disaster strikes. It was further noted that the Ministry has an internal backup drive in the server room which cannot be put to use due to lack of the IT Strategy/ Policy. This exposes the Ministry to a risk of losing all the information stored on the computers in case of virus attack and theft of the equipment or fire breakout.

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Management explained that there is a running strategic plan but in draft form.

I advised the Accounting Officer to have the IT strategy approved and commissioned.

9.6 Directorate of Government Analytical Laboratories - DGAL

The Directorate of Government Analytical Laboratories is mandated to provide scientific advisory and analytical services to government departments responsible for the administration of Justice (Police, DPP, Judiciary); Statutory Regulatory Bodies (NEMA, UNBS, URA, NDA); the Private Sector (UMA, PSF) and the public in general (individuals, scientific researchers).

A review of the operating environment of the DGAL revealed the following: a) Poor infrastructure and working environment at DGAL Headquarters The headquarters of the directorate are located at Wandegeya Kampala. A visit of the offices revealed that the building housing the directorate was built way back in 1927 and is currently in a dilapidated state and needs urgent renovations. The directorate looks abandoned and yet it plays an important role of providing scientific and analytical evidence in administration of justice. The building which houses eight scientific laboratories with expensive and sensitive equipment as well as information is roofed with corrugated iron sheets which are old and require replacement; and in some areas there are leakages. The drive ways and parking area has potholes. DGAL headquarters photos are indicated below:

Main entrance of the directorate headquarters: Falling facial boards; Stairs in a sorry state; Building looks abandoned

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Rear view of the building: Left is behind the Commissioner‟s office; pothole with water visible. Right is the window one of the laboratories, wall needs renovations.

Leaking ceiling that needs urgent repairs/renovations

Left: Front parking with big potholes filled with water. Right: Drive way with pot holes

Parking on the sides that needs re-tarmacking

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With this state of infrastructure, the directorate may find it difficult to meet adequately its mandate.

The Accounting Officer explained that management is cognizant of this appalling situation and has always engaged MoFPED to increase the Ministry development budget but with limited success. The Ministry gets a Paltry 103 Million as its development Budget which cannot do much because of other pending capital commitments.

I advised the Accounting Officer to engage all stakeholders including JLOS Swap Programme to ensure that the Ministry secures funds to renovate the infrastructure. b) Case backlogs and Performance of the Directorate The Directorate provides forensic expertise to back up police in complicated cases such as mass murders and fire out breaks, and also provides expert evidence in courts of law. During the year, the Directorate responded to only 42 (52.5%) of the 80 court sermons received from Kampala and upcountry, and analyzed and disposed of 518 (35%) of the 1480 cases received. The pending cases have accumulated leading to case backlog mainly due to shortage of chemicals and reagents to do forensic analysis. This has in many cases caused delays in providing expertise evidence and government could be losing very important cases due to lack of evidence to guide prosecution.

It was also noted that no funding was provided to facilitate the movement of experts to crime scenes and courts of law. In 2013/14, the directorate only managed to send experts to crime scenes and courts around Kampala being unable to handle upcountry areas. This has greatly affected the level of crime investigations and delivery of justice. With increasing levels of sophisticated crimes and emerging issues in the Oil and Gas Sector, terrorism, bio terrorism and poisons, it is apparent that the directorate is inadequately funded to execute its mandate.

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The Accounting Officer explained that the Ministry has consistently experienced underfunding to most of the critical areas especially in analysing disposing off emergency cases and procuring chemicals and reagents. Management therefore has to rationalize the meagre resources to carry out very critical activities and this has greatly affected performance.

I advised that Accounting Officer to engage all stakeholders to ensure that the Ministry secures enough funding for the directorate.

c) Lack of Maintenance contracts for DGAL Equipment The Directorate has a number of scientific equipment for analyzing forensic and DNA specimens, checking water and waste water samples and analyzing proficiency testing samples, etc. The equipment in question include, but not limited to Genetic Analyiser, PCR Machine, RT- PCR, Vortex Mixer/Mini shaker, Thermal Shaker, Electrophorus Machine, Autoclave sterilizer, Comparison Microscope and Electrostatic Detection Apparatus.

The Directorate however does not have maintenance contracts for these key equipment. Lack of maintenance contracts limits routine and timely maintenance of the equipment. In the circumstances, the efficiency and effectiveness of the equipment is compromised most especially during crisis and peak periods. As a result, the life span of the equipment is shortened or threatened, yet the Ministry may not have capacity to procure and replace with new equipment.

The Accounting Officer explained that there was inadequate allocation of funds for servicing and maintenance of the equipment, calibration of GC/MS, HPLC, AAS and UV-VIS. During the year under review, only UGX.19,037,000 was allocated against required 13,000 US Dollars. Servicing and calibration of DNA and real- time PCR, required UGX.20,000,000 against the allocated 35,000 US Dollars. The budget is still too low to commit service contracts maintenance as the equipment service providers are based abroad.

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I advised that Accounting Officer to continue engaging all stakeholders to ensure that the Ministry secures enough funding to undertake this critical activity.

9.7 Mbale Regional Laboratories

Mbale regional laboratory is a well-equipped laboratory supposed to cover the eastern region by collecting, testing and analyzing samples for suspects. The laboratory however lacks reagents to carry out tests and has become more of a collection centre for the samples than a testing and analysis laboratory. Despite the Government injecting a lot of money for constructing and equipping the Laboratory, it cannot be fully utilized due to lack of chemicals, reagents and other consumables. The samples collected are instead sent to the Kampala headquarters for testing and analysis which greatly affects the timely crime investigations and delivery of justice; and also non achievement of the overall objective of having a regional centre.

In addition, the laboratory is run by a skeleton staff of two government analysts, one cleaner/ receptionist, one Shamba boy and four police guards. The station has a motor cycle as a means of transport which is not provided with fuel. The station receives imprest of only four million to run the office for a quarter which is not enough and not received in time. The last imprest was received in the second quarter of the year.

Under the circumstances, it is evident that the Mbale Regional Laboratory may not achieve its objective of contributing to timely administration of justice in the Eastern Region through testing and analysis of various samples to be used for testifying in courts of law.

The Accounting Officer responded that Management of the Ministry recognizes the need with concern and will continue engaging MoFPED to avail funding.

I await the results of management commitment.

9.8 Budget Performance

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During the year, the Ministry of Internal Affairs received UGX.10,734,020,200 against the approved budget of UGX.10,916,219,910. The grants revenue constituted 98.5% of the approved budget estimates. Subsequently, the Ministry spent a total of UGX.10,358,868,929 which represented 96.5% of the amount released.

However, a review of the Ministry‟s performance as per the annual physical performance report indicated that some planned activities were not implemented, while others remained incomplete despite release of 98.5% of the approved budget. The table below refers:

Planned key activity Expected output Actual output Variance Manage Amnesty Amnesty The Amnesty Amnesty commission offices, six Commission offices, commission office, commission had Demobilization six DRTs and the the DRTs and the accumulated arrears Resettlement Teams liaison office in Beni liaison office in Beni of rent Amounting (DRTs) (Gulu, Kitgum. in the Democratic in the Democratic to UGX.200,127,100 Arua, Kasese, Central Republic of Congo Republic of Congo by the end of the and Mbale) and Beni well managed were not well year. UGX 637m liaison office in DR managed. due to the Congo Commission was not released to the Commission by the Ministry. Procurement of a Motor vehicles and The vehicle was not 100% under double-cabin pickup other transport purchased. performance for Amnesty equipment Commission Procure computer Increased analytical Computer supplies, 20% of cases not supplies, Glassware, scope of the Glassware, analyzed chemicals and laboratory chemicals and laboratory laboratory consumables for Mbale consumables were Regional Laboratory; not procured; Only Analyze and conclude 20% of cases 40% of received cases received were at Mbale Regional analyzed. laboratory

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Planned key activity Expected output Actual output Variance Conclude testing and Timely forensic Out of 1,215 63.5% under analysis within 9 investigation forensic cases performance months undertaken in received only 444 administration of were analyzed and justice. reported on Training Poison Strengthened Poison Activity was not 100% under Information Centre Information Centre. done performance operatives and procurement of intox data (a diagnostic software) among other requirements) Carry out forensic Oil and Gas industry Activity was not 100% under study on oil and gas contaminants in done performance industry contaminants waters of Albertine in water found in region monitored Albertine region (Bulisa District) Procurement and Electronic access Activity was not 100% under installation of control system done performance biometric access installed at D/GAL control system at DGAL Undertake District Best practices in Activity was not 100% study visits for best community service done underperformance practices in the orders adopted and management of applied Community Service Orders. Continue with the National policy on Started the process The development of development of Community service of developing the the National National policy on Draft Policy on corrections Community service corrections (National policy/National corrections policy (in policy on place of National Community service Policy on was not given Community Service priority. only one consultative meeting was held. Carry out Semi-annual Increased Monitored only 90% Monitoring and supervision and 10% of the underperformance. Evaluation (M & E) monitoring of community service visits of Community community service offenders. Service offenders offenders across the country wide. country. 187

Planned key activity Expected output Actual output Variance

Setting up Rehabilitative The rehabilitative 100% rehabilitative projects projects in 4 districts projects were not underperformance in 4 districts of Arua, of Arua, Bulambuli, set up. Bulambuli, Kapchorwa Kapchorwa and and Kyenjojo Kyenjojo set up Monitoring 200 200 NGOs Only 90 NGOs were 55% selected Non- monitored monitored. underperformance Governmental Organizations (NGOs) for Compliance with the Law and the terms and conditions of their permits Renovation of two Two buildings for The buildings were 100% residential buildings UNAFRI renovated not renovated. underperformance for UNAFRI.

Management‟s failure to implement activities as planned negatively affected the Ministry performance and delivery on its mandate.

The Accounting Officer attributed the underperformance to inadequate funding.

I advised the Accounting Officer to liaise with all relevant stakeholders to solicit for adequate funding and have the activities undertaken as planned.

10.0 UGANDA POLICE FORCE

10.1 Payables

Included in payables of UGX.46,702,959,156 are bills in respect of; water, UGX.3,653,659,427; Umeme, UGX.14,443,914,497 and garages, UGX.736,243,151 which have been outstanding for more than a year. The opening balance on these items was again reflected as closing balance indicating no movement in these expenditure items. It is evident that management has not put in place sufficient mechanisms to monitor and control these items. There is a risk of loss of reputation and litigation by creditors. There is also a risk of power and water disconnections by the utility companies.

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Management attributed accumulation and non-clearance of domestic arrears to underfunding of utility expenses which has been brought to the attention of Ministry of Finance, Planning and Economic Development through various communications. Management has in the meantime consulted with the Director Internal Audit to have the electricity and water arrears verified with a view of providing an adequate budget in FY 2015/16.

I reminded management that accumulation of domestic arrears is in contravention of the commitment control systems and advised that the Accounting Officer continue liaising with the responsible authorities for extra funding to clear the outstanding arrears.

10.2 Mischarged expenditure

A review of the entity expenditures revealed that wrong expenditure codes were charged to a tune of UGX.132,090,477 without authority contrary to chapter IV section 156 of the TAIs. This practice does not only distort the intentions of appropriating authority but also results into misreporting of the financial statements balances.

Management explained that the Police budget is underfunded and as such it cannot support the level of services that are required to fulfill its mandate. It was therefore inevitable that certain items were used to fund critical activities resulting into mischarges.

I advised management to streamline the budget process to ensure that sufficient funds are allocated to each account code and to seek for authority before any reallocations are made.

10.3 Unpaid assessment under Express Penalty Scheme recorded by URA –

UGX.672,130,000

The Express Penalty Scheme (EPS) was a policy introduced by Management where traffic offenders were instantly apprehended, fined or cautioned. It was noted that UGX.672,130,000 remained unpaid from Express Penalty Scheme assessment

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captured on the URA portal as at 18th November 2014. The Police and URA have not established any mechanism to follow up offenders for payment of the fines. It was further noted that there is no consolidated record of offenders who are issued tickets but do not report to URA for assessment. Under the circumstances, it was difficult to enforce collection of all the revenue from the scheme.

Management explained that the Traffic and Road Safety(TRS) Directorate has established mechanisms to follow up EPS defaulters. Such mechanisms include daily tracking of EPS defaulters by EPS Tracking Unit on all major roads in Uganda. Some traffic officers from stations that have internet connectivity have been trained to track EPS defaulters. The World Bank is also supporting the TRS Directorate through Ministry of Works and Transport to establish a Road Crash Data Base System together with the computers and other necessary logistics that will be used during the implementation and final rollout.

I advised management to implement the mechanisms in place to ensure that all the revenue assessed is tracked and collected. 10.4 Land matters

a) Land titles and Land Fencing Uganda Police Force has 665 pieces of land in the 106 Districts however; most of them did not have titles as shown in the summary below. While 145 pieces of land had been surveyed pending deed plans, 418 pieces of land were pending surveys.

Total No. of districts Titled land Surveyed land Pending surveys where land is with deed plans and titling located process 665 106 102 145 418 Pieces 15% 21% 64%

Most of the land had not been fenced. Police was losing its land to rampant encroachment due to lack of land titles and fencing. Some of the barracks affected include the following:-

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 In Arua, 8 acres of land located south of the barracks that originally belonged to the Police Special Force are now being used by the army. Also another piece of land of about an acre is being claimed by a business man in town.  In Kiboga, the DPC was only able to show us the blue print of the area which was also being claimed by a local politician.  It was difficult to establish the actual land area in Hoima Police station and barracks as there was a claim of a two acre piece of land by the Municipal authority.  In Masindi Police station and Barracks, there was encroachment of the 3 acre piece of land behind the police station by the staff from water department.  Other stations and barracks without land titles include Nebbi, Yumbe, Atiak, Gulu, Jinja, Kamuli, Iganga, Tororo, Lwakhakha, Mbale, Soroti, Serere, Moroto, Kotido, Mityana, Mubende, Kyenjojo, Fort-portal, Kasese and Kamengo.

Management explained that UPF lands department has extensively conducted surveys and boundary openings of Police land but funding is inadequate to provide fencing for the entire UPF stock.

I advised management to expedite surveying with a view of obtaining land titles in order to protect the land from encroachers, and also source for funding to fence off all police land across the country. b) Encroachment of land at Nateete Police Station Nateete land is titled on Plot 146 Kibuga, Block 18 measuring 3.252 hectares registered under Uganda Land Commission on 5th July 2010 with user restricted to Police Department (Police Station). However, the Force has not opened up boundaries and fenced off the land to safeguard it from encroachers. The land has since been encroached on and the Force has not used its Land Protection Unit under CIID to recover the land. The extent of encroachment is shown in the photos below:

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Left: The trench that boarders with Police land, the rear view of encroachers Right: The front view of the encroachers just overlooking the Station‟s park yard

Left: One of the permanent buildings built on Police land. The boundary of Police land is slightly behind the building Right: Some building belonging to encroachers. Inset is the Natete Police Station being constructed.

Police land just adjacent to the Police station building under construction. The encroachers have just sold it off to a private developer.

Management explained that the Nateete land was already encroached upon at the time of titling. Boundaries were opened and the extent of the encroachment was

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identified. Discussions have since been held with the encroachers and other stakeholders and the Land Protection Unit was notified to take appropriate action. The land that was not encroached upon is properly secured and occupied by Police.

I advised management to continue using the services of its Local Protection Unit to recover the land encroached on or take other actions which may involve legal means.

10.5 Construction of Nateete Divisional Police Headquarters – Delayed

completion

The works at Nateete Divisional Police Headquarter were initiated after the station was burnt down by rioters in 2010. The construction of the “roofed frame structure” commenced in October 2011 and was supposed to be completed by October 2014. The project under force account mechanism was originally estimated to cost UGX.1.648bn but was later revised to UGX.2.358bn.

However, by February 2015, four months after the estimated completion date, the works completed were estimated at only 75% according to the Project Manager. By the time of inspection, there was no activity taking place and yet the condition of the offices at the station was alarming. Although there were some building materials on site, I was informed that funds for cement and labour to complete casting the second floor slab were lacking. At this rate of progress, the building might not be completed within the coming six years and the intended objectives of the construction may not be achieved.

The photos below show the level of completion and the current structure used as an office:

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Above: Rear view of the building Front view of the building

Above: Materials at site (iron bars and timber)

Above: Current offices of the station Management attributed the delays to inadequate funding. Although the completion of the super structure required UGX.2.3bn, only UGX.1.8bn has been released and spent on the Project. The balance of the funds to complete the Project was budgeted but has not yet been released by MoFPED.

I advised management to continue engaging the MoFPED for adequate funds to complete the building. Management was also advised to look into an option of contracting out the remaining works to completion in order to solve the Station‟s office accommodation problems and achieve the intended objectives of putting up a model Divisional Police Headquarters.

10.6 Lack of staff accommodation at Nateete Police Station 194

Nateete Police Station has staff accommodation problems that need to be urgently addressed. Police officers have no official accommodation but rather improvise for their accommodation at the Police station themselves. The security of police officers is at stake as they share accommodation with civilians who encroached on Police land. The situation is made worse because the station is located in a lowland which is more or less a wetland with full of mosquitoes and with poor drainage. The poor living conditions impact on police officer‟s morale and performance.

The physical situation can be observed from the photographs below:

Above: Self improvised accommodation for police officers.

Above left: A newly improvised shelter, on its left with poles, another officer trying to put up his accommodation.

Above right: A police officer washing his clothes in front of his “house”. Inset is the Police station building under construction

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Above left: The old pit latrine and bath rooms. Officers still use the bathrooms for bathing. Above right: The new pit latrine police officers use.

In their response, management explained that due to inadequate budget, no funds have been provided for construction of staff accommodation. The shortage of funds for Police accommodation has always been highlighted in the Ministerial Policy Statement (MPS) as presented to Parliament. The response from MoFPED despite recommendations from Parliament to increase funding for Police accommodation has not been positive. They further explained that staff accommodation is being considered under the wider scope of Public Private Partnerships for delivery of Police infrastructure.

I advised the Accounting Officer to mobilize funds by liaising with the responsible Ministry and other stake holders to provide accommodation for the officers. 10.7 Construction of Yumbe Police Station

Construction of Yumbe Police Station started in Janury 2014 and was to be completed by May, 2014. However, physical inspection undertaken on 31/01/2015 observed that eight months after the estimated completion date, the project was estimated at 77% of completion. The construction had been at stand still for six months since August 2014 when the building had just been roofed but not plastered as shown in the photos below.

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Roofed building but not yet platered

Above: Floor finishes not yet done Ceiling not yet finished

Management attributed delayed completion to inadequate funding. Ministry of Finance Planning and Economic Development had promised to release funds to complete the project in the 4th quarter of 2014/15.

I advised management to liaise with Ministry of Finance, Planning and Economic Development and ensure that the funds are released.

10.8 Manafwa Police Station

The construction of the Police station was abandoned in June 2014 when it had been roofed and ceiling casted. Windows, doors and their frames were not fitted and the ceiling finishes and floor screed were not done. Besides, the station has no provision for staff accommodation forcing the officers to rent outside the barracks. The photos below show the structure:

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Lack of good working environment impacts on the morale of the officers thereby affecting the effectiveness and efficiency of the services delivered.

Management explained that the funding of this project was in phased manner. Funding for the FY 2013/14 could only take the structure to the roofing level. Although funds for completion were expected in 3rd Quarter of FY 2014/15, to date no release had been effected which may further delay the completion.

I encouraged the Accounting Officer to continue requesting for funds and have the Police station completed.

10.9 Olilim Police Training School (PTS)

(i) Inappropriate use of the Olilim PTS classroom block A classroom block was constructed at Olilim PTS however; the block was turned into accommodation for staff, an Armoury, a clinic and office. The workmanship looked poor as evidenced by cracked floor which needed to be redone as seen in the photo below:

Cracked floor

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The building was not provided with the lightening arrester to guard against lightening, and the rain gutters were not fitted to protect the building walls and verandah from rain water. The staff provide accommodation by themselves and use pit water for bathing and washing, which is hazardous for their health and may negatively affect their effectiveness in providing police services. See photos below:

Accommodation Accommodation bathing facilities

Management explained that lack of funds to urgently construct structures to house the staff pushed the school administration to temporarily accommodate the personnel in the classroom block. Plans to construct staff quarters are already underway. The cracks in the classroom block were majorly attributed to the vibrations resulting from explosive training conducted by Counter Terrorism Directorate. The plan to supply safe water system to the training school has also delayed due to lack of funds.

I advised management to plan accordingly and have the staff accommodated. Efforts to have water supplied to the school is also awaited.

(ii) Delayed completion of the Administration block The construction of the administration building was started in 2009 under Force Account arrangement. The works have since stalled as the door shutters and window glasses were not fitted, the floor screed was not done; only electricity conducting was done while the ceiling had big cracks. The photo below shows the incomplete administration block:

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Incomplete administration block

Management attributed delayed completion to inadequate funding. The ceiling cracks in the Administration block was a result of vibrations from the explosive blasts during counter terrorism training that caused slight movements in the ceiling.

I advised management to prioritize completion of the administration block.

10.10 Buliisa Police station and barracks

(i) Police station

The office block was constructed at an estimated cost of UGX.450million using Force Account. The construction was to be completed within 10 months effective December 2013, but this was not achieved due to late release of funds. Although UGX.250 million was released within the first six months, completion of works was delayed. Out of the balance required of UGX.200 million, UGX.137 million was released in the second quarter of 2014/2015 while the remaining UGX.63 million is yet to be released.

There was commendable work in progress by the time of the visit. The works under execution included ceiling works, plumbing and block production. The building however awaits fixing of steel doors, windows, plastering, floor screeding and painting. The photos below refer:

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It was also noted that the uniports being used need proper maintenance works especially on the floor slabs for the officers to continue occupying them. Refer to photos below:

In response, management indicated that funds for completion were expected in 3rd Quarter of FY 2014/15, but these funds have not been released to date. Because of insufficient budget, repairs of uniports have not yet been undertaken.

I advised management to mobilize the required funds from the responsible Ministry and complete the building and also renovate the uniports.

10.11 Kabalye Police Training School (PTS)

Audit inspection of Kabalye PTS was carried out on 19thJanuary 2015. There were three on-going construction projects: a. A four (4) storeyed classroom block contracted by a local company. b. An eight (8) unit accommodation block under Force Account. c. Three dormitory (108 heads) blocks being constructed using hydra foam technology.

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A review of the construction works revealed the following: a) Delayed completion of Four (4) Storeyed Classroom block

A contract for the construction of a Four-Storeyed Classroom Block for UGX.4,324,964,501 was signed on 25th January 2011 between the Government of Uganda represented by Ministry of Internal Affairs, Uganda Police Force and a local company. The work was to be completed within 4 calendar months ending 24thMay 2011. However, despite various extensions of completion periods to 6th March 2014 the Classroom Block had not been completed by 19/01/2015 when I visited the site. I noted that delay in completion was partly contributed by late clearance of contractor‟s certificates which has denied the trainees the benefits of studying from a conducive environment, the objective for which the project was started.

I advised management to intensify supervision and ensure that the works are completed without delay. b) Eight (8) Unit staff accommodation block by Force Account Construction of the accommodation block begun in June 2014 and was to be completed within eight months (end of February 2015). However, at the time of inspection in January 2015, the project construction was behind schedule (as per the photo below) with a few workers currently on site being assisted by four (4) Korean expatriates under the supervision of the foreman and the engineer in charge of the project. Labourers were sent on temporally leave due to lack of funds to pay them.

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Stage of completion of the accommodation block

Management attributed the slow progress to funding gaps which resulted into phased construction.

I advised management to liaise with the responsible authorities for funding and have the works completed. c) Delayed completion of the Dormitory (108 heads) blocks being constructed using hydra foam technology The construction of the three dormitory blocks was started in May 2014 and expected to be completed by October 2014. By January 2015 three months after the expected completion date, one block was at the roofing stage, another one at wall plate level, while the third was at slab level as shown in the photos below:

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Construction dormitories under Hydra form technology

Management explained that insufficient funding led to some delays which affected the contractors‟ cash flows, payment of labour costs and securing the building materials and hence overall completion of the project works.

I advised management to prioritize the completion of the whole construction project at the training school by allocating funds for the completion of the project.

10.12 Poor working conditions at Kanara Police Station

The station operates in a unipot and police officers lack accommodation facilities, which negatively impact on staff morale. The OC Station informed the team that the area local council offered land for use to the Police station but there is need for lands department to formalize the details of titling. The photo below shows the accommodation facilities:

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Management explained that due to inadequate budget, funds have not yet been earmarked for construction of the station and staff accommodation. It further explained that the process of titling all Police lands is ongoing although the speed was hampered by inadequate budget.

I encouraged management to continue engaging the MoFPED for appropriate funding to improve its infrastructure. The Directorate of Engineering and Logistics is also advised to follow up the acquisition of land title for the offered spaces.

10.13 Ishasha Police Post

The Police Post operates in a unipot. The Post is policed by seven officers; each with one pair of uniform that was received in 2011. There is only one motor cycle in good working condition and a bicycle that was grounded. I noted that policing in the area poses a big challenge given the long distances involved. I informed management that lack of adequate facilities negatively affects officers‟ morale and hampers proper service delivery.

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Uniports providing accommodation for staff

Management responded that funds have not yet been earmarked for construction of the station and staff accommodation.

I advised the Accounting Officer together with the engineering directorate to improve on the officers‟ welfare by constructing both the administration and accommodation blocks, provide a vehicle and at least two pairs of uniform for staff.

10.14 Fleet management

During audit inspection of Busia, Tororo, Mbale and Olilim, it was noted that some fleet were not well maintained and their condition was deteriorating. Whereas some vehicles were scrap and ought to have been boarded off, some lacked spares and were grounded. The fleet has continued to lose value through deterioration. It was further noted that although the Force has a draft fleet management policy, it has not been approved to properly guide the fleet management. The table and the photos below show the part of the deteriorating fleet:

Police Motor vehicle No. Make State Station Busia UP 0284 Land Rover scrap Tororo UP 1032 Lacks spares Tororo UP 2611 Toyota Hilux Lacking Battery Mbale No number Toyota Hilux scrap

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Police Motor vehicle No. Make State Station Mbale UP 12299 Toyota Land cruiser Lacks spares Mbale UP 2343 Lacks spares Mbale UP 2819 Motor cycle Lacks spares Mbale UDL 380R Motor cycle Lacks spares Mbale Motor cycle Lacks spares Olilim PTS UP 1038 Toyota Land cruiser Lacks spares Amuria UP 2078 Motor cycle Lacks spares

Grounded vehicles

I advised the Accounting Officer to expedite the process of having the draft policy approved. In addition, the Force should liaise with the Ministry of Works and Transport to have the old fleet evaluated for possible boarding off to avoid further loss of value.

10.15 Failure to complete evaluation for the purchase of the helicopters

Following the 2014 amendments to the PPDA regulations, post qualification evaluation is mandatory under the Technical Compliance Selection evaluation methodology. It was noted that the entity did not conduct post qualification as required under the Reg. 15 (d) of the PPDA (Evaluation) Regulations, 2014. Without post qualification the Entity risks awarding a contract to a bidder without capacity to complete the contract.

Management explained that for the complex procurement such as procurement of helicopters, the entity did a due diligence on manufacturers who were invited to bid and did not envisage the need of carrying out a post assessment in this case.

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The requirement was however noted and the entity will always comply in subsequent complex procurements

The procurement and disposal Unit was advised to ensure that all stages of evaluation are completed as established per evaluation methodology.

10.16 Lack of a policy on creation, development & maintenance of Police

Stations and Barracks

The Force lacks a policy on creation, development and maintenance of Police Stations and Barracks in Uganda. This has been evidenced by the appalling state of sanitation, poor/illegal electricity connection, limited safe and water access, dilapidated and illegal state of infrastructure in the various police stations and barracks. The barracks sampled and found to be in this state of affair include: Masaka Police Station and Barracks, Kiboga Police Station and Barracks, Masindi Police Station and Barracks and Nebbi Police Station and Barracks. Due to lack of a policy, issues such as the required thresholds for in-house vs. outsourced construction works and maintenance works, standard designs, details and specifications procedures will not be clearly identified.

Management admitted to having no approved strategic investment plan and policy guidelines on infrastructure. However, an accommodation master plan has already been drafted together with the Construction Policy that is to address the key issues pertaining to development and maintenance of infrastructure in the UPF. The draft is yet to be presented to the Policy and Advisory Committee of UPF for approval.

I await the approval and implementation of the policy.

10.17 Lack of adequate documentation of assets and other properties

There is inadequate documentation of assets and other properties of the Uganda Police Force. Most of the RPCs and DPCs do not keep inventory of buildings, Land and other Police properties. For instance, Atiak Police Station and Barracks lacks an inventory register. In addition, the OC station complained of lack of uniforms.

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Other stations & barracks without documentation of assets and other properties are in Kiboga, Hoima, Masindi, Buliisa, Nebbi, Arua, Yumbe, Gulu, Lira and Apac. There is a risk of loss of Police property.

I advised management to ensure that inventory of all police assets including land and buildings is maintained at district and regional levels, while a central data base for all the police assets is maintained at the directorate of logistics and engineering.

10.18 Welfare issues

(i) Staff housing and accommodation Due to old and inadequate houses, staff live in make shift structures (manyatas) and dilapidated old buildings with leaking roofs, cracked walls and broken windows/doors which expose occupants to hostile weather. Some Police Stations and Barracks with poor accommodation include: Kiboga, Masindi, Bushenyi, Gulu, Lira, Jinja, Kamuli, Iganga, Tororo, Mbale, Soroti, Moroto, Mityana, Mubende, Kyenjojo, Sembabule, Masaka, Bushenyi and Hoima Police Station.

There is also a shortage of accommodation in Arua despite the renovation of 24 blocks. About 64 of the staff are not provided with accommodation and are renting outside the barracks. In Yumbe, out of 51 staff at the headquarters, only 38 were housed in the barracks and the rest were renting while some sleep in „manyatas‟. In Atiak police station and barracks there is congestion in the four blocks meant to house two families now housing four families. Poor accommodation negatively affects staff morale and output.

Management explained that renovations and maintenance works have been carried out in various barracks including Gulu, Arua, Atiak and Jinja Barracks. However the rate of maintenance and reconstruction of staff accommodation is very slow owing to budgetary limitations.

I advised management to consider regular renovation of the old police stations and barracks and also construct new ones in districts without barracks as a means of improving staff wellbeing.

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(ii) Lack of Electricity connection Many police stations and barracks do not have access to electricity. The electricity connections to a number of Police stations and barracks is old and defective causing electric shocks and damages to appliances. There is rampant irregular connections of power to illegal structures (manyatas) which have become a threat to the lives and properties of the officers and their families. Cases in point include: Kiboga Police Barracks, Hoima Police Station, Nebbi Police Barracks, Lyantonde Police Barracks, Mubende Police Station and barracks, Atiak Police Station and Barracks.

In Jinja and Bushenyi Police Barracks, the electric wires were too old and exposed on the wall surface. Some stations and barracks like Yumbe, Atiak, Kyenjojo, and Kamwenge did not have electricity while Ibanda experienced unstable power supply and the electrical circuit breaker and some of the electrical items are of low gauge.

Management indicated that the Force is undertaking disconnections of all substandard mains supply and replacing them with standard service cables. Inadequate funding is however limiting the pace of executing the exercise.

I urged management to continue with the disconnections but also consider providing electricity to all police stations and barracks throughout the country and carry out routine inspection exercises for electricity connections on a quarterly basis by a team of officials from Welfare, Logistics and Engineering together with UMEME officials in order to ensure adequate connections and safety of the lives of the police officers.

(iii) Lack of clean and safe water access

A number of Police Stations and Barracks especially in the recently created Districts do not have access to clean and safe water. Atiak Police Station & Barracks did not have water at the barracks and the nearest water source “borehole” is about 300 meters away from the barracks. Arua Police Station and

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Barracks is connected to tap water but water access is still a problem due to the broken water taps. Other stations and barracks without water sources are in Kiboga, Apac and Kamwenge. Safe water is essential for human life lack of which negatively affects staff morale and output.

Management indicated that supply of clean piped water has been achieved in many areas for example in Arua, Kyenjojo and Apac. Inadequate funding is however limiting the pace of execution of this crucial activity.

I informed management that access to clean water is a right to life. I encouraged it management to connect water to all the Police barracks and stations.

(iv) Poor sanitation The sanitation condition in most barracks is appalling. There are no functioning toilets since the old ones are filled up. The drainage systems are blocked and the wastes spill onto the compounds. The barracks‟ compounds are very dirty, bushy and have a bad odor. The conditions pose a health problem and lead to serious outbreak of diseases if not attended to. The most affected barracks include: Masindi Police Barracks, Arua Police Barracks, Gulu Police Barracks, Jinja Police Barracks, Kamuli Police Barracks and Lwakhakha Police Barracks.

In Kamuli Police Barracks there was poor garbage and waste management. Garbage piled up in heaps and some was scattered in the compound, while in Lwakhakha Police Barracks, flashing toilets were not functioning well as manholes had been blocked and sewage flows into the nearby river.

Poor sanitation, coupled with lack of safe water and accommodation have adverse consequences on staff morale and output.

I advised management to consider carrying out total overhaul of the sewerage and drainage systems in the affected barracks to avoid possible out breaks of diseases. Regular inspection for cleanliness should be done by a team of officers from welfare and the OC stations and barracks throughout the country. Funds should be budgeted for quarterly maintenance of the stations and barracks.

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10.19 Budget Performance

A review of the budget showed that UGX.369.85bn was released against an approved budget of UGX.375.35 bn. A review of the budget performance for the year 2013/2014 revealed that some planned activities and targets were partially or not achieved at all. Details are as per the table below:

Activities Details Budgeted Achieved Out put Remarks activity Output Enhanced response and 40,900 violent 26,548 cases 14,352 not 125602 investigation of violent crimes to be investigated & concluded. Criminal crime. investigated passed on to DPP Investigations Increased crime and passed on detection. to DPP Reduced CIID case Purchase 16 13 double cabin 3 double workload. double cabin pickups purchased cabin pickups Improved case pickups for not purchased management regional CIID offices. Setup AFIS Not done AFIS system system for for KMP not KMP set up Output Improved public To ensure a 35% proportion of 34% are not 125603 awareness on terrorism. proportion of public are aware of aware. Counter -Increased capacity of 69% public are signs of terrorism. It is also Terrorism personnel to identify and aware of signs unclear the respond to terrorism of terrorism methodology threats/Incidents used to determine the proportion of the public that are aware of terror threats. Output -Enhanced Information 180 cases of 156 cases of 24 cases not 125610 sharing and investigation. international international handled. Police -Enhanced participation in criminals to be criminals Administration UN peace keeping repatriated. repatriated. and Support operations. Services -Enhanced cooperation

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Activities Details Budgeted Achieved Out put Remarks activity with partner states on transnational/crime. Output 1256 Recruit and train 2000 Recruit and 3,500 PPCs and Police PPCs and 500 cadets. train 2000 Cadets recruited services PPCs and 500 and undergoing cadets. training Output 1256 Start Implementation of PPP PPP Program not PPP Program Police PPP. implementation implemented. not services implemented apart from forming the Negotiation team. Complete Police headquarters pending CIID wing constructions completed. Police Stations: Natete (Phase II) completed. Kiira Div. hqtrs completed. Mukono Police completed. Output Contractual obligation on Contractual Fulfilled the Payment 125677 Public Order Management Obligation on contractual completed. bill fulfilled. Public order obligation on Public Management Order Management bill fulfilled. equipment. Output Strategic Policing Strategic Five year strategic Awaiting 125609 finalized. Policing Policing Plan implementatio Police, finalized. developed. n. Command, Control and Planning.

Unimplemented activities hamper service delivery, and the appropriating authority‟s objectives may not be met.

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Management explained that some activities could not be implemented because of inadequate funding.

I advised management to ensure adequate planning and implementation of approved activities.

11.0 UGANDA PRISONS SERVICES

11.1 Mischarged Expenditure

Parliament appropriates funds annually in accordance with the needs of each MDA. This appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account and MTEF codes. A review of the entity expenditures revealed that UGX.637,537,384 was charged on wrong expenditure without authority for the reallocation. This practice does not only distort the intentions of appropriating authority but also results into incorrect reporting of the financial statements balances.

Management explained that some of the outputs like construction and renovation had no related budgets such as allowances spent on their implementation as such funds had to be reallocated from other expenditure codes. Management regretted the anomaly and promised to address the issue in the next budgeting process.

I advised management to streamline the budget process to ensure that adequate funds are allocated to each account code, and utilize the budget as appropriated. Authority should be sought before any reallocations are made.

11.2 Increased Payables Position

A review of the Statement of Financial Position revealed outstanding payables of UGX.46,597,708,858. Payables worth UGX.18,028,999,698 were disclosed in the statement of financial position as at 30th June 2014, implying that there has been an increase in domestic arrears by UGX.28,568,709,160 (158%) from the closing position of the previous year. It is evident that management has continued to incur arrears without establishing sufficient mechanisms to monitor and control

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them. There is a risk of loss of reputation and litigation due to non settlement of creditors.

Management explained that the increase in payables was as a result of demand for food items, electricity and water consumed during the year and not paid accompanied by insufficient funding for these items.

I advised Management to clear the outstanding commitments as a first call on the budget as guided by Accountant General. I also advised Management to liaise with the relevant Government authorities for adequate funding.

11.3 Under performance of letters of credit

Statement of Financial Position had receivables of UGX.2,437,182,189 as at 30th June 2014 which relate to outstanding letters of credit as at the end of year. Out of this figure, LCs worth UGX.677,451,776 relate to the previous year in respect of maintenance-civil, non-residential buildings and residential buildings. It was observed that non-residential buildings and residential buildings LCs‟ performance was quite low while maintenance civil did not perform at all. UGX.203,868,135 was as a result transferred back to consolidated fund as shown below:

Balance Balance Paid Additions Transfer to Balance C/F 30/06/201 Activity 01/07/23 2013/2014 2013/14 UCF 4

Maintenanc 203,227,415 - 203,227,415 - 203,227,415 - e -civil Non – Residential 207,691,509 146,196,986 61,494,523 - - 61,494,523 Building Residential 2,002,887,6 886,931,752 474,201,914 412,729,838 1,590,798,548 640,720 Building 66

Total 1,297,850,676 620,398,900 677,451,776 1,590,798,548 203,868,135

Underperformance of the letters of credit negatively affects the achievements of the intended entity objectives.

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Management explained that the letters of credit were still performing by the close of the financial and some had fully performed awaiting payment of retention fees.

I advised management to continue supervising the projects that had not fully performed and ensure that they are concluded.

11.4 Un-surveyed Land

The prisons service has a lot of un-surveyed land which needs formalization. Out of 240 prisons, only 49 had land titles, 112 prisons land was not surveyed and 79 prisons are on either Kingdom or District land. Most of the untitled land is either customary or mailo land under the Sub-county, Public/Mailo land under District Land Boards or Mailo land under Buganda Kingdom. This poses a risk of subdividing and allocating to private developers, and losing some of it to land encroachers.

Management explained that the process of surveying prisons land where the entity has control is underway. Negotiations to acquire kingdom land have also started. Surveying and titling of land for the 60 prisons under Buganda Kingdom and 19 under District Local Government will only be possible after acquiring them. UGX.1.12bn is required to survey the 112 un-surveyed prison land but only UGX.100 million was provided. Due to budget constraints, survey of land will be done in phases.

I advised Management to follow up with relevant stakeholders for purposes of securing the required funding so that all the land owned by government is surveyed and secured.

11.5 Congestion in prisons

Uganda Prisons Service has experienced an increase in the prisoners‟ population since the merger and takeover of 174 Local Administration Prisons in 2006, from a daily average of 19,179 prisoners in 2006 to 39,844 prisoners by January 2014. In June 2014, Prisoner populations had risen to 41,516 prisoners. According to management the current housing capacity is at 16,040 prisoners only. Compared

216 to the current prisoners‟ population (41,516), 25,476 prisoners cannot be accommodated now. See the table below.

Categories Males Females Total Convicts 17,382 720 18,102 Remands 22,136 1,038 23,175 Debtors 203 36 239 Total 39,722 1,794 41,516 Percentage (%) 95.7 4.3 100 Approved Capacity 16,040 Occupancy Rate (%) 258.8 Not accommodated 25,476

Increase in congestion of prisoners was associated with the following challenges:-

 Overcrowding: I noted that 5 prisons that had occupancy rate of above 500% as indicated below. Space has become a challenge with the growing numbers.

Prison Occupancy rate Gulu 508% Ntungamo 720% Kisoro 906% Kabale 651% Rukungiri 530%

 Low staff Numbers: With the increase of prison population, more staff are needed to exploit production potential of prisons farms, match the challenging profiles of offenders, monitor prisoners and reduce escape routes. This has not been fully achieved because of a ban in recruitment.

 Provision of basic necessities of life to both prisoner and staff: These include uniforms, beddings and staff accommodation. This has been a challenge due to the limited funding of the entity. 217

 Increased food budget: The required annual prisoner‟s food budget for the next financial year has been provided at UGX.50.006bn. However, the budget MTEF provision has been set at UGX.23.298bn thus creating a shortfall of UGX.26.708bn.

 Increased utility costs: Initially, 36 stations were connected to electricity power but currently 77 stations are connected. A total of 63 prison stations are connected to water compared to 32 formerly connected as a result of reduction of the bucket system. The water and electricity tariffs have thus gone up from UGX.1,912 in 2006 to UGX.2,353 in 2013 and UGX.426/kwh to UGX.525/kwh respectively.

 The numbers have caused congestion of the prisons thus increasing the risks of prisoners‟ escape, poor hygiene, diseases and rampant strikes as the prisoners continue scampering for the little resources.

Despite the increase in the number of prisoners and utility connections, accommodation and utility facilities have not increased proportionately.

Management attributed the problem of prisons congestion to the high prisoner population growth of 10% per annum which is not matched with accommodation requirements. The majority of prisons require expansion, major overhauls, renovations, and re-construction but the prisons service lacked sufficient funds. A proposal for renovation of prisons was submitted to Ministry of Finance, Planning and Economic Development and a phased approach over a period of 5 years was proposed. Ministry of Finance, Planning and Economic Development promised to handle the renovation of prisons over a medium term.

I advised management to continue lobbying for additional resources to improve the accommodation facilities of the inmates.

11.6 Budget Performance

A review of the budget performance for the year 2013/2014 revealed that some targets were not achieved despite receiving 99% of the approved budget. Details 218 are as per table below: Unimplemented activities hamper service delivery, and the appropriating authority‟s objectives may not be met.

Key activities Performance/Achieved output

Survey and title 9 Prisons & 09 prisons land surveyed, 06 land titles

open boundaries for 4 Prisons obtained and only 02 boundaries opened.

62% performance

Development and installation of Technical study design and development of

irrigation system at Ruimi irrigation system at Ruimi, Ibuga and Mubuku

Prison Farm; Setup irrigation on-going; Schematic designs completed but

system at Ruimi Prison Farm. Irrigation system not developed yet.

Renovation of Rwimi Prison Plumbing and electrical installations not done

yet

Construction of Kaabong prison Contractor secured, works not yet completed

Construction of Amur Prison Irrigation system not developed yet. Construction of a second Twin Fixing of water tanks, connecting water and prisoner's ward at Ruimi Prison electricity is ongoing. At roofing level by January 2015 Construction of a cotton farm Work on the super structure is ongoing, store at Mobuku currently at foundation stage; expected date of completion is December 2014. Not completed. Estimated at 80% by January 2015 Construction of 14 blocks of All the building materials have been procured staff houses at Muinaina, and delivered on site. Kapchorwa is at roofing Kiyunga, Ruimi and Kapchorwa stage and expected completion date for all Prisons. sites is December 2014, Muinaina nearing completion. 500 staff to benefit from Duty 343 staff benefitted from Duty Free Shop. Free Shop 31% did not benefit

The Accounting Officer explained that some activities were not completed within the year, and spilled over to the subsequent year. The delay was attributed to late 219

acquisition of land from the districts, heavy rain at the beginning of some of the projects and lengthy procurements among others. The Accounting Officer however indicated that the activities were ongoing.

I advised the Accounting Officer to ensure that all planned activities for which funds are released are carried out as planned.

11.7 Field inspections

A) Mbale Main Prison

During field inpection, it was observed that the prisons wards were leaking, some prisoners uniforms were were old and some had got torn. The perimeter fence was damaged and needed repair. The pictures below refer.

Leaking roof

Torn inmates‟ uniforms damaged fence

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The inmates are living in poor health condition with a possibility of inmates escaping because of the damaged fence. The inadequate clothing undermines the status of Uganda prisons.

Management in their response indicated that the majority of prisons structures were constructed in 1920s aimed at a smaller population. The structures have not had major overhaul, renovation and maintenance. The Prison is among those identified to be upgraded through renovation and new construction in the strategic investment plan III (2012/13 – 2016/17), while the prisoner‟s uniforms will be addressed soon.

I advised management to expedite the renovations of the prison to ensure that prisoners‟ rights are not denied. b) Ruimi Prisons Farm - Delayed construction of a twin ward

The construction worth UGX.618,909,737 commenced on 27th March 2014 and was expected to be completed by 27th Sept 2014. The completion date was later extended to 30th December 2014 with a variation of UGX.24,976,180 due to changes on the ground beam and filling murram due to its location (earthquake prone area). Delayed construction has negatively impacted on the intended objective of availing accommodation for prisoners. By January 2015, the building was at roofing level as shown in the photo below:

Construction on-going

Management attributed the delays to the heavy rains at the start of the project.

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The contractor has been given up to April 2015 to have all the activities completed and the wards handed over for occupation.

Management action on the matter is awaited. c) Mubuku Prisons Farm - Delayed completion of the construction of a cotton store

Construction of the cotton store at Mubuku Prison was contracted by a local company at a contract price of UGX.149,982,339. The project that started on 26th May 2014 was to be completed by 15th.January 2015 after an extension of two months. However, during audit inspection in January 2015, the cotton store had just been roofed and plastered outside but the doors had not been fixed and the floor was yet to be casted and screed. The construction has been delayed, and this has had a negative impact on storage of produce. Details are as shown in the photos below:

Plastered outside walls

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Inside walls not yet plastered Floor not yet casted

Management in their response attributed the delay to heavy rains at the start of the project. Management promised that the works will be completed by end of March 2015.

I advised the Accounting Officer to compel contractor to complete the construction of the store on the agreed timelines.

12.0 JUDICIARY DEPARTMENT

12.1 Arrears of rent

It was noted that out of the payables of UGX.6,834,553,806 reflected in the financial statements, UGX.3,010,447,187 comprised of sundry creditors (landlords) who have not been paid rent due from use of their premises by Courts. Delayed payment of rent may lead to reputation risk and eviction of the Courts to the embarrassment of the Judiciary.

The Accounting Officer explained that rental bills accumulate because of the increasing demand for Judicial Services yet the Judiciary lacks self-owned premises across the country. Further, the funds released for rent are inadequate leading to delayed payment to the landlords. The Accounting Officer further indicated that the entity has requested for a supplementary from Ministry of Finance, Planning and Economic Development to settle the arrears.

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I await the results of management efforts. It is also advisable that in the long run Judiciary should consider to construct its premises to minimize funds incurred in rent.

12.2 Deposit of third party funds on operations account

In the miscellaneous application number 44 of 2012, the honourable commercial Court delivered a judgment and awarded damages of UGX.494,990,000. The amount was deposited on the entity operational account in the court of appeal despite the fact that the Judiciary has an account in Bank of Uganda where deposits are paid. I explained to the management that the risk of utilizing these funds for court operations was high. A review of the bank statement indeed revealed that the court had borrowed these funds for its day to today operations.

The Accounting officer explained that the deposit was as a result of a court order and could not change until another order is issued after disposal of the case.

I advised the Accounting Officer to relate with the court and ensure that the funds are deposited in the appropriate bank accounts.

12.3 Human Resource Management

a) Staffing Gaps According to the staff establishment, 297 posts within the Judiciary had remained vacant during the year. These included among others 8 Justices of Court of appeal, 4 Justices of the Supreme Court and 8 High court Judges. Lack of staff in vital positions affects the performance and overall achievement of organization‟s goals and objectives. This could also be a contributory factor to case backlogs.

The Accounting Officer explained that the vacant posts were declared to the Service Commissions and management await its decision.

I advised the Accounting Officer to liaise with the relevant stakeholders and ensure that vacant posts are filled.

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b) Performance Management- Absence of Appraisal system for Judges Section (A-m) 3 of the Public Service Standing Orders requires all responsible officers to manage the performance of their Ministry or department to ensure that the performance of organizations and individuals directly contribute to improved service delivery and attainment of national development objectives.

However, it was noted that this mechanism did not exist in Judiciary. The entity;  Does not have annual performance plans developed at the beginning of every financial year for Judicial Officers.  Does not hold performance review meetings to review the performance of the Judicial Officers.  Does not monitor and evaluate performance of the department and individual staff.  Does not prepare annual performance reports for both Judicial and non- Judicial staff.  Does not carry out staff appraisals of both Judicial and non-Judicial staff.

In absence of a performance management system, staff will not have focus on the organizational goals and priorities, show commitment to their work and also improve on their competences through constructive feedback.

The Accounting Officer responded that Judicial Officers on the lower bench and the non-Judicial Officers are appraised through the normal Public Service Appraisal System. However this appraisal system appeared not appropriate for the Judges and Justices. As a result of this, an appraisal tool that covers all officers within the Judiciary has been developed by a consultant and is now being piloted.

I urged the management to have the appropriate tool finalised for implementation.

12.4 Department structure and issues of strategy

a) Operations of the High Court Circuits Following the 1997-1998 post Constitution Judicial restructuring report, Judicial services were decentralized to now twelve (12) High Court circuits. This was 225 intended to improve delivery of justice to all Ugandans. It was noted that whereas the High Court circuits were supposed to be replicas of the High Court, the concept of divisions at the High Court has not been rolled out to the High Court circuits. This sometimes leads to some cases being transferred from High Court circuits to the respective divisions at High Court in Kampala. This does not only make justice expensive for the litigants, but can be a burden to the divisional judges at the High Court hence leading to case backlogs. It may also cause redundancy of the resident judges.

The Accounting Officer responded that by resolution of Parliament, the Judges of the High Court are to be increased to 82. This will enable additional Judges to be recruited to facilitate creation of additional High Court Circuits. The creation of divisions at circuit level is a long term strategy which will be debated by the Judiciary. In the meantime, the Resident Judges in the High Court circuits have unlimited original jurisdiction and therefore handle all types of cases.

I advised that management considers the concept of High court circuits for implementation. b) Narrow Structure of the Court of Appeal The Court of Appeal has jurisdiction to hear appeals from the High Courts. These appeals come from court rulings of the High Court circuits and the High Court divisions-including Civil division, Criminal division, Commercial division, Anti- corruption division and Land division. A narrow structure of the court of appeal was noted in as far as the handling of cases from the High Courts is concerned. The eight divisions of the High Court and the High Court circuits all feed into the Court of Appeal. This does not allow smooth flow of cases.

The Accounting Officer responded that Management agrees with the need to expand the structure of the Court of Appeal. However, this is to be preceded with a business study to determine the wage and non-wage requirements, the infrastructure and case load.

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I advised that there is need to broaden the structure of the Court of Appeal to match with the High Court structure. This may go along in solving the case backlog in the court. c) Independence of the Judiciary Article 128(1) of the Constitution of the Republic of Uganda states that in the exercise of judicial power, the courts shall be independent and shall not be subject to the control or direction of any person or authority. However, contrary to legislation, the Judiciary has failed to assert its independence as it is treated as a Department rather than an arm of Government and has no financial independence and cannot recruit its own staff.

The Accounting Officer responded that the Draft Administration of Judiciary Bill 2013 was presented to Cabinet. Further discussion of the Bill was deferred until Article 172 of the Constitution is amended to allow for the delinking of certain cadres from the Public Service to the Judiciary.

I advised that effort should be made to delink the Judiciary from the main stream Public Service in order to achieve autonomy in the management of its financial and human resources in a bid to achieve its strategic objectives. d) Absence of a Client Service Charter Good practice requires that the judicature formulates Client Service Charter showing commitment to provide quality service and how to work best with general public. Over the years, the Judiciary has been in the spotlight on issues regarding the integrity of both Judicial and non-judicial officers. Despite the negative publicity, the Judiciary has not developed a client service charter.

The Accounting Officer responded that a draft Client Charter for the Judiciary has been developed and will be operationalized in FY 2015/2016.

I advised the Accounting Officer that there is a need for the Judiciary to expedite the implementation of the client charter that reflects its commitment to providing a high quality service, and how the Judiciary can work hand in hand with the general public to improve services. 227

12.5 Mischarge of Expenditure

The Parliament of Uganda also appropriates funds annually in accordance with the needs of each MDA. This appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account and MTEF codes. A review of the payments for the Judiciary revealed that payments amounting to UGX.423,909,500 were not charged under the appropriated and rightful codes. These payments were made without requisite authority. The practice does not only undermine the budgeting process and the intentions of the appropriating authority but also leads to financial statements misreporting.

The Accounting Officer explained that the Judiciary has endeavoured to streamline the budget in order to minimize mischarge of expenditure.

I advised that Management should allocate enough funds to budget lines in accordance with priorities and reallocations should be undertaken whenever there is need in accordance with the regulations.

12.6 Budget Performance

Although the Judiciary received 98% of its budget, there was notable under performance on the planned activities for the period under review. The table below refers:

Planned Planned Output Actual Variance Planned Actual Budget Activity Output Output Output Spent% Cost Cost Disposal of 3,094 Criminal 1,857 -846 21.154bn 21.696bn 102.6% appeals and suits Criminal suits in High suits and court 391 criminal appeals disposed of 3,056 Family suits 2,186 -870 family suits disposed of 388 Anti- 145 cases -243 228

Planned Planned Output Actual Variance Planned Actual Budget Activity Output Output Output Spent% Cost Cost corruption cases disposed of 3,070 Civil suits 2,558 -278 Civil suits and 234 Civil appeals disposed of 1,297 Commercial 1,754 +457 suits Commercial suits disposed of 1,546 Land Cases 1,413 land -133 cases disposed of Disposal of suits 109,261 cases 63,297 -45,964 15.899bn 15.942bn 100.3% and appeals in disposed of cases Magistrate disposed of Courts Construction Commence No output The two 1.175bn 2.006bn 170% and construction of courts not rehabilitation of Lugazi and constructed Judicial Courts Mayuge Magistrate courts

The underperformance escalated the case backlogs and negatively impacted on the achievement of the Judiciary mandate.

The Accounting Officer explained that the planning was ambitious and furthermore the funds allocated were not only meant for court sessions but for other attendant activities like visiting locus in quo, vehicle maintenance, fuel, rent and general supplies of goods and services.

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I advised the Accounting Officer that the Management team should make realistic plans and ensure that all planned activities for which funds are released are completed to enable the department deliver its mandate.

12.7 Field inspections - Books of Accounts and other operational concerns

Field inspections revealed the following; No Court Observations 1 Jinja High Court and  The High Court has a Senior Accounts Assistant appointed as the substantive cashier. Chief Magistrate‟s  The cashier had last posted the books in March Court 2011.  Similarly at the Chief Magistrates court (which has

an Accounts Assistant), the books were last posted in July 2009. 2 Kyegegwa Grade 1  The Court is in rented premises and the space is not adequate for Court operations. Court

 This court has a wider coverage with distant places in cases of visiting locus but it has no office vehicle thus making it costly to use public means. 3 Iganga Chief  The court does not maintain an assets register.  The computers are not connected to CCAS System. Magistrate‟s Court  Revenues collections are done in the bank after assessments by the Ag. Cashier, but it was noted that the cashier does not issue general receipts.  The court has no substantive cashier and all accounts related functions are carried out by records assistant. The cashbook is wrongly posted for example bank charges which are expenses were recorded on the debit side of the cash book. 4 Kaliro GR I Court  There are no books of accounts maintained at this court. This is because the Ag. Cashier lacks the

competence to perform accounts related functions.  The Court has no exhibit store and the exhibits are not recorded in the register. Exhibits are kept in the registry.  The returns are not submitted in time due to laxity by the clerk.

5 Mbale High and Chief  The mandatory books of Accounts such as Revenue Collectors cash book, Bail deposit cash book, Magistrate‟s Court Operational cash book, were in place but not updated.  Cases registers are in place but not properly posted. Although there are many clerical officers, the team found out that there is no single officer responsible for each register.  There are gaps left in between the cases registered. 230

No Court Observations The Magistrates do not sign in the case registers, especially cases registered as complete to confirm the results recorded in the registers.  Magistrates do not regularly supervise the Clerks to confirm that, whatever is recorded in the register is a true picture of what inspired in the court.  Case returns are prepared but not submitted on time.  There were also cases of use of white wash to correct mistakes in the registers. This is very risky in that anybody can tamper with the information in the register.  Document filing was also found to be poor.  Though the court had an exhibit stores, it was leaking and the floor is peeling off. 6 Sironko GR 1 Court  The cashier does not issue general receipts to the litigants, there were no monthly bank reconciliations.  Accountabilities for funds advanced for March 2014 were unavailable.  Case registers were not properly posted, there are many blank spaces left in between the cases registered. The magistrates do not sign against the results recorded by the clerks in the registers.  Document filing was poor, files having loose papers which are not numbered according to their order. 7 Kabale High Court and  Case registers are poorly posted, there is no specific staff to record cases. There are gaps left in between Chief Magistrate Court cases registered. Mistakes are corrected by overwriting, crossing and use of white wash. The Magistrates also do not sign the results for completed cases entered in the registers by the Clerks. Access to the Registry is not restricted.  Document filing is not properly done. The documents are not are not numbered and they are just loose in the files.  The exhibits register is in place but exhibits are not regularly recorded when received.  It was also noted that, there is a dilapidated store constructed with old iron sheets. The door does not even lock properly, risking exhibits to theft. It was established that in January 2014, thugs broke into the store and stole two bicycles and ten plastic chairs. 8 Nakasongola C/M  Cases registers are in place but are not properly posted: Criminal cases are mixed up with Juvenile Court cases; there are gaps left in between the cases registered. The complete cases are not signed off in the register by the chief magistrate  The court has got enough space for the existing 9 staff. The offices are fairly furnished but there is no 231

No Court Observations photocopier, filing cabinet, and Solar system/ Generator because they do not have stable power.  Nakasongola court makes returns on a monthly basis as required, but the reports submitted in most cases are inaccurate for instance in February 2014, 46 criminal cases were reported and yet the actual cases registered were 49. In January 2014, they reported zero civil cases and yet 2 were registered, in March 2014, they registered 28 civil and reported 30. 9 General observation  In the courts where there is electricity and water, it was noted that, the Office Supervisors do not across the Courts maintain utility ledgers. They did not even know the meter numbers and account numbers for their respective courts. The bills were submitted for payment as received by the courts. It was therefore not easy to verify these bills when the courts submitting them have not given assurance that they are genuine.

The weak record keeping is likely to lead to inaccurate reporting on cases reported and handled, loss of revenue, misuse of assets and, poor accountability.

The Accounting Officer explained that Management has put in place mechanisms to address the weaknesses identified above through; training of staff, recruitment and re-assignment of responsibilities

I await the results of management efforts.

12.8 Loss of motorcycle

Motorcycle Registration No. UG0311J attached to Commercial court Division was stolen at Senate Building Makerere University on Monday 6th February, 2012 from a Process Server who had gone to serve a ruling notice. The circumstances surrounding the theft of this motorcycle were not clear. The place the motorcycle was stolen from is not where the server notice was to be delivered. In addition, the time the officer claims the motorcycle was stolen (2.00 p.m.) differed from the police reports (12:46 p.m). These inconsistencies in reporting were suspicious. The Principal Human Resource Officer was requested by the Transport Officer to take action against the Officer but there was no report to show whether

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disciplinary action was taken against him. Failure to impose strong regulations on officers upon any irregularity may lead to loss of Government resources.

The Accounting Officer explained that the case was reported to Police and investigation is on-going.

I advised management to follow up the matter to conclusion.

12.9 DANIDA UGANDA GOOD GOVERNANCE PROGRAMME (UGOGO) –

SUPPORT TO THE JUSTICE, LAW AND ORDER SECTOR 2011-2016 31ST

DECEMBER, 2014

Use of out-dated Financial Policy and Procedures Manual

The Project has been using the Financial Policies and Procedures Manual developed as far back as 2001 for the Judiciary Danida Support to discharge its accountability function to DANIDA and the Government of Uganda. At the beginning of the third phase of the Danida Support to Judiciary in March 2006, the Registrar Planning and Development in consultation with the Project Director was to propose amendments to these financial procedures to the Technical Committee and facilitate the introduction of new instructions. I noted that no amendments have since been made to these policies.

Management responded that they have been aware of the need to update its Financial and Procurement Guidelines and stated that a consultant has already been engaged to update the guidelines in close consultation with programme management and the Royal Danish Embassy.

I await the out come of management efforts to update the Manual.

Non Compliance with Steering Committee meetings

The Programme policy document provides that a Steering Committee composed of the Chief Justice and members of the Judiciary Planning and Development Committee, and the Royal Danish Embassy would be the forum for the overall

233 coordination at policy level and was required to meet twice a year. However, it was noted that during the year, the Steering Committee met only once. There is a risk that the project may not have obtained the required guidance of the steering committee.

Management explained that the infrequency of meetings was partly due to the fact that for more than two years there was no substantive Chief Justice and the Project was not clear as to whether the Acting Chief Justice can also fulfil the role of the Chairperson of the Steering Committee.

I advised Management to organize regular meetings for the effective implementation of the work plans.

Absence of Approved List of Suppliers

Section 7.2.2 of the Daninda Judiciary Support Project Financial Policies and Procedures Manual states that; for all general stores items, an approved list of suppliers will be maintained. These suppliers should have verifiable premises, be registered for VAT purposes and issue valid tax invoices. It also states that the list will be reviewed and updated regularly by the Technical Committee. However during the audit it was observed that the Project did not maintain such a list.

Management explained that the Project uses a list of suppliers that consists of; Firms from the PPDA Register of providers‟ website; Judiciary‟s list of prequalified suppliers; and firms that were successfully used under the HUGGO phase and have shown high quality service.

I advised Management to ensure compliance with the procedures Manual.

Repair of X-TRAIL Motor Vehicles

A contract for the repair of three x-trail motor vehicles- UG 290J, UG O271J, and UG 274J of UGX.51, 170,000 was awarded to ACE Motors. It was noted that the motor vehicles were not assessed before and after the repairs by mechanical

234 engineer. There are risks that the repairs where over costed or not completely done as per the proforma invoices indicated leading to loss of programme funds.

Management responded that they had taken note and will in future ensure that an independent assessment is done before and after repair of the vehicles. The updated Financial Management Manual will also include clear policies regarding the repair of vehicles.

I advised Management to source for technical support from competent individuals in future.

Non-Deduction of Withholding Tax (WHT):

It was observed that WHT totalling to UGX.75,955,526 was not deducted whilst effecting some payments in contravention of the Income Tax Act.

Failure to withhold tax could lead to penalties as stipulated in the Income Tax Act.

Management admitted the shortcoming and explained that they will endeavour to recover WHT from the listed suppliers. Management further indicated that clarification on tax exemptions and their applications will be sought from the Royal Danish Embassy and URA. Respective provisions will thereafter be included in the updated Financial Management Guidelines.

I advised Management to consult with Royal Danish Embassy and URA regarding the Income Tax Act provisions. i. Non-Deduction of PAYE: The Income Tax Act, 1997 (as amended) section 117(1) states that; every employer shall withhold tax from a payment of employment income to an employee as prescribed by the regulations. During the year, the project paid UGX.32,150,000 as monthly allowances to; the Project Administrator, Office

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Attendant in charge of Resource Centre and the Driver. The project however did not deduct and pay to URA PAYE of UGX.9,645,000.

This is contrary to the Income Tax Act requirement and could lead to penalties from URA.

Management admitted the shortcoming and explained that they will recover the PAYE from the employees. Management further stated that with effect from January 2015 PAYE is deducted from all employees.

I advised Management to have consultations with the Royal Danish Embassy and URA in respect of the tax provisions. ii. Work plans and budgets Budget Shortfall

I noted a shortfall of funding of the approved work plans of the Programme. The total budget funding for the year under review stood at UGX.3,052,299,861 and only UGX.2,075,513,072 was received resulting into a budget shortfall of UGX.976,786,789.

The funding shortfall may in turn affect the implementation of the planned activities.

Management explained that the commitments made by the Embassy towards the project remain valid for the entire programme period. However, as part of due diligence, the Embassy only disburses funds to the project on a needs basis that is; according to the approved work plan/budget and upon receipt of satisfactory progress and financial reports as well as evidence of reduced balance on the project account.

I advised Management to undertake realistic budgeting in order to implement the activities in accordance with approved work plans.

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Physical Budget performance-Non-Partial implementation of planned

activities

UGOGO Project is component 2 of Sector Investment Plan III (SIP III) and is aimed at promoting the rule of law as its overall strategic goal. In order to achieve this goal, strategic objectives and activities are designed and medium term plans are prepared in form of approved annual work plans and budgets.

A review of the Project's performance as per DANIDA 4th progress report (Work plan IV) revealed that a number of activities remained un-implemented during the year while others were partially implemented. The table below refers.

Targeted Planned Budget Expenditu Status Remark outputs activities to (UGX.) re(UGX) achieve the targeted out put 1 IMPLEMENTATION OF THE STRATEGIC INVESTMENT PLAN 1.1 JSIP 111 Conduct 84,800,000 1,360,000 Not Terms of achievements consultancy for completed reference for the and challenges mid-term review of (98% consultancy have in JSIP 111 under been drafted and implementation (inclusive of performan circulated for identified coordination costs) ce) review. Funds reallocated to cater for 3 trainings; one in customer care and another in human rights. PERFORMANCE ENHANCEMENT 2.2 Staff ownership Conduct 3 135,000,000 -- Not done Pending and adoption of sensitization (100% completion of developed workshops for under development of appraisal tool Judiciary staff on performan the Judiciary promoted the use of the ce) performance developed enhancement

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Targeted Planned Budget Expenditu Status Remark outputs activities to (UGX.) re(UGX) achieve the targeted out put performance tool. enhancement & appraisal tool (100 pax per workshop) 3 CASE BACKLOG REDUCTION 4 REFORMS IN JUDICIARY TO ENHANCE ACCESS TO JUSTICE. 4.1 Information on Procure and install 130,000,000 28,686,000 Not 14 Computers Judiciary one computer set completed procured pending policies, cause (monitor, . (78% installation. lists and CPU,UPS, printer & under procedures software) on 26 absorption readily available information desks /performa to the Public in Central and nce) Eastern regions 4.4 Adoption of Conduct two 90,000,000 -- Not A proposal was standard sensitization done.(100 made for these punishment workshops on the %% funds to be measures for developed under reallocated criminals Sentencing absorption towards the roll Guidelines /performa out of Plea nce) bargaining.

Management explained that the failure to fully implement planned activities occurred due to various challenges faced during the year such as; dependence on out-dated Procurement and Financial Management guidelines, increased backlog of activities due to implementation of activities from previous work plans, dependence on various departments and officers in implementation who were also engaged in other Court business, some activities being reliant on the completion of others, and uncertainties that occurred during the period regarding the continuity of the Project.

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I advised Management to ensure commitment to the execution of project activities to enable timely attainment of the Programmes strategic objectives, by addressing the above short comings.

Audit inspections Field inspections were carried out at Jinja, Gulu and Mbarara High Courts. The objectives of the inspections were to establish supply of recording equipment, confirmation of installation and functioning of recording equipment in the courts, and, existence and functioning of the small claims procedure whose subject matter does not exceed UGX.10,000,000.

The equipment was supplied and installed and the small claims procedures were implemented in the courts. However, the following exceptions were noted:

(i) Mbarara High Court - Court Recording Equipment: The court recording equipment was supplied by the Project, comprising of; 8 micro phones, Dell monitor, key board, CPU and mouse, PA Amplifier, Timer, D-Link easy smart switch, Head phones, 4 Speakers, Recorder, and the transcription set that including a CPU (Lenove) Monitor, Key board, Mouse and headphones.

However, it was noted that whereas the Court recording set was functioning and was being put to use, the transcription set was not being utilized due to the challenges below;

 At the time of delivery, the CPU (Lenovo) power cable was not delivered with the rest of the equipment. The IT personnel who installed the equipment explained to the staff at the Mbarara High Court that the CPU uses a different cable from those used by other brands and that meant they would have to wait for it to be delivered. This has not happened to date. Therefore, another computer is used for transcription and this takes place after the court session is done.

 Mbarara High Court lacks a transcriber. When the equipment was supplied and installed, it required two personnel; a recorder and a transcriber so that during a court hearing, the recording and transcription activities can take place simultaneously. This is not possible at the Court, as the position of the 239

transcriber is not filled. Therefore the recorder ends up typing what has transpired after the court session is done.

Management explained that they had not received any official communication regarding the missing power cable. However, Management has taken note of the issue and will follow up.

I advised Judiciary ICT Department to follow up the matter and ensure that the equipment can be put to use.

13.0 DIRECTORATE OF PUBLIC PROSECUTIONS

13.1 Mischarged Expenditure

A review of the Directorate‟s expenditure revealed that the entity charged wrong expenditure codes to a tune of UGX.454,431,122. The practice of mischarge of expenditure violates the TAI, undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to misreporting.

The Accounting Officer explained that he was challenged with budget ceilings within the Medium Term Expenditure Framework (MTEF), where only a few priority areas could be funded. That left out a number of important areas either under-funded or completely un-funded. Further, there arose a number of cases that required the co-opting of a wide range of experts and staff at a scale that was not anticipated during the budgeting process. However, the Accounting Officer indicated that the Directorate has taken administrative measures to improve on Budget discipline.

I advised management to streamline the budget process to ensure that adequate funds are allocated to each account code and utilize the budget as appropriate. Authority should be sought before any reallocations are made.

13.2 Staffing gaps

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It was noted that the Directorate had 31 vacant posts which were not filled. These include a key post of the Assistant Director of Public Prosecutions. The Table below refers. Inadequate staffing affects the timely implementation and delivery of services which may adversely impact in the achievement of the entity strategic objectives.

Post Title Scale No. of Vacancies Status Ass. Director of Public Prosecutions UISE 1 Vacant Secretaries U5-U7 30 Vacant Total 31

The Accounting Officer explained that the post of Assistant Director of Public Prosecutions fell vacant as a result of the promotion of the then Deputy Director of Public Prosecutions in December 2014. The recruitment process to fill the post of Assistant Director of Public Prosecutions has however been initiated. The positions of Secretary (U7-U5) have been vacant for some time as a result of transfers within the Public Service. These vacancies have been declared to the Line Ministry to have them filled.

I await the results of management efforts in having the posts filled.

13.3 Advances to Individual Personal Accounts - Non Compliance with

Treasury Accounting Instructions

Sections 227, 228 and 229 of the Treasury Accounting Instructions (TAIs), provide that all payments should be made by the Accounting Officer directly to the beneficiaries. Where this is not convenient, an imprest holder should be appointed by the Accounting Officer with the approval of the Accountant General. On the contrary, UGX.68,730,000 was advanced to Directorate staff through their personal bank accounts to undertake direct procurements and other activities of the Directorate. Such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the Ministry does not have any control over such funds deposited on personal accounts. 241

The Accounting Officer responded that the Directorate recognizes the inherent risks that are associated with advances and has tried to minimize this type of payments. These payments relate to operational advances for office running mainly to the Secretarial staff for newspapers, tea and refreshments.

I advised the Accounting Officer to avoid the practice and ensure strict adherence with the requirements under the Treasury Accounting Instructions.

13.4 Budget Performance

A review of the budget revealed that UGX.16,276,902,823 was released against an approved budget of UGX.17,252,411,052, representing 94% of the budget performance. Due to the budget shortfall, office and machinery and ICT equipment together with its software estimated at UGX.876,295,000 was not procured. Unimplemented activities hamper service delivery, and the appropriating authority‟s objectives may not be met.

The Accounting Officer explained that part of the Development budget was not released by the end of the financial year. This led to the non-implementation of the planned ICT infrastructure. He further responded that the Directorate shall continue to liaise with the MoFPED to have it honor the approved budget.

I advised the Accounting Officer to continue liaising with MoFEP for adequate funding and effective implementation of the planned activities and service delivery.

14.0 NATIONAL CITIZENSHIP AND IMMIGRATION CONTROL

14.1 Mischarged expenditure

A review of the entity expenditures revealed that wrong expenditure codes were charged to a tune of 5,906,786,217 without authority contrary to chapter IV section 156 of the TAIs. This practice does not only distort the intentions of appropriating authority but also results into misreporting in the financial statements. 242

Management explained that the mass enrolment exercise had one output of registering citizens. Some expenses like allowances to staff on the exercise were budgeted and charged on contract staff salaries (211102) thus indicating a mischarge whereas not. In some instances, funds for allowances would delay and the Directorate charged equipment to pay allowances. However whenever funds for allowances would come, equipment item would be refunded thus showing mischarges. It was therefore inevitable that certain items were used to fund critical activities at a time resulting into mischarges.

I advised management to streamline the budgeting process to ensure that sufficient funds are allocated to each account code and to seek for authority whenever there is need for extra funding before any reallocations are made.

14.2 Procurements of NSIS equipment

In accordance with Section 39 of the PPDA Act, 2003 and Regulations 62 (1) (b)(1), 75(b), 78(1)(d), 79, and 80 of the PPDA Regulations 2003, the Accounting Officer DICC delegated the procurement of additional machinery and equipment for the National Security Information System (NSIS) to Internal Security organization (ISO). The procurement of the machinery and equipment was worth UGX.83,358,464,749 and USD.6,637,239 and reportedly delivered to ISO. Information relating to the above transaction had just been received by management of DICC at the time of concluding this report in March, 2015. As such I was unable to conclude on the verification of this procurement before the statutory reporting deadline.

14.3 Payables

Included in payables of UGX.39,750,093,409 is rent due to Civil Aviation Authority of UGX.780,949,138; Property rent due to UPPC UGX.874,264,954 and a contractual obligation to Mulbuaer of UGX.16,420,383,768 which have been outstanding for more than a year. Delayed settlement of the outstanding obligations can result into wasteful expenditure in form of litigation costs.

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Management attributed accumulation and non-clearance of domestic arrears to budget constraints which has been brought to the attention of Ministry of Finance, Planning and Economic Development.

I reminded the Accounting Officer that accumulation of domestic arrears is in contravention of the commitment control system and advised him to liaise with the MoFPED for extra funding to clear the outstanding arrears.

14.4 Renting of premises from Ministry of Defence at Kololo ceremonial

grounds

The Directorate entered into a tenancy agreement with the Ministry of Defence (MoD) to let the premises at Kololo ceremonial grounds to the Directorate at a monthly rent of UGX.56m. The Building was to be used as a warehouse, offices, issuance place for the National Identity cards and related activities under the National Security Information System (NSIS) Project. Under the contract, MoD was required to make NSIS Project specific modifications to put in a tenantable condition at the cost of the Directorate. The cost of project specific modifications was estimated by the Ministry of Works and Transport at UGX.947,089,983. The following were observed:

a) Lack of costed Bills of Quantities and a schedule of materials

The Directorate paid a sum of UGX.1,619,089,983 to the Ministry of Defence. The payment comprised of rent charge of UGX.672,000,000 for 12 months and project specific modifications of UGX.947,089,983. However, the Bills of Quantities were not costed to support the amount of UGX.947,089,983. I informed management that in the absence of the costed BOQs it was difficult to establish whether the funds paid were for the actual amount billed by the contractor.

Management explained that the works were done by MOD and promised to communicate to the Ministry Accounting Officer over the matter.

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I advised management to follow up the matter with Ministry of Defence and have the necessary documentation provided for future use.

b) Payments to MOD account instead of Consolidated Funds The rented premises (Kololo Cerebration Grounds) are owned by the Government of Uganda and managed by the Ministry of Defence, a Government entity. Equally the tenant is a Government entity both of which draw funds from the Consolidated Fund. However, rent of UGX.672,000,000 was paid to the MoD account held in Bank of Uganda. The justification for not paying directly to the Consolidated Fund was not provided.

Management explained that the payment was in accordance with the tenancy agreement with the MOD.

I await confirmation from MOD that the funds were transferred to the Consolidated Fund.

14.5 Renovation works on the rented premises

On 26th July 2013, the Directorate entered into a contract with UPPC for the renovation of the allocated premises for a contract sum of UGX.2,869,960,881. The Directorate was to renovate blocks 1, 2 and 3 and demolish block 4 to construct a new one in its place. The civil works were to last for 10 calendar months from the commencement date 24th October, 2013 and completed on 24th August 2014.

However, by the time of writing this report (March 2015), five months after the expected completion date, the contractor had not completed the works. The last certificate of work done was prepared on 24th April 2014 with the value of work done put at UGX.434,084,280, implying that the works were at a level of 15% to completion. Besides, the renovation works on Block 1 (see figure 1) had not started.

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Figure 1- Block 1: UPPC has declined to hand over Block 1 over a debt owed to it by DCIC

Figure 2; Block 2 was still far from completion.

Figure 3: Block 3 was not yet completed.

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Figure 4: Interior works at Block 3 were not yet completed.

According to management, Uganda Printing and Publication Corporation did not hand over block 1 to DCIC as DCIC had failed to pay rent arrears of UGX.874,264,954 owing to the Corporation. I noted that at this rate, the Directorate may have to extend its rent with the Ministry of Defence as the UPPC project is still behind schedule.

Management explained that funds for clearing the rent arrears have been secured but the Solicitor General has declined to give legal advice on how to settle the obligation because it was an oral contract between UPPC and Ministry of Internal Affairs.

I advised management to regularise the contract and also expedite the payment of arrears to the Corporation to allow the contractor renovate the block. Management was further advised to liaise with the contractor to speed up the civil works and complete the renovation of the buildings in order to accommodate the project as its tenure at Kololo Ceremonial Grounds has ended.

14.6 Non-tax revenue not retained as Appropriation-In-Aid

According to Section 3 of the Uganda Citizenship and Immigration Control amendment Act, Non-Tax Revenue collected by the entity should be retained and treated as appropriated in Aid (A.A). To the contrary, UGX.68,778,391,313 was collected as Non-Tax Revenue through the Uganda Revenue Authority system and automatically remitted to the Consolidated Fund. The Ministry of Finance, Planning and Economic Development has not authorised the Directorate to utilise the funds 247

at source in accordance with the Act. This has impacted on the Directorate in implementation of its mandate.

The Accounting Officer explained that efforts by the Directorate to have the sections of the law implemented have been futile. A number of meetings have been held with Ministry of Finance but to no success. Management further indicated that they are yet to consult with Solicitor General for interpretation of the law.

I advised management to keep advocating for the operationalization of the section of the Act to be able to improve on its service delivery.

14.7 Human Resource matters

a) Inadequate structure The Directorate has an approved structure however, the structure does not have certain key functions of administration and human resources. It relies on the support of the Ministry of Internal affairs for some very critical and important services. For example, DCIC does not have a Personnel and Administration positions like the Under Secretary Finance and Administration, Principal Assistant Secretary, Senior Assistant Secretary/Transport Officer, Principal Human Resource Officer, Human Resource Officers, Principal Policy Analyst and Statistician in its staffing structure. Whereas Management has taken efforts to have an adequate structure in place, these efforts are yet to yield results. The Directorate performance in terms of Human Resources Management and general administration is currently being stifled.

Management explained that the Directorate is still awaiting the outcome of the study carried out by Ministry of Public Service in regard to the structure.

I encouraged management to continue pursuing the matter with the Ministry of Public Service for approval of the proposed structure.

b) Staffing gaps

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A review of the Ministerial Policy Statement revealed that the Directorate has an establishment of 375 post in the current structure out of which 32 posts are vacant. This is in-spite of having an inadequate structure. These include key posts of: Assistant Commissioners (3), Principal Immigration Officer (2), Principal Procurement Officer, Senior Immigration Officer and the Internal Auditor. The Table below refers:

PROGRAMME AFFECTED POST/TITLE APPROVED VACANT POSTS Finance & Principal Procurement 1 1 Administration Officer (F&A) Internal Auditor 1 1 Records Officer 1 1 Personal Secretary 2 1 Stenographer Sec 5 1 Senior Accounts Assistant 5 2 Principal Stores Assistant 1 1 Office Typists 10 9 Driver 5 2 Inspectorate Assistant Commissioner 2 1 and Legal Drivers 2 1 Services Citizenship and Assistant Commissioner 2 1 Passport Control Immigration Officer 26 1 Immigration Assistant Commissioner 2 1 Control Principl Immigration Officer 11 2 Senior Immigration Officer 32 1 Immigration Officer 107 1 Immigration Assistants 35 1 Office Typists 3 3 GRAND TOTAL 375 32

Inadequate staffing affects the timely implementation of the Directorate's activities and adversely impacts on the Directorate in the achievement of its strategic objectives.

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Management explained that the recruitment process is on-going and was optimistic that the vacant positions will be filled.

I advised management to closely follow up the matter to ensure that the vacant posts are submitted to the Public Service Commission for further action.

14.8 Inspectorate and Legal Services

a) Lack of a Custody Centre

The Department deals with legal compliance. However, it lacks custody centres for the suspects arrested from the field. Although the Uganda Citizenship and Immigration Control (Establishment of Immigration Custody Centres) Regulations, 2012 is in place, the Directorate does not have this facility. Lack of such a facility impacts on the operations of the Directorate as it cannot ably carry out its mandate effectively and efficiently. The remedy has been to release the suspects on immigration bond, pending removal/deportation/investigations into their cases and this leads to delays in deporting or concluding investigations regarding the suspects. Some suspects have ended up jumping immigration bond which culminates associated costs in terms of searching for the culprits and time wasted.

Management explained that works on the custody Centre were temporarily stopped due to administrative reviews on the project. Work will commence as soon as the reviews are completed.

I advised management to expedite the administrative reviews and complete the custody centre for temporary custody of immigration offenders pending deportation and/or investigations to be concluded.

b) Inadequate Enforcement structure

The department has a Skeleton structure of 24 personnel with basically 15 officers to carry out field activities across the country; that is; 3 Principal Immigration Officers, 2 Senior Immigration Officers and 10 Immigration Officers. The structure

250 has been the same since 2007 despite the growing number of illegal entrants in the country. The table below shows the staffing:

PROGRAMME POST APPROVED STRUCTURE Legal an Commissioner 1 Inspectorate Assistant Commissioners 2 Services Principal Immigration Officers 3 Senior Immigration Officer 2 Immigration Officer 10 Personal Secretary 1 Office typist 1 Driver 1 Office Attendant 1 TOTAL 24

Although the structure is fully filled, it is inadequate to cover the whole country and as such, there is no proper presence of legal enforcement officers in the 8 regional offices. According to the Commissioner Inspectorate and Legal, each regional office would minimally require a work force of 15 immigration/Legal enforcement officers.

Lack of necessary staff limits supervision of the border points. This could lead to increase in illegal immigrants.

In their response, management explained that the Ministry of Public Service carried out human resource needs assessment in various votes across Government including DCIC. The Directorate‟s concerns were duly captured and the Directorate still awaits the outcome of the exercise. Management further stated that the recruitment of 150 Immigration Officers and 150 Assistant Immigration Officers is on-going, and hoped this will help bridge the staffing gap as it awaits approval of the proposed staff structure by Ministry of Public Service.

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I encouraged management to continue engaging the Ministry of Public Service for an improved and adequate structure. Meanwhile the outcome of the recruitment exercise is awaited. c) Lack of connectivity of border entry points

The border posts are not interlinked to one another. Data on entrants, how long they are to stay, where they are to stay and from where they can be picked in case of overstay is not interlinked to all border posts for ease of coordination and follow up. Currently enforcement officers do random checking which is not only inconveniencing the public but is also costly in terms of fuel and time.

Management indicated that connectivity of border posts was included in the budget for FY 2015/2016.

I advised management to ensure that they secure the necessary funds and install a system that connects all the entry points with the headquarters to effectively coordinate, monitor and verify persons entering the country and those staying in the country illegally.

d) Inadequate funding and transport

The Department receives approximately UGX.200,000,000 per year for inspections and investigations of illegal immigrants in the whole country. This includes funds for fuel and allowances for the officers undertaking the activities. In addition the department currently has only one pickup and two Mini buses one of which is in a poor mechanical condition. Lack of sufficient funds and transport coupled with inadequate structure practically renders the department inactive which make monitoring entry points difficult.

Management explained that it has been liaising with Ministry of Finance for more funding to secure adequate transport to facilitate the operations but with limited success.

I advised management continue liaising with the relevant Ministry for additional funds to cater for inspections, investigations and monitoring of entry points. The 252

Accounting Officer is encouraged to liaise with development partners to facilitate movements and enable improve on the inspections, investigations and monitoring of all entry points.

14.9 Passport Control Office

a) Inadequate infrastructure The Passport Control Office is expected to receive, expeditiously process, issue and deliver Passports in appropriate quantum to the diverse beneficiaries with considerably less duress and excessive fatigue for efficient and effective delivery of service. Inspection of the Citizenship and Passport Control Department revealed that there is lack of sufficient infrastructure and conducive working conditions as necessary prerequisite to deliver satisfactory services. The Passport Officers are squeezed in dilapidated small rooms and other activities like receiving application forms, interviewing applicants and issuing passports are carried out from the improvised tents. The photos below refer:

Above: Applicants in the queue under the tents for interviews.

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Above: Sometimes the numbers of applicants exceeds the capacity of the tents and have to stand outside the tents:

Above: Ready passports stacked in boxes being delivered to the public under the shade

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Above: A clear view of the shade where passports are delivered/received from.

Management explained that they will continue liaising with the Ministry of Finance for infrastructural funding to secure adequate office space. In the meantime, DCIC is implementing a passport centre in Gulu this FY 2014/2015 and another centre in Arua next FY 2015/2016 in a bid to decongest the centre.

Management is advised to liaise with the responsible Ministry to seek for funding to secure proper accommodation for the Directorate. In the meantime, the Directorate is encouraged to continue pursuing the decentralization of passport centres to reduce on the congestion at headquarters. b) Inadequate staffing The Department is aggressively pursuing decentralization of Passports issuance not only in Uganda but also in the earmarked areas of the Diaspora (Beijing, Brussels and New Delhi) in addition to the existing issuance centres. This is done in consideration of the demand and overall contribution of the saleable documents to Non-Tax Revenue collection in the country.

However, the Department lacks human capacity to carry out this drive notwithstanding the infrastructure and technological gaps. For instance, decongesting the centre requires setting up alternative service centres within 255

Kampala district and opening up more regional offices (in addition to the existing Mbarara and Mbale).

Currently, there are six (06) officers who receive, interview and process approximately 450-600 applications daily, an average of 80 applications per officer per day. The ideal situation for one Receiving Officer is an average of 50 applications a day. This is obviously a high ratio that impacts negatively on performance.

Management indicated that they will liaise with Ministry Public Service to resolve staffing problems.

I encouraged management to continue engaging the Ministry of Public Service for an improved and adequate structure in the Directorate. c) Delays in Passport delivery

The ideal turn-round time for Passport delivery is eight (08) working days. However the increasing numbers in Passport applications averaging 450-630 files daily inclusive of Renewal applications seriously threatens the status quo and has pushed passport delivery period to between twenty (20) to thirty (30) or more days. The continued reliance on one Passport Control Officer and his Deputy for signing more than 600 files a day is rather a toll order.

Management explained that in the established Client Charter, the lead period to issue a passport is 10 working days. In the meantime, the delays at approval processes have been addressed by deploying two (2) more officers to make it four (4) at the Kampala Office.

I advised management keep engaging the Ministry of Public Service more staff to reduce on the lead time to at least an allowance level. d) Lack of Inter connectivity of Passport Issuing System

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In consideration of Clients interests and pursuant to Government Decentralization program, the Department upgraded Mbarara and Mbale Passport offices into fully fledged One-Stop Passport Personalization and issuance centres. The Department of Citizenship and Passport Control also operates Passport Personalization and issuance Centres in Pretoria, Washington and London.

However, all the passport systems at Regional and Mission issuance centres and at the Headquarters are not interlinked. In such situations, details of the passports issued at the missions and regions cannot be retrieved at the head quarter for ease of information flow. In the absence of a system interlinking activities and information of all the passport issuance centres, there is a risk of one person processing more than one passport from different centres.

Management explained that the local remote sites in Mbale and Mbarara are securely data linked with the Kampala Passport Office server and no possibility of an applicant obtaining more than one passport by using different centers. The abroad centers in Pretoria, Washington and London are not linked to Kampala but are only meant for renewing/replacements already vetted passport applications. No new passport applicants are handled by these centers. Management is budgeting for connectivity of the three centres above in the FY 2015/2016.

I encouraged management to secure funds and procure and install an interlinking system to avoid possibilities of people getting more than one passport from different centres. e) Records section/Registry

The department processes an average of 500 hundred files each day from applicants. However, there is no proper system of keeping these files. In most cases, people‟s files get misplaced during processing and when they are under custody. The filling system is manual, and un-systematic and tracing or retrieving files for renewal is a night mare and sometimes the files are lost which leaves the

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public frustrated with the passport office. The problem is made worse with the limited space as can be seen in the photo below:

I advised management to secure funds for establishing an adequate registry and automate the record keeping system at the Directorate to improve on record keeping and reduce the lead time to locate individual files.

14.10 Inspection of the strong room

Passports are processed in the strong room. The processes include but are not limited to personalization of passports which is basically transferring of applicants‟ information from the file to the passport, capturing data into the system and printing, quality assurance, passport signing and dispatch. The following were observed:

a) Security/Physical control

The door to the control room is made of wood and enforced with metallic burglars. However, the metallic burglar both on the door and windows are not strong enough to match the importance of the strong room and to stop any serious criminals interested in its access. There is need to replace the wooden door with

258 the metallic one and replace the weak metallic burglar with stronger ones to guard against any unauthorized intended access to the strong room.

Management noted the recommendation and promised that funds to replace the weak doors and burglar proofs will be budgeted for in the financial year 2015/2016.

I await management commitment on the matter. b) Limited space A discussion with the Commissioner Passport Control and Citizenship revealed that the Directorate is supposed to migrate to E-Passport by close of the year 2015 in accordance with ICAO‟s requirements. However, the Directorate has no suitable space where to install the machines that process electronic passports. The machines need a specious room with certain level of aeration due to high technology that does not allow dust among others.

Currently, the department has been using the same strong room since 1998 despite the increase in the volume of passports processing that match with the increased population. By 1998, 40-50 passports were processed a day compared to an average of 300-400 processed currently. The working space in the strong room is small and not enough for the volume of work involved. The sitting space is small and congested which impacts on the effective processing of passports.

Management explained that the issue of limited space remains a challenge but the Ministry of Finance has authorized the DCIC to engage the Private Developer under the PPP arrangement in the implementation of e-passport. The office space issue will be part of these negotiations.

I advised management that in the meantime, there is need to have an organized bigger space where the data entrants are separated from quality assurance, passport printing and passport signing, recording and dispatch. This would go a long way in improving the working conditions of staff; reduce on time wastage

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due to congestion and damage of passports through human error in the strong room.

c) Labour shortage The labour force is not enough to handle the current volume of work in the strong room. On average, 350 passports are processed daily using 7 work stations. Staffs in the strong room work through lunch break and over the weekends in order to reduce on the workload. There is need to double the workstations and staff to be able to handle the passport processing effectively.

Management acknowledged the increased demand for travel documents by Ugandans and the need to gear up the production capacity and the Strong Room Staff strength to equate the task. The future plan of e-passport is to double the Strong Room capacity in terms of workstations and human resources.

I await management action on the matter.

14.11 Citizenship section

Citizenship section deals with receiving, processing and delivery of Citizenship documents after consideration by the National Citizenship and Immigration Board. It also handles and prepares for delivery Certificates of Identity and Conventional Travel Documents (CTDs) issued out to refugees.

A quick look at the operations of the section for January 2015 revealed that the section handled a number of documents as summarized below:

Type of documents handled Number of documents handled Certificate of Identity 77 Number of Dual Citizenship applications 121 Record of Dual Citizenship granted 119 Number of Naturalized foreigners Still pending Registered as Citizens 30 Dual Certificates issued 87

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Type of documents handled Number of documents handled Deferred applications 11

Like any other section, the section operates under harsh conditions, more so that it deals with foreigners. This leaves the image of the country tainted. Below is one of the offices the section operates from:

I advised management to allocate some funds to renovate the office to improve the working environment.

Management took note of the recommendation of renovating the office and pledged to continue requesting for funds to carry out renovations of office premises despite limited releases from Ministry of Finance.

14.12 National Information Security Sysytem (NSIS) project

On 1st November 2013, Cabinet approved the NSIS strategy, which included the roadmap, budget and governance structure. A countrywide Mass Enrolment was launched on 13th April, 2014 by H.E. the President and on 14th April, 2014 enrolment started across the country. The implementation was undertaken using a Multi

261 sectoral/Multi-Institutional approach, which was coordinated by the Ministry of Internal Affairs. The implementation was guided by a roadmap (detailed Implementation Plan) and managed by an organization structure that was approved by Cabinet. The target was to register 18 million citizens who are 16 years and above during mass enrolment and the continuous enrolment. a) Update on the mass registration/enrolment exercise Registration of citizens to facilitate issuance of national identity cards and for other purposes started at Parish level on 11th April 2014. This went on up to 11thAugust 2014 when registration shifted to the sub-county level.

During the four months of registration of persons (April-August 2014), over 14.8million persons were registered, a performance of 82%. On the 12th August 2014, registration at sub-county level started and over 1.1million citizens were registered. In view of the projected 18million target of those with 16 years and above, about 2,424,000 are yet to be registered. A total of 15,970,000 (88.7 %) based on the 18 million target was registered by 11th Jan 2015 both in Mass and Continuous Registration exercise.

It was however noted that the Uganda Bureau of Statistics released Provisional results of the 2014 National Population and Housing Census exercise, indicating that 15,958,595 people out of the 34,900,000 are aged 16 years and above. In case the statistics are correct, this would mean that 97.6% was registered, leaving 2.3% yet to be registered. b) NSIS Equipment maintenance plan

The National Security Information system acquired various equipment (hardware and software) that were deployed to capture, process and establish a national information register, produce national IDs and issue the ID cards. These include 8,000 registration kits, a data processing centre with over 300 desktop computers, a set of secure central equipment comprising of high end computer servers that include Automated Fingerprint Identification System (AFIS), Facial Recognition

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System (FRS), high end database systems to store the captured data, and a setup of a card personalized centre with four high end personalization machines that produce 60,000 ID cards per day.

A review of the documents pertaining to the purchase of the equipment revealed that the personalization machines consist of many movable parts that are prone to breakages. The contract with the suppliers provided for a 6 months‟ free maintenance in the first six months of production. The machines have been producing cards since October 2014. The six months free period of maintenance end on 31st March 2015 before the exercise is completed. An interaction with the information technology team revealed that to maintain all the equipment for a period April-June 2015 when the registration exercise is expected to be completed, the project will require an estimated cost of UGX.5,542,700,000. The project however has neither funds nor a budget to maintain these machines.

I advised management to properly justify the estimated maintenance costs and liaise with relevant for funding to avoid equipment breakdowns.

14.13 Other observations

a) Board of Survey recommendations A review of the board of survey report of 30/06/2014 noted that various recommendations were made for implementation by DCIC management. These include the following:

 To create more space for storage of the assets and other items especially at the border posts.  Equip the boarder offices with adequate furniture to enable the staff perform their duties well.  Engrave all the assets at the border posts.  To submit a list of assets due for disposal indicating their locations and giving reasons for their disposal.  Proceeds from the disposal of assets to be transferred to the consolidated funds.

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However, by the time of audit, all the above recommendations had not been implemented.

Management explained that the Directorate is apparently faced with a challenge of space not only at the border points but also at the headquarters. However, construction at various border points of Bunagana, Cyanika, Goli, KIzinga, Vura, Amudat, Lia, Swan River, and Ntoroko is on-going and some sites are already complete. This will help reduce the problem of space.

It was further explained that funds for purchase of furniture for a few border stations were provided in the FY 2014/15 both in the MTEF budget and the JLOS and the Procurements process are on-going. Meanwhile a team from various stake holder MDAs has been assembled to handle the process of asset disposal and all the proceeds from the sale will be deposited to the consolidated account as guided by the financial regulations and the Office of the Auditor General.

I await the implementation of the Board of Survey recommendations. b) Maintenance and servicing of Passport issuing system

The Directorate signed a contract with an International Company to maintain and service of passport issuing Machines at the Headquarters, Washington, London and Pretoria for a period of three years from 1st February 2011 to 31st January 2014. Unfortunately, by the time of audit inspection, the contractor had not rendered material maintenance services to the three missions as provided for in the contract and yet there were indications that the systems were about to break down especially in Washington DC.

Regarding the operations at the Headquarters, it was observed that there was no prompt technical support response from the supplier which adversely affects the business process and service delivery to the community due to system break down.

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Management acknowledged the observation and the Commissioner Citizenship and Passport Control promised to work together with the Legal Department on modalities of periodic review of the service contract.

I advised management to follow up the provisions in the maintenance contract and ensure that the service provider renders satisfactory services. Payments to the service provider should be based on actual performance supported by certified reports from the Missions and user department at the Head quarter and this should clearly be included in the maintenance contract. In future, the concerned Missions should submit quarterly service provider`s performance reports to enable management to monitor the performance. c) Training of Staff at the Missions

Staff at the Missions do issue out VISAs and Passports however they have never had formal training or instruction from the Immigration and passport departments about the issuance of Uganda passports and VISAs. In addition, the concerned Missions have no Immigration officers to handle the above functions. This may result into obtaining inadequate information from the applicants. Errors and omissions may not be ignored especially when printing passports.

Management explained that training clinics for Foreign Service Officers are organized as funds may permit. One such training was organized in the 1st Quarter of this FY 2014/2015. Funds to deploy Immigration Officers at Missions are also being budgeted for in FY 2015/2016.

I advised management in consultation with Ministry of Foreign Affairs to organise refresher courses for the staff handling VISAs and Passports at the Missions. Training should be done regularly to update them with the new changes. d) Implementation of Dual citizenship Act

The mission staff indicated that the implementation of the Dual citizenship Act is unclear to them at the Missions. It is unclear as to what documents an applicant is

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supposed to fill and whether they can officiate at the swearing of the Oath of Allegiance. Management acknowledged the observation and promised to handle the matter during the subsequent trainings

I advised management to regularly organize training for the Mission staff to enable them acquire the necessary skills and handle their work diligently.

14.14 Budget Performance

Public Finance and Accountability Regulations, 2003, section 2.10 (b) entrusts the Accounting officer with ensuring that all controls such as those contained in the approved estimates and warrants are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort is required to be made to achieve the agreed objectives or targets of the entity within the availed resources.

During the year, all the appropriated budget plus the supplementary totalling to UGX.178,686,460,900 was released representing 100% release. A review of the Department‟s budget performance for the year 2013/2014 revealed that some targets were not achieved. The table below refers:

Planned Activities Expected Outputs Actual outputs(As Comments per end of FY 2013/14 report) Office of the Director Develop National National Immigration 3rd draft of the National Costing of the Policy Immigration Policy Policy Immigration Policy is pending prepared, pending a final meeting with stakeholders and costing of the policy Finalize Development of National Migration Policy National Migration Development of the National Migration Policy pending National Migration Policy stakeholder consultation Policy stalled Develop a 5 Year 5 Year Strategic Plan Strategic Plan not Strategic Plan Task Strategic Plan for the developed Force Team is yet to Directorate be reconstituted. The Minister lifted the ban he had imposed on development of the strategic plan Inspection and Legal Services Carry out inspections Aliens arrested and 1,114 suspected No and investigations investigated immigration offenders specific/quantifiable 266

Planned Activities Expected Outputs Actual outputs(As Comments per end of FY 2013/14 report) arrested and/or targets/ performance investigated. Out of indicators against these 329 illegal which to evaluate immigrants, performance representing 29.5% of those apprehended were removed from the country. Support to National Citizenship and Immigration Procure passport Issuance System in place System not procured Funds diverted to issuance system for Mbarara and Mbale Gulu passport centers that were under budgeted for. Construct Kaiso Tonya Kaiso Tonya Commissioned Not constructed The contracts and Segaboro border committee declined posts to approve the procurement due to lack of proof ownership of land. Construct Busunga Busunga border Not constructed border post commissioned Construct Kaiso Tonya Kaiso Tonya Commissioned Not constructed The contracts and Segaboro border committee declined posts to approve the procurement due to lack of proof ownership of land. Procure system for Visa issuance software Not procured The system was not electronic visa issuance procured.

Citizenship and Passport Control Grant dual citizenship Aliens and former Granted 234 dual No specific Ugandans granted dual citizenship certificates performance citizenship of which 58 foreigners indicators against and 176 Ugandans in which to measure diaspora. performance Immigration Control ICT Master plan ICT Master plan ICT Master plan not ICT Master plan not developed developed developed

Management explained that the activities were not implemented because of various challenges like land ownership and inadequate funding.

I informed management that unimplemented activities hamper service delivery and the appropriating authority‟s objectives may not be met.

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PUBLIC SECTOR MANAGEMENT

15.0 MINISTRY OF LOCAL GOVERNMENT

a) Mischarge of Expenditure

A review of the Ministry of Local Government‟s expenditures revealed that the entity charged wrong expenditure codes to a tune of UGX.2,497,433,465. This constituted 8% of total expenditure for the Ministry. Mischarges undermine the importance of the budgeting process as well as the intentions of the appropriating authority and lead to misreporting.

Management explained that this was caused by quarterly release limitations which forced management to charge items with cash balances to fund urgent and critical activities. Management further explained that insufficient budget allocations and severe cuts in consumptive areas by MOFPED led to this situation.

I advised management to liaise with the relevant authorities to streamline the budget process to ensure that sufficient funds are allocated to each account. Further, authority should be sought for any reallocations.

b) Unaccounted for remittance to Uganda Police Force – UGX.137,542,000

It was observed that UGX.137,542,000 was remitted by the Ministry to UPF to cater for training of Police Fire and Rescue personnel on Fire fighting equipment but this payment was not supported with a Memorandum of Understanding between the two parties specifying the outputs, responsibilities and accountability framework. Furthermore, I could not confirm whether the activity was undertaken as no accountability documentation or report was availed for verification.

Management explained that UPF had been contacted to furnish them with the accountabilities.

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I advised management to ensure funds are accounted for in time and also have the MoU in place before any remittance of funds to third parties is effected in the future. c) Advances to Individual Personal Accounts –UGX.4,623,642,146

(i) Non-Compliance with Treasury Accounting Instructions UGX.4,623,642,146 was advanced to Ministry staff through their personal bank accounts to undertake direct procurements and other activities of the Ministry contrary to Sections 227,228 and 229 of the Treasury Accounting Instructions. Such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the Ministry does not have any control over such funds deposited on personal accounts.

Management explained that the advances mainly related to activities and workshops undertaken upcountry with staff from other Ministries/Local Governments. Management further explained that staff from the Ministry acted as Team leaders who were responsible for allowances and other facilitations for the team members. All activities were carried out and activity reports filed.

I advised management to ensure strict adherence with the requirements of the Treasury Accounting Instructions. d) Payments for beautification of Kampala

A local Company entered into a contract with Ministry of Local Government for beautification of the Clock-Tower-Nsambya-Gaba/Munyonyo Road corridor in 2007 ahead of the CHOGM activities and final certification of works was issued in May 2008. A review of the payments to the contactor revealed several issues as follows;

(i) Nugatory Expenditure: It was noted that UGX.107,989,414 has been outstanding since issuance of a completion certificate by the consultant in May 2008. Because of that, interest accrued on late payment rose to UGX.371,748,822 as at February 2012 (an increment of 344%) leading to a payable sum of UGX.479,738,236. At the time 269

of reporting, the payable had been made good. The interest paid is considered nugatory.

(ii) Interest computation basis: Clause 43.1 and 43.2 of the contract provided for interest on late payment by the client to the Contractor from the date by which the payment should have been made up to the date when the late payment is made at the prevailing rate of interest for commercial borrowing.

It was noted that the basis for the contractors interest rate was unknown since the clause did not specify the Bank for “prevailing commercial interest” purposes. The contractor seems to have exploited the loophole to compute interest using his own banks interest rate that might have been higher than Bank of Uganda rate. Without providing the schedule for interest computation, I could not confirm the accuracy of the amount and whether the right rate was used in the computation.

Management explained that the transaction was incurred during the CHOGM and it was inevitable that the payment had to be settled although it was not included in the domestic arrears. The Ministry of Finance, obligated votes to settle outstanding claims under their votes the basis upon which the payment was later made.

I advised management to avoid such losses in future by putting in place adequate risk management controls, and paying suppliers and contractors promptly. e) Motor vehicles and office equipment

a) Motor vehicle repairs and servicing UGX.560,453,690 was spent on repairs and servicing of the Ministry‟s motor vehicles during the year. However the following issues were noted which require management attention;

 Payment for grounded vehicles UGX.13,869,979 was spent on four vehicles that were confirmed as having been grounded throughout the year and were ineligible for any repairs.

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 Cash payments Cash payments to the tune of UGX.5,000,000 was paid to a staff for onward remmittance to a pre-qualified supplier being funds to cater for repairs and servicing Ministry motor vehicles instead of using direct EFT payment. This is contrary to the financial regulations.

Management explained that the grounded vehicles were earmarked for disposal but the Ministry failed to acquire a new fleet and the same vehicles remained in use for the time the expenditure was incurred. Management also explained that there was an emergency activity and garages had refused to offer services without settlement of outstanding dues which led to the utilization of cash to undertake the repairs.

I advised management to liaise with Ministry of Works and Transport and have uneconomical motor vehicles boarded off. b) Non-serviceable motor vehicles An inspection of the Ministry‟s stores and motor vehicle yard revealed that there were a number of un-serviceable motor vehicles and office equipment which were occupying valuable space. There was no evidence of any initiated process for disposal. Some of the vehicles were found abandoned in privately owned service garages where they were exposed to risk of vandalism and further loss of value. Non-disposal of un-serviceable motor vehicles and office equipment may lead to loss in value through vandalization or theft and creates shortage of valuable storage space.

Management explained that the Ministry through an Auctioneer carried out the process of disposing off all the old vehicles last year. Unfortunately the fleet continues to depreciate and more vehicles became unserviceable. The Ministry has again initiated the process to dispose them off. I await management‟s effort in the disposal process. c) Nugatory payment of parking fees

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As noted in my previous year report, it was observed that during the year under review, UGX.33,040,000 was again paid to a parking space service provider as parking fees for 16 Ministry motor vehicles parked in the basement of Uganda House contrary to Chapter 7, paragraph 705 of the Treasury Accounting Instructions part 11-Stores that requires compilation of lists of unserviceable vehicles for onward submission to the Accountant General requesting for their disposal. The payments relate to the period January to June 2013 (UGX.15,292,800) and July to December 2013 (UGX.17,747,200). Inspection of the parked vehicles in the basement revealed that these vehicles were grounded and therefore expenses incurred on them are nugatory. There is risk of loss of the vehicles given the incomplete vehicle register and vandalism which will reduce the disposal value.

Management explained that the process of boarding off was in advanced stages.

I advised management to expedite the boarding off of grounded motor vehicles so that wasteful funds paid for parking space is saved. f) Non-deduction of Withholding tax

Section 120(1) of the Income Tax Act requires all Ministries to withhold tax from supplies of any services of an amount or amounts in aggregate exceeding one million shillings to any person in Uganda at the rate of 6% of the aggregate sums. Further, section 124(1) of the Act requires a withholding tax agent to remit the tax within fifteen days after month end.

Contrary to the above, I noted that withholding tax to the tune of UGX.93,970,920 from two payments was not deducted for onward remittance to URA. See the table below;

S/N Description Gross amount (UGX.) 6% WHT 1 Rental payments to NSSF 1,354,050,785 81,243,047 2 Stationery purchases 245,453,819 12,727,873 Total 93,970,920

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The Ministry risks fines and penalties from URA that may be imposed for non- adherence to the laws.

Management in response regretted the anomally and pledged to withhold tax from the suppliers subsequent payments.

I advised management to ensure that due taxes are deducted and remitted to URA as required by the Income Tax law. g) Anomalies in Procurement

A sample of procurement files were selected to enable me audit the various stages of the procurement process from initiation to contract management and a number of observations ranging from undervaluation of taxes, bid and evaluation manipulation, non-compliance to specifications in bid documents, defiance of Public service authority, contract payments and limitation on bidders were noted. Details are as below;

a) Limitation on bidders on procurement of energy packages PPDA regulations 142(1), (2) and (3) requires a shortlist to include sufficient bidders to ensure effective and real competition. Further, it requires a PDU to use information from four sources i.e. PPDA register, entity prequalified list, any other PDU list and market knowledge.

Three bidders were invited using market knowledge and two submitted bids for the above mentioned procurements worth UGX.123,679,500. However, it was noted that there was limitation as the PPDA register had at least four providers for the service who would have been invited to bid and widen competition. As such there was no adequate competition in this respect.

b) Non-compliance to specification Review of the evaluation worksheets revealed that a company that bided for supply of vehicles and motor cycles was non-compliant on the 4WD station wagon of 3000cc with regard to “minimum dimensions” as the company was silent on ground clearance that was required of 0.22m and fell short on the required length

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of 4.9m by submitting a bid of 4780mm. The company should have been eliminated at this stage. The company however went on to win the contract.

Further, Government procedure requires authority from the Minister of Public Service for procurement of vehicles. Authority on the procurement from the Minister of state dated 31/3/2014 specified two double cabin pick-ups not exceeding 2800cc; however the supplier was awarded to provide 3000cc vehicles.

Management explained that PDU‟s knowledge of the market was one of the recognized databases under Rule 142(2) (d) for development of provider shortlist and that three providers on the shortlist were considered sufficient. Management further explained that registered providers will be accorded priority in future.

With regard to non-compliance to specifications, the evaluation and review of specifications offered by providers involved expertise from MoWT and that certain non-conformity could be waived under R178 (4), (5).

I advised management to ensure that the Procurement and Disposal Unit and Contracts Committee adhere to the PPDA Act and regulations are strictly adhered to. h) Local Government Sector Investment Plan (LGSIP) Account

The Ministry operates a Bank Account “Local Government Sector Investment Plan” with Bank of Uganda. At the end of the financial 2012/2013 the Ministry had a balance of UGX.852,593,754 and during the financial year 2013/2014 management made several transfers totalling to UGX.440,697,837 from Treasury Single Sub Account (TSSA) to this account for onward remittance to clearing firms. Audit review of receipts and expenditures on this account revealed the following;

 Rationale for maintenance of Bank account: It was noted that the account has no project funding but rather receives transfers from the Ministry Treasury Single Sub Account (TSSA) for onward remittance to suppliers and Ministry staff which activities should have been effected from the TSSA. It should also be noted that the Project closed some years back but

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Management did not close the account. This is contrary to Treasury Accounting Instructions (TAIs). Such accounts are easily susceptible to irregular activities.

 Financial reporting: The balance brought forward of UGX.852,593,754 and spent during the year was not reflected in any performance report for the year since it was neither project funding nor appropriated by Parliament.

Management explained that Local Government Sector Investment Plan was a Project and as such its expenditure could not be reflected in the statement of financial performance but rather end of year balances are disclosed in the schedule of Project balances. I explained to management that projects have timelines, financing agreements, project appraisal documents and annual audit reports which was not the case.

I advised management to consider closing the account in line with Accountant Generals guidelines. i) Payments for domestic arrears

Treasury Accounting Instructions 2003 Part 1 chapter IV section 188 specifies that an officer authorized to incur expenditure will ensure that no payments due in any financial year remain unpaid at the end of that year. Further, the established commitment control system requires management to commit the Ministry only when funding is appropriated and has been confirmed.

A review of the financial statements of the Ministry for the year ended June 2013 revealed that the Ministry had outstanding commitments of UGX.51,037,123. However I noted that UGX.799,619,907 was paid to several companies for settlement of arrears incurred in the previous financial years. This was a clear indication of non-disclosure of full arrears. Summary of payments is as below;

S/N Description Amount (UGX) 1 Beautification – M/s Omega construction 479,738,236 2 Vehicle repairs 186,545,356

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S/N Description Amount (UGX) 3 Clearing and forwarding 133,336,315 799,619,907

The Ministry misrepresented their indebtedness in the previous financial statements. Furthermore, the Ministry did not budget and neither did it have a provision for item 321605 (domestic arrears) besides, supplementary funding was not requested instead management mischarged already budgeted items. Under the circumstances funds for planned activities appropriated by Parliament were diverted to settle domestic arrears.

I advised management to adhere to the commitment control system and ensure that verified domestic are verified, budgeted for and paid using the appropriate expenditure account codes and are appropriately disclosed in the financial statements. j) Vacant Posts in the Establishment

Ministry of Local Government has an approved establishment structure of 165 staff. However a review of the established structure revealed that 16 posts were not yet filled representing ten (10%) vacancy gap. Service delivery is hampered by delays in filling the vacancies especially at senior management level and staff may be overworked which may adversely affect their morale.

Management explained that some of the posts fell vacant because some staff were interdicted while others were promoted to higher posts. Management further explained that a submission had been made to Public Service Commission to have the vacant posts filled.

I await management‟s effort in filling the vacant posts. k) Budget Performance

are based on outputs to be achieved for the financial year and during implementation, effort is required to be made to achieve the agreed objectives or targets of the entity within the availed resources.

Review of the budget performance for the year under review revealed that some targets were partially or not achieved despite release of funds to the vote functions. Details are in the table below:

Vote Item Planned Amount Amount Actual Remarks function description outputs/ (UGX) released output/ output Quantity budgeted (UGX) Quantity Project 132172-  Constru 300,000,000 113,400,000 No 37% of the 1089a-LGSIP government ction of Sub- construction funds were Support to building and county has started received but District administrative headquarters at construction Development infrastructure Nabweru Wakiso has not district started Project 132272-  Constru 200,000,000 130,400,000 None No 1089b-LGSIP Government ction of Local construction Support to buildings and government has started local councils administrative offices supported development infrastructure pledges Project 134975-  Procure 200,000,000 133,400,000 None -No vehicle 1089d-LGSIP Purchase of ment of Motor was Support to Motor vehicle procured policy, Equipment despite planning and and other receiving support Transport 67% of the Equipment funds

Service delivery is hampered and the appropriating authority‟s objectives are not met.

Management explained that funds were transfered to Mubende Town Council and District for completion of a sanitation site and office block at district headquarters respectively. Management further explained that funds for procurement of a vehicle were used on vehicle maintenence.

I advised management to ensure that all activities are undertaken as planned.

15.2 UGANDA GOOD GOVERNANCE (UGOGO) PROGRAMME

a) Compliance with the Financing Agreement and GoU Financial Regulations

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It was noted that the Programme management had complied material with Financing Agreement Terms and Government of Uganda Financial Regulations except in the following matters; b) Lack of an Annual Procurement Plan

Procurements under the Uganda Good Governance Project were carried out without a procurement plan contrary to the PPDA provisions Section 58. Annual procurement plans help to rationalize procurements and ensure economy while avoiding split procurements made on adhoc basis. This also enables subsequent comparisons of planned implementation against actual procurements.

Management explained that the project did not have major procurements apart from routine maintenance of vehicles and equipment plus a few stationery items which were mainly done through the three quote system.

I advised management to put in place a procurement plan to ensure compliance to Public Procurement and Disposal of Public Assets Act provisions. c) Vacant Position of the Program Officer

It was noted that the position of Uganda Good Governance Program Officer was vacant. This implied that some members of staff were overstretched since they were taking activities beyond what was stipulated in their job description. Management explained that the Unit recruited a Program Officer who lasted for 3 months only and considering the remaining period for the program and the time it would take to recruit and orient the officer, it was decided that the work be distributed among the different officers within the Unit and outputs are being achieved through other officers within the Unit.

I advised Management to liaise with relevant government bodies to ensure that the project achieves full establishment. d) Procurement Irregularities

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The Public Procurement and Disposal of Public Assets (PPDA) Act 2003, and the Local Government PPDA regulations 2006 require that all public procurement of goods services and works comply with the procurement law. However services worth UGX.8,800,000 were procured without following Public Procurement Regulations and guidelines. The details of the transactions are in the table below: Voucher No Date Payee Item procured AmountRemarks 358 12/09/2013 Paper Supply of 1,800,000 Requisition from user department made on Capito Ltd stationery 10/09/2013  Request for quotations 12/09/2013  Proforma invoice raised on 09/09/2013  Evaluation report done by Nakasi Esperanza not dated.  393 The Leading Edge Printing 7,000,000 One Proforma invoice dated 05/08/2013, Services 8days before the request for quotations was sent on 13/08/2013  Evaluation report signed by only one person and not dated  No receipt on file from The Leading Edge for the monies received. Total 8,800,000

There is a risk that value for money might not have been obtained.

I advised management ensure compliance with the PPDA Act, Regulations and Guidelines to strengthen the procurement processes.

e) General Standard of Accounting and Internal Control

A review was carried out on the system of accounting and internal control. It was noted that management had instituted adequate controls to manage project resources except in the following areas;

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f) Unacknowledged Payments

It was noted that payments in respect of Pay As You Earn, WHT and National Social Security Fund lacked acknowledgment by respective statutory bodies. From the sample payments reviewed UGX.87,549,248 was not supported with acknowledgement receipts. Further, UGX.6,913,290 in respect of purchase of stationery was not accounted for by way of receipts. I could not therefore ascertain with reasonable accuracy as to whether those payments were actually received by the intended beneficiaries.

Management explained that for tax deductions they were in the process of making sure that tax payments were acknowledged through the monthly return system.

I advised management to ensure that the person responsible for making returns should always endeavor to pick acknowledgement receipts and certificates as proof of payment. g) Missing voucher

Examination of accounts revealed that payment records amounting to UGX.14,940,000 were missing from the expenditure files. The payments were in favor of Joint Monitoring team –UGOGO activities. Missing documents indicate a weakness in the projects records keeping function which could lead to loss of vital records. In the absence of documentation, I could not verify whether the amounts had been regularly withdrawn from the project accounts and applied for the intended purposes.

Management explained that there was already restricted access to financial information. They further explained that the voucher could have been misfiled and they promised to trace it.

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I advised management to institute controls like restricted access to records to ensure proper safeguard of the projects accounting documentation, and also to trace the missing voucher for verification.

h) Students Complaints

According to demand notes issued by training institutions, the fees charged relate to lecture costs, revision and study materials. During the head count exercise it was noted that students complained that they do not get all the benefits as the sponsoring program states, the program claims to be paying tuition fees, study materials and revision for students but it was noted in some training centre‟s that students pay for themselves revision fees and study materials.

Management explained that each student knows exactly what is being sponsored by the Ministry and they have avenues of reporting to the respective personnel departments of the respective local governments for the ministry to follow up with the respective centre‟s and training colleges.

I advised management to investigate those complaints and ensure that students obtain the required benefits and to always comply with the guidelines and principles of local government sponsorship of students to pursue professional courses. i) Failure to Comply with Sponsorship Guidelines

According to the guidelines for sponsorship signed by the program and the training centers a student is allowed to sit for a paper for a maximum of two sittings failure to do so the student pays for him or herself for the third sitting. However it was observed that this guideline is not being complied with as was noted from one of the students of College for Professional Development from Gulu center who sat for papers 6, 10 and 11 for three sittings and the program paying for him for all the sittings. Non compliance with guidelines implies a risk of mismanaging the program funds. 281

Management explained that the guideline was revised in the program meeting considering that usually it is the finalists who repeat papers. They further stated that it would be a great loss not to support the finalist until when they finally pass the papers because they are likely to fall out.

I advised management to comply with the guidelines in place and always review student‟s database to avoid such anomalies.

j) Review of Previous Year‟s Audit Issues

The status of implementation of previous recommendations as reviewed and the table below provides the update. Issue Managements Status comments Accounting System Acknowledged. The During the audit of the During the previous audit, it programme is period under review, was noted that the ending in a the audit team programme support year‟s time and noted that the team unit maintained a it is not one of Programme is not manual accounting those that have yet integrated to system (excel spread been prioritized IFMS. sheet) to record all its to be included accounting ledger on the IFMS by books. This rendered MoFPED due to accounting including its remaining the preparation of Fund life and size. For Accountability the remaining Statements is Laborious life, the Project and prone to errors. team has no

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Issue Managements Status comments choice but to continue with manual accounting system. Diversion of programme Acknowledged. The During the review of the funds Ministry is current period there During the previous audit, we committed to was no evidence observed that a staff of paying back this that the money the Ministry of Local debt. The talked of above had government was loaned Ministry is actually been UUGX.14,270,000 from intending to refunded. UGOGO Funds to cater settle this debt for his tuition for a from the third course on sustainable quarter release Local Economic from MoFPED . Development in Netherlands on 19th March 2013 Voucher No. 219 Internal Audit function The internal audit During the audit of the During the previous audit, we team‟s report period under review, noted that internal was still being the audit team audit function was processed by observed that the lacking. the time of the internal audit team audit. It is now made reviews but ready and there was no report available for all of the findings. stake holders. However, the report was not availed for

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Issue Managements Status comments inspection.

Lack of Memorandum of Acknowledged. The No MOU is in place. Understanding programme is in (MOU) with its final life professional training stages so it did institutions not warranty to start recruiting During the previous audit, we the institutions observed that there afresh for a was no memorandum continuing of Understanding program. The (MOU) between the Ministry Uganda Good continues to Governance (UGOGO) issue operating Programme and the guidelines Training institutions to which the govern their already relationship and recruited accountability institutions use arrangements. until when the project ends.

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15.3 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT

PROGRAMME – PROJECT 1 (CAIIP 1)

a) Compliance With Financing Agreement And Government Of Uganda Financial Regulations

It was noted that management had complied in all material aspects of the financing agreement and GoU financial regulations except for the matters below;

b) Un-remitted Pay-As-You-Earn

UGX.188,840,643 was deducted and withheld as PAYE from salaries of Programme staff during the year under review. However, these funds were not remitted to URA. Furthermore PAYE arrears of UGX.147,392,099 noted in last year‟s audit report remained unremitted. Non remittance of deductions is a violation of the tax law which may lead to penalties and fines being imposed on the programme.

Management explained that the bilateral agreements with the Donors prohibit the use of donor funds to meet the above obligations. GOU funds should have been used to cater for both the PAYE and the NSSF Contributions. However, during the year, remittance for PAYE was not done because counterpart funding of UGX.53,000,000 was not enough to cater for all outstanding obligations.

I advised management to liaise with the relevant Government authorities and ensure that the funds are released and remitted to the rightful authorities as required by the law.

c) Failure to deduct 6%Withholding tax (WHT) from Service providers

It was observed that Management did not withhold tax amounting to UGX.304,715,889 on payments for services provided by non-exempt companies contrary to the requirements of the tax law under Section 120(1) of the Income 285

Tax Act. Non-deduction of withholding tax may result in to penalties and fines being imposed on the Programme by the tax body.

Management explained that the Project is being financed using Loan funds from the African Development Bank (ADB) whose bilateral Agreement with Government precludes the use of the loan funds for the payment of taxes relating to goods and services required for the execution of the Project. Therefore deduction and subsequent remittance of WHT under this Loan funding constitutes ineligible expenditure which are grounds for suspension of disbursements of loan funds to the Project.

I advised management to engage the Ministry of Finance, Planning and Economic Development to ensure that withholding tax from outstanding payments to eligible service providers is done and remitted to the tax body as required by the Income Tax laws. d) General Standards Of Accounting And Internal Control (i) Spending at source Project Operations Manual Part Two Paragraph 3.1 (Sub-sections 111 Flow of funds) requires all project funds including GoU counterpart funding to be deposited to special account held with Bank of Uganda.

However, it was noted that GoU contribution amounting to UGX.53,000,000 was released by Ministry of Finance, Planning and Economic Development to the project through the Ministry of Local Government Treasury General Account, where these funds were spent on non project activities. Spending Project funds by the Ministry does not only deny Project Management control over the funds but also poses a risk of diverting the funds to activities outside the project.

Management explained that with the migration of Government accounting system to the IFMS system, all the GOU project accounts were closed hence counterpart funds for the project were transferred to the Ministry General account.

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I advised management to ensure strict adherence to controls of project accounts such as authorization and purpose of the expenditure for proper monitoring and control. e) Field Inspections

Field inspections were undertaken with a view of establishing among others, Physical progress of civil works on district feeder roads and community access roads; construction of rural markets and agro processing shelters. The extent of supervision and monitoring by the respective District Local Governments were also considered. The following matters were observed during inspections:-

Agro Processing facilities (i) Apparent project overload to the contractor A construction company was awarded a contract to construct Agro Processing facilities in the three sub-counties of; Nagongera (2 rice hullers), Merikit (2 rice hullers) and Nabuyoga (1 maize mill and 2 rice hullers) all in Tororo District at a total cost of UGX.227,594,063. All agro processing facilities were to be executed and completed within the same period. It was however noted that the contractor lacked capacity to execute the contracts within the contract period and as a result works had stalled for over three years. This led to the delayed completion of the project hence a breach of contract. Refer to the pictures of Agro-Processing plants shown below:

Incomplete rice hullers in Nagongera and Merikit sub-counties for over 3 years

The delayed works deprive the beneficiary community of intended services.

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Management explained that the contractor had financial challenges after the contracts had been signed. However, the construction of the shelters was completed and agro process facilities were installed. Management further explained that it had now downsized on the number of shelters being handled by a single contractor in order to avoid work overload and ensure that the construction of the shelters is completed in time to allow for the installation and operationalization of the machines scheduled to ensure maximum benefit to the communities.

I await the outcome of management‟s efforts.

(ii) Missing components for Agro process equipment It was noted that some of the equipment for the agro processing plants in various districts and sub counties visited lacked vital components like mortars, gear switches and foundation bolts causing a delay in the installation process. Details are shown below; District/Sub county Missing components Tororo, Katajula sub-county, Mortars for the rice hullers were stolen Nagongera Kapchorwa The rice hullers lacked main gear switches, tool boxes and foundation bolts. The site engineers stated that most of the missing components were apparently not delivered by the supplier Pallisa, Agule Sub-county The milk cooler lacked a Lactometer while the rice mill lacked a weighing scale and stitching needle.

Failure to fully install the agro processing equipment and safeguard the project assets denies the beneficiary communities services which would improve their livelihood.

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Management explained that due to the delays in the completion of the shelters, the Ministry decided to deliver the equipment to the respective beneficiary sub counties for safe custody as a measure of reducing on the accumulation of the storage costs charged by the suppliers and during the process some of the equipment components went missing after delivery to the respective beneficiary sub counties. However management is working hand in hand with the district, police and affected sub counties to ensure that all the missing accessories are replaced so that machine installation can be completed.

I await the outcome of management‟s efforts on this matter.

(iii) Supply of the wrong type of generators It was noted that some districts were supplied with low capacity generators which could not operate the Agro processing equipment. The faulty generators were replaced with higher capacity generators in some districts like Kapchorwa, Sironko and Pallisa. However, the new generators had not yet been installed, while the rejected generators had been abandoned at the agro-processing facilities. Refer to the pictures below;

Rejected generators abandoned at Patete and Agule sub-counties in Pallisa district

The suppliers of the faulty equipment alleged that the equipment was damaged due to poor storage as deliveries were made before construction of agro processing shelters. At the time of inspection, the suppliers had issued an intention to sue the Ministry of Local Government for neglecting payment of outstanding balance and damages totalling to USD. 1,081,059 (M/s Capital Venture Ltd USD 529,830 and Ms Charm Ltd USD 551,229

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Supply of generators with wrong specification and delayed replacement of these generators denies the community of the benefits of improving the household livelihood.

Management explained that delivery and installation of new generators at the respective affected sites has now been done. Management further explained that it is working hand in hand with the office of the Solicitor General to address the pending litigation to ensure that there is no financial loss to Government.

I await the outcome of management‟s efforts.

(iv) Non-operational Agro–processing facilities at various district An inspection of Agro–processing facilities revealed that while the facilities had been completed, some remained non-operational. The Agro processing facilities affected include those in the districts of Kapchorwa, Sironko, Iganga, Pallisa districts. The communities are therefore being denied the benefits of the Project meant to improve household income.

District Sub- Pictorial Facility remarks County Kapchorwa Ngege Rice huller By June 2014 the Agro processing facility had been completed however the facility was not operational because the Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed.

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Kapchorwa Kawowo Coffee By June 2014 the Agro huller, milk processing facility had cooler been completed however the facility was not operational because the Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed. Kapchorwa Kaptanya Milk cooler By June 2014 the Agro processing facility had been completed however the facility was not operational because the Local government had not yet recruited Private Operator and Farmer management committee

had not yet been formed.

Sironko Zesui Maize mill The Agro processing facility was to be completed by September 2012. By June 2014 the Agro processing facility had been completed however the facility was not operational because the

Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed.

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Sironko Buteza Milk cooler, The Agro processing maize mill facility was to be completed by September 2012. By June 2014 the Agro processing facility had been completed however the facility was not operational because the

Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed. Pallisa Agule Milk cooler The Agro processing facility was to be completed by September 2013 By June 2014 the Agro processing facility had been completed however the facility was not operational because the

Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed. Pallisa Patete Rice huller The Agro processing facility was to be completed by September 2013. By June 2014 the Agro processing facility had been completed however the facility was not operational because the

Local government had not yet recruited Private Operator and Farmer 292

management committee had not yet been formed. Iganga Namugalwe Coffee The agro processing huller facility was to be completed by September 2013 By June 2014 the Agro processing facility had been completed however the facility was not

operational because the Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed. Iganga Nakigo Coffee The agro processing facility huller was to be completed by September 2013. By June 2014 the Agro processing facility had been completed however the facility was not operational because the

Local government had not yet recruited Private Operator and Farmer management committee had not yet been formed

Management explained that the listed Agro-processing facilities were not operational mainly due to lack of private operators to run and manage the facilities on behalf of the respective Sub counties. Management indicated that they are working closely with the affected Sub counties to expedite the process of identifying the suitable private operators to operate and manage the facilities sustainably.

I await the outcome of management‟s efforts. 293

(v) Poor storage facilities for Agro processing equipment It was observed that the agro processing equipment in Kawowo Sub-county, Kapchorwa district was kept in an open place without any proper safe guards. The equipment may be damaged or stolen which may result in to a financial loss to the project.

Management explained that the affected machine had been transferred to a completed shelter and was currently undergoing installation.

I await the outcome of management‟s efforts. f) Non-operational markets in the districts

Audit inspection revealed that some markets that had been completed were not operational. For instance the market in Kaptanya Sub-county contracted at UGX.364,993,230 and Kawowo Sub-county contracted at UGX.392,752,964 in Kapchorwa District, was completed but there were no locks in place and the contractor abandoned work before fixing the locks. In Sironko, Tororo and Pallisa Districts, the unutilized markets were being occupied by idlers. Management stated that these markets were handed over to the Sub Counties and it was the responsibility of the Sub-counties to allocate the stalls to the vendors. Refer to the pictures shown below:

Abandoned market in Kaptanya and Kawowo Sub-counties Kapchorwa District

The community is not benefiting from the project infrastructure.

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Management explained that the non-operationalization of markets was due to among others poor location, lack of enforcement of the Market Act by the Local Governments, political interference in the running of markets, reluctance to pay market dues by the vendors, inadequate produce/commodities to sell in the market during the off-season. However the aforementioned issues were being addressed jointly by the affected Local Governments and positive results were being realized.

I await the outcome of management‟s efforts. g) Rehabilitation of Community and Access Roads (CAR) 1. Delayed completion of road works UGX.392,009,451 During the financial year 2010/2011, Masaka District Administration awarded a contract worth UGX.392,009,451 to a local contractor to rehabilitate community roads under CAIIP-1 batch B. However, the CAIIP-1 project ended before the road works were completed and at the time of project closure four certificates amounting to UGX.170,662,000 had been paid. Refer to the schedule of roads below

Roads Length b Nkuke-Minyinya-Kitoma road 4.8km e Bbuliro4.8 km -Kitunga road 4.2 km l Kaswa -Kibbe-Butosi road 3.2 km o

wManzi-Bukunda road 2.5 km : Biyinja -Kyembazi road 6.0 km TOTAL 2.5 km 21.3 km

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The delay in contract performance increases administration costs. It also denies the community access to good roads meant to improve peoples livelihoods.

Management explained that Masaka District Local Government was notified and advised several times by the project management to improve on contract management of this contract or have it terminated. However by the time remedial action was taken, the donors had closed the window for fresh procurements. Currently the roads had been opened and were motorable save for the sections that needed raising the swampy areas. To address the challenge the district used counterpart funding from Government and force on account. I explained that the funds advanced to the contractor earlier with no partial works done could be a loss to government.

I advised management to follow up and ensure that the road works are fully completed.

2. Lack of routine maintenance of roads by the Districts Most of the roads in the Districts under CAIIP 1 (Batch A and B) Project were completed. However, the districts are not maintaining these roads and consequently some roads have narrowed as a result of growth of grass. During inspection of Lyantonde and Ssembabule districts, the District Engineers explained that the districts do not get enough funds to maintain the roads. Refer to the pictures below: Districts Remarks Lyantonde  Buyaga-Keishango-Rwamyongo road 10.5 km The road was rough due to lack of maintenance

Ssembabule

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 Lugusulu-Kanjunju road 10.0km contracted to M/S PRIBERA CIVIL A section of the road had narrowed due to overgrown grass.

Due to non-maintenance, the roads may not last to their expected life span.

Management explained that a list of all rehabilitated roads was submitted to the Uganda Road Fund to harmonize the periodization of the community roads in the Project Sub-Counties for maintenance. However, management promised to closely liaise with the Road Fund and the Project Districts to ensure that the rehabilitated roads are maintained.

I await the outcome of management‟s efforts. h) Status of Project Implementation

3. Project performance against the logical frame work According to the project five year implementation plan and annual progress reports, the performance of the project as at 30th June 2014 was noted as below;

Project Target as Achieved %age Amount (UGX) Audit Remarks Activity per as per achieved project draft as per Appraisal Annual draft document report Annual report Rehabilitation of 4680Km 4447Km 95% All completed roads have been CARs 110,156,252,767 dully handed over to the respective LGs. However there is lack of routine road maintenance. Some roads in Masaka district contracted had not been completed. Rehabilitation of 520 Km 578 Km 111% 21,244,312,717 All completed roads have been District Feeder dully handed over to the Roads respective LGs. However, there is lack of routine road 297

Project Target as Achieved %age Amount (UGX) Audit Remarks Activity per as per achieved project draft as per Appraisal Annual draft document report Annual report maintenance. Construction of 78 markets 77 98.70% 10,456,057,439 All markets have been handed rural markets markets over to the respective LGs. However some markets are not being utilized by the beneficiary communities. Construction of 117 123 105% 4,090,876,965 There were 3 uncompleted agro APF Shelters processing facilities in Tororo district. It was also noted that some agro processing facilities especially in Eastern Uganda were not being utilized by the beneficiary communities. Supply and 117 123 105 5,560,049,800 It was noted that some Agro installation of assorted processing equipment especially APF machines APF in Eastern Uganda lacked some machines essential components which affected their use for example milk coolers in Pallisa lacked Lactometers while in Kapchorwa and Tororo districts rice mullers lacked gear switches and mortars.

Extension of HEP 52 Km to 5,002,089,182 grid to APF sites 67 APF sites Supply, 40 KVA 40 KVA 100% 1,894,002,500 Wrong type generators had installation and generators generators been supplied and later replaced commissioning of with new ones however some generators areas in Eastern Uganda had not received the new generators. Services and 15,549,356,915 The project had not completed operations the following activities; completion report, RIMS Follow- up study, financial impact assessment and environmental 298

Project Target as Achieved %age Amount (UGX) Audit Remarks Activity per as per achieved project draft as per Appraisal Annual draft document report Annual report audit. Total 173,952,998,285

Management explained that the pending activities include operationalization of the markets and the agro facilities. Management further explained that since the project was implemented in Local Governments, it will ensure that all the completion activities are fully implemented under its supervision.

I await the outcome of management‟s efforts.

15.4 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT

PROGRAMME – PROJECT I1 (CAIIP I1)

(a) Compliance w (b) .ith Financing Agreement and Government of Uganda Financial Regulations i) Budget Performance-Low Absorption Capacity The approved Project expenditure estimates for the financial year amounted to UGX.89,898,531,239. However, only UGX.40,035,310,967 was spent during the year, representing an absorption capacity of 45%.

Low absorption capacity denies the beneficiary communities services which would have improved their livelihood. There is also a risk that Management may not meet project objectives within the agreed project period.

Management explained that 83% of the total budget was earmarked for the rehabilitation of 1,533 km of Batch B and C community access roads, rehabilitation of 230.4km of District roads, and the construction of shelters for agro processing facilities, however implementation was delayed because of procurement challenges. The procurement processes for the last batch of community access

299 roads were concluded during the year under review and project implementation has now been rolled over to the financial year 2014/15.

I advised management to ensure that the implementation is carried out as planned and within the agreed project timelines. ii) Failure to deduct 6%withholding tax (WHT) from service providers It was observed that Management did not withhold tax amounting to UGX.1,792,568,024 on payments for services provided, contrary to Section 120(1) of the Income Tax Act. Non-deduction of withholding tax from civil works was a violation of the tax laws which may result into penalties and fines being imposed on the Project by the tax body.

Management explained that the Project is being financed using Loan funds from the African Development Bank (ADB) whose bilateral Agreement with Government precludes the use of the loan funds for the payment of taxes relating to the goods and services required for the execution of the Project therefore deduction and subsequent remittance of WHT under this Loan funding constitutes ineligible expenditure which are grounds for suspension of disbursements of loan funds to the Project.

I advised management to engage the Ministry of Finance, Planning and Economic Development to ensure that withholding tax from outstanding payments to eligible service providers is deducted and remitted to the tax body as required by the Income Tax law. iii) General Standards Of Accounting And Internal Control i) Vacant post of Financial Management Specialist The project‟s approved organization structure requires the project to employ a Financial Management Specialist who is responsible for establishing and maintaining a financial management system which is in line with the GoU Regulations and Donor Procedures and ensuring that sound internal controls are in place. However, it was noted that the project operated without a Financial

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Management Specialist for over a year. Absence of a financial management specialist may hinder proper and prompt implementation of project activities.

Management explained that the recruitment process for the post was initiated and the successful candidate was submitted to African Development Bank for approval.

I await the outcome of the management initiation. iv) Field Inspections An audit inspection was carried out in September 2013 and the following issues relating to the implementation of the Project were noted;

(i) Abandonment of Community access road under Batch B Terms and conditions of Project civil works contracts stipulate that the contractors should complete the work and correct any defects within six months from the contract substantial completion date. It was however noted that some road works had not been completed while other sites had been abandoned. Specifically during the inspection in Lango region, it was observed that Agwata Atidi-Kachung road in Agwata Sub County in Dokolo District constructed by Sefkon (u) Ltd had been abandoned. The road was contracted at a sum of UGX.428,915,399 and as at 30th June 2014 a sum of UGX.55,759,002 had been paid to the contractor.

There is a risk that extra administrative costs will be incurred as a consequence of delayed implementation.

Management explained abandonment of site for a continuous period of 28 days is a substantial breach of contract. When this occurred, management through the District Local Government took immediate action by terminating the aforementioned contract. The works have been re-packaged for procurement to a new contractor and the accrued retention shall be used to meet additional administrative costs.

I advised management to urgently recruit the new contractor and have the contractual works concluded.

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(ii) Delayed completion of contracts for Agro–processing facilities According to Terms and conditions of Agro Processing facilities contracts, the contractors were to execute, complete the works and remedy any defect therein, in conformity with all aspects in the contract within a period of six months from the date the contract comes in force. During inspection, it was noted that the Agro-processing shelter at KYAMULIBWA in Masaka district constructed at a cost of UGX.103,499,045 had been completed, however there was no electricity connected to the facility hence the facility was not being utilized. Refer to photos below. At the time of inspection, the transformer had not been installed.

Agro processing facility at Kyamulibwa not functional

Poles with no transformer to supply electricity to the facility

The community is being denied the benefits of the Project meant to improve household income and livelihood.

Management explained although the construction of the shelter was completed, the contract for the extension of the grid, supply and installation of the agro- processing facility and the transformer were still on-going. Management also explained that supervision and monitoring of on-going works throughout the beneficiary districts had been intensified to ensure that activities are completed by December 2014.

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I await the outcome of management‟s efforts. v) Status of Project Implementation (i) Project performance against the logical Frame Work According to the project five year implementation plan and annual progress reports, the project had not achieved the following targets by the time of audit, despite the fact that the project is set to close in December 2014:

Component Planned Activity Status as at 30th June Remarks 2014 Rural  Completion of  1418.4km (97.5%) out  Civil works on the pending Batch A 1454.1Km of Batch A remaining 8.2 km in Infrastructure contracts CARs have been Kapchorwa district still Improvement completed. on-going.  3 non performing

contracts in Katakwi, Kitgum, Kibale, were terminated and re- advertised under Batch C and 1 contract in Pader (Lot 80) with works on-going under Batch B.

 Complete all  91.4% (1096.75km)  All pending civil works pending works- out of 1,198.2km of of 101.45km Batch B 642.6km of Batch B have been CARs are expected to Batch B and completed and handed be completed during 27.9kms of over to the respective the financial year district feeder district Local 2014/15. roads Governments  All the 230.4 km of 230.4km of District Feeder roads have been completed.  Complete  Civil works on the 12  Pending civil works on construction of re –advertised lots agro-shelters and 80 agro-shelters, commenced while the stores were expected 2 produce stores 3 contracts in Dokolo to be completed and and Pader have been during the next procurement of re-advertised and at financial year. contractors for evaluation stage  Civil works on the re- the 15 re- advertised agro- advertised agro- shelters commenced shelters. and works are on- going at all sites

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Component Planned Activity Status as at 30th June Remarks 2014  Rehabilitate  10 contracts of batch  Civil works for the about 600km of C CARs have been cleared lots were Batch C CARs granted a no objection expected to by the bank and the commence by in the rest of the contracts first quarter of will be considered for 2014/15 re-advertisement in the next quarter.  Deliver 95 APFS  All the 95 assorted  Installation of APFs is to the respective APFs have been still on going through districts delivered. Overall 30 out the project area assorted APFs have where the APF been installed shelters have been including 5 milk completed. coolers, 2 coffee hullers, 15 maize mills, 5 grain mills and 3 rice hullers.  Complete works  Progress on works for  Installation of energy for the extension extension of 54Km of meters and opening of of 54 km of grid Hydro Electric power accounts will be done to 57 APFs sites grid to 57 APF sites in the first quarter of averages at 85% with 2014/15 completed extension of conductors and installation of transformers. Community  Follow up  Out of the 14 districts  There is need to districts on so far visited only 12 sensitize the districts Mobilisation issues of (86%) have confirmed about sustainability of formation and formation and the project‟s training of IMCs, presence of farmers‟ investments such as engagement of co-operatives for roads and Agro- private APFs. The remaining processing facilities. operators, ones are in process. identification /  IMCs for Batch A&B formation of are in place formed farmer‟s and trained cooperatives and on issues of security of tenure for all investments.  Complete  Formation of IMCs  Training was formation and completed and training completed training of IMCS is on-going. for batch C CARs

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Component Planned Activity Status as at 30th June Remarks 2014 Component  Carry out  The project  It was noted that Monitoring and participated in one some works had been Coordination Supervision Support Supervision abandoned and some mission conducted by agro processing the Bank towards the facilities were not in beginning of the operation thus there quarter. The mission was need to intensify emphasized the need monitoring and to expedite supervision of project implementation of on- activities in order to going civil works to increase their benefit ensure that they are to the communities. all completed before project closure in December 2014  Technical support supervision, monitoring and guidance offered to all districts and lower local governments.

Management has not fully achieved targets in the loan agreements.

Management explained that although the Project is set for closure at the end of December 2014, an extension is anticipated for effective completion. Management further explained that most of the road works had been completed while the progress on construction of agro-shelters averages 54% of the works and besides all the 95 assorted Agro-Processing facilities had been delivered and installation was on-going.

I advised management to intensify the supervision and monitoring and ensure that the project implementation is fully undertaken within the agreed timelines.

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15.5 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME – PROJECT I1 (CAIIP III)

(a) Compliance With Financing Agreement And Government Of Uganda Financial Regulations

It was noted that management had complied in all material aspects of the financing and GoU financial regulations except for the matters below;

i) Budget Performance-Low Absorption Capacity The approved Project expenditure estimates for the financial year amounted to UGX.45, 015,592,384. However, only UGX.2,249,801,651 was spent during the year, representing an absorption capacity of only 5%.

Management explained that the bulk of the budget was earmarked for rehabilitation of 1,318.9Km of the first batch of community access roads, selection of subsequent priority infrastructure, carrying out needs assessments towards identification and prioritization of agro processing facilities including designs and carrying out of a project baseline study. However the project performance was affected by procurement challenges of the community access roads which was the major cost driver. Management however indicated that a number of contracts have now been awarded and major civil works will commence in 2014/15.

I advised management to undertake procurements early enough and ensure that budget implementation is carried out as planned and in agreed time period.

(b) General Standards of Accounting And Internal Controls

i) Spending at source Project Operations Manual PART two Paragraph 3.1 (sub-sections 111 Flow of funds) requires all project funds including GoU counterpart funding to be deposited to special account held with Bank of Uganda. However, it was noted that GoU contribution amounting to UGX.199,728,000 was released by Ministry of 306

Finance, Planning and Economic Development to the project through the Ministry of Local Government Treasury General Account, where funds were spent on non project activities contrary to the Project‟s operations manual. Spending Project funds by the Ministry does not only deny Project Management control over the funds but also poses a risk of diverting the funds to activities outside the project.

I advised management to ensure strict adherence to controls of project accounts such as authorization and purpose of the expenditure for proper monitoring and control. ii) Vacant post of Financial Management Specialist The project‟s approved organization structure requires the project to employ a Financial Management Specialist who is responsible for establishing and maintaining a financial management system which is in line with the GoU regulations and Donor procedures and ensuring that sound internal controls are in place.

It was noted that the project operated without a Financial Management Specialist for over a year. Absence of a financial management specialist may hinder proper and prompt implementation of project activities.

Management explained that the recruitment process for the post was initiated and the successful candidate was submitted to African Development Bank for approval.

I await the outcome of the recruitment process.

(c) Status of Project Implementation i) Project performance against the logical frame work The Project was expected to commence in 2011 and run for 5 years, however, operations begun in April 2012. A review of the project implementation plan and

307 project progress reports revealed delays in the implementation of activities as indicated below;

Activity Targets Progress as at 30th June 2014 Rehabilitation of Community 3,060km  3 contracts for lots 22, 62 and 77 in the districts of Sheema, Luwero and Access Roads Busia are ongoing and physical progress averaged 70% as of 30th June 2014. In addition, civil works for 43 lots under the re-advertised Batch A CARs commenced in May 2014 and 31 non-responsive lots were retendered Rehabilitation/Construction of 68 Markets  Rehabilitation of rural markets was deferred until there is improved Markets performance of markets under CAIIP-1

Construction of shelters for 78 78 shelters  Needs Assessment and design of 78 Assorted APFs completed. However Agro Processing Facilities construction had not yet started.

During inspection of beneficiary some districts, it was observed that operational funds had been received to cater for needs assessment, training and construction of community access roads among others. However, activities had not yet started. Delay in implementation of planned activities denies beneficiaries the benefits of the project, besides, project objectives may not be achieved.

Management explained that measures had been put in place to ensure that all activities are undertaken in time and these included expediting the procurement of the remaining batches of roads, design of agro processing facilities and training staff in contract and environmental management.

I advised to expedite the planned project activities in order to meet project objectives within the agreed time frame.

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15.6 MARKETS AND AGRICULTURAL TRADE IMPROVEMENT PROJECT 1 (MATIP 1) (a) Compliance With Financing Agreement, Government of Uganda Financial Regulations And Statutory Obligations i) Under-Performing Loan from Arab Bank for Economic Development in Africa (BADEA) - US$ 10,000,000 According to the loan agreement signed on 16th July 2009 between Government of Uganda and the Arab Bank for Economic Development in Africa (BADEA), the loan amount of USD 10million was for construction of five markets at Kasubi, Busega, Kansanga (Kampala City), Kimaka (Jinja District) and Nyendo (Masaka District). The executing Agency was required to acquire land for construction of the markets in the above mentioned locations before disbursement of funds. The agreement indicated that the borrower shall pay interest at the rate of one per cent (1%) per annum on the principal amount of the loan withdrawn and outstanding from time to time. The loan was declared effective on 21st January 2010 with the last disbursement expected on 30th March 2013. It was however noted that only UGX.112,428,671 was disbursed during the year under review.

The funds were spent on consultancy services for developing architectural designs and supervision of the construction of the five markets. The commitment fees and interest that has accrued on this loan account since its effective date is estimated at US$500,000. Under-utilization of the loan may result into a financial loss to Government. Delays in accessing funds have a negative effect on service delivery to communities as the period for the construction of the above five markets has since overlapped the agreed date of last disbursement of 30th March 2013.

Management explained that the performance of the loan was mainly affected by lack of evidence of ownership of land in Kansanga, Kimaka and Kasubi, a major condition for the design of the markets of the town councils. However following the confirmation of availability of land for Nyendo and Busega, detailed designs were completed and submitted to BADEA and approved. To date, the bids for the construction of Busega and Masaka markets have been evaluated and sent to BADEA for approval after which construction will commence for the two markets.

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I advised management to acquire land in Kansanga, Kimaka and Kasubi as required to enable the smooth utilization of the loan fund. ii) Budget Performance-Low Absorption Capacity The approved Project expenditure estimates for the financial year amounted to UGX.61,349,873,640. However, only UGX.40,449,178,104 was spent during the year, indicating absorption capacity of 66%.

Low absorption capacity denies the beneficiary communities services which would have improved their livelihood. There is a risk that Management may not meet project objectives within the agreed project period.

Management explained that the shortfall in absorption capacity was mainly due to the failure of Government to contribute towards the tax component which affected the performance. However, communication had been made to Ministry of Finance, Planning and Economic Development, and the taxes are expected to be cleared in the 2014/15 financial year.

I await the outcome of management‟s efforts. iii) Counterpart funding According to the Provisions of the Loan Agreement, GOU is required to contribute funds towards the implementation of Programme activities. A review of the project budget revealed that a total of UGX.10,395,482,191 was budgeted as GOU counterpart funding, however according to the Project‟s records, only UGX.1,273,934,149 was released for Project activities resulting into a shortfall of UGX.9,121,548,042 (88%). Failure to provide counterpart funding as budgeted for is in violation of the project Financing Agreement. Besides, underfunding hinders the smooth implementation of the project activities.

Management explained that the Ministry was aware of the constraints caused by inadequate funding and had already communicated to the Ministry of Finance, Planning and Economic Development to ensure sufficient releases are made in the financial year 2014/15. 310

I advised management to continue liaising with the Ministry of Finance, Planning and Economic Development to ensure all budgeted funds are released to allow smooth implementation of the project activities. iv) Outstanding VAT on certified works and consultancy The contract agreements signed between the Line Ministry and the contractors for civil works for the construction of markets quoted the prices inclusive of Value Added Tax (VAT). The project had VAT payable and accumulated interest of UGX.12,767,665,608 at the close of the financial year. It was noted that the contractors for civil works at the seven sites were threatening to sue Ministry of Local Government for the unpaid VAT including interest. The delayed payments may result in to a nugatory expenditure in terms of legal costs to the Project.

Management explained that VAT was not paid to a number of service providers due to insufficient Government counterpart funding. Management further stated that supplementary funding was sought to cover the outstanding amounts which will be catered for in the financial year 2014/2015.

I wait the outcome of management‟s efforts on the matter.

(b) General Standards of Accounting And Internal Control i) Spending at source Project Operations Manual PART two Paragraph 3.1 (sub-sections 111 Flow of funds) requires all project funds including GoU counterpart funding to be deposited to special account held with Bank of Uganda.

A review of the Ministry of Local Government development expenditure records revealed that GoU contribution amounting to UGX.995,300,408 released by Ministry of Finance, Planning and Economic Development to the project through the Ministry of Local Government Treasury General Account, was spent by the Ministry on behalf of the Project on non project activities which was contrary to the Project‟s operations manual.

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Spending Project funds by the Ministry does not only deny Project Management control over the funds but also poses a risk of diverting the funds to activities outside the project.

However, it was noted that the project operated without a Financial Management Specialist for over a year. Absence of a financial management specialist may hinder proper and prompt implementation of project activities.

Management explained that the recruitment process for the post was initiated and the successful candidate name was submitted to African Development Bank for approval.

I await the outcome of the recruitment process.

(c) Status of Project Implementation i) Delayed implementation of project activities A review of the project implementation plan and progress reports revealed that the project had not achieved planned targets in the agreed timeframe. The following activities should have been undertaken by the end of the year under review;

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Component Activity Progress as at 30th June 2014  Complete and handover all  Works are still on-going on all the the remaining 4 markets 4 markets. namely; Lira, Jinja, Gulu and  The Progress of work was Hoima. affected by delayed VAT payment to contractors and civil works consultants. Market  Complete designs of Busega  Detailed designs were produced, Infrastructure and Nyendo markets under reviewed and approved by BADEA loan. relevant authorities, including Development. urban authorities and the funding agency (BADEA).  Initiate procurement of  Construction of the Busega and contractors for Nyendo and Nyendo markets is currently Busega markets under the under procurement with bid BADEA loan closure slated for 1st September 2014.  Complete the re-location of  The process of resettling vendors vendors back to the in Mbale and Hoima markets is completed markets still on-going. A total of 1,753 vendors had already resettled in Mpanga and Wandegeya markets. Registered vendors are given first priority in the allocation process and any other remaining facilities will be given out on a competitive basis as per Market the laws that govern Management and Procurement and Disposal of Trade Public Assets. However there is Enhancement need to carry out sensitization of market vendors in Hoima, Gulu, Jinja and Lira markets regarding market facilities management guidelines in order to enable sustainability of project objectives.  Complete the establishment  The process of establishing the of the Market and Market Management and Management Information Information System is still on- System going. Programme  Undertake monitoring and  The construction work continues Management and supervision to be supervised by respective consultants with oversight Coordination guidance from the Programme 313

Component Activity Progress as at 30th June 2014 Facilitation Team (PFT) of the Ministry.  Conduct a progress review  No review workshop was held workshop during the reporting period.

Delay in implementation of activities denies beneficiaries the benefits of the project, besides, project objectives may not be achieved due to the delays.

Management explained that the project is in its fourth year of implementation and is expected to close in 2015. By then, the indicated project milestones will have been achieved.

Management is advised to expedite the planned project activities in order to meet project objectives within the agreed time frame.

15.7 DISTRICT LIVELIHOODS SUPPORT PROGRAMME (DLSP) – MINISTRY OF LOCAL GOVERNMENT (MOLG)

(a) Compliance With Financing Agreement And Government of Uganda Financial Regulations

A review of the Programme implementation records revealed that generally there was compliance with the financing agreement and Government of Uganda financial regulations, except for the following:

(i) Government of Uganda (GOU) counterpart funding A sum of UGX.296,008,000 was received as GOU counterpart funding during the year out of the approved budget estimates of UGX.399,883,115. The receipts were credited to the Ministry of Local Government (MoLG) General Treasury Account. The following were noted during the audit;

Non-incorporation of the GOU counterpart funding into the Consolidated Annual budget of DLSP According to the Project Financial Guideline 1.32, all budgets are required to be associated with codes which identify the funding source, budget categories, 314 budget components, sub components, and activities as indicated in the budget plan chart and analysis. However a review of the Annual work plan and budget for the programme revealed that GOU counterpart funding budget and work plan was not incorporated in the project consolidated work plan and budget as required.

Failure to incorporate the GOU funding budget estimates in the Project consolidated work plan and budget may result into the entity spending funds on unplanned activities.

Management explained that the Annual Work Plan Budget (AWPB) will be adjusted to incorporate the GoU Component in the subsequent year, however, the GOU component had been incorporated in the Ministerial Policy Statement as a starting point.

I await management implementation on the matter.

Low absorption Capacity The approved budget for the financial year 2013/2014 was UGX.49,301,833,686. Although UGX.24,430,141,921 was actually released during the year, only UGX.23,769,033,103 was spent representing an absorption capacity of only 48.2%. It is worth noting that the Project is in the second last–year of implementation. Low absorption capacity denies the community services ability to uplift their livelihoods. Furthermore Project objectives may not be achieved within the stipulated time frame leading to extra administrative costs.

Management explained that all the funds were committed in contracts and that the Programme Coordination Unit had put in place mechanisms to complete planned activities by December 2014.

I advised management to ensure that budget implementation is carried out as planned before activity closure.

Status of the loan disbursement A review of the financial statements revealed that out of the total IFAD loan of USD 52,000,000, Management had only utilized USD 38,951,348 resulting into an 315 estimated unlimited loan balance of USD 13,048,652 (25% of the total loan) yet the project completion date is set for 31st December 2014. This assertion was supported by the project Aid memoire dated 7th-31st October,2014 where it was revealed that pending road works and other activities amounted to USD 12.1m while un disbursed funds on the IFAD account amounted to USD 12.2m as at that date. There is a risk that management may not fully utilize the loan by the project closure date if activities are not completed in time. Administrative costs are also likely to escalate.

Management explained that all the undisbursed funds were already committed to on-going road works. Management further explained that although the project completion scheduled for end of December, 2014, the project will continue processing payments even after the project completion date provided the payments relate to works which were performed before the project completion date.

Management is advised to expedite the implementation of the activities to ensure that the loan is fully utilized to allow the project achieve its objectives.

(b) General Standards of Accounting And Internal Control

(i) Wasteful expenditure on purchase of „„TOMPRO‟ Accounting Software According to the Supervision and Implementation Support Mission report: (16-27 July, 2012), ''TOMPRO'' Accounting Software was procured at USD 50,000 and installed at both the districts and the Project Coordination Unit in Kampala. The Accounting software was intended to harmonize the financial, monitoring and reporting for the project team. The software has modules for system parameters; financial accounting, reports analysis, budget control, fixed assets management, credit management, procurement management and disbursement reports.

It was noted that the software had not been put to use at the Project Coordination Unit (PCU) and the districts despite further recommendation by the IFAD mission in the Aide memoire (8th-19th July 2013) to fully implement “TROMPO” by 31st July 2013. Therefore the objective of introducing the software to capture transactions

316 at Project Coordination Unit and Programme districts has not been achieved wasteful expenditure of USD 50,000 to the project.

Management explained that the software could not be used at PCU since data capture had failed at the district level and it needed reconfiguration which was expensive and would not yield value for money since the programme was left with only one year to operate before project closure. Management further explained that the time was not sufficient to allow the procurement of the consultant to reconfigure and allow it operate at both PCU and district level.

I advised management to always carry out a study on the use and benefit of such procurements before undertaking implementation decisions.

(ii) Spending at source A review of records revealed that GoU contribution amounting to UGX.296,008,000 was released by Ministry of Finance, Planning and Economic Development to the project through the Ministry of Local Government Treasury General Account, where funds were spent on behalf of the Project on non-project activities which was contrary to the Project‟s operations manual. Spending Project funds by the Ministry denies Project Management control over the funds.

I advised management to ensure strict adherence to controls to allow project management full control of the project funds.

(iii) Un accounted for advances The project had outstanding advances of UGX.183,219,506 as at 30th June 2014 as indicated in the table below.

The delays in accountability affect project implementation and intended objectives may not be achieved within the stipulated project timelines.

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District/PCU Outstanding advances as at 30th June,2014 Apac 76,430,000 Bundibugyo 4,728,000 Kamwenge 55,614,834 Luwero 997,000 Busia 15,119,400 PCU 30,330,272 Total 183,219,506

Management explained that they had instituted measures to recover the outstanding advances in line with the project guidelines.

I await the outcome of Management‟s efforts.

Field inspection to assess progress on implementation of DLSP activities was undertaken and the findings were noted: i) Poor workmanship Section vii sub sec 1.23.1 General condition of the contract specifies that the contractor shall construct and install the works in accordance with specifications and drawings.

During inspection of the rehabilitated roads works in Apac and Oyam districts, it was noted that although the works had been completed, there was evidence of poor workmanship on some roads. For example there were no headwalls at the culvert ends, culverts were not properly installed while some of the headwalls built were already cracked and lacked wing walls. Details are in the pictures below:

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Olelpek-AbapirinAbei Border Road, 22.8km, Batch 2 in Apac district constructed at a Contract price UGX. 563,264,970

Silted culverts blocked the road drainage channel.

The culverts should have been lifted up. Alira-Oder Swamp-Abwongo H/C, 12.2 km, Apac district Batch 3 constructed at a cost of UGX. 333,117,310 Cracked headwall along the road.

Arocha market-Tolkoling- owalo trading center 7.2km in Apac district ,Batch 3 constructed at cost of UGX 167,255,691 Head walls were built without wing walls

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Otwal railway-Ojwii road 12.7km in Oyam district constructed at a contract price of UGX. 344,396,456 Headwalls were built without wing walls.

The poor workmanship affects the lifespan of the roads.

Management explained that the beneficiary districts and contractors had been notified to correct the defects.

I await the outcome of management‟s efforts. ii) Under scope of work Clause 36 of the conditions of contract for the rehabilitation of Community Access Roads (CARs) states that the Bills of Quantities (BOQs) shall contain items for the construction, installation, testing and commissioning of the work to be done by the contractor. It is also used to calculate the contract price and the contractor is paid for the quantity of work done at the rate in the BOQs for each item.

Furthermore for quotations to be made, the bidder is required to inspect the project sites with a view of establishing the bills of quantities and develop proper bid quotations. The consultant is required to inspect the site to come up with standard costing upon which the projection valuation will be based while the Project Support Officers (District Engineers), and Infrastructure Engineers are required to carry out comprehensive assessment of requirements of works in order to come up with accurate bids.

During inspections in Oyam district, it was noted that some projects had design gaps which could not be covered using the amount quoted. This was because the contractors made quotation based only on the paper project design provision resulting into significant mismatches with actual road bottle necks. 320

Engineers stated that some of the BOQ provisions were below the desired requirements, given the levels of road bottlenecks observed on the road. Some contractors have requested for contract variations in order to cover the design gaps. One of the examples is sited below:

Camnono road –Teogali TC, 11km: Constructed at a contract price of UGX.374,616,650 was poorly designed as the road had low filling which resulted into big depression that causes water lodging during the rainy season. The district engineers amended the road design as requested by the project and quoted a contract variation of UGX.46,055,863 for th additional works on 8 October 2013, however Project Management had not yet responded to the quotation.

The under scope of work led to delayed completion of the project, sub-standard works and resulted into increased administrative costs. It is also evident that the contractors, consultants, Project Support Officers and Infrastructure Engineers did not carry out comprehensive assessment of the requirements of works on the ground.

Management stated that measures will be taken to improve on the quality of designs by undertaking due deligence in validating designs. Management further stated that the bidding process will compel intending bidders to inspect works prior to bidding.

I await the outcome of management‟s efforts. 321

iii) Delayed completion of road works During inspection of DLSP Batch C Community Access Roads in Bulisa and Masindi districts, it was noted that some road works had delayed and lacked signposts contrary to the agreement. It was also noted that in some cases culverts were poorly installed, particularly the road works done in Bulisa district. In one instance, the contractor had abandoned works and another construction company contracted but this time at a higher cost. Details are in the table below;

Batch3 MASINDI District Management Response Rehabilitation of Biraizi- Kuhuuba road (3.2km) Inspection team noted At the time of that although the works inspection the head had progressed well, and wing walls were the contractor did not not yet constructed to construct headwalls allow for settlement around swampy areas. of the fill material. This leaves the road Otherwise the head surface prone to and wing walls may erosion. crack when there is substantial settlement after construction. This was part of the snags that the Monitoring Unit

enlisted to be done. Katagurukwa-Kibbali Balyegoma Road (13.6KM)

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Batch3 MASINDI District Management Response It was noted that The bill boards have although the works had been installed. progressed well, the contractor did not construct headwalls around swampy areas. This left the road surface prone to erosion.

Kyagamoyo-Kaikuka-Ntoma Raod 28.9KM It was noted that The issue was noted although the works had and brought to the progressed well, the attention of the contractor did not contractor. construct headwalls

around swampy areas.

This left the road surface prone to erosion. BULISA DISTRICT Wanseko-Murchison falls Park road-18.6 km rehabilitated under DLSP Batch 2.

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Batch3 MASINDI District Management Response This site was The bill boards have abandoned by the first now been installed. contractor M/S PATROV International Ltd who started work in April 2012 at UGX.559,378,600 and was paid UGX.196,684,120 after doing 35% of the works. It is now contracted to M/S

PEKASA Enterprises at a contract cost of UGX.874,963,793. There was no signpost for the works. St. Mary‟s Kalengeija Primary school- Bubwe road-5.2 km rehabilitated under DLSP Batch 3. This site was contracted Management has to M/S SINAI General instructed the Merchandise and contractor on the Supplies Co. Ltd at a defects. combined cost of UGX.913,280,340 which also covers other road sections with total distance of 14.3 km. It was observed on roads all done by M/S SINAI that the culverts were poorly installed creating steep humps which may hinder the benefits of the services to the road

users.

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Batch3 MASINDI District Management Response Angolyero-Akollo-Garasoya road 2.6 km rehabilitated under DLSP Batch 3. It was contracted to Management has M/S SINAI General instructed the Merchandise and contractor on the Supplies Co. Ltd at a defects. combined cost of UGX.913,280,340 which also covers other road sections with total

distance of 14.3 km. It was observed on all roads done by M/S SINAI that the culverts were poorly installed creating very steep humps which may hinder the benefits of services to the road users.

The delay in contract performance and poor workmanship increase construction and administration costs and it denies the community access to good roads which are meant to improve their livelihoods.

I advised management to regularly monitor activities in the districts to ensure quality and timely completion of road works. Management is further advised to invoke the penalty clauses within the contract agreements for delayed completion of works.

(d) Status of Project Implementation i) Project performance as per logical framework According to the Project seven year implementation plan and progressive reports, the project had not achieved some of the following targets despite the fact that the project closure date was set for 15th December 2014: 325

Activity Targets Progress as at 30th/June/2014 Community infrastructure Community -Construction of - The civil works for the first batch of roads Access roads 2,400 Kms of measuring 313.5 Kms were completed community access and the roads are now under routine roads. maintenance by the districts. -Training 300 road user committees - The construction of the second batch measuring 640.1 kms has been completed.

- The construction of the 3rd batch (418.25 km) community access roads is near completion and about 85% construction work has been completed.

- The construction of the fourth batch of community access roads totaling to 766.8 km is in progress and only 55% construction was has been completed.

COMMUNITY DEVELOPMENT -Train and facilitate - Trained 1,232 Community volunteers (FAL 1,872 community instructors and house hold mentors) and volunteers empowered them to conduct 572 FAL (household classes aimed at mentoring the targeted mentors and FAL 17,280 poorer households in all the 13 instructors) districts.

-Enroll 46,800 FAL - Identified and trained 680 groups in learners group dynamics and leadership skills.

-Train 15,600 - Mentored a cumulative total of 18,172 farmers in group poorer households to enable them organization and participate in development initiatives leadership skills. through identifying and developing their own path ways out of poverty. -Mentor 17,280 - A total of 24,283 FAL learners were poor house holds enrolled to improve their literacy and

numerical skills. Consequently, over

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Activity Targets Progress as at 30th/June/2014 14,067 FAL learners did proficiency tests and were able to apply their numerical and literacy skills. There was a shortfall about 50% of the planned enrolment.

Agriculture Development And Land Tenure

-Establish 312 on - 251 on farm demonstrations were farm established focusing on different demonstration. agronomic practices in management of Upland rice, bananas, and cassava (Akena variety). (80%) District And Sub-County Execution - Refurbishment of 2 district headquarters Refurbished (40%). 5 district headquarters.

Management stated the audit observations were appreciated and they were to ensure that all the remaining activities are completed in time.

I wait the outcome of management‟s efforts towards timely implementation of project activities.

15.8 MILLENNIUM VILLAGES PROJECT (MVP) PHASE II

(a) Expenditure on project activities USD 577,239 was expended by the Millennium Villages Phase 11 Project between 22nd May and 31st October 2013 as shown in the table below:

Project Component Amount Spent (USD) Increased Agricultural Production and Enhanced Nutrition 48,655 Business Development and Micro-Finance 29,231 Promoting Universal access, Retention and Quality Education 43,874 Strengthening Health Service Delivery Systems for Improving 223,088 access to Basic Health Care

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Infrastructural Development and Innovation Promotion 32,775 Water for Domestic Consumption, Production and Sanitation. 36,344 Project Implementation Unit Management 163,273 TOTAL 577,239

It was noted from the review of expenditure records that USD 359,393.17 which represents 62% of the expenditure for the five months period was spent on wages, salaries and top-up allowances to staff in the seven components and yet the workplan and budget for the thirteen months period from 22nd May 2013 to 30th June 2014 provided for a total of US $230,000 on the staff costs. This limited funding to other vital project activities to just 37.5%. This practice could constrain effective implementation of other project activities in the long run.

Furthermore, the project employs 200 staff to implement activities in 8 villages of Isingiro district. The organization structure appeared too big for the project considering that major activities are executed in Ruhiira village, Isingiro district. Refer to table showing staff numbers and categories below:

Staff categories Total Number Coordinators 8 Operations 13 Facilitators 17 Technicians and assistants 12 Data staff 13 Radio presenters 3 Community Education worker 11 Medical workers 31 Support staff 27 Community Health workers 65 TOTAL 200

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The huge number of staff will lead to excessive staff costs and hamper implementation of planned project activities, since funds are likely to be drawn from other programmes to cater for staff costs.

Management explained that Millennium Promise Alliance (MPA) was in the process of streamlining the project personnel to a structure that suites the task although the existing team which implemented Millennium Villages Project (MVP) Phase I kick-started Millennium Villages Project Phase II.

I advised Management to expedite the process of streamlining the Project staffing structure.

(b) Lack of Government of Uganda (GoU) counterpart funding Article 7.1 of the loan agreement between Government of Uganda and IDB requires the borrower to promptly fund the Project in accordance with the lender‟s terms and conditions. Accordingly, Government of Uganda was required to contribute USD 980,000 to the project over three years in addition to secondment of health workers and teachers to the Project and other non-monetary support. However, no funding was received from Government of Uganda for the period under review.

Failure by Government to meet its funding obligations negatively affects the project activities.

Management explained that the Project agreement was signed on 22nd May when the financial year 2012/13 was ending and that a provision for GOU co-funding was made in the budget for the financial year 2014/15.

Management should follow up the matter with the Ministry of Finance, Planning and Economic Development to ensure that Government meets its funding obligation to the project.

(c) Non-compliance with procurement guidelines Section 7.2 (iv) of the of the loan agreement between the Republic of Uganda and Islamic development bank (IDB) requires all procurements of civil works,

329 equipment and supplies, computers and related technologies and training materials whose estimated cost are above ID 25,000 (approximately equivalent to USD 16,66.26) to be carried out via national competitive bidding.

It was noted that two contracts were awarded through the direct procurement method contrary to the IDB procurement guidelines. Refer to the table below;

Name of Contract Contract Remarks contractor sum Joint Medical Stores Supply of 48,308,664  No procurement files for the contract. Medicine and  Joint Medical Stores owed medical supplies the project a balance UGX.1,270,560 from the prior supplies made but this was not deducted from the final payment. J & K Technical Construction of 67,000,000  Whereas the procurement documents (evaluation committee Services Staff house at minutes) indicated that 3 Ruhiira H/C companies bidded for the construction of the Staff house, there was no evidence of bid documents and bid submission for the other companies involved in the bidding process.

Non-compliance with procurement procedures denies competition which may lead to procurement of lower quality services at unfavorable costs.

Management explained during the period under review, the project had not received funding from either GOU or IDB. Therefore MPA procurement procedures were consistently applied and not IDB procurement guidelines. Management further stated that when the project received funds from IDB loan, the procurement was streamlined with Ministry of Local Government where big items are centrally purchased using PPDA procedures which cover IDB guidelines. Management also indicated that the project recruited a procurement specialist to assist the project in the procurement of goods and services.

I advised Management to follow the procurement guidelines in place.

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(d) General Standard of Accounting and Internal Controls It was noted that management had instituted adequate controls to manage project resources.

(e) Field Inspections Inspection of the project site in Ruhiira was undertaken. The objective of the inspection was to assess the extent of implementation of the project, its impact on the community and compliance with contract agreements. The major findings from the inspection are below: i) Lack of Sign Posts Bills of Quantities provided for a sign post for identification of the sub projects undertaken by MVP II in the area which the project is located. The bill board is required to clearly specify the project, the project funders, Sub County, District and contractor. It was observed that some project investments lacked the required sign posts.

In absence of sign posts, it becomes difficult to ascertain whether all projects inspected were actually genuine as there were similar projects being implemented by Isingiro District Local Government and other Non-Government Organizations (NGOs).

Management explained that all sign posts for completed and on-going projects will be installed at the projects sites. I await the outcome of management‟s efforts. ii) Delayed completion of staff house at Ruhiira Health Centre III According to the contract agreements for the construction works, the contract period for works of the staff house at Ruhiira Health Centre III was three months ending 27th March 2013. It was however observed that construction had stalled for over a year. Refer to the picture below;

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Construction of Ruhira Health Centre III staff house by J&K Technical Services

Delay in implementation of planned activities could lead to unnecessary extra costs in form of administration, monitoring and supervision.

Management explained that the construction of the health centre staff house was under Millennium Village Phase I which could not be completed due to insufficient funds. However, the project had included the finishing works of the project in the Annual work plan 2014/2015 of Millennium village phase II in order to complete the construction of the health centre staff house.

I await the outcome of management‟s efforts.

iii) Poor Storage of drugs at Ruhiira Health centre The drugs at the Health centre were poorly stored and as such I was not able to differentiate between drugs delivered by the project and those from the district.

Poor storage of drugs may lead to losses as the drugs are exposed to undesirable conditions.

Management has promised to ensure that there is proper storage of drugs at the Health centre.

I await the outcome of management‟s efforts.

16.0 OFFICE OF THE PRIME MINISTER

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16.1 Mischarge of Expenditure

The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Office of the Prime Minister‟s expenditures revealed that the entity charged wrong expenditure codes to a tune of UGX.5,564,282,629. This constituted 6% of total expenditure for the Office of the Prime Minister. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to misreporting.

Management explained that the Ministry of Finance Planning and Economic Development (MoFPED) advised them to utilize funds that had been released and were not performing to cater for emerging priorities that included refugee influx and drought emergencies.

I advised management to streamline the budget process to ensure that sufficient funds are allocated to each account and budget line codes. Authority should always be sought before any reallocations are made.

16.2 Advances to Individual Personal Accounts

Non Compliance with Treasury Accounting Instructions Sections 227, 228 and 229 of the Treasury Accounting Instructions (TAIs), provides that all payments should be made by the Accounting Officer directly to the beneficiaries. Where this is not convenient, an imprest holder should be appointed by the Accounting Officer with the approval of the Accountant General. UGX.3.6 billion was advanced to Ministry staff through their personal bank accounts to undertake direct procurements and other activities.

Although the funds were accounted for, such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the entity does not have any control over such funds deposited on personal accounts.

Management explained that most of the activities undertaken by the office are field based and involve working with other stakeholders in the Districts who are 333

not usually known at the time the requisitions for funds are made, necessitating it to advance funds to individuals to execute field based activities. In the meantime, management has engaged the Permanent Secretary/Secretary to the Treasury, who has authorized OPM to process an impest warrant through the Accountant General which decision will hopefully go a long way in addressing the problem.

I advised management to ensure strict adherence with the requirements of the Treasury Accounting Instructions. Meanwhile management effort to resolve the issue is awaited.

16.3 Refund to NUSAF 2 for PRDP expenditure

A review of the Ministry‟s expenditures revealed that the entity irregularly paid funds to a tune of UGX.271,193,000 to NUSAF 2 project account as refunds to the project for ineligible expenditure under the World Bank portfolio. The funds were for start up activities and fuel paid to PRDP in 2010. The accounting officer charged sub-programme 0932-130306 item 224001 (Medical and Agricultural Supplies) for the refund. These funds were not appropriated in the Appropriation Act. It was also noted that neither virements warrant nor supplementary funding was requisitioned and approved for the expenditure. This practice undermines the importance of the budgeting process, suffocates the approved programmes and also hampers service delivery. Further, the practice leads to misreporting.

Management explained that at the time, there was no budget provision for preparatory activities for the design of NUSAF2 (counterpart funding). World Bank insisted that there should be a commitment on part of Government to meet the initial preparatory costs.

I advised the Accounting officer to ensure adherence to the financial regulations and apply for supplementary provisions where unforeseen circumstances arise which may not be postponed without detriment to public interest.

16.4 Quarterly Staff allowances

The Ministry paid quarterly allowances to Ministers, staff, police officers, home guards and political assistants for the year under review to a tune of 334

UGX.1,269,305,000. The payments were not provided for in the standing instructions.

Payment of irregular allowances affects the entity cash flows and results into diversions of government funds.

Management promised to streamline payment of these allowances.

I await management‟s efforts in streamlining the payment process.

16.5 Gross payment tax

a) Budgeting Budget estimates provide a basis for the Ministry commitment and represents the Ministry‟s understanding of the scope and expense of what needs to be done, and the amount required to settle in taxes. The Ministry budgeted for a total of UGX.16,413,653,190 to cater for gross tax payments and only UGX.5,100,000,000 was released by Treasury. Out of the release only UGX.3,539,828,278 was spent reflecting 31% budget release and 69% release utilization. Allocating funds for activities/expenses whose likelihood of occurrence is remote provides avenues for diversions as well as large budgetary slacks which provide for future unfair budgetary variations.

Management explained that the gross tax budget was a non-resource item and not tied to the ceiling of Vote 003. Due to the withdraw of donor support to OPM, a lot of anticipated procurements which would have consumed much of the gross tax were not procured creating a huge variance between the budgeted and the actual outturn. Management further explained that the gross tax component is also used to pay taxes on imports donated by Non-Governmental Organizations (NGOs) to the Sector which in most cases are not known at the time of budgeting.

I advised Management to always ensure that reasonable budgetary estimates are made.

b) Tax obligations by the Ministry

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The Office of the Prime Minister entered into several Memoranda of Understanding with Non-Governmental Organizations and provided for tax settlement on their behalf within these MoUs for goods acquired by them. As such, the Ministry had to meet tax obligations on behalf of these NGOs arising out of the agreements made. The following were observed:  Article 7 of the MOU‟s signed before 2013/14 financial year regarding taxes and duties was open ended as it did not limit the type of imports, e.g. vehicle capacities, luxurious goods etc.

 It should be noted that upon paying, the Ministry has no control in regard to the final destination of the goods implying that there is a risk that such goods may end up in the open market.

This practice exposes the Ministry to the risk of payment for non-beneficial commodities which may end up on the open market and undermine the tax planning efforts of Government.

Management explained that the MOU with all NGOs partnering with OPM and those intending to do so has been reviewed to address the gaps identified. These include among others the kind of imports that are eligible for tax clearance, verification of imports in the presence of OPM internal auditors and the NGO before goods are distributed to intended beneficiaries. In addition it is now a requirement that the Head of Department or a senior officer appointed by the Head of Department monitors the utilization of donated items by the beneficiaries in accordance with the provisions of the MOU. The officer will be required to make a report to the accounting officer at the end of the distribution detailing the items received and how they were finally utilized.

I urged management to implement the action points in the process of streamlining the tax payment process.

16.6 Lack of verifiable database for Kasiimo Project

The Ministry through the department of Luwero Affairs is charged with the mandate of paying gratuity to non-combatant War (civil) veterans. To expedite the

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process, the Ministry transfers funds to Centenary Bank equivalent to moneys due to the veterans verified by the Luwero triangle war debt verification committee. The Bank then pays individual veterans by crediting bank accounts opened with them.

During the year, UGX.6,140,000,000 was transferred to the bank for onward transfer to the beneficiaries. However as mentioned in my previous years report, neither the committee responsible nor the Office of the Prime Minister has a comprehensive verifiable database of the combatants who have been paid and those who are pending six (6) years after the onset of the scheme. The Ministry has schedules that have been remitted to Centenary bank for payment since inception of the programme but not all the beneficiaries in the schedules were paid as reconciliations have proved because of the manual environment. The Ministry may lose funds given that under the circumstances, cases of duplication and inclusion of non-entitled beneficiaries cannot be ruled out.

Management explained that the Verification Committee is compiling a complete data base on those who have not been paid and those who did not get the verification forms during the first verification exercise. To streamline the process further, a consultant to develop a computerized web based database has been procured. This will resolve the manually managed payment process.

I advised management to ensure that a comprehensive database is developed that should be able to capture all payments to individuals and be reconciled to total remittances to the bank since project inception. In the meantime, management is urged to expedite the implementation of the computerized web data base.

16.7 Execution of Unenforceable performance securities on Procurement for Construction of Education Infrastructure in Karamoja The Office of the Prime Minister signed contracts with several firms for the construction of Education Infrastructure in Karamoja District under three lots with lot 3 being awarded to a Construction company at a contract sum of UGX.1,073,713,920 to construct semi- detached houses at Moroto High School. Special Conditions of contract 52.1 and 52.3 required the contractor to execute a

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performance security of ten percent (10%) contract price in form of a bank Guarantee.

Contrary to the above requirement, no performance security in form of a bank guarantee was availed by the contractor. The firm provided a performance security from Mercantile Credit Bank Ltd which is a credit institution and licensed to conduct credit institution business (Tier II) and as such is not a Commercial Bank. Absence of performance security puts the entity at a risk of losing funds in the event of non-compliance.

Management explained that they had communicated to the contractor to provide the Performance Security that is consistent with the provision of the contract.

I advised management to always carry out due diligence on securities prior to contract commitment.

16.8 Dormant Accounts

Guidance from the Accountant General provides that all Government accounts held with Bank of Uganda are automatically blocked if they are inactive for a period of six months. Accountant General should advise of any alternative action on these accounts. It was noted that three project bank accounts held in local currency were found to be dormant for a period of twenty four (24) month with a total credit balance of UGX.375,662,268 as at 30th November 2014 as indicated below:

ACCOUNT NUMBER ACCOUNT TITTLE AMOUNT (UGX.) 000030088000009 DFID SUPPORT TO THE NATIONAL 326,397,167 INEGRATED MONITORING AND EVALUATION STRATEGY 000030088000027 NORTHERN UGANDA DATA CENTRE-GIZ 46,710,876 COMPONENT 000030088000038 PEACE RECOVERY AND DEVELOPMENT PLAN 2,554,225 (PRDP) NORTHERN UG&A TOTAL 375,662,268

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Dormant accounts are risky as they provide an avenue for perpetuating illegal activities through concealment.

Management explained that these accounts were for donor funded programmes and projects which were suspended following the financial impropriety that occurred in OPM and other MDAs. Negotiations are on-going between Government and the Development partners to have these accounts unfrozen and release the monies to complete the outstanding activities. In the meantime, management has written to Accountant General to justify the continued existence of these Accounts.

I advised management to continue liaising with the Accountant General to ensure that the Accounts are maintained in line with financial regulations.

16.9 Budget performance

Public Finance and Accountability Regulations 2.10(b) entrusts the Accounting Officer with ensuring that all total controls such as those contained in the approved estimates, warrants and others are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort is required to be made to achieve the agreed objectives or targets of the entity within the availed resources.

Review of the budget performance for the year under review revealed that some targets were partially or not undertaken despite release of funds to the vote functions as below;

Vote functionItem Planned Amount Amount Actual output/Remarks Mgt response output description outputs/ (UGX) released Quantity Qty budgeted in(UGX ) in billions billions Project 1235- 130275- 0.83 0.83 Three pickups 100% of Procurement ressetlement of purchase of -Purchase of were funding was for trailer and landless persons motor vehicle one trailer procured got but no trucks not and disaster -Purchase of instead of budgeted done yet there victims two (2) trailer and 2 activity/outp was increased tonne tipper tippers uts were demand for

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Vote functionItem Planned Amount Amount Actual output/Remarks Mgt response output description outputs/ (UGX) released Quantity Qty budgeted in(UGX ) in billions billions trucks procured emergency instead response management procured pickups rather than tippers and one trailer Programme 18- 130203 IDPS -Construction 2.0 2.146 Finishes on -100% of the As a result of Disaster returned and of 100 more 50 of the first funds were global preparedness resettled permanent released but warming and and management houses for 100 more climate landslide permanent change, victims houses were disaster -Finishes on not built challenges 50 of the have increased first 101 and this led to houses increased demand for relief. 130374- -Construction 3.0 1.5 -NO bridges -Bridges The funds major bridges of major constructed were not were non- bridges built despite resource release 50% which were of the funds managed and controlled by MOFPED and earmarked for imports. Programme 06 – Output -4500 to be 6.133 6.133 -3064 civilian Despite full - Luwero Rwenzori 130302 – paid veterans paid release, 70% Triangle payment of of planned gratuity and veterans coordination were paid of war debts clearance Project 0932 – 130375 – -Purchase of 0.810 0.810 -Three double -one vehicle Procurement Post war pacification vehicles (3) cabins for and tippers for vehicles recovery and and procured for Gulu office were not was not presidential development Gulu office procured procured finalised and pledges -Purchase of instead ten 340

Vote functionItem Planned Amount Amount Actual output/Remarks Mgt response output description outputs/ (UGX) released Quantity Qty budgeted in(UGX ) in billions billions two tipper (10) hydra trucks foam -purchase of machines were vehicle for procured coordinator

Service delivery is hampered and the appropriating authority‟s objectives are not met.

Management explained that the underperformance on the specified areas was attributed to other emerging pressures and priorities that cropped up in the course of the financial year necessitating reallocations and Virement for which authority was sought from PS/ST.

I advised management to always undertake activities as planned.

16.10 NORTHERN UGANDA SOCIAL ACTION FUND (NUSAF 2) (a) COMPLIANCE WITH THE MEMORANDUM OF UNDERSTANDING AND GOU REGULATIONS i) Unaccounted for Subproject Disbursements UGX. 58,826,655,271 Section 2.2 of NUSAF II Operational Manual requires that at least 80% of previous disbursements are accounted for before replenishment to a subproject. The policy also requires that all funds to subprojects should be accounted for within six months.

It was noted that UGX.58,826,655,271 (25.8%) out UGX.227,844,706,768 disbursed to subprojects remained unaccounted for as at 30th June 2014. Out of the UGX.58 billion unaccounted for, UGX.41,547,079,004 relates to disbursements which have been outstanding for over six months. The table below refers;

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% % UN- AGE DISBURSED ACCOUNTED ACCOUNTED UNACCOUNTED ACCOUNTED Above 12 Months 142,994,940,365 124,511,969,492 87.1% 18,482,970,872 12.9%

9-12 Months 24,756,699,087 17,209,507,363 69.5% 7,547,191,724 20.6%

6-9 Months 40,914,262,109 25,397,345,701 62.1% 15,516,916,408 36.5% Sub-Total (≥ 6Mths) 208,665,901,560 167,118,822,557 80.1% 41,547,079,004 19.9%

3-6 Months 5,047,535,125 1,208,680,407 23.9% 3,838,854,718 72.6%

0-3 Months 14,131,270,083 690,548,534 4.9% 13,440,721,549 94.4% Sub-Total (0-6Mths) 19,178,805,208 1,899,228,940 9.9% 17,279,576,268 90.1% Overall Status 227,844,706,768 169,018,051,497 74.2%

Under the circumstances, I was unable to establish whether the unaccounted for funds were used for intended purposes. Further, the delays in accounting for subproject funds affects Project implementation as the activities are not completed within project timelines.

Management explained that the delay in project accountability is a result of many factors which include; the Community Infrastructure Rehabilitation (CIR) and Public Works Program (PWP) which take 4-6 weeks before project implementation, delays by contractors due to limited capacity to execute contracts on time and fiduciary requirements that require at least 80% accountability for the previous disbursement to sub projects and overall outstanding community accountabilities above 6months in the district to be below UGX.50m. Management further explained that the District Financial Tracker clean up exercise and Rapid Results Initiative to clean up subproject accountabilities at the district had been carried out and as a result unaccounted for funds had gone down.

I advised management to ensure that all project funds are fully accounted and within the project timelines. ii) Discrepancy between approved budget estimates by project funders and the estimates approved by Parliament

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The approved estimates by Parliament for the year under review were indicated as UGX.41,648,920,000 while the approved budget by the World Bank amounted to UGX.169,189,150,568 creating a variance of UGX.127,540,230,568. Management stated that the variance was as a result of committed funds as at 30th of June meant to implement the backlog of subprojects. However, according to the NUSAF-World Bank work plan, the committed funds for the backlog sub project amounted to only UGX.102,903,898,568 hence creating an outstanding variance of UGX.24,636,332,000.

There seems to be a mismatch between the work plans and the Appropriation Act.

Management explained that the discrepancy was due to the project implementation design where projects for Community Infrastructure and Public works once approved receive only 50% of funds in the first tranche to commence the implementation and receive the last 50% as second tranche subject to a satisfactory report and accountability of not less than 80% of the funds released. Management further indicated that the approved funding that is not released to subprojects is retained by the project and reflected as committed funds and rolled over to the subsequent financial year and that the difference observed was planned to offset the accumulated outstanding 2nd tranche demands of the community projects which were rolled over.

I advised management to harmonise project annual estimates submitted to Parliament and those of the World Bank. This will also facilitate smooth performance measurement. iii) Low absorption capacity The Annual work plan and budget for NUSAF II activities stood at UGX.169,189,150,568. During the year, a total of UGX.91,783,256,891 was received by the project in addition to the bank balances of UGX.49,084,796,298 meant for subprojects which were rolled over from the prior year. UGX.104,683,883,524 was utilized during the year representing an absorption capacity of only 62% of the approved budget, despite the Project being in its fifth

343 year of the six–year implementation plan. This implies that a number of planned activities are likely not to be implemented.

Non-implementation of planned activities in the stipulated timelines does not only lead to spillover of activities to the next planning period but may also lead to non- achievement of the desired outputs, subsequently hampering fulfillment of Project objectives. This could also lead to extra administrative costs in case of project extension.

Management explained that the rate of absorption against IDA Credit is 100% based on planned withdrawals versus actual withdrawals. Management further explained that the project planned for 10,042 subprojects at the onset of NUSAF2 programme and to date 9619 projects had been funded.

I advised management to carry out adequate planning to enable full implementation. Management should also ensure that planned activities are completed before the project closure date (31st August 2015).

(b) General Standard of Accounting and Internal Controls

A review was carried out of the project system of financial management and the following matters were observed; i) Failure to insure Project vehicles Section 4.4 (ix) of the NUSAF2 administrative hand book requires all Project vehicles to be comprehensively insured with a reputable insurance company in Uganda. This was not the case as all the project vehicles had not been insured at the time of audit.

Failure to insure Project vehicles may lead to Project incurring unwarranted costs in form of replacements and repairs in case any of the programme vehicles got involved in accidents.

Management explained that the Process for procurement of Non-consultancy services for insurance of NUSAF2 Vehicles was initiated, proposals received and evaluated but the process could not proceed further because of Government‟s

344 policy which does not provide for insurance of government vehicles. Management further explained that NUSAF2 being a main-streamed project had all its vehicles registered under the ownership of OPM and therefore could not operate in exception regarding insurance of government vehicles.

I advised management to liaise with the relevant authorities to ensure that the matter is resolved so as to comply with the guidelines.

An Audit inspection of subprojects was carried out to assess the progress of implementation. The following issues were observed:

Absence of sign posts at the sub-project sites Bill of Quantities- provided for a sign post for identification of the sub projects undertaken by NUSAF2 in the area which the project is located. The bill board should clearly specify the Ministry, the project, the subproject name Sub County, District and contractor. However, it was observed that all sub-projects in Karamoja Region (Kaboong and Kotido) and many in areas of Acholi and Lango regions inspected lacked sign posts for identification with the exception of Dokolo District.

In absence of the sign posts, it becomes difficult to ascertain whether all the projects inspected were actually the right ones as there were other similar projects run by Non-Governmental Organizations. There was also a financial loss for the project as the item was budgeted for in the BOQs but not adhered to by the contractors.

Management explained that a written communication had been made to all the districts to prioritize the installation of sign posts at sub project sites.

I await management‟s efforts to ensure that installation of sign posts by the contractors in all the sub-projects is done for easy sub project identification.

(d) Status of Sub Project Implementation i) Project performance per annual work plan and Budget 2013/14

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NUSAF II Project Management planned for implementation of various activities during the year. A review of the annual work plan vis-à-vis actual implementation and outputs for the year revealed that while a number of activities had been completed, some activities were partially implemented. The table below refers:

S/No Activities for Targets for the Amount Progress during the year the year year (UGX) 1. Subprojects 10,042 A total of 6,503 subprojects completed subprojects (HISP-5,047 CIR-1,377 and completed PWP-79) are completed out of the 8,719 funded subprojects giving a completion rate of 75%. 2. Accountability for 99% of funds The project disbursed a total grants mobilized disbursed of UGX.227,828,905,089 and UGX.185,294,319,134 have been accounted which is 81.3% of disbursed amount. 3. Implementation Reaching 55 65,000,000 One support supervision visit support and districts – two was conducted reaching 11 guidance offered visits per district districts (7 in Karamoja, 2 in to districts Elgon, 1 in Teso and 1 in Lango sub-regions). 4. Training district 110 (55 Dist. 160,000,000 3 regional trainings were held staff on Env. Officers and in Gulu for participants from environment and 55 DCDOs) Acholi, Lango and West Nile social safeguards districts; Mbale for participants from Elgon, Bukedi and Teso districts and Moroto for participants from Karamoja districts. 5. Technical support 55 districts 33,229,840 3 technical support visits were on environment done reaching 42 districts and social (76% coverage). safeguards 6. Radio talk shows 5 radio talk 20,000,000 1 radio talk show on and broadcasts shows per region commissioning of NUSAF2 subprojects held in Sironko and 4 radio broadcasts in Karamoja on NUSAF2 status updates. 7. Support 3 visits to 55 20,000,000 Backstopping of 34 districts supervision and districts done on documentation of backstopping of best practices and record district staff on keeping (62%). 346

S/No Activities for Targets for the Amount Progress during the year the year year (UGX) documentation

Delay in implementation of planned activities denies beneficiaries the intended benefits of the Project. Besides, Project objectives may not be achieved.

Management explained that the decision to extend the project life by one year was made after the preparation of the 2013/14 work plan and the targets that were made under the assumption that the project would end in August 2014. Management further explained that a new road map had been made providing new targets for the project close in August 2015.

I advised management to expedite the planned Project activities in order to meet Project objectives within the agreed time frame.

ii) Project Performance as per Logical Framework

According to the Project five year implementation plan and progressive reports reviewed from management, the Project had in some instances (Public Works Programme) not progressed well despite the fact that its closure date was set for August 2015:

Sub Projects Funding % Achieved Component Planned Approved Planned Approved against (US$) (UGX) 5 yr target Community Infrastructure 1,915 2,533 132% 57,450,000 182,070,857,306 Rehabilitation (CIR) Household Income Support 7,236 6,716 93% 36,180,000 72,737,780,326 Projects (HISP) Public Works Programme 891 370 42% 17,820,000 11,977,982,373 (PWP) TOTAL 10,042 9,619 96% 111,450,000 266,786,620,005

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Delays in implementing activities could result into extra administrative costs.

Management explained that the project was set to meet the planned target once the project is extended for another year.

I wait the outcome of management‟s efforts towards implementation of project activities within the agreed timelines.

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17.0 MINISTRY OF PUBLIC SERVICE

17.1 Unspent Balances Due to the Consolidated Fund – UGX.262,479,735

The Public Finance and Accountability Act, 2003, requires that any unspent funds as at the 30th of June that were obtained from the Consolidated Fund (UCF), be returned to the Fund. It was noted that at the close of the financial year under review, a balance of UGX.262,479,735 was still on the PSRP project account and had not been remitted to the UCF account. I was not given an explanation on the fate of the amount in question, given that the project closed in 2014.

In response, the Accounting Officer stated that these funds could not be remitted to the UCF account, nor transferred back to the Ministry account as they were meant to procure IPPS equipment whose procurement process was on-going. I was however, not presented with documentary evidence to this effect. I advised the Accounting Officer to always remit unspent balances to the Consolidated Fund Account or else seek authority of the PS/ST as provided for under the Act.

17.2 Domestic Arrears – UGX.1,187,512,043

A review of the financial statements revealed that the ministry‟s domestic arrears position increased by 281% from UGX.311,659,924 at the start of the year to UGX.1,187,512,043 as at 30th June, 2014. This is an indication that the ministry continues not to fully comply with the commitment control system introduced by the Ministry of Finance Planning and Economic Development.

The Accounting Officer explained that the bulk of the arrears incurred during the year (i.e. Ugx.680,700,719) related to validated monthly pension invoices which remained unpaid on the system as at 30th June 2014, but were settled in July 2014.

I advised the Accounting Officer to always adhere to the commitment control system of government and only commit her ministry to the extent of availed funds.

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17.3 Mischarges of Expenditure – UGX.1,721,329,414

The GOU Chart of Accounts defines the nature of expenditure for each item code, with the intention of facilitating better and consistent classification of financial transactions and tracking budget performance per item.

It was noted that expenditures totalling to UGX.1,721,329,414 were charged on items which do not reflect the nature of the expenditure. Such a practice impacts on the credibility of the financial statements, since the figures reported therein do not reflect true amounts expended on the affected expenditure items. In addition, the practice distorts budget performance review on an item by item basis.

I advised the Accounting Officer to avoid such a practice and always ensure strict budgetary discipline.

17.4 Imprest not Accounted For – UGX.108,336,942

Section 227 to 229 of the Treasury Accounting Instructions (TAI), 2003, provides for retirement of all imprest by the close of the financial year, failure of which recovery measures should be instituted against the concerned officers‟ (imprest holder‟s) emoluments.

During the year under review, the Ministry paid cash imprest totaling to UGX.260,718,300 of which UGX.108,336,942 had not been accounted for by the time of concluding the audit. In addition, it was found that, contrary to provisions of section 226 of the TAIs, there were no Imprest cashbooks maintained throughout the year. The poor record keeping coupled with delayed accountability further raise doubts as to whether the funds were properly utilised.

Given the circumstances, I was unable to establish whether the amount in question was expended for the intended purposes. I advised the Accounting Officer to follow up this matter and have the concerned staff account for the funds and to always ensure full compliance with the requirements of the TAIs.

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17.5 Refunds to the PSRP-UPSPEP Project – UGX.66,872,000

Paragraph 156 of the Treasury Accounting Instructions (TAIs), 2003 Part 1, prohibits expenditure from being charged to an item/sub-item merely because funds are available under that item/sub-item. In addition, funds available on one vote may not be transferred to another vote without parliamentary approval.

Contrary to the above requirement, the ministry paid a total of UGX.66,872,000 to the PSRP-UPSPEP project, being a refund of project funds borrowed by the ministry during the year. I was not availed with the details of the borrowings made and the activities involved to ascertain their genuineness, and whether they related to the financial year under review. I was also not availed the requisite authority to borrow the project funds.

Although the Accounting Officer indicated that the documentation in question was available, this had not been availed to me at the time of concluding this report. I advised the Accounting Officer to always seek for proper authority for such borrowings with a justification.

17.6 Non Deduction of 6% Withholding Tax - UGX.38,087,253

Section 117-1 of the Income Tax Act (ITA), Cap 340 (as amended), requires a withholding agent to deduct and remit a withholding tax on payment of employment income. During the year under review, the ministry made payments to various service providers for goods and services supplied without deducting 6% withholding tax totaling to UGX.38,087,253. According to the ITA, failure to remit the amount withheld constitutes an offence for which the Accounting Officer, as a withholding agent, is personally liable. In addition, it further exposes the ministry to the risk of penalties/fines imposed by URA.

The Accounting Officer stated that the anomaly resulted from a failure to activate the With-holding tax function at the time of setting up the suppliers on the IFMS, and that a letter had been written to the Accountant General, requesting him to activate the function of withholding the 6% tax. I advised the Accounting Officer

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to follow up this mater and ensure that in future, withholding tax is always deducted before making any payments above the threshold prescribed in the Act.

17.7 Unaccounted For Funds For Various Activities – Ugx.193,681,503

Section 212 of the Treasury Accounting Instructions (TAI), 2003 provides for temporary imprest advanced to staff to be recorded in the General Ledger until they are accounted for. Thereafter they are expensed to respective expenditure items.

Examination of payments however revealed that a total of UGX.193,681,503 either advanced to staff or deposited directly with service providers in respect of workshops/conferences conducted by the Ministry remained unaccounted for at the end of the year. There was no supporting documentation availed for audit examination in respect of the amounts advanced/deposited. Under the circumstances, I was unable to confirm whether the amount involved was applied for the intended purposes.

Although the Accounting Officer indicated during my concluding meeting with her, that the documentation in question was available, this was not availed to me. I advised the Accounting Officer to ensure full adherence to the TAI and have all advances accounted for.

17.8 Payments to Foreign Pensioners – UGX.113,324,176

A review of pension records revealed that the ministry pays pension to foreign pensioners through account number 0196000236505 in Stanbic Bank, and that during the year, the ministry paid to this account, a sum of UGX.113,324,176. However, I was not availed with records to establish the authenticity of these foreign pensions. Although the Accounting Officer indicated that the files in question would be availed to me, these had not yet been availed by the time of concluding my report. I advised the Accounting Officer to ensure that all records pertaining to pension payments are always properly kept and filed, to facilitate their retrieval in case of need, say for audit purposes. In the meantime, the files in question ought to be obtained and provided for audit examination.

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17.9 Payment of Pensioners Beyond The Pensionable Period–

Ugx.12,755,933,531

It is a requirement under Section 18(1) of the Pensions Act, Cap 286, that every pension or other allowance granted under the Act, should cease upon the death of the person to whom it is granted. For the avoidance of doubt, it is declared that a pension granted under this section be payable for a period not exceeding in aggregate, fifteen years from the date of retirement of the deceased pensioner. Pursuant to the above therefore, all pensioners must furnish the Ministry of Public service with annual life certificates after the expiry of their 15 year pensionable periods as proof that they are still alive.

Contrary to above, a total of 19,135 pensioners who had attained the maximum pensionable period of 15 years were still on the ministry‟s payroll and earning monthly pension yet they had not furnished the ministry with life certificates. As such, a total of UGX.12,727,686,849 paid in respect of their monthly pensions during the year under review could not be justified in the absence of life certificates. In addition, a total of UGX.28,246,682 was paid to administrators of estates of pensioners whose cause of retirement was death and had earned pension beyond the stipulated period of 15 years. Under the circumstances, the audit could not confirm that the said pensioners were still eligible. There is a risk that the ministry continues to pay pension to ineligible or non-existent pensioners and thus occasioning loss to government.

The Accounting Officer explained that according to the Pension Act, Cap 286 all pensioners who are over 75 years should furnish the Ministry with Life Certificates, but that the Ministry cannot just delete them off the payroll unless it is confirmed that they are dead. I advised the Accounting Officer to institute a mechanism that tracks pensioners so that they do not get paid beyond the lawful pensionable period. In addition, the ministry should enforce the requirement of pensioners, specifically those that have attained the maximum pensionable period of fifteen years, to avail life certificates.

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17.10 Pension Payments To Group Associations – Ugx.956,803,416

A total of UGX.953,803,416 was paid to various pension groups as both gratuity and monthly pension of group members. However, it was noted that these groups did not furnish the Ministry with accountability records/evidence of acknowledgements to show that the funds reached the bona-fide beneficiaries. There is no evidence that the ministry has a mechanism to track the pensioners under these groups to ascertain whether the pensioners were still alive and eligible for pension as there were no life certificates on file for the beneficiaries under these groups. Absence of the monitoring measures may lead to payment of non-existent/ineligible pensioners and thus occasioning loss to government.

In response, the Accounting Officer stated that the Ministry has instituted mechanisms to ensure that each pensioner or beneficiary is unique. However, at payment, the pay code can be to a group as in the above cases. Where a pensioner has not been paid, the ministry is always notified, and no complaint to this effect has ever been received. I advised the Accounting Officer to update all data in respect of group pensioners and institute a monitoring mechanism to ensure payments are made to genuine pensioners.

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SECURITY SECTOR

18.0 MINISTRY OF DEFENCE

18.1 Outstanding commitments

A review of the Statement of Financial Position revealed outstanding payables of UGX.81,928,017,200 as at 30th June 2014. Payables worth UGX.57,385,245,362 were disclosed in the statement of financial position as at 30th June 2013, out of which UGX.26,037,671,862 was paid implying an increase in domestic arrears by UGX.50,580,443,700 (88%) from the closing position of the previous year. It is evident that management has continued to incur arrears without establishing sufficient mechanisms to monitor and control them. There is a risk of loss of reputation and litigation due to non settlement of creditors.

The Accounting Officer attributed this problem to increased activities, emergencies widening operations and escalation of food and other essential commodity prices without corresponding increase in funding.

I advised management to liaise with Ministry of Finance, Planning and Economic Development for improved funding for the Ministry.

18.2 Borrowings

It was established that at the beginning of the financial year, the Ministry had an outstanding interest bearing loan worth UGX.136,781,479,167 and no repayment was done during the year. Further, this loan attracted a fixed interest of UGX.80,506,679,188 for the period March 2010 to June 2011.

The Accounting Officer explained that this resulted from procurement of classified equipment‟s undertaken by the Ministry in the financial year 2009/2010 by a drawdown on foreign reserves of Bank of Uganda. The loan interest has not attracted any interest since then as per the funding arrangement.

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I advised the Accounting Officer to engage Ministry of Finance, Planning and Economic Development to have this amount budgeted for so that the loan can be cleared.

18.3 Avoidable expenditure

It was established that on 18th December, 2013 the Ministry of Defence entered into a lump sum agreement/contract with a motor company to supply 109 different types of brand new motor vehicles at an agreed total price of USD.5,578,094.80 and corresponding spare parts at USD.248,900.20, leading to a total contract price of USD.5,826,995.00. The terms of payment were 40% deposit with a signed contract/order confirmation and the balance of 60% upon transfer of ownership of the vehicles (before delivery). The contract also required the Ministry to pay by an irrevocable Letter of Credit.

However, instead of opening up an irrevocable Letter of Credit with Bank of Uganda, the Ministry opened up a Deferred Letter of Credit Facility (LC Facility) with Stanbic Bank of USD.6,273,438.40 payable in 13 quarterly instalments with a commission of USD 31,367.19 payable every quarter. This resulted into excess payment of USD.446,443.40 equivalent to UGX.1,104,947,415. In addition, the Ministry intends to pay another of 13 quarterly instalments of USD.31,367.19 which will also result into an extra cost of USD.407,773.47 equivalents to UGX.1,009,239,338.

The Accounting Officer explained that BoU issues irrevocable letters of credit on deposit of full LC value yet the Ministry did not have the entire contract amount of US$.5,826,995 to open this type of Letters of Credit.

I advised that management should have consulted with the Accountant General regarding the Letters of Credit prior to execution.

18.4 Sub-constructed works of NSIS project at Kololo

Engineering Brigade made a payment of UGX.560,000,000 to a local company to partition the offices and provision of other necessary facilities under the National

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Security Information system (NSIS) project at Kololo. However, no contract was availed to enable me evaluate the sub-contracted works. The Accounting Officer presented copies of the acknowledgement receipts for the money paid without details of works done. I explained to the Accounting Officer that carrying out works without a formal agreement may result into shoddy or abandoned works. I was therefore unable to review the works undertaken for purposes of compliance.

The Accounting Officer explained that the arrangement was entered into in order to speed up the works.

I urged the Accounting Officer to always ensure that formal agreements are entered into for all Ministry contracts.

18.5 Un-reconciled Government of Uganda debt with UMEME and Ministry of

Defence

Government of Uganda entered into an agreement with UMEME in which the latter was required to offset government bills that remained outstanding for a period of more than 60 days. A review of the available documents indicates that total Government debt as at 31st January, 2013 amounted to UGX.62,771,404,221, of which UGX.30,303,286,732 relate to Ministry of Defence. At that date UMEME set off UGX.31,717,538,490 from the debt leaving a balance of UGX.31,053,885,731 as total outstanding. However, it was not clear of what amount offset relates to the ministry of Defence.

Furthermore, it was noted that during the year Ministry of Defence did not reconcile with UMEME to ensure that the amount off set is deducted before making payment.

The Accounting Officer explained that information on the outstanding debt was communicated to PS/ST who will ensure that when paying the debt, all offset amount will be taken into consideration and deducted.

I advised management to liaise with the Ministry of Finance, Planning and Economic Development to have the position reconciled. 357

18.6 Un-reconciled National Water and Sewerage Corporation Bills

UGX.3,102,169,373 was paid to NWSC for water supplied to the Ministry. However, the Ministry did not have updated ledgers for all the water accounts to keep track of the bills paid and what was outstanding. The Ministry did not include any amount outstanding at the end of the year despite the fact that April 2014 bills were the last to be paid in the financial year. Further, no reconciliation was done at year end to establish what was owed to NWSC. The Ministry therefore understated the outstanding commitment for the year.

The Accounting Officer explained that water payment ledgers are not up-to-date due to un-concluded process for verification of water bills of the Ministry. The verification is underway and expected to be completed in the financial year 2014/15.

I urged the Accounting Officer to follow up the verification process and ensure that it is completed.

18.7 Intended Sale of Kiseka Hospital

Some time back in 2007, a decision was taken by management of the Ministry of Defence to have the premises and land comprised of the former Kiseka Hospital sold. However, to date this property has not been sold off. The property is dilapidated, abandoned and is losing value as time passes. There is also a risk that this property could easily be encroached. By the time it is sold, the Ministry may not get the expected value from the sale.

The Accounting Officer explained that effort was made to have this property sold off through competitive bidding but the highest bidder was found to be below the reserve price. A decision was then taken to revalue the property but the highest bidder sued the Ministry where Court ruled in favour of the Ministry. The ruling was appealed against and management of the Ministry is still waiting for the outcome.

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I advised the Accounting Officer to follow this case and also liaise with Uganda Land Commission and ensure the safety of the land and property.

18.8 Audit Inspections

a) Inspection of Schools and Colleges i. Under-funding of Kimaka The budget of Senior Command and Staff College, Kimaka has remained at the same level since 2004 at UGX.1,532,905,096 and cannot meet all the requirements of the college. During the financial year under review, the approved budget was not adjusted against UGX.2,972,117,000 that was required. As a result of inadequate funding the college is facing a number of challenges which include:  The lagoon that serves the Senior Command and Staff College was degenerating and may in the end fail to serve the purpose for which it was set up.  The place is surrounded by garbage which has reached too close to the fence.  Cattle were found grazing within the fence. A piggery with 46 pigs was adjacent to the lagoon presumed to belong to someone who is not a member of Uganda Peoples‟ Defence Forces.  The screen that sieves the spillage into the lagoon together with the three metallic electrical poles which were meant to provide light have been removed.

The continued lack of adequate funding will hamper the achievement of planned activities and the long term objectives of the college.

The Accounting Officer attributed the current situation to budgetary constraints faced by the Ministry.

I advised the Accounting Officer to liaise with the responsible authorities to ensure the College is funded to meet the objectives for which it was established.

b) Junior Command and Staff College  Un-surveyed land

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Land measuring about 697.721 acres belonging to the College is not surveyed and as a result most of the training areas in Bugungu, Buikwe District have been encroached on by people in the area. The Ministry is at a risk of losing this land to the encroachers and as such in future it may be difficult to undertake trainings at the college.

I advised management to have the land surveyed to avoid costs associated with evictions.

 Amber court Market This market is situated on Kimaka Road on army land which was established in conjunction with the Jinja Municipality with a specific aim of improving the welfare of the spouses of soldiers within the Gaddafi Garrison. Correspondences about this subject are dated as back as July 2002. The available records indicate that the accruing revenue from the market was to be shared between Municipality and welfare of solders in the ratios of 60 to 40. It was established that to-date, these instructions have never been honoured. The records further called for empowerment of the soldiers‟ spouses to be able to bid and run the market. This has also been persistently ignored.

At the time of this audit inspection (October, 2014), this market was being operated by a third party at a monthly rent of UGX.2,330,445. This translates into UGX.27,965,340 a year and for the last five years, a total of UGX.139,826,700 should have been paid. Because of laxity in the implementation of the instructions, the soldiers‟ welfare fund has lost UGX.55,184,937 which is equivalent to 40% of UGX.139,826,700.

I advised the Accounting Officer to follow up the matter to ensure that the army benefits from the facility. 18.9 Bugema barracks in Mbale

a) Barracks land This barracks which is the 3rd Division Headquarters, occupies an area of approximately 600 acres located within Mbale Municipality. It was however noted that land owned by the barracks is not in the inventory of the Ministry‟s lands. 360

Information available indicates that this barracks has existed since the days of African Rifles (the first Ugandan Army). There were reports that some people have started claiming ownership of the same land. The Ministry is at a risk of losing this land if no action is taken immediately.

I advised the Accounting Officer to follow up the matter with authorities with a view of resolving land ownership of the facility. b) UPDF maize mill project at Mbale The Military Maize Mill at Mbale Industrial area was contracted out to an individual to manage and run it on behalf of 3rd Infantry Division of the UPDF for a period of 30 months commencing from 1st June 2014, at an agreed total consideration of UGX.92,910,000. Out of the total consideration, UGX.62, 910,000 was to settle all the outstanding debts incurred by the milling project and UGX.1,000,000 was to be paid to the Division on a monthly basis up to the end of the period. The following issues were however noted:

 The individual who hired the mill is one of the long-time suppliers of maize flour to Ministry of Defence, an indication of conflict of interest.  The outstanding amount of UGX.62,910,000 was not verified by an independent person at the time when it was forming part of the consideration.  It was also not clear as to whether 3rd Division has mandate to commit the UPDF assets for that period.  The revenue of UGX.6,000,000 (period of 6 months) was not verified as no document was availed for verification at the time of inspection.  It was also noted that the individual who hired the mill was the land lord of the maize mill project, an indication that insider dealing with this supplier was possible as no advertising was made at the time of soliciting the services of the contractor.  The agreement signed was never cleared by the Solicitor General as per the requirement of government agreements.

The Ministry is therefore at a risk of losing the entire maize mill if no follow up is made on this project.

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I advised management to review the contract in consultation with the Solicitor General.

18.10 Moroto Barracks

a) Encroached Land This land which was surveyed during the time when the Uganda Army was referred to as Uganda Rifles has a number of encroachers. Keeping these encroachers on Ministry land is in contravention of Commander in Chief directive which required all people to vacate Ministry land. The latest report on opening of the boundaries dated 30th July 2014 revealed that some key military installations are outside the surveyed land and recommended annexure of the same before scrupulous people take advantage. At the time of this report no action to the effect had been taken.

Delays in implementing the directives to have all encroachers off the Ministry land will expose the land to unscrupulous people with intention to own it.

The Accounting Officer explained that Military Land Board was following up the issue of encroachers of the Ministry/UPDF land. A report on the outcome is awaited.

b) Generator at Oliver Thambo training school The standby generator of 250hp at Oliver Thambo is degenerating due to inadequate maintenance. It was not possible to establish when it was last serviced because the service card was worn out. Besides, it could not be used during power blackout because the changeover control panel fixed is for a single phase yet the generator is of a bigger capacity. At the time of audit inspection, there was no power and lectures were being conducted on a very small generator of 5hp.

Lack of funding is causing vital assets of the school to degenerate and as such the Accounting Officer was advised to secure further funding for maintenance of the assets.

I advised the Accounting Officer to secure funds to service the generator. 362

18.11 Motorised infantry workshop-Nakasongola

The motorized infantry workshop under construction at a cost of UGX.1, 507,894,518 appeared abandoned after building it to shell level. The same applied to the toilet and the septic tank. There was no documentation at the site to assess whether the work was on schedule. Besides, the contract records were not provided for review.

18.12 5th Division Acholi Pii

a) Land occupied by the division headquarters According to records, the land occupied by the Division Headquarters is estimated at 1,388 hectares for the Acholi Pii (Arum Site) and the Agago Ranch 3,429 acres formerly belonged to the Office of Prime Minister supposed to accommodate refugees but has since been converted to Army use. At the time of inspection, the users (the army) were not aware of the boundaries of the land. It is also believed that the land is heavily encroached. The Military Land Board asserts that the formalization of acquisition from Office of the Prime Minister and Pader District is on-going.

Delay in streamlining ownership credentials increases encumbrances on the land with the attendant litigation costs as result of encroachment.

The Accounting Officer explained that arrangements for the acquisition of the land are in advance stages and a final decision is awaited from the Office of the Prime Minister.

I urged the Accounting Officer to ensure that the process of finalising the acquisition of the land is expedited.

18.13 Masaka armoured brigade

a) Land Encroachments With the exception of Masaka armoured brigade land, the army land at Lukaya and Lake Nabugabo is heavily encroached. Whereas administratively this land belongs to the Uganda Peoples Defence Air Force as users, the land has been 363

encroached on. The encroachment on the land appears to be due to lack of effective use.

The Accounting Officer explained that the Ministry contested the encroachment and several meetings have been held between ULC, Lukaya Town Council Authorities and UPDF to have the matter resolved.

I urged the Accounting Officer to continue pursuing the above action and ensure that the matter is resolved.

b) Financial loss due to termination of contract During the audit inspection; a site that was for the flat lets which was abandoned by a construction company after payment of UGX.474,576,271 had been completely abandoned and preserved as exhibit. The new flats built by another construction company were now complete under a completely new contract and new site.

The choice of a new site and contractor resulted into a financial loss of UGX.474.5Million which was not reported in the financial statements in accordance with financial regulations.

I advised the Accounting Officer to undertake due diligence prior to award of contracts.

18.14 2nd Division Mbarara

a) Encroachment of 2nd division headquarters‟ land Records obtained from the Military Land Board revealed that the land accommodating the 2nd Division Headquarters measured 600 acres. The barracks land has been encroached on and there is no evidence of action taken by management. Besides, there was nothing on the ground like a copy of the land title to indicate the extent of the barracks premises.

The Accounting Officer was advised to take interest on the matter and ensure that the land is secured. 364

b) Abandonment of rehabilitation works at School of Military Intelligence, Muhoti Baracks An inspection of the contract for rehabilitation of the School of Military Intelligence revealed that the contactor had only done progress work on nine (9) blocks out of twenty two (22). At the time of audit inspection, the keys to the nine blocks were still retained by the contractors and could not therefore be used to alleviate the acute accommodation problem at the school. Records obtained from the Engineers‟ Brigade indicated that the contract sum was UGX.2, 274,831,418 and by the time of this report, UGX.1,901,206,927 had been paid representing a payment of 83% against a performance of 41% or less. Besides, the contract period was for 2008-2010 which indicated that it was five years behind schedule. I advised the Accounting Officer to follow up on the delayed works to ensure accommodation issues are resolved.

c) Hima Barracks 305 Brigade Headquarters It was observed that all buildings at the brigade headquarters had developed cracks while these structures appeared recently renovated. These included the administration block, hospital and barracks quarters. This may be an indicator that the design and execution of the contract was not undertaken properly.

I advised management to follow up on the defects noted.

18.15 Mubende Rehabilitation Centre

a) Maize mill The Chieftaincy entered into a tenancy agreement to operate the maize mill belonging to Uganda Peoples‟ Defence forces at an annual rent of UGX.18,000,000. The contract indicates that on signing of the contract (1st May 2014) the tenant had paid the annual rent in advance. However in absence of a general receipt, bank slip and bank statements, we were unable to certify ourselves on the authenticity of the payment. Besides, the legal capacity of the Chieftaincy to contract on behalf of Ministry of Defence was not properly demonstrated. It was also noted also that the income was not recognised as Non-

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tax Revenue. There is a risk that the Ministry did not carry out enough due diligence about this contractor.

The Accounting Officer explained that management is to review the contract in consultation with the Solicitor General with a view to addressing the anomalies in it.

This action is awaited.

19.0 OFFICE OF THE PRESIDENT

19.1 Cumulative outstanding commitments

Office of the President had arrears of UGX.8,816,941,731 at the beginning of financial year 2012/2013 comprised of domestic arrears of UGX.4,527,940,977 and pension liabilities of UGX.4,289,000,977. By the end of the financial year 2013/2014 the arrears had accumulated to UGX.24,944,370,718 comprising of

domestic arrears of UGX.11,182,915,772 and pension liabilities of UGX.13,761,454,946. Accumulation of arrears is in contravention of the commitment control system and the entity also risks loss of reputation and litigation due to non settlement of the obligations.

The Accounting Officer explained that outstanding commitments were a result of insufficient funding of the Security Agencies and that the resultant arrears have been brought to the attention of Parliament and the Ministry of Finance, Planning and Economic Development. MoFPED provided UGX.7,240,894,000 in the budget and a supplementary of UGX.6,335,942,636 to clear the reported arrears under financial year 2014/2015 which reduced the arrears to UGX.11,367,534,082.

I have advised management to continue following up the matter and ensure that all the outstanding arrears are cleared.

19.2 Budget performance

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The financial statements submitted by the Office of the President for the financial year ended 30th June 2014 indicated that UGX.73,619,648,221 was budgeted, UGX. 73,561,071,202 released and UGX.73,389,672,977 was spent. Despite the Ministry having received virtually all the budgeted funds, some activities were not undertaken as shown in table below:

Output Planned Expected outputs Actual outputs Unimplemented Code Activity Output: Economic Policies reviewed to Research Policies reviews 160104 Research identify policy conducted on the and actionable and implementation implementation recommendations Information weakness with the and performance for Investment, aim of generating of the pension taxation finance actionable policy and a report not done. recommendations produced and for policy submitted to development in relevant MDAs for  Sectors of appropriate action. energy (Oil and Gas Research carried sector ) out to assess the  Investment progress in the and taxation and development of micro finance the Energy (oil and gas) sector, the report is in draft form. Research on Agricultural Financing on- going. Output: Cabinet  60 Agenda 56 Agenda and 4 agenda and 160201 Support and and Minutes issued Minutes of Cabinet Minutes of Cabinet Policy to Ministers and Meetings issued. meetings not Development Ministers of State. issued.  248 draft 166 Draft Cabinet cabinet submissions Submissions 82 draft cabinet Reviewed for reviewed for submissions not adequacy. adequacy. reviewed for 3951 Extracts of adequacy  4,800 Cabinet Decisions extracts of cabinet Issued to Minutes, 849 extracts of decisions issued to Ministers of State cabinet decisions ministers and PS. and Permanent not issued to Secretaries. ministers and PS

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Management explained that there were changes in work plans regarding policy reviews while the anticipated Cabinet business did not take place.

I advised management to ensure that all planned activities are undertaken and that any changes to the workplans are documented and authorised.

19.3 Delays in completion of construction of RDC`S Office in Otuke District

A Local Company was awarded a contract to construct RDCs office in Otuke District at a contract sum of UGX.605,221,056. The contract start date was set on 21st March, 2012 and the intended completion date was 20th July, 2012. Works were later extended to 31st December, 2013. Despite the extension, the contract is still behind schedule. The technical inspection report dated February 2014 observed that the roofing works had been completed but with some defects. Since the project had delayed, the Ministry should have enforced the liquidated damage clause which was not done. This implied that there was loss of revenue let alone the signed agreement was not enforced.

Management explained that an inspection team from the Office of the President identified defects for rectification by the Contractor before the works could be handed over.

I await confirmation that the defects were actually rectified and that liquidated damages due to delay are claimed before handover exercise.

19.4 High Vehicle Maintenance costs

It was noted that most vehicles in the Office of the President had exceeded 5 years since they started running and almost all of them had mileage beyond the limit of 250,000 kms. Because of this, the maintenance costs of the fleet have tremendously increased. Whereas at the end of the financial year the office had outstanding garage bills amounting to UGX.534,000,000, management managed to clear bills amounting to UGX.397,000,000 leaving a balance of UGX.137,000,000. The office is still faced with bills amounting to UGX.565,106,000 for the first half of the year alone and this has created a balance of UGX.702,106,000 due for payment. 368

With this trend, it is likely that at the close of the financial year the office may have outstanding garage bills over UGX.1,000,000,000 given the projections.

Management explained that replacement of aged vehicles is constrained by the inadequate budget and the Office has raised the matter of the need for additional resources with the Ministry of Finance, Planning and Economic Development but no positive response has been received. I advised management to continue liaising with Ministry of Finance, Planning and Economic Development and have the outstanding debt cleared to avoid eventual litigation from garage owners. Plans should be put in place to address the aging fleet.

19.5 PPDA Audit observations

a) Procurements not in the entity`s procurement plan The entity conducted five procurements worth UGX.64,037,000 outside the procurement plan during the financial year contrary to Regulation 3 (2) and (3) of the PPDA (Procuring and Disposing Entities) Regulations, 2014. Conducting procurements outside the plan may lead to domestic arrears.

Management explained that the procurements were undertaken as emergency requirements which had not been foreseen at the time of consolidating User Department‟s procurement plans.

I urged the Accounting Officer to always ensure that that the user departments prepare comprehensive work plans and all intended items should be included on the procurement plan in accordance with the Regulations.

20.0 STATE HOUSE

20.1 Outstanding commitments incurred during the year

Contrary to the commitment control system which requires the Accounting Officer to commit the Ministry to the extent of funds available, State House incurred

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outstanding commitments worth UGX.529,849,725 during the year under review. This practice is contrary to the financial regulations and could lead to litigation costs due to non-settlement of outstanding obligations.

Management explained that these were utility bills for the month of June which were received after the financial year had ended and were settled in the first quarter of financial year 2014/2015.

I advised management to always settle the utility arrears as and when they fall due.

20.2 Non reconciliation of Government of Uganda debt with UMEME and

State House Government of Uganda entered into an agreement with UMEME in which the latter was required to offset government bills that remained outstanding for a period of more than 60 days. A review of the available documents indicates that total Government debt as at 31st January, 2013 amounted to UGX.62,771,404,221, of which UGX.495,904,662 relate to State House. At that date UMEME set off UGX.31,717,538,490 from the debt leaving a balance of UGX.31,053,885,731 as total outstanding. However, it was not clear of what amount offset relates to State House

Furthermore, it was noted that during the year State House did not reconcile with UMEME to ensure that the amount off set is deducted before making payment.

Management explained that State House was not informed of the deductions and as such could not undertake the reconciliation.

I advised management to liaise with the Ministry of Finance, Planning and Economic Development to have the position reconciled.

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AGRICULTURE SECTOR

21.0 MINISTRY OF AGRICULTURE, ANIMAL INDUSTRY AND FISHERIES

21.1 Land issues

The Ministry has land located in Kampala, Entebbe and various parts of the country. An inspection was undertaken with a view to establish ownership and status of use. The following observations were noted;

a) Land not surveyed and titled

A significant portion of the Ministry land especially up country is not surveyed and therefore not titled making it vulnerable to encroachment. I noted that some of the land has been encroached on and the issues have not been resolved so far. I further noted that most of the land especially the up country land has been idle for a long time and this could have contributed to this challenge.

I was not availed with documents pertaining to occupancy, utilization and transfer of ownership. I explained to management that the unclear status makes MAAIF land and assets more vulnerable to waste, encroachment and grabbing. (Details in table below).

Current Owner Location Size Title Extent Of Status Encroachment

Nyakashashara Holding Kiruhura 287 Hectares/717.5 Surveyed The originals plot Ground acres has been subdivided into 43.2 ha and leased to a private individual while 244 ha is what remains for the holding ground Nshaara Kiruhura 27.3 Sqm17472a Surveyed 5 Square Miles encroached

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Current Owner Location Size Title Extent Of Status Encroachment

Kabagore holding Kiruhura 4 Hectares/10 acres Surveyed - ground Kazo Veterinary Centre Kiruhura 10 Hectares/25 acres Surveyed - Sanga Kiruhura 2.5 Sqm/1600 acres Partly titled 1.5 Square Miles encroached Ruhengyere Kiruhura 21 Sqm/13440 acres Titled Kayonza trading centre 5-10 acres Katikara in Nalweyo Kibaale 3 sq m/1280 acres Surveyed, a Missing bsentee landlord - Mame Sabagabo area (3 sq.m/276 acres) Kasenene Tsetse Hoima 10 Acres Encroached - control South Bururuma Kabale 250 ha/625 acres surveyed - Mbarara zonal Mbarara 520 ha/1300 acres NARO in the 32 hectares Agricultural Research & process of encroached Development Institute resurveying, titled (Title with Uganda Land Commission ) Kirimirire Ibanda 8 ha/ 20 acres Not Approximately surveyed 1/3 is encroached on Nyabikurungu Coffee Ibanda 4 ha/10 acres Surveyed - Demonstration Coffee Demonstration Nyarushanje sub 4 ha/10 acres Not - Centre/House county surveyed Mushunga Hoima class 111 Hoima 8 acres according to Surveyed - MAAIF record Ibanda farm class II Hoima Estimated 4 Acres Surveyed -

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Current Owner Location Size Title Extent Of Status Encroachment

W/S Kitegana Coffee/Cocoa Kagadi 2 ha/ 5 acres Surveyed - nursery Ibanda workshop class Ibanda town 1.2 ha/3.0 acres Not Approximately II surveyed 1/10 of it has been encroached on Kagadi TVC Kagadi town 2 ha/5 acres Surveyed - Kakumiro TVC Kakumiro 2 ha/5 acres Surveyed Whereas MAAIF &Agricultural farm intervened initially, the sub county through ULC &DLB got a land title 7 demarcated plots for private developers Kitagasa coffee Hoima 1.6 ha/4 acres Surveyed - demonstration/nursery Buseruka house of DAO Hoima - Not - near L.Albert surveyed Ijamirembe group farm Masindi 1.546 ha/3.87 acres No evidence - of survey Kigumba sub county Masindi 4 sq miles/2560a surveyed - Dyanga Tsetse control Masindi 201 ha/502.5 acres Surveyed - Unit on Gulu road area is 209 ha, I/SE 0148 Pakanyi- Kihonda Masindi 560 ha/1625 acres surveyed - Kihihi class II Kanungu - Difficult to workshop estimate extent encroached Kibimbiri cotton Kanungu 320 ha/800 acres Not - growing farm surveyed Kihihi fish pond Kanungu 4 acres Surveyed - Bugangari Coffee Rukungiri 1.2 ha/3 acres Surveyed - Demonstration Centre 373

Current Owner Location Size Title Extent Of Status Encroachment

Ntoroko fisheries house Bundibugyo - Not - surveyed Ntoroko meteorological Bundibugyo - Not - Equipment and surveyed Fisheries Officer‟s Residence Ruhadagaza fish fry Bushenyi 5 acres Surveyed - centre Kicwamba Fisheries Bushenyi 13.63 ha/34.1 acres Surveyed - regional hqtrs Omunyole Livestock Tororo Approx. 3 Acres - - Market, KisokO Kisoko, Gwaragwara, Omunyole Obukuru Holding Tororo, Approx. 3 Acres - - Ground, Kayolo Nyakanysi-Nsongezi Isingiro - - - Rwivoro Kisoro 300 acres Not - surveyed Rwerere Kisoro - - - Kyanika Kisoro - Not titled - Bunagana Kisoro 100 acres Not - surveyed Birere Mbarara - - - Nalugamba, Busujju Mubende 4.2 acres Surveyed - Kakuto Class II W/S Kakuto 2 acres Not Residential by surveyed- private people Kyotera Class II W/S Kyotera 2 acres Not Private surveyed - developments National semi arid Soroti 1,768 acres Survey There is an issue resources research process of the technology institute currently verification going on centres, where encroachment has been realized to a large extent Kidetok Vet Centre Soroti 0.5 acre 374

Current Owner Location Size Title Extent Of Status Encroachment

Odapakol, Pingire Agu night stop Kumi - Not titled - Obotia Holding Ground Kumi 50 Acres Not titled - Alodi Akism, Kadir Kumi Not titled - Alamaka Mukura sub Kumi - Not titled - county, Oyinuku Koburu, Ngora Kumi - Not titled - subcounty, Bukedea Livestock Kumi Approximately 2.5 Market Acres Omatenga Kajamaka - Not titled - parish, Kanyum sub county Akuoro parish, Bukedea Kumi - Not titled - sub county kumi Ogirai parish, Kanyum Kumi - - sub county, Kumi Okunguro Kumi Approx. 7 Acres Demonstration Farm Abilakim, Bukedea Kumi Boma parish, Kumi 6 acres - - Kumi Trading centre Ngora Nyamongo, Kumi 1 acre - - Karamoja district farm Moroto - - - show ground Atumkat Moroto 937.5 - - Kihole Katakwi 177 acres Kuju Katakwi - - - Nawaikoke agicultural Tororo - - - workshop Masafu Tororo - - - Omunyole Livestock Tororo Approximately 3 a Heavily Market encroached Tororo Class I Tractor Tororo Approximately 3 a Workshop Okukuru Holding Tororo Approximately 3 a Heavily

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Current Owner Location Size Title Extent Of Status Encroachment

Ground Encroached by the Ringtho Family Kisoro sub county TVC Tororo - - - Malaba Kwapa road, Tororo 2 acres - - Osukuru Tororo 100 acres - - Okille Quarantine Kaberamaido Okille Quarantine Kaberamaid Okille Quarantine Okille, Kobulubulu, Okille, Kobulubulu, o Okille, station/Ranch station/Ranch Kobulubulu, station/Ranch Ikulwe Research Mayuge 214 acres On going 1 acre station Bugiri 3335 acres Registered 95% under plot 9, block 7 (Bukoli) Sironko Cattle Holding Sironkho 173 Acres (surveyed Registered Wholly taken Ground Buwalasi by Sironko DLG) under Sironko DLG Bugusege Experimental Sironkho Approx. 20 Acres - - Station, Budadiri Nalugugu Tractor Sironkho Approx. 2 Acres - - Workshop, Bukisa Nabbongo Variety Trial Sironkho Approx. 50 Acres - -- Centre Bulegeni (ARDC) Sironkho 47.82 Process of On the side of securing a the trading land title in centre the local the names authority on NAORO constructed part is on-going of the market on the land Nakaloke Holding Mbale Approx. 13 Acres - - Ground, Mbale Kidetok Kasilo,Pingire Soroti 0.5 acres - - Aswa ranch/Acholi Pader 62 ha,11 ha Leased - branch expired 376

Current Owner Location Size Title Extent Of Status Encroachment

Agricultural VTC Patongo, Pader - Un-surveyed - Maruzi Apac 64 sq miles Titled Extent not yet determined

Management attributed the encroachment to inadequate funding of the survey process and the lengthy process of acquiring a title. Management indicated that efforts have been made to survey and secure titles of some of the land that include plots 16-18 station road Entebbe and Fisheries department land. On idle land, this was attributed to the reforms whereby government divested, itself from direct production.

I advised management to pursue the matter further with the relevant Authorities and have the title and land secured.

b) Land usage changed from MAAIF to entities affiliated to the Ministry

During the review, I noted that some land usage changed from MAAIF to other entities affiliated to the Ministry under various mandates, however ownership status remained unchanged. For example Sanga Ranch in Mbarara of size 2.5sq. Miles currently under the stewardship of an affiliate Organisation - NAGRC was handed over to NAGRC by the Ministry but ownership remained unchanged as evidenced by the Ministry giving out 30 acres to Sanga Town Council while 1 sq. mile was reported grabbed by an individual.

Management explained that some land was handed over to MAAIF statutory agencies and that the recipient agencies are processing transfer of the titles to their names.

I advised management to liaise with the responsible stakeholders to facilitate the survey process and have all its land titles acquired. Management should also consider handing over ownership of the land to affiliated entities for close supervision and security. 377

21.2 Under performance

A review of the Ministry‟s performance showed that the Ministry had total operating revenue of UGX.68,986,685,103 including NTR of UGX.824,106,174 during the year. As at 30th June, 2014 I noted that funds worth UGX.8,663,443,218 remained un-utilized reflecting under absorption capacity of 12.7%. As a result, a number of activities planned for the year were not implemented as indicated below:

Vote Planned/Perfo Achieved Perfor Review Management Responses Function/out rmance Target mance Comments put Indicators gap

010103 Purchase of 20 16 4 not Management The suppliers attempted to (The total tractors for delivered delivere should explain supply 4 tractors of a output budget distribution as d (80%) the cause of different specification and was 2,601bn grants to failure to this was not acceptable to and farmers. deliver the the ministry foreseeing a 2,850bn was balance of 4 lengthy process for spent under tractors. clearance by Chief various Mechanical Engineer, the activities of Solicitor General and the output) approval by contracts committee without strong justification. Administrative arrangements are being made to ensure that the four tractors of the same make as the 16 are delivered to MAAIF. 010103 22 Irrigation and 9 13 not No reasons This was due to absence of Crop water harvesting Installed. installed given for the Extension Staff in Districts: production demonstrations Gulu, failure to The success of this activity technology made in the Kitgum, install the 13 was dependent on the ease promotion: various districts. Pader, water with which MAAIF could get 378

Vote Planned/Perfo Achieved Perfor Review Management Responses Function/out rmance Target mance Comments put Indicators gap

Lira harvesting the list of selected ,Oyam, demonstration beneficiaries from the Nebbi, s yet the item Districts. Almost all districts Buliisa, was overspent. on average have only two Maracha members of staff in the and District Production Rubirizi Department who are over loaded with limited facilitation to traverse the sub-counties identifying suitable candidates. This affected the critical processes of project implementation. 010103 Establish an Not Not No activity was It is true the bills of Crop Agricultural implemen impleme done. quantity for rehabilitation production Mechanization ted. nted. Management works were not completed technology Resource should explain during the financial year promotion Centre for the reasons. and the works were not training of undertaken. machine operators, technical information generation, referral workshops and testing/evaluatio n of agricultural machinery 010105 35 districts to be 25 10 not Management This was due to unforeseen Food and assessed for assessed. assesse should explain increase in operational

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Vote Planned/Perfo Achieved Perfor Review Management Responses Function/out rmance Target mance Comments put Indicators gap nutrition food and d the cause of expenses which would not security. nutrition underperforma allow undertaking training security nce in all the 35 districts. 010109 Soil fertility Procured 200 not Management There was change in plan Control of pest knowledge 100 procure should explain because the kits are to be and diseases management d the reasons for used by trained extension in priority enhanced 300 under staff and these had not commodities. soil testing kits performance. been recruited, since the procured and consumables in the kits (Total output distributed to expire, had to procure Budget was districts. those that can be used by 1,600bn and available trained staff. The 1,553bn was rest were carried over to Spent (97.1%) 2014/15, to be procured as under various more staff are recruited activities of and trained to use them. the output) 010204 Fishing capacity Not All No reasons It is true that not all fishers Promotion of controlled reported fishers given for non- were licensed. Delays in sustainable through on. not performance. implementing the new fisheries. licensing all licensed. licensing strategy was (Total output fishers on all caused by delays in the Budget: water bodies. procurement of the Fishing 9,121bn Vessel Identification Plates and 6,824bn (FVIPs); because it was a (74.8%) was new innovation requiring spent under standardizing the vessel various plates, structure, activities of numbering and their reflect the output) ability. These new innovations hampered the licensing activities on all

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Vote Planned/Perfo Achieved Perfor Review Management Responses Function/out rmance Target mance Comments put Indicators gap

water bodies. However from September 2014 to date; 3,809 FVIPs have been issued out as follows:-  Lake Victoria-2759  Lake Albert-350  Lake Kyoga-450  Lakes Edward/George-240 Other water bodies-10 010204 Fishing capacity Not Activity Districts are It is true that districts are Promotion of controlled implemen not not supported not yet directly supported sustainable through direct ted. carried by the Ministry by the Ministry to fund fisheries. support to out. yet. licensing activities. The districts to fund mandate of direct support licensing to districts awaits clearance activities. of a MOU by the office of the Solicitor General. The Ministry is however pursuing the operationalization of the Fisheries Fund to support grass root activities. 010204 5,000 Only 820 Perform No reasons The Directorate does not Promotion of aquaculture structures ance given for the establish but promotes sustainable structures establishe gap of underperforma establishment and adoption fisheries. established. d. 4180 nce of cage culture enterprises in aquaculture. Achieved were 820 cages setup in various locations. Response by private sector has remained low; however the PPP law was put in place in 2014; and the

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Vote Planned/Perfo Achieved Perfor Review Management Responses Function/out rmance Target mance Comments put Indicators gap

situation is bound to change. MAAIF is currently developing a comprehensive aquaculture policy to provide an enabling environment for aquaculture development.

Failure to utilize the available funds translates into failure to achieve the targeted short-term objectives which has a negative effect on the mandate of the Ministry.

I advised management to enforce monitoring and supervision of its operations to ensure all the planned activities are implemented.

21.3 Procurement issues

a) Un planned procurement

During the review, I noted that procurement worth UGX.59,659,384 for extra works for Entebbe office premises renovation was not included in the procurement plan contrary to the PPDA Regulations. I explained to management that unplanned procurements could lead to diversion of funds as well as wastage of financial resources.

Management responded that the procurement became emergent due to the instructions received in the middle of the financial year for the Ministry to shift from Kampala to Entebbe.

I advised management that emergencies should also be handled in accordance with specific regulations in the PPDA Act.

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21.4 Incomplete renovation works

A construction company was contracted to undertake renovation of the Ministry office premises in Entebbe. The renovation works included; plastering, painting walls and ceilings, replacement of faulty roofing materials, electrical repairs, installation of sanitary appliances and others. By the end of the financial year; payments worth UGX.144,214,834 had been made to the contractor. A review of bills of quantities (BOQ) and the extent of works carried out so far indicated that the quality of work performed by the contractor was lacking. I noted that the contractor mostly painted the buildings other than doing the above listed jobs. Hanging cables, unrepaired ceiling boards and broken locks were not fixed as illustrated in some of the photographs below:

Loose absolute telephone cables. Ceiling board not replaced /repaired.

There is a possibility that the contractor was not properly supervised.

I also noted that some offices that were equally in need of renovation such as the Department of Crop Protection, Project office and stores were not included in the renovation plan. The pictures below show the state of the buildings not yet renovated;

 Department of Crop Protection block. Below is the project Office surrounded by squalid shacks in which scrap stationery is piled

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Below; MAAIF Stores.

I explained to management that the state of affair reflects a bad image of the Government Ministry.

Management explained that the exclusion of other buildings like the store and the Crop Protection block was due to limited funding.

I advised management to prioritise and liaise with ministry of Finance for adequate funds to enable completion of repair works.

21.5 Delayed Supply of 4 tractors

A Local Company was contracted to supply 20 (4 wheeled) tractors with implements under mechanization/Labour saving technologies each at a cost of US$.34,336. The contract was signed on the 17th June 2013 and the delivery date had been slated for end of March 2014. The tractors were a grant to farmer groups engaged in the production of strategic commodities. A review of this procurement revealed the following anomalies:

 Records availed showed that at the time of reporting, only 16 tractors had been delivered, inspected and received at Namalere leaving 4 tractors 384

undelivered with no clear reasons. There was no evidence as to when the balance of 4 tractors would be supplied and delivered to the beneficiaries.  I also noted that there was equally no information pertaining to the deliveries of the tractors to the targeted beneficiaries.  It was further noted that the performance security was waived under the general conditions and Ministry is not covered in case the supplier fails to supply all the tractors which could end up in prolonged litigation process denying citizens‟ benefits. The Ministry also risks losing resources in re- starting up the procurement process.

The Accounting Officer explained that the supplier supplied 16 tractors with implements in accordance with the contractual specifications and the request to supply 4 tractors of different specifications was not acceptable and hence it was likely that the procurement of the 4 tractors will be re-advertised.

I advised the Accounting Officer to revisit the issue and take appropriate action.

21.6 Non Tax Revenue

a) Lack of statistical data

The Ministry has various revenue sources under three major directorates; the Directorate of Crop Resources, Directorate of Animal Resources and Directorate of Fisheries Resources. However; I noted that the Ministry does not have statistical data on its revenue sources and as a result, revenue forecasts are not realistically made which continues to affect the NTR collections. I explained to management that lack of reliable data and performance targets makes it difficult for the Ministry to appraise revenue performance.

I advised the Accounting Officer to allocate the necessary resources to facilitate the directorate towards the process of data collection in order to make realistic revenue estimates. b) Failure to revise the Fisheries rates

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During the review of NTR collected from fisheries, I noted that the license/permit rates have never been reviewed ever since they were set under Statutory Instrument No 33 of 2010. I explained to management that the economy has since then grown and the volume of fishing activities increased hence application of the same rates could only lead to loss of revenue to Government which further translates into under performance in collection of NTR.

Management acknowledged that the rates have never been revised since 2010 when the Fishing rules were formulated and passed. Nonetheless, several aspects of this law have already been identified for revision. Several internal meetings have been done as part of the procedures for the review of the 2010 fishing rules and relevant steps will be taken to operationalize the revisions into law.

I await the outcome of management commitment.

21.7 Neglect of stores

In my previous year‟s report, I reported the issue of the state of MAAIF stores but no action has since been taken and instead the situation is getting worse. Physical inspection of stores indicated that they are in a deplorable condition. I further noted that the stores department operates a manual system which has also not been updated. I explained to management that failure to update the stock ledgers regularly could result into failure to detect irregularities like theft of stores.

Management explained that the Ministry undertook a phased approach renovation of the stores which includes installation of vital facilities. The stores renovation plan was however interrupted by the directive to revert the Ministry to Entebbe premises which expanded the renovation requirements. The apparent neglect of stores is attributed to inadequate funding under maintenance-civil amidst competing renovation requirements.

I advised management to prioritise the stores section so as to enforce good stores management practices.

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21.8 Misuse of Government assets and illegal tenants

As part of the audit; inspection of Wandegeya premises which is a prime land that accommodates an affiliate Organisation - COCTU offices was carried out. I noted that part of the premises has been turned into residential quarters, food kiosks, restaurants and some offices are occupied by unauthorised tenants such as Kampala Capital City Authority Veterinary Officer and Walimi Fish Farmers Cooperative Society (WAFICOS).

I noted that there were no tenancy agreements hence no evidence that the tenants have ever paid rent. Further, COCTU which is an affiliate entity under the MAAIF sector is in shortage of office accommodation and yet the unauthorised persons continue to occupy government premises without even paying rent, including some tenants rearing chicken near the offices an activity that is not rational near offices. Failure to collect rent from the tenants translates into causing financial loss and misuse of government assets. The pictures below describe part of the situation at the Wandegeya premises:

Above shacks structures converted to residential Food kiosks/restaurant without designated quarters. toilet facilities.

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Food preparation is done from the open spaces within the compound in front of some COCTU offices.

I also noted that one of the Ministry‟s old vehicles parked at the premises was burnt from the parking lot under unclear circumstances. As at the time of reporting (February, 2015), there was no police investigation report in place.

The above situation puts the premises to several risks including insecurity, fire outbreak and health related issues. I explained to management that there is a risk that this prime land could easily get grabbed by the current squatters if no controls are put in place to secure the premises.

Management explained that the Ministry has already taken steps to notify the illegal occupants to vacate the premises.

The outcome of management action is awaited.

21.9 Department of Crop Production

a) Staffing gaps (10)

During the review, I noted that the Ministry has not yet filled some vital vacancies under the department of Crop production as provided for within its establishment as summarised below:

No Position Number of vacant posts 1 Mobile Workshop Mechanic 1 2 Grader Operator 2 3 Drivers 4 4 Turn-Man 3 TOTAL 10

I explained to management that the current staffing gaps could affect the Department‟s performance hence failure to operate efficiently. 388

Management explained that staffing gaps exist because there were no adequate funds to fill all the positions. Management however indicated that in the next financial year, a provision has been made to fill all the vacant positions.

I await the outcome of management‟s commitment.

21.11 Plan for Modernization of Agriculture

a) Vacant posts (11)

During the review, I noted that the department lost up to 11 employees who had literally resigned. Although this department is small; I noted that it is a very crucial department such that a big number of staff resigning is a cause to worry. Below is a summary of staff who resigned since 2004:

Numbers Title Date of Resignation 1 Director 2006 2 Director 2012 3 Accountant/Administrator 2004 4 Gender Specialist 2007 5 Accountant/Administrator 2005 6 Accountant/Administrator 2012 7 Office Attendant 2009 8 Driver 2007 9 Driver 2007 10 Driver 2010 11 Research Assistant 2012

I was not availed with any report about the possible causes of resignations. I explained to management that there is a possibility of failure to implement the planned activities which could lead to failure to attain the project objectives.

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I advised management to consider filling the gaps for effective service delivery.

21.11 Loss of a motor cycle UG 2125A-Suzuki.

During the review, I noted that a motor cycle valued at UGX.9,000,000 was stolen from an officer by unknown people around his home in Kigaga Zone Salama parish Makindye Division Kampala. I was not availed with appropriate documentation permitting the officer to use the motor cycle and permission to ride it home. At the time of reporting (February 2015),the motorcycle had not been recovered. In the circumstances, it is highly likely that the motorcycle may not be recovered and besides, the loss was not captured in the financial statements.

Management explained that the case of the stolen motorcycle was reported at Katwe Police station, arrests were made and the Police are still handling it and management is still waiting for the conclusion of the case by Police, then a decision will be taken against the officer.

I outcome of the above action is awaited.

21.12 Motor vehicle UAA 718E-pick up

Motor vehicle UAA 718E –Pick up got involved in an accident in Jinja and was taken to a Garage in Mengo. During the review, I noted that the vehicle had stayed in the garage for close to 3 years without being repaired. I further noted that there was no police report and the circumstances under which it got involved in the accident and its status before it was taken to the garage could not be established. There is a possibility of vandalism and further loss of value of the said car if it is not retrieved out of the garage immediately.

Management explained that the vehicle was inspected by Police and the process of repairing the vehicle has been initiated pending conclusion. I advised management to endeavour to repair the vehicle and put it to proper use.

21.13 Delayed establishment of Agriculture Police. 390

A review of the correspondences available revealed that MAAIF has been in the process of creating an Agriculture Police Force to boost its enforcement effort. I noted that the process has been rather slow and as at the time of reporting (February 2015), the deployment had not yet started. I explained to management that delays in deployment of the police force is likely to increase illegal fishing and fish trafficking which puts to risk the lives of Fisheries personnel and Beach Management Unit (BMU) members. Lack of adequate enforcement may also lead to loss of revenue and gradual depletion of fish stock.

Management explained that the delays in establishment of Agriculture Police were due to the process and deployment which is beyond MAAIF‟s control. The Ministry made a follow up and the Police have now been secured awaiting deployment.

I advised management to deploy the police without any further delay.

21.14 Inspection of fish landing sites As part of the review, inspections of a sample of some fish landing sites was carried out and below were the findings: Landing Site Observation/Remarks

Kalangala MAAIF‟s Insufficient revenue mobilization strategy In Kalangala, Mwena, and a) Lack of personnel I noted that MAAIF does not have personnel in the districts to Lutoboka fish monitor revenue collection despite the re-centralization of landing sites revenue collection. The fishing rules recognize the District were inspected Fisheries Officers and Beach Management Unit (BMU) members

as authorized officers under the rule 26 however; because of lack of facilitation from MAAIF the officers cannot carry out enforcement activities.

I explained to management that failure to deploy personnel and

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Landing Site Observation/Remarks build capacity in the districts will continue to affect revenue collection and thereby impact negatively on the general performance of the Ministry.

Management explained that MAAIF has no personnel in the districts but supports District Fisheries Officers (DFOs) and BMU leaders to mobilize, vet and approve fishermen to acquire licenses in fishing for all NTR. Management further indicated that the Ministry is undertaking the following to improve revenue collection.

 Transformation of the Department of Fisheries Resources into now a fully-fledged directorate will have more recruitments  Under the single spine agriculture system provision is on for each district to have a District Fisheries Officer and also at Sub-counties with lake Fisheries  Pursuing the operationalization of a Fish Levy Fund for a plough back mechanism to ensure sustainable financing.

I await the outcome of the management planned actions.

b) Failure to license boats

Most fishing boats operating in the water bodies were not licensed contrary to the Fishing Rules. Whereas the Ministry developed the concept of Vessel Identification Plates (VIP) around 2011, the introduction of the same took off at a very slow pace during the financial year under review. I noted that the majority of the boats operating in the lakes have not yet been licensed and issued with certificate of vessel ownership and vessel identification plates as required under Rule 16 (1-3).

Kalangala district received only 60 plates whereas it has about

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Landing Site Observation/Remarks 64 landing sites with approximately 3,000 boats implying that a balance of 2,940 boats would still not be issued with the plates. The revenue loss accruing in respect of application fees of 10,000 and fishing license of 100,000 per annum for the 6 years was UGX.1,940,400,000 (UGX.323,400,000 per year) since MAAIF recentralized revenue collection.

One of the sites visited; Mwena has a fleet of 66 boats and out of these only 10 boats were licensed (15%) meanwhile Lutoboka landing site has a fleet of 59 boats out of which only 17 (29%) were licenced. I explained to management that Failure to license boats causes loss of revenue to Government. Management explained that Kalangala district has so far received more than 1,387 FVIPs and the current deployment of the Agriculture police and Fisheries Inspectors at border posts will strengthen enforcement compliance to improve licensing of boats and other NTR obligations.

I advised management to expedite the registration of fishermen, issuing of licenses and VIPs backed by an effective enforcement and supervision so as to improve on revenue collection.

c) Use of un authorized fishing gears

I noted that illegal fishermen use prohibited fishing gears contrary to the Fishing Rule 3 (1)-(3) which leads to depletion of fish stock given that illegal fishing is carried out at the lake shores which are the fish breeding grounds. In the entire fish landing sites visited, it was reported that the catch has reduced by over 50%. Lack of adequate monitoring and supervision by the Ministry could accelerate this challenge leading to loss of revenue to Government and lack of employment to citizens.

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Landing Site Observation/Remarks

Management explained that the Ministry has an appropriate enforcement strategy which it has been using to tackle the use of unauthorized fishing gears. The expansion of the Regulation Unit into a Department will go a long way to strengthen the enforcement strategy in place. The Ministry also has a strategy to implement cage fish culture/aquaculture development that is being implemented to boost fish production.

I advised management to roll out an effective enforcement strategy to curb illegal fishing and promote cage fishing and aquaculture.

d) Dormant fish landing facilities

Despite the huge investment of up to UGX.2,803,549,835 invested on Mwena Landing Site; the facilities have been dormant since its completion and hand over in 2007. Refer to pictures below:

Some of the reasons advanced were that the facility was handed over to the district for management without operational funds. I could not establish the clear reasons for failing to utilize the new structures yet a significant amount of funding was spent on it.

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Landing Site Observation/Remarks The Accounting Officer explained that the districts are managing the facilities with challenges due to the unforthcoming revenues from the proposed sources attributed to the general decline in the stocks of Nile perch and Tilapia fish, the species for which the landing sites were designed to handle. With the positive trend in the fish stocks registered last year at 1.2%, coupled with other fisheries management measures put in place, the challenges noted in the Audit report shall be overcome and the fisheries infrastructures will be cost effectively operated.

I advised the Accounting to plan adequately and ensure the facilities are put to use.

Kashanga At this site the following challenges were noted: Landing site Bad fishing methods brought about by usage of unauthorized fishing gears. I further noted that some of the BMU members who are supposed to check illegal fishing methods are sometimes engaged in fishing of premature fishing themselves due to the fact that the Ministry has not yet put in place a rigorous vetting methodology for electing members of the BMUs.

Inadequate toilet facilities which could lead to sanitation challenges. The above challenges have continued to affect the operations of the fisheries sector translating into poor performance during the year.

Management explained that regular routine sensitization against the use of illegal gears has been on-going and with the help of Agriculture Police and deployed border fisheries inspectors‟

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Landing Site Observation/Remarks compliance surveillance will be intensified. The BMU guidelines and statute of 2003 is in its final stages of being revised and BMU leaders will now be vetted before they are elected by the fishing communities. Promotion of use of suitable sanitary facilities at fish landing sites is part of the fisheries infrastructure development which is a continuous process to support communities.

The outcomes of the above management actions are awaited. Lambu Lambu landing site had 120 boats on site but only 34 (29%) were registered. It is estimated that revenue amounting to UGX.79,200,000 from the boats application fees and license has not been collected from them for the last 6 years. Lack of controls such as Issuing Vessel Identification plates affected the collection of revenue abetting illegal fishing in which premature fish is targeted. Other challenges at this site included;

- Landing of fish in un designated places, - Lack of capacity to carry out law enforcement. - Failure to register all the fishermen. I noted that the Ministry embarked on the process of registering the fishermen and created a data bank of about 1,857. Out of these, 358 were approved by MAAIF after they paid a registration fee of 10,000 each. - Lack of personnel for law enforcement and equipment; the fish landing facility was privatized and it is difficult for government to prescribe measures to the private business man.

Management explained that the exercise is in many cases dodged by the community that find it easier to operate against the national laws. This is now being addressed through the current procurement of FVIPs and enforcement equipment and agriculture police.

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Landing Site Observation/Remarks I advised management to enforce the law in place. Majanji Inspection of the above landing site revealed that the ice plant was non-functional due to lack of power and low fish production yet Government invested up to UGX.3,703,694,777. The landing site has 35 registered fishermen but none of them had paid the application fee, the fishing licence and permit translating into loss of revenue to government. I noted that no revenue has been collected from this landing site for the last 6 years implying an estimated revenue loss of UGX.23,100,009 (110,000 x 35 x 6) in application fees of UGX.10,000 each and license fee of UGX.100,000. The other challenge was un-authorized cross boarder illegal fishing at the border.

Management explained that the landing site was handed to the district in July 2012, and is connected to the national grid. The non-functionality of the structure is largely due to management issues in the district and lack of fish due to cross border trade. A senior Fisheries Inspector has been deployed at Busia Boarder to provide effective monitoring and supervision of the fishing activities. I advised management to strengthen monitoring and supervision of the fishing activities. Kakyanga Kakyanga landing site had 50 registered fishermen from which no revenue has been collected for the last 6 years implying revenue loss of about UGX.33,000,000. I noted that all the boats operating at this landing site are doing so illegally contrary to the Fishing Rule No 12 of the Statutory Instrument No 33 of 2010. Whereas MAAIF introduced Vessel Identification Plates (VIP) for the purpose of easy identification of noncomplying Vessels, such controls have not been embraced at this landing site. There is a possibility that the Ministry could lose more revenue in uncollected fees if controls are not strengthened.

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Landing Site Observation/Remarks

Management explained that the distribution of FVIPs is ongoing and will solve the anomaly. I advised management to strengthen controls so that all boats are licensed before they are allowed to operate.

21.16 General observation affecting operations of landing sites.

Fish landing facilities in the rest of the water bodies are faced with similar challenges as stated above. A review of monitoring and evaluation report of the Ministry for year revealed the following weaknesses:

No Location Cost(U) UGX Status Review comments Management Response 1 Mwena in 2,803,549,8 Non- No electricity for Not connected to the Kalangala 35 Operational operation of the national grid, but heavy ice plant provided with 2 machinery generators 2 Kitobo in 2,545,934,7 Operational Operational with Kalangala 18 but with power challenges of challenges running the generator. It is not cost effective 3 Bwondha in 2,711,582,2 Operational Being managed by The insulated store Mayuge 25 but with the BMU. The ice for ice storage challenges. plant is not functional rooms is provided because there are no and the landing site cold room facilities. It was handed over to was not handed over. the district. 4 Bugoto in 2,798,302,6 Operational No power and Not connected to the Mayuge 71 running water but national grid, a use a generator generator is which is not cost provided and there effective. is installed water pump and treatment system 5 Majanji in Busia 3,703,694,7 Operational Fully operational but Handed over to the 77 but with it was never handed district, connected to challenges. over officially. The the national grid and facility does not have provided with power. standby generator 6 Gorofa Island in 3,635,593,2 Not Not commissioned, Provided with 2 Bugiri 99 operational. not handed over and generators, persons no power supply. nominated by the

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No Location Cost(U) UGX Status Review comments Management Response district to operate the installed facilities trained, not operating due to challenges (power and management). 7 Namasale in 3,926,810,7 Operational It is incomplete, i.e. Fully completed, Amolatar 60 incomplete plumbing provided with a District work and there is no generator and electricity on site. It managed by the was not officially district together with handed over although the BMUs fishermen are using it. 8 Kiyindi in 2,105,834,4 Non Incomplete power Connected to the Buikwe 38 Operational house and there is no national grid, electricity on site. provided with a stand by generator. There are items in the design to be completed 9 Bukungu in 1,741,977,1 Non Construction of the Not connected to the Buyende 55 Operational jetty for the boat national grid, landing is not provided with a complete and there is generator, jetty no electricity on site completed. There are items in the design to be completed 10 Butyaba in 2,162,380,3 Operational It is operational Masindi 94 but with however there is no challenges. water and electricity. 11 Lwampanga in 2,199,538,4 Non There is no power at Not connected to the Nakasongola 21 Operational the landing site and national grid, with no running water. provided with a challenges. The constructions are generator, water also incomplete treatment system provided. There are items in the design to be completed 12 Busia TC- Fish Operational Fully operational Officially handed market however, there was over no official hand over. 13 Tororo Operational Operational however, Electricity and water Municipality- there is no fridge and provided. Fridge and Fish Market cold room, there is no cold room was not in water and electricity the scope of the facilities to be provided 14 Iganga TC-Fish Non Facility was Officially handed Market Operational abandoned due to over, was connected

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No Location Cost(U) UGX Status Review comments Management Response lack of running water to electricity and and electricity. There water but ownership is also encroachment wrangles within the on the land. district is affecting operationalization. 15 Mukono TC Operational Operational however, Electricity and water there is no water and was provided. electricity 16 Mityana TC Non There is no Officially handed to Operational electricity, the district with all vandalized. facilities fitted. District is getting ready to use it. 17 Nyendo in Operational Operational however Electricity was Masaka there is no cold room connected. and electricity. However, cold room was not part of the design. 18 Mbarara Non Incomplete- need to Officially handed to Municipality Operational install the the district with all breeding machinery facilities fitted. for the fish, need to electrical repaired by install electricity district. 19 Kabale Operational Operational however Water was provided, Municipality there is no running cold store was not water and no cold part of the design. room 20 Ishasha Demolished Broader market and in Kasese constructed a new one 21 Mpondwe Demolished A new structure was Boarder Market and put up by Belgium in Kasese constructed a Technical new one Cooperation. There was no communication allowing them to demolish 22 Kagadi TC- Functional It is operational but Officially handed Market there is no fridge, over. Fridge and latrine and never latrine was not in handed over officially. the scope of the facilities to be provided. 23 Lira TC-Market Non Reconstructed functional 24 Gulu TC-Market Demolished Incomplete. The Reconstructed and machinery was constructed a delivered but not new one installed, hatchery

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No Location Cost(U) UGX Status Review comments Management Response was not installed, fish ponds and other buildings not completed. 25 Soroti TC Non Officially handed to Operational the district with all facilities fitted 26 Luwero TC Operational Operational however Cold room and there is no running administration block water and no cold was not in the scope room. The of the works administration block was not Constructed yet it was on the original plan 27 Masindi TC Non It is operational Electricity and water Operational however there is no was provided. Cold running water and room facilities was electricity. There are not in the scope of no cold room facilities the design. 28 Paidha TC Operational Operational however Cold room facilities there is no cold room was not in the scope and electricity. of the design 29 Bushenyi TC- Non Incomplete- need to Installation of the aquaculture Operational l install the breeding Hatchery equipment center machinery for the in progress fish, need to install electricity. 30 Kajansi Operational Fully Operational 31 Mbale TC Non The infrastructure Process of having it Operational was abandoned when completed in it was incomplete. progress The hatchery machineries were not installed Sub-total 30,335,198, 693 SUMMARY OF COSTS Sub –total as shown above 30,335,198,693 Construction of Fish Market stalls in the 605,328,438 North East zone. Construction of Fish Market stalls in Central 1,118,625,475 zone and extension of fish quality control laboratory at Entebbe. Construction of fish market stalls in the North East zone. Rehabilitation and Construction of Fish 833,856,897 Markets stalls in South West. Total 32,893,009,503

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Despite the heavy investment put in fisheries sector as summarised above; the Ministry has not yet put up mechanisms to maximise revenue collection. There is a risk that the assets could depreciate before they are put to proper use and thereby fail to meet the intended objectives.

I advised management to put in effort to collect revenues from fisheries and emphasize law enforcement on water/landing sites operations.

21.17 Inspection of Small Scale Irrigation/water harvesting demonstration sites

MAAIF entered into a framework contract on the 21st November, 2013 for the establishment of Small Scale irrigation/harvesting demonstration sites. The objective was to reduce rain dependent Agriculture and to cope with the rainfall variability due to climate changes. a) Lira district The project is located in Adekokwok S/C in Angweta-ngwet Parish.  One of the criteria of locating the demonstration site was existence of water source however I noted that the site did not have any water source. The farmer was dependent on rain water since the supply from NWSC was unreliable and costly. A trial garden of about an acre with tomatoes planted therein was inspected. I noted that a 5,000 litre water tank was installed, the garden is connected with perforated plastic pipes for water sprinkling but due to absence of water, the garden is almost drying up as the water tank had no water.

 A water pump that was supplied was not found on site as the farmer reported that the same had been borrowed by a nearby farmer since it was basically idle. I noted that lending equipment supplied to unknown people under the

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project was not provided for and the possibility that the pump could have been sold could not be ruled out.

 I noted that the site had been faced with drought for the last three months, an indication of poor choice contrary to the selection criteria. There is a possibility that the investment may turn out to be wasteful leading to loss of value for money benefits.

Management explained that rainfall is the principle source of water. The only viable option at this site was rainwater harvesting and the facility was installed at the peak of the dry season. Therefore the farmer will only have water in the reservoir for demonstration of supplementary irrigation after the coming rains. The names of the beneficiary farmers‟ of the demo sites were given to MAAIF by the Districts in order of priority, and they were representative of the area in terms of water scarcity. The technology is intended for farmers in water stressed areas to take-up rainwater harvesting because it is the cheapest to replicate at the smallholder farmer level.

I advised management to ensure the project is closely monitored so that the farmers benefit from the support and the project objectives achieved. b) Oyam district I noted that this site was chosen due to the fact that it had already demonstrated transformative farming methods among the community with a major objective of improvement of household income. The site did not have a nearby water source and the pump that was meant for pumping water from surface water was found idle as shown below;

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 The perforated pipes for sprinkling and water pump supplied under the project were not yet put to use (still in the store). The reason for this was that the pump was designed to draw water from the surface sources which is not available ; instead, the proprietor is using water from a deep well which he had before the project was initiated, an indication that this investment too has not added any value to the farmer. The other challenge reported was that the perforated watering pipes seemed fragile and the farmer prefers to use water bottles for sprinkling. This showed that some farmers need sensitisation on handling which is not yet done. A tour of the farm showed a lot of fruits rotting due to various diseases and failure to access the market.

In spite of the above challenges, there was no evidence that the project was effectively monitored. There is a possibility that the project objectives will not be achieved.

Management explained that at the time of site identification and beneficiary selection the farmer had no water source. However, the farmer is enterprising and had drilled a production well for home use and the nearby planned poultry unit by the time the contractor was deployed and after discussions with the farmer an agreement was reached to retain the surface water pump to extend water to his Orchard and fodder garden a distance away where water would not reach by gravity from his system. He pledged to construct a small pond (collection sump) where the surface pump would lift the water from the primary source further away to the Orchard.

I advised management to enforce monitoring and sensitization to farmers.

21.18 BUKALASA AGRICULTURAL INSTITUTE i) Inappropriate College Structure During the review, I noted that the College structure was designed and approved in 2003 when the College was administering only two courses/programs (Animal Production and Management & Crop Production and Management). However, currently the College offers six programs as follows; Animal Production & 404

Management, Crop Production & Management, Human Nutrition & Dietetics, Agri- Business and Horticulture and Management. I noted that the structure of the College is inappropriate for its current size and operations which could affect the delivery of services to various stake holders.

Management explained that Public Service cleared the review of the structures of training institutions and requested MAAIF to provide the plan and logistical support for the exercise. MAAIF has already provided a budget for review of structure and arrangements have been made to finalize the plan and to provide logistics to enable the Ministry of Public Service undertake a review of the structures.

I await the outcome of management action. ii. Academics - Admission of students

I noted that the College admits both Government sponsored and private students and in the two types of admissions, the list of successful students is normally approved. However, during the review I noted that out of the 485 students admitted, 93 private students‟ supplementary admission list for all courses including in-service students who do their studies during holidays was not approved as shown below:

Course Gov‟t Private Private Sub Private Total A-Level A-Level F/S Total Supplementary Animal 25 28 12 65 15 80 Production Crop Production 25 52 13 90 18 108 Agri-business 10 37 5 52 16 68 Human Nutrition 10 15 5 30 09 39 Horticulture 10 8 4 22 05 27 In-service animal - NA NA 65 15 80 In-service crop - NA NA 68 15 83 Total 80 140 39 392 93 485

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There is a risk that revenue generated from the students whose admission was not approved by the Council may not be disclosed and could get misappropriated.

In response, management explained that the Universities and Other Tertiary Institutions Act, 2001 gives the College powers to admit students on Private Programme through the Admissions Committee made of Heads of Departments and the Academic Board normally sits to admit all the students that are on Private Sponsorship. Management has taken steps to regularize the supplementary admission and minutes.

I await the outcome of management‟s commitment.

22.0 NATIONAL AGRICULTURAL ADVISORY SERVICES (NAADS)

22.1 Compliance with the Financing Agreement

Component 3 of the financing agreement focussed on the provision of advisory services. However, Government changed the implementation of this component to free input distribution which led to disagreements with the development partners that resulted in their suspension of funding for the component.

The change in implementation to provision of free inputs to farmers implies that the expenditure of UGX 84,823,360,000 recorded under component 3 of the ATAAS project is ineligible for funding by the participating partners and achievement of the ATAAS project intended objectives for component 3 may have been compromised.

Management explained that discussions were held with development partners during the mission of August 2014 and it was agreed that GOU funds should solely be used to input purchase for distribution to farmers. As such the development partners agreed to fund other components excluding component 3.

I advised management to ensure that project activities are implemented as agreed with the development partners to avoid suspension of funding to the project.

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22.2 Monitoring and Evaluation of interventions by NAADS secretariat

NAADS is involved in implementation of strategic government interventions in the agricultural sector for enhancement of household income. The interventions include the distribution of farm inputs across the country. To assess the impact of the intervention and to further focus government efforts on priority areas in the sector, it is necessary to establish a strong and functioning monitoring and evaluation function. However, it was noted that the existing monitoring and evaluation function at NAADS is lacking in aspects such as; (i) Beneficiaries are not identified and documented before procurement of inputs which creates the risk of diversion of inputs. (ii) There is no data base of farmers supported by NAADS to track their progress and success of the interventions.

The absence of a strong monitoring and evaluation mechanism leads to ad-hoc implementation of the interventions and this may lead to failure to achieve intended objectives.

Management explained that NAADS Secretariat provided technology inputs to beneficiaries to address strategic and special demands usually identified at the top political and policy leadership level. Management further explained that the support would therefore normally be provided to clearly defined target groups known well before procurement and initiation and approval of the procurements of technology inputs for such support would require evidence of the source of demand.

I advised management to establish a well-functioning monitoring and evaluation department to measure performance of government‟s interventions. Further a well-documented process should be developed to identify beneficiaries prior to distribution of farm inputs.

22.3 Procurement Management

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In implementing ATAAS project and other programs, NAADS makes various procurements for supplies and services. However, my review of procurement procedures and controls revealed the following anomalies; (i) The procurement plan was not approved by the World Bank contrary to the provisions of the financing agreement. (ii) The department does not maintain procurement complaints register where bidders can register their complaints. (iii) There is no procurement notice board for publicity.

Failure to ensure approval of the procurement plan by the participating partners implies non-compliance with the financing agreement provisions which may lead to the partners‟ refusal of funding procurements under the ATAAS project. Further, absence of a notice board does not only compromise transparency in the procurement process but also violates established standard government procurement procedures.

In these circumstances, procurements are not done in accordance with approved plan which impacts adversely on the implementation of various activities.

Management explained that the procurement plan was approved by the Board and submitted to the World Bank which never responded. Management further informed me that indeed they don‟t have a specific procurement notice Board but are using a general notice board at NAADS Secretariat on the Ground floor at the reception area and will put in place a specific notice board for procurement

I advised management to ensure that a procurement plan is prepared and approved in accordance with the Project financing agreement provisions. Further, a procurement notice board and a complaints register should be put in place to ensure transparency and accountability within the process of procurement.

22.4 Framework contracts

A framework contract with an Estates firm was signed on 20th February 2014 to supply 80 motorised Knapsack Sprayers at a price of UGX 1,850,000 per sprayer.

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However, the call-off order made to the company on 23rd March 2014 was for 250 units. The additional 170units of motorised Knapsack Sprayers were in excess of the contracted quantity of 80 units and therefore supplied without being subjected to the procurement rules and regulations.

Management explained that this was due to the tremendous increased demand for motorised Knapsack Sprayers following a successful demonstration stage of the efficient technology in the control of pests and diseases of fruit trees crops notably citrus, mangoes and coffee. As such, more of the knapsacks were urgently required.

I advised management to ensure full compliance with procurement rules and regulations to obtain value for money at competitive prices.

22.5 Distribution of farm inputs

During the year, the secretariat incurred UGX 3,953,424,825 on the purchase and distribution of inputs to farmers that was not supported by lists of beneficiaries or acknowledgement by the beneficiaries. Further still the distribution of the inputs is not properly planned because the procurement of the inputs was done before determination of the beneficiaries.

As a consequence the expenditure on farm inputs was not adequately supported and there is a risk that some of the inputs did not reach the targeted beneficiaries implying that the intervention may not achieve the intended objectives.

Although Management explained that all support documents required for payment as per the financial procedures were attached to the payment vouchers and were availed and reviewed during the audit process, I was not availed with the required documentation.

I advised management to properly plan the distribution of the farm inputs by inspecting the intended beneficiaries to confirm their requirements and readiness before procurement of inputs is done. Further, management should ensure that 409

deliveries are monitored, properly documented and the beneficiaries should acknowledge receipt of the inputs which acknowledgement should be used to support the payment.

22.6 Tea Intervention Project

Expenditure amounting to UGX 18,555,353,908 was incurred on the purchase and distribution of 38,168,367 tea seedlings mainly in the Kigezi region. In the course of the audit i noted irregularities in the procurement, distribution, delivery and payment for the tea seedlings as elaborated below;

(i) Suppliers of Tea seedlings It was observed that contracts for the supply of tea seedlings were made after supplies had taken place. This was contrary to the established government procurement laws and regulations which require contracts to be signed after a due procurement process.

Management explained that this was an innovation after failing with the conventional procurement process which had revealed that nearly 60% of the seedlings were lost mainly due to mismatch in funds availability, completion of the procurement process and the agricultural/growing season and as a result of the delay most beneficiary farmers would abandon the tea on road sides thus negating the tea intervention efforts and wastage of funds. As a remedial measure, the District Authorities together with Kinkizi Development Company who are implementers of the project devised an innovative approach –the “garden store approach”. Under this approach farmers who wish to plant tea in a given season do receive supplies directly from the supplier before completion of the procurement process and it was found to reduce the mortality rate of the tea plantlets from nearly 60% to 10% with adequate measures in-built in the approach to mitigate against risk of paying for undelivered supplies.

I advised management to adhere to the procurement regulations.

(ii) Lead agencies

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The tea intervention in Kigezi area is implemented in collaboration with three lead agencies. These companies signed Memorandum Understanding (MOUs) with NAADS to provide services such as mobilizing farmers provide market outlets, training and field extension services, identify nursery operators, transport and distribution of plantlets and to facilitate farmers to form cooperatives.

The initial MOUs signed in April 2013 did not provide any payment basis to the lead agency. Subsequently, an addendum was signed in April 2014 providing a 30% payment to the lead agency on the value of tea seedlings procured and planted.

During the year payments amounting to UGX 3,659,524,377 were made to the project lead agencies. Issues of concern with this arrangement are;  The MOU does not clearly justify the 30% payment of the value of tea plantlets to the lead agency.  Payments to the lead agency are not supported by evidence of extension services provided.

Management explained that the lead agency‟s responsibilities are stipulated in the Memorandum of understanding and payment is effected upon meeting the conditions there in and the lead agency provides periodic reports on activities carried out on basis of which payments are effected. I advised management to document activities undertaken to enable proper justification of the payments.

(iii) Distribution/delivery of tea seedlings to farmers A field inspection was conducted to confirm existence of tea seedlings distributed. Four (4) farms were inspected and it was noted for the selected sample that tea was planted on farms but we were not provided with acreage planted except for one farm. Generally tea seedlings deliveries to the farms as recorded in the payment records do not appear to match farm acreage planted. For the farm where acreage was provided, there was a big discrepancy between the tea seedlings recorded as delivered and the tea plants that can be accommodated on the farm. The specific cases are noted below;

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A farm for a religious parish The tea garden was established in March 2012 and has received tea seedlings from NAADS from start to date. I requested for information on tea seedlings supplied for the years 2012 and 2013 but this was not availed. For the year 2014 deliveries of 1,836,000 in May 2014 were noted. We were informed at the time of the audit (11/12/2014) by the farm manager that in September 2014, additional 1,460,000 tea seedlings were delivered to the farm. There was no information availed on the garden acreage.

An individual‟s Farm The farm is located in Busengo Parish Nyarubuye Sub-county Kisoro. Acreage planted is unknown. Planting of tea in the garden started in March 2012. I was informed that the farm received seedlings in the subsequent tea seasons of September12, March 2013, September 2013, March 2014 and September 2014. In May 2014, the farm received 360,000 tea seedlings. Information on tea seedlings delivered in the other seasons was not availed.

A Farm for Community Based Organisation The farm is located in Rubuguri and Ntenko parish in Kisoro district. It is adjacent to Bwindi National park. Farming commenced in 2012 with an initial delivery of 650,000 tea seedlings supplied. I was informed by the chairman of the community that these seeds were not planted and dried up on the road side. The actual acreage planted is unknown. A delivery of 1,793,793 tea seedlings was made to the farm on 20/05/2014 and received by the chairman. The farm has also received other tea seedlings over the years but information on these deliveries was not availed.

An individual‟s Farm The farm called green valley dairy farm is located in Nyamasizi Kabale district. The total acreage of the farm was not availed. It is recorded that the farm received 3,006,640 tea seedlings on 02/04/2014. I was informed by the farm manager that he had also received an additional 1,000,000 million tea seedlings in September 2014. 412

The procurement processes and procedures in the tea intervention project are not transparent and contravene procurements rules and regulations. In absence of clear acreage planted, it was not known how the supplies to particular farms are determined and there is a risk that some of the recorded deliveries of tea plants are not actually supplied to the farms/ gardens. Furthermore, I was not certain that the payments to lead agencies were for actual services rendered.

Management admitted to the need to have records on acreage for tea planted but observed that tea growing areas in Kigezi sub region require experts to be able to determine contour acreage as opposed to horizontal acreage on which traditional land measurement systems are based. As such management promised to engage the services of an expert and aim to have the process completed by June 2016.

22.7 Commitments through local letters of credit at the year-end

Funds amounting to UGX 13,892,716,461 were transferred to Bank of Uganda as commitments to open local letters of credit between 19th June and 27th June 2014. Included in the funds transferred was UGX 137,551,648 as commission for the letters of credit. It was further observed that 6 months later after the commitment of the funds for the local purchases, UGX 6,977,959,526 remain unperformed local letters of credit. This is made of mainly commitment to the suppliers of citrus seedlings amounting to UGX 3,640,513,000.

The transfer of these funds to Bank of Uganda in form of local letters of credit was done to retain unutilised funds at the year end and the additional cost of UGX 137,551,648 in form of the local letters of credit commission paid to Bank of Uganda was considered wasteful. Such avoidable costs reduce funds meant for service delivery in this case farm input distribution.

Management explained that the funds transferred were for purposes of retaining unutilised funds which were for the contracts signed at the end of the year but had not yet performed due to the fact that the funds amounting to UGX. 30 billion were received in April towards the closure of the financial year and the

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procurement procedures had not been concluded. Management further explained that some of the supplies depend on the season/weather and being a dry season, it was advised that some supplies be put on hold for the dry season to end.

I advised management to implement planned activities timely to avoid such year – end funds retention schemes that result in wastage of resources. Further, management should not enter into contracts without forecasting and analysing weather conditions.

22.8 Fixed Assets

It was observed that the fixed asset register is not properly maintained. It lacks most of the details of assets stipulated in the treasury accounting instructions. Some assets do not have date of purchase, cost and right location. Further, some of the motorcycles recorded this year appear twice in the register and one UAA 338F sold during the year was still maintained in the asset register. It was also noted that the organisation started a disposal process of eight vehicles in 2012 when bids were received but to date, only one vehicle had successfully been disposed off with the rest still parked at Ministry of Agriculture Offices.

The absence of a comprehensive, accurate and up to date Assets Register implies that there is a risk that asset losses and misuse may not easily be detected. Further, failure to timely dispose of assets further diminishes the realisable amount from the assets because of the continuous waste of these assets that reduces their value.

Management explained that although some assets in the register lack details, efforts had been made in subsequent verifications to ensure that gaps of that nature and others are filled. Management further explained that during their quarterly financial back stopping to districts, reviewing the maintenance and updating of asset register of NAADS assets is always done.

I advised management to ensure that there is an updated asset register showing all details as per the Treasury Accounting instructions.

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22.9 Unaccounted for funds

In the course of the audit I noted the following unaccounted for funds amounting to UGX 499,008,800.

s/n Description Amount Remarks 1 Advance to PMA 352,000,000 Unaccounted for six months after advance Advance to Buginyanya 147,008,800  Training workshops for 44 Zardi SNCs and 88 AASPs from Mbale and Sironko Districts at a cost of UGX. 29,040,000.  Payment to service providers totalling UGX.17,528,800 paid out on 30th June 2014. There are no lists of workshop participants.  Missing payment details amounting to UGX.59,749,000 payment references 395327,477805 and 477814.  Excessive cash drawn on cheque no 477816 amounting to UGX 40,691,000 for joint training Workshop with NARO. Accountability not sufficiently supported.

In absence of support documents on payments I was unable to confirm that the funds were used for intended purposes.

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Management explained that it was following up the above accountabilities and failure to obtain satisfactory accountability would result into instituting recovery measures.

I advised Management to expeditiously follow up the matter and institute recovery measures from responsible officers where misuse is confirmed.

22.10 Summary issues from inspection of Districts and sub-counties

A review was carried on the programmes system of accounting and record keeping including implementation of programme activities. The review was undertaken in 761 sub counties/town councils in the 112 districts spread across the country and the following matters were observed. Details of the matters are attached in the management letters appendix to this report. (a) Unaccounted for Funds – UGX 4,007,686,846 These are funds for which we were not availed accountability documents by the accounting officers. It includes expenditure for sub counties/town councils which did not avail their books for audit, missing payment vouchers and supporting documents and unbanked co-funding receipts. Further details are included in the District/sub county management letters.

(b) Ineligible Expenditure – UGX 47,296,801 It was observed that some districts/sub counties incurred ineligible expenditure under the ATAAS project by spending outside the approved annual budget or by failing to comply with ATAAS project procurement procedures. Further details are included in the respective district/sub county management letter.

(c) Un-remitted Statutory Deductions – UGX 179,906,634 In almost all the districts/sub counties audited, it was noted that withholding tax, PAYE and NSSF were either not deducted or where deducted, remittance to URA and NSSF was usually beyond the stipulated time.

(d) Record Keeping

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I noted instances where the sub counties and districts financial reports amounts differed from the amounts in the underlying records, the cash books and payment vouchers implying that these reports are not derived from underlying records. These are noted in the respective district and sub county management letters.

(e) Fixed assets and financial records I noted that the fixed assets of NAADS were not properly handed over for safe custody to the Chief Administrative Officers as per instructions during the transition period. NAADS‟ Motor vehicles and motorcycles in many districts and sub counties continued to be used in activities unrelated to NAADS programme. Some of the former NAADS coordinators were still in possession of financial records like receipt books, cash books and payment vouchers in their homes at the time of the audit.

(f) Project implementation Manual (PIM) Many of the districts and sub counties audited had diverted from the PIM. For instance the food security component was not fully supported. Funds meant for this component were in most cases diverted to market oriented component without approval. More still, the top ceiling of the market oriented farmers support of UGX.750,000 had been overridden thus supporting fewer farmers than planned.

I advised management to make a follow up on the above matters.

22.11 VEGETABLE OIL DEVELOPMENT PROJECT

(a) Compliance with financing agreement provisions and GOU financial regulations A review was carried out on the project compliance with the loan agreement provisions and GoU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GoU regulations except in the following matters:

i) Under absorption release of funds

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During the year under review, a total of UGX.12,477,320,546 out of UGX.35,215,199,674 budgeted for the year was not released to the Project. UGX12.3bn of the unreleased funds was meant to have been released by the IFAD. However, it was noted that out of the released funds, UGX.6,240,584,580 remained unutilised at the end of the year. The under absorption capacity of the available funds translates into underperformance for year. As a result, the following activities were not implemented as planned:  Delayed delivery of 2 station wagons and motor cycles;  Delayed construction of a fertilizer store in Kalangala and  Uncompleted Environmental impact assessment that delayed trainings and workshops.

The Accounting Officer explained that the under performance of the work plan was a result of delayed procurement process and failure to conclude the MoUs with the implementing districts. I advised management to expedite the pending processes and have the activities implemented. ii) Review of the Operations of KOPGT  Un-utilized recoveries from the farmers Article 3 (h) of the agreement signed on the 28th April 2006 between OPUL and KOPGT, provides that it is the Trustee‟s obligation to refund to the Government the resources of the Scheme repaid by the smallholders and out growers within one year of receipt, or utilise such resources as may otherwise be agreed upon by the Government, the Trustee and IFAD.

I noted that loan recoveries worth UGX.3,257,536,892 had accumulated on the Loan Recovery Account and the Trustee declared the resources to Ministry of Agriculture but no action has been taken on the utilisation of the funds. I explained to management that this contravenes the agreement and denies farmers and the Trustee in general a chance to grow further and enhance achievement of the project objectives.

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Management explained that GOU and IFAD agreed under Schedule 3 of the Financing Agreement for the second phase of VODP to have the repayments made by KOPGT on Bugala Island re-cycled to finance loans for new smallholder oil palm growers in Kalangala and other areas during the second phase of the project. Also during the Mid Term Review (MTR), GOU and IFAD agreed that the recoveries be utilized to finance oil palm activities on the outlying islands and Buvuma where activities are planned to start in early 2015.

Management actions on the matter are awaited.

 Outstanding loans from KOPGT Small holders At the reporting date, a total of UGX.33,728,757,674 had been disbursed as cash and input loans to KOPGT farmers for oil palm activities. However, I noted that UGX.3,257,536,892 only has been recovered from the farmers as loan repayments to-date leaving the balance of UGX.30,491,220,782 yet to be recovered. I explained to management that the recovery rate was slow. Management explained that the loans for oil palm cultivation by smallholder farmers are supposed to be fully recovered 15 years after planting according to the oil palm model. Since Oil palm planting in Kalangala started in 2006, the last loans are anticipated to be fully recovered in 2030. The repayment schedule was proposed to enable farmers have a reasonable take-home income and also enable the farmer invest in maintaining the oil palm garden.

I advised management to come up with a payback schedule indicating how much has been recovered and what is anticipated to be recovered over the remaining period. This will enable me assess the performance of the loan portfolio.

 Untitled land In 2006, the registered farmers agreed to purchase a plot of land on which the KOPGT secretariat was to be constructed. The farmers contributed UGX.50,000 each collecting a total of UGX.24,000,000 that was used specifically to buy land in Kalangala Town Council in 2007. However, as at the time of reporting, I noted that management had not yet acquired the land title. I also noted that there are some capital developments currently undergoing on the land. The Secretariat had

419 invested UGX.182,283,547 to construct an official building and UGX.1.6bn to construct fertilizer store. I explained to management that this is risky due to the uncertainty of the legal rights on the same land.

Management explained that KOPGT Management submitted forms for land transfer to Masaka Land Registry and the district is in the process of transferring the title into the name of Kalangala Oil palm Growers Trust (KOPGT).

I advised management to expedite the process of securing the land tittle.

(b) General Standard of Accounting and Internal Control A review of the system of accounting and internal control was carried out and in all material respects, the internal control system and measures to ensure proper accountability for the project funds put in place by management was satisfactory.

(c) Status of Project Implementation A review of the status of project implementation revealed the following; i) Inspection of Oil seeds component hubs

As part of the audit, inspections of the Oil Seeds Component hubs was carried out and below are the findings: a) Staffing at Mbale Hub

A review of the operations at Mbale Hub that comprises of 20 districts in Eastern Uganda indicated that it is currently managed by only one staff yet the hub is too big. I explained to management that farmers may not get the guidance they need and in time.

Management explained that the project design document did not provide for extra staff at hub level however, the concern of low levels of staffing was noted and raised with IFAD and accordingly, the September 2014 IFAD Support Mission Aide Memoire recommended recruitment of a hub driver and another staff to manage the regional office. Further, the Mid Term Review has recommended another

420 private service provider for the hub in addition to the two that are already on ground and it is anticipated that this will enable the farmers to access extension services they need.

I advised management to expedite the recruitment process. b) Inspection of oil palm component - Buvuma Palm Oil Project The Oil Palm Component of the project covers the districts of Kalangala and Buvuma.

(i) Acquisition and hand over of 4,000 hectares to BIDCO (U) Ltd (BUL) According to VODP 2 work plan and budget for the financial year under review, the project was to consolidate all the acquired land, identify more, survey, process and hand over 4,000 hectares of this land to BUL for nucleus estate out of the total planned and agreeable 6,500 hectares of land. I noted that the project has not handed over the planned hectares of land. This has made the hand over difficult since. I explained to management that this is likely to affect the progress of the project.

Management responded that there was delay in land acquisition but the required 6,500ha have now been acquired, which is the amount required by BIDCO. The delays were a result of unclear land titles, squatters, lengthy valuation, hostile tenants and conflicts in ownership which are being resolved systematically.

I advised management to expedite the process and have the handover concluded.

(ii) Establishment of Buvuma Oil Palm Growers Trust According to the VODP 2 work plan and budget for the financial year under review, the project was supposed to have started the establishment of Buvuma Oil Palm Growers Trust and the recruitment process of the skeleton staff should have taken off. However at the time of inspection, it was noted that no such Trust had been established. I explained to management that failure to establish the Trust as

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agreed makes it difficult for the project to set off, dragging behind all the planned activities for implementation.

The Accounting Officer explained that according to the Financing Agreement, the project can only establish Buvuma Oil Palm Growers Trust after BIDCO starts implementation of nucleus activities in Buvuma. It was indicated that currently, the project is working with the Buvuma District Local Government in handling oil palm activities on the Island with emphasis on land acquisition.

I advised management to address all the issues hindering progress of the project activities for successful implementation of planned activities.

23.0 NATIONAL AGRICULTURAL RESEARCH ORGANISATION (NARO)

23.1 Mischarge of expenditure-UGX.206,704,980

The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. During examination, it was noted that expenditure worth UGX.206,704,980 was charged on wrong expenditure codes contrary to GOU chart of accounts. Mischarge leads to misallocation and diversion of resources to non-planned activities contrary to appropriation by Parliament. The practice also leads to misrepresentation of facts in the financial statements and undermines the importance of the budgeting process.

The Accounting Officer explained that they have on several occasions written to the PS/ST and the Accountant General seeking for a research code to over-come the budgeting anomaly without any response. The research activities include; client priority setting and planning, experimental site visits and maintenance, surveys and other data collection activities; which require much of the budget and the amount involved cannot be accommodated on the related codes like travel inland because of restricted budget line allocations.

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I urged the Accounting Officer to continue pursuing the matter with the Accountant General to have it resolved.

23.2 Budget Performance

a) Under funded budget Management budgeted to receive UGX.41,867,739,709 in order to carry out its activities for the financial year under review. However, only UGX.35,027,197,017 (79.9%) was received leaving a balance of UGX.6,840,542,692 un released as summarized below:

Funding category Budgeted Released variance Recurrent releases 27,737,246,147 27,614,680,851 122,565,296 Development releases 6,130,493,562 4,597,870,172 1,532,623,390 Gross tax 8,000,000,000 2,814,645,994 5,185,354,006 Total transfer from 41,867,739,709 35,027,197,017 6,840,542,692 Govt.

The shortfall in releases affected the research works and a number of activities. These activities included; data collection on farm performance trials, data collection on pests & diseases, training of rural artisans, assessment of economic impact of management of fruit flies, nursery activities & field trials monitoring, data collection on plant bio diversity, monitoring of project activities, field activity on vector specimens, identification of termite specimens, monitoring, purification of cultures experiments and data collection on plant bio diversity purification of cultures and experiments.

The Accounting Officer explained that the bulk of the unreleased funds relate to gross tax that could not be utilised because of the length of the procurement process. He further explained that there was underfunding from Government as the Organization did not receive its 4th quarter release.

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I advised management to pursue the matter of funding with MoFPED with a view of ensuring that in future all the resources for all the planned activities are accordingly released to enable implementation.

b) Un-collected NTR - UGX.2,734,758,542

NARO‟s approved NTR budget for year was UGX.5,815,021,500 but I noted that UGX.3,080,262,958 was realised leaving UGX.2,734,758,542 un collected. This translates into underperformance of 47% of the budgeted revenue collections. Compared to the previous year, performance declined by UGX.298,081,719 (9%). The declining performance could be attributed to poor collection strategies and or weak revenue collection controls.

The Accounting Officer attributed the under collection to compensation from UEDCL of over UGX.2bn for land occupied by electricity line sub-station at NARL- Kawanda Institute which did not materialize due to land wrangles between NARO and the veterans. However, the matter was reported to the courts of law under suit no. 434/2014.

I advised management to follow up the matter with a view of having the compensation settled.

23.3 Un recovered car loan-UGX.22,910,000

Sect. 16.2.3 of the NARO human resource manual requires NAROSEC and PARIs management to recover any outstanding amount from its members by deducting such amount from gratuity if it cannot be recovered from the salary. Besides, according to condition b (5 & 6) of the car loan agreement, a staff is under obligation to pay the loan whether he/she is in full employment with NARO or not. However, I noted that NAROSEC terminated the services of its two staff after the expiry of their employment contracts without recovering the outstanding loans. The other staff is on a study leave whose loan is not being settled. Details in the table below:

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Name Designation Terms of service Outstanding Last date of Loan recovery Staff Principal Still employed by 6,910,000 30th June,2013 Research Officer NARO but on Study Quality Leave Assurance Former staff Senior Contract terminated 8,000,000 31st Procurement in June 2013 October2013 Officer Former staff Civil Engineer Contract terminated 8,000,000 30th June 2013 in June 2013 Total 22,910,000

I explained to management that failure to recover outstanding loans from the former staff translates into financial loss to government.

The Accounting Officer explained that the matter of the affected former staff was brought to the attention of the governing council and have written to them to have the outstanding amounts settled. The staff on study leave promised to pay in 2 installments and so far US $ 1,200 has been recovered.

I urged management to pursue the affected staff and ensure that their outstanding loans are recovered.

23.4 Internal Audit Function

a) Operations of Internal Audit NARO has twenty (20) internal audit staffs and out of these; 4 are based at Headquarter while the rest are based at the Institutes spread across the country. During the audit, I noted that the Institutes of ABI –Arua and Mukono ZARDI did not have internal auditors.

I explained to management that a review of the structure of operations of internal audit needs to be carried out to ensure the available staff can offer services to the

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Institutes. Strengthening the internal audit is very essential as it will empower the unit to handle the ever growing responsibilities at all the Institutes country wide.

The Accounting Officer explained that the internal auditors for ABI and Mukono ZARDIS resigned from NARO service and the process of replacing them was in advanced stages. In the meantime, the internal audit staffs at NAROSEC were reportedly providing internal audit services to these institutes.

I advised management to expedite the recruitment process with a view of strengthening the internal audit department for effective service delivery.

b) Inadequate staffing –NARL –Kawanda A review of the Institute‟s internal control environment showed that NARL has one internal auditor responsible for all internal audit assignments including carrying out verification of monthly reconciliation statements of over 65 bank accounts. I noted that during the year, the auditor‟s key role at the institute was to carry out pre- audits however, there were no internal audit reports, an indication that there was limited review of the systems and processes at the Institute. I explained to management that lack of a strong internal audit could result into non-detection of errors and therefore misstatements of the financial statements.

The Accounting Officer explained that the recruiting process was on-going. I await the outcome of management‟s commitment.

23.5 Audit Inspections

a) Continued illegal encroachment on MBAZARDI Land I previously reported that an individual had encroached on MBAZARDI land. During the year under review, management carried out eviction of some encroachers on this land. However during inspection, I noted that more land is being encroached on by the same person earlier evicted. An estimated 31.8 acres had been encroached on by this person.

It was also noted during the eviction exercise that a staff of NARO was assaulted by the same encroacher and the case is before the courts of law. However, after a

426 period of more than 5 months, the case has not been put to mention. The organisation‟s land is at more risk of encroachment.

The Accounting Officer explained that the case is in court suit no. 070 of 2014. I urged management to pursue the matter and strengthen measures against land encroachers. b) Rwebitaba ZARDI a. Lack of official hand over report of properties NAROSEC received land and other properties from Kabarole local Government. Rwebitaba ZARDI then shifted to Kyembogo station as its administration centre. However, I was not availed with the hand-over report/list of assets to NAROSEC from Local Government for verification and the land title to confirm ownership.

Furthermore, I noted that the institute has not fenced off its boundaries putting the assets at more risk as evidenced by a public road passing through the institute as illustrated in the pictures below:

The public road that passes through the Office block without a gate/Fence compound.

I explained to management that this could cause thefts due to open access of the facility.

The Accounting Officer explained that the hand over is being done in phases and has not been completed, a complete report is expected after the exercise and will be availed as soon as it is received.

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I advised management to ensure that a proper hand over is done and also ensure that the administration block is fenced off. Acquisition of ownership of the land should be expedited. b. Dilapidated properties The institute buildings where the staffs are accommodated are roofed with asbestos that was internationally condemned. Furthermore, I noted that some structures (staff quarters) and a toilet in the compound were very old and inhabitable and some blocks within the compound were not completed as shown in the pictures below:

One of the public toilets in the compound The building with asbestos sheets

Un completed block Dilapidated structure at staff quarters

I explained to management that the poor state of structures affects the operations of the institute and reflects a bad image of the organisation.

Management explained that NARO inherited the infrastructure from Kyembogo Local Government and that some rehabilitations are being done gradually. Once funds are available, the unroofed blocks will be roofed.

I advised management to plan and have the renovations completed. Meanwhile the asbestos which is a health hazard to staff should be replaced. c. Security at the station

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It was noted that the security at the station is inadequate; there are four contracted security guards of Reserve Protection Services (RPS) and one locally employed. Two guards at night and others during the day. I noted that the two guards deployed at night were not enough to provide the required protection for the institutes assets and resources that are scattered on approximately 500 acre piece of land.

Information gathered at the station indicated that the institute experienced thefts of research materials in the cassava fields and fire out breaks by the outsiders during the year but the guards could not do much to prevent such occurrences. I explained to management that those were clear signals that the institute‟s security is not enough hence putting the assets at high risk of theft and destruction.

Management explained that provision of security to such a wide area including experimental gardens is a challenge. However costs of recruiting local based guards to support those deployed by RPS were considered in the budget estimates of 2015-2016.

I advised management to plan for adequate security and ensure the institute land is fenced off. c) MBAZARDI Land encroachment by a Company Inspection of MBAZARDI land indicated that other encroachers have installed an illegal structure and a container on the institute land but management has not taken any action to have them evicted. Below is a picture of the illegal structures: Discussion with management indicated that the case is now before the courts of law.

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Containers and a structure illegally erected on the institute land.

I further noted that there were a number of encroachers on the institute land along Kasese road. These encroachers have started operating on the institute‟s land, an indication that there are no strong safeguards set up by management to stop them. There is a possibility that the entity land could all be grabbed in the near future thereby affecting the research activities of the organisation.

I advised management to pursue the matter with relevant authorities and ensure that the government land is recovered from the encroachers. Meanwhile, strong measures should be put in place to counter any further encroachment. d) Un compensated land - MBA ZARDI Institute During the inspection, I noted that the current construction of Mbarara by–pass by China Railway Seventh group (CRSG) contracted by UNRA affected the activities of the Institute on approximately 22.670 acres of land on plot 4 & 4a along Kabale road. It was evident that the water pipes had been destroyed, water troughs had been affected, EAAPP cassava garden destroyed, trees for animal shades and pasture for animals destroyed as indicated in the pictures below:

The by-pass that crosses the NARO land Part of the cassava that remained undestroyed

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A review of correspondences available revealed that the Institute was to be compensated for the development structures and crops destroyed to the tune of UGX.1,836,545,630 broken down as below;

Item Valued Amount Land 1,586,900,000 Development 5,786,200 Crops 4,310,000 Sub-total 1,596,996,200 Disturbance allowance 239,549,430 Total 1,836,545,630

However, at the time of reporting (December 2014), no compensation had been received. I noted that there was lack of adequate follow up of this claim with the relevant authorities.

The Accounting Officer explained that a follow up with UNRA to have the funds paid has not yet yielded results. I advised management to pursue the matter further and have the compensation resolved. e) Coffee Research Centre (COREC)-Kituza i) Outstanding fuel arrears-UGX.24m A review of the institution‟s documents revealed that there were outstanding fuel arrears worth UGX.24m to an oil company that were consumed during the year. However, there was no documentation detailing the outstanding fuel bill. Only fuel statements were availed for review but these lacked the purpose for which the fuel was consumed. I explained to management that payment of such claims without supporting documents could lead to misappropriation of funds.

The Accounting Officer explained that the bill was received after the financial year and its accuracy was being assessed. I advised management to verify the claim before settlement is made.

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f) National Forestry Resources Research Institute (NAFORRI) i) Use of the Guest House Inspection of the Institute‟s Guest house was carried out as a follow up of the issues raised in the previous audit. I noted that the 10 bed roomed Guest House requires renovation as its roof top, some walls and parts of the floor had developed cracks. In my previous report, I advised management to maintain the building to avoid further deterioration however, no action has been taken since the previous audit and the asset continues to deteriorate. This has affected the collection of revenue to the Institute.

The Accounting Officer explained that NARO engineer was asked to inspect the guest house and prepare technical reports and BOQs so that the estimates for renovation are included in the 2015-2016 budget, however the process has delayed.

I advised management to ensure that the repairs are carried out urgently and the assets put to use. ii) Destruction of property at Bulegeni Satellite Station Bulegeni Satellite station was attacked by a riotous mob of local people on the 27th February 2014. The Institute property was burnt to ashes that included buildings, office property, dormitory property, livestock, and crops. It was also indicated that the attackers stole UGX.1,500,000 (One million five hundred thousand shillings) which was in the cash box. Two people were reported dead during the incident; one a security guard hired from RPS to guard the Institute and another person who had come to graze animals on the Institute land.

Furthermore, I noted that staffs who were residing at Bulegeni also lost their property which included motor cycle, beddings, utensils, furniture, documents and clothes. As at the time of inspection (August 2014), it was reported that management was still compiling the list of the lost property. I noted that management delayed to compile the list.

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There was also no evidence that management has taken steps to have the lost assets valued with a view of quantifying the loss for subsequent reporting to appropriate authorities and financial statements. The Police report was also not availed for review.

The Accounting Officer explained that the list of destroyed property was available and that the government valuer would soon cost the property lost. It was further explained that the case was in Mbale High court and that the satellite was earmarked for renovation while Police is keeping guard of the property.

I advised management to quantify the loss in compliance with the regulations for subsequent action and reporting.

23.6 EAST AFRICA AGRICULTURAL PRODUCTIVITY PROGRAM (EAAPP)

a. Compliance with financing agreement provisions and GOU financial regulations A review was carried out on the project compliance with the credit agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GoU regulations.

b. General Standard of Accounting and Internal Control A review of the system of accounting and internal control was carried out and it was noted that management had instituted controls and measures to ensure proper accountability for the project resources except in the matter below;

i) Arbitrarily determined labour rates It was noted that all the Institutes implementing EAAP Project activities do not have uniform labour rates for similar activities. As a consequence supervisors were paying differing rates for the same activity in the same period. Examination of records/payments related to labour revealed that the rates were arbitrarily determined or were dependent on the bargaining ability of the activity supervisor

433 and labourers. Absence of standard or uniform rates at the institutes may lead to misuse of project funds. Besides, it makes it difficult to draw a realistic comprehensive work-plan/budget for a year.

The Accounting Officer explained that a uniform rate policy is being formulated to have this issue resolved.

I advised the Accounting Officer to expedite the process of formulating the policy to avoid eventual consequences. c. Status of Project Implementation A review of the status of project implementation revealed the following matters; i) Under absorption of funds

It was noted that the total project budget for the year was US $ 12,633,896 (32.8bn) against the total expenditure of US $ 9,007,795 (UGX.23.4bn). This resulted into under absorption of US $ 3,626,101 (UGX.9,426,703,017) representing 51% of the total receipts for the year of UGX.19,199,442,787. As a result, some of the project activities were partially implemented at the Institutes as summarized below;

Agency Budget ($) Actual Variance % Of Pending/Uncompl Expenditure ($) Absor eted Activity ($) ption NACRRI 4,905,304 4,078,723.89 826,580 83 Delayed civil works CASSAVA on office block construction. NACRRI 329,650 312,963.29 16,687 95 Delayed construction RICE works & Rice research initiatives BUGI ZARDI 380,416 235,633.83 144,782 62 Supply of tractors & WHEAT implements NALIRRI 783,930 390,681.76 393,248 50 Installation of

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Agency Budget ($) Actual Variance % Of Pending/Uncompl Expenditure ($) Absor eted Activity ($) ption DAIRY livestock unit, water RESEARCH reservoir. NARL VAC 767,340 641,370.11 125,970 84 Rehabilitation of food nutritional lab. NAGRIC & 1,760,561 1,360,704.49 399,857 77 Embryo transfer lab DB nearing completion and installation of equipment. MAAIF 251,327 76,648.11 174,679 30 Supply of office DAPM consumables, support Research on rice varieties. PCU 1,006,000 977,482.55 28,517 97 Capacity building in Procurement.

In view of the expected project closing date of 30th June 2015, I explained to management that the project is behind schedule which is likely to cause unnecessary project extension costs. Besides, failure to absorb the available project funds translates into under-performance that may lead to failure to achieve the project intended objectives in the scheduled time frame which could affect agricultural development in the country.

The Accounting Officer explained that the cause of this under absorption arose from delayed procurements due to the rigorous procurement procedures involved. However, a no cost project extension of six months has been applied and it is anticipated that the pending activities will be finalised.

I advised the Accounting officer to ensure all the planned activities are accomplished as scheduled.

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23.7 AGRICULTURAL TECHNOLOGY AND AGRIBUSINESS ADVISORY

SERVICES (ATAAS)

(a) Compliance with financing agreement provisions and GOU financial regulations A review was carried out on the project compliance with the credit agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applicable GOU regulations except in the following matters:

i) Mischarge of expenditure

A review of the project expenditures for the year revealed that expenditure to the tune of UGX.215,925,820 was wrongly charged on budget lines to fund activities that were not meant to be paid from the affected budget lines. The practice resulted into misrepresentation of expenditure balances in the financial statements and a diversion of project funds from the intended activities.

The Accounting Officer explained that since 2012, management has been requesting for a research code from Treasury to take care of all the research activities that are provided for in the Project Implementation Manual (PIM) and not appropriately aligned to the GOU chart of accounts but this request has not been fruitful.

I advised management to continue following up the matter with the Accountant General with a view of obtaining research code.

ii) Un-realized GOU Counter-Part funding

A review of the project agreement indicated that out of the total project cost of US $ 665.5 million, GOU was supposed to finance the major share of the project costs of US $ 497.3M (US $ 166M applicable to NARO) over a 5 year project period from 22nd June 2010 to 30th June 2015. However, I noted that since project inception to date, there has not been any contribution from GoU to the project. This contravenes the signed agreement and fulfillment of obligations. I explained to management that non fulfillment of the funding obligations affects the

436 implementation of the planned activities and the attainment of the overall project objectives.

The Accounting Officer expressed commitment to continue in dialogue with the responsible authorities to have the funds released.

The outcome of the above commitment is awaited.

A motor company was awarded the contract to supply 37 vehicles worth $1,109,593 in January 2013. However, as at the time of reporting (December, 2014) only 20 units had been delivered leaving a balance of 17 units yet to be delivered. Delay in delivery has exceeded the delivery deadline of 12 weeks from contract date as required. There was no evidence that management had started charging liquidated damages as required. I explained to management that Failure to charge the liquidated damages amounts to non-adherence to procurement procedures and may lead to loss of revenue.

The Accounting officer explained that the delay was caused by the late release of funds to cater for taxes for the 17 pickups. However, the taxes have since been paid and the registration process is ongoing.

I advised management to expedite the registration process and have the vehicles delivered.

(c) Status of Project Implementation A review of the status of project implementation revealed the following: i) Project Socio – economic impact assessment of Research

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The mandate of NARO is to carry out research and come up with improved varieties and disseminate the technologies by way of offering demonstration and advisory services to the farmers, carry out multiplication and distribution of seeds, implements and others. However, I noted that the socio-economic impact of research output on the stake holders especially farmers has not been evaluated and reported on so that it is shared or communicated to the stake holders.

NARO has not adequately documented and publicized the extent to which their research success has greatly contributed to the improvement of the incomes and life standards of the general population. There is a possibility that resources are spent on activities that may not have generated socio-economic benefits to the stakeholders and the citizens and therefore not realizing value for money benefits.

I advised management to ensure that a socio-economic impact assessment report is prepared for the benefit of all stakeholders.

ii) Under absorption capacity It was noted that the Project did not utilize funds worth UGX.26,287,401,192 during the year. This reflects a 71% increase in under-absorption capacity compared to last year‟s unutilized funds of UGX.15,371,395,463. As a result, a number of activities were partially implemented as summarized below:

Institute Annual Total release Budget % Uncompleted projects budget balance performance NACRRI 1,807,190,971 1,516,355,457 290,835,514 84 The rehabilitation of storied office block and screen house is still on going. Supply of pick up motor vehicle not done. NAFIRRI 890,739,460 785,741,351 104,998,109 88 Staffing gaps still exist. Only 10 technicians available. NAFORRI 839,671,451 649,780,150 189,891,301 77 The specialized machinery & equipment for research activities were not acquired. The digital and bench meter was not procured. NaSARRI 952,481,291 798,733,427 153, 747,864 84 The specialized machinery & equipment for research

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Institute Annual Total release Budget % Uncompleted projects budget balance performance activities were not acquired. Supply of pick up motor vehicle not done. NARL 1,734,394,795 1,432,965,648 301,429,147 83 Infrastructure & equipment were not procured and mobile applications. Supply of pick up motor vehicle not done. ABI ZARDI 475,912,628 404,050,087 71,862,541 85 Construction of screen house. Still on going BULINDI 497,151,128 472,635,723 24,515,405 95 Construction of screen house not completed yet. NGETTA 523,274,128 427,023,208 96,250,920 82 Construction of screen house on going. Supply of pick up motor vehicle not done. NABUIN 526,052,466 503,398,244 22,654,222 96 The rehabilitation of office block Still on going.

MBARARA 463,346,128 455,183,515 8,162,613 98 Development of ICT infrastructure and equipment not yet fully done. BUGINYANYA 79 Training and recruitment of 465,985,628 368,822,170 97,163,458 ICT specialists were not done Construction of screen house not yet done. RWEBITABA 95 ICT infrastructure and 485,794,091 461,285,729 24,508,362 equipment not fully developed. 9,661,994,165 8,275,974,709 1,386,019,456

From the table, it is noted that most of the planned civil works involving renovation of office blocks at all Institutes and building of laboratories were not carried out during the year as planned. I explained to management that failure to absorb the available funds may disrupt the achievement of the project objectives in the scheduled time frame leading to unnecessary project extension costs.

The Accounting Officer explained that there were unnecessary delays in procurement process but procurement contracts for civil works have now been awarded.

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I advised management to increase the supervisory role and ensure that the civil works are concluded within the stipulated period. iii) Delayed strengthening of Human Resource Under this project sub component the targeted staff establishment was 995 where 830 has been filled and 165 is still vacant. Of the un filled positions, I noted that out of the planned 268 scientists, 242 were filled leaving 26 un filled while out of 274 targeted staff technicians, 199 staff were filled leaving 75 gaps. I explained to management that this affects research work, one of the core activities of the project.

The Accounting Officer explained that for the last 2 years, NARO wage bill has not been increased and this has had a direct effect on the staffing levels. This was not in line with the plan which should have been fully actualized by July 2014.

I advised management to take up the matter with the responsible authorities and ensure that the staff gaps are filled as planned.

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ENERGY SECTOR

24.0 MINISTRY OF ENERGY AND MINERAL DEVELOPMENT

24.1 Mischarge of expenditure

Paragraph 400 (a) of the Treasury Accounting instructions (TAI), 2003, requires that all Government transactions shall be recorded in the books of account applying the Government of Uganda Chart of Accounts as prescribed by the Accountant General. In addition, Accounting Officers shall ensure that all financial transactions are properly coded.

Contrary to the above provision, the Ministry, charged UGX.3,038,506,327 on expenditure codes other than those for which funds had been appropriated. Mischarging expenditure is a sign of weaknesses in budgetary controls and leads to misstatement of the financial statements.

Though the practice of mischarging expenditure is declining at the Ministry, further budgetary discipline is required.

The Accounting Officer explained that additional measures will be put in place to further streamline the budget implementation process so as to avoid the practice of mischarging expenditure.

I have advised the Accounting Officer to strengthen supervision of the budget implementation and where necessary, re-allocation warrants should be sought.

24.2 Non Compliance with the Provisions of the Mining Act

a) Unremitted Royalties

By law, mineral royalties collected by the Ministry are shared between the Central Government (80%) through the UCF, and other stakeholders who include: districts, urban councils and individual land owners where mining takes place (20%) through Bank account No.000170148000002 in the Bank of Uganda.

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It was noted that UGX.5,659,692,377 was collected as mineral royalties through URA during financial year 2013/2014 but the 20% share was not distributed to the other stakeholders. This could have had a negative effect on the implementation of activities by district and urban councils whose budgets may have factored in the anticipated royalties.

The Accounting Officer explained that the royalties are collected through URA which is expected to transfer 80% and 20% of the collections from mineral royalties to the UCF and; the mineral royalties Sharing Fund Account, respectively. The latter portion, which was supposed to be distributed to the beneficiaries by the Ministry was not received on the Fund account.

I advised the Accounting Officer to expedite the distribution of mineral royalties to the bonafide beneficiaries to enable them execute their planned activities.

b) Failure to Collect Royalties and Surface Rentals from Former Holders of Exploration Licenses Section 105 of the Mining Act, 2003 states that, the assessed royalty on any mineral shall be due within thirty days from the date of assessment, and delay in payment shall attract an interest on the unpaid royalty at the rate of 2% per annum above the commercial bank lending rate as established by the Bank of Uganda.

Section 104 (1) of the same Act states that where the holder of a mineral right fails to pay any royalty payable by him or her on or before the due date, the Commissioner shall, by notice served on the holder, prohibit the holder from disposing of any mineral obtained or mined by him or her from the mining area concerned, or from any other mining area held by that holder, until all outstanding royalties have been paid or until an arrangement has been made, acceptable to the Commissioner, for the payment of the royalties, and the holder shall comply with the notice.

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It was however noted that 174 companies whose exploration licenses had expired had arrears of royalties and surface rent amounting to UGX.850,246,000 not collected by the Ministry. There was no evidence to show that the Ministry had made any attempts to collect the debts. Failure to collect the outstanding fees may result into a loss of revenue to the Government.

The Accounting Officer explained that collection of outstanding debts had not been done, but the Ministry was planning to collect the debts in accordance with the provisions of the Act.

I advised the Accounting Officer to take appropriate measures and collect the outstanding debts, and in future, to ensure that all royalties and surface rent due are collected in a timely manner.

c) Mining Lease Holders Failing to Submit Audited Financial Statements

Section 50 (2) (a) and 2 (c) of the Mining Act, 2003 obligates the holder of a mining lease to maintain and submit monthly to the Commissioner of the DGSM complete and accurate records of operations relating to his/her lease including a copy of his or her audited financial report showing the profits or loss for the financial year, and the state of the financial affairs of the lease within 90 days of the end of each financial year.

Contrary to the above provision, it was noted that the companies holding the licences listed in the table below had not submitted the required records and audited financial statements to the department for the past three years.

Compliance Compliance with section Mining Lease No. with section 50 50 (2) (c) (2) (a) 4651 Not Submitted Not Submitted 61 Not Submitted Not Submitted 127 Not Submitted Not Submitted 593 Not Submitted Not Submitted 594 Not Submitted Not Submitted 443

702 Not Submitted Not Submitted 248 Not Submitted Not Submitted

762 Not Submitted Not Submitted 842 Not Submitted Not Submitted

4063 Not Submitted Not Submitted 4064 Not Submitted Not Submitted 4128 Not Submitted Not Submitted I 4227 Not Submitted Not Submitted

n4474 Not Submitted Not Submitted 4478 Not Submitted Not Submitted

4603 Not Submitted Not Submitted t 1110 Not Submitted Not Submitted h e absence of audited financial statements, Management had no information on the profit or loss made by the lease holders, on which assessment for royalties payable is based. There is a risk that essential data is deliberately withheld and therefore the Ministry may not be able to make appropriate decisions regarding such licences.

Management indicated that it had noted the anomaly and undertook to start implementing the provisions of the Mining Act.

I advised the Accounting Officer to ensure that the companies submit the required records and accounts for the DGCM to be able to assess the royalties payable.

24.3 Budget Performance

Out of the appropriated sum of UGX.1,305,566,104,201 the Ministry received only UGX.189,656,857,225 resulting into a short fall of UGX.1,115,909,246,976 (85%), as indicated in the table below;

Budget Revised Budget Releases (UGX) % Funds not released % not (UGX) Relea (UGX) released s e Recurrent 6,917,210,169 6,278,124,062 91% 639,086,107 11.6

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Budget Revised Budget Releases (UGX) % Funds not released % not (UGX) Relea (UGX) released Development 1,298,648,894,032 183,378,733,163 14% 1,115,270,160,869 90.4 s Totals 1,305,566,104,201 189,656,857,225 15% 1,115,909,246,976 85% e

A review of the implementation of Ministry projects indicated that due to the insufficient release, a number of projects were not adequately funded, for example, Karuma hydro power project received only 3% of the appropriated amount, Mbarara- Nkenda/Tororo – Lira transmission line, Opuyo-Moroto interconnection and Kampala – Entebbe Expansion projects received no funding at all. Non-financing of the projects may lead to failure to fully implement them within the planned timelines.

In his response, the Accounting Officer explained that the low budget performance was due to less release of capital development funds which were intended for the development of large hydropower projects such as Karuma and Isimba, whose procurement processes had delayed to be completed. He further indicated that the Ministry would continue to liaise with the Ministry of Finance, Planning and Economic Development (MoFPED) to ensure that funds are released as planned.

I have advised the Accounting Officer to always implement all planned activities as intended so as to achieve the set targets and objectives of the Ministry.

24.4 Delayed Compensation of Project Affected Persons for the Oil Refinery

Land

The Government of Uganda through MEMD is undertaking an Oil Refinery Project in Kabaale, Buseruka Sub - County, Hoima District. Accordingly, a consultant was engaged to provide consultancy services for the implementation of the Resettlement Action Plan (RAP) for the project affected persons (PAP) living in the affected area.

The Chief Government Valuer (CGV) approved the RAP report and cleared 2,708 PAPs for compensation at an estimated cost of UGX.70,915,217,225.12 to pave way for the construction of the Refinery. However, by the end of the financial year 445

2013/14, only 1,836 (68%) PAPs had been compensated with a total of UGX.32,208,516,443. I explained to the Accounting Officer that delayed compensation of land owners may delay the commencement of project works. The Accounting Officer attributed the delays to; PAPs delaying to sign off the consent forms after valuation and verification, while others initially contested the valuation rates, and; Delays in the process, for example procuring land to resettle PAPs who opted for relocation, and renewal of the consultant‟s contract. He however indicated that all the issues had been addressed and the compensation exercise was moving on smoothly, and it was expected that the activity would be concluded by the end of June, 2015.

I await the outcome of Management„s commitment in this regard.

24.5 Staff Matters

a) Failure to Appraise Staff Performance

Section A-m (14)(a) and (C) of the Public Service Standing Orders provides that a staff performance appraisal report form shall be completed for each pensionable and non-pensionable officer and a copy submitted to the Responsible Permanent Secretary.

However, review of a sample of personnel files revealed that 12 officers had not been appraised for at least two financial years. Failure to appraise staff hinders assessment of their performance, identification of training gaps and commendation of good performance, which ultimately renders staff development difficult.

The Accounting Officer attributed the anomaly to the officers‟ reluctance to complete the appraisal forms although they had been reminded in several meetings. He indicated that the officers had been reminded about the same.

I advised the Accounting Officer to ensure that the human resource department follows up with all the officers and ensure that they are appraised.

b) Irregular Extension of Probation Period

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Section A –d (1), (12) and (13) of the Public Service Standing Orders provides that, probationary appointment shall last six months, and may be extended only once for a period not exceeding six months, upon the responsible officer making a submission to the relevant Appointing Authority for the extension.

It was noted however that 15 staff had been on probation for more than a year without evidence that their probationary period had been extended. A prolonged probationary period has the effect of reducing staff morale, and may result into inefficient performance by the affected staff.

The Accounting Officer attributed the delay to the officers, who had delayed to complete their appraisal forms. He further explained that a number of submissions had been made to the Public Service Commission (PSC) seeking confirmation of officers who had completed their appraisal forms.

I advised Management to appraise all the staff whose probationary period had expired and take appropriate action in accordance with the Standing Orders.

24.6 Management of Fixed Assets

a) Lack of a Comprehensive Fixed Assets Register

Paragraph 805 of the TAI requires all purchases of plant and tools to be charged to a plant and tools item in the ledger and a fixed assets register to be maintained to show the location of plant and tools, furniture and equipment. It was observed however that the Ministry did not comply with this provision, as explained below:  A review of the Board of Survey Report for the MEMD for the financial year 2013/2014 revealed that although the asset register was in place, it did not meet all the requirements of the TAI. Some items did not have cost prices and values such as the buildings of the DGSM and the Petroleum Exploration and Production Department (PEPD), and land in Moroto. The report further revealed that the asset register did not indicate the location, cost and/or users of various assets in the categories of computers, office equipment and vehicles, but only indicated the department.  The inspection of the DGSM laboratory further revealed that a number of the laboratory equipment were not included in the asset register and were not 447

part of the Board of Survey Report for the FY 2013/2014. Although an inventory list of the equipment was provided, it was not possible to ascertain the cost of the equipment as it was not indicated.

Without a complete asset register for all the Ministry assets and complete information such as user and location, there is risk of loss of assets without a trace.

The Accounting Officer indicated that the Ministry had started the process of updating the assets register as required by the TAI. I await the outcome of Management‟s action. b) Property Without Certificates of Title

The Ministry lacked certificates of title to its property in Entebbe, plot 21-29 Johnstone road, on which the departments of PEPD and GSMD are housed and for the land on which the regional offices in Gulu, Kabale, Tororo, Moroto, Kabarole and Mbarara are situated.

Documents available at the Ministry show that there were individuals who claimed to have titles of ownership, and a case of land grabbing involving plot 10a located on Hill Road and plot M26 Kibira Road (Mirza Road) were reported to the Police.

In the absence of land titles, the Ministry faces the risk of losing the land.

Management explained that significant efforts had been made to secure the land titles of Plot 21-29 Johnstone Road Entebbe, and a request was made to the Commissioner Land Registration to cancel the forged titles for the pieces of land that had been grabbed and issue titles to the Ministry.

I advised the Accounting Officer to expedite the process of obtaining the certificates of ownership/ land titles for the land so as to avert the risk of losing the land. c) Assets Handed Over From Exploration Area 4B and 5

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The provisions of the Production Sharing Agreements (PSAs) require that all equipment and other assets, whether fixed or movable acquired and owned by the licensee for use in petroleum operations shall become the property of the Government upon ceasing operations. Review of documents showed that in February 2013 and August 2013, two companies, handed over assets worth USD.1,521,687, (NUL- USD.85,815 and DUL – USD.1,432,869) to the Government. The following matters were noted; a) Although the Ministry acknowledged receipt of the assets, the assets were not added to the fixed assets register, and their physical location could not be ascertained during the audit. b) Three pick-up trucks (UAK 724C, UAK 772C and UAK 697C) and a motorcycle (UDE 115H) handed over to the Government had not been registered with Government number plates, rendering their ownership uncertain.

I informed Management that there is a risk of misappropriation of the assets.

The Accounting Officer explained that, the items in good condition were distributed for use in the respective departments, while the obsolete ones were boarded off and disposed of as per the PPDA procedures.

I advised Management to ensure that all the assets handed over are clearly marked for identification, registration and entered into the assets register of the Ministry.

24.7 Funds Not Accounted For

a) Allowances and Workshop Expenses

Paragraph 217 of the TAI requires advances to be accounted for without delay. It was observed that UGX.98,566,501 paid to staff of the Ministry to undertake official activities remained unaccounted for by the time of audit. In the absence of the relevant accountability documents, it was not possible to confirm that the funds were used for the intended purposes.

I advised the Accounting Officer to ensure that advances are accounted for by the concerned staff. 449

b) Travel Abroad

UGX.24,323,000 was paid to facilitate officers to travel to Denver, USA to participate in the Unconventional Resources Technology Conference. However the expenditure was not adequately supported with invitation letters, back to office reports and copies of boarding passes for passports. In the absence of such documentation it was not possible to ascertain that the trips were beneficial to the Ministry. I advised the Accounting Officer to ensure that the funds are properly accounted for.

24.8 ELECTRICITY SECTOR DEVELOPMENT PROJECT – MEMD

a) GoU Counterpart Funding During the year under review, the Government of Uganda released UGX.11,530,031,689 (USD.4,612,012.68) in respect of counterpart funding for the project out of which UGX.11,420,000,000 was expended. Examination of the expenditure records revealed the following matters;

 UGX.7,523,718,204 was reflected on the Integrated Financial Management System (IFMS) payments file as having been expended on the project activities. The expenditure for the balance of UGX.3,896,281,796 could not be traced to payments for the project. In the circumstances, the funds remain unaccounted for.

Whereas management explained that the said funds were not expended directly through IFMS but rather transferred to UETCL for implementation of RAP activities, there was no documentary evidence to this effect.

 In my report to parliament for the year ended 30th June 2013 I indicated that UGX.5,133,052,162 was expended on non project activities and reported project expenditure was overstated in this regard. No adjustment to the financial statements has been made.

Additionally out of the UGX.7,523,718,204 spent directly by the Ministry, UGX.1,650,707,968 was again spent on non project activities. Therefore, 450

cumulatively the project financial statements are misstated to the tune of UGX.6,783,760,130.

The practice of expending project funds on non-qualifying activities amounts to diversion of project funds and negatively impacts on the achievement of the overall project objectives. In addition, the reported expenditure is overstated in this regard as the diverted funds did not contribute to the performance of the project.

 The counterpart funds released by the Government of Uganda amounting to UGX.11,530,031,689 (USD.4,612,012.68) for funding for the project activities were not deposited on the project account. In the circumstances, the funds are prone to being diverted to other activities and monitoring their utilization is rendered difficult.

Management in response explained that Treasury had been requested to activate the project account to facilitate deposit of funds but approval was not granted and undertook to follow up the matter with Treasury.

I have advised management to;  account for the funds and in future ensure that funds meant for the project are transferred to and expended through the project account,  restore the diverted funds to the Project Account for utilisation on planned activities, and adjust the financial statements accordingly, and  ensure that all counterpart funds are deposited on the project account as required under the project agreement. b) Under absorption of funds

The project commenced in January 2012 and is expected to close in February 2017. It was noted that there is slow implementation of the project activities. For example, while USD.614,150.26 remained unutilised during the previous financial year and was available for utilisation during the current financial year on a number of activities, it was noted that by 30th June, 2014, only USD.343,192.82 had been absorbed, leaving a balance of USD.270,957.43. In the circumstances, there is a

451 risk that the overall project objectives may not be achieved. In addition, management risks funding sanctions from the Development Partners.

Management explained that most of the project activities were at the procurement stage with all Consultants already engaged to support the procurement of contractors. Management anticipated that the absorption of the funds would improve when the major activities of the project commence. I have advised Management to strengthen its internal capacity to implement the project planned activities and allow substantial disbursement of funds by the bank. c) Manual Financial Management System

Section II (B)(4) of the Projects‟ financing Agreement states that the “Recipient shall, not less than six (6) months after the effective date install or cause to be installed within the Ministry a computerized accounting and financial management system satisfactory to the Association”. However, it was noted that the accounts department has continued to generate accounts manually using excel spread sheets. I informed management that, this may lead to inaccuracies in financial reporting.

Management undertook to seek approval from the World Bank to procure an Accounting package with a view to improving the security and accuracy of the accounting records. I await management‟s commitment in this regard. d) Role of Internal Audit Function

According to the PAD, it is very important that internal audit unit conducts a risk based audit on project internal controls periodically, such that appropriate corrective actions are taken to address any weaknesses found. It was noted that no transactional and systems audits had been conducted on the Project activities by the internal audit. In the circumstances, there is a risk of ineffective internal controls not being identified for corrective measures to be taken.

Management explained that the Internal Audit Department had been conducting reviews of project operations and periodically advising management on measures to improve project operations without formal documentation. However, management undertook to advise the department to document their findings. I 452

have advised the project management to ensure that internal audits are carried out and reports issued on a regular basis as required in the Project‟s financing agreement.

24.9 MBARARA-NKENDA & TORORO-LIRA POWER TRANSMISSION LINES PROJECT – 31ST DECEMBER 2012 a) Delays in acquisition of Rights of Way It is a requirement under best practices that a Right of Way (ROW) is acquired under the Resettlement Action plan (RAP) to allow implementation of works without interferences.

It was however noted that works on a number of locations on the transmission lines had not started at the time of audit due to delays in obtaining Rights of Way from the Project Affected Persons. Delays in obtaining Rights of Way impact negatively on the timely completion of the project.

Management acknowledged the delays which they attributed to delayed approval of RAP reports by Chief Government Valuer (CGV), disputes with Landowners, family disputes, absentee landlords, and speculation among landowners. They further explained that all efforts were being made to address the causes of the delays for instance through frequent follow-ups with the CGV to expedite the process of approval.

I have advised the Project Management to devise means of coming to terms with the project affected persons in order for them to give Rights of Way for the transmission lines to be erected.

24.10 MBARARA-NKENDA & TORORO-LIRA POWER TRANSMISSION LINES PROJECT – 31ST DECEMBER 2013 a) Delays in construction of PAP Houses M/S Lamba Enterprises, the contractor who undertook the construction of houses for the Project Affected Persons (PAP), failed to complete the construction works due to financial problems. The last construction works were done in January 2013 453 and as of 31st December 2013, only 3 of the 50 planned houses had been constructed.

Although management was in the process of procuring another firm to complete the construction works, this had not been done by the time of the audit. Delays to construct houses for the affected persons are likely to delay the completion of the project. The project is also exposed to a risk of loss of the unrecovered money advanced to the Contractor, (USD.15,193).

Management explained that a new contractor had been procured and a kick-off meeting held. In addition, UETCL wrote to the PPDA to ban the previous contractor for abandoning site. It was further stated that out of UGX.474,445,180 advanced to the previous contractor, the outstanding balance of UGX.41 million was being pursued through legal mechanisms.

I advised the Project management to ensure that the new contractor mobilizes and starts the construction works to enable completion of the project in time. Meanwhile, I await the outcome of the legal proceedings aimed at recovering the balance. b) Delays in processing PAPs‟ Land Titles

As part of the requirements of the project resettlement and compensation program, Project Affected Persons (PAP‟s) were required to deposit their land titles with UETCL in order for the project to curve out land acquired for Transmission Lines. Whereas the payments had been made to the PAPs, it was noted that most of the land titles had not yet been returned to them at the time of the audit. In the circumstances, disputes may arise with the PAP‟s leading to legal actions being taken against the project.

Management explained that the process of land acquisition and transfers required authentication, proof of ownership and the involvement of several stakeholders‟ right from the Parish Land Committees (PLCs) to the Land Offices. The team further stated that UETCL was in possession of the said titles for mutation purposes. The process of mutation & transfers was affected by the delays in the land office. 454

I advised management to take up the matter with the relevant authorities and Ministry of Lands with a view to expediting the transfers by the Lands Office.

24.11 INTERCONNECTION OF ELECTRICAL GRIDS OF NILE EQUATORIAL LAKES COUNTRIES (NELSAP) UGANDA – 31ST DECEMBER, 2012 a) Review of formal Enterprise wide risk management policy, procedure and plan During the review of risk management policy and procedures, the following were observed:  It is not extended to various projects implemented by UETCL  There is no formal reporting structure (Risk committee, Risk department) whereby the risk related activities are executed by internal audit.

Management was advised to consider making the various projects implemented by UETCL part of risk management policies and procedures.

Further management was advised to amend the policy and procedures such that they include appropriate and regular reporting structures.

Management explained that the risk is done internally by the project managers through the Head of Department who Reports to Management and Board on a Quarterly basis.

b) Review of Audit Committee Charter:

It was observed that:  The Audit committee charter was not reviewed and formally approved by audit committee since 2008, though charter requires review, revision and approval every 3 years.

 Management charter has not been reviewed and approved since 2008, though charter requires review every 5 years.

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Management explained that the management charter was not yet due for reivw by the end of the financial year under audit. However, it was scheduled to be reviewed after 2013.

Management was advised to thoroughly review, revise and approve the audit committee charter in order to strengthen the monitoring controls required to address various risks associated with current operations. c) Delay in implementation of the Resettlement Action Plan (RAP)

In addition to the observation identified, it was also observed that the RAP which was supposed to have been approved by January 2011, was not yet approved by the end of 2011.

The delayed approval of the (RAP) within the timelines has subsequently lead to the late implementation of the RAP.

Management explained that the RAP report approval is an external process because the approval is vested in the office of the Chief Government Valuer (CGV) in the Ministry of Lands. The CGV handles all infrastructure projects in the country and the delays have been noted by various parties. However, the approval was later achieved and the process of compensation is on-going and currently more than 79% and 78% are compensated for Bujagali-Tororo and Mbarara-Mirama respectively.

Management was advised to ensure that RAP is implemented in time as required by the developments partner‟s guidelines. d) Delay in handover of sites to the contractor

During the field visits and interviewing the contractors, it was observed that there is significant delay in handing over the sites to contractors as a result of either delay in approval of plans or settling the claims of PAP and RAP.

The compensation progress report as on December 31, 2012 is as under;

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Compensation progress Percentage (%) LOT A - Mbarara - Mirrama 49%

LOT B - Bujagali - Tororo 48%

Management explained that the delay to hand over sites is due to a number of factors such as delays to approve the RAP report by CGV, disputes with landowners, family disputes, processing delays, absente land lords, speculation which leads to landowners selling to new persons leading to new claimants.

Management was advised to expedite the RAP implementation. e) Inappropriate handling of source documents

During the review of expenses, it observed that; i. PAP Compensations

It was noted from the sample of PAP files for verification, many PAP files were misplaced/disorganized and were not availed in time.

Management explained that it is important to note that the Audit exercise coincided with an on-going exercise to digitise the RAP processes and records into the Way Leaves Information Management System. The Exercise required files to be assembled to the scanning teams at different locations, (Jinja, Lugogo and Hannington) therefore their timely retrieval when instantly required posed a challenge.

Management further explained that the process of Land Acquisition and transfers is not instantaneous. The process requires Authentication, proof of ownership and the involvement of several stakeholders right from the PLCs to the Land Offices. Most of the paid land is customary owned and therefore the process of transfer is handled at a later stage as long as clearance for construction of the transmission line is achieved. Registration of transfer forms is done after the mutation process has been completed.

Management was therefore advised to develop a strong control over maintenance and safeguarding the physical files that is periodical physical verification of number 457 files and accurate records for movements in files. i. Lack of transfer of ownership to of NELSAP acquired land

From the reviewed samples, it was noted that; a) PAP land transfer forms were not signed by appropriate authority of UETCL, yet payments were made in full. b) PAP land transfer forms have not been registered with land office.

Both the above are contrary to the provision of the Project Implementation manual, where the land titles are supposed to be obtained before full payment to the PAP.

Management explained that approval is given to the professional staff whose CVs are documented in the Bid of the Lead consultant. These are evaluated and approved accordingly. However, the mentioned staff belonged to a sub consultant engaged by the main consultant as clerk of works, although they are engineers.

Management was advised to ensure that the process of transfer of title of land into UETCL names is expedited. Further management was also advised to keep in mind the disbursement process; which should be in line with project implementation manual.

Further still it was noted that non compliance with the conditions stated in the manual, may create a future financial loss to the NELSAP.

ii. Lack of approval of key field engineers

We have not received the evidence of below missing approval for change of professional field engineers:

Missing documented apporvals Consultant Edward Byaruhanga AECOM/ RSW

Paul Kasozi AECOM/ RSW

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Management was advised to make sure that any change in approved staff must be approved by a consultant.

iii. Project fixed assets monitoring:

It was noted that the projects fixed assets are were not engraved/tagged, labeled with NELSAP project identification codes and there was no evidence of regular verifications.

Management explained that the UETCL assets are engraved and managed through the main Corporate Assets Management arm. However, improvements to add inscriptions to identify project assets will be implemented.

Management was advised that project assets be tagged/labeled with NELSAP identification codes and periodic counts should be performed and reviewed for all assets, with count results reconciled to the fixed asset register by individuals.

iv. Non compliances to withholding tax provisions

As per Section 119 of the Income Tax Act Cap 340, UETCL is liable to deduct withholding tax @ 15% on each payment made to any resident. However, UETCL did not remit the deducted WHT @ 15% on payments made to RSW International (AECOM) to URA by the time of this audit.

Management explained that deduction of WHT for RSW International (Acecom) is provided for but awaits cash release from the same treasury (MoFPED) so that it can be paid to URA, the collecting arm of the same Treasury.

Management further explained that for all donor based payments, the taxes are part of counterpart funding and therefore a GoU obligation. Management was advised that non-deducted WHT from previous payments should be deducted from subsequent payments and paid to URA at the earliest. Moreover in future, it should be fully complaint to the provisions of the income tax act.

24.12 INTERCONNECTION OF ELECTRICAL GRIDS OF NILE EQUATORIAL LAKES COUNTRIES (NELSAP) UGANDA – 31ST DECEMBER, 2012

459 a) Review of formal Enterprise wide risk management policy, procedure and plan During the review of risk management policy and procedures, the following were observed:  It is not extended to various projects implemented by UETCL  There is no formal reporting structure (Risk committee, Risk department) whereby the risk related activities are executed by internal audit.

Management explained that risk management in projects is assessed during feasibility study as well as Environment Assessment/Resettlement Action Plan (RAP) preparation. In addition, the risks are identified and assessed during the preparation of the Project Implementation Manual (PIM).

Management explained that the risk is done internally by the project managers through the Head of Department who Reports to Management and Board on a Quarterly basis.

Management was advised to consider making the various projects implemented by UETCL part of risk management policies and procedures.

Further management was advised to amend the policy and procedures such that they include appropriate and regular reporting structures. b) Review of Audit Committee Charter: It was observed that:  The Audit committee charter was not reviewed and formally approved by audit committee since 2008, though charter requires review, revision and approval every 3 years.

 Management charter has not been reviewed and approved since 2008, though charter requires review every 5 years.

Management noted the audit comment and said that the Audit Committee Charter is in the process of being reviewed accordingly.

460

Management further explained that the management charter was not yet due for review by the end of the financial year under audit. However, it promised that the Charter was scheduled to be reviewed after 2013.

In addition to the observation identified, it was also observed that the RAP which was supposed to have been approved by January 2011, was not yet approved by the end of 2011.

The delayed approval of the (RAP) within the timelines has subsequently lead to the late implementation of the RAP.

Management was advised to ensure that RAP is implemented in time as required by the developments partner‟s guidelines. d) Field Visits i. Delay in handover of sites to the contractor During the field visits and interviewing the contractors, it was observed that there is significant delay in handing over the sites to contractors as a result of either delay in approval of plans or settling the claims of PAPs and RAP.

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The compensation progress report as on December 31, 2012 and 2013 is as under;

Compensation Progress Percentage (%) LOT A – Mbarara - Mirrama 49% LOT B – Bujagali - Tororo 48%

Management noted the audit comment and explained that the delay to hand over sites is due to a number of factors such as delays to approve the RAP report by CGV, disputes with landowners, family disputes, processing delays, absente land lords, speculation which leads to landowners selling to new persons leading to new claimants.

Management was advised to expedite the RAP implementation. ii. Inappropriate handling of source documents

During the review of expenses, the following was observed; a) PAP Compensations

It was noted from the sample of PAP files for verification, many PAP files were misplaced/disorganized and were not availed in time.

462 line is achieved. Registration of transfer forms is done after the mutation process has been completed.

Management was therefore advised to develop a strong control over maintenance and safeguarding the physical files that is periodical physical verification of number files and accurate records for movements in files. b) Lack of transfer of ownership to NELSAP acquired land

From the reviewed samples, it was noted that;

 PAP land transfer forms were not signed by appropriate authority of UETCL, yet payments were made in full.  PAP land transfer forms have not been registered with land office.

Both the above are contrary to the provision of the Project Implementation manual, where the land titles are supposed to be obtained before full payment to the PAP.

Management explained to the audit team that the process of Land Acquisition and transfers is not instantaneous. The process requires Authentication, proof of ownership and the involvement of several stakeholders‟ right from the PLCs to the Land Offices. Most of the paid land is customary owned and therefore the process of transfer is handled at a later stage as long as clearance for construction of the transmission line is achieved.

Registration of transfer forms is done after the mutation process has been completed. Management explained further that for titled Land, UETCL is in possession of the said Titles for mutation. In cases titles are not available, 70% of the funds is paid so that the PAPs allow construction activity to take place and when titles are presented, the 30% is cleared. All this is done through memorandums of understanding between land owners and the company. The process of transfers is also affected by the delays in the land office such as the recent computerisation when all land offices in the country closed, and even after opening, the process has not resumed smoothly. 463

Management was advised to do the following;  To ensure that the process of transfer of title of land into UETCL names is expedited.  Payment authorities should keep in mind the disbursement process; which should be in line with project implementation manual.  Non compliances with the procedural manual, may create a future financial loss to the NELSAP. c) Lack of approval of key field engineers

We have not received the evidence of below missing approval for change of professional field engineers:

Missing documented apporvals Consultant Edward Byaruhanga AECOM/ RSW

Paul Kasozi AECOM/ RSW

Management explained that the approval is given to the Key professional staff whose CVs are documented in the Bid of the Lead consultant. These are evaluated and approved accordingly. However, the mentioned staff belonged to a sub consultant engaged by the main consultant as clerk of works, although they are engineers.

Management was advised to make sure that any change in approved staff must be approved by a consultant. d) NELSAP Physical implementation

During the time of audit, the following was noted; a) There was a lot of pending work with an estimated delay of about 1 year on Lot B and 6 months on both Lots A and C.

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There is a risk that the funding period will expire before full project implementation and all unclaimed funds will attract a surcharge in form of interest expense to the Government.

The UETCL management promised that it will strive to expedite the process of handing over the corridor to the contractor as soon as it acquires the remaining portions. b) It was also noted that the earthing resistance of the foundation installation was not measured after back filling as provided for in the contract.

Management explained that the tower foundation installations were still in work in Progress and all criteria for finalising them will be met.

Management further explained that the earthing of the foundation installations is a quality conformity requirement by all known electrical installations. It will be done after tower erection. After foundation back filling and tower erection, extra earthing is applied on two tower legs on a diagonal (Lattice tower), It is at this point that earthing resistance is measured and a comparison made against the recommended standard. The Project Manager will ensure that the measurements are done once all erection and leg earthings are complete.

Management was advised to do the following;

 Ensure that the earthing resistance of the towers is measured and improved upon through extra earthing pits before stringing of the conductors can be done and;  Ensure that in rocky places, soil for backfilling be brought from other areas for good earthing of the system. c) It was also noted that the number of supervisors on the consultant‟s team were not adequate. For example a stretch of LOT A with five Gangs operating at the same time was being supervised by one consultant engineer and LOT B which had over three Gangs was also being supervised by one consultant engineer.

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It was noted that there may be a risk of not attaining the agreed tower foundation.

Management explained that earlier in the contract, the Consultant was requested to submit a proposal for enhanced supervision. This was received, reviewed and forwarded to the Financier for a no-objection which was declined. However, UETCL.

Management was advised to consider increasing the number of supervisors for adequate supervision.

Contractor does not maintain accurate and reliable quantitative records for the movements, use and balance of stocks.

In the absence of the accurate records, there is a risk of not ensuring that all inventory items purchased are appropriately used for the project and no frauds have taken place.

Management was advised to maintain the appropriate stock records and consultant the consultant should periodically review and verify the physical stock and directly report to the UETCL management.

No test results to ascertain grade of steel being used. Management was advised to ensure that a sample for each batch is tested to ascertain the correctness of the steel used.

No toilet facilities at field active sites.

Management was advised to ensure that waste disposal is well managed by the contractor at all active sites. d) Unrecorded liquidated obligations It was observed that NELSAP follows a modified cash basis of accounting where by expenses are recorded when paid modified by accruing for un-liquidated obligations at the reporting period

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However, we observed that un-presented cheques which was paid to PAPs was not recorded in the books of NELSAP and still showing under reconciliation of Stanbic Bank account.

Management was advised to disclose these obligations in their quarterly/yearly financial reporting to the development partners and other reporting authorities.

e) Project fixed assets monitoring: It was noted that the projects fixed assets were not engraved/tagged, labelled with NELSAP project identification codes and there was no evidence of regular verifications.

Management was advised to label all the project assets with the project NELSAP identification codes and periodic counts should be performed and reviewed for all assets.

f) Unremitted withholding tax It was observed that following amount withheld from suppliers yet not remitted to the Uganda Revenue Authority: Supplier Date deducted Amount (US$) AECOM Jan 2013 97,340 AECOM Feb 2013 97,340

Management was advised that withholding tax deducted on payment should be promptly remitted to URA to reduce the future penalty.

24.13 ENERGY FUND a) Lack of Operational Guidelines for the Fund In my report to parliament for the year ended 30th June, 2013, I pointed out that the Fund lacks operational guidelines for implementation of its activities and financial reporting. By close of the current year‟s audit the issue remained outstanding. Under the circumstances, there is risk of uncoordinated operation of the Fund resulting into sub-optimal decision making.

467

Management explained that the matter had been communicated to the Accountant General and that interactions between the Ministry of Energy and Mineral Development and the Office of the Accountant General were ongoing.

I advised management to expedite the process of developing the guidelines without further delay. b) Unauthorized Expenditure Reg. 4 (2) of the Energy Fund Regulations, 2008 provides that monies shall not be withdrawn from the Fund unless the withdrawal has been duly authorised for a specific purpose of the Fund. In addition, section 9 (6) of the Public Finance and Accountability Act, 2003 provides that no expenditure shall be incurred by a special Fund except under the authority of a warrant signed by the Minister of Finance and addressed to the Accounting Officer.

Contrary to the above provisions, UGX.10,432,195,553 was paid out of the Energy Fund without evidence of the requisite authorisation by the Minister responsible for Finance. I pointed out a similar scenario in my report for the previous year.

Payment without authority exposes the money in the Fund to the risk of misappropriation which would undermine the objectives for which the Fund was established.

Management explained that that it had running contracts whose obligations had to be met using proceeds of the Energy Fund in anticipation that authority to utilize the proceeds of the Fund would ultimately be granted by the Minister.

I have advised management to always ensure that all withdrawals from the Fund are authorised by the Minister as required by law. c) Direct Payments from the Energy Fund A sum of UGX.11,218,827,049 was paid out of the Fund directly to Energy Infra tech Ltd, a service provider providing consultancy services for the supervision of

468

construction of Karuma Hydropower project instead of making transfers to the Hydro power development unit of the Ministry for subsequent disbursement. It was noted that in the previous year UGX.7, 070,240,250 had been paid out in the same manner. The practice of making direct payments from the Energy Fund Account turns it into an ordinary operational account. A similar matter was pointed out in my report for the previous year.

I informed management that the practice undermines the strategic intent of the Fund.

Management explained that, a request to the Accountant General to open an operational account for the Energy Fund had not been cleared by the end of the financial year. It was further stated that the Hydro power development unit has since been absorbed into Uganda Electricity Generation Company Limited (UEGCL).

I advised management to follow up the matter of an operational account with the Accountant General without further delay. d) Unimplemented Activities The Ministry policy statement provided for implementation of the following activities using the Energy Fund;

S.No Activities Estimated Costs (UGX Bn) 1 132 KV transmission line from 70.2 Kabulasoke to Hoima, including substations. 2 132KV transmission line from Lira to 50.7 Gulu to Agago, including substations. 3 Nyagak 111 hydro power project. 22.425 469

S.No Activities Estimated Costs (UGX Bn) 4 MW Maziba small power plant. 7.397 Total 150.722

It was however noted that none of the activities was implemented. Non implementation of the planned activities undermines the intentions of the Fund.

Management explained that the necessary Funds were not released by the Ministry of Finance.

I advised management to continue liaising with the Ministry of Finance, Planning and Economic Development together with relevant stakeholders to have the Funds released.

24.14 STRENGTHENING THE MANAGEMENT OF OIL AND GAS SECTOR IN UGANDA PROGRAMME (SMOGP) a) Inconsistencies in the Accounting and budgeting periods Section 8.0 (3) of the programme document requires that annual financial statements and budget should be submitted to Norway (Ministry of Foreign Affairs) within three weeks before the Annual Meeting each year to give complete and detailed information on the financing of the Programme. However, it was noted that whereas the Programme follows a calendar year budget cycle, the financial statements are prepared for the period July to June in accordance with the Government of Uganda fiscal year. In the circumstances, analysis of the programme's trends in performance is rendered difficult. Management explained that quarterly expenditures were made against approved quarterly budgets for the calendar year as provided for in the annual meeting and the four (4) quarters that make a financial year were analysed. However, management indicated that in the event of new programmes, exemptions would

470 be made so that the financial statements follow the Donor period. I have advised management to align the budget and the GoU financial reporting periods.

471

HEALTH SECTOR

25.0 MINISTRY OF HEALTH

25.1 Mischarge of Expenditure

Paragraph 156 of the TAI prohibits transfer of funds available on one item or sub item of expenditure to another save, on the authority of a virement warrant. It also prohibits charging expenditure to items merely because funds are available on a particular item. However, It was noted that out of the appropriated expenditure of UGX.45,794,208,890, a total of UGX.2,644,401,389 (5.7%) was charged on codes other than those for which funds were appropriated. Though there was an 80% decrease from UGX.13,431,161,682 mischarged in the previous year, there is need for further measures to stop the practice, as it contravenes budgetary controls and distorts the intentions of the appropriating authority.

Management indicated that further controls in budget implementation would be undertaken to reduce the mischarge. I await the results of Management‟s efforts.

25.2 Payables

Included in the payables balance of UGX.10,815,916,944 in note 26 to the financial statements are long outstanding liabilities in respect of UMEME (UGX.3.131 billion), NMS (UGX.3.77 billion), JCRC (UGX.1.1billion), UTL (UGX.127 million) and NWSC (UGX.61 million) which may result in discontinuation of essential services to the Ministry.

In response, the Accounting Officer stated that he was liaising with MoFPED to settle the liabilities to enable sustainability of services.

I advised Management to ensure that resources are set aside to settle the liabilities without further delay.

25.3 Expired Letters of Credit 472

The Ministry of Health had expired letters of credit amounting to UGX.696,965,456 in respect of settlement of liabilities with various construction companies at the end of the financial year. There was however no evidence of renewal of the LCs or a mechanism of settling the liabilities which may result in litigation.

The Accounting Officer indicated that a request to MoFPED for renewal of the LCs was not responded to. I advised Management to continue liaising with MoFPED to ensure that resources are set aside to settle the liabilities without delay.

25.4 Nugatory Expenditure

A local Construction firm was contracted by the Ministry to undertake various projects between 1997/1998 and 2005/2006 at a total cost of UGX.4,419,818,390. The projects included;

i. Reconstruction of the Ministry of Health Headquarters; ii. Rehabilitation of Jinja Hospital; iii. Rehabilitation of sewerage, water reticulation and plumbing installation for Entebbe Hospital, and iv. Construction and equipping of Health Centres in Kamuli and Kisoro Districts.

However, owing to delayed settlement of the contractual sum, interest of UGX.2,116,126,197 was charged to the Ministry. The expenditure is considered wasteful, since it would have been avoided if the bills were settled promptly. Besides, the interest charge continues to accumulate with further delays in settlement of the bills.

In response, the Accounting Officer explained that the entire contract was being reviewed by the Internal Audit section of the Ministry, after which a final position would be communicated to all stakeholders.

I advised the Accounting Officer to expedite the review process and liaise with the Ministry of Finance, Planning and Economic Development (MoFPED) to settle the bills without further delay to save public funds from wastage.

25.5 Budget Performance 473 a) Revenue Performance

Out of the budgeted revenue of UGX.473.99 billion, the Ministry received only UGX.291.62 billion, resulting into a shortfall of UGX.182.37 billion (39%). It was noted that the component supported by Development Partners suffered the biggest shortfall amounting to UGX.171.7 billion (41%) as shown in the table below;

Particulars GoU (billions) Donor (billions) Total (billions)

Approved budget 57.32 416.67 473.99 Released funds 46.70 244.92 291.62 Shortfall 182.37 % shortfall 38.48

As a result, various planned activities were not implemented such as construction of the Central vaccine store, District vaccines stores and staff houses in the hard to reach areas. Failure to construct stores for vaccines and staff houses has the effect of constraining immunisation programmes and motivation of staff in hard to reach areas respectively.

In response, the Accounting Officer explained that the funds were carried over to the FY 2014/2015 and would be applied to the planned activities.

I advised the Accounting Officer to continue liaising with MoFPED and other stakeholders to ensure that appropriated revenue is realized in a timely manner to be able to meet the MoH and sector objectives. b) Low Absorption Capacity for Global Alliance for Vaccines Initiatives (GAVI) The Global Alliance for Vaccines Initiatives (GAVI) was launched in 2000 to improve access to immunisation services for children in Uganda. The Project‟s main objective is to contribute to strengthening Uganda‟s health system to deliver the National Minimum Health Care Package (NMHCP), including immunization in an efficient, equitable and sustainable manner for reduced morbidity and mortality in Uganda. The first phase of the Project is expected to end in June 2015.

474

A review of the Financial Performance Analysis of the GAVI Project for the period ended 31st June 2014, revealed that out of the disbursement of UGX.54,862,533,887, only UGX.1,512,757,372 (2.76%) was expended on Project activities, leaving a balance of UGX.53,349,776,515.3, as indicated in the table below;

Grant Rolling Budget Disbursement for Expenditure by 30th Variance %Exp FY 2013/14 (a) June 2014(b) (c)=(a)-(b) e n d i t u r e Health 46,180,800,936 46,180,800,936 223,878,800 45,956,922,136 0.5 Systems Strengthening Grant Immunisation 2,046,059,631 860,950,281.3 169,139,020 691,811,261.30 20 Support Services one grant Immunisation 6,358,853,680 6,358,853,680 605,206,500 5,753,647,180 9.5 Support Services Two grant Vaccine 3,384,276,000 1,461,928,990 514,533,052 947,395,938 35.2 introduction Grant Total 57,969,990,247 54,862,533,887 1,512,757,372 53,349,776,515.3

Under absorption of funds hinders achievement of immunisation goals.

The Accounting Officer attributed the low absorption capacity for the Global Alliance for Vaccines Initiative (GAVI) to procurement delays resulting from administrative reviews of various procurements. He further explained that, consequently the top Management of MoH together with the GAVI alliance had resolved to use the delegated procurement method, using international agencies such as UNICEF, USAID and Catholic Relief Services (CRS).

I advised the Accounting Officer to ensure that procurement systems within the Ministry are strengthened so as to minimize administrative reviews and gain the confidence of financiers. c) Review of the Annual Health Sector Performance Reports

475

A review of the annual health sector performance reports for the period 2006 - 2014 revealed that there was stagnation towards achievement of the Sector set targets and goals as indicated in the table below;

The Health impact indicators against the MDGs and the HSSIP 2010/2011-2014/2015 targets Health Impact MDG/H 2006 2011 2012 2013 2014 Audit Remarks Indicator SSIP 2015 target Maternal 131 435 438 438 438 438 Declining/stagna mortality ratio ted trend (per 100,000 live births) Neonatal 23 29 27 27 27 27 Stagnated trend mortality rate (per 1000 live births) Infant mortality 41 76 54 54 54 54 Stagnated trend rate (per 1000 live births) Under 5 mortality 56 137 90 90 90 90 Stagnated trend rate (per 1000 live birth)

The low performance ratios were attributed by Management to various factors including; health service communication breakdowns, lack of blood products, supplies and consumables, Health staff non-action, staff misguided action, staff lack of expertise, inadequate Human Resource (HR) numbers and skills at the health facility level at only 69% of the required positions. It was noted that the general Government funds allocation to the Health Sector as a percentage of the total Government budget had averaged about 8% from 2010/2011 to 2013/20141 which is 1.8% short of the HSSIP target of 9.8%.

The Accounting Officer explained that the impact indicators had been measured by UDHS in 2011 and the following interventions have since been undertaken:  Increasing funding for reproductive health commodities from USD.3.3 million to USD.6.9 million, thus reducing stock outs;

1 In 2013/2014 the total government budget allocation to the Health Sector increased from UGX.852,200,000,000 allocated in the previous year was UGX1, 127,480,000,000. 476

 Setting up regional blood banks at Mbale, Mbarara, Fort Portal, Arua, Gulu and Soroti Regional Referral Hospitals;  Recruitment of health workers to operate Health Centre (HC) IVs thus increasing HC IVs offering comprehensive emergency obstetric care from 17 % - 35%;  Mentoring health workers to carry out emergency obstetric care and other reproductive health services;  Procuring and distributing of equipment to health facilities;  Using Village Health Teams to mobilize, register and refer mothers and their babies to health facilities, and;  Carrying out maternal and prenatal death reviews as a quality improvement tool.

I await the results of Management‟s action in this regard.

25.6 Funds Not Accounted For

a) Administrative Advances Paragraph 215 (a) of Part I of the TAI, 2003 requires advances to be accounted for within sixty days of disbursement. It was however noted that UGX.121,360,800, advanced to various Ministry staff during the financial year for implementation of official activities, remained outstanding.

In the absence of the necessary accountability documents, it was not possible to confirm whether the funds were put to intended use.

The Accounting Officer explained that the concerned individuals had been notified and reminded of the need for timely accountability.

I advised the Accounting Officer to ensure that the outstanding advances are accounted for by the various beneficiaries or else, the funds are recovered.

b) Advances to Staff Personal Bank Accounts UGX.15,644,667 advanced to Ministry staff through their personal bank accounts for purchase of fuel while on official activities remained outstanding. I explained to

477

the Accounting Officer that the practice contravenes paragraph 228 of the TAI, 2003 which exposes the funds to the risk of mismanagement.

In response, the Accounting Officer explained that further consultations with MoFPED are to be undertaken to enable staff carry out field activities without paying funds to personal accounts.

I advised the Accounting Officer to consider providing staff with fuel cards for use during field activities. Meanwhile, the funds should be accounted for or recovered.

25.7 Wasteful Expenditure

The Ministry contracted a hotel for four (4) days from 23rd to 26th September, 2013 to provide hotel services for the Joint Health Review Mission. However, it was noted that whereas 1,600 participants were paid, only 1,284 attended, resulting into wasteful expenditure of UGX.27,047,783. In response, the Accounting Officer stated that the Ministry paid the hotel on the understanding that all invited guests would attend.

I advised the Accounting Officer to always ensure prior confirmation of participation by invited guests before booking the services, since the Joint Review Mission is a regular and planned event.

25.8 Implementation of Procurement Audit Recommendations

Review of the implementation status of the PPDA Authority audit recommendation for the year 2012/2013 revealed various outstanding matters as indicated in the table below;

Ser. no. Procurement area. Current status 1. Preparation of solicitation documents Not implemented 2. Signing of all contracts by the Accounting Officer. Not implemented 3. Reporting; Donors funded projects with an estimated Not implemented value of UGX 380,000,000 not reported to PPDA 4. Performance of Accounting Officer – Not implemented - Take responsibility of the Nugatory expenditure - Ensure delays in procurement processes are avoided

478

Ser. no. Procurement area. Current status at the various stages and timelines in the bid notice.

5. - Performance of the procurement and disposal Unit Not implemented staff for failure to seek contract committee approvals of some mentioned procurements

6. Performance of user departments – Caution in writing an Not implemented officer for usurping the role of the procuring and disposal unit.

Failure to implement the procurement audit recommendations may result in recurrence of the anomalies. The Accounting Officer stated that out of the 13 recommendations, 7 had been implemented and plans were underway to implement the outstanding 6 matters.

I advised the Accounting Officer to ensure that all procurement audit recommendations are implemented by the Ministry so as to improve its performance.

25.9 UGANDA GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS AND MALARIA

PROJECT – HEALTH SYSTEMS STRENGTHENING COMPONENT IN THE

MINISTRY OF HEALTH

25.10 Delayed Release of Project Funds

The review of the Portfolio Disbursement Release (PDR) document for the financial year 2013/2014 revealed that Global Fund released a total grant of USD.2,272,147 on 20th June 2014 through the Principal Recipient - Ministry of Finance Planning and Economic Development (MoFPED). However, the funds could not be transferred to the Project account since they had been released towards the end of the financial year. As a result, the planned activities could not be implemented during the period thus affecting the project completion timelines and the attainment of the overall project goals and objectives.

479

The delayed release of funds was attributed to the delayed recruitment of the Regional Performance Monitoring Teams (RPMTs).

The Accounting Officer explained that the Management of the Fund together with the Global Fund (GF) Secretariat team had put in place measures to unblock roadblocks and expedite the implementation of the grant activities. I have advised the Project management to ensure timely release of funds to enable implementation of planned activities, thus ensuring attainment of project objectives.

25.11 Global Fund GoU counterpart funding

A review of the Project work plan and Government of Uganda (GoU) Global Fund schedule of releases from IFMS system revealed that management had budgeted for GoU funding of UGX.4,000,000,000, but only UGX.3,277,112,100 (82%) was actually released as co-funding to the Project.

Failure to fully fund the Project stifles the project cash flows thereby constraining the implementation of the planned activities and the attainment of Project objectives.

Management explained that they were in negotiations with MoFPED to ensure that all budgeted counterpart funds are released early in the financial year according to work plans.

I have advised management to always liaise with MoFPED to plan properly for the release of funds to ensure proper implementation of all planned project activities.

25.12 Un-updated asset register and Un-engraved assets

The Specific Terms and Conditions, Para 2 of the Project Grant Agreement (Annex 2) require the Principal Recipient to provide an up-to-date, complete asset register (including, without limitation, the location of the fixed asset, the owner of the fixed asset, specific fixed asset identifier code or reference). It was however noted that the fixed asset register for Global Fund was not updated with all the details of the assets. 480

Review of the asset register also revealed that a number of assets which were distributed up-country such as microscopes, laptop computers, printers, desktop computers, Laboratory Refrigerators, Drawer filing cabinets, Round conference tables and standard office chairs had not been engraved. Failure to update the asset register and to engrave the assets is an indication of weaknesses in the internal controls which exposes the Project assets to misuse.

Management acknowledged the anomaly and pledged to endeavour to engrave the assets, and update the fixed asset register.

I have advised the Project Management to ensure that all assets are engraved and that the asset register is updated with all the details of the assets.

25.13 Un-utilized Funds for Regional Planning and Monitoring Teams

UGX.2,889,664,406 was released for operational funds for the component of Health Systems Strengthening for the period Jan - June 2014. Audit noted that UGX.1,783,007,073 was properly utilized and accounted for while the balance of UGX.1,106,657,333 meant for Regional Performance Monitoring Teams (RPMTs) was not utilized. This was attributed to the late release of funds to the regional offices (i.e on 14th May 2014). Management was given a no cost extension up to December 2014, to implement the activities of RPMTs. However, at the time of writing this report (March 2015), there were no further details regarding the matter.

The Accounting Officer explained that the delay to release the implementation funds for RPMTs was due to the time it took for the host districts to include them in the district system - because they had to be approved as supplementary funds by the respective district councils. He further stated that implementation was on- going and once completed, the funds would be fully accounted for.

I have advised the Accounting Officer to ensure that the implementation of the RPMTs activities is duly expedited and fully monitored to ensure proper utilization of the funds.

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25.14 Review of implementation of recommendations

i. Status of conditions precedent and/or other special conditions It was observed that the Principal Recipient had three conditions precedent and/or other special conditions to be fulfilled before and after the first disbursement could be made. While one condition had been met, the other two remained outstanding. Failure to fulfil these conditions could result into delayed or withholding of further disbursement.

In their response, the Project Management committed to continuously liaise with the stakeholders to fully address the work in progress of the issues noted.

I have advised management to expedite the implementation of the outstanding conditions in order not to frustrate further disbursement of funds.

ii. Follow up of Local Fund Agent (LFA) findings and recommendations The Local Fund Agent (LFA) raised a number of issues during the year on the Grant. While some actions had been taken by Management to address the recommendations, a number of them remained outstanding and this could affect grant disbursements.

In their response, Management promised to continuously work towards providing remedial actions/measures for the above issues.

I have advised the Project Management to ensure that it fully addresses the outstanding issues raised by the LFA.

25.15 UGANDA GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS AND MALARIA

PROJECT – MALARIA COMPONENT ROUND 4 – MOH

a) Un-utilised Funds by Sub Sub-Recipients (Districts) In October 2012, a number of district Global Fund accounts were credited with funds under the Round 4 (AMFm) Project meant for Project activities with the understanding that these funds would be spent by 31st December, 2012. Districts

482 which were unable to spend these funds within the given timeline were to refund the unspent funds to the Ministry of Health. However, by the end of the previous financial period, 19 districts holding UGX.261,505,730 had not made the refund. By the time the Grant came to an end on 31st December, 2013, 14 districts still held UGX.119,652,304 (USD.46,126).These funds had not yet been refunded by the districts despite a directive from the Permanent Secretary, Ministry of Health to do so.

These balances are being eroded by the charging of bank charges, besides the Project‟s objectives are not being enhanced because these funds were not used for what they had initially been planned for.

Management noted the observation and explained that the recovery of these funds is being carried out as part of the closure activities for this Grant.

I advised Management to pursue the recovery of these funds and ensure they are recovered and refunded to the Global Fund since the Project has come to an end. b) Undistributed Torches and Batteries

In the previous period‟s audit report, I noted that a number of districts had not been able to distribute the torches and batteries procured under the AMFm funding round. Following up on this observation, we noted that this condition had persisted in some districts like Tororo. Also observed that some of these batteries were now damaged which could have discouraged the intended recipients from picking them up from the district stores.

Unutilised torches and batteries affect service delivery and could result in financial loss especially when the batteries expire or get damaged.

Management regrets the holding of torches and batteries at district level, as the distribution point was supposed to be at the sub-county level, for onward transmission to the beneficiaries Village Health Teams (VHTs). Management promised to follow up with the districts to ensure that this anomaly is rectified and report by the next audit period.

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I advised Management to ensure that the intended beneficiaries are identified and given the torches, batteries and nets. c) Long Outstanding Invoices from the National Medical Stores

The National Medical Stores (NMS) is an autonomous public corporation established under the National Medical Stores Act, CAP 207 and mandated to procure, store and distribute pharmaceutical products to health institutions in the Public Sector in Uganda. The MoH pays NMS a handling fee of 8.5% of the Cost Insurance Fright (CIF) value of goods and services.

Included in AMFm (Round 4) Project‟s commitments are unpaid amounts to the NMS totalling up to USD.1,007,758, of this, USD.825,827 (82%) relates to services and invoices that NMS provided before the reporting period.

Long outstanding invoices could result in errors like the inclusion of invoices which have already been paid for. In other instances, legal proceedings could be initiated by the aggrieved third party resulting in financial and/ or reputation loss. Furthermore, the service provider, NMS may institute punitive conditions for handling Global Fund Projects‟ deliveries (like asking for 100% payment before they allow the goods into their stores).

Management noted the observation and explained that this has however changed and payment to the National Medical Stores is on-going following NMS‟ opening of an account with the Bank of Uganda, which was a requirement by the GoU.

I advised Management to expeditiously review the NMS invoices received and settle them timely. d) Refund of Advance for Consultancy Services

A local firm and its consortium were contracted in 2012 to provide consultancy services for private sector training in ACT medicines for affordable medicine facility at a contract sum of USD.867,624. 80% of the contract amount was advanced in two tranches; 50% of the contract amount (USD.433,812) in September 2012 and 30% of the contract amount (USD 260,287) in June 2013. The terms and conditions of the Contract Agreement require accountability of the advance 484 payments before the final payment is made. However, contrary to the General Conditions of the Contract (GCC), the firm did not submit the required accountability when they submitted the detailed report on the training. Although the Accounting Officer followed up the matter with the firm there was no response from the firm.

It was also noted that the Ministry could not effect the final payment of USD.173,525 because of non-accountability for the advance payments. Instead, the Ministry of Health has sought the guidance of the Solicitor General to recover in full the advanced amount of USD.694,099 from the firm.

Without the financial accountability, the Ministry of Health may not be able to ascertain whether the firm actually carried out the activities which might impede Project objectives.

Management explained that it will proceed to recover the money from the firm once the Solicitor General has given guidance on the matter.

I have advised that at the highest levels, the Ministry proactively engages the firm to ensure that the money is accounted for. e) Lack of a Fixed Asset Register

The Implementation Letter dated 26th July 2013 from the Global Fund requested that by no later than 30th June 2013, the Recipient should have provided an up-to- date and complete asset register. SC3 provides that the PR shall ensure that: i. The asset register is updated regularly and submitted to the Global Fund on a semi-annual basis; ii. An annual verification and fixed assets inspection report shall be submitted on an annual basis. The existing fixed asset register does not capture all the information regarding the assets. Although the PR procured accounting software, Navision, with a fixed asset register module, the software has not been installed, pending purchase of a server to host it.

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With an asset register maintained in MS Excel, errors of omission or commission may occur without being detected.

Management explained that they were in the final stages of installing and implementing the upgraded Accounting Software, from Navision 2009 to Navision Serenic Navigator 2013.

I advised Management to expeditiously complete the installation of Navision so that they can make use of the asset module.

25.16 UGANDA GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS AND MALARIA

PROJECT – MALARIA COMPONENT ROUND 7 – MOH

a) Unaccounted for Funds Review of the status of the Special Condition Account from Malaria round 7 phase 1 revealed that USD.518,614 remained un-accounted for from the advances paid out from Phase 1 of the Grant, contrary to Section 5 of the Malaria round 7 PR Special Conditions (SCs). In an interview with the Focal Coordinator, it was established that the matter was being investigated by the Police and had not been resolved. A further delay on the resolution of the matter is likely to jeopardise Project funding and implementation.

Management explained that they were waiting for the finalization of the Police investigation and report for appropriate action to be taken.

I have advised the Program Management to proactively follow up with the Police and ensure that the investigation is concluded and appropriate action taken against the culprits.

b) Lack of Reconciliations for Purchases Made Under the VPP

Mechanism

The Voluntary Pooled Procurement (VPP) mechanism is a strategic initiative established as a result of the Global Fund Board decision B5/DP151 aimed at ensuring a cost-effective and cost-efficient procurement process focusing on the three key principles of: 486

• Efficient, timely and reliable procurement. • Stringent quality standards for procured products. • Attractive pricing for key health products.

Through the VPP mechanism, Principal Recipients (PRs) can procure health products through the VPP pre-qualified Procurement Services Agents (PSAs):

Step 8 of the 8-step VPP procurement process states that the PSA shall reconcile the PR‟s account based on updates about procurements and deliveries made and submit the final invoices to the PR. These invoices bear the price and quantity of the health products procured. However it was noted that the Program Management did not receive these invoices to carry out reconciliations.

There is a risk that in case of any errors, they may not be identified and corrected in time.

The PR noted the observation and undertook to continue to work with the PSAs to get all the necessary documentation.

I have advised the Program Management to always obtain the final invoices from the PSA and carry out the necessary reconciliations. c) Lack of a Fixed Asset Register

The Implementation Letter dated 26th July, 2013 from the Global Fund requested that by no later than 30th June, 2013, the recipient should have provided an up-to- date and complete asset register. SC3 states that the PR shall ensure that: i. The asset register is updated regularly and submitted to the Global Fund on a semi-annual basis; ii. An annual verification and fixed assets inspection report is submitted on an annual basis. It was noted that the existing fixed asset register does not capture all the information regarding the assets. Although the PR procured an accounting software, Navision, with a fixed asset register module, the software has not been installed pending purchase of a server to host it. With the current asset register

487

maintained in MS Excel, errors of omission or commission may occur without being detected.

Management explained that they were in the final stages of installing and implementing the upgraded Accounting Software, from Navision 2009 to Navision Serenic Navigator 2013.

I have advised the Program Management to expeditiously complete the installation of the upgraded Navision so that they can make use of the asset module.

d) Supervising and Monitoring of Sub Sub-Recipients (SSRs)

In the previous year‟s report it was observed that monitoring, supervision and progress reports were not available to enable assessment. This finding persisted in the current period. Management inquiries revealed that in November 2013, the Ministry set up Regional Performance Monitoring Teams (RPMT) to provide direct assistance to the SR‟s in the field through quarterly stakeholder meetings and trainings. The RPMTs also help improve the quality of the data prepared by the SRs before it is shared with other stakeholders. Without progress reports, weaknesses may not be identified for corrective actions to be taken.

Management noted the observation and explained that the SR periodic reports had started coming in.

I have advised the Grant Management that, in addition to the critical role played by the RPMTs, reports should be obtained from all the SRs.

25.17 UGANDA GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS AND MALARIA

PROJECT – MALARIA COMPONENT ROUND 10 – MOH

a) Lack of Reconciliations for Purchases Made Under the VPP Mechanism The Voluntary Pooled Procurement (VPP) mechanism is a strategic initiative established as a result of the Global Fund Board decision B5/DP151 aimed at ensuring a cost-effective and cost-efficient procurement process focusing on the three key principles:

488

 Efficient, timely and reliable procurement  Stringent quality standards for procured products  Attractive pricing for key health products

Through the VPP mechanism, Principal Recipients (PRs) can procure health products through the VPP prequalified Procurement Services Agents (PSAs): Step 8 of the 8-step VPP procurement process states that the PSA shall reconcile the PR‟s account based on updates about procurements and deliveries made and submit the final invoices to the PR. These invoices bear the price and quantity of the health products procured. However it was noted that the program management did not receive these invoices to carryout reconciliations.

There is a risk that in case of any errors, they may not be identified and corrected in time.

The PR noted the observation and undertook to work with the VPP team to get all the necessary documentation.

I have advised the Program Management to always obtain the final invoices from the PSA and carryout the necessary reconciliations.

b) Lack of a Fixed Asset Register

The Implementation Letter dated 26th July, 2013 from the Global Fund requested that by no later than 30th June, 2013, the recipient should have provided an up-to- date and complete asset register. SC3 states that the PR shall ensure that: a. The asset register is updated regularly and submitted to the Global Fund on a semi-annual basis; (j) An annual verification and fixed assets inspection report is submitted on an annual basis. It was noted that the existing fixed asset register does not capture all the information regarding the assets. Although the PR procured an accounting software, Navision, with a fixed asset register module, the software has not been installed pending purchase of a server to host it. With the current asset register

489

maintained in MS Excel, errors of omission or commission may occur without being detected.

Management explained that it was in the final stages of installing and implementing the upgraded Accounting Software, from Navision 2009 to Navision Serenic Navigator 2013.

I have advised Management to expeditiously complete the installation of the upgraded Navision so that they can make use of the asset module

25.18 GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS AND MALARIA PROJECT

– HIV COMPONENT a) Expired Drugs An audit inspection carried out in various hospitals and Health Centres revealed expired drugs that were still being kept in the stores. It was further noted that in some cases, the expired drugs were kept together with the useful ones thereby risking contamination and the possibility of dispensing improper drugs to patients . The table below refer;

Ser. No/ Particulars Expiry date Audit remarks Health facility Dokolo HC IV 251 packets of Atazanavir Jan 2015 All the items were still +Ritonavir on shelf of the (300mg/100mg) time of the capsules inspection Dokolo HC IV 1400 pieces of Determine Jan 2015 -do- (HIV test kits). Kyabugumbi 70 bottles of Efavirenz HIV 31/Jan/2015 Items were still on the HCIV, capsules 50mg for store shelves. children Kiwoko Hospital 336 strips of 28RHZE tablets 31/12/2014 The drugs were received 75/150/275/400mg on 19/11/2014, one month to expiry.

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Expired drugs were also found in Lyantonde Hospital and in Lukoki HC IV and Bwera Hospital in Kasese. It was further noted that registers for expired drugs were not maintained at various health facilities which hindered proper tracking and destruction of the drugs. There is a risk of expired drugs being channelled to private clinics.

In response the Accounting Officer explained that, as part of inventory management, before medicines and other health commodities are removed from the shelf, they undergo a systemic review to identify and ascertain the remaining shelf life to determine those that are to be retained, replenished, or removed for disposal. He indicated that this was an on-going process in conformity with the WHO guidelines to guard against medicines falling in un-authorized persons‟ possession. He further indicated that on a monthly basis there was a stock taking exercise to enable replenishment and removal for disposal of expired drugs. He also promised to follow up the issue of expired drugs with the respective Health Centers.

I advised the Accounting Officer to ensure that the managers of the health facilities together with the district health officers institute proper disposal measures for the expired drugs. b) Inadequacies in Stores Records Management Inspections of stores in the sampled Health Centers revealed various challenges in stores management which included inadequate records, lack of qualified personnel, inadequate space and poor record keeping, as indicated in the table below:

Health Center Observations Atiak HC IV - The store lacks substantive stores personnel. It was being manned by a nursing assistant. Dokolo HC IV - Incomplete ARV & PMTCT medicines order forms and patient reports. - Stock cards were not updated a case in point Tenofovir/Lamivudine/Efaverenz Tabs physical stock was 908 the card reflected 2089 units. Naguru China - The store lacks store shelves. 491

Health Center Observations Friendship - The store is not equipped with firefighting equipment. Hospital Lyantonde Hospital - The hospital has a very small compact store. - The store has inadequate ventilation (most drugs in the store require storage below 20 degrees but the store lacks windows and ventilators. Kyabugimbi Health IV - The stock cards were not updated hence making it hard to track drug usage. - The store lacks adequate space and thus the boxes of HIV and malaria drugs were lying on the store floor. - The HMIS form 017, district requisition and issue voucher forms for the period 2013/2014 were never authorized by the departmental supervisors or the health unit in-charge as required by the HMIS regulations. Bushenyi HC IV - Un-authorized issue and requisition vouchers by the in-charge (sample of vouchers for the period 10/06/14 to 31/12/14 reviewed indicated that none had been authorized). - The stores in-charge does not verify the dispensing logs to confirm stock-outs from the different departments before replenishments. - Inadequate storage space hence boxes of medicines were lying on the floor. - The store is not fitted with shelves. Kasese town HC IV - Some items were not posted to stock cards. A case in point were 13 boxes of stat-pak test kits and 158 tins of nevirapine 200mg. Kyamuhunga HC III - The expired/spoiled medicines register was not maintained. For example 2,300 Vactainer tubes and needles had expired but there was no record in place. Rukoki Health Center - The unit lacked dispensing logs hence drugs picked from the III stores were not recorded at the dispensing area. - The HMIS form 17-requisition and issue vouchers were not authorized by the in-charge. The requisitions were made directly to the stores in-charge. - The unit has a small compact store for HIV and malaria drugs therefore some medical supplies are kept on the floor in a separate room. Kiganda HCIV-Mubende - Un-authorized issue and requisition vouchers by the in-charge. A district sample of vouchers, serial numbers 1571802-1571884 and 10781101-1078158 in 2013/14 were un-authorized - The health facility lacked the expired/spoilt drug registers, therefore there was no record of the current expired drugs. - The store space is inadequate. Kataraka HC IV- - Unauthorized issue and requisition vouchers by the in-charge. Kabarole - The unit lacked dispensing logs which made it difficult to carry

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Health Center Observations district out confirmation of genuine stock outs at the dispensing areas - The HIV/Malaria drug store was small and compact without enough shelves. Some drugs were kept in boxes which may affect their durability. - Due to inadequate space, expired drugs were kept in the open at the residence of the in-charge. Mukono HC IV - The stores recording system was manual and could not separately record and file Global Fund deliveries from GoU and other sources. - Orders made for drugs were general and it could not be ascertained whether all Global Fund drugs ordered for were actually delivered. Mpoma HC II - Mukono - The HC II did not order for drugs delivered and deliveries could District not be verified against orders made since a push system of delivery was used by NMS. - Global Fund drugs received at the health facility could not easily be distinguished from drugs from other sources since general delivery notes were used by NMS. Buwenge HC IV - Jinja - Poor filing system. A case in point was the Delivery notes for 95 District packets of contrimoxale 120 mg tablets delivered on 27th July 2013. Delivery records were not availed for review and thus deliveries could not be confirmed. - Storage space was inadequate for large consignments. - The health facility had a manual system of store record keeping and Global Fund drugs could not be identified from drugs from other sources. Bulesa HC III - Bugiri - Delivery notes for the months of February and April 2013 were District not availed for review. - Delivery notes from NMS were general and Global Fund deliveries could not easily be identified. Thus, comparisons of orders versus actual deliveries could not easily be done. Soroti Hospital - The store records system was manual and inadequate to capture orders for drugs and other essential medical items, deliveries, distributions and expiries of drugs. - Although a list of expiry drugs was availed, it lacked values of expired drugs and due to poor filing system, it could not be ascertained which drugs were from Global Fund. Pallisa Hospital - Delivery notes from NMS were general and Global Fund deliveries could not easily be identified. Thus, comparisons of orders versus actual deliveries in respect to Global Fund could not easily be done. - Stores returns/reports as per delivery cycles were not prepared. Pallisa Town Council HC - Delivery notes from NMS were general and Global Fund III deliveries could not easily be identified. Thus, comparisons of orders versus actual deliveries in respect to Global Fund could

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Health Center Observations not easily be done. - Stores returns/reports as per delivery cycles were not prepared. Kamuli Police HC II - The health facility‟s system of record keeping was inadequate as delivery notes reviewed were note well fastened in file folders. They were loosely kept in a box and these could easily be misplaced. - Global Fund drugs and sundries could not be identified among those from other sources.

The weaknesses mentioned above hinder delivery of medical services to the grass root population.

The Accounting Officer explained that the health delivery system was designed to serve smaller populations in the rural areas which have now expanded together with the administrative units. As a remedial action, the Health delivery System was being reviewed with a view to carrying out the necessary expansion.

I advised the Accounting Officer to ensure that standard record keeping forms are distributed and utilized at the Health Centres. In addition, the Ministry of Health should liaise with the Health Service Commission and District Service Commission to improve on staffing in the Health Centres. Expired drugs should be stored separately from drugs still in use. Besides, efforts should be enhanced to minimize expiry of drugs.

c) Review of prior year audit issues Below is the implementation status of the issues raised in the prior year:- No Finding Recommendation Status of Implementation 1 Non-availability of Management was All health Products and health equipment, records in advised to medicines & pharmaceutical relation to obtain and products are procured through Procurement avail the mechanisms called Voluntary Pooled of health records Procurement (VPP). The VPP agent products and relating to is tasked to deliver the above 494

supply the referred to health and medicine management procureme products after undergoing a costs. nt and PSM tendering competitive process. All UGX.116,310, costs for transactions are made by the Global 182,000 audit fund secretariat on behalf of the PR scrutiny. with consent/concurrence of the PR. Audit queries regarding these procurements have been ironed out through convening meetings between the OAG and GF country mission as well as holding teleconferences and all information provided to the audit team.

Matter Addressed The Procurement process was clearly narrated during a teleconferencing and records submitted.

2 Non-Refund of Un- Management was PR‟s has continued to recover un utilized utilized funds advised to funds from SRs. Total of from Sub- enforce the UGX.107,909,265 has been Recipients. requiremen additionally refunded within this UGX.107,872, t of Sub- current year and the process is still 000 Recipients on going. (SR) refunding All funds were refunded by the SRs. the unutilized balances to the Principal recipient (PR) 3 Low Absorption of Management was Verification of PSM cost from NMS was Funds (funds advised to carried out by PSM expert in were liaise with collaboration with Pharmacy. A awaiting the NMS and payment of funds totaling presentation hasten the USD.3,149,249.54 was effected to and process so NMS on 2nd September 2014. The verification of that the process of verification of NMS PSM costs funds are invoices is continuous. Absorption from NMS) – used to rate has reached 97% USD.4,391,17 implement 6 the planned 495

activities. 4 Ineligible Expenditure Management to This has since stopped. All funds under in respect of stop different Grants are spent individual comminglin independently of other Grants. consultants‟ g funds on fees and the Project newspaper account adverts – and to Matter addressed UGX.214,990, include the 000 counterpart funds in the Project budget 5 Status of Global fund Management was This was noted and has seen been effected closed Grants advised to as advised. This is illustrated under (HIV/AIDS) ensure that closure of the Affordable Medicines Round I and the closure Facility For malaria Grant (AMFm) II closed but procedures no closure are Matter addressed procedures undertaken were carried out. 6 Conditions to the grant agreement i) By not later than Management was This was done and the approved operations 30th June advised to manual is in place. 2012, the expedite principal the Matter addressed Recipient Fulfillment (PR) shall of the deliver to outstanding the Global conditions Fund an operations Manual ii)  The fixed asset Management was Currently, the PR maintains and updates the register is advised to fixed assets register. Additionally, the updated expedite Asset register is annually updated regularly and the with the condition of the Assets in the submitted to the Fulfillment various locations after the verification global fund of the exercise has been carried out.  An annual outstanding verification and conditions. Issues addressed inspection of the fixed asset register shall be conducted and a report of the 496

inspection shall be submitted to the GF iii) The PR represents Management was Negotiations are still on-going between MoH, and advised to MoFPED and Min. of Public Services. acknowledg expedite es that the the regional Fulfillment Global fund to handle up to June 2015 performanc of the e outstanding monitoring conditions teams will be subsumed within MOH. By not later than 31st Dec 2012, the PR shall submit to GF a transition plan acceptable to GF with detailed actions and timelines of how the PR will take over the RPMTs In response, Management promised to continuously work towards providing remedial actions/measures for the above issues. They indicated that by the end of the current financial year, all the matters will have been resolved. I await the outcome of Management‟s resolve to address the audit recommendations

25.19 UGANDA GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS AND MALARIA

PROJECT - TUBERCULOSIS COMPONENT

a) Lack of Quarterly Progress Reports

497

In May 2014, the Ministry of Health through the Global Fund component on Tuberculosis entered into a Memorandum of Understanding (MoU) with Makerere University School of Public Health to carry out a National Tuberculosis Survey for three quarters covering April 2014 to December 2014. Consequently, an advance payment of USD.968,352.32 was made to the University for the activity. It was noted that although the MoU stipulated that quarterly progress reports would be submitted to assess the progress of the activity, no reports were produced. This contravened the provisions of the MoU and could have hindered monitoring of the results of the survey.

The Accounting Officer acknowledged and regretted the anomaly but added that Management had communicated to the School of Public Health requesting for quarterly reports in accordance with the MoU requirements.

I have advised the Accounting Officer to follow up the matter and ensure that quarterly progress reports are prepared and submitted to enable proper monitoring of the activity.

b) Un Implemented Activities The Project Management planned a number of activities to be implemented during the financial year under review. A review of the Global Fund TB component budget performance reports revealed that while many of the planned activities were implemented, a number of others remained outstanding. Management advanced various reasons for the non-implementation as indicated in the table below:-

Code Activity Budgeted amountManagement response USD 3.17 Provide 67,500 The activity did not go through the procurement incentiv process because it involves payment of es to 45 allowances to incentivize the health health 498

Code Activity Budgeted amountManagement response USD workers workers working in the Programmatic in 5 Management of Multi-Drug Resistance TB PMDT Treatment units. treatme nt Units The requisition process commenced. However, MDR health facilities had increased from 5 to 14 at the implementation. It therefore required approval from GF Secretariat, Geneva to pay all the 14. This has not been secured yet. 3.8 Support TB 36,468 All the invoices are processed for payment as they specime are submitted. n Going forward, we shall advise Posta Uganda to referral submit invoices on a bi-monthly basis to system ease processing payments for routine surveilla nce of Drug resistant TB 5.1.1 Support salaries 108,600 The MoU between TASO and the partnership fund of expired in June 2014. The process to get Uganda an MoU between the MoH and USTP Stop TB commenced in July 2014 and its now in Partners the final stages at the Solicitor General‟s hip Office. Staff- 4Staff 5.1.3 Facilitate USTB 9,232.53 Implementation awaiting an approved MoU Monthly between MoH and USTP which is at the and Solicitor General‟s Office. quarterl y meeting s 5.1.4 Rents and Costs 24,712.48 Implementation awaiting an approved MoU for between MoH and USTP which is at the USTP Solicitor General‟s office 5.1.5 Insurance costs 6,456.75 The vehicles to be insured were MOH Program for 3 vehicles. vehicles 499

Code Activity Budgeted amountManagement response USD of USTP 5.1.6 Maintenance 1,485.13 The three vehicles to be maintained were MoH TB costs for program Cars. 3 vehicles of USTP

There is a risk that non-implementation of planned activities may hinder the achievement of the overall objective of the project.

I have advised the Project Management to address the causes of delays in implementing project planned activities

25.20 EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT

(EAPHLNP)

a. Funds not accounted for Contrary to section 217 of the Treasury Accounting Instructions 2003, which requires public officers to account for funds advanced to them within a period of 60 days, audit noted that UGX.20,520,000 out of the UGX.95,761,200 advanced to various staff to undertake various project activities, remained un-accounted for. Failure by staff to account for advances was attributed to management‟s failure to enforce accountability procedures. Accordingly, I could not ascertain whether the money was used for the intended purpose.

I have advised the project management to strengthen and enforce controls related to accounting for funds and should ensure recovery of the outstanding amounts.

b. Doubtful Expenditure UGX.10,857,000 was paid out to a local Hotel in January 2014 to provide hotel services, but the expenditure was doubtful owing to the fact that the supporting attendance list was a photocopy and had inconsistent dates on the payment documents. While some documents indicated that the workshop was held for five days from 23rd to 27th September 2013, the activity report attached to the payment voucher indicated the activity was undertaken from 8th to 14th September 500

2013 (8 days). In such circumstances, there is a risk of expending funds for services that were never supplied.

I advised the Accounting Officer to investigate the circumstances surrounding the event with a view of ensuring that the intended objective was met. I further advised him to always ensure that original documents are used whilst making payments.

c. Un-acknowledged Statutory Remittances i. Non deduction of Tax A foreign firm was paid USD.116,152 for supply of medical laboratory equipment, without deducting 15% withholding tax of USD.17,422 (Equivalent2 to UGX.48,261,156), contrary to section 85(2) of the Income Tax Act, 1997, (as amended). There is a risk of the project being subjected to penalties and fines which will occasion loss of funds.

I have advised the Accounting Officer to endeavor to recover the tax and to ensure that withholding tax is always deducted from suppliers of goods and services to avoid penalties and fines from URA.

ii. Un-acknowledged remittances to NSSF UGX.20,244,025 that was purportedly remitted to NSSF in respect of employee contributions lacked acknowledgement receipts and in the absence of which audit could not ascertain whether the said funds were actually remitted.

I have advised management to provide the necessary documentation for audit and to always obtain official acknowledgement receipts for proper documentation and accountability.

d. Status of Implementation of Project Activities i. Loan Performance A review of the loan status revealed that the loan whose closing date is projected to be 30th March 2016 has had a low disbursement rate. Of the loan amount of USD.10,100,000, only USD.5,919,345.74 (58.6%) had been disbursed by end of

2 Exchange rate as at 23rd Dec 2014 1USD = 2,770 501 the current financial year. It was also noted that USD.1,414,175.01 remained unutilized from the funds disbursed for the year under review.

The low disbursement rate coupled with big unutilized balances does not only affect the project implementation and attainment of the targets set, but may also be an indication of prior project planning before the loans are disbursed.

The Accounting Officer explained that the bulk of the unexpended funds were in relation to the Construction of the National TB Reference Laboratory at USD.2,200,000, Renovation of Mbale & Lacor satellite sites estimated to cost USD.650,000 and Operational Research, USD.455,100. The activities under performed due to the delays to complete the Architectural Designs by the Consultant and other procurement procedures. He further stated that the activities had since commenced and will be completed within the Project life.

I have advised the project management to expedite the implementation of the outstanding activities so as to improve on funds absorption and thus disbursement rates, so as to attain the project objectives. ii. Delayed Implementation of Project Activities A review of the five year project work plan revealed that a number of civil works had delayed, including;  Consultancy Services for design and Supervision for National T.B Reference Lab and satellite labs (Including a laboratory infrastructure consultant). This was supposed to be implemented between 2010 and 2013, however the project progress report of March 2014 indicated that the construction started on 11/03/2014, many months after the intended timeline;  Consultancy Services for design and Supervision for 5 satellite Labs (Including a laboratory infrastructure consultant). This was also supposed to be implemented between year 2010 and 2013, but the progress report of March 2014 indicated that the architectural plans of the satellite sites had not yet been finalized.

The project management team attributed the delays in execution of project activities to long and slow procurement processes. The failure to timely implement

502 the project activities may hinder attainment of project objectives. The Accounting Officer acknowledged the delay and explained that work was on course and will be completed before Project closure.

I have advised the project management to expedite the works so as to ensure that the implementation is in accordance with the project work plans. e. Lack of Proper Authorization for use of Motor Vehicles Best practices in the management of project assets call for proper authorization before an asset such as a motor vehicle is released for official activities/work. This strengthens internal controls over the project assets/vehicles. However, for the year under review it was noted that such internal control measures were not being implemented by the project.

Absence of formal authorizations may lead to mismanagement of project motor vehicles and is an indicator of internal control weakness. The Project Management acknowledged the anomaly and committed to institute authorization measures.

I have advised the Project management to institute asset management measures for proper accountability of project assets. f. Inspection of supply and delivery of the Gene X-pert machine The project procured and distributed equipment for high drug resistant testing in a number of hospitals including Jinja, Mbale, Lacor, Mbarara, Mulago and the headquarters on Buganda Road. However, it was noted that, the equipment in Mbale had failed and was non-functional.

Interview with management revealed that there were a number of samples that had been stored in the queue pending processing and pressure was mounting as a result of delayed release of results due to delayed testing. Delayed release of test results may cause delays it treatment of patients which may be fatal.

Management explained that they were aware of the defects and arrangements with World Health Organization (WHO) through which the equipment was procured were underway to rectify the defects. In the short term, the Project was arranging to procure a spare compartment to be delivered to Mbale site.

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I have advised the Project Management to liaise with the respective stakeholders to ensure that the equipment is repaired.

25.21 UGANDA HEALTH SYSTEMS STRENGTHENING PROJECT (UHSSP)

a) Funds not accounted for i. Preparation of a long term family planning mentorship UGX.33,532,000 was expended on the preparation of a long term family planning mentorship activity for health workers in Jinja regional Referral hospital. However, UGX.8,800,000 paid out to eight (8) purported participants as allowances through their respective personal bank accounts was not accounted for, contrary to section 217 of the Treasury Accounting Instructions, 2003. In the circumstances, I could not ascertain whether the expenditure was genuinely used for the intended purpose.

Management acknowledged the anomaly which was attributed to a Circular from the Office of the Permanent Secretary and Secretary to Treasury (PS/ST) instructing Accounting Officers to transfer funds to participants‟ bank accounts. This had a challenge of individuals who may not attend at all or attend fewer days than paid for, but pledged to recover the funds through the officer who managed the training.

I have advised the Accounting Officer to recover the funds from the concerned officers and in future strengthen and enforce controls related funds accountability.

ii. Advances to staff Regulation 65(1) of PFAR, 2003, requires all imprest funds to be retired as soon as the necessity for their use ceases or on the last working day of the financial year, however, UGX.10,515,333 (equivalent to USD.4,177.14) remained unaccounted for. In response, management stated that reminders had been sent to the concerned officers but to no avail and was thus planning to recover the funds.

I await management‟s action in this regard.

iii. Vehicle Maintenance and Repairs 504

A total of UGX.7,692,154 (equivalent to USD.3,071.49) was incurred on repairs and servicing of project motor vehicles during the year under review, however, contrary to best practice, the repairs were not supported with post vehicle inspection reports. In the absence of inspection reports, it was not possible to ascertain whether the repairs and maintenance were satisfactorily done. I have advised management to ensure that motor vehicle repairs and maintenance are undertaken after pre-inspections have been carried out and post inspection reports availed before effecting payments.

b) Donor Funding i. Funds Disbursement According to the Loan Agreement, the UHSSP project‟s funding is supposed to be SDR 85.7 million (equivalent to USD.130 million) from the International Development Association (IDA) of the World Bank and USD.14.4 million from the Government of Uganda (GoU) over a 5 year period (2011-15). A review of the project income and expenditure revealed that the cumulative project disbursement as at 30th June 2014 was USD.70,456,145.82, representing about 54% of the total expected project funding.

Given the low rate of funds disbursement and activity implementation, it is doubtful whether the project will meet its intended objectives within the agreed project period. Project Management acknowledged the low funds absorption given the life on the Project left. I have advised the project management to strengthen project implementation so as to increase disbursement of funds for better project implementation and attainment of set objectives before the end of the project life. ii. Delayed implementation of project activities It was noted that a number of project activities that had not been undertaken despite the project winding up in one year‟s time. The delayed implementation of the planned activities may lead to failure to achieve the project objectives.

Management in response acknowledged the state of affairs and undertook to ensure that all activities are executed before project closure. I have advised the

505 project management to expedite the implementation of project activities in order to achieve the intended objectives. c) Delivery of Equipment to General Hospitals and Health Centre IVs

Physical inspection of the various health facilities revealed the following anomalies: i. Failure to replace medical equipment and Hospital Furniture After the distribution of general, specialized medical equipment and instruments under health infrastructure component was finalized, the National Committee on Medical Equipment (NACME) pointed out some medical equipment that did not meet specifications and had to be replaced; including: defibrillators, Ear Nose and Throat (ENT) instrument sets, delivery and adult patient beds with mattresses; bed side lockers, bowl stand, cupboard, instrument, cupboard, steel, lockable, examination couch (gynaecology), filing cabinets and patient trolleys.

However, a physical inspection carried out in a number of Health facilities including Iganga Regional Referral Hospital, Budaka HCIV, Kibuku HCIV and Budondo HCIV revealed that the faulty equipment had not been replaced but were instead repaired.

Failure to replace the equipment may result in constant breakdown of equipment resulting in high repair costs. In the long run it may result in failure to achieve value for money and thus compromising attainment of project objectives. In response, the Accounting Officer explained that the Supplier had been tasked to replace the equipment that did not meet the specifications and so far the patient Trolleys had been replaced for all health facilities and modalities for replacement of the remaining items were on course. I have advised the Accounting Officer to ensure that the contractor replaces all the equipment that did not meet the specifications. d) Delivery of equipment to a non-operational General Hospital Whereas management had resolved to deliver the equipment to operational health facilities and that each delivery coincides with completion of civil works and handover period, dispatch was made to one of the health facilities in Jinja District -

506

Buwenge General Hospital, whose buildings had not been completed. Because the hospital was non-existent, the equipment was delivered to Buwenge Health Centre IV. The equipment is being kept at the Centre‟s theatre.

Audit further noted that the works at Buwenge General Hospital have since been abandoned, with the contractor‟s supervisor last visiting the site in December 2012. Through inquiries, it was also revealed that the abandonment of the site was due to financial constraints arising from cost under estimation by the contractor. The delivery of equipment to non-operational health units may result in loss of funds and the project failing to achieve the intended objectives.

In response, the Project management stated that the Ministry of Health had instituted a Team to analyse the usage, storage, condition and availability of trained Staff for the Medical Equipment distributed under the Project and come up with recommendations. I have advised management to ensure that the equipment is reallocated to other eligible health facilities, to avoid obsolescence. e) Non recording of equipment in the facilities‟ records It was noted that equipment was delivered to health centres as allocated, however all the health centre IVs that were visited had not recorded the equipment in their stores books. Records such as stock cards and ledgers for the equipment were not maintained. This was evident in Soroti General Hospital, Kibuku HC IV, Budaka HC IV, Mbale Regional referral Hospital, among others. There is risk of loss of equipment.

In response, the Project Management stated that a letter would be drafted for the Accounting Officers instructing the health centres to dully record the equipment in their books. I have advised the project management to enforce the recording of equipment in the books in all the beneficiary health centres and hospitals so that assets are safeguarded. f) Un-used equipment Most equipment delivered were not in use, for reasons ranging from lack of power (since some health centres are not connected to the grid), lack of trained personnel to operate lab and theatre equipment, manuals not issued to users, lack 507 of spare parts or accompanying items like oxygen, items delivered to wrong units, theatres not operational. These were noted in Budondo HCIV, Buwenge HCIV, Bugembe HCIV and Kumi HCIV among others. This state of affairs affects service delivery.

In response, management stated that the Ministry has instituted a team to analyse usage of medical equipment distributed by the Project and come up with recommendations. I have advised management to ensure that all facilities delivered to health centres are put to use so as to improve service delivery to the populace. g) Un-fitted equipment in some health facilities Some health centre theatres were not operational; cases in point were Kumi Health Centre and Apapai Health Centre, which were still under construction. There were many incidences of equipment not installed for use, for example at Princess Diana Health Centre, in Soroti. The new beds had not been fitted since being delivered six months before.

In Serere Health Centre, there was no storage space and the equipment was being kept along the corridors and in Iganga equipment like anaesthesia units, autoclaves, incubators and lab equipment had not been fitted. Also noted were instances of poor storage of equipment e.g in Budondo HC IV, where equipment had gathered dust and had starting to rust. In Buwenge Health Centre IV, termites had destroyed paper boxes in which the equipment had been wrapped.

Management in response stated that the Ministry had instituted a team to analyse the usage and condition of the medical equipment distributed by the Project and come up with recommendations. I have advised the project management to ensure that all equipment is fitted/installed in all the beneficiary health centres so that they can be utilised for health service delivery in order to realise the project objectives.

508

26.0 UGANDA BLOOD TRANSFUSION SERVICES

26.1 Mischarge of Expenditure

Paragraph 40 of the Treasury Accounting Instructions, 2003, requires all virements to be approved in advance by the Minister who may choose to delegate such powers to the Secretary to Treasury. It was noted that UGX.27,880,704 in respect of various activities was charged wrongly to item codes meant for other activities resulting in misstatement of amounts expended on the affected item codes. This implies that the financial statements are misrepresented with regard to the mischarged amounts and the practice renders the budgeting process redundant.

The Accounting Officer explained that the mischarge of expenditure occurred in the fourth quarter when the remaining funds of the financial year had already been received and yet the Treasury Accounting Instructions do not provide for seeking virement retrospectively once funds are received. I have advised the Accounting Officer to streamline the budgeting process and to subsequently ensure that payments are correctly charged on the item codes to enable proper implementation of the entity‟s programmes.

26.2 Staffing Gaps A review of UBTS‟ establishment records revealed that out of the establishment of 116 staffing gaps, only 98 were filled, leaving 16 vacancies as shown in the table below. The four Regional Blood banks of Gulu, Fort portal, Arua and Mbale were greatly affected by this understaffing. For example; Arua Regional Blood Banks in particular lacked a Laboratory Technician and Nurse to carry out day to day operations. Staffing gaps in the regional blood banks may result in inefficiencies in operations thus affecting performance and service delivery of the Blood Bank. The table below refers;

Post Title Salary Establishment Filled Vacant Scale Posts Posts Principal Medical U2 6 5 1

509

Post Title Salary Establishment Filled Vacant Scale Posts Posts Officer Blood Donor U4 14 Recruiter 12 2 Donor Clerk U7 18 17 1 Lab Assistant U7 24 22 2 Medical Records U7 11 Assistant 9 2 Driver U8 40 33 7 Receptionist U8 1 0 1 Total 114 98 16 The Accounting Officer explained that the Health Service Commission was in the process of recruiting the staff to fill the vacant positions.

I have advised the Accounting Officer to follow up with the Health Service Commission to ensure that the recruitment process is concluded expeditiously.

26.3 Boarding off Obsolete Assets Paragraph 705 of the TAI, 2003 requires that where it is considered that inventories, vehicles, plant, equipment have reached the end of their useful life, and are beyond economical repair or are unserviceable for any other reason such items should be recommended for boarding off.

However, an audit inspection carried out at the UBTS yard revealed a number of old vehicles in a state of disrepair that had not been boarded off. Although the Transport Officer had brought the matter to the attention of the Accounting Officer in April 2013 and the Contracts Committee considered it in August 2013, no action was taken thereafter to have the vehicles disposed off. There is risk of further deterioration in value of the vehicles.

The Accounting Officer explained that an adhoc board of survey committee was constituted to carry out the physical inspection and evaluation of the old vehicles and obsolete stores for purposes of boarding off. The committee met in June 2014

510

and agreed on activities and the facilitation required for undertaking the physical inspections. The committee was scheduled to complete this task in quarter three of the financial year 14/15.

I have advised the Accounting Officer to expedite the process of disposal of obsolete assets to avoid further loss in value.

26.4 Shortage of Storage Space

It was noted that there was shortage of storage space for inventories at UBTS. Some inventories were kept in space that was earlier designated as washrooms. There is a risk of inventories getting spoilt due to poor storage. Pictures below illustrate.

Inventories blocking the ventilation Inventories stored in place space. earlier designed for toilet use

The Accounting Officer explained that management would continue to liaise with MoFPED for additional funding to commence the construction of the centralised medical store at Nakasero Blood Bank Headquarters in the next financial year (2015/2016).

I await the outcome of management‟s actions towards improving the storage problem at the Blood Bank.

511

26.5 Status of Implementation of the planned activities

A review of implementation of activities revealed that although the Blood Bank received 100% of its budgeted funds, a number of activities detailed in the table below were partially implemented. Activity Summarized Cause of Non Status Implementation Expand Blood Transfusion Infrastructure; Partly Lack of Funding Implemented Furnish and equip the newly constructed Partly Lack of Funding Gulu and Fort Portal Regional blood Implemented banks;

Procure four vehicles for blood collection Partly achieved Vehicles – Delays in and continue construction of central Procurements stores at the Headquarters Stores – Inadequate Funds Operate an active nationwide quality Partly achieved A Programme to assurance program that ensures blood Accredit UBTS Blood safety –from vein to vein by; testing all Products has been blood for transfusion –transmissible embarked upon – infections (TTIs) – HIV; Hepatitis B; C; Quality Assessment and Syphilis in addition to blood On-going to identify grouping; quality gaps. Initial Funding is provided by Donors (PEPFAR) Strengthen the organizational capacity of Partly achieved On – going/ continuous UBTS to enable efficient and effective process. service delivery; through mentoring and training of UBTS staff Some CPD Conferences for staff are funded

512

It was further noted that UBTS had unfunded priorities which included;  Creation of 2 additional blood collection teams.  Procurement of office furniture and equipment for the newly constructed Regional Blood Bank (RBB).  Construction of a RBB in Moroto.  Accreditation of UBTS, Rent for office space at Arua RBB and;  The shortfall of UGX1.2bn to National Medical Stores to procure adequate supplies and cover handling charges.  The newly constructed library building lacked furniture. This hindered the utilization of the facility.

The Accounting Officer explained that management would continue to negotiate for additional funding from MoFPED so that furniture and fittings are procured for the newly constructed regional blood banks and the construction of new regional blood facilities at identified sites, including a centralized Medical Store at Nakasero Headquarters.

I await the outcome of management‟s actions towards negotiating for more funding for the identified unfunded priorities.

Non-funding of priorities may lead to failure by UBTS to perform its functions and eventually not achieving its objectives.

513

26.6 SUPPORTING NATIONAL BLOOD TRANSFUSION SERVICE IN THE

IMPLEMENTATION AND STRENGTHENING OF BLOOD SAFETY

ACTIVITIES IN UGANDA

a) Compliance With The Financing Agreement And Gou Financial Regulations

It was noted that management had in all material respects complied with the financing agreement provisions and Government of Uganda financial regulations.

b) General Standard of Accounting And Internal Control

c) Exceeding Budget lines

The cooperative agreement requires the project management to implement activities within the budget lines that have been provided and approved. Audit however noted that the expenditure budget line for Fringe benefits had been exceeded during the budget implementation. This was as a result of inadequate reviews and monitoring of the actual expenditure against the budget which also led to some activities not being implemented as planned. The Table below refers.

Actual Budget Variance Expenditure Item Expenditure USD USD USD Fringe benefits 37,353.83 27,152 10,201.83

In their response, management atttributed the over expenditure on the fringe benefits on insufficient allocation at the time of budgeting.

I have advised management to adhere to the approved budget lines during implementation of project activities. d) Employee Personnel Files

It is good management practice to have up to date and complete performance appraisal records for all employees prior to renewal of employment contracts. Audit 514

noted that personnel files of eight (8) PEPFAR project employees lacked authentic or up to date staff performance evaluations.

This was caused by failure by management to enforce the requirement of periodic performance evaluation. This leads to inadequate or inappropriate assessment of employee contribution towards the success of project activities.

I have advised management to ensure that proper and complete performance appraisals are undertaken for all project employees and that documentary evidence is maintained on the individual staff files. e) Late Income Tax (PAYE) remittance

The Income tax Act of the Republic of Uganda requires employers to remit income tax charged on employees by the 15th day of the following calendar month to which it relates. Audit however noted that UBTS made late remittances of the Income Tax (PAYE) returns for the months below;

Month Amount (USD) Deadline Date Date Remitted

October 2012 816.27 15th Nov 2012 6th May 2014

November 2012 795.95 15th Dec 2012 24th Sept 2013

December 2012 795.95 15th Jan 2012 24th Sept 2013

January 2013 795.95 15th Feb 2012 9th Oct 2013

February 2013 800.75 15th Mar 2012 10th Sept 2013

March 2013 821.07 15th Apr 2012 10th Sept 2013

April 2013 821.07 15th May 2012 10th Sept 2013

May 2013 821.07 15th June 2012 31st July 2013

June 2013 821.07 15th July 2012 24th July 2013

Delays in remittances of the statutory obligations could result in fines and penalties being imposed by the tax Authority. Management explained that the remittances were made at the time of salary payment and that the obligations were remitted within the 515

statutory deadlines, however there were delays in filing returns and obtaining acknowledgement receipts.

I have advised management to adhere to statutory deadlines when remitting statutory deductions and to timely file returns.

27.0 BUTABIKA MENTAL REFERRAL HOSPITAL

27.1 Mischarge of Expenditure

Treasury Accounting Instructions require that transactions should be recorded in the books of account using the Government of Uganda Chart of Accounts as prescribed by the Accountant General. The detailed explanations for each account prescribe what expenditures should be charged on the account.

It was noted that out of the total hospital operating expenditure of UGX.8,718,327,417, UGX.74,863,427 (0.9%) was charged on codes other than those under which it was appropriated leading to mischarge of expenditure on these accounts. The financial statements are misrepresented to the extent of the mischarge.

The Accounting Officer regretted the anomaly and attributed it to under/over estimation of some items during the budgeting process. However, during the bidding process, actual costs varied from the estimates leading to deficits and surplus on some items. It was not possible to obtain authority for a virement from Permanent Secretary/Secretary to the Treasury, as the funds had already been released and uploaded on IFMS.

I have advised management to streamline the budgeting process and, ensure that payments are correctly charged on the item codes to enable proper implementation of the Hospital‟s programmes.

27.2 Un authorised additional funding above contractual figures

516

Regulation 105(1)(c) of PPDA Regulations, 2003 prohibits procuring and disposing entities from initiating any procurement proceedings or activities for which funds are neither available nor adequate, except where the Permanent Secretary/Secretary to Treasury (PS/ST) has confirmed in writing that the required funding shall be made available.

Review of the procurement records and the consolidated procurement plan revealed that the Hospital estimated to buy a dental chair at a cost of UGX.40M and to fence a football pitch and private wing of the hospital at a cost of UGX.60M. It was however noted that the cost of the dental chair was UGX.67,200,000 while that of fencing the football pitch and private wing was UGX.115,969,990. I was not provided with evidence of confirmation of additional funding.

In response, the Accounting Officer explained that the purchase of these items was under budgeted in comparison with the actual contract values, while the transport equipment – Ambulance, was over budgeted. Given the need to fence off the football pitch to secure land from encroachment and the high numbers of both in and out patients demanding for dental services, the savings from the Ambulance were used to top-up the under budgeted items.

I advised the Accounting Officer to ensure that the Hospital operates within the accounting warrant or else seek for authority to spend over and above the budgeted amounts in a timely manner.

27.3 Staffing gaps in Butabika NMRH

Butabika National Mental Hospital staffing was restructured in 1999/2000 as part of the overall restructuring of Government and the Ministry of Health resulting into the current establishment of 433 staff of which 346 positions are filled leaving 87 vacancies. Analysis of the current patient load revealed a need for filling of the vacancies and further review of the staffing structure given the nature of patients who require dedication of more time by the medical staff. The table below refers;

517

S.no Nature of Planned Current average Increase in Period clinic average No of No of patients average No of patients patients 1. In patients 550 800 250 Daily

2. out-patients 27,500 40,000 12,500 Annually clinic 3. mental clinic 16,875 27,000 10,125 Annually

Understaffing and inadequate staff establishment may result into deterioration of delivery of medical services to the patients.

Management indicated that a proposal for a new structure of 762 staff had been forwarded to the Ministries of Health and of Public Service.

I have advised the Hospital Management to follow up with the line Ministry and other stake holders to ensure that the staffing requirements of the Hospital are addressed.

28.0 UGANDA CANCER INSTITUTE

28.1 Mischarge of Expenditure

Paragraph 400 (a) of the Treasury Accounting Instructions 2003 stipulates that all government transactions shall be recorded in the books of account applying the Government of Uganda chart of Accounts as prescribed by the Accountant General. The accounting officers shall ensure that all financial instructions are properly coded.

It was however noted that out of the total payments of UGX.7,141,831,790 for the financial year, an amount of UGX.656,275,672 was charged on codes other than those for which the funds were appropriated resulting into unauthorized diversion of funds. The practice is an indication of breakdown of controls in the budget implementation process.

518

In response, the Accounting Officer explained that funds were diverted to outreach activities, patients‟ food, non medical sundries and detergents in order to ensure continuity of service since the appropriated amounts were inadequate.

I advised the Accounting Officer to always liaise with the Ministry of Finance, Planning and Economic Development and ensure adequate allocation of funds to the essential items.

28.2 Nugatory Expenditure

The institute incurred nugatory expenditure of UGX.448,408,158 as follows;

a) Idle charges Idle Charges amounting to UGX.320,924,000 were paid to M/s Ambitious Construction Company Limited vide payment voucher number DB02/2/14 and EFT No. 363329 on 10th February 2014 as a result of delayed handover of the site because of a disagreement between Uganda Cancer Institute and Mwanamugimu Nutrition Unit over location of the building. This occurred when the contractor‟s materials, equipment and labour had already been mobilized and availed at the site.

The expenditure would have been avoided if proper identification of the site had been done by the Institute prior to signing of the contract.

In response management stated that the change of construction site was directed by the Ministry of Health after an appeal by Mwana Mugimu Unit.

I advised the Accounting Officer to always make adequate consultations with all stakeholders before embarking on projects that may have costly financial implications.

b) Interest Costs

519

A sum of UGX.127,484,158 was paid to M/s Ambitious Construction Co. Ltd as interest charges due to delayed payment on interim certificates 1-6 and 6-8 for construction of the Cancer Ward.

This expenditure could have been avoided if realistic payment terms and confirmation of availability of funds were made before contracting the firm.

In response, the Accounting Officer explained that the interest accumulated between the period of closure of the financial year 2012/2013 and the beginning of financial year 2013/2014 when the funds for the new year had not yet been realised.

I advised the Accounting to ensure that in future, realistic payment terms are included in the contract agreements and commitments are made only when funds are available.

28.3 Expired drugs

An inspection conducted in the Institute‟s drug store revealed that an assortment of drugs worth UGX.425,825,877 had expired. Expired drugs represent a loss to the public and further loss may be incurred in the process of their destruction.

The expiry was attributed to long procurement processes and short shelf lives of some of the drugs.

In response, the Accounting Officer explained that the procurement of medicines was a function of National Medical Stores (NMS) and some medicines were supplied in large quantities that could not be consumed rapidly.

The Accounting Officer further explained that National Drug Authority had been contacted to have the expired medicines incinerated.

I advised the Accounting Officer to streamline liaison with NMS so as to minimize expiry of drugs.

28.4 Budget Performance

520

a) Under collection of Non-Tax Revenue (NTR) Whereas the Institute had estimated to raise UGX.900,000,000 from its Non-Tax Revenue sources only UGX.580,670,600 was actually raised resulting into under collection of UGX.319,329,400. It was further noted that all financial transactions relating to NTR were recorded manually and bank reconciliation statements were not prepared regularly.

The weaknesses above make the process not only tedious but also prone to inaccuracy and errors in the revenue collection.

Management attributed the under collection of NTR to failure to operationalize medicine sales in the private wing. It was further stated that a computerized system of revenue collection and recording would be procured.

I advised the Accounting Officer to ensure that bank reconciliations are prepared monthly and reviewed by a senior staff in addition to procuring appropriate accounting software for revenue collection and recording.

28.5 Non Tax revenue not receipted

Regulation 49(1) of the PFAR 2003 requires a receipt in the prescribed form to be issued immediately for any public moneys received; and when the payer presents himself or herself in person, the receipt must be handed to him or her at once.

It was however noted that, direct bank deposits amounting to UGX.45,495,600 lacked acknowledgement receipts.

There is a risk of understatement of revenue collections.

In response, the Accounting officer stated that some institutional clients remitted funds to the bank directly for their staff and there was delay in reconciling the payments with actual clients.

I advised the Accounting Officer to ensure the said revenue is receipted to safeguard the revenue.

28.6 Irregular Amendment of contract 521

Regulation 262 (1) of the Public Procurement and Disposal of Public Assets Regulations, 2003 defines an amendment to a contract as a change in the terms and conditions of an awarded contract. Sub-regulation (5) states that no individual contract amendment shall increase the total contract price by more than fifteen percent of the original contract price or cumulatively by more than 25%. It was however noted that the entity amended the contract referenced as UCI/WRKS/09-10/00081 entered into with M/s Ambitious Construction Co. Ltd for the Construction of the 5 – Level cancer building at an original contract price of UGX. 5,783,789,753 to 6-Level Cancer Ward Building with an additional cost of UGX. 2,197,609,659. The total contract price was thus increased by 37.9% of the original contract price contrary to the aforementioned regulation. The practice contravenes regulations and distorts procurement planning. It also disadvantages other service providers who were not offered opportunity to bid for the entire works thereby undermining the principle of transparency and competitiveness.

In response, the Accounting Officer explained that guidance was sought from PPDA and the Solicitor General. However, the retrospective approval sought from PPDA was rejected.

I advised the Accounting Officer to always follow PPDA regulations in relation to variations.

28.7 Failure to operationalize the New Cancer ward

It was noted that despite official handover of a new Ward, there was no observable evidence that the Cancer Institute had put it to use.

Physical inspection revealed overcrowding of patients in the existing wards as indicated below. Ward Planned Capacity Current Capacity

Lymphoma Treatment Centre (LTC) 32 Over 50 patients

Solid Tumor Centre (STC) 24 Over 30 patients

Private ward 10 Over 15 patients

522

In response, the Accounting Officer explained that the use of the new ward was dependent on installation of diagnostic equipments and furnishing which shall be acquired in a phased manner with effect from 2014/2015 financial year. I advised the Accounting Officer to liaise with relevant stakeholders and expedite the process of equipping the new Cancer Ward in order to alleviate the problem of overcrowding of patients.

28.8 Repair of Motor Vehicles

The Institute carried out repair of vehicles at a total cost of UGX.19,486,696 of which Motor Vehicle UG 4016M was allegedly repaired at a cost of UGX.15,470,600. The following anomalies were noted;

 There were no pre -inspection reports before the vehicles were referred to the garage  There were equally no post-inspection reports provided after the alleged repairs. Without pre and post repair reports, there was a possibility of inflation of repair costs.

In response, the Accounting Officer explained that vehicle UG 4016M was grabbed by security personnel on its way to the Institute after which it was involved in an accident while still under their care.

I advised the Accounting Officer to ensure the pre-and post inspection reports from the Ministry of Works together with the police report are submitted for verification.

523

29.0 UGANDA HEART INSTITUTE a) Outstanding Payables Included in the payables under Note 26 was a sum of UGX.207,840,052 for goods and services, and UGX.197,576,992 for equipment all of which amounted to UGX.405,417,044. It was noted that the payables accumulated during the year in contravention of the Commitment Control System. The Institute risks litigation and a bad reputation over failure to settle obligations in a timely manner.

Management attributed the accumulation of payables to an increase in the quantities of sundries and equipment required to meet the growing number of heart patients.

I advised management to always make realistic budgets taking into account the demographic factors and disease prevalence rates. b) Short fall in Non-Tax Revenue Collection Out of the budgeted NTR of UGX.2,850,000,000 only UGX.2,461,193,370 was received resulting in a shortfall of UGX.388,806,630. As a result, planned activities such as intensive care admissions were limited. There is a risk of increase in deaths of patients requiring intensive care who are not adequately cared for.

The Accounting Officer attributed the NTR shortfall to limitation in admissions in th pravate wing due to inadequate space. Shortfall in NTR negatively impenges on the effective delivery of Health care services.

I advised management to expedite the process of expanding facilities for admission of patients. c) Physical Performance of the Institute Review of the Institute‟s workplan for 2013/2014 revealed significant variances between planned and actual physical performance regarding clinical, diagnostic and surgical services as indicated in the table below:

524

Clinical Services

Activity Planned Output Achieved Comments/ Remarks

Outpatient attendances 10,000 13,561 Increased number of patients

General Admissions 1,000 1,372 Increased number of patients

Intensive Care Unit Admissions 180 107 Minimal bed capacity

Coronary Care Unit Admissions 500 495 Increased number of patients

Endoscopy 80 0 Machine break down

Stress Test 260 0 Inadequate Specialist skills

Diagnostic services

Echocardiography (ECHO) 12,000 8,028 Machine failure, (A new machine bought in the mid-year) Increased activities

Electrocardiography (ECG) 11,000 6,599 Inadequate number of machines and increased activities

Holter Monitoring 180 Increased number of patients

Surgical services

Closed Heart and Thoracic 240 174 Most children required Surgeries operations, less costly

Open Heart Surgeries 100 37 Very costly to be done yet required highly skilled personnel

Cath-Lab Procedures 172 Limited by sundries

Outreache to RRH 14 13 Need for clinics in RRH

Outreache to facilities 10 9 More public awareness needed

Research publications 4 5 Including PhD Thesis

525

The increase in patient numbers coupled with inadequate facilities impaired the effectiveness of service delivery.

Management indicated that a new Heart Institute would be built under the Cardio Thoracic diseases Project to be funded by the Islamic Developement Bank (IsDB). This is expected to address the shortage of facilities.

I advised the Accounting Officer to ensure implementation of the project without delay to enable improvement in service delivery

30.0 MULAGO REFERRAL HOSPITAL COMPLEX

30.1 Mischarge of Expenditure

Paragraph 400 (a) of the Treasury Accounting Instructions (TAI), 2003, requires all transactions to be recorded in the books of account applying the Government of Uganda chart of Accounts as prescribed by the Accountant General. In addition, paragraph 156 of TAI, 2003 require expenditure to be charged in accordance with the appropriation of funds to the items by Parliament. It was however, noted that UGX.1,756,710,500 out of the total actual expenditure of UGX.47,774,796,289 was not charged under the correct item codes leading to mischarge of expenditure. Mischarge of expenditure is an indication of a breakdown in budgetary control and leads to misrepresentation of information in the financial statements.

I have advised the Accounting Officer to streamline the budget implementation process to ensure expenditure is charged in accordance with the appropriation by Parliament.

30.2 Non-Disclosure of Receivables

The Accounting Officer is responsible for the preparation of financial statements in accordance with the Financial Reporting Guide, 2008, issued by the Accountant General. Section 2.5.18 (viii) of the Guide - Statement of arrears of revenue, requires the Hospital to disclose revenue billed but not collected by the end of the financial year, so as to provide additional information to the users. 526

A review of the Private Patients Scheme records revealed that funds totalling UGX.1,256,811,309 that were receivable by year end were not disclosed in the financial statements (memorandum statement of Arrears of Revenue).

Also noted was that no efforts were being made to collect the debts. The debtors‟ ageing list was also not availed for audit.

Failure to disclose revenue billed but not collected, exposes the Hospital to a risk of loss of revenue and the financial statements are misstated to the extent of undisclosed receivables. The non-disclosure of Revenue is also contrary to the Financial Reporting Guide, 2008 while absence of the aging list makes it difficult to follow debts that are overdue.

The Accounting Officer explained that the services were rendered to the clients who did not pay their dues during the financial year and that in line with the prudence concept, the recognition of revenue is done when the funds are received and not when services are rendered. He hastened to add that the Non-Disclosure of Receivables was to avoid overstatement of assets.

I advised the Accounting Officer to follow the prescribed Reporting Guide, and in case of any significant departure to seek the Accountant General‟s approval.

30.3 Inadequate Control over the utilisation of Utility Services

Section 8 (2) and (3) (a) of the Public Finance and Accountability Act, 2003 state that the Accounting Officer shall have control and be personally accountable to Parliament for the regularity and propriety of the expenditure of money applied by an expenditure vote and shall ensure that adequate control is exercised over the incurring of commitments.

The Hospital reported payables of UGX.8,901,380,582 at the end of the financial year which was a significant increase from UGX.1,704,626,602 reported in the previous year. The biggest portion of these payables constituted of unpaid utility bills of UGX.8,539,720,698 (water UGX.4,779,837,982 and Electricity UGX.3,759,882,716).

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It was noted that other independent institutions such as Makerere University College of Health Sciences, Infectious Diseases Institute (IDI), Uganda Heart Institute, Uganda Cancer Institute, Baylor College, Dental School, Makerere University John Hopkins University (MUJHU), The AIDS Support Organisation (TASO), Makerere Joint AIDS Programme (MJAP) and others including banks, churches, canteens and restaurants were connected to the Hospital utility meters and yet there was no evidence that they contributed to settlement of the bills.

The cause of the anomaly was lack of Memoranda of Understanding (MoU) with these institutions and independent utilities‟ meters, to enable separate billing by the utility companies.

The accumulation of utility arrears by the Hospital is reaching unprecedented levels which may be difficult to settle within the Hospital‟s current budget settings. There are also risks associated with the disconnections by the utility companies.

I advised the Accounting Officer to make adequate provisions in the budget to pay the outstanding arrears. I have also advised him to separate the various independent institutions from the Hospital‟s meters so as to reduce on the hospital‟s utility bills.

30.4 Un-acknowledged statutory deductions

Section 123(1) of the Income Tax Act CAP 340 of the laws of Uganda, 2000, requires a withholding tax agent to pay to the commissioner any tax that had been withheld or that should have been withheld within fifteen days after the end of the month in which payment subject to withholding tax was made.

A review of the payment records revealed that, UGX.1,867,853,563 comprising of withholding tax of UGX.1,060,315,674 and Pay As You Earn (PAYE) of UGX.807,537,889 lacked evidence of receipt by the Uganda Revenue Authority (URA).

The anomaly was attributed to laxity by management to make follow up on acknowledgement receipts for the payments made. There is a possibility that the

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funds may not have been remitted to the tax authority and the Hospital may be exposed to risk of penalties due to non-compliance with the law.

I advised the Accounting Officer to ensure that the remittances reached URA and that the acknowledgment receipts are obtained from URA as evidence that the money reached.

30.5 Staffing Gaps

A review of the approved establishment of the Hospital revealed that out of the approved posts of 1,477 only 1,290 (88%) were filled leaving 187 (12%) vacancies. It was also noted that the approved staff establishment was at variance with the payroll for the month of June 2014 which indicated 1,842 staff were paid.

Inadequate staffing makes it difficult for the Hospital to achieve its strategic objectives and also affects the quality of service delivery. The rate at which the vacancies are being filled doesn‟t match the current requirements and developments at the hospital.

Management explained that during the Financial Year 2013/14, the hospital made efforts to fill some of the vacancies basing on the available wage bill budget. A total of 89 positions were filled. The remaining vacancies with an estimated wage requirement of UGX.1,646,623,656 could not be filled within the medium term because of the constrained wage budget. The vacancies therefore remain a non- funded priority.

I advised the Accounting Officer to liaise with the Ministry of Public Service and the Health Service Commission to consider recruitment of more staff to fill the existing vacancies to enable the Hospital attain its objectives.

30.6 Inadequately Funded Commitment on Construction of 100 Units of Staff

Houses (2 Flats) at Mulago Hospital

Section 59 (2) of the Public Procurement and Disposal of Public Assets Act, 2003 states that procurements or disposals shall only be initiated or continued on the

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confirmation that funding, in the full amount over the required period is available or will be made available at the time the contract commitment is made.

Contrary to the above, the Hospital entered into a contract with a Local Construction firm to construct 100 Units of Staff Houses at a contract sum of UGX.17,453,287,500 with a commencement date of 24th October 2013 and completion by 18th October 2015. However, review of the approved budget for the financial year under review revealed that only UGX.3,000,000,000 was provided for residential buildings. By the time of the audit, UGX.2,980,809,498 had been paid to the contractor for the certified works, leaving UGX.14,472,478,002 outstanding pending subsequent interim payment certificates. There was no evidence to show that there was commitment for funding of the project over the three years. There is a risk of failing to settle the interim payment certificates submitted by the contractor.

There is also a risk of accumulation of domestic arrears contrary to commitment control policy.

The Accounting Officer explained that management had ring fenced all available capital budget allocation on Medium Term Expenditure Framework (MTEF) of UGX.5 billion in the two financial years 2014/15 and 2015/16 to this project and also hoped that Ministry of Finance, Planning and Economic Development (MoFPED) would agree to increase the MTEF capital budget provision by UGX.4 billion in the two financial years, so as to have this project completed.

I advised the Accounting Officer to source for adequate funding for the project well in time, to avoid accumulation of domestic arrears.

30.7 Payment of Advances to Individual Employees Personal Bank Accounts

Paragraphs 227, 228 and 229 of the TAI, 2003, state that all payments should be made by the Accounting Officer directly to the beneficiaries. Where this is not convenient an imprest holder shall be appointed by the Accounting Officer with the approval of the Accountant General. It also requires that the imprest funds must be accounted for promptly.

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It was noted that UGX.1,099,484,885 was advanced to various staff through their personal bank accounts to implement a number of activities. Though the funds were accounted for, the practice is susceptible to abuse and can easily lead to loss of public funds. This anomaly was attributed to a weak internal control system.

I advised the Accounting Officer to always make payments directly to service providers procured in accordance with the prescribed regulations. Official advances should be paid to designated cash agents for ease of accountability.

30.8 Direct Procurements

Section 46 of the PPDA Act 2003, requires all procurement and disposal to be conducted in a manner that maximizes competition and ensures attainment of value for money. It was noted that UGX.504,358,000 was paid to various staff to procure items and provide services instead of using pre-qualified suppliers. Value for money and benefits of competition might not have been achieved.

This could be attributed to disregard of procurement legislation by management and inadequate planning by the user departments and the PDU.

I advised the Accounting Officer to always engage prequalified providers in order to encourage transparency and competition.

30.9 Irregular Procurements

Section 29 of the Public Procurement and Disposal of Public Assets Act, 2003 gives powers to the Contracts Committee to authorize:-  the choice of a procurement and disposal procedure;  solicitation documents before issue;  award of contracts in accordance with applicable procurement or disposal procedures as the case may be.

It was noted that contracts worth UGX.128,956,377, were awarded to various service providers without approval of the procurement method by the Contracts Committee. In certain cases, evidence of quotations from at least three prequalified service providers were not available. In one case regarding the contract awarded for

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supply of a warmer machine worth UGX.53,100,000, the Solicitor General‟s approval was lacking.

Failure to abide by the procurement Laws makes the procurements irregular and could negatively impact on the quality of goods or services procured.

Management explained that the payments were made to staff in the emergency situations that required urgent fixing which included; maintenance and repairs of the Hospital‟s dilapidated structures and machinery like sewage lines and leakages.

I advised the Accounting Officer to ensure that the Contracts Committee is always involved in all procurements.

30.10 Procurement of Parking Management Services

Sec. 58 of the PPDA Act, 2003 requires a PDE to plan its procurements and disposals in a rational manner. A review of the procurement of parking management services at the hospital revealed the following anomalies; a) The requirement for parking management services was not included in the Hospital‟s Annual Procurement plan for the financial year 2013/2014 and was instead treated as an emergency procurement. b) The contracted firm was required to pay to MNRH a monthly fee of UGX.31,300,000 for three years effective July 2013, of which the hospital would reimburse the contractor UGX.5,727,900 per month, to recover costs of park construction. However, no record of receipts or re-imbursements was provided for audit review. c) There was no evidence of monitoring and evaluation of the contract performance. Without proper records of revenue and re-imbursements, there is a risk of under declaration of funds and possible misrepresentation of financial statements.

Management acknowledged the anomaly and explained that it was no longer necessary to have a provider charging parking fees given the anticipated renovations funded by ADB. However, because of safety requirements during this

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period when vehicles are parked outside the hospital premises, management opted to have a provider setting up a parking for safety of the vehicles.

I advised the Accounting Officer to ensure that the Hospital effectively plans for all procurements to avoid emergency situations in future.

30.11 Inadequate Accounting Software for Private Patients Scheme

Paragraph 219 of the TAI, 2003, requires Accounting Officers to account for all revenues received in form of Appropriation in Aid, by maintaining a separate ledger account for each item of revenue in accordance with the chart of accounts.

It was however observed that the quick books software used by the Hospital in the collection of Non Tax Revenue (UGX.6,997,363,939 during the financial year) did not code the various transactions in accordance with the GoU chart of accounts. This led to manual interventions to code the transactions outside the system which is susceptible to error. The users of the software were not adequately trained to use the software for the purpose of revenue collection. Meanwhile UGX.1,256,811,309 reported in the financial statements as receivables was not supported with a list of invoiced patients who had not paid at the year end.

Failure to follow the GoU chart of accounts may result in mischarge of revenue and thus inaccurate disclosures in the financial statements. The anomaly could have been caused by inadequate specifications to the vender which led to acquisition of a system not compatible to the GoU chart of accounts.

Management explained that the Treasury Department at MoFPED was in the process of acquiring a module to link the system with IFMS for proper management of NTR. They were meanwhile using quick books for their record keeping purposes.

I advised the Accounting Officer to ensure that the software is upgraded to ensure that revenue collections are properly coded and limit the human intervention in the process.

30.12 Non-disposal of unused Hospital Beds

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Regulation 2(1) of the Public Procurement and Disposal of Public Assets (Disposal of Public Assets) Regulations, 2014 requires an Accounting Officer in each financial year to cause the public assets of a procuring and disposing entity to be reviewed, to identify the public assets for disposal in the following financial year.

It was noted that when the hospital acquired 100 new hospital beds and 1000 mattresses, the old beds and mattresses were piled up in the open and exposed to severe weather conditions, as seen in photographs below;

A review of the Procurement & Disposal plan for the year showed that no provision had been included either to repair the beds or dispose of them.

Management explained that they were in the process of boarding off the old beds and mattresses.

I advised the Accounting Officer to either have the beds repaired for further Hospital use or have them disposed of expeditiously to avoid deterioration in value. 534

30.13 Lack of a Strategic Plan

Contrary to best practice, it was noted that the Hospital did not have a strategic plan to guide management in the operations and implementation of its activities, after the expiry of the 2008/9-2012/13 version. This means the Hospital operated without medium and long term plans to guide its management and operations during the financial year. The budget was therefore not linked to any strategic objectives.

Lack of a strategic plan implies that implementation of activities aimed at achieving the entity„s mission and long term objectives may not be properly guided. This practice might expose the allocated resources to waste.

This was attributed to laxity and inadequate planning by management to embark on the process of developing a new strategic plan in time.

The Accounting Officer explained that a draft of a 30 year Master Plan and a 5 year strategic and Investment Plan had been developed awaiting final approval by the Board. I advised the Accounting Officer to expedite the process of approval and have the strategic plan in place to guide management in their operations.

30.14 Bed Occupancy

Audit also noted that the hospital had about 2,000 beds, with occupancy rate of 119% compared to the planned 90%. The high patient population notwithstanding, the tendency of many attendants for patients also contributes immensely to the congestion in the hospital and overstretches the available facilities.

Management acknowledged the fact that the bed occupancy in the hospital was higher than expected throughout the year and attributed it to the weak referral systems and limited functional health facilities in Kampala Metropolitan area. They explained that a plan for decongesting MNRH was designed and would be achieved through the following strategies;  Construction of other referral hospitals in the Kampala Metropolitan area.  Linking the three hospitals in Kampala to Mulago Hospital through Telemedicine to allow tele-consultations.  Remodelling and renovation of Mulago Hospital to restrict visitors.

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 Increase in the number of theatres from 7 to 16 and the number of beds in ICU from 12 to 26, to help increase the number of surgical operations hence reducing the average length of stay for surgical patients.  Construction of a 320 bed Women‟s hospital was slated to begin in February 2015 to reduce on the congestion in the current facility.

I advised the Accounting Officer to devise measures to control the number of caretakers, so as not to overstretch the hospital facilities, given the high maintenance and utility costs.

30.15 Adequacy of Dialysis Machines

It was noted that the Hospital had a total number of twenty one (21) Haemodialysis Machines, of which four (4) had broken down and needed repairs, while the other seventeen (17) were functional. Although management explained that seven (7) more machines were expected, it was noted that the Renal Unit on average received 80 patients daily who required the dialysis services. Each machine has a capacity to handle three (3) patients each day.

Due to staffing gaps in the unit and in the hospital generally, the unit operated more or less as an outpatient unit and the machines therefore handled 2 patients per day, per machine, indicating 34 patients per day leaving out an average of 46 unattended to. Failure by the hospital to offer desired services timely may lead to loss of lives.

It was also noted that the hospital did not have any Peritoneal Dialysis, machines, which would serve mainly child patients below the age of 10 years and it was not clear how such child patients were being attended to.

Management explained that the Hospital had entered into a contract through National Medical Stores for a supplier to provide sundries and/or consumables for dialysis to enable attendance to additional sixty (60) patients twice a week.

Management further stated that whereas patients ought to be dialysed three times a week, this is being done only two times a week because of limited funding.

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I advised the Accounting Officer to liaise with the respective Ministries so as to acquire optimal number of dialysis machines with the associated staffing levels, for improved service delivery.

30.16 IMPROVEMENT OF HEALTH SERVICE DELIVERY IN MULAGO HOSPITAL

AND IN THE CITY OF KAMPALA PROJECT (MKCCAP)

a) Funds disbursement According to the Loan Agreement, the MKCCAP project whose total funding is Unit of Account (UA) 56 million3 is supposed to run for a period of 5 years (2012 - 2016), with the last (disbursement expected by 31st December 2016). However, a review of the project income and expenditure revealed that the cumulative project expenditure as at 30th June 2014 was USD.7,977,440 representing 14% of the total expected project funding. Given the low rate of funds disbursement and activity implementation, it is highly doubtful that the project will achieve its intended objectives within the remaining project period.

Management attributed the delays to the fact that most of the project resources (about 86%) were allocated to civil works and procurement of hospital equipment and furniture, and the hospital civil works had to go through elaborate African Development Bank (ADB) and GoU procurement processes to identify contractors before funds could be disbursed. Management explained that the disbursement of funds would soon greatly improve.

I have advised management to hasten the implementation of activities so as to improve the disbursement of funds and thus attainment of the project objectives within the remaining project period.

b) Delays in development of Master Plan for Mulago Hospital

A Contract to develop a 30 year master plan for Mulago National Referral Hospital was awarded to a consultant at a cost of USD.369,900. A payment of USD.73,980 was made during the year.

3 African Development Fund loan of UA 46 million and Nigeria Trust Fund loan of UA 10 million

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A review of the Aide Memoire of July 2014 showed that the initial contract for the consultancy expired on 30th November 2013 and a-no-cost extension was granted up to 30th April 2014. The contractor however, could not produce the final report by the due date but only submitted a final draft in July 2014. However, by the time of this report December 2014, not all deliverables of the consultancy had been concluded. There is a risk that the consultants may not be able to deliver on all the aspects of the contract.

Management attributed the delays to the consultant and the delayed feedback from clients because of the many stakeholders that had to be consulted. Management further explained that the Bank Supervision Mission had advised GoU to seek for No Objection for the extension of completion time.

I have advised project management to review the progress of the consultant and ensure that the process is expedited to ensure completion of the task. Meanwhile I await the action of management as far as seeking for a No Objection is concerned. c) Failure to meet the Bank‟s conditions i. Uganda legislation and public policy concerning public private partnerships A review of the project documents and the Aide Memoire of July 2014 showed that the project did not meet a number of the conditions as specified in the Loan Agreement. These include:-

 Submitting a Memorandum by the Ministry of Health (MoH), Mulago Hospital and Makerere University in form and substance acceptable to the Fund, clarifying roles and responsibilities of the three institutions by 31st December 2012”.

 Submitting to the Fund for review and approval, prior to execution, any contract that is entered into by the MoH and the selected service provider, for the management of the Ambulance referral system in the city of Kampala and provide written confirmation that any contract entered into by MoH for the purposes of the ambulance referral system in the city of Kampala, is in 538

accordance with the Republic of Uganda‟s legislation and public policy concerning public private partnerships by 31st July 2013.”

The above conditions which had not been met by the time of audit could result in withholding of funding for the project and thus lead to stalling of implementation of the project activities.

Management acknowledged the anomaly and explained that Work on the MOU had already started and a draft had been prepared. Management added that since the time of the loan agreement, GoU had realized that it needed to prepare one MoU between MoH, the 5 Universities with Medical Schools and the respective teaching hospitals. The above process was on-going and was expected to be finalized by March 2015. Due the wider stakeholder consultations, the process had taken longer than expected.

I have advised the project management to address the impediments so that the Bank‟s condition as of developing legislation and public policy concerning public private partnerships is met. d) Status of Implementation of Mission Recommendations

A review of the project documents and the Aide Memoire of 18th-24th July 2014 revealed that the activities below were still pending implementation due to procurement technicalities.

Issue Recommendation Actions Expected Implementation time line Procurement of 10 Review specifications and re- By 31st July 2014 Ambulances advertise tenders for Ambulances Referral and Submit proposal and budget 31st July 2014 Ambulance system details from IFC to the Bank Procurement of the Submit request for the bank Immediately requested for project vehicle consideration

The failure to act upon the recommendations of the Bank Supervision Mission may have a negative impact on attainment of the overall project objectives.

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I have advised management to always implement the recommendations of the Bank Supervision Mission as agreed for better and smooth project implementation. e) Land dispute at Kawempe

A review of the Aide Memoire and other project documents indicated that the project was undertaking construction of a General Referral Hospital in Kawempe but on a disputed piece of land.

The Accounting officer explained that the Banks Compliance review and Mediation Unit (CRMU) undertook a fact finding mission in Uganda to meet all the relevant stakeholders, including KCCA, Minister of Health, the Permanent Secretary MoH, Solicitor General and the complainants. It was however noted that at the time of this report (December 2014), the matter had not been fully addressed. The progress of the works was likely to be interrupted should the complainants opt to take legal action.

The project management explained that the matter was being handled amicably with the claimant in order to have it resolved and enable the hospital construction works to continue. Two meetings attended by key stakeholders had been held with the claimants. The Ministry of Lands had provided documents from the Land Registry that clearly showed KCCA as the rightful owner of the Land on which the hospital was being constructed.

I await the outcome of the on-going actions towards resolving the land dispute. f) Asset Management i. Marking/ engraving of Assets Regulation 101 of the Public Finance and Accountability Regulations 2003 (PFAR) requires all assets to be appropriately marked or engraved to ensure that they are easily identifiable as Government assets. It was however noted that the project owns a number of assets such as furniture, computers and office equipment valued at UGX.67,450,000 and USD.45,644.05 respectively that have not been engraved. Failure to engrave the assets exposes them to a risk of loss without trace.

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Management acknowledged the anomaly and committed to engrave all project assets by January 2015.

I await management‟s actions on the commitment of engraving all the project assets by January 2015.

30.17 SUPPORT TO THE DEVELOPMENT OF A SPECIALIZED MATERNAL AND

NEONATAL HEALTH CARE UNIT IN MULAGO NATIONAL REFERRAL

HOSPITAL (MULAGO III) PROJECT

a) Delay in procurement activities During a meeting held on 17th July 2014, between the Project Management Unit (PMU) Mulago National Referral Hospital and the Islamic Development Bank (IsDB) Project Implementation Assessment and Support (PIAS) Mission, it was agreed that the procurement of a consultant for the supervision of works, contractor for civil works were to be completed by December 2014 and the civil works for the project to commence by January 2015.

By the time of audit (November 2014), the agreed upon activities had not been implemented and a letter of no objection for the shortlisted service providers had not been obtained from the Bank. The delay may impact negatively on the project implementation and attainment of project objectives.

The project management explained that the procurement of the supervision consultant was underway and the technical evaluation of the bids had been completed, awaiting a no objection from the Bank and there after financial proposals would be opened. The contract was expected to be signed by end of February 2015.

I have advised management to ensure that the project implementation timelines are adhered to for the attainment of project objectives.

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30.18 UGANDA SANITATION FUND

a) Outstanding Fuel Deposits Fuel worth UGX.10,162,425 was deposited with M/s. Shell Kumi Petrol Station during the financial year 2012/2013, however fuel worth UGX.6,698,607 was consumed, leaving a balance of UGX.3,463,818 worth of fuel unutilized.

It was explained that the operators of the station closed business before the project could consume all the fuel. Although the dealers acknowledged the debt and showed willingness to pay the outstanding amount, the District had not recovered the money by the time of audit.

In his reponse, the Accounting Officer plegded to take necessary steps to recoverthe funds.I await the action of theAccounting Officer to recover the money.

b) Under-utilization of funds

A review of the financial statements revealed that out of a total of USD.544,338 received by USF during the 15 months period, USD.386,820.20 was utilized leaving a balance of USD.157, 517.80 unutilized. Failure to utilize funds within the planned timeframe slows down project implementation and may hinder attainment of project objectives.

The Accounting Officer attributed the delay to slow rate of the procurement processes in the Ministry and the delay to recruit project staff. I have advised him to always ensure that the project activities are carried out according to the project work schedules.

c) Project Asset Management

a. Non-maintenance of Asset inventory According to the Grant Support Agreement between the UNOPS and the Government of Uganda for the Global Sanitation Fund Programme in Uganda (Annex A - General Condition for the Grant Support Agreement 9.2), the recipient is expected to maintain records of non-expendable equipment with an acquisition value of USD.500 or more purchased with project funds. The recipient is expected

542 to submit an inventory of such equipment to UNOPS, indicating descriptions, serial Nos, date of purchase, original cost, present conditions, location of each item attached to each yearly progress report.

Similarly,Regulation 101 of the Public Finance and Accountability Regulatios, 2003 requires that a register, in a form prescribed by the Accountant General shall be maintained for all assets, and all such assets shall also be appropriately marked or engraved to ensure that they are easily identifiable as Government assets. However, it was noted that the project assets such as vehicles, computers and Cameras procured using the project funds were not recorded in the inventory register. Additionally, assets were not appropriately marked or engraved.This complicates their identification, management and reporting.The Accounting Officer explained that the ministry had embarked on the process of engraving the project assets.

I have advised Project management to maintain an asset inventory and ensure that all project assets are engraved as required for ease of asset identification, management and reporting.

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REGIONAL REFERRAL HOSPITALS

31.0 ARUA REGIONAL REFERRAL HOSPITAL

31.1 Unaccounted for funds

a) Unsupported Cash withdraws Regulation 60(1) of the Public Finance and Accountability Regulations, 2003 states that all disbursements of public moneys shall be vouched on payment vouchers. However, a review of the cashbook and the Bank statements of the Operational account of Hospital revealed that UGX.253,556,250 was withdrawn in cash from the bank without payment vouchers or any supporting documents rendering the expenditure incompletely vouched. In the circumstance, the payments are doubtful.

I advised the Accounting Officer to investigate the matter and ensure recovery.

b) Funds not accounted for Paragraphs 214(a) and 215(a) of the Treasury Accounting Instructions, 2003 require an Accounting Officer prior to approving an advance to staff to ensure that the concerned staff has settled any old advances and that the advance must be accounted for without delay. However, UGX.105,574,390 remained unaccounted for by the time of audit. Consequently, I was unable to confirm that the funds were utilized for the intended purposes.

I advised the Accounting Officer to obtain the accountability or else enforce recovery from the responsible officers.

b. Non-Tax Revenue shortfall

Regulation 44(1) of the Public Finance and Accountability Regulations, 2003 states that an Accounting Officer is personally responsible for ensuring that adequate safeguards exist and are applied for the prompt collection of, and proper

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accounting for, all Government revenue and other public moneys relating to their departments.

However, the Hospital budgeted to collect UGX.70,000,000 from Non-Tax Revenue source. However, only UGX.27,308,825 was realized leading to a shortfall of UGX.42,691,175, representing 61% of the budgeted Non tax revenue.

Management attributed the poor performance to the renovations that were on- going at the private wing of the maternity ward.

I advised the Accounting Officer to ensure that all budgeted revenue is collected.

31.2 Understaffing

The hospital has a staff establishment structure of 354 posts. However, out of the 354 approved posts, only 301 posts had been filled leaving 53 posts vacant. It was observed that some of the vacant posts are the key positions which include Senior Consultant Surgeon, Senior Consultant Physician, Senior Consultant Paediatrician, Senior Consultant Obs/Gyn, Principal Dental Surgeon, Nursing officers which are so fundamental in the operations of the Hospital. Understaffing undermines service delivery.

Management explained that the hospital operates within the staffing policy of Government. In liaison with the Ministry of Health and Ministry of Public Service the hospital developed a recruitment plan, vacant positions were advertised and interviews to secure staff to fill the vacant positions on replacement basis are under way.

I advised the Accounting Officer to liaise with Ministry of Public Service and Ministry of Health to expedite the recruitment exercise to fill the vacant posts.

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32.0 MBALE REGIONAL REFERRAL HOSPITAL

32.1 Funds not accounted for

a) Unaccounted for Advances

Paragraph 120 of the Treasury Accounting Instructions (TAI) Part 1 requires that funds be properly accounted for with appropriate documents. However, it was observed that a sum of UGX.9,319,000 advanced to staff remained unaccounted for at the time of audit contrary to the regulations. Consequently, I could not confirm that the funds were utilised for the intended purposes.

The Accounting Officer was advised to obtain the accountabilities or else recovery be made from the responsible officers.

b) Incompletely Vouched Expenditure

Paragraph 120 of Part I of the TAI, 2003 requires all payment vouchers to be properly supported with appropriate documents or sub-vouchers before they are passed for payment. However, it was observed that expenditure amounting to UGX.14,207,000 lacked the necessary supporting documents, contrary to the regulations.

I advised the Accounting Officer to ensure that the accountability is obtained and presented for audit verification.

32.2 Wasteful expenditure

Ms Ambitious Construction Company limited was contracted to construct an accommodation block for staff under procurement reference number MRRH/WORKS/09-10-/00034 at a contract price of UGX.3, 885,939,190 in the FY 2009/2010.

However, the hospital failed to pay interim certificates in time which resulted into the contractor claiming interest payment/penalties for delayed payments of UGX.146,883,559. By the time of audit UGX.127,700,000 had already been paid leaving a balance of UGX.19,183,559 as shown below;

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Invoice Invoice Description/Pu EFT/ Distribution Supplier Number Date rpose Cheque Amount Account Number Name DB13/09/ 27-Sep-13 Payment of 2919322 Ambitious 113 Interest accrued 45,900,000 Construction from delayed Company Ltd Payments. DB13/12/ 23-Dec-13 Payment of 98944 Ambitious 183 Interest on 81,800,000 Construction delayed Company Ltd payment. Total 127,700,000

The Accounting Officer admitted the shortcoming and attributed it to the delay by Ministry of Finance to release funds on time.

I advised the Accounting Officer to ensure compliance with the commitment control procedures.

32.3 Outstanding Commitments

Section 198 of Treasury Accounting Instructions Part I Finance, requires all purchases of goods or services to be subject to the commitment control system procedures issued by the Accountant General from time to time. Commitment control system requires that commitments are not made in excess of cash limits project for the period. By the end of the financial year, the entity had accumulated outstanding commitments amounting to UGX.266,412,236 these comprised of the balance brought forward from last 2012/13 of UGX.252,252,984 and commitments incurred during the F/Y under review of UGX.14,159,252. Failure to settle the outstanding commitments may lead to litigation and penalties.

The Accounting Officer admitted the shortcoming and explained that these commitments could not be cleared because of insufficient funds. He however indicated that Ministry of Finance Planning and Economic Development cleared the hospital to settle the commitments from the current budget.

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The Accounting Officer is advised to ensure that commitments are made within the cash limits available in accordance with the regulations.

32.4 Supply of Medical equipment by Crown Health Care

The hospital awarded a contract for supply of medical equipment worth UGX.163,215,950 to Crown health care under contract MBH/SUPLS/13-14/00044 during the year under review. It was however, observed that some of the items supplied had defects. The internal auditors inspection report dated 15/5/2014, recommended return of some of the items on the basis of either being poor quality and not conforming to the specifications.

The Accounting Officer explained that defective items were replaced and that there was an internal Audit report confirming the deliveries. However, the report was not availed for verification.

The matter requires urgent attention.

32.5 Understaffing of PDU

The approved staffing structure requires the procurement and disposal unit (PDU) to have three staff. However, the department is manned by only one officer. It was also observed that while the department was expected to be headed by a senior procurement officer, it is headed by a procurement officer.

Failure to adequately staff the PDU undermines the level of performance of the unit. The Accounting Officer explained that the matter had been brought to the attention of the Ministry of Finance Planning and Economic Development (MOFPED).

I advised the Accounting Officer to follow up the matter with MOFPED to ensure that the PDU is adequately staffed.

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32.6 Service Delivery

a) Dental Clinic/ Department (Masaba Wing)

Para 2.1.1 (D) of the LGMSD program operational manual, sets out health service delivery packages or minimum standards for proper functioning of health centres. Inspection of the dental clinic revealed the following shortcomings:  Limited supplies of dental cements (amalgam) one of the major items required in the clinic.  X-ray board was not functional. It was established that absence of this board makes it hard for the dentist to read the x-ray for better results.  The available dental chairs were not functioning properly. It was observed that they could not rotate as expected.  Dental trimmers in the theatre were not in use due to lack of a technical person to operate them  The X-ray monitor was not functional at the time of inspection.  No protective wall for the x-ray machine making it risky for the operator

The Accounting Officer attributed the failure to use the dental X-ray machine to absence of a protective wall / shield for the operator and that the X-ray viewing board does not light properly. He further explained that the dental chairs were also malfunctioning and required an expert dental technologist.

I advised the Accounting Officer to liaise with the line Ministry of Health to address the issue and ensure that the dental clinic is fully operational.

33.0 KABALE REGIONAL REFERRAL HOSPITAL

33.1 Irregular Payment of VAT

Section 19, paragraph (a a) of the Value Added Tax (VAT) Act 2009 (amended) stipulates that supply of civil works related to health sectors were exempt from VAT.

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It was observed that the Hospital paid a total of UGX 7,594,636 as VAT to GESES Uganda Ltd in respect paving and fencing works of the Nurses hostel which was VAT exempt. The VAT payment was irregular.

The Accounting Officer explained that he had written a letter to Geses (U) Limited advising the firm of the intended recovery.

I advised the Accounting Officer to follow up the matter and ensure recovery.

33.2 Un spent balances

Section 19(1) of The Public Finance and Accountability Act, 2003 require that every appropriation by Parliament of public moneys for the services of a financial year, shall lapse and cease to have any effect at the close of that year and the unexpended balance of any moneys withdrawn from the Consolidated Fund shall be repaid to the Consolidated Fund. However, UGX.462,821,812 in respect of unspent balances that remained on the Hospital bank accounts at the year-end was never returned to the consolidated fund.

The Accounting Officer explained that the request to retain the committed funds had been submitted to the Permanent Secretary/Secretary to Treasury, Ministry of Finance, Planning and Economic Development but a response had not been obtained.

I advised the Accounting Officer to follow up the matter with the PS/ST to ensure that authority for retention is obtained or else the funds should be returned to the consolidated as required under the law.

33.3 Lack of Hospital Board

Part III section 5 (3) of the Ministry of Health National Hospital Act 2006, require hospitals to have hospital management boards.

However, it was observed that for the year under review the hospital did not have a board. Consequently, the strategic and operational decisions lack the requisite scrutiny and guidance of a board.

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The Accounting Officer explained that they had communicated the matter to the Ministry of Health and were still awaiting response.

I advised the Accounting Officer to follow up the matter with the Ministry of Health and ensure that the hospital management board is appointed.

33.4 Understaffing

The approved staff structure of the hospital had 350 positions. However, out of the 350 approved positions, only 227 are filled, leaving 123 vacant positions, representing 35% of the establishment.

Staff shortages undermine service delivery.

The Accounting Officer explained that the matter had been brought to the attention of relevant authorities.

I advised the Accounting Officer to follow up with the relevant authorities to ensure that vacant positions are filled.

34.0 LIRA REGIONAL REFERRAL HOSPITAL

34.1 Non-Disclosure of Project balances in the Cash and Cash Equivalents

The cash and cash equivalent of UGX 123,929,499 reported in the statement of financial positions is understated by the project balances of UGX 107,583,155 which were not disclosed as part of the Cash and Cash equivalents for the year. The Accounting Officer indicated that they were not guided on the accounting treatment of project funds. Therefore they needed to consult Ministry of Finance, Planning and Economic Development in order to adjust the financial statements.

I advised the Accounting Officer to follow up the matter with the Ministry of Finance, Planning and Economic Development for the necessary guideline.

34.2 Unaccounted for Funds

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Section 43(2) of the Local Governments Financial and Accounting Regulation, 2007 requires administrative advances to be accounted for within a period of one month. In addition, paragraph 2.2.1 (6) of the Local Government Financial and Accounting Manual, 2007 requires the Head of Finance to ensure that all payment vouchers are supported by relevant documents. However, UGX.106,394,580 paid to staff and service providers was either unaccounted for or lacked supporting documents at the time of audit. Consequently, I was unable to confirm that the funds were utilised for intended purposes.

I advised the Accounting officer to obtain the accountabilities or else recovery be made from the responsible officers.

34.3 Non Deduction Withholding Tax

Section 124 (1) states that a withholding agent who fails to Withhold Tax is personally liable to pay to the commissioner the amount of tax which has not been withheld but the withholding agent is entitled to recover this amount from the payee.

However, it was observed that UGX 29,094,551 in respect of withholding tax was not deducted from service providers contrary to Income Tax law.

Non-compliance with the tax law may attract fines and penalties from the tax body.

I advised the Accounting Officer to comply with the tax law to avoid fines and penalties.

35.0 GULU REGIONAL REFERRAL HOSPITAL

35.1 Un-vouched Expenditure

Regulation 60(1) of the Pubic Finance and Accountability Regulations 2003, requires all disbursements of public monies to be properly vouched on payment vouchers prescribed by the Accountant General. However, expenditure totalling

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UGX 219,224,118 lacked expenditure vouchers, rendering the authenticity of the expenditure doubtful.

The Accounting officer explained that the vouchers had been kept in Sustain Office in Kampala. By the time of writing this report, the vouchers had not been presented for audit verification.

Management was advised to obtain the accountabilities and present them for audit verification.

35.2 Stores not Taken on Charge

The Treasury Accounting Instructions (TAIs) 2003 paragraph 203 requires stores receipts taken on charge to be recorded in the stores ledger.

Management procured stores worth UGX 105,779,182 but the items were not recorded on the store ledger. In the circumstances I could not confirm that the items were delivered.

The Accounting officer attributed the anomaly to understaffing.

I advised the Accounting officer to ensure that the stores are recorded in the ledgers and accountability rendered for audit verification.

35.3 Unutilised Line of Credit

The Ministry of Health of Uganda allocated UGX.949,000,000 for medical supplies to Gulu Regional Hospital under the credit line allocation for the year 2013/14. It was further noted that under the Hospital credit line there was unutilised balance of UGX.374,408,533 leading to a total of UGX.1,323,408,533 funds available for the year under review.

However, the hospital utilised only UGX.863,279,300 out of UGX.1,053,859,302 worth drugs ordered leaving a balance of UGX.190,580,000 with drugs ordered not delivered by NMS as shown in the table below:- Hospital Records

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Cycle Order Value Per Cycle Delivery Value Per Cycle Variance Cycle 1 181,285,506.00 124,955,029.38 56,330,477 Cycle 2 156,602,842.00 148,050,035.59 8,552,807 Cycle 3 154,264,205.00 110,334,127.33 43,930,078 Cycle 4 150,051,355.00 124,683,255.66 25,368,100 Cycle 5 150,059,055.00 123,499,302.22 26,559,753 Cycle 6 261,596,341.00 231,757,552.97 29,838,789

TOTAL 1,053,859,302 863,279,300 190,580,004

The Accounting officer explained that National Medical Stores did not fulfill all the orders made due to non-availability of some drugs, although the hospital made orders for their entire line of credit.

I advised the Accounting Officer to engage National Medical Stores and the Ministry of Health to ensure that line of credit is fully supplied.

36.0 MBARARA REGIONAL REFERRAL HOSPITAL

36.1 Goods not Taken on Charge

Paragraph 203 of the Treasury Accounting Instructions, Part II, requires all stores receipts to be taken on charge in the stores ledger. However, a review of Stores records revealed that purchases totalling to UGX.10,164,220 were not taken on charge in stores. There is a risk that the goods may not have been supplied. The Accounting Officer explained that the goods were taken on charge, however, the stores records were not availed for verification.

I advised the Accounting Officer to ensure that all the items presented are properly recorded in the records of the stores.

36.2 Understaffing

The approved Staff establishment of the hospital had 620 positions. However, out of the 620 approved positions, only 437 were filled, leaving 183 posts vacant,

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representing 30% of the establishment. Understaffing negatively affects service delivery.

The Accounting Officer explained that advertisements for the vacant positions had been placed in the media and recruitments were under way.

I advised the Accounting Officer to follow up that matter and ensure that the vacant positions are filled.

36.3 Lack of an Information and Communications Technology Policy

The Public Finance and Accountability Act requires the Chief Executive to designate an officer to ensure that adequate information and communication technology policies are established and are applied to enable adequate security and protection over computers and of data held on computers or information systems operated by a government department.

However, there were no proper procedures formulated to guide the use of the equipment.

This could be attributed to the hospital staff structure that does not provide for information technology personnel. Misuse of computer equipment and loss of vital data may not be ruled out in the prevailing circumstances.

The Accounting Officer acknowledged the shortcoming and promised to liaise with the Ministry of Information Communication Technology (ICT) to establish an IT policy.

I await the outcome of the Accounting Officer‟s commitment.

37.0 FORT PORTAL REGIONAL REFERRAL HOSPITAL

37.1 Understaffing

The approved staffing establishment for the hospital is 421 positions. Out of the approved 421 positions only 310 were filled, leaving 111 vacant positions, representing 26% of the establishment, as shown below. 555

Filled Vacant %age of Positions Approved Posts Posts Posts Gap Doctors 42 12 30 71 Nurses 152 122 30 20 Paramedics 89 61 28 31 Administration 33 17 16 48 Support Staff 105 98 7 7 Total 421 310 111 26

Understaffing undermines service delivery.

According to the Accounting Officer staffing challenges have persisted for so long yet the number of patients continue to increase and the hospital is also expanding in terms of structure and function. It was difficult to attract and retain the critical cadres at the current terms and conditions of service.

I advised the Accounting Officer to engage the Ministries of Health and Public Service to ensure that the vacant positions are filled.

37.2 Vehicle Repairs

Section 199 of TAI provides that payment vouchers for the purchase of stores must be supported with all the relevant documents, including requisitions, purchase orders, supplier„s invoice, delivery notes and an inspection/goods received note.

However, repair services totaling UGX.36,420,396 were carried out without requisitions from user departments, LPOs and Job Completion Certificates. There is a risk of paying for no work done.

According to the Accounting Officer, the workshop follows a work-plan, routine maintenance, but also respond to emergency breakdowns. They do not have to wait for complete breakdown of equipment in order to repair them. There is need for periodic service of machines and equipment. 556

I advised the Accounting Officer to abide by the laid down repairs procedures.

37.3 Unutilized Equipment

In January 2014 the hospital received Anaesthetic Machines, Datex-Ohmeda 9100C, Autoclaves and Delivery Beds from M/s. SIMED International, the supplier of ENONC equipment under Uganda Health System Strengthening Project; IDA CR No. 47420. However, audit inspection revealed that the Anaesthetic machine was not working because its accessories were not supplied. Similarly, the Autoclaves and Delivery Beds were also not being used.

According to the Accounting Officer, the Anaesthetic machine was supplied by Ministry of Health. The anaesthetic machine can be used but require oxygen under high pressure which can only be obtained by using cylinders which are not readily available in the HCIVs. However, for further details the Ministry of Health can be contacted for a better position of choice of the equipment.

I advised the Accounting Officer to liaise with the Ministry of Health for necessary action to ensure that the equipment‟s are put to use.

38.0 JINJA REGIONAL REFERRAL HOSPITAL

38.1 Service delivery

a) Expired Drugs

The expired drugs are required to be returned to National Medical Stores (NMS) for destruction.

However, it was observed that some drugs worth UGX.15,884,100 had expired and had not been returned to NMS for destruction. Besides, the expired drugs were not properly kept as shown in the photograph below;

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Expired Neverapine still in the shelf mixed Expired kaletra oral suspension still with drugs with active drugs. kept in the fridge with other medicines.

The expired drugs may be misused.

I advised management to ensure that expired drugs are isolated and disposed off urgently. b) Understaffing

The staff structure of the hospital had 417 approved posts. However, out of the approved posts 364 were filled, leaving 53 vacant which represent about 13% of the establishment.

Management explained that the hospital requests for recruitment were submitted to relevant authority and some posts were cleared for filling.

I advised management to follow up the matter with the authorities and ensure that the vacancies are filled. c) Department of Obstetrics and Gynaecology

An inspection of the above department revealed the following:-  The department lacks 5 B/P machines and a weighing scale.  Gynaecology ward was in a sorry state, some doors were broken. It lacked evacuation set, stethoscopes, thermometers, wheel chairs, oxygen heads and sterilizer/boiler.  The patients‟ toilets lack water.  The building housing the Family Planning/Association of voluntary Surgical Contraceptives was dilapidated.

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Management agreed with the observation.

I advised the Accounting Officer to engage the relevant stakeholders to address the matter.

38.2 Lack of Land Titles

Treasury Accounting Instruction 2003, Part I 400 (h) requires the particulars of the fixed assets acquired shall be recorded and kept in a fixed assets register (Treasury form 89).

It was observed that the hospital did not have land titles for some of its land on which its properties are located namely plots 31-39, Nile Avenue, Plot 26-32, Nalufenya road, Plot 34-40 Nalufenya road, Plot 52 Gabula road and Plot 47 Nile Garden.

Lack of land titles creates a risk of encroachment. Management explained some of the land plots were under dispute.

I advised the Accounting Officer to ensure that the disputes are resolved and land titles secured.

38.3 Management of Information and Communication Technology

Review of the IT general and application controls revealed that the hospital has not formulated an IT policy and there was no evidence of any effective measures that had been taken to create awareness regarding IT security amongst staff despite having a number of desk top computers and laptops.

The Hospital has also installed IT systems like Personnel management system, Health management information system and the procurement information system but all this systems run without a fully-fledged IT steering committee that among other functions will incorporate IT issues in the hospital strategic plan and budgets, and these committee is also vital in instituting internal controls to safeguard against data usage and loss.

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The implication is that misuse of computer equipment, loss of vital data and information and theft may not be ruled out. This could be due to lack of awareness of computer use. The Accounting Officer is advised to formulate an IT steering committee and maintenance policy in order to safe guard IT resources at the Hospital. Management acknowledged the findings.

The Accounting Office should also liaise with the Ministry of Information Communication Technology (ICT) to formulate IT policies, to guide in management of IT resources, and with the Ministry of Public Service with a view of recruiting an IT staff.

39.0 SOROTI REGIONAL REFERRAL HOSPITAL

39.1 Unaccounted for Funds

Section 215 (a & b) of Treasury accounting instructions requires advances to be accounted for without delay. However, it was observed that advances totalling to UGX. 23,466,678 remained unaccounted for at the time of audit.

This was attributed to laxity on the part of the management to enforce controls regarding accountability. Consequently, it was difficult to ascertain whether the funds were utilised for the intended purposes.

I advised the Accounting Officer to obtain the accountabilities or recover from the responsible officer.

39.2 Understaffing

The approved hospital establishment has 344 posts. However, out of the 344 approved posts only 259 posts had been filled leaving 85 vacancies representing 25%.

According to management under staffing was caused by retirement, transfers and the ban on recruitment by the Ministry of Public Service. Understaffing undermines service delivery. 560

I advised the Accounting Officer to liaise with the Ministries of Finance, Planning and Economic Development and Public Service to address the matter.

39.3 Non Disposal of Expired Drugs

The inspection of the hospital store in November 2014 revealed that several drugs had expired and had not been disposed.

Expired drugs if not destroyed can end up on the market. The Accounting officer explained that most of the expired drugs were a cumulative effect over a number of years from donors and projects.

I advised the Accounting Officer to ensure that the expired drugs are disposed off.

40.0 MASAKA REGIONAL REFERRAL HOSPITAL

40.1 Operation of a dollar account without authority

Regulation 327 of Treasury Accounting Instructions (TAI‟s) 2004, states that no bank account shall be opened or closed without the prior authority of the Accountant General. However, management opened and operated a dollar account under account name CDIC without authority of the Accountant General. There was no disclosure of the operations of this account in the Hospitals financial statements. Besides, management did not avail accountability documents for the transactions on this account for audit verification.

The Accounting Officer explained that the Hospital Director Masaka Referral Hospital is the chairperson of the steering committee and one of the signatories to the account. The account is not for the hospital but for Ministry of health although it benefits from the project which covers the whole country.

I advised the Accounting Officer to obtain the Accountant General‟s authority for opening the account and ensure that the funds are appropriately accounted for.

40.2 Construction of the maternity and children complex

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The BOQs provided for iron bars of 4x25 on the outside columns and 4x16 on the inside columns; it was observed that instead of using 4x25 as per BOQs, 4x16 column bars were used for the section of the outside wall. The difference in column size as per specifics in the BOQ could affect the substructure and lead to the collapse of the building as these were not erected and strong enough to hold a 3 storeyed maternity complex as shown below;-

4x16 iron bars on the outside columns that are weak

The Accounting Officer explained that this was caused by the record in the structural plans which provided for 4x16 iron bars on the outside columns which were installed, varying from the BOQs which provided for 4x25. The 4x16 columns appeared weak and may crumble under the weight of 3 storeys. The issue of the variance of the outside columns between the BOQs and the structural plans remains a sticky issue as it will affect structure of the building. Since the bars constitute part of the foundation level for the base beam installations, it is paramount that they are of a considerable strength and promised to investigate the variance between the columns sizes, the number of columns to be erected and have it rectified.

I advised the Accounting Officer to investigate the anomalies and have them rectified.

40.3 Lack of a Hospital Board

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Guideline 1.1.1 (e) of the Governance structure guidelines issued by Ministry of Health January 2013; provides that at a referral hospital, the board shall provide the oversight role for effective functioning of hospital in order to deliver quality services.

However, the hospital did not have a board.

It was observed that during the year, these roles were performed by hospital managers yet they are the implementers of the annual work plans and the hospital budget. This grossly compromised the quality of services at the hospital. The Accounting Officer admitted the shortcoming and explained that the old board‟s term of office expired in December 2013 and a new board had been appointed.

I advised the Accounting Officer to show proof of the new board appointment and evidence of the oversight role by the board.

41.0 MUBENDE REGIONAL REFERRAL HOSPITAL

41.1 Lack of Vehicle Log Books

Section 801 of the Treasury Accounting Instructions on Stores provides that vehicle log books are maintained for each vehicle to show details of dates, purpose of journey or works performed, the signature of the officer authorising them, details of fuel, oils, and spares used, dates and nature of servicing and repairs and lists of tools, spare wheels and other equipment carried on or associated with the vehicle, launch or equipment.

However, management did not maintain vehicle movement log books contrary to the regulations. Consequently, it becomes difficult to monitor and control vehicle movements and fuel.

The Accounting Officer has promised to establish the vehicle movement registers.

I advised the Accounting Officer to establish the vehicle movement log books.

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42.0 MOROTO REGIONAL REFERRAL HOSPITAL

42.1 Use of Non-Prequalified Suppliers

Regulation 125 (1) (b) of the PPDA Regulations (2003), requires a procuring and disposing entity to send the solicitation documents to a number of bidders appropriate for effective competition from among the providers who submitted pre-qualification submissions or expressions of interest and who meet the prequalification criteria.

It was however, observed that procurements worth UGX. 31,600,500 were solicited from non-prequalified suppliers, contrary to the regulations. In the circumstances the hospital may not have achieved value for money.

The Accounting officer was advised to ensure that only prequalified suppliers are invited when soliciting for quotations.

42.2 Inspection of Hospital Facilities

a) Wards Most wards were noted to be in a poor state with lack of enough beds, non functioning water system and dilapidated structures, among others, as shown below: Childrens Ward

Dilapidated Childrens Ward with Patients on floor, no enough beds and ward congested Medical Ward

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Falling ceiling, no running water with a few Drip stands in the ward.

The Accounting Officer explained that the beds appear to be insufficient because there are too many patients in the hospital.

I advised the Accounting Officer to priortise the renovation and equiping of the hospital.

b) Hospital Mortuary The Hospital does not have a functional mortuary. The building that is used as the mortuary is dilapidated with broken window panes and without any cold storage facility. According to management, the Hospital Mortuary is planned to be constructed in the second phase of Uganda Health Services Support Porject/World Bnak Project.

I advised the Accounting officer to liaise with the Ministry of Health for the release of project funds to have a functional mortuary.

42.3 Non-Deduction of Taxes

Section 123 of the Income Tax Act, 1997, requires a withholding agent to pay URA any tax that has or should have been withheld within fifteen days after the end of the month.

It was observed that 6% Withholding tax of UGX 17,686,200 was not recovered from a payment a local firm contracted to construct a staff houses.

Non-compliance with the Tax Law may attract fines and penalties from URA. The Accounting Officer promised to recover the taxes from the subsequent payments to the contractor.

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I advised the Accounting Officer to comply with the tax law.

42.4 Fixed Assets Register

Paragraph 801 of Treasury Accounting Instruction 2003 part II-public stores requires an entity to maintain a Fixed Assets register showing the location of plant and tools in daily use. However, the hospital purchased fixed assets amounting to UGX 35,713,000 but were not recorded in the asset register, contrary to the regulations.

I advised the Accounting Officer to ensure that the fixed assets register is regularly updated.

42.5 Human Resources

a) UnderStaffing The approved staff structure of the Hospital has 386 posts. However, out of the approved 386 posts only 153 were filled leaving 233 positions vacant representing 60% of the establishment. Understaffing undermines service delivery.

This was attributed to the ban on recruitment by Ministry of Public Service and difficulty to retain staff in the region as it is a hard to reach and staff.

I advised the Accounting Officer to liaise with the Ministries of Health and Public Service to ensure that the vacant posts are filled.

43.0 HOIMA REGIONAL REFERRAL HOSPITAL

43.1 Funds not Accounted for

Paragraph 217 of Part 1 of the Treasury Accounting Instructions (TAI) 2003 requires advances to be accounted for within 60 days and there after deductions to be made from the monthly salary of the debtor and no new advance to be given before accounting for the previous advance.

It was however, observed that UGX 12,520,753 remained unaccounted contrary to the regulation as shown below; 566

Unaccounted for funds

Date Vr No. Particulars Payee Amount remark Funds not 3.10.13 3.'1 Refund to the MOH MOH 7,395,755 acknowledged Repair and servicing of Computers and 27.2.14 67.2 computers beyond Africa 5,125,000 No job cards

12,520,755

Delays in submission of accountability may lead to falsification of documents. Consequently, I could not ascertain whether the funds were used for the intended purposes.

I advised the Accounting Officer to ensure that funds are accounted for or else recovery be made in accordance with Section 217 of Treasury Accounting Instructions.

43.2 Mischarge of Expenditure

Paragraph 156 of Treasury Accounting Instructions provide that funds available under one item or sub item of expenditure may not be transferable to another item without the authority of a virement. UGX.35,875,900 paid for various services were charged on items which do not reflect the nature of the expenditure. This was done to disguise expenditure as per the approved estimates.

Management took note of the anomaly and promised to desist from this practice in the future.

I await to see the outcome of management promise.

43.3 Under Staffing

The hospital has an approved structure of 401 staff, however only 209 (55%) were filled; leaving a staffing gap of 192 representing 45% of the establishment.

The staff shortage includes critical staffs like consultants, medical officers, surgeons, gynaecologist, radiographers, nurses and Laboratory Technicians were

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inadequate. This man power shortage hampers delivery of service to the community.

The Accounting Officer admitted the shortcomings and explained that there is need for the Central Government to ensure that key critical staff are recruited in order for the hospital to be able to deliver on its mandate.

I advised the Accounting Officer to liaise with Ministry of Health to address the matter.

44.0 CHINA-UGANDA FRIENDSHIP HOSPITAL NAGURU

44.1 Transfers from Treasury General Account

A review of the bank statements for the referral hospital revealed that funds totaling to UGX.1,500,129,768 were transferred from the Treasury General Account to a Sub Treasury Single Account as indicated below;

NO Date. Document No. From Amount (UGX). 1. 18/10/13 9911FN132910118 Q336TSA Naguru Referral Hospital 1,057,785,926 2. 30/01/14 991SIS03132940077 00376 Naguru Referral Hospital 86,833,440 3. 10/06/14 991SIS0132940077 00376 Naguru Referral Hospital 290,724,060 4. 16/06/14 991SIS0132940077 00376 Naguru Referral Naguru 64,786,342 Total 1,500,129,768

I was not availed with documentation on how the funds were eventually spent. In the circumstances, it was not possible to ascertain the purpose for which the money was used.

Although the Accounting Officer indicated that management was taking measures to provide the documents, these were not availed by the time of writing this report.

I advised the Accounting Officer to avail the necessary accountability or enforce recovery of the above funds.

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44.2 Revenue performance

The Hospital had an appropriated budget of UGX.9,548,296,000 for the year under review but received only UGX.7,187,921,785 resulting into a shortfall of UGX.2,498,998,215 (26%). As a result, the following activities were not implemented:  Medical waste management to handle organic medical waste,  Construction of incinerator,  Hospital expansion by an additional floor,  Oxygen supply to essential units of the Hospital,  Provision of food to patients and staff motivation through allowances.

Failure to implement planned activities impedes the Hospital from achieving its objective. There is also a risk that the initial government intentions of improving the referral system in Kampala and decongesting Mulago Hospital Complex may not be achieved in the short run.

I advised the Accounting Officer to liaise with the Ministry of Finance Planning and Economic Development and other stakeholders, to ensure that the Hospital‟s budget is always fully funded to enable it achieve its objectives and the government intentions of improving the referral system in Kampala.

44.3 Purchase of Land for Staff Houses

During the year under review, UGX.993,000,000 was paid to an individual for measuring 0.776 hectares, and Block 230 plot 1471 measuring 0.034 hectares under procurement reference number CUFH/SUPLS/13-14/00016. The following anomalies were observed:

 While the purchase was meant for block 230, plot 1472 and part of plot 1471, the contract signed with the vendor and the certificate of title showed the land details as to be for block 230, plot 1473 and part of plot 1472. Plot 1473 had not been valued by the Chief Government Valuer and therefore the price for it had no basis. This could cause unnecessary land wrangles.

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 The certificates of title had not been transferred into the names of the Hospital by the time of audit. The transfer of ownership had been halted by the Principal Registrar, Wakiso district, pending clarification on the Hospital names since the Hospital interchangeably uses the names of China Uganda Friendship Hospital and Naguru Referral Hospital.

The Accounting Officer explained that the differences in plot numbers were not attributed to Naguru as an entity but to Wakiso lands office as they indicated that the initial plots were “re-numbered due to double plotting”. This was not in any way likely to cause any confusion in future. He also indicated that management was making all efforts to transfer the titles in the Hospital names following clarification in the Hospital‟s name by the Permanent Secretary, Ministry of Health.

I advised the Accounting Officer to obtain clarification regarding the details on the land title and also expedite the transfer process.

44.4 Construction of a Drug Store

The Hospital procured a local construction firm to construct a three level office structure and a drug store at a contract sum of UGX.769,240,009. During the year under review, a total of UGX.223,077,200 was paid to the firm on Voucher number NR310/06/2014, vide EFT 1239859, however the following anomalies were noted:

 Non Public bid opening

There was no public bid opening contrary to Regulation 62 (1) of the PPDA Regulations 2014 (Rules and Methods for Procurement of Supplies, Works and Services) which requires bids submitted under the open bidding method or the restricted bidding method to be opened at a public bid opening session.

 Raising a bid advertisement before contracts committee approval A bid Advertisement was raised on 3rd January 2014 before the Contracts Committee approved the procurement method, Bid document and Advert which was done on 17th March 2014. This contravenes regulation 12 of the PPDA (PDE) regulations 2014.

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 Lack of approval of plan by KCCA The plan for the offices and stores was not approved by the Area Planning Authority (KCCA). It was noted that the Directorate of physical planning in KCCA gave a notice of deferment of development permission sighting among other reasons the encroachment by the drug store on the planned road reserve and the confusion relating to the developer‟s name. This has stalled construction which may lead to escalation of construction costs and delayed completion.

In response, the Accounting Officer explained that, Plans for the drug store were submitted to KCCA as required by law. However, KCCA deferred the development permission for the Project. Efforts were made to address all the concerns raised.

I advised the Accounting Officer to follow up with KCCA and ensure that the development plans are approved. In future, bid documents should always be approved by the Contracts Committee before an advertisement is placed.

44.5 Medical waste Treatment Machine

A review of the hospital medical waste disposal process revealed that the hospital has a medical waste treatment machine bought locally at UGX.250m for incinerating solid medical waste materials. The hospital however does not have the capability to handle medical waste like placentas and is locally disposing off such waste.

Whereas the hospital is commended for acquiring the medical waste treatment plant, the absence of a placenta pit, makes it difficult to handle and dispose the non solid waste matter. The Accounting Officer explained that the recommendable manner could not be achieved because the Hospital was financially constrained as this activity was among the unfunded priorities.

I advised the Accounting Officer to put in place maintenance procedures for the equipment to ensure its sustainable use and to also institute other necessary measures for disposal of other waste matter.

44.6 Demurrage Charges

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A review of the documents revealed that during the year funds totaling UGX.20,700,916 were paid to a clearing firm for clearing medical equipment donated by the Republic of China. However, it was noted that 40% (UGX.8,054,900) of the payment was wasteful as it was paid as demurrage for delay in clearing the equipment.

The Accounting Officer attributed the delay to absence of the TIN for the Hospital at the time and explained that the Hospital had before delivery of the said equipment initiated the process of acquiring a TIN online, which process was delayed due to uncertainty of ownership of the Hospital by URA.

I advised the Accounting Officer to put in place mechanisms of expediting specific processes whose delays could lead to such wasteful expenditure.

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EDUCATION SECTOR

45.0 MINISTRY OF EDUCATION AND SPORTS

45.1 Mischarge of Expenditure

Paragraph 156 of the TAIs prohibits the transfer of funds available on one item or sub-item of expenditure to another, save on the authority of a virement warrant. It also prohibits charging expenditure to an item/sub-item merely because funds are available under that item/sub-item.

On the contrary, it was noted that out of the total expenditure of UGX.97,566,221,002 (excluding transfers to other organisations), UGX.4,395239,994 (4%) was charged on expenditure codes meant for other activities possibly because funds were available on these item codes.

Mischarge of expenditure is a weakness in budgetary controls and results into misrepresentation of balances in the financial statements.

Management explained that funds were not released as budgeted, warranting the accounting officer to use the available limited resources to deliver services.

I advised the Accounting Officer to ensure that transactions are correctly charged on the right expenditure item codes or else seek reallocations before loading the releases on the system.

45.2 Unreconciled Position of Payables A schedule of payables obtained from from the MoFPED (Treasury) indicated that the Ministry had submitted payables of UGX.20,412,601,005 as at 30th June, 2014. This position differed from that reported in the financial statements of UGX.1,608,017,001 by UGX.18,804,584,004. The conflicting positions pose a risk of settling bills that are not supported with underlying transactions.

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The Accounting Officer explained that a fresh verification by Internal Audit had been instituted to establish the true position of the payables. I await the outcome of Management‟s action in this regard.

45.3 Under-Funding of Examination Boards

During the year, Uganda Allied Health Examination Board (UAHEB), Uganda Business and Technical Examinations Board (UBTEB) had a and Uganda Nurses and Midwives Examinations Board (UNMEB) revenue budget of UGX.20,674,619,576 expected from Government. However, the Board received only UGX.16,655,471,933, resulting into a shortfall of UGX.4,019,147,643. This could have greatly affected the performance of the boards. The Table below refers: Board Budgeted Revenue from Received (UGX) Shortfall (UGX) Government (UGX)

UAHEB 3,990,255,000 2,509,379,167 1,480,875,833 UBTEB 9,000,000,000 6,901,365,226 2,098,634,774 UNMEB 7,684,364,576 7,244,727,540 439,637,036 Total 20,674,619,576 16,655,471,933 4,019,147,643

Management attributed the shortfall to stagnant non-wage allocations within the sector ceiling, which could not allow allocation of additional funding to the boards.

I advised the Accounting Officer to liaise with MoFPED to ensure that the boards are adequately funded to facilitate implementation of their planned activities.

45.4 Redundant Teachers SACCO Fund

During the year, the Government offered UGX.25bn to the teachers‟ SACCO fund to be contributed in 5 years with the objective of enabling teachers access affordable credit financing. A total of UGX.4,317,423,564 was released to Micro Finance Support Centre during the year under review. However, by the time of writing this report, the funds had not yet been accessed by the beneficiary teachers. Besides, the fund management had become a source of conflict between UNATU and the Ministry. In the circumstances, the objectives of funding the teachers SACCO may not be achieved. 574

Management attributed the delay in operationalization of the fund to the long procurement process of a fund manager, and the process of developing the necessary guidelines. Management further indicated a fund manager was eventually procured and the process of disbursements was underway.

I advised Management to ensure operationalization of the fund so that the intended objectives are achieved.

45.5 Funds Not Accounted For

a) Advances to Schools, Colleges and Technical Institutions Funds amounting to UGX.559,122,789 were advanced to various primary schools for construction activities during the year under review. However, it was noted that the Ministry neither received accountability returns nor progress reports for the funds. In the circumstances, there is a risk that the funds were not utilized as intended.

The Accounting Officer indicated that reminder letters had been sent to the Head Teachers of the affected schools demanding for accountability of the funds.

I advised the Accounting Officer to ensure that funds advanced to schools for various activities are accounted for in a timely manner. In the alternative the funds are recoverable.

b) Other Advances UGX.314,636,968 was advanced to various institutions and individuals outside the Ministry to undertake various activities such as teachers training and subventions. However, contrary to paragraph 217 of the Treasury Accounting Instructions, there were no accountabilities to show utilization of the funds. In the circumstances, I was unable to ascertain whether the funds were utilized for the intended purposes.

I advised the Accounting Officer to ensure that all the funds are accounted for by the respective beneficiaries to give assurance that the money was used for the

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intended purposes.

45.6 Budget Performance

Out of the budgeted revenue of UGX.197,562,361,139 only UGX.186,558,729,377 was received resulting into a shortfall of UGX.11,003,631,762 (6%). As a result a number of activities were not implemented which hinders the Ministry from achieving its objectives. The table below shows the activities that were not implemented;

Output Name Description of Planned outputs Status and Performance reason for variations Pre primary and Instructional  The department planned The evaluation of Primary materials for to complete procurement bids for P1 education primary schools of P5 -P7 and P2 was a spill- textbooks as rolled over over activity from  contracts for the FY 2012/13. 2,378,829 pupils books -Final payment for and 325,000 teachers' the supply guides for P5 and P7 and delivery for P5-  Reprint curricula for P1 P7 textbooks in and P2; favor of M/S  Pay for consultancy of Longhorn Needs assessment for Publishers SNE; combined the two  Procure hearing Aids for final tranches (60%  assessed learners of SNE; upon presentation  Procure instructional of shipping materials for PTCs; documents; 20% Conduct prequalification upon workshop for P1 and P2 Verification of instructional materials deliveries.) -Funds for the procurement of assorted textbooks to support implementation of revised PTE curriculum were processed but not paid. Therefore, the Procurement process and monitoring requisition could not be 576

Output Name Description of Planned outputs Status and Performance reason for variations accomplished by the end of the Financial Year. Secondary Instructional  Books and periodicals Under the APL School Education materials for procured; project by the Secondary  Computer and ICT end of Q4, the schools services supplier had not yet provided; delivered the  4th cycle of 50 schools science kits to the under Digital Science beneficiary schools Cyber handled;  Text books for science and mathematics for the UPOLET government and PPP schools procured;  Computer laboratory of Bukoyo SS; Iganga equipped with 80 Computers. Secondary Monitoring and  425 site meetings Funds were School Education Supervision of attended at 56 transferred to item Secondary  institutions to, monitoring 70201 to offset a Schools of 43 funding shortfall  institutions by ADB IV; Secondary USE Tuition  East African essay - The East Africa School Education Support competitions Essay competition  carried out in Secondary schools was not facilitated because money was transferred to offset a funding shortfall. -Funds were defrayed from training of secondary teachers to follow up trained teachers.

Secondary Provision of  Furniture supplied to 100 The process is School Education furniture and  beneficiary schools in being financed by equipment to Phase III donor funds. secondary  Under world bank schools project. Quality and Inspection  Inspection of 1,900 -The targeted Standards (Primary secondary number of 8 Secondary  schools, 500 BTVET vehicles was not BTVET) and  Institutions 10 NTCs, 20 tenable because of monitoring of PTCs price variations at 577

Output Name Description of Planned outputs Status and Performance reason for variations construction the time of works in PTCs procurement. -Activities for the relocation of Shimoni project did not proceed due to contractual problems which are being sorted out.

Management explained that the Ministry of Finance, Planning and Economic Development (MoFPED) only released 94% of the appropriated budget which consequently affected the performance of MoES.

I advised Management to always liaise with the MoFPED to ensure that all appropriated funds are released.

45.7 Government of Uganda Payroll Validation Exercise

I appointed Ernst & Young to undertake a payroll audit and to validate and capture the biometric details of all Government of Uganda Employees.

In a press release dated 4th April, 2014, I reiterated that employees who failed to present themselves for validation and have their biometric data captured face the risk of being deleted from the Government payroll.

However, it was noted that 37 staff of MoES never presented themselves for validation. There is a risk of being deleted from the Government payroll, if at all the affected employees do exist. Management explained that by the time of Audit some staff had not been validated but since then, they have been validated however verification could not confirm management response.

I advised the Accounting Officer to ensure that the affected employees are validated or deleted from the payroll as appropriate.

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45.8 Unreconciled UMEME Arrears

In his communication to various accounting officers dated 7th October, 2014 (Ref. ISS 49/137/01, the PS/ST indicated that UGX.26.193 billion due to Uganda Electricity Distribution Company (UETCL) had been withheld by UMEME on account of Non-payment of bills in the MoES by Government of Uganda for the period June 2013 to June 2014. Previously another UGX 18.34 billion had been withheld in a similar manner for the previous period

In the case of the MoES, the letter indicated that UGX.20,187,950 was outstanding as at 30th June 2014. However, the list of payables indicated that the outstanding UMEME bill was UGX.1,513,523,108 as at 30th June, 2014.

Although the Accounting Officer was requested to confirm and reconcile with UMEME the arrears position, there was no evidence that this was done. There is a risk that the Ministry continues to settle bills that had already been offset from payments to UEDCL. .

Management explained that the ministry had not paid any arrears on outstanding UMEME bills cause they had not received any cash limits for it and that management was in contact with MoFPED to provide the ministry with information regarding funds withheld owed by government to UMEME.

I have advised the Accounting Officer to reconcile UMEME bills with the Ministry balances to avoid multiple settlement of the same bills.

45.9 Consultancy Services for Undertaking Assessment of Learners with

Disabilities/Special Needs-Hearing Aid Assistive Devices-MOES/12-

13/SRVCS/0233/C0737

a) Delayed Procurement Process It was noted that the Ministry planned to procure consultancy services to undertake Assessment of Learners with Disabilities/Special Needs in the Financial year 2012/13. Significant delays were however noted in this procurement from the 579

time it was initiated up to the time of contract signing as shown in the table below: Activity Date when action was taken Procurement Requisition was raised by the user department 25th October, 2012 on PP Form Confirmation of funding was approved by US/FA at Estimated 20th February,2013 Cost of UGX. 200,000,000. An Advert run on in the Daily Monitor included a Schedule of 10th May, 2013 activities which stated that implementation start date was 22nd July, 2013 Contract Agreement Signing at Contract Price of 1st November, 2013 UGX.413,082,200

Delays in the procurement process greatly affect procurement planning and lead to delayed service delivery.

The Accounting Officer attributed the delay to major staff transfers in the PDU during the year under review which impacted negatively on performance.

I advised Management to ensure that procurements are always initiated and implemented in the planned time period.

45.10 Supply of Textbooks and Instructional Materials (MOES/Supplies/11-

12/0013)

a) Delayed Delivery of Instructional Materials by Contractors Regulation 260 (1) (b) of the PPDA Regulations, (2003) requires a contract manager to ensure that the service provider performs the contract in accordance with the terms and conditions specified in the contract. During the year under review, the Ministry engaged various private firms to supply and deliver instructional materials to various schools in the country. However, delays were noted in the execution of the contracts well beyond the agreed 120 days. Besides, there was no documentary proof that the liquidated damages clause was evoked. Contractor and contract Contract Contract Expected Actual Varianc details sum date date of date of e (UGX) discharge discharge (120 days) M/S Longhorn 7,057,673,400 30/5/2013 30/9/2013 16/10/2014 381 days publishers.(supply of p.5,p6& p.7 text books) 580

Contractor and contract Contract Contract Expected Actual Varianc details sum date date of date of e (UGX) discharge discharge (120 days) M/S East Africa Educational 519,135,760 30/5/2013 30/9/2013 13/10/2014 378 days. publishers. (supply ofP.5 Swahili text books) M/S St.Bernard 500,916,000 30/5/2013 30/9/2013 23/5/2014 223 days. publishers.(supply of p.5 math text books) M/S Fountain Publishers. 2,588,953,878 30/5/2013 30/9/2013 03/02/2014 123 days (Supply of p.5, p.6 & p.7 text books). M/S M.K Publishers Ltd, 3,433,484,300 31/5/2013 30/9/2013 14/04/2014 194 days. (supply of p.5,p.6 & p.7 text books)

In the circumstances, the objectives of the procurement were undermined. I explained to Management that there could be change of curriculum before utilization of the said books. The delays could also affect the intended beneficiaries especially the candidate classes.

The Accounting Officer attributed the anomaly to delays in issuing of clearance certificates to contractors for mass printing.

I advised Management to always ensure that terms and conditions of a contract are complied with to ensure effective and efficient service delivery. b) Lack of Contract Management Records Regulation 259(1) of the PPDA Regulations, (2003) requires the Accounting Officer to appoint a contract manager for each contract/procurement, who will inter alia draw a contract management plan and keep a record of performance of the contract. However, it was noted that no contract management plan for the procurement of instructional materials was drawn, and contract management records such as progress reports, field reports, copies of payments made, among others, were not maintained on file.

I explained to Management that absence of contract management records makes it difficult to confirm whether supervision and monitoring of the contract was carried out in accordance with the specified terms of the agreement.

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Management explained that the contract manager had limited human resource capacity to effectively implement the Regulation and promised to build capacity in contract management.

I advised Management to always ensure compliance with the Regulations in this regard.

45.11 MUNI UNIVERSITY

a) Budget Performance Whereas the University budgeted to receive revenue amounting to UGX.5,000,000,000 from government grants, only UGX.4,459,251,381 was received through the MoES, thereby registering a shortfall of UGX.540,748,619 (10.8%). The shortfall constrained Management in implementing planned capital development projects at the University.

Management explained that MoES received 94% of its appropriated budget which consequently affected the performance.

I advised Management to always liaise with the Ministries of MoFPED and MoES to ensure all budgeted funds are released.

b) Implementation of Unapproved Strategic Plan It was noted that the Management of the University has been implementing a 5- year draft Strategic Plan covering the period 2010/11 to 2014/15. Lack of an approved strategic plan may lead to implementation of activities that are not strategic to the University.

Management explained that the draft Strategic Plan was submitted to the Council for consideration.

I advised Management to follow up the matter and ensure that the Strategic Plan is approved to give proper direction to the University when it is still at its formative stage.

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c) Land Ownership The University owns various pieces of land totaling to 3,690.3746 acres. All the land was donated by the local communities and agreements of offer are in place, except for 0.4446 acres along post office Road. By the time of writing this report, only one title for the land measuring 2973.13 acres had been secured, with the rest of the pieces of land without ownership titles. There is a risk of the university losing the land to encroachers. The table below refers;

Location Sub- county District Land size Status Muni Oluko Arua 130.054 acres Lease process ongoing Paroketo Pakwach Nebbi 147.166 acres Lease process ongoing Bidibidi Romogi Yumbe 439.58 acres Lease process ongoing Madiokello Okollo Arua 2973.13 acres Land title obtained Along Post Arua Arua 0.4446 acres Process of opening Office rd, Municipality boundaries 3,690.3746

Management explained that most of the leases were in the final stages of processing, and the parcel of the land along post office road in Arua Municipality had just been donated. The process of re-opening the boundary had also begun.

I advised Management to liaise with the relevant authorities and expedite the transfer processes.

45.12 SUPPORT TO THE POST-PRIMARY EDUCATION TRAINING EXPANSION

AND IMPROVEMENT (EDUCATION IV) PROJECT

a) Compliance With Financing Agreement Provisions And Gou

Financial Regulations

i. Government of Uganda Counterpart Funding The African Development Fund Project Appraisal Document required the Government of Uganda to contribute 10% of the total project cost and partially 583 finance the categories of expenditure for works (10%), services (10%) and operating costs (80%), all to the tune of UA 5,780,000 (Approx. USD 9.36 Million). However, with 92% of the project time elapsed as at 30 June 2014, the GoU contribution stood at UA 4,170,776, equivalent to USD 6.76 Million (72% of the agreed amount). There is a risk that the project will close without the government making its full contribution to the project. This can also lead to accumulation of unpaid bills thereby affecting completion of all agreed and planned activities.

The Accounting Officer explained that the pace at which the counterpart funds were released to the Ministry on a quarterly did not match the rate at which the contractors‟ requests for interim payment certificates came in. I have advised the Accounting officer to liaise with the Ministry of Finance Planning and Economic Development to ensure that GOU obligations are met to enable the implementation of the agreed activities. ii) Slow Progress in Project Implementation Review of the project implementation records showed clusters I, II and III were due to have been completed in September 2013. However, it was noted that some of the cluster I, II and III activities were still outstanding. Also noted was that the works under cluster IV whose contracts were signed in September 2013 and expected to be completed in September 2014 were behind schedule.

Delays in the completion of works would call for unnecessary variations and increase in contract administrative costs in terms of inspection. In addition, the specific activities may be affected if they are still incomplete at the time the project ends.

The Accounting officer explained that time contract extensions had been site- specific and they did not result into a change in contract price variations hence no additional cost. Out of the 68 targeted beneficiary institutions under the Project, 44 (65%) had been completed and 17 (25%) had attained a rate of completion of 75-95% and above. Management further indicated that measures had been put in place to address civil works challenges and intensify site supervision and monitoring.

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I await the outcome of management‟s intervention in this regard.

iii) Recruitment of Teachers for Seed Schools Under the project 12 new seed secondary schools are to be constructed and be fully furnished and equipped. It was noted that out of the 12 schools, 4 schools namely; Mella SSS, Atutur SSS, Kanara SSS and Wakyato had been completed, handed over by the contractors and students enrolled. However, no teachers were posted to these schools to teach the enrolled students. It was further noted that the schools were operating with the support of a few community volunteer teachers who were not on government payroll. Lack of committed and facilitated teachers may compromise the project objective of accessing equitable and quality education.

Management explained that the Executing Agency had made attempts to deploy Teachers to the new seed secondary Schools but the majority had not reported for duty citing relocation challenges arising from location of the seed secondary schools. They stated that a formal request for approval of recruitment of teachers for the seed schools had been sent to the Ministry of Public Service.

I await the outcome of management‟s action in this regard.

b) General Standards of Accounting And Internal Control

It was noted that management had in all material respects, put in place a satisfactory internal control system and measures to ensure proper accountability for all project funds.

45.13 UNIVERSAL POST PRIMARY EDUCATION AND TRAINING PROJECT

a) Compliance With Financing Agreement Provisions And Gou Financial Regulations

It was noted that management had in all material respects complied with the covenants contained in the Financing Agreement and the Government of Uganda Financial Regulations except for the following matters: 585

i) Funds not accounted for The Treasury Accounting Instructions, paragraph 181 and the Public Finance and Accountability Act Reg. 63(4) require all vouchers to contain full particulars of each service or goods procured and such supporting documents as may be required to enable checking without reference to any other documents.

Furthermore, Guideline 4.18 of the School Based Procurement and Implementation Manual for Civil Works 2012 requires the accountability returns to be submitted to the Ministry of Education and Sports (MoES) within one month after utilization of funds.

A sum of UGX.225,472,952,772 was advanced to schools for UPPET activities under phase 1 and phase 2. However at the time of audit, only UGX.215,464,635,286 had either been accounted for after utilisation or refunded by various schools leaving an outstanding balance of UGX.10,008,317,486.

The funds were advanced between May 2011 and December 2013 as summarized in the table below:

No of Advanced Accounted Refunded Total Accounted Total s (UGX) (UGX) (UGX) for and refunded Outstanding c (UGX) Balance (UGX) h o o l s Phase 215 56,105,595,216 59,523,373,232 49,872,017,510 3,417,778,016 1 6,233,577,706 Phase 422 155,889,800,45 159,359,040,070 165,949,579,540 6,590,539,470 2 2 3,469,239,618 637 215,464,635,286 Total 225,472,952,772 205,761,817,962 9,702,817,324 10,008,317,486

Failure to account for the funds in a timely manner could lead to their misuse by the respective schools.

Management explained that they had intensified financial accountability requirements and the status continued to change as more accountability returns 586 were being submitted by the schools. In addition management had requested the PS/ST to consider attaching accounts of schools with big outstanding balances.

I have advised the Accounting Officer to follow up the long outstanding accountabilities and ensure that the respective schools comply with the accountability requirements.

iii) Terminated contracts without recovery of Performance Securities Section 232 (5) & (6) of the PPDA Regulations state that where a provider is required to provide a performance security, a bid security from that provider shall not be released until a satisfactory performance security is received by a procuring and disposing entity. A performance security shall not be released by a procuring entity until all the provider's obligations have been fulfilled.

A number of firms were engaged to undertake civil works at 35 schools for an aggregate contract sum of UGX.9,099,561,449. At the time of audit, a sum of UGX.3,894,801,294 had been paid to the contractors in respect of certified works. However, the contractors failed to execute the contracts to completion culminating into termination. At the time of termination most of the performance securities had expired and as such they could not be cashed. This could lead to loss of funds where particular contractors fail to perform their contracts.

Management explained that during the project implementation, a number of challenges arose such as inflation, delayed release of funds to schools, low quotations; and these resulted into slow progress and un-recorded time extensions. Whereas the schools were advised to terminate non-performing contracts, delays in termination resulted into expiry of performance securities making it impossible to cash them.

I have advised management to always ensure proper contract management and to consider legal action against the errant contractors. iv) Refund of ineligible Expenditure to IDA 4570-UG USD 1,124,755

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Funds amounting to UGX.2,868,124,565 (USD.1,124,755) was validated as ineligible contrary to the loan agreement according to the validation exercise of accountability reports. Consequently the PS/ST by way of a virement effected a refund of UGX.2,958,105,650 equivalent of USD.1,124,755 to IDA Bank in New York.

I explained to the Accounting officer that there is a risk that project activities were not implemented as planned and management risks funding sanctions from the Bank due to noncompliance with the loan agreement. The virement in the current budget to refund the money implies that the planned activities in the current budget could not be implemented.

Management explained that the ineligible expenditure was caused by individual head teachers who chose to spend project funds outside the guidelines. These head teachers were interdicted and some were being investigated by CIID and as a result, some of the head teachers were paying back and the names of the errant ones had been submitted to MoFPED to tag the funds on their retirement benefits. I have advised the Accounting officer to ensure full recovery of the outstanding ineligible expenditure from the errant head teachers. Future programmes of same nature should also include detailed sensitisation of head teachers on the procedures of implementation and utilisation of programme funds. v) Government obligation arising from Delayed procurement process The construction of 44 Schools (19 new and 25 for completion) were turned down by the World Bank on the basis that the computations contained errors and they were late as there was insufficient time to correct the errors and sign the contracts to get the work completed by Project closure date of 31st July 2014. The amount spent on the 25 incomplete Schools was UGX.1,454,214,518 and the estimated cost up to completion is UGX 15,727,562,518 which gives rise to immediate government obligation to implement the construction of the incomplete schools.

Management explained this was brought about by failure by the schools to account for disbursed funds and that Government has committed to provide resources to complete the unfinished activities in the financial year 2015/16.

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I have advised the Accounting officer to pursue the matter urgently so as to avoid further deterioration of the unfinished structures. vi) Cancelled Schools A total of 48 schools were cancelled during the IDA Implementation Supervision Mission of the UPPET/APL1 project in April 2014 on grounds of having outstanding issues with their financial records with possible interdiction of some head teachers who were also still reluctant to terminate contractors contrary to technical advice provided. It was noted that work resumed on six of them and two had been completed as detailed in the table below:

School Status Jubilee SS On Going Nyakinoni SS On going Puranga SS Completed St Kizito SS Nakibano On Going Nyabiteete SS Completed Kiyeyi High School On going

The remaining 42 Schools were still un-attended to after a total of UGX.6,140,261,629 was incurred on them. It was also noted that no measures had been put in place to safeguard the developments which may result into their destruction and therefore loss of the money spent so far. There is also the risk that the intended project targets may not have been met.

The Accounting officer indicated that the cancelled schools were to be budgeted for and constructed in the FY 2015/16 using GoU funds. I await the outcome of management action. b) Project implementation status

By June 30, 2014, USD.140,924,633.55 (94.04%) of the credit had been disbursed and later the project closed on 31st July 2014. However, the status report showed that some project component activities had not been completed and by the time

589 of Audit (November 2014), the following components had not achieved 100% status of implementation. There is a risk that with the project closure, the components may not be implemented fully.

Project Purpose (Sub components) Status (Nov 2014) Component Increasing On-going construction of 87% equitable Classrooms access to lower secondary schools Improving Revised Curriculum framework for 95% quality for lower secondary lower Supply of lockable metallic 90% secondary bookshelves education

Management attributed the delay in project implementation to strict adherence to procurement processes and preliminary activities such as need to adequately prepare and train the different categories of actors involved in the project implementation.

I have advised management to ensure steps are taken so as to ensure attainment of the intended project objectives. i) Incomplete and Delayed supply of School Furniture By the close of June 30, 2014, 131 out of the 573 completed schools did not have furniture of which 122 schools‟ furniture had been centrally procured. It was noted that 30% of the centrally procured furniture contract were to be executed by 31st July, 2014. This implies that 94 schools will not have furniture, (85 of the 122 schools will not be furnished from the project, and additional 9 complete schools whose bills of quantities did not include furniture supply but were identified at completion).

Although Management explained that Furniture for 122 schools has been delivered to the central stores in the Ministry and is yet to be distributed to the beneficiary schools, I was unable to verify the delivery to the central stores. 590

iii) Delayed Delivery of Procured Motor Vehicles On 29th November. 2013, the Ministry signed a contract with M/S Toyota U Ltd to supply 2 motor vehicles - Toyota Land cruiser (station wagon) at a cost of USD.241,654,000.

Examination of payments revealed that the Ministry paid a total of UGX.397,093,223 in 2 instalments vide Invoice No. UPPET124 of 30th April, 2014 (UGX.199,649,223) and Invoice No. R 730/Jun (UGX.197,444,000). However, by the time of writing this report in December 2014, the vehicles had not yet been delivered to the Ministry (project closed on 31st July 2014).

I explained to management that Delayed delivery defeats the purpose for which the vehicles were required. Full payment for the vehicles amounted to pre- financing the supplier.

The Accounting Officer explained that the vehicles were with the supplier and were to be delivered to the Ministry. I have advised management to follow up with the supplier and have the vehicles delivered.

46.0 MAKERERE UNIVERSITY a) Mischarge of Expenditure Paragraph 156 of the TAI provides that funds available under one item or sub-item of expenditure may not be transferred to another item or sub-item save on the authority of a virement warrant, nor may expenditure be charged to an item/sub item merely because funds are available under that item/sub-item.

It was noted that UGX.969,917,237 was wrongly charged on item codes meant for other activities other than those for which the expenditure was incurred. Mischarge of expenditure is an indication of weaknesses in budgetary controls and results into misrepresentation of balances in the financial statements to the extent of the mischarged expenditure.

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I advised the Accounting Officer to strengthen controls over budget execution to avoid mischarge of expenditure codes. b) Payment for Extra Load Allowance During the year under review, the University spent a total of UGX.308,857,850 as allowances for the extra lectures taught and work done during the weekends and evenings. However, the basis of computation of individual payments, including information relating to the total number of hours lectured above the standard hours by each lecturer and rates were not availed to support the payments.

There was also no evidence of monitoring and supervision of teaching staff, who taught outside the normal working hours. In the circumstances, the authenticity of the payments could not be ascertained.

Management explained that at the time of the audit, some staff had not been confirmed in the University service but this was later rectified. However, the relevant supporting documents were not availed during the verification exercise. I advised the Accounting Officer to:  ensure that payments for extra load allowances are properly supported with evidence of having carried out the extra load activities.  ensure that the appointments are approved by the Appointments Board as required.  formulate and institute a proper mechanism of monitoring and ensuring that payment for extra load activities are undertaken. c) Delayed and Non Deduction of NSSF Contribution Section 11(1) of the National Social Security Fund Act, Cap 222 of the Laws of Uganda, 2000 requires that every contributing employer shall, for every month during which he or she pays wages to an eligible employee, pay to the fund, within fifteen days following the last day of the month for which the relevant wages are paid, a standard contribution of 15 percent calculated on the total wages paid during that month to that employee. However, it was noted that the University remitted UGX.1,256,828,654 to NSSF more than 15 days after the due dates.

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Also noted was that the University did not make deductions amounting to UGX.338,830,110 as 5% employee contribution from staff salaries. This could lead to loss of staff earnings in form of interest,in additionto exposing the University to the risk of penalties by NSSF. The reported payables in the financial statements are misstated in this regard.

Management explained that the affected staff had not yet been allocated NSSF numbers which were later given and the University was in the process of remitting the money to NSSF.

I advised the Accounting Officer to ensure that the deduction in respect of NSSF is always effected and remitted in a timely manner. d) Pension Liabilities The University had outstanding pension liabilities of UGX.30,406,365,541 at the close of the financial year. The following observations were made:

a) Unremitted DAP Arrears contributions The University runs its own Retirement Scheme, Deposit Administration Plan (DAP)where the staff contribute 5% deducted from their individual salaries while the University contributes 10%.Included in the balance of pension liabilities is a sum of UGX.10,632,082,369 in respect of deductions and contributions that Management had not been deposited on the DAP Account by close of the year. In the circumstances, the fund‟s ability to grow to cater for members‟ interest earnings is limited and its sustainability is curtailed.

The Accounting Officer attributed the state of affairs of the DAP to underfunding of the University which leads to payment of net accounts and leaving the contributions to DAP as payables.

I advised Management to ensure timely remittance of contributions in accordance with the provisions of the Fund to ensure its sustainability.

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b) Unremitted NSSF Contribution Arrears Section 11(1) of the NSSF Act, requires every contributing employer every month during which he or she pays wages to an eligible employee to pay to the fund, within fifteen days a standard contribution of 10 percent calculated on the total wages paid during that month to that employee. On the contrary, it was noted that the University did not remit UGX.601,706,641 for financial years ending June 2007 and June 2008 to the Fund. Non-remittance of contributions to the Fund impacts on the staff savings inform of interest and could also attract penalties from the Fund.

The Accounting Officer attributed the non-compliance to underfunding of the University but indicated that they had started remitting the outstanding balances.

I advised the Accounting officer to engage the key stakeholders and ensure that all the outstanding balances are remitted to NSSF to enable members earn interest on their contributions and also avoid possible penalties. e) Accumulation of Payables Contrary to the Commitment Control Policy of Government, there was an increase of UGX.14,412,306,708 (126%) in the reported payables from UGX.11,409,981,432 (FY 2012/2013) to UGX.25,822,288,140 in FY 2013/2014. There is a risk that the University may not be able to settle the creditors given the current level of funding. It was also irregular for the University to continue to accumulate domestic arrears without adequate funds to settle them.

The Accounting Officer explained that payables accumulated due to underfunding of the University but efforts were being made to ensure that they are settled.

I advised the Accounting officer to adhere to the Government‟s Commitment Control Policy and ensure that the outstanding payables are settled. f) Unauthorized Over Expenditure Paragraph 152 of the TAIs Part I, 2004 and section 17 of the Public Finance and Accountability Act (PFAA), 2003 requires that expenditure not provided for in the approved estimates of any financial year may not be incurred without the authority 594

of a Supplementary Estimates Warrant, a Virement Warrant or a Contingencies Fund Advance Warrant. It was noted that the University incurred excess expenditure of UGX.4,037,303,551 on the two items shown below without the necessary approval.

Expenditure Budget Actual Expenditure Variance Item Other operating 14,561,400,379 17,114,067,918 2,555,667,539 expenses Domestic Arrears 780,000,000 2,261,636,012 1,481,636,012 TOTAL 15,341,400,379 19,375,703,930 4,037,303,551

I explained to the Accounting Officer that this practice suffocates other planned activities whose budgeted funds are diverted.

The Accounting Officer attributed the anomaly to increased prices for students‟ food, unfavourable exchange rates for invoices that were quoted in foreign currency and pressure to pay the domestic arrears as some creditors threatened the University with court action.

I advised Management to ensure proper budgeting for all expenditure items to avoid diverting funds meant for other activities. Furthermore, the Accounting officer should always seek relevant authority prior for spending over and above the budget. g) Revenue Shortfall Out of the budgeted Internally Generated Revenue of UGX.122,590,439,007 for the year under review, the University collected UGX.103,076,996,162, resulting into a shortfall of UGX.19,513,442,845 (16%). Failure to collect budgeted revenue hindered the University from achieving its planned activities and also accumulating domestic arrears.

In response, Management attributed the shortfall to the University tuition policy at the time which gave room for students to pay 60% of fees and the 40% was carried forward to subsequent years. It however indicated that the University had taken corrective action and the current policy on tuition is such that all students must pay100% tuition before sitting for the semester examinations. 595

I advised Management to enforce the fees collection policy to avoid accumulating receivables which may eventually become uncollectable. h) Management of Receivables During the year, Receivables increased from UGX.630,545,566 to UGX.4,914,675,690, indicating an increase of UGX.4,284,130,124 (680%). A review of the supporting schedules revealed that a significant proportion of the debts was in respect of tuition fees (UGX.3,706,164,617) not collected during the year under review. There was laxity in enforcement of debt collection as there were students who sat exams without settling the tuition fees contrary to the University policy.

I explained to Management that accumulation of receivables hinders availability of cash to finance University operations. There is also a risk that the debts may eventually become uncollectable.

Management explained that a new unit called Makerere University Revenue Services Unit had been created and mandated to ensure that fees collection is enhanced. I advised Management to ensure enforcement of the fees collection policy. i) Staffing Gaps A review of the University staff establishment revealed discrepancies between the establishment structure and the filled positions. Out of the 2,780 approved positions, only 1,484 (53.4%) positions were filled leaving 1,296 (46.6%) vacancies.

I explained to the Accounting Officer that understaffing leads to work overload on the existing staff and limits the ability of the University to effectively deliver and achieve its mandate. There is also a risk that optimum teaching is not achieved, which may affect the University products (students).

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Management explained that the University had tried to uplift the staffing levels to an optimal level, but the University Council could not handle the wage bill since it caters for only 42% of the total wage bill annually.

I advised the Accounting Officer together with the University Governing Organs to liaise with other stakeholders and address the matter of understaffing by recruiting more staff to ensure effective service delivery. j) Government of Uganda Payroll Validation Exercise The Auditor General appointed Ernst & Young to undertake a payroll audit and to validate and capture the biometric details of all Government of Uganda Employees. It was noted that 95 members of MUK staff did not turn up for the exercise. There is a risk of these employees being deleted from the Government Payroll if at all they exist.

The Accounting Officer explained that the University was in touch with the Ministry of Public Service to ensure that the affected staff are validated. It also indicated that, 22 of the queried staff could not be traced and had been deleted from the payroll, and the University Security Department was spearheading efforts to trace and recover the money from the affected staff.

I advised the Accounting Officer to ensure that the traceable employees are validated. I also await the outcome of the action being taken with regard to the 22 employees. k) Non-Deduction of Taxes Section 120 of the Income Tax Act, 1997, requires a withholding agent to pay withholding tax to Uganda Revenue Authority (URA) within fifteen days after the end of the month in which the payment for goods and services in excess of UGX.1 million was made. However, UGX.457,214,062 was paid to various suppliers without deducting withholding tax at 6% and remitting it to URA. Failure to deduct and remit taxes may attract fines and penalties from URA.

Whereas Management indicated that taxes had been deducted and remitted to URA, no details of payment were availed for examination. 597

I advised Management to recover the un-deducted taxes from the respective suppliers for onward remittance to URA in accordance with the Act. l) Incompletely Vouched Expenditure Paragraph 181 of the TAI requires all vouchers to contain full particulars of each service or good and be accompanied by such supporting documents as may be required so as to enable them to be checked without reference to any other documents. However, UGX.76,742,813 paid in respect of various activities including teaching and internship workshops and placements lacked the relevant supporting documents like attendance registers and minutes.

In the absence of supporting documents, I was unable to confirm that the expenditure was correctly incurred.

Whereas Management indicated that the supporting documents were available, they were not provided for audit examination.

I advised the Accounting Officer to ensure that all expenditure incurred is appropriately vouched and accounted for. m) Under Utilization of the Integrated Tertiary System for Revenue Collection The University procured a computerized integrated tertiary software system (ITS) in 2004 as a major part of the University‟s wide initiative to improveFinancial and Human Resource management, and maintenance of Academic Records. The system is constituted of three Modules, the ARIS (Academic Register Information System), the FINIS (Financial Information System) and the HURIS (Human Resource Information System).

It was noted that despite the expected benefits, all three modules were notfully operationalized to reap the benefits of automation.

The following table summarizes the module components that are functional and those that are not.

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MODULES FUNCTIONAL MODULES NON FUNCTIONAL  Application and Admission  ARIS  Registration  Time table  Study Records  Graduation  Assets ,Budgeting Procurement, Sundry  FINIS  Revenue Collection Debtors, Student debtors  Code structure and General Ledger  Payroll, Cash Book

 HURIS Non functional

This implies that the University is not deriving value for money from the procurement and installation of the ITS.

Management explained that the system was acquired under donor funding but later the University was meant to take it up. Due to the financial constraints the University was faced with, it failed to maintain all the modules as earlier planned. However, the Ministry of Finance, planning and Economic Development (MoFPED) is introducing the Centralised Educational Management and Accounting System (CEMAS) which is expected to replace all the modules with new ones.

I await the outcome of Government‟s intervention in this regard. n) Failure by the System to Generate Reports A review of the ITS revealed that the system was notable to generate a number of reports which are considered important at Management level and for audit purposes. Examples of reports that the system could not generate include the following:

S/N Detail 1. Transaction of bank statement 2. Cost center Report for Revenue collections 3. Revenue & Expenditure Statement report 4. Report for Student Biographical Information

Failure by the ITS to generate certain reports implies that the system is not being used by the University Management to make important decisions.

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Management acknowledged the challenge but indicated that the Ministry of Education and Sports (MoES) and MoFPED were planning to implement the CEMAS, an IT platform for all Public Universities. I wait the outcome of Government intervention in this regard. o) Land Ownership Review of documents of ownership of land belonging to the University revealed the University owns various pieces of land in different locations with unspecified acreage. While some of it is registered in the name of Makerere University Council, other pieces of land are not. It was noted that in most cases there was delayed renewal of lease agreements and land encroachment on University land by various individuals claiming ownership of the land. Without evidence of ownership, it was difficult to confirm that the land actually belongs to the University. There is a risk of the University losing the land if not transferred into its name or having the expired leases renewed. The table below refers;

Location Plot No. Acres Audit Action taken comment Kasangati 2.97 No lease  The land is clearly fenced off and agreement there is no illegal settlement. Boundaries have been opened and the process of obtaining the lease title on-going. Katalemwa F-N, BC, CD- 43 No title  Katalemwa covers total acreage CZ,DE-DL of 82 and the University has 31 acres of land titled.  The boundary opening for this land was done  A formal land search at the Ministry of Lands, Housing and Urban Development was done.  Investigation of encroachment was being handled by the Police Land Protection Unit. Makerere 77, 88,103- 20 No title  Boundary mark stone pillars were North 119, 156- installed and a land search 159,350,364 commenced for these plots before further action could be taken. Buyana 350 No title  An instruction was issued to Surveyors on a frame work contract to process the title and work wason-going. Lira 7-9 1.49 Expired lease  The process of renewing the lease Municipality title was in the final stages, all necessary fees were paid and alease agreement signed and forwarded to the External 600

Location Plot No. Acres Audit Action taken comment Lawyers for final execution. Katanga 1-47 31.73 Alterations  The land ownership dispute in made on the Court and awaiting final ruling on land title. this case.

Makerere 239 1.08 Title is under  The transfer forms for this land North the names of were obtained and a search Amos issued to the land office to KaluleSempa ascertain ownership before further action could be taken.

Makindye 14, 45, 57 14 Land  A court injunction was issued encroachers against the encroachers for trespass on the land and the matter was in court.  A caveat had been registered on the land and the court hearing was due in February 2015.

Management explained that in order to address the land issues which were inherited from past years, the University had engaged a surveyor to handle cadastral issues and a law firm for legal issues, both on framework contract basis. I await the outcome of Management‟s actions on the matter. p) Lack of Staff Performance Plans Staff performance appraisal is part of the performance management system that is used as a management tool for establishing the extent to which set targets within the overall goals of the organization have been achieved. It also helps identify performance gaps and development of training needs of individual employees. However, a review of the staff personal files revealed that they lacked annual performance plans which would have been the basis for appraisal at the end of the appraisal period. I explained to Management that there is a risk that staff performance was not being properly planned, monitored and measured through a staff performance management and appraisal system. This can lead to non- performing staff being rewarded at the expense of those who are performing.

Management explained that the University was reviewing its Human Resource Manual, and among the areas under review was performance management.

601

I advised the Accounting Officer, together with the Human Resource Department to ensure that the University has a proper mechanism for staff performance management and appraisal. q) Operations of Makerere University Guest House a) NSSF Remittances Section 11(i) of the NSSF Act, Cap 222 of the Laws of Uganda, 2000requires every contributing employer to pay to the fund, within 15 days next following the last day of the month for which the relevant wages were paid, a standard contribution of 15% calculated on the total wages paid during that month to that employee.

It was noted that whereas the Guest House was deducting NSSF contributions at a rate of 5% from staff, there was no evidence to show that deductions amounting to UGX.49,789,874 were remitted to NSSF together with the 10% employers‟ contribution.

Besides, most of the employees lacked NSSF Numbers and no effort had been made by Management to have this matter addressed. Failure to remit NSSF contributions exposes the Guest House and the University as a whole to penalties and fines by the Fund.

Whereas Management indicated in their response that all arrears had been subsequently cleared, I was not availed with evidence to this effect.

I advised Management to have all employees registered with NSSF and their contributions (arrears and future) remitted to avoid penalties by the Fund.

b) Unremitted PAYE Section 123 (1) of the Income Tax Act requires a withholding agent to pay to the Commissioner any tax that has been withheld or that should have been withheld within fifteen days after the end of the month in which the payment subject to withholding tax was made by the agent.

602

However, it was noted that UGX.43,131,990 in respect of PAYE deductions from staff salaries was not remitted to the tax body. This omission attracts penalties in form of interest which the Guest House may have to pay.

Whereas Management indicated in their response that all arrears had been subsequently cleared, I was not availed with evidence to this effect.

I advised the Accounting Officer to have all the money that was deducted from employees as PAYE remitted to URA and also to ensure that all future deductions are remitted in the stipulated statutory period to avoid possible penalties.

c) Failure to Disclose VAT The Value Added Tax (VAT) Act, Cap 349 of the Laws of Uganda, 2000 requires that all persons registered for VAT levy it on all transactions which are vatable and that a VAT return is filed every month.

However, it was noted that Management of the Guest House did not furnish its VAT returns to URA and yet the issued invoices were inclusive of VAT.

The Guest House Management‟s failure to declare VAT charged on supplies could lead to penalties by the tax authority.

I advised the Accounting Officer to ensure that the Guest House Management submits the required returns to URA. r) Outstanding Debtors It was noted that despite the fact that the Guest house is struggling to remain a going concern, it had accumulated debtors to the tune of UGX.227,802,294 as at 30th June, 2014.

A review of the list of debtors revealed that the University departments were among the biggest debtors for the services provided by the Guest House, to the tune of UGX.133,042,055.

603

Whereas Management indicated that the debts had since been cleared, I was not availed with evidence to this effect.

I advised the University Accounting Officer to ensure that the debts owed by the various departments are settled to enable the Guest House settle its own obligations. s) Profit and Loss Account of the University Bakery It was noted that the bakery has been making losses for the last two consecutive financial years. The prior year loss was UGX.24,003,919, while a loss of UGX.36,633,600 was incurred in the year ended 30th June, 2014. I explained to the Accounting Officer that those are indications of the bakery becoming a non- going concern.

Management attributed the huge losses to increasedcosts of production for the Bakery and the fixed price of selling bread to the Halls. They further indicated that the Bakery had been taken over by Makerere University Holdings Company which is expected to turn it into a viable commercial unit. I await the outcome of Management‟s intervention in this regard.

t) ECONOMIC POLICY RESEARCH CENTRE -MUK a) Unacknowledged receipt of funds

A sum of UGX 62,020,000 was paid to enumerators to undertake research during the year under review. However, it was noted that receipt of the funds was not acknowledged by the beneficiaries. This practice leads to gaps in the accountability process of the money involved which can result into misappropriation of the funds.

Management explained that the funds were paid to 84 enumerators through their Bank accounts whose details were provided and confirmed by the beneficiaries. The payments to bank are always followed with notification to pay and these payments are clearly indicated on the Bank statement.

604

I have advised management to ensure that payees acknowledge receipt of funds received.

b) Adjustments made through journal vouchers Best practice requires that any adjustments made in the accounts be supported by properly authorized adjustment vouchers. It was noted that three journal entries totaling to UGX.16,749,605 passed in the accounting system to correct book keeping errors were not approved by management. There is a risk of intentional misrepresentation of transactions on account balances going undetected.

Management acknowledged the anomaly and undertook to take action in future. I await management‟s commitment in this regard. u) NORWEGIAN PROGRAMME FOR CAPACITY DEVELOPMENT IN HIGHER EDUCATION AND RESEARCH FOR DEVELOPMENT (NORHED) FUNDED PROJECTS - MUK a) Delayed Project implementation It was observed that the implementation of projects was delayed especially the signing of partnership contracts for collaboration to enhance capacity building programs at the Universities. Consequently, a balance of USD.1,240,793 remained unutilized for the 7 month period ended 30th June 2014. The delay in project implementation may affect the enrolment of new students under the program in Higher Education Institutions.

In their response, management acknowledged the state of affairs which it attributed to the following factors:-

 delayed disbursement of funds by the donor  Inadequate descriptive financial information of the first disbursements which did not synchronize with project details hence delaying access to the funds.  Some programme partners had not opened their respective accounts, making it difficult for Makerere University to disburse institutional funds on individual accounts.

605

 NORHED was a unique programme involving not only many programmes, but many distant partners, with different financial management systems, therefore there was initial problem to study these systems and harmonize the different procedures.  South Sudan became politically insecure making it insecure for staff to conduct business with the Universities there.  A bigger proportion of the balances held on the A/C is for Tuition and Stipends of the Ph.D. and Masters Students whose process of identification took longer than anticipated especially from the partner institutions of University of Juba, South Sudan and University of Agder, Ethiopia.  Delays in the procurement processes for items such as Computers and other specialized scientific equipment.

Management undertook to provide the necessary support to all projects with implementation of programme activities with a view to harmonizing and increasing efficiency in budget performance. I await management‟s commitment in this regard. b) Funds not properly accounted for i) Incompletely Vouched Expenditure A sum of USD 12,247 was expended in respect of various project activities. However, it was noted that the payment vouchers lacked appropriate supporting documents like receipts, air ticket bookings, transfer slips, and schedule of beneficiaries. Delayed accountability may lead to falsification of documents.

Management explained that at the time of Audit, some receipts and other accountabilities were separately filed. In addition, the doctoral students to whom funds had been advanced to procure laptops were still in Oslo, Norway. However, management undertook to provide the accountability documents as soon as they are available.

I have advised management to always ensure that payment vouchers are supported with the necessary accountability documents.

606 v) MAKERERE UNIVERSITY: ADAPTATION OF SMALL SCALE BIOGAS DIGESTERS FOR USE IN RURAL HOUSEHOLDS IN SUB SAHARAN AFRICA PROJECT FOR THE 16 MONTHS PERIOD ENDED 31ST MARCH 2014

a) Compliance With Financing Agreement Provisions and Government of Uganda Financial Regulations

It was noted that management had in all material respects complied with the financing agreement provisions and Government of Uganda financial regulations except for the following matters:

i. Funds not accounted for A sum of Euros 137,326.624 advanced to 9 partners to carry out project activities lacked relevant supporting documents contrary to Articles 2.1, 16.2 & 16.3 (Annex II) of the Grant Contract. Unsupported expenditure may result into misuse of the project funds thereby hindering implementation of the project.

Management explained that the funds disbursed to all partners were based on the submitted funding requests and bank information that served as supporting documents. Management undertook to ensure that other supporting documents are obtained and kept by the Lead Applicant.

I have advised management to ensure that in future, all partners submit periodic accountability returns in respect of the funds disbursed to them.

ii. Irregular Expenditure Comparison of the approved budget and the actual expenditure for the financial year under review revealed that the expenditure exceeded the budget on a number of items by a total of Euros 10,758.54 without the relevant authority. Activities whose funds were encroached upon may not be fully implemented. Management acknowledged the anomaly which they attributed to posting of figures to wrong budget lines. However, management undertook to ensure that partner institutions correctly post report figures in the appropriate budget lines.

I await management‟s action in this regard.

607 iii. Unauthenticated Bank Documents from Partners During the first year of payment, it was noted that most of the bank statements submitted by partners apart from Cameroon were not authenticated by their respective bankers thereby rendering them doubtful.

Management in response acknowledged the anomaly and undertook to communicate the same to all partner institutions. b) General Standards of Accounting and Internal Control It was noted that management‟s control structure environment, accounting system and policies and control procedures were generally adequate to ensure prudent use of, and accountability for all project expenditure except in the following instances: i. Unabsorbed Funds During the year under review, a sum of Euros 61,311.06 was disbursed to several Project Partners to undertake various activities. However, the funds remained unutilized by end of the period under review. There is a risk of delayed completion of project activities and/or diversion of funds which may result in funding sanctions.

Management attributed the state of affairs to low burn rates for some partners due to a delay in project start time yet some partners‟ activities depended on others‟ output. I have advised management to ensure that all funds are absorbed in accordance with the workplan. c) Status of Project Implementation During the year under review a total of Euros 258,161.37 was disbursed to various African Union Commission Project partners implementing the project. Field inspections were carried out in a selected number of beneficiary homes in Uganda in the Districts of; Luwero, Kiboga, Mpigi and Buikwe among others to review the status of project implementation and the following anomaly was noted: i. Project Monitoring Costs

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A review of the project documents revealed that no provision was made for the principal investigator or an independent person to undertake monitoring and inspections of project implementation. Without proper monitoring and inspection, there is a risk that any deviation may not be detected and corrected in a timely manner.

Management explained that this matter was communicated to African Union Commission to permit budget reallocation to include monitoring costs. I await the outcome of management‟s action in this regard.

46.1 SUPPORT TO RESEARCH ACTIVITIES AT MAKERERE UNIVERSITY

FUNDED BY THE SWEDISH INTERNATIONAL DEVELOPMENT

COOPERATION AGENCY (SIDA)

I. COMPLIANCE WITH FINANCING AGREEMENT PROVISIONS AND GoU FINANCIAL REGULATIONS

It was noted that the Project complied in all material respects with the Financing Agreement provisions and Government of Uganda Regulations except for the following matter: I.1 Unauthorized over expenditures

A number of budget lines were overspent to the tune of UGX.2,483,197,182 (Refer to table below) without the necessary approval in the form of virement/reallocation warrants. In the circumstances, the expenditures are deemed ineligible. Management attributed the anomaly non revision of budget allocations since 2010 and consequently, allowing researchers to continue with their activities without sufficient funding on the items so long as the central account still had funds.

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Expenditure Item Budget Actual Over

(Ugx) (Ugx) (Ugx)

Travel abroad 876,643,694 1,226,395,691 349,751,997

Machinery & 477,274,593 589,605,277 112,330,684 Equipment

Scholarships- 1,094,481,724 1,644,799,380 550,317,656 fieldwork

Scholarships- 31,570,754 152,785,205 121,214,451 unforeseen

Scholarships- 2,011,125,531 3,360,707,925 1,349,582,394 subsistence

Total 4,491,096,296 6,974,293,478 2,483,197,182

I have advised the project management to always revise their budgets in accordance with the level of activities to be undertaken.

I.2 Irregular procurement of goods

It was noted that procurement of goods worth USD.56,106(UGX.147,839,310) for E-Resources from M/S International Network for the Availability of Scientific Publications(INAP) was not approved by the Solicitor General as required by the PPDA Act 2003. In the circumstances there is a risk of being party to unfavourable contractual obligations.

610

Management in response indicated that the transfer of USD 56,106 was a subscription fee for E-resource, a research site negotiated between the University and the supplier through an agreement which is reviewed every three years. I have advised management to always seek approval of the Solicitor General for all procurements in excess of UGX.50 million as required under the PPDA Act.

II. GENERAL STANDARDS OF ACCOUNTING AND INTERNAL CONTROL

II.1 Project funds not accounted for

A sum of UGX.567,731,120 that was spent on various project activities during the financial year lacked appropriate supporting accountability documentscontrary to the Project operational guidelines. In the absence of such documentation, I could not ascertain the correctness of the expenditure. Management attributed the delayed accountabilities to circumstances beyond the control of some researchers such as conditions that had to be fulfilled before they could proceed with other funded activities on a given research. I have advised management to always ensure that project funds are promptly and properly accounted for. II.2 Inappropriate application of Exchange Rates

The application of exchange rates during the year under review was inconsistent with generally accepted accounting practice. The project used exchange rates at the dates when remittances were received from the SIDA and such rates would remain operational until the subsequent remittance. In the circumstances, there is a risk of misrepresentation of the operating results of the project as they may not have been translated into the functional currency (UGX) at the correct rates. Management in response explained that it was viable to use set rates at given periods to avoid frequent fluctuations which worsen at the time of the transaction.I have advised management to ensure that rates applicable on the date of transactions are used. II.3 Mischarge of expenditure

Procurement of computers worth USD.13,100(UGX.34,518,500) from a local firm was wrongly classified under Scholarships subsistence budget line thereby distorting the operating results of the Project. 611

Management explained that the equipment was charged on scholarship because all moneys received on exchange gains and interest earned is accumulated under scholarships as it is received unexpectedly. However I have advised the project management to always budgetand spend such windfall gains in accordance with the existing budget provisions.

III. STATUS OF PRIOR YEAR AUDIT RECOMMENDATIONS I reviewed the implementation of the previous year audit recommendations and the following table summarises the status of those still outstanding.

Observation Status

Inadequate management of fixed assets Partially addressed (incompletefixed assets register, some assets not engraved and lack of a maintenance schedule for assets like heavy duty Photocopier and Lab testing Machines which have manufacturers‟ recommendation of usage and service)

I have advised management to address all the audit issues and recommendations made in the previous reports as they are intended to enhance efficiency of operations, accuracy of financial reporting and compliance with the applicable legislation

47.0 MAKERERE UNIVERSITY BUSINESS SCHOOL

a) Outstanding Payables Section 1.1.5 of the School Accounting Manual 2012 requires settlement of outstanding dues within 30 days from the date of receipt of invoice. However, a review of payables revealed that a balance of UGX.5,081,938,136 remained outstanding at the close of the year under review. By the time of writing this report, a total of UGX.3,562,439,292 had been settled leaving a balance of UGX.1,519,498,844 unsettled. This is contrary to the commitment control system 612

which prohibits entities from entering into commitments unless funds are available.

Management explained that the School largely depends on NTR which is normally received between mid-May and June when students are to sit their final exams. I have advised management to comply with the commitment control system. b) Unauthorised Excess Expenditure Section 2.5.1 of the MUBS Finance and Accounting Manual 2012 requires management to effect re-allocations between expenditure line items, within the same vote, only after approval by the Secretary to Treasury in accordance with the Public Finance and Accounting Regulations, 2003.

During the year under review, the School sought for a virement /reallocation of funds amounting to UGX.3,592,572,343 to enable the School cater for additional staff recruitment and the need to enhance the welfare of science staff. It was noted that although the request was granted by the PS/ST, the school still incurred UGX.1,936,187,681 over and above the approved estimates on various expenditure line items without the necessary approval. Incurring expenditure without the requisite approval of any amendments to the budget was irregular.

Management in response attributed the anomaly to some challenges faced with respect to four items namely employee costs, professional services, travel and transport, and maintenance of grounds and buildings.

I have advised management to always follow the prescribed procedures prior to incurring excess expenditure.

c) Unapproved ICT Policy Section 40(2)(b) of the Universities and Other Tertiary Institutions Act, 2001 outlines the formulation of the general policy of the Public University (School) as one of the responsibilities of the University Council.

613

The purpose of an Information and Communications Technology (ICT) Policy is to streamline the management of an Organization‟s ICT activities with regard to acquisition, utilization, development and sustainability. However, it was noted that the Draft ICT Policy was never approved by the School Governing Council although management had been using it since 2010. The lack of Council‟s approval makes it difficult to enforce the provisions in the Policy.

Management explained that the draft policy was being reviewed and expected to be submitted to Council for approval by the end of financial year 2014/2015.

I await management‟s action in this regard. d) Student Records Section 9.4.4 (f) of the School‟s Human Resource Manual 2009 states that it is the responsibility of the School Registrar to liaise with the School Bursar to maintain and update the students‟ database including registration and examination records.

On the contrary, management did not maintain a comprehensive record of students during the year under review. The records lacked vital information such as nationality and sponsorship (Private or Government). In the circumstances, proper management of student affairs is rendered difficult. Additionally, there is a risk of misstating the revenue collected from privately sponsored students.

Management explained that the School maintained a comprehensive record in the form of a nominal role. I have advised the Accounting Officer to ensure that a student database is maintained as required under the Manual. e) Transfer of Staff Loan Recoveries The School operates a loan account with Bank of Africa- Jinja road, Kampala out of which low-interest loans are extended to staff and recoveries deposited back on the same account. During the year under review, a total of UGX.1,179,009,120 was recovered from staff loans. However, it was noted that recoveries for the months of May and June 2014 amounting to UGX.222,832,405 had not been deposited on the designated loan account. I explained to management that this negatively impacts on the would-be interest income accruing from the loans. 614

Management explained that the delay to deposit the money on the loans account was caused by challenges in cash inflows.

I have advised management to ensure timely transfer of loan recoveries to the designated account to enable other staff also benefit from the loan scheme. f) Contract not cleared by the Solicitor General Regulation 225 (2) (f) of PPDA Regulations, 2003 stipulates that a contract document, purchase order, letter of bid acceptance or other communication in any form conveying acceptance of a bid that binds a procuring and disposing entity to a contract with the provider, shall not be issued prior to approval by all relevant agencies, including the Attorney General.

Management hired office space at MTAC at a contract sum of UGX.152,707,104 without approval of the contract by Solicitor General which was attributed to inadequate Government valuer‟s report:

Failure to have the contract cleared by the Solicitor General exposes the School to a risk of financial loss in the event that there are disagreements with MTAC.

I have advised management to get clearance from the Solicitor General‟s Office and heed the legal advice provided.

Management explained that although the contract had delayed to be cleared by the Solicitor General, they relied on the relationship already established with MTAC supported by an earlier contract cleared by the Solicitor General. They further explained that any further delays to pay would have resulted into MTAC terminating the relationship.

48.0 UGANDA MANAGEMENT INSTITUTE a) Accumulation of Payables Payables increased from UGX.2,630,011,183 to UGX.6,831,472,117 representing 160% increment from the previous financial year. Accumulation of payables exposes the Institute to a risk of litigations and the attendant costs. 615

Besides, there was no payables management policy to enable the Institute monitor and pay its creditors.

Management acknowledged the lack of payables management policy and undertook to take measures to reduce the risk exposure.

A Payables Management Policy should also be instituted to enable timely settlement of obligations. b) Receivables The Institute Debt Management policy requires all trade debtors to be allowed a grace period of 30 days from the date of the invoice. It was noted however that receivables increased from UGX.5,607,228,689 to UGX.7,642,135,737 representing an increase of 36.29%. Included in these receivables is „other accounts receivable‟ comprising mainly student debtors of UGX.7,332,342,516 of which UGX.3,577,080,183 relates to the period 2010-2012 and UGX.818,900,355 to earlier periods.

I informed management that an inadequate cash position undermines settlement of liabilities as they fall due. The accumulation of the receivables is attributed to laxity of management in enforcing the debt management policy of the Institute. The analysis below refers;

Analysis of Debtors

Bal b/f F/Y 2010/11 F/Y 2011/12 F/Y 2012/13 F/Y 2013/14 TOTAL

818,920,355.79 1,048,794,675.36 734,006,846.04 1,793,630,660.93 3,246,783,199.52 7,642,135,737.64

Management undertook to enforce the debt collection policy more consistently. I have advised the Accounting Officer to consistently enforce the debt management policy, so as to improve the cash position and subsequently settle the Institute‟s payables. c) Delayed contract Execution

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The Institute engaged an international construction firm in March 2012 to construct a new Classroom and Office Block, at a contract sum of UGX. 21,324,058,054. The completion date of the works was September 2013. However by the time of the audit, in February 2014, the works had stalled at structural level. It was also noted that the performance security had expired. Without renewal of the performance security, there is a risk of financial loss in the event of failure to execute the contract to its completion.

Management attributed the delayed execution of works to cash flow challenges and indicated that the construction would be completed using funds from AfDB under the HEST project. I advised the Accounting Officer to ensure that adequate funds are provided to complete the works. The performance Security should also be renewed. d) Rehabilitation of the Hostel A local construction firm was awarded a contract for rehabilitation of a hostel at UGX.2,543,323,798 (including a variation of UGX.163,931,252). By the time of the audit, UGX.1,589,061,770 had been paid representing 67% of the value of work done. Whereas the completion date was October 2013, inspections carried out in November 2014 revealed that the works were incomplete and had since stalled.

Delay to execute the rehabilitation works to completion may lead to escalation of c o s t s Left: Three completed blocks Right: Three hostel blocks which stalled

Management explained that the works stalled because of cash flow challenges and that construction would resume when funds are collected from the debtors.

I advised the Accounting Officer to enforce debt collection strategies and finalize the construction as envisaged.

617 e) Understaffing at the Institute The Uganda Management Institute has an approved establishment structure of 219 posts, out of which only 182 (83%) were filled leaving 37 vacancies. The most affected departments were the Quality Assurance, Procurement, Planning, M&E, Projects and Monitoring, SDL and IT, Research center, which lacked Heads of Department and staff.

Failure to fill all approved posts impacts negatively on the effective delivery of services by the Institute. Management undertook to fill the vacant positions in phases and in accordance with the existing recruitment Plan.

I await the outcome of management undertaking.

49.0 MBARARA UNIVERSITY OF SCIENCE AND TECHNOLOGY a) Unauthorized Excess Expenditure The University incurred excess expenditure of UGX.680,036,286 over and above the appropriated amount on Research, Consultancy, Publication and Administration and support services without relevant authority.

Management attributed the anomaly to excess revenue collections and inability to obtain authority to spend during the year under review. In the circumstances, the intentions of the appropriating authority are undermined.

I have advised management to always seek the necessary approval prior to incurring expenditure in excess of the approved amounts. b) Outstanding Commitments The University reported in its financial statements payables UGX.5,404,564,479 as at 30th June 2014. Included in the reported balance is UGX 4,442,293,176 in respect of salary arrears due to non-teaching staff, out of which UGX 4,185,159,868 had been settled by the time of audit. Also noted was that the payables included NSSF arrears of UGX.245,306,319 and a long-outstanding obligation of UGX.420,000,000 due to the former owners of the University Inn.

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I explained to management that accumulation of domestic arrears contravenes the Government Policy on commitment control and may attract litigation from long outstanding creditors. The NSSF obligation could attract fines and penalties as well.

Management explained that requests had been made to MoFPED to provide funds to settle the obligation. I have advised management to ensure that the outstanding obligations are settled to avoid possible litigations and their attendant costs. c) Management of Receivables Management reported a receivables balance of UGX.698,323,077 in the statement of financial position as at 30th June 2014. A sum of UGX.478,105,350 had been collected by the time of audit, thereby leaving a balance of UGX.220,217,727. A review of the supporting schedule revealed that the debts were owed by sponsors of private students. Also noted was that some students sat exams without settling tuition fees contrary to the existing University policy. This is an indication of laxity on the part of the University administration to enforce debt collection policy.

Accumulation of receivables hinders availability of funds for University operations.

Management explained that the University had introduced mechanisms for tracking defaulters which was expected to mitigate the problem. I await the outcome of management‟s intervention in this regard.

d) Budget Performance The University received a total of UGX.22,656,019,762 during the year under review, against an annual appropriated budget of UGX.21,817,082,000 representing a percentage performance of 103.8%. However, it was noted that whereas the University realized revenue over and above the bulk of the appropriated funds during the year, some key planned activities were not implemented as detailed in the table below:

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KEY OUTPUT PLANNED OUTPUT ACTUAL VARIANCE Research Conduct 35 Research Conducted 28 7 Research studies not Consultancy and studies, make 16 research studies, held,9 Publications not Publication Publications, Hold 4 made 7 publications, made,1 public lecture public lectures 8 held 3 public not held Research workshops lectures,11 research and 1 research workshops and 1 Dissemination research Conference dissemination conference Purchase of Networking of 1 level Procured 40 Desktop The procurement Office and ICT of science block,40 computers for process for network Equipment desk top computers laboratories,1CISCO fiber switches, including for laboratories,2 Switch for ICS, Wall bandwidth software wireless outdoor network cabinet for optimization tool and points, Network FoM, completed server was at equipment, website networking of 4TH evaluation stage. camera floor science block

Failure to implement planned activities undermines the University objectives.

Management attributed the state of affairs to the long procurement process that was still in progress by the end of the year under review. I have advised the accounting officer to always ensure that procurement processes are properly planned and undertaken early enough to enable management implement planned activities. e) Investment in Shares During the audit, it was noted that management invested in bank of Baroda with 5000 shares equivalent to UGX.3,000,000 in 2002. However, contrary to Treasury Accounting Instructions, the following anomalies were noted:  The University did not have an investment policy in place.  There was no due diligence report showing the viability of the investment.  There was no revaluation carried out at the end of the financial year since 2002, this leaves the investment presented at the nominal value in the financial statements hence misrepresenting the value of the investment to date.  Management does not maintain any investment ledgers that are meant to indicate the nominal amount of investment, income received, actual cash paid representing the capital invested and duration of the investment.

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In the absence of the above, I could not confirm the justification of the investment.

Management in response explained that the shares were bought as one of the initiatives of income generation for the University. I have advised management to formulate policy guidelines on investment proposals. f) Incomplete Fixed Assets Register It was noted that the University did not maintain an updated fixed assets register.

I explained to the management that failure to maintain the register renders the monitoring and tracking of the University assets difficult.

Management in response attributed the anomaly to posting of values, to a number of assets. However, an adhoc Valuation Committee had been established to come up with asset values whose work is yet to be completed. I await the outcome of management action in this regard. g) Outstanding Advances A sum of UGX.17,407,000 advanced to various staff for official activities remained outstanding contrary to paragraph 217 of the Treasury Accounting Instructions 2003, which requires accountabilities to be submitted within 60 days from the date of payment. Delayed accountability may result into falsification of accountability documents.

Management explained that the concerned staff had been advised to submit the accountabilities for verification. I have advised management to ensure that advances are accounted for or else recovered.

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50.0 KYAMBOGO UNIVERSITY a) FINANCIAL STATEMENTS

i. Misstatements in the Financial Statements

A review of the financial statements presented for audit revealed the following misstatements;

 The statement of financial performance reflects total expenditure of UGX.66,995,757,620 which excludes accrued expenditure of UGX.4,619,832,348, as shown in the statement of outstanding commitments as at 30th June 2014.

 Whereas the Appropriation Statements reflect total expenditure of UGX.66,995,757,620, the statement of Expenditure reconciliation reflects total expenditure per appropriation account as UGX.64,528,959,341, leading to an unexplained variance of UGX.2,466,798,279.

 The receivables figure of UGX.4,983,181,359 includes a total of UGX.4,716,181,435 related to outstanding students‟ fees. However this figure is not supported and analysed by management to indicate the details of the debtors such as students‟ name, programme/year of study and the respective faculties where such amount is due. Besides the bulk of this amount (i.e. UGX.3,343,584,532) is not allocated to any specific faculty, but is shown as due from „Revenue collection stanbic‟ with no proper justification.

The above errors imply that the financial statements are misstated. Although the Accounting Officer committed to having them corrected, this had not been done by the time of concluding this report in March 2015.

ii. Lack of budget provisions for domestic arrears - UGX.959,827,755

A total of UGX.959,827,755 was paid to suppliers in respect of unpaid invoices relating to previous years. However, a review of the University records revealed that although the University budgeted for settlement of domestic arrears, these particular arrears had not been reflected in the financial statements for the preceding year and accordingly, had not been budgeted for in the year under 622

review. Under the circumstances, I could not confirm whether the arrears and the corresponding payments were genuine transactions. Payments for unbudgeted expenses, tantamount to unauthorized expenditure and also leads to diversion of funds meant for other planned activities.

The Accounting Officer explained that the University paid the above amount of domestic arrears without adequate budget provision in the FY 2013/14, but also indicated that going forward, the University shall endeavor to minimize arrears, and when they occur, will be adequately budgeted for in the subsequent financial year.

I have advised the Accounting Officer to always ensure that only budgeted for expenditures are incurred by the University, or else use the options available under the Budget Act, 2001, to request for a supplementary estimate to cater for such unplanned expenditures. iii. Failure to adhere to the Commitment Control System Contrary to the commitment control system which requires Accounting Officers to commit the entity to the extent of funds availability, a review of the statement of financial position revealed that the entity has continued to incur domestic arrears. It was noted that the University payables increased by 49% from UGX.2,549,415,022 as at 30th June 2013 to UGX.4,983,181,359 as at 30th June 2014. Failure to adhere to the commitment control system leads to delays in settlement of supplier invoices, which can lead to loss of goodwill as well as imposition of interest charges on outstanding amounts.

In his response, the Accounting Officer explained that the increment in the payables figure was mainly due to the salary arrears arising from the failure by the Ministry of Finance, Planning and Economic Development (MOFPED) to remit on time UGX.2,860,377,118 for staff salaries and gratuity for the month of June, 2014.

I advised the Accounting Officer to always adhere to the regulations and ensure that commitments are only allowed to the extent of the available funds.

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iv. Management of Receivables The University reported receivables and prepayments of UGX.1,695,217,227 by the close of the year. Of this amount, UGX.1,428,217,303 relates to student‟s fees while UGX.266,999,924 relates to other debtors. The University has a policy which requires full settlement of fees before students are allowed to sit for exams. Strict implementation of the policy would mean that no debtors would arise from unpaid fees. The presence of significant balances of unpaid fees is an indication of laxity on the part of management to implement the University policy. This increases the risk of non-payment of fees by students, thus denying the University the much required funding.

In his response the Accounting Officer explained that the fees arrears related to State House. Statehouse requested the University to allow the sponsored students to sit their examination before paying fees pledging to pay later. It was further noted during scrutiny of correspondences between State House and the University on the matter, that State House owed the University UGX.1,298,349,081 and by 30th January, 2015, it had paid a sum of UGX.1,251,270,988 leaving a balance of UGX.47,078,093 outstanding. Considering the above development, receivables amounting to UGX.129,868,222 relate to other students other than those sponsored by State House. I advised the Accounting Officer to consider fully implementing the set policies of the University regarding payment of University dues. b) REVENUE i. Failure to collect Revenue from staff rentals – UGX.180,966,472 For the period under review, the University let out 120 units of its houses to staff for accommodation at a monthly rental fee agreed upon in the individual contracts with staff, which was recovered at source from staffs‟ monthly salaries. It was noted however that the University had outstanding rental dues totaling to UGX.180,966,472 as at 30th June 2014.

The Accounting Officer explained that the failure to effect rental deductions was due to a problem of payroll management during the FY 2013/14 when Ministry of

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Public service was shifting to IPPS. He explained that for the period from July to September, 2013, deductions were made by MoPS, whereas from October, 2013 to April, 2014 no deductions were made due to the transition process from Legacy to IPPS. However, although he indicated that the amount has since been recovered, I was not provided with sufficient documentation to confirm recovery of the amount involved apart from a schedule indicating indebtedness by staff. I have advised the Accounting officer to recover the amounts due from staff and provide proper accountability. ii. Failure to collect outstanding rental fees from private businesses - UGX.42,457,276 The University hired out spaces to private businesses and the National Council for Higher Education (NCHE) from which it collects rent. At the close of the year, it was noted that unpaid rental fees had accumulated to UGX.42,457,276 over the years. There is no evidence that the University has taken adequate steps to recover the outstanding rental dues. Further noted was that this amount was not included in the receivables balance as at 30th June 2014, implying that the receivables balance was misstated.

The Accounting Officer acknowledged that the University did not fully collect the rent due, but was making progress towards recovery of the outstanding amounts. I have advised the Accounting Officer to institute mechanisms to recover all outstanding rental dues and in future, consider putting in place strong controls to prevent accumulation of unpaid rental dues. In addition, the amount in question needs to be reflected in its books of accounts. iii. Unpaid Hall Fees - UGX.62,560,000

Privately sponsored students housed in the University halls are required to pay UGX.920,000 per annum (UGX.460,000 per semester) as accommodation fees. The fee is payable to halls of residence A/c No:9030005812444 in Stanbic bank, which is the sole recipient of hall accommodation payments.

A comparison of the nominal roll sheets for all privately sponsored students accommodated in the University‟s halls, with the Halls of residence account bank 625

statement, revealed that 68 students appeared on the nominal sheets but had no corresponding payments on the halls of residence account bank statement. This translated into a possible loss of UGX.62,560,000 to the University in uncollected revenue.

The Accounting Officer explained that many students normally reside in the halls of residence in one semester and leave in the next at will. He requested to reconcile the figures and report back. However, by the time of writing this report (in March 2015), I had not yet received any feedback in regard to this matter.

I have advised the Accounting Officer and the University Bursar to expedite the reconciliation and ensure that the amounts due are fully recovered from the students and properly accounted for. iv. Non collection of rent from businesses operating illegally in the University

In my special audit report to Parliament of October 2014, I noted that a number of businesses were operating illegally within the University. By January, 2015 a number of these businesses had neither been regularized nor discontinued from operating within the University. In addition, several of these private businesses were operating without valid contracts and were not paying rent for the spaces occupied, and for the utilities, such as water and electricity consumed.

The Accounting Officer explained that the University through the Chief Government Valuer, appointed a technical committee which identified and assessed all small businesses in the University. A report was prepared and submitted to the contracts committee to guide the tendering process. The contracts committee completed the award process and contracts are to be signed soon. In addition, he appointed an implementation committee which among other things is to ensure that the recommendations of the technical adhoc committee are implemented.

I advised the Accounting Officer to expedite the process of contract signing by all business operating within the University. In the meantime, I await the outcome of management‟s commitment.

626 v. Banks operating in the University premises without paying rent and/or valid contracts Kyambogo University has got three banks operating within the University premises namely; Stanbic Bank, Eco Bank and Crane Bank. The University invited and contracted Eco Bank and Crane Bank for provision of banking services. Audit review established the following;

 Although the banks modified University premises, I was not availed evidence of authorization by the University. Besides, it was not clear as to what was the cost of such modifications, as well as who was to bear the associated costs.  The tenancy agreement with Stanbic bank expired on the 31st September 2007 and has since not been renewed.  The contracts between the University, Eco Bank and Crane Bank did not have special conditions of service attached and they were open ended with no contractual period.  There is no record of payment of rent by these banks for the use of University premises with the exception of Stanbic bank which last paid rent in the FY 2012/2013.

In the absence of valid tenancy agreements and comprehensive contracts, I was unable to ascertain the actual rent due from Eco Bank and Crane Bank and the minimum service standards expected by the University.

In his response the Accounting Officer stated that University procured two Banks (ECO Bank and Crane Bank) to provide the University with banking services through a procurement process. The cost of renovation was to be met by each of the said banks. The University recently contracted valuers to value the said premises for the purpose of contracting and that the report had just been received. The legal section was drawing up tenancy agreements between the University and the banks. He further explained that the contracts will address the issue of special conditions of contract, their comprehensiveness and the recovery of arrears of rent due to the University from the date of commencement of operations at the University.

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I have advised the Accounting Officer to expedite the process of securing comprehensive contracts and tenancy agreements with the banks and ensure recovery of arrears of rent.

i. Revenue from the University Farm: Outstanding credit sales to departments – UGX.15,571,150 The University owns a dairy farm as one of its income generating ventures. By the time of the audit, the farm had 87 heads of cattle and 27 pigs. The farm generates revenue from credit sales of milk, mainly to University departments who pay into the University farm account. An analysis of the records availed revealed that for the period under review, the farm made total credit sales of UGX.24,029,650 to various departments. However only UGX.8,458,500 was received from the departments leaving a balance of UGX.15,571,150 unpaid.

In his response the Accounting Officer indicated that the actual recoveries were UGX.12,113,700 and not UGX.8,458,500. However, scrutiny of the additional payments revealed that they were made during the period from July, 2014 to January, 2015 and there was no evidence to show that they were related to the amounts in question. Failure to effect the full remittances implies that the farm may be denied of revenue to implement all its planned activities.

I have advised the Accounting Officer to follow up this matter and ensure that the departments clear their indebtedness to the University farm. c) EXPENDITURE i. Unauthorized Over Expenditure – UGX.5,135,749,119 Contrary to Section 17 of the PFAA, 2003, as well as, the University and other Tertiary Institutions Act, 2001, an analysis of budget estimates and the actual expenditure of the University for the financial year under review revealed that the budget lines on Teaching and Training, Research, consultancy, and outreach students‟ welfare were overspent by UGX.5,135,749,119. I was not availed any evidence of authorization by way of approved reallocation or virement warrants, as is required by the PFAA.

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Overspending on one budget item suffocates the implementation of other planned activities. Notable among them was the planned renovation of buildings where actual expenditure was a meagre 25% of the approved budget. This explains why many of the University buildings are in a sorry state. Besides, the practice of over spending on certain budget lines undermines the intentions of the University Council on specific University objectives.

The Accounting Officer explained that the over expenditure was due to under budgeting in regard to this important sector of the University. I have advised the Accounting Officer to always ensure adherence to budgetary discipline and where circumstances do not permit, to always seek Council approval before incurring such expenditures. ii. Mischarge of expenditure – UGX. 978,727,963 The University uses the Government of Uganda Chart of accounts, which defines the nature of expenditure for each item code. The Chart of accounts is intended to facilitate better and consistent classification of financial transactions and also track budget performance per item in line with the approved budget. During budgeting, funds are tagged to particular activities and outputs using account codes and are appropriated accordingly.

Contrary to the above, in the financial year under review, it was noted that Expenditure totaling to UGX.978,727,963 was wrongly charged on budget lines to fund activities that had not been provided for under those budget lines. This practice undermines the importance of budgeting process, as well as the intentions of the appropriating authority to instil budget discipline. The practice further leads to misleading reporting and affects the credibility of the financial statement figures, since they do not reflect the true amounts expended on the respective items. It also undermines the budgeting process and it is a violation of the principle of proper accountability as stipulated in the TAI and gives avenues for diversion of funds.

The Accounting Officer explained that items were wrongly classified and they were to be re-classified in the final accounts. However, I was not provided with

629 evidence of re-classification of the items in question. I advised management to ensure adherence to approved budget provisions unless proper authority for reallocation is obtained from Council. iii. Unexplained deductions - UGX.239,465,087 A review of bank statements, bank reconciliation and cash books of Faculty of Arts account No:9030005812975 and School of Management account No:903005705044, revealed that Stanbic bank made deductions unknown to the University management totaling to UGX.239,465,087 with unclear descriptions including: ATM cash withdrawals, Fee-Coin Deposit, among others. When contacted, the University accounts staff explained that the deductions were unknown to them and that the Accounting Officer had written to the bank seeking for details and explanations. However, there was no documentary evidence to that effect and by the end of the audit, the issue had not yet been resolved between the banks and the University.

I have advised the Accounting Officer to closely follow up these transactions with the banks and ensure that the amounts irregularly deducted are recovered from the banks.

Payment of Allowances The Uganda Public Service Standing Orders, 2010 Section (E-a) defines an allowance as a payment in cash additional to salary, that is payable to an officer to facilitate the proper execution of an assignment or duty. The allowance should be regulated and properly explainable. For the period under review the University paid a number of allowances to its staff, some of which had no justification and/or were not provided for in the Terms and Conditions of Service for Members of Staff of Kyambogo University. The details are discussed in the following paragraphs; a) Extra Load Allowance - UGX.40,145,000 According to Section 27 (b) of the Terms and Conditions of Service for Members of Staff of Kyambogo University, the normal working hours for full time staff is 8.00AM to 5.00PM. Section 16 (3) of the same Terms and Conditions states that, “Extra load allowance” shall be paid to full time staff who are authorized and carry

630 out extra duties in addition to their official normal duties and/or work outside the normal hours.

For the period under review, the University paid a sum of UGX.40,145,000 to full time staff as extra load allowance. Scrutiny of the payment vouchers, teaching timetables and signed attendance sheets revealed that these payments majorly applied to day assignments for which the staff earned a salary, thus not warranting the payments. Such payments are irregular as they translate into a double benefit to such employees since allowances will be paid for hours already covered by their contractual obligation.

The Accounting Officer explained that the University Council made an exception for academic staff who teach in excess of the normal teaching load during the normal working hours. However, I found this explanation not satisfactory, given that a staff cannot justifiably be expected to have excess load during the normal working hours.

I advised the Accounting Officer to correct the anomaly and consider recovering the funds that have been paid out irregularly. b) Doubtful Payment of Teaching Allowance - UGX.17,957,500 Teaching allowance is paid to Lecturers and Tutorial Assistants for lecturing students basing on the number of lectures and tutorials undertaken, respectively. The number of lectures is stipulated in the time table at the beginning of each semester. The time table provides the basis for payment of teaching allowance. This is further supported by the Lecturers‟ appointment letters which requires them to sign an attendance register in the departmental office, which must be counter signed by the head of department confirming that the lecturer conducted the lecture.

However, contrary to the above set procedures, the University paid a sum of UGX.17,957,500 as teaching allowance to Lecturers and Tutorial assistants for lectures that did not appear on the timetable and were not signed for in the attendance register and confirmed by the head of department. Under the

631 circumstances, it is likely that the allowances were paid for lectures which were not conducted. In the absence of proper supporting documentation, I could not confirm that the expenditure was properly incurred by the University.

Further scrutiny of the payment of lectures‟ teaching allowances, revealed that lecturers claimed payments using wrong payment rates. Lecturers‟ contracts with the University stipulates the rates per contract hour of; UGX.45,000 for evening lectures, UGX.25,000 for day lectures, UGX.20,000 for tutorials, and UGX.55,000 for masters programs. These rates form the basis for the lecturer‟s claims. It was however noted that some lecturers claimed teaching allowances using evening program rates yet the lectures were conducted during the day resulting into an over payment of UGX.43,260,000.

The Accounting Officer promised to look into the matter and recover the amount from the concerned lecturers. I advised the Accounting Officer to correct the anomaly and consider recovering the funds that have been paid out irregularly from the affected staff members. i. Un-presented Payment Vouchers – UGX.504,161,513 Regulation 60 of the PFAR, 2003 requires all disbursements of public monies to be properly vouched on payment vouchers prescribed by the Accountant General. However, contrary to the requirements of the Public Finance Act, 2003 and the National Audit Act, 2008, payment vouchers and supporting documents for transactions totaling to UGX.504,161,513 were not presented for audit. In the absence of the payment vouchers together with their supporting documentation, I cannot provide assurance as to whether the funds were rightfully expended.

The Accounting Officer explained that most of payment vouchers had been mixed up in other documents due to big volumes of files and promised to avail them. By the end of my audit exercise, payment vouchers to the tune of UGX.504,161,513, were still missing. I advised the Accounting Officer to always ensure that all expenditure vouchers are properly filed as required by the financial regulations.

632 ii. Advances not accounted for - UGX.66,335,791 Section 217 of the Treasury Accounting Instructions requires accountabilities for the amount advanced to be submitted within 60 days. However, for the period under review, a total of UGX.66,335,791 advanced to several staff remained unaccounted for at the time of concluding the audit. The Accounting Officer explained that a number of accountability submissions faced filing problems after being verified by the internal audit department and that any staff who will not have accounted for the funds advanced will have the money recovered from their salaries. I await the outcome of this management commitment. iii. Statutory Deductions a) Non remittance of taxes to URA - UGX.382,901,835

Section 119 of the Income Tax Act, Cap 340, as amended, requires an agent to withhold on the gross amount a payment at the rate provided in the third schedule of the Act and remit it to URA by the 15th day of the next month from which it was deducted. I noted that PAYE totaling to UGX.382,901,835 was deducted from lecturers‟ allowances in the Faculty of Sciences and was not remitted to URA. Non remittance of withholding tax deductions is a violation of the tax law and may lead to imposition of penalties on the University by URA. Besides, this amount is not reflected in the University payables. This implies that the payables position is understated.

I advised the Accounting Officer to always adhere to the requirements under the Act. In addition, the outstanding amount needs to be recognized in the books of account. b) Un-deducted NSSF – UGX.315,232,550 According to Section 11(1) of the NSSF Act, Cap 222 and Solicitor General Guidance to the University on payment of NSSF, dated 24th April 2013, every contributing employer shall, for every month during which he/she pays wages to an eligible employee, pay to the fund, within fifteen days a standard contribution of 15% calculated on the total wages paid during that month to that employee. On the contrary, it was noted that the University did not deduct NSSF amounting to UGX.315,232,550 from a reviewed sample of payments of allowances for part

633 time teaching and course work marking, from the faculty of arts and Sciences. Non remittance of NSSF deductions is a violation of the law and may lead to imposition of penalties on the University by NSSF. In addition, it denies employees of their future benefits.

In his response the Accounting Officer stated that the University sought legal advice from the Solicitor General in respect of deduction and payment of NSSF on allowances, with an objective of ensuring that the University pays the correct NSSF. Subsequently, the University signed a deed of settlement of the NSSF arrears. The instalment payment of the above arrears as per the deed of settlement ends in May 2015. However, the above amount has not been included in the University payables.

I advised the Accounting Officer to always adhere to the NSSF Act and also ensure that the amounts in question are deducted from the staff concerned and accordingly remitted to NSSF, without further delay. In addition, the outstanding amount needs to be reflected in the University‟s books of accounts. c) Undetailed Procurement work plan According to PPDA Regulations 70 and 97(a), a combined work plan for the procuring and disposing entity shall include a detailed breakdown of activities of works, services or supplies to be procured. It was noted that the consolidated procurement work plan of the University for the FY 2013/14 was not detailed. The items planned to be procured were generalized and the plan did not indicate the specific procurement needs of the various units of the University. The failure to prepare a detailed procurement plan contravened the PPDA Act, 2003.

The Accounting Officer explained that the Procurement Plan for 2013/14 was not adequately detailed and pledged to continuously improve and comply with the Act. I await the outcome of this commitment.

634 d) PROJECT ACCOUNTS a) Child To Child Project The University received a total of UGX.96,146,599 for empowering children with disabilities. It was noted that UGX.95,995,000 was spent under the project with UGX.45,807,000 withdrawn on the same day (2/07/2013) in three equal instalments and another UGX.50,188,000 was also withdrawn on the same day (25/07/2013), again in three instalments for running workshops in various schools.

During a review of the accountabilities submitted, it was found that the accountabilities appeared doubtful. They contained numerous inconsistencies and some of the expenditure was found ineligible. There is a risk that these funds may not have been properly utilised. In the absence of proper accounting records and accountabilities, I cannot confirm whether the funds were used for the intended purpose. I have advised the Accounting Officer to institute further investigations into these transactions with an aim of ruling out possible misuse. e) HUMAN RESOURCE MANAGEMENT

a) Staffing gaps

A review of the approved University staff establishment revealed that out of the approved 1,550 posts, only 830 (54 %) were filled leaving 720 (46 %) posts vacant. A further review of the structure revealed that the category of academic staff was the most affected. Out of 530 required academic staff, only 270 posts were filled. This implies that the University does not have the requisite number of teaching staff, despite the fact that teaching is its core activity. Most affected positions were those above lecturer position, implying that the university is facing challenges of supervising academic work at a senior level which impacts negatively on the university‟s research initiatives. Inadequate staffing undermines the achievement of strategic objectives and affects the level and quality of service delivery at the University.

The Accounting Officer explained that he had so far engaged several stakeholders to address this matter without a positive response yet. I have advised the University management to continue liaising with the relevant authorities to ensure

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that this challenge is brought to their attention and addressed with the urgency it deserves. f) MANAGEMENT OF ASSETS

i. LAND

a) Failure to record land in the Fixed Assets Register

Regulation 101 of the Public Finance and Accountability Regulations and the Treasury Accounting Instruction, 2003, Part 11 Public Stores (Paragraphs 804-806) require maintenance of an assets register for all assets in a form prescribed by the Accountant General to ensure that the assets are easily identifiable. The Register should show the asset code, description, and serial number, date of acquisition, value, condition, and location.

Scrutiny of the University assets register however revealed that, land comprised in FRV 461 Folio 13 also known as plot M902 situated at Kampala-Kyambogo measuring 137.51 Hectares and various pieces of land in Kyagwe comprised in Block 87 plots: 150, 30, 146, 123, 113, and 151 situated at Namasiga-Mukono were not registered in the Assets register. Absence of a complete fixed asset register is a critical internal control weakness that exposes the University land to a risk of loss.

The Accounting Officer explained that this was an omission and that the register was to be updated accordingly. However, at the time of concluding the audit, the register had not yet been updated. I have advised the Accounting Officer to update the fixed asset register to include all university assets. b) Failure to transfer land titles into the names of Kyambogo University Kyambogo University was established by Instrument No.37 of 2003 as a result of a merger of three institutions; Teachers Education Kyambogo (ITEK), Uganda polytechnic Kyambogo (UPK) and the National Institute of Special Education (UNISE). Consequently, the three institutions ceased to exist. It was however noted that the University land in Namasiga has never been transferred into the names of Kyambogo University, but was still in the names of a non-existent

636 institution (i.e. Institute of Teachers Education). Failure to transfer University land into its names exposes the land to a risk of being encroached or even grabbed by unscrupulous individuals.

The Accounting Officer explained that the process of transferring the Land at Namasiga into the names of the University had started. I have advised the Accounting Officer to expedite this action accordingly. c) Unabated Land Encroachment Inspection of the University land during audit revealed that encroachment on the University Land was rampant. The encroachers have constructed permanent houses, established agricultural farmlands with perennial crops, while others are engaged in fabrication and selling of charcoal stoves along Mackay road, Kyambogo Road, Kigobe Road, junior staff quarters and near UNISE. Failure to evict the encroachers may lead to loss of University land and/or the University may suffer high costs of compensating the encroachers if not evicted earlier.

The pictures below illustrate the level of encroachment on the University land along Mackay,Kigobe and Kyambogo roads.

Encroached sections of the University land

In his response the Accounting Officer stated that the land encroachers settled on Kyambogo many years ago and that it was not easy to remove them without a due process of the law. However, the University employed land valuers under the guidance and instructions of the Chief Government Valuer. The valuation process has just been concluded and the University is to embark on the process of compensating and removing the said people from the University land.

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I have advised the Accounting Officer to ensure that all University property and land in particular is properly safeguarded from illegal encroachment.

d) Un-demarcated University Land The University fenced off most of its land to protect it from encroachment and grabbing. However during inspection, it was revealed that along Mackay road, the land above Kyambogo primary school staff quarters was not fenced as shown in the photographs below; Un-demarcated University land along Mackay road

Management stated that they were considering swapping the land in issue with Buganda Kingdom because of its proximity with the kingdom palace. However, audit noted that the land was being taken over by encroachers.

I have advised the Accounting Officer to fence off the land and legitimately expedite the process of the land swap if considered appropriate by the University Board. g) STATUS OF HALLS OF RESIDENCE AND INSTITUTIONAL HOUSES

The Universities and Other Tertiary Institutions Act, 2006, requires the University Council within a period of three months before the end of each financial year, to submit to the Minister for approval, the income and expenditure estimates of the Public University for the next ensuing year. These annual estimates should include

638 among others charges for the maintenance of the buildings and other assets of the University.

It was noted however that for the period under review, the University did not budget for renovations and repairs of halls of residences and as a result the status of the halls of residence and houses was appalling. During inspection of Mandela, Kulubya, Africa, Nanziri and Pearl halls of residences, the following was observed:- a. Dilapidated East end Kitchen (Mandela Hall)

It was noted that the status of the Kitchen at the East end dining hall was appalling and needs immediate renovation. It is not safe and hygienic to serve its purpose as a dinning and Kitchen for the students in its current status as indicated in the photographs below;

Dilapidated Kitchen at the East end Dinning hall

The Accounting Officer explained that the University has been repairing a number of its buildings including some of the Halls of Residence. However, due to limited resources, the renovation process is done in phases. In the financial year under review, the University renovated West end kitchen, which was in a worse condition. In the next financial year, maintenance work on the dining, hall, stores

639 and kitchen will be put before the University Council for consideration. In the meantime, minor maintenance work on the said buildings is being done.

I have advised the Accounting Officer to appropriately prioritize and budget for renovation of University buildings. b. Non-functioning CCTV cameras

The University installed CCTV cameras to improve the security at the East end Kitchen and Mandela Hall. However, it was observed that management has failed to utilize and operate the CCTV cameras. As a result, the purpose of their installations was not being served. In his response, the Accounting Officer explained that the non-functionality was a temporary problem and that the process of repairing them was ongoing.

I have advised the Accounting Officer to expedite this process and ensure that the CCTV cameras are functional at all times. c. Failure to install proper burglar proofing at the East End Dining stores The burglar proofing at the food stores in the East End dining hall was not satisfactory to protect the University property from theft. As a result, it was explained during inspection, that burglary was becoming rampart at these stores. This was aggravated by the fact that the CCTV cameras installed were not functional.

The Accounting Officer explained that the University was in the process of making repairs on these structures. However, due to limited resources the process was moving on slowly. d. Broken water pipes and dilapidated Lavatory facilities in Halls of residences Inspection of the lavatory facilities in Mandela, Kulubya, Nanziri and Pearl halls of residences revealed that the plumbing system in the bathrooms and lavatories had broken down and as a result, there was uncontrolled water flow in some of the bathrooms. The state of hygiene was poor and some of the laundry rooms had been turned into dumping rooms for unwanted materials as shown in the photographs below;

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Dilapidated Lavatory facilities in Mandela, Nanziri and Pearl halls

The Accounting Officer explained that the broken water pipes had been repaired. The dilapidated lavatory facilities require a big budget and will be renovated accordingly when a new budget is provided.

I advised the Accounting Officer to ensure that renovation works are prioritized and budgted for accordingly. h) MOTOR VEHICLES

Failure to dispose grounded vehicles

Regulation 295 (1) of the PPDA requires an Accounting Officer to carry out regular annual reviews of assets for purposes of identifying those which are obsolete and those that should be disposed. Good practice also requires that the assets that are no longer of economic value to the organization be disposed and the profits or losses that accrue from such sales subsequently disclosed in the financial statements. Furthermore, a procuring and disposing entity may use a board of survey to identify assets to be disposed off, on a periodic basis.

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During inspection of the University, it was revealed that a number of University vehicles had been abandoned at; Kyambogo University police station, security office, UNISE and other parking lots, and had not been boarded off. The vehicles were in a bad state and were deteriorating in value. Examination of the Assets register revealed that the vehicles were recorded as those belonging to Kyambogo University though most of them had Ministry of Education number plates.

There is a risk of further deterioration in the value of the assets if no immediate action is taken to board off and dispose the vehicles. In his response, the Accounting Officer stated that the vehicles in bad condition belong to the MoES, and that he had written to the ministry to obtain authority to either dispose them off or to have them taken by MoES.

I have advised the Accounting Officer to follow up this matter with MoES until an amicable solution is obtained. Details in the photographs below;

Pictures showing some of the grounded motor vehicles Some of the University vehicles not included in the asset register, but grounded and parked for over 2 years

Kyambogo University vehicles, some with Ministry of Education registration numbers, grounded and parked for over two years recommended for disposal in the BOS 2013/14, but have not been disposed off by management. 642

i) SPECIAL INVESTIGATION INTO THE AFFAIRS OF KYAMBOGO UNIVERSITY

I instituted an investigation into the affairs of Kyambogo University in January 2014 following a Parliamentary resolution and a letter from the University Secretary (Accounting Officer). In addition, I received several allegations from whistle blowers which included mismanagement of funds, fraud in the collection and utilization of fees, asset mismanagement and human resource mismanagement.

The investigation focused on the period from July 2009 to June 2012 and was conducted with specific terms of reference. However, earlier and later periods were included in instances where this provided clarity. Below are the highlights of the key findings;

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1. Observations on general governance of the University  My investigation revealed that the University Council lacks a charter governing the activities of the Council and only has guidelines for Council meetings. This creates uncertainty in so far as the operations of the University Council are concerned.

 I observed that the University lacks salient policies on recruitment and promotion of staff, research and projects, financial management among others and only relies on Council decisions that are passed from time to time.

 I observed that the University is currently grossly understaffed. The University is currently operating under an establishment approved by the University Council in 2004, which was made at a time during which it had a population of 8,000 students compared to the current total of over 23,000. I observed that of the 2,351 positions in the said establishment for both teaching and non-teaching staff, only 1,102 are filled. This in effect means that the university is operating at a 47% capacity.

 The Academic Registrar was negligent in so far as she failed to detect and stop the irregular admission of 10,486 students, during the period under review, who did not apply for admission.

2. General observations on the Human Resource Management

 Contrary to the National Social Security Fund Act, the University failed to remit NSSF contributions for staff totaling to UGX.1,119,515,189 and as a result, also attracted a penalty of UGX.3,021,399,729.

 There was irregular recruitment of support staff and part time lecturers without being interviewed and being appointed by the Appointments Board. According to the Public Service Standing Orders, the University Terms and Conditions of Service of Staff, all academic, administrative and support staff

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of the University shall be appointed by the Appointments Board on terms and conditions that may be determined by the University Council.

 A total of UGX.653,963,329 was paid as headship allowance yet it is not an approved allowance. An additional UGX.688,352,000 was also paid to non- academic staff as extra load allowance without the necessary board approval.

 A total of UGX.48,564,124 was also paid to top management as domestic allowance despite the fact that this allowance was abolished by Public Service in 1995 and is also not provided for in the University Terms and Conditions of Service. A further UGX.81,166,251 was also paid to the top management in form of salary increment contrary to their employment contracts.

 UGX.373,364,544 was paid to staff after they had reached the retirement age of 60 according to the Terms and Conditions of Service

 I established that several members of staff that were arrested for criminal offences were never suspended and continued to receive their full salaries, contrary to the Public Service Standing Orders and the Terms and Conditions of service.

3. Observations on revenue and expenditure

 A total of 10,486 students were admitted by the University without applying and consequently UGX.532,825,000 was not collected as application fees during the period under review. This was a loss to the University.

 The University has huge debtors as a result of admitting students who are sponsored by other government agencies. For example a total of UGX.2,615,298,661 for the academic years 2009/10 to 2013/14 remains outstanding. I have received written assurances that this particular debt will be settled.

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 The University lacked cash books and a students‟ ledger which should have contained a comprehensive list of all students admitted into the university as well as details of how they have cleared all their fees.

 I noted several internal weaknesses in the fees banking process and receipt issuance by the bursar‟s office. I observed that the entire process was manual in nature with the use of manual receipt books and in several instances the amounts recorded in the receipts was more than the amounts deposited per the bank statement.

 I noted a discrepancy in revenue accountability of UGX.8,928,814,082 as only a total of UGX.71,913,461,494 was recorded as collected compared to UGX.80,842,275,576 that should have been collected as per the number of students that sat for examinations.

 An analysis of the receipted revenue and bankings for the year 2010/11 revealed an amount of UGX.4,343,299,348 that was receipted by the desk officers in the various faculties which is not supported by corresponding bankings onto the University bank accounts.

 The University does not have a complete tenancy Register and as such cannot easily track all the tenants and their respective payments. It also lacks clear guidelines for determining the amount of rent payable by the tenants.

 In the period between 01st January 2010 and 24th March 2014, the University spent a total of UGX.3,720,720,373 on fuel. I observed that the university lacks a policy to regulate the distribution and use of fuel. A total of 295 total- plus fuel cards had been issued to staff. A total of UGX.83,328,998 was consumed from fuel stations outside the Kampala area especially on weekends.

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4. General observations on Asset Management  There has been laxity and negligence on the part of management in failing to curtail the massive encroachment and illegal activity on the University land in Kyambogo by unknown persons.

 I also noted several irregularities in so far as the management of the University farm in Nakagere, Mukono is concerned. Only 7 out of 187 acres of this land is being utilized by the University thereby leaving the rest of the land susceptible to encroachment by squatters who have erected permanent structures on the land. The University could stand to lose part of the land.

 The University farms lack animal registers. In fact some of the animals are not tagged for identification purposes and so are prone to theft

 I found that there were several irregularities and control weaknesses in the management of the University mechanical and production workshop. This could be attributed to lack of clear guidelines and policies, lack of proper documentation and record keeping making it difficult to verify the revenues received from the workshop.

 There was poor maintenance of the University staff houses as most of them are in a state of disrepair despite the fact that the University has always budgeted for their repair and several Council resolutions have been passed to that effect.

 The University lacks tenancy agreements with some of the occupants of its houses contrary to the Public Standing Orders. Those that had been issued had provisions that were unlawful as they were contrary to the Housing Policy (basically state the specific policy) which required the tenancies to be held for a term of not more than three years. The agreements were to run for 10 years.

 I discovered several irregularities in the management of the cricket oval. I noted that Uganda Cricket Association (UCA) had erected structures and let out the premises to a third party contrary to the initial MOU that was signed 647

between UCA and the former UPK. I further established that there is currently no binding MOU between KYU and UCA regarding the usage of the cricket oval.

 Inspections of the University vehicles revealed that 13 of them are grounded. They are in a deplorable state, were being vandalized and therefore need to be disposed off.

 I tested for the completeness of the asset register by tracing the vehicles log books in the motor vehicle register. I noted that there were 14 vehicles whose registration books were in the custody of the University Secretary but the same were not recorded in the vehicle register. I sought to verify the existence of the said vehicles but the transport officer failed to avail the same for physical inspection.

 Whereas the University had annual budgetary provisions for insurance of its motor vehicles, for the financial years 2010/2011, 2011/2012 and 2012/2013 respectively, only six (6) vehicles had been insured and 40 had their insurance cover expired.

General Recommendations The following general recommendations have been proposed:- a. Governance  The University Council is advised to formulate a charter that will guide and govern its operational modalities.  The University Council is further advised to ensure that policies on recruitment and promotion of staff, financial management, research and projects among others are developed, approved and complied with in the day to day operations of the university.  The current University structure needs to be reviewed to allow for an optimum level of staffing that can adequately manage the current student levels and other University responsibilities.  The Academic Registrar is advised to always follow the laid down admission procedures while admitting any student.

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b. Human Resource Management  The University Bursar is advised to always ensure that statutory deductions on staff pay such as contributions to the National Social Security Fund are always effected and remitted promptly as required by the law.  The Director Human Resource is advised to always ensure that recruitment of staff is done in accordance with the law and laid down procedures.  Allowances that are not provided for in the University Terms and Conditions of Service of Staff and the Public Service Standing Orders should not be paid by the University. c. Revenue and Financial Management  The University Bursar is advised to exercise close supervision to staff in his office that are charged with revenue collection, safe custody of accountable stationary and also ensure regular reconciliation of financial records.  The University Bursar is further advised to always ensure proper maintenance and recording of all books of accounts such as cash books, student ledgers among others as per the Generally Accepted Accounting Principles.  The University Management is advised to always ensure that all fees payable by students during the admission process such as applications fees under the private sponsorship scheme are collected and accounted for.  The University Management should institute stringent and robust debt collection mechanisms in order to ensure prompt payment of fees by the various student sponsors.  The Accounting Officer is advised to establish a mechanism through which all audit findings contained in the annual audit reports are to be followed up and actioned upon. d. Asset Management  The University Accounting Officer is advised to ensure that all University Assets are recorded in an Assets Register which ought to be periodically

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updated to reflect an up-to-date status of the assets owned by the University.  The University Accounting Officer is further advised to ensure that all University land is secured and all activity on the said land is authorized and monitored by the University Authorities.  The University management is also advised to develop guidelines that will govern the running and management of all University workshops and ensure adherence to the same.

51.0 BUSITEMA UNIVERSITY a) Receivables Included in the receivables are student debtors that increased from UGX.333,193,785 to UGX.426,591,128 implying an increment of UGX.93,397,343 (28%). The increment may be attributed to laxity in enforcing the fees collection policy. Accumulation of student debts may result into bad debts. Management explained that the University has a debtor‟s policy which requires students to clear their tuition and functional fees to zero balance before the examination date and that efforts would be made to fully implement the policy.

I advised management to strengthen mechanisms of enforcing collection of debts. b) Payables Payables increased from UGX.192,279,917 to UGX.313,777,260 indicating an increase of 63%. Included in the payables is a sum of UGX.114,774,856 payable to National Social Security fund (NSSF), UGX.27,758,768 (withholding tax) and UGX.9,135,284 (PAYE) payable to Uganda Revenue Authority (URA). The University is exposed to the risk of penalties and fines from NSSF and URA.

Management stated that arrangements to settle the obligations were underway. I advised management to ensure settlement of obligations in a timely manner to avoid penalties and fines.

650 c) Land ownership The University owns various pieces of land at different campuses totalling to 2,840.77 acres. While some of it is registered in the names of Busitema University Council other pieces of land are not. Without evidence of ownership, it was difficult to confirm whether the land actually belongs to the University. There is a risk of loss of the land if it is not transferred appropriately.

In response management stated that the process of titling the land is underway. The table below refers;

LOCATION AREA ( STATUS OWNERSHIP Acres)

Busitema 1,309.658 530 hectares titled Busitema University Council campus

Namasagali 187 50.2 acres titled. Namasagali University &Namasagali College.

Pallisa 27.804 11.252 hectares titled Busitema University Council

Nagongera 584.775 228.62 Hectares. titled Busitema University Council

Arapai 679.54 275 Hectares. titled Uganda Land Commission.

Mbale 52 0 Title not availed, therefore could not confirm ownership.

TOTAL 2,840.777

d) Non -implementation of planned activities

Comparison of the University‟s budget and Policy Statement for the year with milestones attained revealed that the following planned activities and acquisitions were not achieved;

The table below refers; S/No. Item Estimated Cost (UGX) 1 Rehabilitation works at Mbale Campus. 100m

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S/No. Item Estimated Cost (UGX) 2 Procurement of Identification Unit. 30m

3 Procurement of Conference Table for Council Hall. 28m

4 To Establish LAN (Local Area Network) in 2 100M campuses.

5 Preparation of the quarterly progress and NTR No estimates reports and submission to the MoFPED and MoES respectively.

6 Development of a consolidated Human Resource No estimates Policy.

7 Procurement of 50 computers. Only 21 computers No estimates were purchased.

8 Conducting a Training Needs Assessment exercise. No estimates

9 Planting trees around the boundaries of the No estimates University land at all campuses.

Management attributed the shortfalls in the performance to inadequate funding.

I advised management to continue liaising with the Ministries of Finance, Planning and Economic Development (MoFPED) and of Education and Sports (MoES) so as to attain necessary funding for implementation of planned activities.

In addition all planned activities should be properly costed for ease of analysis of the funding gaps. e) Lack of Revenue collection procedures for Guest Houses The University owns guest houses at Busitema University campus, Arapai Campus and Namasagali Campus. However, the University lacks proper revenue collection, recording and reporting procedures for the guest houses. In the circumstances there is a risk of loss of revenue.

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Management stated that arrangements are underway to put in place revenue management mechanisms. I advised the Accounting Officer to strategize the revenue management without further delay. f) Inconsistencies in the recruitment regulations Regulation 2.5.4 of the University Terms and Conditions of service require that the Accounting officer makes part-term appointments for non-academic staff on recommendation of the recipient Unit. On the contrary regulation 11(d) of the recruitment and promotion policy requires appointments of non-Academic staff to be made by the Vice chancellor on recommendation of the recipient Unit.

I explained to management that vesting of recruitment powers in different centres may result into conflicting recruitments. Management stated that the regulations and policy would be harmonized.

I await management action on the matter.

52.0 GULU UNIVERSITY a) Doubtful Payment for Extra Load Allowance In my previous report to Parliament, I qualified my audit opinion on the basis of doubtful payments for extra load allowance, amounting to UGX.728,758,584. In the report, I indicated that the basis of computation for the payments, including information relating to the total number of hours lectured above the standard hours by each lecturer rates and evidence of occurrence were not availed to support the payments.

Management has indicated that controls surrounding the payment of extra load allowances have been strengthened. However, I was still not availed with evidence to satisfy myself that the payments were authentic. b) Un-discharged Statutory Obligation Section 14(1) of the National Social Security Fund, 1985 requires that every contributing employer shall, for every month during which he or she pays wages

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to an eligible employees, pay to the Fund, within fifteen days, next following the last day of the month for which the relevant wages are paid, a standard contribution of 15 percent calculated on the total wages paid during that month to the employee.

However, contrary to the above requirement NSSF arrears stood at UGX.577,709,906 as at 30th June 2014. Included in this figure is UGX.283,146,154 for the period July 2009 to June 2010, with interest of UGX.105,306,471. I explained to management that there was a possibility of litigation and this could put the University assets at risk.

Management explained that when staff salaries were enhanced, the employer‟s contribution (10%) was not catered for and this contributed to the accumulation of NSSF arrears. They further indicated that, a request for settlement of domestic arrears which include NSSF obligations had been submitted to the MoFPED for consideration.

I await the outcome of management‟s action in this regard. c) Management of Receivables Receivables relating to student debtors increased by UGX.266,567,004 from UGX.2,098,511,984 to UGX.2,365,078,988 reported in 2012/13 and 2013/14 financial years respectively. There is laxity in enforcement of fees collection which affects the implementation of planned activities.

Management undertook to enforce the policy on fees management which requires students to pay all tuition fees and other University dues within 8 weeks after commencement of the semester. I await management‟s commitment in this regard. d) Ownership of Land The University owns five pieces of land, all totaling to 812.452 acres. However, the University lacks certificates of title to show ownership. Without evidence of ownership, it was not possible to confirm whether the land actually belongs to the University. I explained to the accounting officer that there was a risk of the 654

University losing land to encroachers and other developers, if not transferred into the University‟s name.

Management indicated that a lease offer had been granted for the 100 acres at Latoro in Nwoya District and all efforts were being made to secure all the University land.

I advised management to follow up the matter with the concerned authorities and have all the University land secured and certificates of title transferred into the University‟s names. e) Direct Procurements Regulation 94 (1)(a) of the Public Procurement and Disposal of public assets states that a contracts committee or a holder of delegated authority shall approve the choice of a procurement method prior to commencement of the procurement process. On the contrary, goods and services worth UGX.34,444,000 were procured by way of advancing funds to university staff and other non-prequalified firms for purposes of purchasing various items directly. I explained to the accounting officer that the use of such unconventional methods in acquisition of goods and services lacked transparency and may not have achieved value for money.

Management explained that the University had approved framework contracts for regularly required items to limit advances. I advised the Accounting Officer to streamline the procurement of the routinely purchased items to avoid possible misuse of advances. f) Understaffing in Internal Audit Department It was noted that Internal Audit Department is understaffed and is currently headed by a Senior Auditor. In the absence of a substantive Chief internal auditor, the department‟s capacity to deliver on its mandate is not effective, given the size and nature of the operations of the University.

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Management explained that their submission to the Ministry of Public Service authorization, to recruit both academic and non-academic staff especially for key positions had not been responded to.

I advised management to follow up the submission made to Ministry of Public Service and ensure that all key positions are filled to avoid operational inefficiencies. The internal audit function should be appropriately staffed. g) Absence of Fraud Control Policy Best practice and good corporate governance require that organizations should institute policies and procedures to detect, control and minimize occurrence of fraudulent actions. It was noted that the University did not have any fraud control policies and procedures to guide staff in the event that they encounter fraudulent activities in the day-to-day operations within the University. In absence of such procedures, it is difficult to mitigate occurrence of fraud and may create a conducive environment for staff to commit fraud.

Management explained that the Audit Committee of Council in its meeting of 14th October 2014 tasked management to table a fraud control policy at its next sitting in February 2015. I await the outcome of this process. h) Grounded Motor Vehicles Regulation 2(1) of the Public Procurement and Disposal of Public Assets (Disposal of Public Asset) Regulations, 2014 requires that the Accounting Officer shall, in each financial year, cause the public assets of a PDE to be reviewed to identify the public assets to be disposed of in the following financial year.

Audit noted that a number of motor vehicles belonging to the University had been grounded for a long time without reviewing them for purposes of disposing them. There is a risk that the vehicles are deteriorating further and therefore reducing scrap value.

Management explained that the assets were recommended for boarding off by the Board of Survey and approved by University Council and that the disposal process was in progress. 656

I have advised the Accounting Officer to expedite the disposal process and in future ensure that annual reviews are undertaken to identify any assets for disposal in the next financial year as required by the PPDA – Disposal Regulations.

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GENDER AND LABOUR SECTOR

53.0 MINISTRY OF GENDER, LABOUR AND SOCIAL DEVELOPMENT a) Payables Audit of Financial Statements for the period under review revealed that the Ministry had liabilities of UGX.4,771,858,282, broken down as follows: No Item Amount 1 Trade Creditors 220,000 2 Sundry Creditors 4,730,824,170 3 Withholding Tax Payable 40,814,112 Total 4,771,858,282

The sundry creditors arose out of outstanding claims for workman‟s compensation, dating back to 2003/2004 financial year. Meanwhile, the withholding tax liabilities may attract penalties from Uganda Revenue Authority as provided for in the Income Tax Act, 1997 (as amended). The delay in paying renders the claims redundant.

In response, management stated that requests to MoFPED for funds to settle the liabilities had not been responded to positively.

I advised the Accounting Officer to continue liaising with the MoFPED and other stakeholders to ensure prioritization of funding for the items to avoid litigations and other costs that may arise.

b) Mischarge of Expenditure Paragraph 400 (a) of the Treasury Accounting Instructions (TAI), 2003 states that all government transactions shall be recorded in the books of account applying the Government of Uganda Chart of Accounts as prescribed by the Accountant General. In addition, Accounting Officers shall ensure that all financial transactions are properly coded. It was noted that out of the total actual expenditure of UGX.27,871,419,382, a total of UGX. 66,982,475 were mischarged. The practice is a sign of a breakdown in controls over the budget implementation process. 658

Management explained that more adherences to the charge codes in line with the Chart of Accounts is now being emphasized.

I have advised the Accounting Officer to streamline the budgeting process so that available funds are properly allocated to the planned activities. c) Advances not accounted for A sum of UGX.25,000,000 advanced to three Districts for purchase of toolkits for PCY activities lacked accountability contrary to TAI and MoU which requires accountability within 60 days. The table below refers:

Document Date Details Amount Paid No (UGX) 1139107 4/10/2013 Payment to CAO - Arua district to 16,000,000 purchase toolkits for Youth trained 1216325 4/12/2013 Payment to CAO Gulu for 4,000,000 purchase of tool kits for training and coordination of PCY project 1216321 4/12/2013 Payment to CAO Lira for 5,000,000 purchase of tool kits for training and coordination of PCY project Total 25,000,000

In the circumstances, I could not confirm whether the funds were used for the intended purposes.

In response, management explained that letters reminding the respective Chief Administrative Officers had been dispatched.

I advised the Accounting Officer to ensure submission of accountability or recovery of the funds.

659 d) Staffing Gaps I noted that the Ministry was grossly understaffed. Out of 609 posts in the approved structure, only 276 were filled leaving 333 posts unfilled. Among unfilled posts were; the Director Social Protection and Director Labour Employment (Occupational Safety & Health), which are key posts in the management structure of the Ministry.

Management indicated that submissions were made to the Ministry of Public Service and Public Service Commission to ensure that the staffing challenge is addressed.

I advised management to follow up the matter and fill the positions in a phased manner beginning with the critical ones. e) Non-Disposal of Obsolete Assets Section 295 (5) of the PPDA Regulations, 2003 requires a procuring and disposing entity through the board of survey to identify assets for disposal on a periodic basis. A review of the Ministry‟s Asset register revealed a number of old and obsolete assets due for boarding off and these included; motor vehicles, desktop computers, laptops, furniture, tyres and books among others. I also noted that the recommendations of the Board of Survey for disposal in the Financial Year 2011/2012 were not implemented.

Management indicated that it is in the process of updating a Disposal Plan and will dispose of obsolete items in FY 2014/15.

I advised the Accounting Officer that failure to timely dispose of these assets results in further physical deterioration and diminution in value. I await results of management actions. f) Lack of Performance Appraisals for some Staffs Sec. A-m (14) of The Uganda Public Service Standing Orders, 2010 states that “A staff performance appraisal report form shall be completed for each pensionable and non-pensionable officer and a copy submitted to the Responsible Permanent Secretary. 660

It was however noted that 25 staff out of a sample of 45 staff of the Ministry were not appraised during the year under audit. The Accounting Officer explained that strict guidelines and deadlines have been put in place for those that do not comply.

I await results of management actions in this regard. g) Repayments into the Revolving Fund According to the YLP Programme Document dated December 2013, the revolving nature ensures sustainability through the cash and kind refunds and re- disbursement. This is further amplified in Part 4.0 of the YLP Project Funds Access Criteria document which requires YLP to be administered as interest-free Revolving Funds to ensure sustainability of the Programme.

I observed that out of 27 districts that had received the funds, only 6 had opened the special collection accounts.

Management indicated that the outstanding 21 districts had been reminded. I advised the Accounting Officer to ensure that the remaining Districts comply with the regulatory requirements for YLP. h) General Challenges faced in the Implementation of Youth Livelihood Programme:

58.h.1.1.1.1 Determination of the age of the group members According to YLP Project Funds Access Criteria part 2.2 (i) (Beneficiary Selection Criteria) paragraph and program document chapter 2 section 2.4, all intended beneficiary Youths should be persons within the age bracket of 18-30 and evidence was to be provided through birth certificates, immunization cards, passports, baptism cards, marriage certificates, National Identity Cards or community knowledge of the youth.

During the period under review, audit noted that birth certificates for beneficiaries on a number of project files were missing, rendering confirmation of the qualification by age difficult.

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Management indicated that a number of potential beneficiaries did not have documentary evidence for their ages. The Selection Committees relied on the judgement and decision of the community members under the leadership of LC I Chairpersons as provided in the Programme Guidelines.

I advised the management to use the National identity cards in determining age of beneficiaries in the successive following phases of the programme.

58.h.1.1.1.2 Inadequate monitoring of the projects It was noted that the Districts were not closely monitoring the activities of the approved youth projects due to inadequate staffing. For example, there were no monitoring reports for the 16 districts inspected out of the 27 pilot districts. The respective CAOs and the District Focal Point Persons indicated that there is low human resource capacity as opposed to the number of approved projects to allow closer monitoring to take place.

I await results of management actions on this matter.

58.h.1.1.1.3 Lack of sign posts for respective Projects It was observed that a majority of the YIG Projects that were inspected did not have sign posts. Those that had sign posts did not have YLP identity. It was therefore not possible to easily identify them with YLP funding.

In response, management stated that all the new projects are being advised to provide for the signposts in their budgets. Furthermore, YLP has concluded the Geographical Information System (GIS) mapping for all the projects financed under Phase-I as a strategy of enhancing accountability, transparency and to avert a possibility of using one project site for multiple accountabilities to various

662 agencies or persons. In the meantime, I await the results of management effort in this regard.

58.h.1.1.1.4 Inadequate training of the 3 committees in a group The YLP Programme Document requires each YIG to have at least 3 committees namely; Youth Project Management Committee (YPMC), Youth Procurement Committee (YPC) and Social Accountability Committee (SAC).

Audit revealed that the trainings received by the members of these committees were so general and did not address the specific roles that each committee is supposed to play in a group. Furthermore, the trainings were conducted under limited time frame.

Management explained that any gaps identified during monitoring visits are documented and addressed as part of the routine continuous support to the groups.

I advised management to ensure that trainings to the committee members are conducted to enable them appreciate their roles on the committees so as to avert conflicts and failure of groups‟ businesses.

58.h.1.1.1.5 Record Keeping It is good practice for any type of business/project to keep proper books of account, management records among others. I noted that most of the groups visited did not maintain/keep such records including minutes and procurement details.

Management indicated that the varied literacy levels of the beneficiaries supported under YLP affects record keeping. However, the Sub-county Community Development Officers (CDOs) have been advised to provide support to weak groups on regular basis as part of their overall mandate in community mobilization and development.

I await the results of management efforts in this regard.

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53.1 EXPANDING SOCIAL PROTECTION PROGRAMME 2011/2012

a) Lack of National Social Protection Policy It was noted during audit that the program still lacked an approved policy, contrary to the recommendation contained in Expanding Social Protection (ESP) Quarterly report of July to September 2011, requiring an approved policy framework to be in place within the financial year 2011/12. In the circumstances, there is no formal framework to guide the activities of Social Protection in the country. There is also a risk of having social disharmony between the societies that have benefited and those that have not. Management explained that at the inception of the programme, the design foresaw the development of a Social Protection “framework” which would have simply defined the scope of social protection services in Uganda. However, during the course of the programme, management realized that a full National Social Protection Policy was required along with a comprehensive costed plan of Interventions (PPI) to cover social assistance, social insurance and social care services. Management further stated that according to the revised log-frame, the policy and PPI are due to be finalised by December 2014. I have advised management to engage the stakeholders involved and expedite the discussions to have the policy finalised and approved. b) Co-funding Section 2 of the Joint Financing Arrangement requires the Government of Uganda (through the MoGLSD) to provide an agreed level of funding to the programme. It was however noted that GoU, which had committed to provide USD.20,030 (about UGX. 70,105,000), did not fulfill its obligation in the period under review. This could have hampered the implementation of the planned activities and may affect the overall attainment of the programme objectives. Management explained that they were continuing to engage the Ministry of Finance, Planning and Economic Development to fulfill the government obligations towards the programme.

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I have advised management to continue with the engagement of the Ministry of Finance Planning and Economic Development so as to ensure that Government fulfills its commitment towards the programme for better implementation. c) Un-accounted for Funds UGX.227,301,091 (equivalent to USD.49,778.45) was transferred to ESP operational account in the MoGLSD, to facilitate older persons day celebrations and orientation of Members of Parliament. Audit noted that a total of UGX.106,618,500 was utilized for the celebrations and orientation of MPs, leaving a balance of UGX.120,682,591 unaccounted for. Although management explained that the balance was retained in the MoGLSD ESP operations account for other ESP activities, no documentary evidence was availed to confirm this and how it was utilised. I have advised management to ensure 53.2 EXPANDING SOCIAL PROTECTION PROGRAMME 2012/2013

a) Co-funding Section 2 of the Joint Financing Arrangement requires the Government of Uganda (through the MoGLSD) to provide an agreed level of funding to the programme. It was however noted in the year under review that GoU allocated only UGX.40,000,000 million as opposed to the FY 2012/13 counterpart commitment of UGX.500,500,000. This could have hampered the implementation of some planned activities and may affect the overall attainment of the programme objectives. I advised management to engage Ministry of Finance Planning and Economic Development so as to ensure that Government fulfils its commitment towards the programme for better implementation.

b) Doubtful contract award Regulation 90 (g, h & i) of the Public Procurement and Disposal of Public Assets, 2013, stipulates the procurement records that should be maintained by a procurement and disposal unit. However it was noted that a total of UGX.191,666,376 was paid to Property Development Company Ltd for rent, but procurement documents were not maintained, contrary to the requirements of the regulations. In the circumstances, audit could not ascertain whether the procurement was fairly competed for and that there was value for money. 665

I advised management to ensure that all procurement records are in future maintenance for all procurements undertaken on behalf of the programme. c) Un-vouched Expenditure Audit noted that out of a total of UGX.135,369,238 transferred to Kyenjojo District to fund SAGE activities in the months of January and June 2013, a total of UGX.116,152,804 was spent without preparing payment vouchers. The authenticity of the expenditures relating to all the missing vouchers could not be ascertained.

I advised management to ensure that the funds are accounted for. d) Mischarged expenditure items A total of UGX.11,976,000 was charged wrongly on expenditure items other than those under which it was supposed to have been spent, contrary to the requirements of section 3.1 of the overview of the financial management of SAGE. Failure to comply with the requirements portrays a breakdown of controls in the budget implementation process and it affects the implementation of some planned activities.

I advised management to streamline the budgeting process and ensure that payments are correctly charged on the item codes to enable proper implementation of the programme. e) Un Accounted for Funds Funds totaling UGX.56,178,500 advanced to various officers in Katakwi district to implement programme activities remained un-accounted by the time of writing this report. In the absence of the necessary accountability, audit could not confirm whether the funds were put to intended use.

I advised management to recover the funds from the officers

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53.3 EXPANDING SOCIAL PROTECTION PROGRAMME 2013/2014

a) Irregular payments to Deceased Persons The Social Assistance Grants for Empowerment (SAGE) comprise two sub- components namely; Senior Citizen‟s Grant (SCG) and Vulnerable Families Support Grant (VFSG).

Chapter six (6) of the Implementation Guidelines for SAGE, SCG and VFSG provide that „In the event of the death of an older person, households benefitting from the SCG will cease to be eligible immediately‟. An older person refers to one who has attained the age of sixty five (65) years and above. In addition, the third paragraph of chapter 6.1 of the same guidelines states that „The death of a registered beneficiary of the SCG will result in termination of payments. Death of a beneficiary must be reported by the next of kin to the Village Chairperson as soon as possible and an SCG Beneficiary Death Notification Form (Annex X) should also be completed by the next of kin with the support of the village chairperson‟.

A review of the SCG component, beneficiary payrolls and files in 14 Districts inspected revealed that names of deceased beneficiaries were neither reported as required nor deleted from payrolls after they had passed on. In the circumstances, payments totalling UGX.36,950,000 made in respect of deceased persons were made irregularly.

In response, management explained that a team of staff had been constituted to work on improving the system of capturing information on deaths.

I advised management to strengthen mechanisms for timely reporting of deaths under the SCG component so as to ensure the programme meets its intended objective of assisting Senior Citizens b) Suspected SAGE Fraud in Kole District Review of an investigation report prepared by a contracted Auditor revealed suspected fraud on beneficiary payments for the month of December 2013 in Kole District amounting to UGX.132,268,500. The suspected fraud was attributed to lack of a documented policy over SIM card management and collusion between the MTN Mobile Money Agent and SAGE staff.

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In response, management stated that disciplinary hearing with SAGE staff had been held and efforts were being made to have criminal prosecution of the staff together with the MTN Mobile Money Agent. In addition, training on SAGE Policy on fraud, complaints and whistle blowing would be undertaken for all SAGE and local government staff.

I await results of management actions. c) Lack of Procurement Plan Regulation 6 (2) of the PPDA Regulations, 2003 requires an entity to prepare a consolidated procurement plan. However, Expanding Social Protection Programme (ESPP) carried out procurements without a procurement plan. It was observed that departmental procurement work-plans were also not prepared. There is possibility of sub-optimal procurement.

Management indicated that the procurement activities for different programmes have now been integrated into programme work plan for the implementation in the next period.

I await the results of management action. d) Governance Weaknesses 1.d.1 Lack of approved Human Resource Manual A human resources manual, guides staff recruitment, appointments and is a vital tool in management of staff of any organization. It was however noted that the Programme lacks a human resources manual. There is a risk that the Programme‟s human resource operations are not well guided.

It was also noted that a draft manual has now been developed and is awaiting approval by the Programme Steering Committee.

I advised management to expedite approval of the manual to enable proper management of staff.

1.d.2 Lack of Internal Audit Function

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The internal audit function helps to regularly conduct reviews on entity risk management, monitor and provide assurance on internal controls. It was however noted that ESPP operated without an internal audit function during the period under review. There is a risk of weaknesses in internal control remaining undetected over long periods.

Management stated that a proposal to establish the function will be tabled before the Steering Committee for approval.

I await management action in this regard.

1.d.3 Lack of approved Finance and Procedures Manual The Finance and procedures manual helps guide management of finances in an organization. Audit however noted that ESPP did not have an approved accounting and financial procedures manual.

Management indicated that a draft manual was in place and it would be updated before approval by the Steering Committee.

I advised management to expedite the process. e) Inadequate Management of Inventories Paragraph 203 of the Treasury Accounting Instruction, 2003 requires all stores receipts to be posted in the ledger as soon as they have been examined in accordance with the receiving procedure. All issues of inventories will be posted in the stores ledger daily but if on any occasion, daily posting of vouchers proves impracticable, the vouchers will be posted with the least possible delay, and the circumstances will be notified by the Storekeeper to the Head of his Department or Accounting Officer.

During audit, it was noted that all procured items were not taken on charge and were not issued using bin cards and issue vouchers. Weaknesses in the inventory management may result in loss/misappropriation of programme assets.

Management indicated that the purchases are normally made in small and irregular quantities which did not require detailed recording.

I advised the Accounting Officer to ensure proper record keeping of stores in compliance with the accounting instructions. 669 f) Incomplete Transition Plan According to part 9.1 of the ESPP 2010 - 2014 Programme Document, capacity was to be progressively built in government over the first 3 years so that full responsibility for funds and management of the ESPP can be handed over to the Government of Uganda. During the course of the 3 year existence of ESPP, certain budgets and other areas of the programme were to be transferred to GoU. It was however noted that the transition plan, in terms of capacity building, had not been achieved as envisaged, even after contracting an Institutional Development Specialist in the first quarter of 2011/2012 to operationalize the plan. This was attributed to the freezing of the donor funding in December 2012, where money initially channelled through the Chief Administrative Officers for this purpose was stopped and the management agent was introduced. There is a risk that the programme may collapse after the current arrangements cease.

Management indicated that consultations are underway to have new transition arrangements in place.

I advised management to ensure that the transition work plan is implemented and re-aligned with the current level of implementation to ensure that the programme is able to operate sustainably. g) Long distances travelled by beneficiaries to Mobile Money Pay Points To effectively deliver payments, an extensive and reliable distribution network is required to reduce the cost of access for recipients. Through interviews with some of the beneficiaries during audit inspection, it was noted that many of them had to travel on average four (4) kilometres to pay points to access payments. In some extreme cases, such as Nebbi, Kole, Amudat and Napak districts, some beneficiaries travelled distances as far as seven (7) kilometres to pay points. This was partly attributed to weak signal strength of the Mobile Money service provider (MTN Uganda) at some places.

The resultant effect of the above is that beneficiaries incur high transportation costs, which erodes the value of the grant transferred and the overall benefits to

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the beneficiaries. The attainment of the initial objective of improving the livelihoods of the beneficiaries is therefore undermined.

Management indicated that the payment service provider (MTN) would be engaged to improve on signal strengths.

I await results of management action. h) Replacement of lost SIM cards Interviews conducted with the OPG beneficiaries in the Districts revealed instances of loss of SIM cards by the beneficiaries. It was further noted that it took up to two months or more for lost SIM cards to be replaced. Failure to replace lost SIM cards in a timely manner hinders accessibility to the payments thereby impairing achievement of the programme objectives.

Management explained that the replacement process for the lost cards takes long due to the fact that the service provider imports the cards.

I advised management to liaise with MTN with a view of ensuring that the time taken to replace lost SIM cards is reduced, so as to ensure uninterrupted monthly payments to beneficiaries. i) Selection criteria for Vulnerable Families Support Grant (VFSG) According to the programme document, Social Assistance Grants for Empowerment enrols people who are in vulnerable families. Vulnerable families are defined as those which have majority of orphans, do not have any bread earner and are living in poverty conditions.

Interviews conducted with some beneficiaries and Community Development Officers in Kiboga and Kyenjojo Town Councils revealed that some of the selected beneficiaries did not meet the criteria as defined in the ESPP selection criteria. This practice denies the genuine vulnerable families the opportunity to benefit from the VFSG program.

Management explained that the VFSG programme was a pilot study alongside the SCG to identify the best method of targeting the families. Going forward VFSG method will be phased out and an alternative method developed. I advised management to put in place rigorous beneficiary selection procedures and carry

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out post selection reviews to ensure that rightful persons benefit from the programme

WATER AND ENVIRONMENT SECTOR

54.0 MINISTRY OF WATER AND ENVIROMENT a) Mischarge of expenditure The Parliament of Uganda appropriates funds in accordance with the needs of the Country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes.

A review of the Ministry‟s expenditure revealed that the entity charged UGX.1,545,058,115 a decline of 84% from previous year‟s amount of UGX.9,438,526,861 on expenditure codes other than those for which funds had been appropriated. There was no evidence of authority under which the mischarges were allowed while executing the budget.

Though the practice of mischarging the expenditure is on the decline at the Ministry, further budgetary discipline is required.

The accounting officer explained that additional measures would be put in place to further streamline the budget implementation process, so as to avoid the practice of mischarging expenditure.

I advised the Accounting Officer to strengthen supervision of the budget implementation and where it is inevitable re-allocation warrants should be sought from the Ministry of Finance, Planning and Economic Development before release of funds. b) Payables

The Ministry had domestic arrears and other payables amounting to UGX.3,019,492,303 at the close of the financial year as presented in note 26 to the financial statements. Included in this amount were long outstanding debts

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such as; PAYE (UGX.1,348,649,448), contributions to international organizations (UGX.291,740,137), and UMEME (UGX.41,900,648).

It was noted that Tax liabilities attract fines in accordance with the Income Tax Act, 1997 (As amended). Failure to contribute to international organizations may result into forfeiture of corresponding rights and benefits. There is also a risk of disconnection of electricity to the Ministry by UMEME.

Management attributed the outstanding payables to failure by the Ministry of Finance, Planning and Economic Development (MoFPED) to release necessary funds for their settlement.

I advised management to continue liaising with MoFPED to ensure that resources are set aside to settle these payables. c) Nugatory expenditure

The Ministry paid UGX.1,120,908,971 to A Construction company being interest charges on delayed payments for the contract of reconstruction of water supply and sanitation facilities in Sironko, Soroti and Kaberamaido districts under contract No DWD/WORKS/04-05/00140. It was further noted that UGX.223,694,883 relating to the interest was paid in error. Payment of interest charges is considered wasteful expenditure as it could have been avoided with proper project planning.

Management attributed the nugatory costs to delayed release of advance payment to the contractor, unscheduled public holidays, scope changes and additional work. It was also stated that efforts to recover UGX.223,694,883 relating to interest paid to the contractor in error were underway.

I advised the Accounting Officer to always ensure timely settlement of obligations to save public funds from wastage. Meanwhile, I await evidence of recovery of interest paid in error. d) Administrative advances

Paragraph 217 of Treasury Accounting Instructions requires that administrative advances be accounted for within 60 days from the date of payment or else be 673

deducted from the monthly salary of the official. Contrary to the above requirement however, UGX 90,073,333 advanced to staff for official activities lacked supporting documents. In addition, review of accountability documents submitted by the Ministry staff revealed improper accountability for UGX.112,817,000 thereby bringing the total sum of outstanding funds to UGX.202,890,333. Failure to ensure proper accountability and/or enforce recovery may result into loss of public funds. Though the Accounting Officer indicated that supporting documents were available, the outstanding sum was not supported.

I advised the Accounting Officer to ensure proper accountability or recovery of the funds from the concerned staff. e) Delays in the procurement evaluation process

According to the Ministry‟s approved procurement plan, procurement of works service should take a maximum of 38 days from the date of bid opening to the date of evaluation. I however observed that procurement of consultancy services funded under the donor component lasted up to 91 days. The table below refers;

Subject Of Procurement Provider Contract Value Start date No of Days Consultancy Services for MS M&E UGX.1,213,300,000 25-Nov-13 91 Feasibility Studies, Detailed Associates Designs and Construction Ltd Supervision of Water Supply Systems Under Lot3: for Namulonge-Kiwenda-Busiika and Kiwoko, Butalanga and Rehabilitation of Katuugo and Improvement of Kakooge and Migeera Water Supply Systems.

Consultancy Services for MS Seureca € 512,288 25-Nov-13 91 Feasibility Studies and Consulting EA Detailed Designs Under Lot2: In for Busaana Association Kayunga,Kabembe-Kalagi- With Warner Naggalama and Kakunyu- Consultants Kiyindi and Construction Supervision for Rehabilitation

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of Buvuma

The Accounting Officer attributed the delays to the time that was taken to seek for no objection from the donor. Delayed procurement of service providers affects timely delivery of services to the population.

I have advised the accounting officer to ensure that procurement planning takes into account donor requirements so as to attain timely delivery of services to the population.

f) FARM INCOME ENHANCEMENT & FOREST CONSERVATION PROJECT

Under absorption of project funds The Government of Uganda obtained funding from the African Development Bank (ADB) Group and the NDF to support the FIEFOC Project which was designed to support the Government of Uganda‟s (GoU‟s) Plan for Modernisation of Agriculture (PMA) aimed at increasing incomes and improving the quality of life of poor subsistence farmers and their households through market-oriented agricultural production. The financing requirements provide for a refund of any funds not absorbed.

It was noted that by 30th June 2014, UGX.911,108,559 and UGX.337,799,685 from the African Development Bank and the Nordic Development Fund respectively had not been absorbed and therefore the amounts were refunded.

As a result, planned activities such as; capacity building of farmer based organizations for efficient management of Doho, Mubuku and Agoro irrigation schemes and establishment of contour hedgerows on 10,000 km of slopes were not undertaken.

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The accounting officer attributed the under absorption to delay of civil works while the irrigation component was under the Ministry of Agriculture, Animal Industry and Fisheries.

I advised the Project Management to ensure that in future, bottlenecks to project implementation should be timely resolved so as to ensure timely and proper implementation and thus improved funds absorption.

54.1 BRIDGING SUPPORT TO CLIMATE CHANGE UNIT PROJECT a) Project Bank Account Best practice requires each project to have a separate bank account for ease of tracking and accounting for any project transactions at any particular time. Audit noted that there was no separate bank account maintained for the project making it difficult to track inflow and outflow of the project funds. There is also a risk of project funds being utilized on activities of other projects and vice versa. Management attributed the anomaly to the communication from Ministry of Finance Planning and Economic Development of minimizing the opening of Government accounts but hastened to add that an application had been lodged with the Accountant General‟s Office to obtain clearance to open a separate account for the project. I have advised management to hasten the opening of a separate bank account for the project. b) Implementation of activities Accordance to the approved project agreement and approved work plan, Bridging support project was to run for a period of two years, up to the end of the year 2013. Consequently, 75% of the activities ought to have been implemented by the year end (i.e. 30th June 2013). Audit noted that by the end of the financial year, most activities had not been implemented. For example the activities under the climate change coordination mainstreaming and capacity enhancement at national and district level had not been implemented. This may affect the attainment of the overall project objectives.

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I have advised management to ensure that project implementation is carried out as planned so as to meet set objectives

54.2 CLIMATE CHANGE INITIATIVE PROJECT

a) Non-Compliance with the terms of the standard project agreement During the year, the Government of Uganda (GoU) contributed UGX.787,260,833 to the project. However the funds were not banked on a Climate Change Unit Account, contrary to the requirements of Section 14.1 of the Standard Project Agreement. This was a violation of the Standing Agreement. In the circumstances, management of the project cannot be able to control the expenditure of the funds. Management explained that the funds for the project were maintained on a different account and managed by the Ministry of Water and Environment. This matter was reported in my previous report (30th June 2013) and although management had explained that it was an oversight that would be corrected, no action was taken. I have advised management to liaise with the Ministry of Water and Environment so as to ensure that the Standing Agreement provision pertaining to banking in a project account is complied with. b) Delay in accounting for funds UGX.32,151,743, which was advanced for the National Conference on Climate Change Policy on 7th August 2012 was accounted for on 27th February 2013, together with a refund of UGX.3,208,243 on the same day (a delay of 205 days). The financial monitoring and internal control is thus inadequate. Management acknowledged the anomaly but attributed the delay to the busy schedule of the concerned officers who had engagements of developing the National Climate Change Policy. I have advised management to ensure that project staff timely account for funds advanced to them to enable effective financial monitoring.

c) Local Service Tax Section 80 (1b) of the Local Governments Act states that a local service tax is to be levied on all persons in gainful employment or who are practicing any 677

profession or on business persons and commercial farmers producing on a large scale. A review of the project monthly payrolls revealed that the local service tax was not withheld for onward remittance to Local Councils. Defaulting on local service tax exposes the project to risks of penalties. Management regretted the anomaly and pledged, with effect from January 2015 to deduct Local Service Tax fees from all the Climate Change Department‟s staff salaries and remit to the respective Local Councils, as per the requirements of the Act. I await management‟s action in this regard.

54.3 JOINT WATER SANITATION SECTOR PROGRAMME SUPPORT (JWSSPS)-

AfDB FUNDED COMPONENT

a) SECTOR PROGRAM SUPPORT-COMPONENT

a. Under absorption of donor funds Sector program support budgeted and received UGX.4,240,000,000 from AfDB but audit noted that only 50% (UGX.2,115,000,000) of the funds released were utilised. Failure to absorb all the released funds does not only affect performance but may also affect future cash flows.

Management attributed under absorption to the delay in finalizing the joint financing agreement for the Joint Water and Environment Sector Support Programme (JWESSP) and delays in opening of the fund and operational bank accounts.

I have advised the program coordinator to closely monitor the performance of the activities experiencing slow progress in implementation and ensure that corrective actions are undertaken to bring those activities back on course.

b) RURAL WATER AND SANITATION SUPPLY-COMPONENT

i. Budget performance The component budgeted for revenue of UGX.36.818 billion to implement agreed activities but only UGX.19.171 billion was released resulting in a variance of UGX.17.647 billion. Failure to release all the budgeted funds constrained the 678

implementation of the core component activities hence greatly affecting the component performance. Management attributed this to the delay in finalizing the Joint financing agreement for the JWESSP.

I have advised the Accounting Officer to always conclude the signing of project funding agreements well in advance and allow for adequate time to enable smooth release of funds allocated in each financial year.

ii. Accounting for Staff Advance The project management advanced UGX.22,485,000 to an employee on Voucher No.13-0509 to undertake a training of Iganga district local government staff in appropriate sanitation promotion approaches. Review of the accountability revealed some anomalies as indicated below;  JPF operations manual requires a log book to be maintained for every vehicle and to be filled by a driver for each trip, which should be counter signed by the officer. Furthermore, JPF manual requires drivers to submit monthly vehicle reports showing summary of mileage covered and technical performance of the vehicles. Contrary to these requirements, it was noted the activity holder fuelled vehicles registration Nos. UG 1739S and UG 1733S with fuel worth UGX.729,200 from various fuel stations without adhering to the mentioned requirements. Although management in its response stated that the log books were available, however, they were not provided for verification.  The activity holder paid Canaan Resort Hotel Ltd and Shelter Guest House UGX.4,000,000 and UGX.10,675,000 respectively for hotel services, however, withholding tax of UGX.880,500 was not deducted. Management in its response pledged to recover the tax from the activity holder. I await the outcome of management‟s action in this regard.

I have advised the Accounting Officer to ensure that vehicle movements are adequately documented in log books to enhance management of vehicle fleet. g) WATER AND SANIATION DEVELOPMENT FACILTY-CENTRAL REGION

i. Absorption of donor funds

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Review of the budget performance for the facility revealed AfDB committed to finance agreed facility activities with a total of UGX.26,361,540,000 and this money was duly transferred from JPF operations account to the facility in the year under review. However, audit noted that only UGX.24,374,999,000 was absorbed leaving a balance of UGX.1,986,541,000 un-utilized.

This was caused by delays in the approval and implementation of some construction works in rural growth centres which negatively affected the overall performance of the facility.

I have advised the facility manager to enhance monitoring, supervision of procurement processes and construction works to avoid unnecessary delays. ii. Procurement from Non Prequalified Service Providers Regulation 94(1) (a) of the public procurement and disposal of public assets, 2003 stipulates that a contracts committee or a holder of delegated authority shall approve the choice of a procurement method prior to commencement of the procurement process.

However, review of payment vouchers revealed that UGX.520,649,524 was paid to un-prequalified firms for hotel services without proper justification or contracts committee approval. This practice undermines the purpose of prequalifying firms and it is likely that the facility did not obtained value for money from the expenditure incurred.

Management explained that the facility operates in Rural Growth Centres where there are no pre-qualified service providers to offer the required Hotel Services and thus uses the “National Shopping Procurement Method” as provided for in the funding agreement between AfDB and GoU. A review of the funding agreement however showed that the purported procurement method is not providing for.

I have advised the Accounting Officer to prevail over the procurement officer and ensure that procurement procedures are adhered to when incurring public funds. iii. Fuel Management Public Procurement and Disposal of Public Assets Authority gave the Facility authority to procure fuel advantage card facilities from M/s Shell (U) Ltd and M/s

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Total (U) Ltd. The two service providers were selected due to their geographical spread. A review of fuel payment vouchers however revealed that the facility‟s management disregarded the authority and deposited UGX.140,000,000 with Shell Nansana as opposed to M/s Shell (U) Ltd and M/s Total (U) Ltd. Failure to adhere to the authority granted by PPDA does not only undermine its mandate but also makes management‟s actions suspect.

Management in its response explained that the funds were deposited with Shell Nansana, because it‟s located near the Facility. Management further explained that it was an interim measure undertaken when the previous credit card system by Standard Chartered Bank was terminated.

I have advised the Accounting Officer to always carry out transactions in accordance with the authority granted by PPDA, and in case of need for divergence, to seek for PPDA approval. iv. Consultancy services for feasibility studies, design review and detailed engineering design for lot 1: Kiganda, Kakumiro, Kagadi and Kiboga Water and Sanitation Development Facility signed a contract No. MWE/SRVCS/11- 12/1292/1 dated 10th October 2012 with COWI (U) Ltd for consultancy services for feasibility studies, design review and detailed engineering design for lot 1: Kiganda, Kakumiro, Kagadi and Kiboga at a contract price of UGX.176,077,984.

The project commenced on 1st November 2012 with expected completion date of 30th June 2013. It was however, noted that contrary to Paragraph 18.1 of the general conditions to the contract agreement, requiring the contractor to complete the feasibility studies of the 4 schemes within 8 months (1st Nov 2012 to 30th June 2013); the contractor delayed to complete the project by 5 months (completed in November 2013).

Failure to timely complete feasibility studies delayed the implementation of the water schemes in the above mentioned towns, hence affecting service delivery. Management attributed the delay to the failure to identify adequate water resources in the towns of Kiboga, Kagandi and Kakumiro.

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I have advised the facility manager to always expedite test drills to allow sufficient time for the consultants to finalize detailed designs within the agreed contract period.

v. Consultancy services for feasibility studies and detailed designs for Busaana Kayunga, Kabembe-Kalagi-Naggalama and Kakunyu- Kiyindi and feasibility studies, detailed designs and construction supervision for rehabilitation of Buvuma WSDF- Central contracted Seureca Consulting Engineers in Association with Seureca EA Ltd and Warner Consultants on 13th May 2014 to carry out feasibility studies and detailed designs for Busaana Kayunga, Kabembe-Kalagi-Naggalama and Kakunyu-Kiyindi and feasibility studies, detailed designs and construction supervision for rehabilitation of Buvuma at a contract price of Euros.512,288.

I noted that contrary to regulation of 239(2) of PPDA, which requires a procuring and disposing entity to pay a service provider for the actual cost of the works, as evidenced by receipts and other appropriate documentation, management paid Euros.53,324 for reimbursable expenditure to the consultant under certificate 1 without adequate supporting documents.

Management in its response indicated that communication had been made to the consultant to submit supporting documentation for the re-imbursable expenditure for certificate one.

I await the outcome of management‟s action in this regard; else the Accounting Officer will have to deduct the funds from the subsequent certificates of the consultant. 54.4 JOINT WATER AND SANITATION SECTOR PROGRAMME SUPPORT

(JWSSPS) – SOUTH WESTERN

a) COMPLIANCE WITH THE PROGRAMME FINANCING AGREEMENT AND THE GOU FINANCIAL REGULATIONS Compliance review was undertaken on the programme operations, however there was no material breach of compliance issues that came to my attention during the audit that would warrant reporting. 682 b) GENERAL STANDARD OF ACCOUNTING AND INTERNAL CONTROL i. Inefficient Accounting System WSDF-SWB is required by the Joint funding partnership operations manual to process financial transactions and maintain books of accounts using a Computer Financial Management System (CFMS).

It was observed that there was poor connectivity between the central server at Luzira and the facility office at Mbarara. As a result officers had to travel to headquarters in Kampala to enter data in the system and process transactions. The poor connectivity does not only defeat the purpose for which the system was installed but has also caused delays in the processing financial transactions, increased operational costs and can affect the branch performance of the project.

Management explained that a new web-based system had been adopted and that the IT department was working on its connectivity. I await the outcome of management‟s action in this regard. ii. Unbudgeted for expenditure Paragraph 152 of the Treasury Accounting Instructions (TAI), 2003 requires that, expenditure not provided for in the approved estimates of the current financial year may not be incurred without the authority of a supplementary estimates warrant, a virement warrant or a contingencies fund advance warrant.

It was however observed that the facility paid out UGX.234,239,258 to URA as withholding tax and PAYE arrears relating to the previous financial years yet the expenditure had not been provided for in the approved estimates for the period under review. In the circumstances, management is constrained in implementing the planned activities. Management explained that the amount was deducted in the previous FY but was not remitted to URA due to lack of funds. I have advised management to always seek approval from the sector working group for any expenditure outside the approved budget. iii. Management of the Facility Assets  Grounded Facility Vehicles and Motorcycles

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Section 6.3 of the Joint Partnership Fund, Phase 2 operations manual, requires the facility to efficiently and effectively manage the vehicles and assets under its control in order to maximize the future economic benefits. This required management putting in place an organized system of planned preventive maintenance that provides for scheduled maintenance before an asset breaks down.

It was noted that seven motor vehicles and two motorcycles belonging to the facility broke down and had been grounded and needed boarding off. However, the boarding off process had not been initiated. The failure to timely board off the grounded assets is bound to result in further loss of realisable value.

Management acknowledged the anomaly and explained that the assets had become costly to maintain. I have advised the facility management to liaise with the Ministry‟s Accounting Officer and commence the disposal process of grounded vehicles and motorcycles.

 Ownership of plot of land on Mbarara - Kabale road It was observed that WSDF-SWB occupies Plot Number one on Mbarara - Kabale road, which lacked a land title. In the circumstances, the facility is exposed to a risk of forfeiture of the piece of land in the event that the Municipal Authorities decide to re-allocate the land to other developers.

Management explained that it was in the process of obtaining the land title and that the surveying process had been concluded and deed plans secured. The conclusion of the matter was still pending offer by the District Land Board. I await the outcome of the process initiated by the facility management.

iv. Construction of Kyempene Town Water Supply and Sanitation Scheme in Ntungamo District Ministry of Water and Environment, Directorate of Water Development, Water and Sanitation Development Facility-South Western Branch signed a contract with a

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construction firm in August 2013 for the construction of Kyempene Water Supply and Sanitation Scheme in Ntungamo District at a cost of UGX.1,582,646,835.

Paragraph 104(2) of the PPDA regulations, 2003 requires the procuring and disposing entity to ensure that engineers‟ estimates are realistic and are based on up-to-date information. It was noted that the project was designed with estimated cost of UGX.1,369,003,298. However the submissions to the Contracts Committee, had an amount UGX.1,586,684,122, which lacked details of how the estimates increased from the original amount of UGX.1.369 billion.

Although management explained that there were supporting documents to justify the increment, these documents were not availed for examination. I have advised the Accounting Officer to investigate the cause of the increment in the engineers‟ estimates in the above matter and to ensure that any changes in estimates are always properly documented.

54.5 KAMPALA WATER – LAKE VICTORIA WATER AND SANITATION PROJECT

a) Low budget utilization rate Our review of Article 3, 3.2 of the financing agreement between KfW and the Government of Uganda, revealed that KfW has a right to refuse to make disbursements towards the project after 31st December 2017.

A comparison between the planned and the actual funds utilization for the financial year 2012/2013 showed that the project was behind schedule in implementation of some activities. A low absorption capacity rate could lead to the project not meeting its set objectives in the Common Partnership Terms Agreement (CPTA), in the stipulated time frame. Table below refers;

Description Budget for the Actual utilization Budget year ended 30 for the year utilization as a June 2013- ended 30 June percentage Euros 2013-Euros Direct disbursements made 3,934,049 2,065,282 52%

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Total Uses of Funds 7,134,049 4,205,489 59%

Management acknowledged the slow progress of the project but attributed it to the delays in attaining the initial/prerequisite conditions for disbursement like the development and approval of the operating manual, development of the implementation/works packaging strategy and its consequent approval.

I advised the project management to hasten the implementation of various project activities in order to meet the set project targets and objectives.

54.6 JOINT WATER AND SANITATION SECTOR PROGRAMME SUPPORT

(JWSSPS)- WATER AND SANITATION WATER DEVELOPMENT FACILIY

EAST

a) Compliance with Project Agreement, Government Regulations and Operations Guidelines and Internal Controls i. Information System Security and Disaster Preparedness Audit noted that the project lacked an external hard drive for backing up sensitive finance and procurement information. Also noted was that all the IBF grant information was saved on the hard drives of the computers which are kept at the office premises, hence the project risks losing all project information in case of computer damage, fire outbreaks, theft or computer crash. Furthermore, there was no risk management plan (disaster preparedness) to ensure early risk identified and to sufficiently manage risks in all the project activities.

Management regretted the oversight and promised to initiate the process of acquiring external hard drives and start the process of risk identification as a prelude to establishment of a risk management plan.

I advised management to hasten the;  Acquisition of hard drives for the accounts and procurement department to enable regular data back-up which should be kept offsite to facilitate information restoration in case of damage or loss of the computers.

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 Creation of risk awareness so that potential risks at the facility are ably identified, assessed and mitigation measures put in place. ii. Internal Audit Function It is expected that quarterly internal audit reviews are undertaken for the facility. Audit however was availed only one report, implying that for the other three (3) quarters, no internal audit review was undertaken, signifying a weak internal review function thus increasing risk of non-compliance with policies and agreement provisions. The project‟s internal control systems are weakened under the circumstances. Management in its response acknowledged lack of an audit function in the facility to complement the Ministry‟s internal audit.

I advised the facility management to lobby for the creation of an Internal Auditor position so as to strengthen the control environment at the facility. iii. Human Resource Capacity Development The project injects a lot of funds for implementation of activities and yet there were non-finance personnel involved in the implementation. Audit noted that the said personnel were neither conversant with financial management nor trained. There was therefore a training gap. Management acknowledged the shortcoming and stated that it was arranging to have the non-finance project staff trained in financial management.

I advised management, in consultation with the relevant stakeholders, to hasten to arrange the training so that project funds are well managed during project implementation.

iv. Accounting Controls Audit noted that same cheques were being used to settle several payments. Cases in point were cheque numbers 763 and 777, which were used to pay out funds for 10 and 12 payment vouchers respectively, hence complicating filing based on cheque numbers.

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Secondly, there were instances of delayed implementation of activities after the funds had been advanced to staff. For example funds released on 25th April 2014 for surveying the additional distribution line of Kaliro Town Water Supply System, were utilised in the period 2nd to 9th June 2014. The funds are susceptible to misuse and/or teaming and lading.

Management acknowledged the anomaly and promised to use one cheque for each payment or to provide a comprehensive schedule of payments in instances where one cheque has been used to pay various payments.

I advised management to ensure that;  Cheques are used for each individual payment relating to specific planned activity to facilitate record filing and review by management.  Funds are requisitioned by the implementing staff after the necessary preparations have been undertaken for the execution of the project activity. v. Use and Management of Vehicle At the time of the audit, it was noted that the vehicle journey log book system was in place, however, the one for Vehicle No. UG 1894S was not counter signed by the officers who made the trips, implying non-compliance with the Operation manual requirement under section E.4 Vehicle operations and management (E.4.4 Vehicle records). Management regretted the omission of the procedural requirement but indicated that the signing of the vehicle log books was always done by both drivers and officers.

I have advised management to ensure that the procedural requirement is adhered to so as to facilitate tracking and ease the general management of vehicles.

b) General Standard of Construction Works and accountability i. Poor Quality Ecosan Toilet Construction Works During the inspection of the sampled Construction Works for 2013/14, audit noted satisfactory quality of works by the contractors, with the exception of works done by a local engineering firm at a cost of UGX.43,641,000, on institutional toilets at

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Kibuku Primary School, where low quality materials were used for doors and roofing. The structure had no ring beam, the finishing and works on the walkway stairs were poorly done. Also noted was lack of facial boards, the poor quality timber used for roofing, none galvanised low gauge iron sheets and the peeling off of rough cast towards the roof. Picture refers.

Picture showing the poor quality works of the Institutional Ecosan Toilet (FY 2013/14) at Kibuku Primary School in Kibuku Town Council

Audit noted that the contracted firm signed a contract agreement in January 2014 to construct eight (8) Institutional Ecosan Toilets at an overall cost of UGX.349,128,010; and works in seven (7) of the sites was in initial stages. Given the poor quality work noted in Kibuku Primary School, there was a likelihood of the contractor replicating the same in the other 7 sites.

Management stated that the contractor had been notified of the defects and corrective action is being taken.

I have advised management to ensure that the construction works are closely supervised by the WSDF-E contract manager to ensure implementation of quality works in all the facility sites. ii. Inappropriate and Insufficient Expenditure Accountabilities

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Audit noted that UGX.19,417,500 relating to software was unaccounted by the project staff, contrary to the Operation manual section E.1.4, requiring staff advances to be accounted for and retired within 60 days. Further noted were inadequacies in the activity reports, payment sheets and attendance lists that had been attached as part of the accountabilities.

Management in its response stated that the concerned officers had been engaged to account for the funds and that the accountabilities were in place. On the issue of inadequacies in the accountability documents, management undertook to address the anomalies in the subsequent period.

I advised management to;  Ensure adequate follow-up on the officers who do not timely furnish the necessary accountabilities after the implementation of facility activities.  Develop a formal system of communicating to staff who delay to account for funds advanced within the stipulated 30 days period and administrative sanctions taken on the non-responsive officers.  Avoid advancing more funds to staff who have not accounted for previous funds.  Ensure completeness and clarity of accountability documents for ease of audit trail and for proper stewardship.

54.7 LAKE VICTORIA ENVIRONMENT MANAGEMENT PROJECT II

a) Project Implementing Partners The management of LVEMP signed memoranda of understanding (MoUs) with two Ministries of Agriculture Animal Industries and Fisheries [MAAIF], Works and Transport) in August 2011, 9 districts (Mubende, Masaka, Kalangala, Namayingo, Mityana, Gomba, Rakai, Mpigi and Kalungu) in April 2012, and 4 other organizations (National Water and Sewerage Corporation, NARO-Kawanda, Makerere University and NaFIRRI) in August 2011 to implement specific project activities.

Documents relating to the Implementing Partners (IPs) however revealed that all the signed MoUs did not specify the amount of money each entity was supposed 690 to receive and the timing of remittances. From July 2012 to April 2014, the two ministries and the four other organizations had not received any project funding and the districts on the other hand took 24 months (ie April 2012 to April 2014) to receive funding. This was a prolonged delay for a project whose initial implementation period was from 29th Oct 2009 to 30th June 2013. As a result of such delays the project was extended for two years up to 30th June 2015.

Management attributed the delays to the long lead time from signing of MoUs to disbursement of funds, as a number of processes had to be completed before disbursement.

Article II and III of the signed MoUs requires the IPs to prepare work plans and submit to the National Coordination Office for approval. Although the work plans were prepared and submitted, audit was not provided with the minutes for the meetings in which they were approved. I therefore cannot rule out the use of non- approved work plans. Although management indicated during exit meeting that the documents were available, they were not provided for verification.

A review of work plans and remittances to the IPs revealed disparities ranging from IPs getting more funds than had been planned, while some that had not been planned for received funding. Management did not provide evidence to confirm that the work plans were amended.

Although management attributed the variances to the fact that funds for the subprojects were budgeted under the respective implementing partner overseeing the implementation of subprojects in the districts, no documentary evidence was availed in support of that explanation.

I have advised the project coordinator to develop a new implementation plan, fast track it and closely monitor its implementation so as to be able to meet the new deadline of 30th June 2015. b) Low absorption of funds by the Implementing Partners (IPs) The project, which started on 29th Oct 2009 was supposed to close on 30th June 2013, however due to the delayed implementation of the agreed activities the project was extended for two more years from 1st July 2013 to 30th June 2015.

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Despite the extension, low absorption of funds by IPs was noted, which casts doubt on whether all the planned activities would have been implemented by the end of the extended period. A total of UGX.3,880,599,296 was released to the IPs but only UGX.439,868,485 (11%) had been utilized by the end of the financial year, leaving a balance of UGX.3,533,295,929 (89%) un-utilized. Table refers. I further noted that by the time of audit (September 2014), all the un-spent balances had not been accounted for.

Agency Voucher No. / Amount Amount Unspent % Disbursement Disbursed Spent balance at Perform date 30/06/2014 ance Ministry of 875/February 14 80,000,000 0 80,000,000 0% Works Ministry of 876/February 14 404,800,000 158,100,754 246,699,246 39% Agriculture NARO – 877/February 14 127,100,000 12,735,231 114,364,769 10% Kawanda NWSC 878/February 14 69,900,000 0 162,465,118 0% Makerere 879/February 14 87,300,000 86,449,350 850,650 99% University NaFIRRI 944/April 14 304,000,000 182,583,150 121,416,850 60% Local May –June 14 2,807,499,296 0 2,807,499,296 0% Governments Total 3,880,599,296 439,868,485 3,533,295,929

As a result of low absorption, most of the planned activities for the year under review were not implemented and is likely to result in another request for project extension. Consequently, this lowers Uganda‟s chances of benefitting from the second project phase (APL3 (FY13-FY18), which is already overdue.

Management attributed the delay in disbursement of funds to the delay by the Districts to open up LVEMP designated bank accounts and also the delay by some implementing partners to submit progress reports and accountabilities.

I have advised the Project Coordinator to enhance planning, monitoring and reporting systems with the view of ensuring that all planned activities are carried out within the stipulated time frames.

692 c) Unaccounted for funds i. Personal Advances UGX.30,758,200 paid out for various activities remained unaccounted for, contrary to Chapter 1V section 217 of the Treasury Accounting Instructions (TAI) 2003, which requires public officers to account for funds advanced to them within 60 days. This was caused by the laxity of management to adequately enforce the internal controls relating to accountability of advances.

I have advised management to recover the funds from the concerned officers. ii. Project counterpart fund Account Section 4.1.2(IV) of the Financial Management Manual (FMM) required the project to operate a separate account in Bank of Uganda for the purposes of receiving and managing the government‟s counterpart funds. Contrary to this, it was noted that the project used one operational account for both donor and counterpart funding, resulting in co-mingling of funds.

This may result in the use of donor funds to pay for disallowed expenses, improper accountability and misstatement of financial statements. This arose due to laxity of the project management. Management acknowledged the anomaly and promised to take corrective action by ensuring that a separate account is opened.

I await management‟s action on this matter. d) Human Resource Management i. Annual Leave Section C-a (2) and section C-b (1 & 5) of the Uganda Public Service Standing Orders, Jan 2010, stipulate that annual leave is a right applicable to public officers employed on full time basis and when due, should be obligatory. A review of the employee personal files revealed that some officers had not taken leave, right from time of recruitment. This was attributed to management‟s failure to prepare a leave roaster and to encourage officers to go on leave. Although management in its response stated that a leave roster was in place, it was however not provided for audit verification.

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I have advised management to always prepare annual leave roasters and to encourage officers go for leave. ii. Incomplete Personal Files A review of staff personal files revealed lack of academic papers and appraisal forms, contrary to section (P-d) sub sections 4 and 5 of the Uganda Public Service Standing Orders, Jan 2010, requiring all documents which affect the official record of a public officer to be properly kept.

This is an indication of poor record keeping by the human resources department (HRD). In the absence of these records, the competences/abilities and performance gaps cannot be determined and thus the appraisal of the HR is made cumbersome.

Although management attributed the anomaly to the centralization of the main staff files at the Ministry‟s Headquarter, by the time of this report, the files had not been updated.

I advised management to always update public officer‟s personal files for proper human resource management. e) Motor Vehicle Records A review of the asset‟s register revealed that the project owned a number of vehicles however, contrary to paragraph 818 of the TAI, Part 2 (public stores), it did not maintain log books or operating records for eleven motor vehicles. In the circumstances, it was not possible to ascertain whether the vehicles were properly maintained and/or carrying out project activities.

Management explained that the vehicles in question were being used by the implementing partners and promised to urge them to maintain logbooks.

I advised the project management to always maintain log books or operating records to ease the management of the vehicle fleet.

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54.8 JOINT PARTHNERSHIP FUND

a) Accounts receivable Review of note 4.8 revealed that a total amount of UGX.120,438,000 relating to sundry debtors had been outstanding since the previous year without any efforts at recovery. Included in the amount is UGX.52,188,892 relating to withholding tax paid in error, which URA advised the project in 2011 to deduct from subsequent remittances, an offer the Ministry has not adequately taken advantage of. There is a risk of loss of funds under sundry debtors. The accounting officer indicated that instructions had been given to the accounts department to follow up the matter.

I wait for the outcome of management action in this regard. Meanwhile, management is advised to take up the offer of offsetting WHT remittances from subsequent payments to URA. b) Under absorption of component funds The JPF components received a total funding of UGX 17,365,514,880 however only UGX 10,818,999,000 was utilized resulting into under absorption of UGX 6,546,515,880. The table below refers: Component Amount received Expenditure Variance % variance

Rural water 11,100,000,000 12,420,206,000 -1,320,206,000 -11.9

Water for production 3,170,350,000 2,914,000 3,167,436,000 99.9

Water resource 2,463,000,000 4,543,280,000 -2,080,280,000 -84.5 management Regulation unit 500,000,000 542,522,000 -42,522,000 -8.5

Climate change 1,000,000,000 305,901,000 694,099,000 69.4

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Component Amount received Expenditure Variance % variance

Sector programme 6,955,000,000 4,750,000,000 2,205,000,000 31.7 support and PMS Urban water supply 3,900,000,002 1,931,485,000 1,968,515,002 50.5 and sanitation component Water management 3,791,508,880 1,786,806,000 2,004,702,880 52.9 zones

Water and sanitation 11,560,000,000 8,644,370,000 2,915,630,000 25.2 development facility- North Improved hygiene 1,600,006,000 307,361,000 1,292,645,000 80.8 and sanitation Environment and 414,000,000 80,462,000 333,538,000 80.6 natural resources Total 17,365,514,880 10,818,999,000 6,546,515,880 37.7

Management attributed low absorption of funds to the delayed signing of JPF phase II agreement and operationalization of the new accounts for phase II that only became possible 6 months after the start of the Financial Year.

Non-implementation of planned activities is likely to hinder the project from achieving its overall objective of “providing sustainable safe water supply and sanitation facilities based on management responsibility and ownership by the users within reach of 77% by the year 2015 with 90% effective use and functionality of services”. I advised the Accounting Officer to institute adequate measures that will ensure timely implementation of planned project activities to avoid future extensions. c) Un-authorized excess expenditure Section 4.6 of the JPF III operational manual permits the project management to make budget variations of up to a maximum 20% (plus or minus) on every component‟s expenditure budget line items. Audit however noted that under Rural Water component, a total amount of UGX. 1,320,206,000 was spent in excess of the budgeted line items amount of 696

UGX.11,100,000,000. Included in the amount of excess expenditure among others was UGX.414,172,440 (92.04%) spent above the initial budget of 450,000,000 under procurement of vehicles budget line item. On the other had a total sum of UGX 2,080,280,000 (99.9%) was incurred above the line item budget allocation of UGX.2,463,000,000 under Regulation Unit component without obtaining necessary approvals. In the management‟s response the Accounting Officer attributed spending above the approved budget to changes in the market price, failure to realize Government‟s contribution and need to give extra training and capacity building support to the newly created districts. The Accounting Officer further explained that the anticipated mid-year budget revision to re-align component budgets/work plans did not take place as planned. Incurring funds over and above the approved budget without obtaining necessary authorisation does not only contravene budgetary controls but also impacts negatively on the implementation of activities from which funds were re-allocated. I advised the Accounting Officer to always operate within the budget allocations and where it is unavoidable seek for the necessary approvals for budget variations. d) Construction of structure & protective house at Jinja pier Regulation 4 of the PPDA (Force Account Mechanism), 2014, requires the procuring and disposing entity to use procurement rules and methods in the PPDA Act, 2003 when procuring equipment and supplies required while undertaking works using the force account mechanism. Contrary to the above requirement audit noted that supplies worth UGX.16,629,500 were procured under force on account arrangement for the construction of structure & protective house for telemetry hydrological station at Jinja pier without following force on account procurement procedures. As a result withholding tax amounting to UGX.997,770 was not deducted from the suppliers as required by income Tax Act, 2012 (As amended) . The Accounting Officer explained that materials procured were obtained from the informal sector which would have been hard to get through the normal procurement process. This explanation however was not satisfactory as

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accountability receipts attached show that the materials were procured from hard ware shops.

I advised the Accounting Officer to remit the taxes involved to Uganda Revenue Authority and ensure strict adherence to the force on account regulations in subsequent transactions of similar nature. e) Non deduction of WHT from Payment of Contractors Section 119 (1) of the Income Tax Act, 2011 requires any government entity paying for the supply of goods or services exceeding one million shillings, to deduct 6% of the amount paid, as withholding tax and remit it to the tax authority. Contrary to this requirement, UGX.18,566,648 was not withheld from the payments amounting to UGX.309,44,125 made to various suppliers as shown below: Vr No Payee Details Memo Amount WHT deduc tible

V16/03 Sumadhura Construction Certificate No.6 217,679,396 13,060,764 Tech. Ltd for Adjumani TC

V36/03Palm Construction Construction Certificate No.6- 91,764,729 5,505,884 Ltd Paidha TC.

Total 309,444,125 18,566,648

The facility management attributed the anomaly to the fact that the contractors presented premature withholding tax exemptions on which the decision not to deduct the tax was based. However, failure to make the deductions may result in penalties being levied by the tax body. I have advised the accounting officer to recover the money from the subsequent payments to the contractors. f) Unsupported payables A sum of UGX.6,793,000 was reported as accounts payable in the statement of financial position however, the amount was not supported with schedules or

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claims to justify its authenticity. Unsupported balances may result into payment for bills without authorised underlying transactions.

In response the Accounting Officer indicated that documents were available however, they were not submitted for audit verification. I advised the accounting officer to ensure that adequate documentation supporting the above figure is submitted for verification.

54.9 NYABYEYA FORESTRY COLLEGE

1. Budget short fall Out of the appropriated grant of UGX.842,455,000 only UGX.719,973,455 was released by the Treasury resulting in a shortfall of UGX.122,481,545. As a result the College was unable to undertake planned activities such as, construction of a lecture block and renovation of old College buildings. The accounting officer indicated that recurrent funds for the fourth quarter were not released and there was no explanation to that effect. I advised management to follow up the matter with Ministry of Water and Environment (MWE) and Ministry of Finance, Planning and Economic Development (MoFPED) to ensure releases are in tandem with appropriated amounts. 2. Extra Budgetary funding UGX.401,012,695 brought forward from the previous year and UGX.82,203,500 received from African Network for Agroforestry and Natural Resources Education (ANAFE) were not supported with necessary appropriation and supplementary estimates respectively. Unauthorised extra budgetary funding contravenes budgetary controls and undermines the responsibility of the appropriating authority. Management indicated that it was an oversight to spend without appropriation and that ANAFE funds were received unexpectedly when the budgeting process was already complete.

I advised management to always ensure that extra funds are properly appropriated by relevant authority.

699

3. Unauthorised reallocation Review of the budget revealed that UGX.277,973,324 was spent over and above certain budget line items without obtaining the necessary approval as shown in the table below.

Expenditure Budget (UGX) Actual (UGX) Variance (UGX) Variance item (%) Students welfare 238,000,000 271,296,037 33,296,037 14 Allowances 175,000,000 289,150,300 114,150,300 65.2 Vehicle operation & 55,000,000 118,300,575 63,300,575 115.1 maintenance Staff welfare 25,500,000 38,733,500 13,233,500 51.9 Consumables 60,000,000 87,708,330 27,708,330 46.2 Other goods and 93,930,105 118,769,527 24,839,422 26.4 services Bank charges 5,500,000 6,945,160 1,445,160 26.3 652,930,105 930,903,429 277,973,324

The un-authorized expenditure was due to management‟s failure to seek for reallocation from the finance committee. This practise does not only undermine the principles of budgeting but also renders the expenditure unauthorized. Management promised to streamline the budget preparation and implementation processes. I have advised the Accounting Officer to ensure that budget procedures and controls are adhered to.

4. Governance Matters 4.1 College Governing Council Section 77 (1) of the Universities and Other Tertiary Institutions Act, 2001, requires any Public Tertiary Institution to establish a Governing Council. Audit however noted that the College has since July 2011 operated without a Governing

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Council. Operating without a Governing body is irregular and effects the effective operation of the College. The Accounting Officer explained that the names of proposed members of the Governing Council were forwarded to the Permanent Secretary MWE in September 2014 and the College awaits his response. I have advised the Accounting Officer to continue pursuing the matter with the Permanent Secretary of the MWE so that the process of establishing a Governing Council for the College is concluded without further delay.

4.2 Absence of a Strategic Plan Nyabyeya Forestry College is mandated to offer practical oriented technical forestry training by offering diploma and certificate courses. To effectively carry out its functions; good practice requires that the college prepares a strategic plan which identifies key objectives, resource mobilisation, coordination of activities and application of resources among others. However, it was noted that the College has continued to operate without a strategic plan. In response, the Accounting Officer explained that the College lacks adequate financial resources to prepare a strategic plan but further indicated that management is in close contact with the MWE to ensure that funds are provided for this activity in the subsequent budget period. I have advised the Accounting Officer to expedite the consultations and consider using internally generated revenue to kick-start the process.

4.3 Internal Audit Function Regulation 27(2) of the Public Finance and Accountability Regulations, 2003 states that in order to discharge his or her responsibilities, an Accounting Officer should maintain an effective internal audit function throughout the Ministry, department or agency or other reporting unit of the Government for which he or she is responsible. Audit however noted that, in the year under review, the College lacked an internal audit function. As a result, management was not provided with oversight over the accounting, financial and operational Controls.

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Management indicated that it would liaise with MWE‟s Internal Audit Department for provision of internal oversight role to the College.

I await the outcome of management‟s liaison with MWE.

5. Staffing Gaps Out of the College establishment of one hundred seven (107) staff, only 20 positions (19%) were filled, leaving 87 vacancies (81%). Notable among the unfilled positions were the posts of Senior Lecturers, Lecturers and Assistant Lecturers. It is evident that with this level of staffing, the students‟ training needs may not be satisfactorily met, which impedes on the attainment of the College‟s set objectives. The Accounting Officer explained that qualified staff keep leaving the College due to low remuneration and that the staff shortage was reported to MWE.

I advised management to liaise with relevant stakeholders to improve the working environment of the staff. 6. Failure to bank Revenue Paragraph 339 of the Treasury Accounting Instructions, 2003 requires all government revenue collected to be banked intact on the same day of collection or the day following that of collection or the next banking day. Contrary to the above, audit noted that the College failed to bank UGX.34,019,872 internally collected from the Sawmill and Guest House. This exposes the funds to risk of misappropriation.

The accounting officer attributed the anomaly to emergencies that come up when one of the principal signatories is not at the duty station. Management further indicated that they have initiated the imprest system. I advised management to operationalize the accountable imprest system so as to meet the College cash requirement in a transparent manner and ensure that revenue collected is banked intact. 7. Non-submission of monthly Procurement Reports to PPDAA

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Paragraph 20 (1) of PPDA regulations, 2014 requires a procuring and disposing entity to submit to the Authority, by the fifteenth day of the following month, a report on the procurement activities undertaken by the procuring and disposing entity in the month. On contrary, procurements worth UGX.777,354,347 undertaken by management during the year were not reported to PPDA. In response, management indicated that the institution lacked substantive procurement staff and only a procurement assistant (Trainee) had been recruited to perform procurement activities.

I advised management to liaise with MWE to ensure that the College recruits a procurement officer who will be charged with the duty of ensuring that procurement reports are prepared monthly and submitted to PPDA

54.10 WATER MANAGEMENT AND DEVELOPMENT PROJECT

a) Low funds absorption During the year under review the project received USD.3,660,353 for the implementation of the planned activities, however only USD.690,457.85 (18.9%) was utilized (absorbed) leaving a balance of USD.2,969,895.15 (81.1%) unutilized. This implies that the activities for which the funds were provided were not fully implemented and this distorts the project implementation schedule and may result in requests for project extension, which is not only costly but also affects future rating of the country‟s similar projects by the World Bank.

Management acknowledged that there was unrealistic (over-ambitious) budgeting for the first year of implementation which did not adequately take into account the actual duration of the respective procurements for supply of goods, and consultancy services. Therefore, the under-expenditures arose because most of the planned procurements were still not finalized during the year.

I have advised management to revisit project implementation strategies to ensure that funded activities are implemented on time, and all unspent funds for the year under review are absorbed in the subsequent period.

703 b) Excess Expenditure The Ministry of water and Environment prepared and submitted the project work plan for the financial year under review to World Bank and was duly approved. Best practice requires management to implement the agreed work plan activities in accordance with the activity ceilings. Review of the project work plan however, revealed that management budgeted to spend USD.353,992 on certain specific activities but instead spent USD.570,573.83, hence creating an excess expenditure of USD.216,581.83 (61.2%). No evidence for approval of the excess expenditure was provided. There is a risk of the funders demanding for a refund of money spent over and above the budgets.

Management explained that over expenditure on the specific budget lines was as a result of under estimating the amounts that would be spent on contracts for goods and services at the time the work plan was made, in October 2013. However, the contracts for the goods and services to which the expenditures relate were signed in February 2014 after getting the World Bank “No Objections.”

I have advised management to obtain retrospective approval of the excess expenditure from the funders to avoid future penalties. c) Late Submission of Financial Statements Water Management and Development Project is managed following GoU financial management and accounting procedures. Paragraph 441 of the Treasury Accounting Instruction, 2003 requires the Accounting Officer to submit the financial statements within 3 months after the end of the financial year, to the Minister and the Auditor General, with a copy to the Accountant General.

The project management however did not submit the financial statements, within the stipulated time, as the financial statements were submitted on 4th December 2014 (5 months after the statutory deadline).

I have advised the Accounting Officer to ensure that financial statements are prepared and submitted in time for audit and for other purposes. 704

54.11 SECOND NATIONAL COMMUNICATION PROJECT

a) Under absorption of funds Out of the budget of USD 317,600, for the Second National Communication Project for the period January 2013 to June 2014 only USD.144,423.04 was utilised by 30th June 2014 resulting into under absorption of USD.173,178. It was further noted that USD.168,408.54 was withheld by donors pending submission and approval of the first draft report on climate change adaptation. Among the activities that were not fully implemented were: strengthening of the National capacities on climate change, training of staff adaptation of international practices, establishment of a website and collection of baseline data.

Management attributed partial implementation of agreed activities to delayed approval of the draft climate change report by the funders, a requirement necessary for execution of the remaining activities. Management further indicated that UNEP remitted the remaining funds in July 2014 and January 2015 to implement the remaining activities.

There is a risk that untimely implementation of the project activities may affect future project funding arrangements.

I advised the accounting officer to expedite the implementation of the pending activities and in future ensure that adequate monitoring mechanisms are put in place to allow timely completion of agreed project activities.

55.0 MINISTRY OF TRADE, INDUSTRY AND COOPERATIVES a) Mischarges-UGX.592,962,823 The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds

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are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Ministry of Trade, Industry and Cooperatives expenditures revealed that the entity charged wrong expenditure codes to a tune of UGX.592,962,823. This constituted 4% of total expenditure for the Ministry. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to financial misreporting.

I advised management to streamline the budget process to ensure that sufficient funds are allocated to each account. Authority should be sought for any reallocations. b) Irregular payment of monthly consolidated allowances - UGX.483,678,941 It was observed that the Ministry paid UGX.483,678,941 to staff as entitled monthly allowances in form of night subsistence allowance ranging from two to three days and lunch for the various categories of staff. This allowance paid in form of night subsistence was paid irregularly because it was not supported with any administrative circulars/standing order instructions approving it from Ministry of Public Service.

Management explained that the payments were a composition of field trip allowances based on departmental work plans tagged to activities that the Ministry undertook during the year. I explained to management that staffs in U8 are office support cadres and are not field based. I also explained that there are no standard field days undertaken monthly by staff. Where the need arises, subsistence allowances are requisitioned and paid separately.

I advised management to liaise with the Ministry of Public Service to have the monthly allowance regularized or work within the regulations and pay for approved allowances such as mileage. c) Unaccounted for Funds A review of the expenditure records for the Ministry revealed that funds worth UGX.51,338,990 were spent on various activities but lacked accountability

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documents such as bills, evidence of travels, minutes of meetings, attendance lists, boarding passes and activity reports. Details are as below;

S/N Description Amount (UGX) 1 Advances to personal accounts 8,194,000 2 Travel abroad 26,400,000 3 Temporary advances 16,744,990 Total 51,338,990

In this regard, I was unable to confirm whether the amount involved was applied for the intended purposes.

I advised management to enforce recovery measures from responsible officers. d) Unsupported utility payments It was noted that several transactions worth UGX.163,771,216 made with utility organizations and other service providers were not supported with adequate documentation to evidence the accuracy and completeness of the amounts paid to the companies i.e. consumption statements and receipts.

Management explained that they had requested the service providers to avail the documentation.

I await management‟s efforts on the matter failure of which recovery measures should be instituted.

e) Contributions to International Organizations a) Transfers to World Trade Organisation-UGX.172,765,620 Government of Uganda is a member and participates in the proceedings of World Trade Organisation Ministerial Conferences which requires the country to make an annual contribution to the World Trade Organisation budget. A statement of

707 account for the Ministry indicated that Swiss Francs 40,803 was outstanding for the year 2012 while Swiss francs 43,010 was outstanding for the year 2013. During the year, the Ministry made a payment of UGX.172,765,620 as annual contribution to WTO which was acknowledged with a receipt of Swiss francs 20,000 leaving a balance of Swiss francs 63,811 outstanding as at October 2013. However some issues were noted as below;  Delays in remittance of the Contribution (two years) impacts negatively on the image of the nation.  The contribution for the year 2014 was not paid by the time of audit.

Management explained that they indeed acknowledge the negative impact of the delays in remittance and attributed the problem to Ministry of Finance, Planning and Economic Development (MoFPED) inability to release funds on the budget line.

I advised management to liaise with the MoFPED and ensure that the contributions are prioritised and paid. b) Contributions to the regular COMESA budget The Ministry paid a total of UGX.2,536,957,800 USD.975,754 to settle arrears of contributions for 2012 and 2013. However the following issues were observed;  Out of the arrears paid, there is a component of interest on arrears of COMESA Dollars 1,281.30 COMESA Dollars accumulated as at 2nd May, 2013. The interest component incurred could have been avoided had the management complied with Section 166(6) of COMESA. This is considered as nugatory payment.  Delays in remittance of the Contribution (two years) impacts negatively on the image of the nation.  The contribution for the year 2014 was not paid by the time of writing this report.

Management explained that though the funds had been budgeted for, it was treated by MoFPED as unfunded priority and the funds were released under a supplementary budget and by then it had incurred interest. Management further

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explained that funds for the year 2014 were being processed through a supplementary budget that was before Parliament at the time of writing this report.

I advised management to liaise with the MoFPED and ensure that the contributions are prioritised for the Ministry releases to avoid nugatory payments in form of interest. f) Review of procurements A sample of procurements undertaken by the entity were reviewed and the following were noted;

a) Un implemented activities in the procurement plan A review of the procurement plan and the procurements undertaken revealed that nine procurements worth UGX.1,866,080,000 were not undertaken during the year as planned. Failure to undertake all the planned procurements could have affected the operations of the Ministry. The needs of the user departments were not met since the procurements were not fulfilled.

Management explained that procurements that were not undertaken due to failure by the MoFPED to release funds for their implementation.

I advised management to liaise with the MoFPED and ensure that budgeted funds are promptly released and utilized as planned.

b) Un supported procurement Section 56(1) of PPDA Act 2003 requires a PDE to maintain detailed records of all proceedings, preserve and safe guard all relevant documents it issues and receives.

During the year, a sum of UGX.45,900,000 was spent on procurement of air ticketing services, however the procurement file with full documentation confirming that the procurement procedures and regulations were followed in obtaining the services was not provided for review. This casts doubt as to whether the PPDA regulations were adhered to.

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I advised Management to avail the file for confirmation of adherence to regulations. g) Inspections of stores management An inspection of the stores revealed that the store is not ventilated or air- conditioned to make it environmentally usable. Exposure of the store keeper to such conditions is not only a health risk but may also affect his efficiency. Further, damage or deterioration of the inventories due to dumpiness may not be ruled out.

Management explained that the Ministry has a very small storeroom which is poorly ventilated but that the storekeeper had been allocated accommodation in a safe working environment as his alternative office.

I advised management to consider relocating the stores to a more conducive environment. h) DISTRICT COMMERCIAL OFFICERS SERVICES SUPPORT (DICOSS) – 31ST DECEMBER 13 a) Compliance with Financing Agreement Provisions and GoU Financial Regulations A review was carried out on the project compliance with the credit agreement provisions and GoU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GoU regulations except in the following matter:

i. Unapproved addendum The project was approved on 7th June, 2011 and was to expire on 31st December 2013. Any extension of the duration of the project was subject to the beneficiary writing a request with supporting justifications to UNOPS at least three (3) months before the memorandum ends for Enhanced Integrated Framework (EIF) board approval. The project management through an addendum No.1 to DICOSS memorandum of implementation dated 4th April 2013 sought for an amendment

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extending the contractual period. This period has since expired and the project has continued to operate without the requisite approval.

Management explained that Government had contracted UNOPS on the financing of the project and an amendment had been sought to extend the operational period to December 2014.

I urged management to expedite the approval process and have the activities implemented on time.

b) General Standard of Accounting and Internal Control i. Unaccounted for procurements for Districts A total of USD.654,630 was transferred to UNDP account for the procurement and delivery of furniture and equipment by 31st August 2012. The procurement included 81 office desks, 81 chairs, 208 chairs for round tables, 52 book shelves, 26 safes, 26 round tables, 300 notice boards, 79 desk computers, 28 laptops, 26 printers, 26 scanners, 26 photocopiers, 25 mobile phones, 1 pick-up double cabin, 51 motor cycles and 79 UPSs.

However, it was noted that the procurement file together with the accountability in form of delivery notes, invoices, and receipts were not submitted to the project management. In addition, information on the balances of funds as stipulated in the Memorandum was not availed. I was therefore unable to verify whether all the items were procured for the funds advanced.

Management explained that the donors preferred this particular procurement to be handled by UNDP.

I advised management to liaise with UNDP with a view of retrieving the accountabilities for audit verification. ii. Refurbishment and repair of District Commercial Offices According to the records availed, the funders were to refurbish and repair District Commercial Offices in the 23 districts country wide out of the 25 implementing districts. This expenditure was valued at USD 104,043. According to the records,

711 the procurement of contractors was the responsibility of the respective districts and work was to start at the end of December 2012. At the close of 2013, USD 106,185 had been paid out to various contractors. This resulted in unexplained overpayment of USD 2,142. I was also not availed the procurement files to ascertain how the procurement was undertaken and the extent of refurbishing and repair of the district offices.

Management explained that procurement of contractors was a responsibility of Districts and hence the documentation in lieu of the procurements remained with the Districts.

I advised management to liaise with the beneficiary Districts and have the original documents submitted to provide me an assurance that the refurbishment and repairs were actually undertaken. c) Status of Project Implementation i. Low absorption of project funds According to the Memorandum of Understanding, a total of US $ 2,232,311 should have been received by 31st December 2013 however only US $ 873,540 was received leaving a balance of US $ 1,358,772. Various activities remained unimplemented as a result implying that only 39% of the projected funds were absorbed. For instance, funding of the items listed below was not realised at all:

Activity Amount Budgeted (UGX) Funding of District work plans 625,000,000 Radio programs 165,000,000 Insurance 49,000,000 Compensation and motivation 243,000,000 allowance

The failure to fund the activities as planned hinders the project from achieving its intended objectives.

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Management explained that the low absorption was occasioned by delay in recruitment of project implementation team and delayed procurements.

I urged management of the project to fast track the activities to enable achievement of project objectives. i) SECOND TRADE CAPACITY ENHANCEMENT (TRACE) PROJECT 31ST DEC 2013 a) Compliance with Financing Agreement Provisions and GoU Financial Regulations A review was carried out on the project compliance with the credit agreement provisions and GoU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GoU regulations.

b) General Standard of Accounting and Internal Control A review of the system of accounting and internal control was carried out. It was noted that management had put in place measures to ensure proper accountability for the project funds.

c) Status of Project Implementation A review of the status of project implementation revealed the following;

i. Project performance During the year under review, the project budgeted for USD 302,809 and received only USD 100,000 towards the close of the financial year (October 2013) resulting into a shortfall of USD 202,209. As at the end of the financial year, USD 63,769 had been spent leaving a balance of USD 36,231 on the account. As a result, some activities that had been planned were not undertaken. These include among others procurement of equipment, conducting professional services and communication and publicity of entity activities to the stakeholders. The intended objectives may not be realized within the project life time.

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Management explained that three quarters of the period was operated under no cost extension and the funds were received in the last quarter. This affected the absorption capacity.

I urged management of the project to always liaise with the development partners to ensure that funds are released timely to enable early implementation of the project activities. j) QUALITY INFRASTRUCTURE AND STANDARDS PROGRAM (QUISP) a) Revenue performance UGX.9,737,388,600 was budgeted to undertake project activities but only UGX.3,136,178,649 (23%) was received from the development partners leaving a funding gap of UGX.6,601,209,951. Of the funds received UGX.2,207,960,878 was spent leaving a balance of UGX.928,217,771 on the project account in the Bank of Uganda. Failure to realise the total funds budgeted for implies that almost all the planned activities of the project could not be undertaken. This may result in non- attainment of the project objectives.

Management explained that the work plan for the financial year was negatively affected because of the funding suspension from the development partners. The development partners only released funds for activities that did not require lengthy procurements and the balance will be disbursed after signing contracts with service providers.

I urged management to liaise with the development partners and have all the budgeted funds released and ensure that all funds released are utilised as planned.

b) Unpaid Creditors It was observed that a sum of UGX.332,401,737 remained unpaid for works and services rendered to the project. Failure to clear debts is likely to result into unforeseen litigations and waste of government funds.

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Management explained that the PDU office is in the process of arranging for the payments once the office is satisfied that works were properly undertaken and delivered.

I advised management to expedite the payment process and have the creditors cleared. c) Non-remittance of WHT It was noted that funds worth UGX.18,823,505 were deducted in form of WHT but were not remitted to the tax body as required by the law. Non remittance of statutory deductions may result in payment of penalties which could have been avoided.

I advised management to remit the outstanding statutory deductions without delay. d) Funds not fully utilized as per work plan UGX.712,198,500 was disbursed by QUISP to UNBS to facilitate the implementation of various planned activities such as assistance of SMEs in implementing standards, awareness and publicity, development of harmonization of standards, training on Technical Barriers to Trade (TBT) on line notification and for the facilitation of the UNBS 27th meeting of the National TBT/SPS. However, part of the funds totalling UGX.257,179,644 representing 36% of the total funds released were not utilized.

Failure to absorb the limited funds available may lead to failure to implement the activities for which they are meant which results in non-attainment of project activities.

Management explained that because of the delayed approval of the work plan, funds were availed to UNBS in April, 2014 which was so short a time to implement the activities. The planned activities were carried forward in the revised work plan from July to December, 2014 to ensure that all the activities are implemented and the funds utilized. The Ministry will further discuss with UNBS management to ensure adequate manpower is provided to implement QUISP activities. 715

I advised management to liaise with the development partners to ensure that funds are released are fully utilized as planned.

56.0 MINISTRY OF TOURISM WILDLIFE AND ANTIQUITIES a) Mischarge of expenditure The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. During the year, management of the Ministry of Tourism, Wildlife and Antiquities charged wrong expenditure codes to a tune of UGX.115,112,418. This constituted 1.5% of total expenditure for the Ministry. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to misleading reporting.

Management explained that these funds were balances of savings made on rent, consultancies and subscriptions and they could not be technically re-allocated for funding the emerging needs.

I advised management to streamline the budget process to ensure that sufficient funds are allocated to each account and budget line codes should be in accordance with the Government of Uganda chart of accounts for uniformity in reporting and understanding by users of the statements. Authority should be sought for any reallocations. b) Grounded old vehicles The Ministry has two old vehicles that are no longer in use and have been grounded for sometime. The vehicles are at a risk of being vandalized as detailed below;

Vehicle no Type UG 0190T Nissan Terrano

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UG 0299T Mitsubishi Pajero

Management explained that the vehicles are adequately secured at Uganda Museum and the process to have them boarded off is in progress. Management further explained that vehicle no. UG 0299T has already been inspected by the chief mechanical engineer and the other is yet to be inspected.

I advised management to expedite the disposal process to have value for money obtained before total loss in value of the vehicles. c) Lack of land titles The Ministry is in charge of a number of museums and historical sites. It was however noted that the historical sites and museums listed below had no land titles:

Name Location Size Structures Status Rock art paintings, Kapir Ngora 12 acres foot prints land surveyed Kakoro Rock paintings Pallisa 15 acres Rock art paintings land surveyed Karamoja Museums Moroto 6 acres Museum building no title Soroti Administration Museum Soroti 4 acres block land surveyed Monuments, Sir Samuel dilapidated office Fort, Patiko Gulu 10 acres and shade no title Katasiha Fort Hoima 1/2 acres monuments no title Bigo by a 334.4 Monumental Trench Mugenyi Ssembabule hectares System land surveyed Ntusi Female 0.23 Archaeological mounds Ssembabule hectares Female mound land surveyed Ntusi male Ssembabule 0.16 Archaeological male land surveyed

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Name Location Size Structures Status mounds hectares mound 10.51 Archaeological Ntusi basin Ssembabule hectares basin and mounds land surveyed Barlonyo Lira 1/2 acres Monuments land surveyed Lokudi Gulu 23 acres Monuments land surveyed Pabbo Camp Amuru 0.75 acres Huts land surveyed Museum, cultural Kabale village and craft Museum Kabale 1 acre shop land surveyed Dufile Moyo 12 acres Monuments no title Bweyogerere Capital site Mbarara 5 acres Empty no title

There is a risk that the land may be encroached on by the neighbouring communities.

Management explained that despite limitation of resources, the program of acquisition of land titles by the department of museums and monuments is on- going to ensure that all heritage sites are properly preserved. I advised management to liaise with Ministry of Finance to fund this activity to enable the acquisition process concluded. d) Inadequate staffing An analysis of the staff establishment and the staff for the Ministry indicated a staffing gap of 43. Included among these are one position for Director and 5 positions at Assistant Commissioner level. The vacant positions are likely to limit the ability of the Ministry to effectively deliver on its mandate.

Management explained that due to wage bill limitations, only 7 of the 43 posts have been cleared for filling by Ministry of Public Service. Management further explained that they had gone ahead and written to Permanent Secretary/Secretary

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to the Treasury to consider an increment in the Ministry‟s wage bill so as to fill the critical positions.

I advised management to keep following up on the matter with Finance and Public Service and have the situation resolved. e) Budget performance-Funding gap The Ministry budgeted to receive UGX.13,612,395,000 for the period under review but only received UGX.12,309,697,806 resulting into an underfunding of UGX.1,302,697,194. Included in the underfunding is a sum of UGX.1,050,000,000 for non-resource gross tax and UGX.252,697,000 for taxes on capital purchase and activities under hotel establishment classification respectively.

A review of the performance report revealed the following issues:

i. Budgeting Budget estimates though not accurate enough provide a basis for the Ministry commitment and represents the Ministry‟s understanding of the scope and expense of what needs to be done. The Ministry budgeted for a total of UGX.1,300,000,000 for gross tax but only UGX.250,000,000 was released by Treasury out of which a sum of UGX.147,430,768 was spent reflecting 19% budget release and 59% release utilization. Allocating funds for activities/expenses whose likelihood of occurrence is remote provides avenues for diversions as well as large budgetary slacks which provide for future unfair budgetary variations.

Management explained that the released amount was sufficient for taxes on capital purchases.

I advised Management to always ensure that reasonable budgetary estimates are provided.

ii. Unimplemented activities A review of the budget performance revealed that activities in the table below were not implemented:

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Activity/ indicator Planned Actual output Classification of accommodation establishments. 200 63 Regional & international meetings. 9 6

Non implementation of planned activities may affect the Ministry in achieving its short-term and long-term objectives and performance of its mandate.

Management explained that the above unimplemented activities were due to Ministry of Finance release adjustments which were necessitated by the need to fit within the revenue performance of Government.

I advised management to continuously liaise with the Ministry of Finance, Planning and Economic Development for funding and ensure that all activities are undertaken as planned.

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LAND SECTOR

57.0 MINISTRY OF LANDS, HOUSING AND URBAN DEVELOPMENT a) Mischarge of expenditure - UGX.543,519,621 Expenditure worth UGX.543,519,621 was inappropriately charged on budget lines to fund activities that were not planned without authority. I explained to management that mischarge of expenditure translates into misrepresentation of expenditure balances in the financial statements and it also undermines the purpose for which the funds were appropriated by Parliament.

Management explained that mischarges arose out of necessity because the budget did not support critical expenditure like payment of entitlements. This called for sourcing for funds across the board thereby creating imbalances in the budget and hence the mischarges. However this situation has now been addressed in the Ministry budget proposal for the year 2014/15.

I advised management to streamline the budget process to ensure that sufficient funds are allocated to significant account areas and should there be need for reallocation, authority for the virement should be sought. b) Funding gap A review of the budgeted revenue against the actual revenue realized for year revealed that management had budgeted to receive UGX.17,277,762,153 however; UGX.15,256,559,842 (88.3%) was received, leading to a shortfall of UGX.2,021,202,311 representing 11.7% of the expected release. I noted that due to the budget shortfall, some planned activities were not performed and others were partially undertaken as summarized in the table below:

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S/N Activities to be achieved Target Status of implementation No. %age of implemented implementation Under Land Administration And Management 1. Dissemination of national 40 districts Not achieved 0% land policy and implementation guidelines 2. Registration of land 300,000 37,878 13% transactions transactions Registered Physical Planning And Urban Development 3. Dissemination of national 25 Not achieved 0% housing policy and guidelines Government Land Administration. 4. Processing of lease 600 leases 309 processed 52% applications and issued out

Management explained that this was a long standing problem. The Ministry does not influence Ministry of Finance, Planning and Economic Development (MoFPED) on release of funds to the Ministry.

I advised management to continue pursuing the matter with the MoFPED to ensure all the budgeted funds are always released to accomplish the planned activities. c) Irregular payment of transport and lunch allowances Expenditure worth UGX.283,314,333 was paid out to staff during the year as transport and lunch allowance. However, the basis upon which the allowances were paid and how the rates were determined could not be ascertained. Besides, there was no authority from Public Service to allow such payments. In the circumstances, I could not confirm the regularity of these payments.

Management explained that the allowances were paid as a motivation for the Ministry staff that are required to work beyond normal working hours.

I advised management to make sure these allowances to staff are regularised by Ministry of Public Service.

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d) Staffing gaps- 496 Vacant Posts Out of 839 approved staffing positions for the Ministry, only 343 (40.9 %) positions had been filled as at the end of the financial year leaving 486 (59.1%) unfilled. This position was over the half way mark. With this current staffing gaps, performance of the Ministry may be affected and may result into failure to achieve the entity‟s mandate.

Management explained that the filling of vacancies has been done in a phased manner starting with the six (6) operational Ministry Zonal Offices; however that notwithstanding all vacancies cannot be filled at once due to limitations of the budget. The Ministry has so far submitted 109 vacant posts to the Public Service Commission for filling which include some of the vital posts.

I await the outcome of management efforts. e) Un-serviceable stores due for disposal During the review; I noted that some items were kept in store and others kept at the parking yard without any record or order of arrangement as evidenced by the photographs below:

Interview with management and inspection of the stores showed that some items had become unserviceable and are due for disposal as illustrated below;

Items Quantity 1 Computer sets 4 2 Photocopying Machines 3 3 Steel Filing Cabinets 4 723

Items Quantity 4 Swing chairs 3 5 Telephone switchboard 1 6 Used Vehicle Tires of different sizes 40 7 Wooden Chairs 8

I noted that the unserviceable stores had no records and items have overstayed and continue to lose value. There is a risk that the items in the stores could easily disappear through theft or negligence without detection.

Management explained that a Board of Survey has been constituted that will guide the disposal of all unserviceable stores in the Ministry by the close of the financial year.

I await the outcome of management‟s action. f) Vehicles due for boarding off A physical inspection carried out on the Ministry assets revealed that there were 12 vehicles grounded in the Ministry Parking yard as listed below;

Vehicle Registration Number Make. 1 UG 0010L Toyota Land Cruiser 2 UG 0019L JEEPGRAND CHEROKEE 3 UG 0020L JEEPGRAND CHEROKEE 4 UG 0053L NISSAN HARD BODY 5 UG 0025L TOYOTA HILUX 6 UG 0073L ITSUBISH 7 UG 0079L FORD RANGER 8 UG 0034L FORD RANGER 9 UG 0022L NISSAN HARD BODY 10 UG 0032L FORD RANGER 11 UG 0007L TOYOTA LAND CRUISER 12 UG 0072L NISSAN PATROL

The vehicles seemed to have been packed for a long time in the Ministry parking yard as reflected in the pictures below:

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Some two pickups ready for disposal packed in the UG 0019L JEEPGRAND Ministry parking yard. Cherokee

Interview with management revealed that the vehicles became uneconomical to run because of constant repairs due to old age. Further analysis showed the following anomalies:

 Although the transport officer had written to the responsible officers recommending the vehicles for boarding off; no action had been taken by management.

 The vehicles were parked in the Ministry parking yard which has continuously congested the already limited parking space.

Management explained that a Board of Survey has been constituted that will guide the disposal of all old vehicles in the Ministry by the close of the financial year 2014/15.

I advised management to expedite the disposal process and have the vehicles disposed off to avoid any eventual deterioration of value due to weather and other factors. g) Ministry Zonal Offices A review of the Ministry staff establishment revealed that the Ministry is supposed to have 21 zonal offices throughout the country and these were planned to start in June 2012. However, inspection of the zonal offices carried out in January 2015 revealed that only 6 Zonal offices were established and are operational. These were Kampala (KCCA building), Wakiso, Mukono, Jinja, Masaka and Mbarara Zonal offices. Below is a summary of inspection findings:

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a) Congested offices and corridors According to the Principal Lands officer in charge of Wakiso zonal office, the Zonal office had 45 staff members occupying 11 offices. Physical inspection revealed that the offices were very congested and some staff did not have chairs to use. The most affected section was the strong room with 5 staff members who had only one table with two chairs placed in the corridor to the strong room.

According to the hand over report dated 18/08/2014 by the outgoing Principal Lands Officer, the entire first floor of the building was supposed to be occupied by the Ministry Zonal Office but it was noted that most of the offices of the first floor were still occupied by the District staff. I explained to management that the current state reflects a bad image of the Ministry. Moreover; the congested offices hinder the smooth progress of work and could seriously affect individual performance and the Ministry at large.

Management explained that Wakiso zonal office is the largest of the zonal offices with a total of 160,000 titles hence the heavy human traffic. Works are underway to control unauthorized access by land agents as an initial measure by creating access control systems. Management further explained that in the long run, the Ministry is considering creating another Ministry Zonal Office out of Wakiso either in Entebbe or Kira to further decongest Wakiso.

The outcome of management‟s effort is awaited. h) Ownership of Buildings Century house plot 13/15 Kampala and survey and mapping plot 1-3A, 3B, 3C Entebbe were the only buildings captured in the assets register. It was observed that both office buildings were too old, over 50 years and maintenance was not being done periodically to control wear and tear. It was also observed that acquisition date of the buildings was not captured in the fixed assets register and this made it difficult for the audit team to assess the value of the buildings. The ownership was also not ascertained.

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Management indicated that some officers were assigned to handle the issues mentioned. The buildings have not been adequately maintained over a period of time due to lack of a budget. However the Ministry through USMID project has commenced on an initiative to renovate part of the buildings in a phased manner.

The outcome of management initiatives is awaited. i) Zonal offices a) Arua zonal office a. Procurement of office furniture Public procurement and Disposal of assets Act 2003 Section 58, requires that entities plan its procurements in a rational manner and this is done to guide the Government expenditure so that the entity acquires what it needs at the right time given resource constraints Government is faced with.

It was observed that the furniture procured for all zonal offices was done without plan and were therefore not reconciled to the time line of implementing operationalization of zonal offices. As a result, the furniture got damaged through use by the district staff.

I advised management to contact the district offices to make good of the damaged furniture.

(k) Maintenance of the building Although this is still a new structure, I noticed that maintenance was not being done. The strong room was heavily infected by termites that had built ant hills as a result; some of the files were found with some getting damaged by termites. Poor maintenance of the building results into quick deterioration. I recommended that management should direct the District to make routine maintenance as a condition of occupying the building.

b) Lira Zonal Building a. Building maintenance

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The inspection of the building revealed that the building is inadequately maintained as stated below:  The once white paint is now dirty in most parts of the building both inside and outside;  The cob webs are a common site inside and outside the building.  The building has water born toilets however; most of these toilets are now out of use resulting from poor usage. They require major plumbing work.  The compound was found bushy;  The building is also at risk in case of fire outbreak. The fire extinguisher in the building has service which expired on 1/10/2010.

I advised management to consider renovating and improving the zonal building. j) LEVERAGING MUNICIPAL INFRASTRUCTURE IMPROVEMENT INVESTMENT (LMIII) PROJECT – 2012/2013 a) General Standards of Accounting and Internal Control A review of the system of accounting and internal control was carried out and in all material respects, the internal control system and measures to ensure proper accountability for the Grant funds put in place by management was satisfactory.

b) Compliance with Financing Agreement Provisions and GoU Financial Regulations A review was carried out on the project compliance with the grant agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GOU regulations except in the following matter:

i) Delayed submission of Project Expenditure Report and accounts It was noted that management did not submit the project expenditure report and accounts in time to allow me review the report and the accounts yet the Grant agreement became effective way back in July 2012. Management submitted the expenditure report one (1) year later after the end of the financial year. Further, the accounts were submitted 2 years later. The delay affected the audit of the

728 project for the 2012/13 implying that the report could not be prepared and availed to the various stakeholders at the required time.

I advised management to ensure that the expenditure report is submitted in time to facilitate timely reporting on the Project financial performance. c) Status of Project Implementation i) Delays in concluding the Consultancy on Environmental Impact assessment and Resettlement Framework On the 17th January 2011, the Ministry entered into an agreement with a consulting company to carry out environmental impact assessment and resettlement framework in the fourteen (14) Municipalities country wide at a price of US $ 104,621. According to the special conditions of contract, the commencement date was supposed to be 7 days after the date of the contract becoming effective and the time period was supposed to be 45 days for the environmental and social impact assessment and 35 days for the resettlement frame work while two additional weeks were to cater for the approval of the final report.

It was noted that the contract for provision of consultancy services was signed in January 2011 while the grant agreement was signed in July 2012; 18 months before the LMIII grant agreement came into existence. The final consultancy report had not been concluded at the time of reporting. I explained to management that without a report, I could not establish whether the funds were put to proper use and whether the report will be useful to the users at the end of the exercise.

Management explained that the World Bank provided US $ 85,000 to pay a consultant to come up with the Environment & Social Management Framework under a different management. The consultant quoted US $ 104,000 and informed the Bank management about the financing gap. The Ministry of Finance was accordingly required to make a formal request for additional funds however the Ministry delayed and the Grant closed before the Consultant was fully paid. Management further explained that when the LMIII Grant came on board, the

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Consultant‟s balance was included in the LMIII work plan which was okayed by the funders since it well fit in the LMIII Grant objectives.

I advised management to follow up on the report and ensure that the contents are still useful and applicable to the users. k) LEVERAGING MUNICIPAL INFRASTRUCTURE IMPROVEMENT INVESTMENT (LMIII) PROJECT – 2013/2014 a) General Standards of Accounting and Internal Control A review of the system of accounting and internal control was carried out and in all material respects, the internal control system and measures to ensure proper accountability for the Grant funds put in place by management was satisfactory except in the following matter;

i. Delays to disburse funds to the Municipal Councils During the financial year under review, UGX.317,186,100 was remitted to nine Municipal Councils as indicated in the table below: Municipality. Voucher Number Amount Entebbe MC 001052014 35,242,900 Fort Portal MC 002052014 35,242,900 Gulu MC 003052014 35,242,900 Hoima MC 004052014 35,242,900 Lira MC 005052014 35,242,900 Masaka MC 006052014 35,242,900 Moroto MC 007052014 35,242,900 Soroti MC 008052014 35,242,900 Tororo MC 009052014 35,242,900 Total Funds sent 317,186,100

I noted that funds to finance the activities of the Municipal Development Forum (MDF) for the financial year were remitted on 20th May 2014, one month and 10 days to the end of the financial year although the funders released the second installment early on the 4th October, 2013. Delays by project management to disburse funds to Municipal Councils on time impacted negatively on the 730 implementation of the planned activities in municipalities. There is a risk that the project may be extended leading to extra administrative costs.

Management explained that the delays were occasioned by the delay in concluding with the work plans by the Municipalities but committed that in future, disbursement of the project funds to the project beneficiaries will be timely.

Management was advised to always remit the project funds to avoid another project extension. b) Compliance with Financing Agreement Provisions and GoU Financial Regulations A review was carried out on the project compliance with the grant agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GOU regulations. c) Status of Project Implementation Inspection of the Municipal Councils. Inspection of the nine Municipal Councils that benefited from the grant was carried out and the following were observed; i. Failure to utilize the disbursed funds Whereas UGX.317,186,100 was remitted to nine selected Municipal Councils at the time of inspection, eight (8) of the nine (9) municipalities had not utilized the funds except Gulu Municipal Council which had utilized just UGX.2,058,500 of the total funds remitted. The funds utilization status has been summarized in the table below;

Table: Funds utilization status

Municipality Amount sent Utilized Unutilized Amount % age of Amount. % age of funds funds utilized. unutilized Entebbe MC 35,242,900 00 00 35,242,900 100%

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Municipality Amount sent Utilized Unutilized Amount % age of Amount. % age of funds funds utilized. unutilized Fort Portal MC 35,242,900 00 00 35,242,900 100% Gulu MC 35,242,900 2,058,500 5.8 33,184,400 94.2 Hoima MC 35,242,900 00 00 35,242,900 100% Lira MC 35,242,900 00 00 35,242,900 100% Masaka MC 35,242,900 00 00 35,242,900 100% Moroto MC 35,242,900 00 00 35,242,900 100% Soroti MC 35,242,900 00 00 35,242,900 100% Tororo MC 35,242,900 00 00 35,242,900 100% Total 317,186,100 315,127,600

Management explained that the Municipal Council funds were sent to their respective General Funds Account towards the close of the financial year, a period that was considered to be too short to utilize the funds. It was further indicated that the funds were sent without guidelines on how to utilize them. I explained to management that delayed utilization of funds denies citizens timely benefits of the Grant which could frustrate the purpose for which the grant was accepted.

I advised management to ensure guidelines for the utilization of funds to the municipal councils are issued immediately to avoid further delays. ii. Memorandum of Understanding between LMIII Project & Municipal Councils During the review, it was noted that the disbursement of funds to other Agencies (municipal councils) was not supported by a memorandum of understanding (MOU) between the Municipal Councils and the Project management. I explained to management that without the MoU, it may not be easy to enforce binding obligations on both parties a situation that could pose challenges on effective implementation of the project activities. Besides, funds could easily get diverted into non project activities. In response, management explained that after the Municipalities signing the Project Participation Agreement under the USMID Program, it was anticipated that this would suffice because; the intercalations between the Municipal Councils and 732

the MDF‟s were clearly pointed out in the Program Operational Manual to which all parties are bound.

I advised management to ensure that the MoUs are in place that defines the obligations of each party for successful implementation of the project activities. l) TRANSFORMING SETTLEMENTS OF THE URBAN POORIN UGANDA (TSUPU) a) Compliance with the Financing Agreement and Government of Uganda Provisions A review was carried out on the project compliance with the Grant agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GOU regulations.

b) General Standard of Accounting and Internal Control A review of the project financial management system was carried out and it was noted that management had instituted adequate controls to manage project resources except for the following matters;

i. Delayed adoption of National Urban policy (NUP) A contract for provision of consultancy services to finalize the development of National Urban Policy was awarded to a consulting firm in October 2012 at a contract price of USD.442,633. The consultant was required to specifically come up with:-

 15 year strategic Urban Development Plan  Creation of an Urban Indicators Data base and  Preparation of the Information, Education and Communications (IEC) strategy).

At the time of reporting, the consultant had received all the contract amount. According to the National Consultant Workshop held in May 2014, the stakeholders were satisfied with the consultant deliverables. However, it was noted that the

733 policy had not yet been submitted to cabinet for approval and adoption. Implementation of the Policy is delayed.

Management explained that the NUP draft policy is currently before an editor to remove the editorial mistakes before submitting to cabinet.

I advised management to expedite the process to ensure the policy is submitted to Cabinet for approval. ii. Inspections of Project activities in Municipal Councils During the year, TSUPU project was implemented in five Municipal Councils of Kabale, Mbarara, Jinja, Arua and Mbale where funds worth UGX.2,162,487,369 were remitted. As part of the audit, inspection was carried in all the five Municipal Councils to establish the extent of implementation of project activities. The following were observed:

KABALE MUNICIPAL COUNCIL i. Unutilized funds-UGX.413,159,381

During the financial year, the Council received UGX.413,159,381 from the Ministry for TSUPU activities. The funds were disbursed in two instalment of UGX.234,787,170 and UGX.178,372,211 on 23/09/2013 and 20/06/2014 respectively.

At the time of inspection (September 2014) all the funds were still held on the Municipal account. These funds had therefore not been put to use in implementing planned activities.

Management explained that the delay to utilise the funds arose from late disbursement of funds from the development partners.

I advised management to always liaise with the financiers for timely release of funds.

JINJA MUNICIPAL COUNCIL i. Unutilized funds -UGX.4,481,863 734

Jinja Municipal Council received UGX.491,511,798 for implementation of TSUPU activities. As at 30th June 2014 UGX.4,481,863 was still held on the Municipal account. Non utilization of all funds received implies that the intended project activities were not fully implemented.

Management explained that these funds still on the account were retention for the CUF projects to cater for the defect period.

I advised management to avoid comingling of TSUPU project funds with other project funds as this is likely to cause diversions.

MBARARA MUNICIPAL COUNCIL i. Unutilized funds – UGX.15,553,957 During inspection, it was discovered that the Municipal Council had UGX.15,553,957 unutilized at the close of the financial year on TSUPU Bank Account in Crane Bank.

Management explained that the Ministry had formally written to the Town Clerk to respond to the issue.

I advised management to ensure adequate follow up on the matter to enable proper accountability.

ARUA MUNICIPAL COUNCIL i. Delayed release of TSUPU funds from General Fund Bank A/C

The Ministry remitted UGX.423,162,659 to Arua Municipal Council for TSUPU activities for the financial Year 2013/2014. The funds were remitted in two instalments of UGX.234,787,170 and UGX.188,375,489. However, I noted that the last instalment of UGX.188,375,489 was not transferred from the General Funds Account until 19/07/2014. Delayed release of project funds affected the project performance during the financial year.

I advised management to ensure that project funds are remitted in time to allow project implementation of planned activities.

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57.1 UGANDA SUPPORT TO MUNICIPAL INFRASTRUCTURE DEVELOPMENT

PROGRAM (USMID) PROJECT

1.1 Compliance with the Financing Agreement and Government of Uganda Provisions A review was carried out on the project compliance with the credit agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GOU regulations fairly except in the following;

1.1.1 Unutilised funds at Project Headquarters The project received all the budgeted funds expected (UGX.66,542,389,583) but only UGX.51,874,220,299 (78%) was spent leaving UGX.14,668,169,284 (22%) un utilized as summarized in the table below:

Expenditure Allocated Spent Unutilized Unutilized budget line funds amount funds funds as allocation %age to the allocated funds 1 Municipal 41,826,946,37 41,826,946,37 Nil 0 Developm 7 7 ent Grant 2 Municipal 6,139,735,248 6,139,735,248 Nil 0 Capacity Building 3 MLHUD Capacity 13,381,200,82 3,907,538,673 9,473,662,156 71% Building 9 Grant

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4 IFMS Installation 5,194,507,129 Nil 5,194,507,129 100% in 12 Municipalit ies Grand Total 66,542,389,583 51,874,220,299 14,668,169,284 22%

All the funds due to Municipal Councils of UGX.41,826,946,377 and UGX.6,139,735,248 for Municipal Development Grant (Infrastructure development) and Municipal Capacity Building respectively, were remitted to the Municipal Councils. However, it was noted that management did not deliver as expected under MOLHUD capacity building grant and installation of IFMS.

Failure to implement all the planned activities for year implies underperformance and could result into failure to attain the project intended objectives in the scheduled period.

Management explained that generally there was time constraint and the project had to start late. The loan became effective in September 2014 and initial disbursement started thereafter. On procurement of IFMS implementation firm, management procured a service provider and installation of IFMS in the 12 municipal councils are in the final stages.

With regard to capacity development programme, management had entered into agreements with contractors to supply vehicles, furniture and equipment.

I advised management to expedite the procurement processes and have the implementation kick-started.

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1.2 General Standard of Accounting and Internal Control A review of the project financial management system was carried out and it was observed that management had instituted adequate controls to manage project resources except for the matter below:

1.2.1 Training Abroad The project spent US $ 8,814 and UGX.16,930,780 on training of six officers in South Africa and India.

The following anomalies were noted:  The project had no training guidelines to guide the project staff on training. Training was therefore done haphazardly.  All the individuals trained were MoLHUD officials and not project staff. It was not clear under what project budget item the Ministry officials were trained. The project funds were therefore diverted.  There was no evidence of training needs assessment carried out to confirm that the individual‟s needs were assessed as necessary and beneficial to both the individuals trained and the project. There is a possibility that Project funds could have been spent on non-beneficial trainings. I advised management to endeavor to put in place a training policy that will guide the project management and staff in training so as to benefit from the project. Management should also account for the funds not supported.

1.3 Status of project implementation A review of the status of project implementation revealed the following:

1.3.1 Unutilized funds remitted to Municipal Councils An inspection carried in August 2014 of some of the Municipal Councils revealed the following: 1.3.2 Unutilized funds for capacity building-UGX.4,723,244,616 The project head office remitted a total of UGX.6,139,752,416 to 14 Municipal Councils. However, it was noted that as at the close of the financial year

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2013/2014, only UGX.1,416,507,800 (23%) had been utilized implying that UGX.4,723,244,616 (77%) remained unspent as indicated in the table below:

%age spent to the %age of un spent to Un spent Municipal Amount released Amount spent amount the amount bal. released released

Arua 438,553,744 61,977,050 14% 376,576,694 86% Entebbe 438,553,744 18,835,250 4% 419,718,494 96%

Fort Portal 438,553,744 24,293,244 6% 414,260,500 94%

Gulu 438,553,744 24,665,015 6% 413,888,729 94% Hoima 438,553,744 209,805,895 48% 228,747,849 52% Jinja 438,553,744 39,921,493 9% 398,632,251 91% Kabale 438,553,744 95,716,701 22% 342,837,043 78% Lira 438,553,744 75,237,743 17% 363,316,001 83% Masaka 438,553,744 260,814,754 59% 177,738,990 41% Mbale 438,553,744 29,980,300 7% 408,573,444 93% Mbarara 438,553,744 134,622,798 31% 303,930,946 69% Moroto 438,553,744 248,104,708 57% 190,449,036 43% Soroti 438,553,744 59,462,688 14% 379,091,056 86% Tororo 438,553,744 133,070,161 30% 305,483,583 70% 4,723,244,61 Total 6,139,752,416 1,416,507,800 23% 77% 6

At the time of inspection, the Municipal council‟s management had not come up with the capacity building implementation reports. Further, the annual report for the first year of program implementation by the project headquarters did not provide details of the Municipal Council capacity building implementation status. Underutilization of capacity building funds (some below 10%) affects implementation of planned activities and ultimate attainment of overall project objectives.

Management explained that the Municipalities received the funds barely 4 months and had not fully completed the procurement process for consultants and supplies.

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The Municipal Council also needed support from the Ministry to ensure that quality tools were procured. Further, the Municipal Councils had started on the process of coming up with capacity building plans and the reports will be produced accordingly.

I urged management to support the municipal councils and ensure that the procurements are done on time and activities implemented.

1.3.3 Un-utilised fund for Infrastructure Development The project head office remitted a total of UGX.41,826,946,392 to 14 Municipal Councils as budgeted. During inspection, it was noted that at the close of the financial year, a total of UGX35,018,760,442 (84%) remained unspent as per the details in the table below:

Municipal Bank Amount sent Closing Balance 1 Arua Orient Bank 2,598,140,991 8,765,460 2 Entebbe Bank of Baroda 2,689,196,081 2,724,879,781 Housing Finance 3 Fort Portal 1,660,797,443 1,691,167,821 Bank 4 Gulu Bank of Africa 8,162,894,235 8,162,755,481 5 Hoima Crane Bank 3,511,992,326 3,521,915,938 6 Jinja Crane Bank 3,193,079,981 3,202,039,427 7 Kabale Bank of Baroda 1,535,126,450 1,532,367,451 8 Lira Bank of Africa 4,967,344,540 4,967,190,552 9 Masaka Crane Bank 3,041,414,632 3,045,632,403 10 Mbale Crane Bank 2,911,814,550 851,962,587 11 Mbarara Crane Bank 2,687,417,388 2,698,862,531 12 Moroto Crane Bank 446,244,780 475,868,980 13 Soroti Crane Bank 2,482,947,571 1,240,434,155 14 Tororo Crane Bank 1,938,535,424 894,917,875 TOTAL 41,826,946,392 35,018,760,442

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By the close of the financial year, municipalities in cluster 2 (Mbale, Soroti and Tororo) had just signed contracts for works and at the time of inspection; contract execution was ongoing.

I could not rule out lack of commitment by municipalities on the implementation of project activities which may hinder the achievement of project objectives.

Management explained that 10 Municipal Councils signed contract agreements at the end of the financial year and in the course of the first quarter of 2014/15 financial year. The other 4 Municipal Councils are still in negotiation stage. Management however promised to fully utilize the funds in the subsequent year.

I urged management to liaise further with management of the municipalities to ensure that infrastructure development activities are successfully implemented

57.2 DEVELOPMENT OF NATIONAL URBAN SOLID WASTE MANAGEMENT

STRATEGY - 2012/2013

a) General Standards of Accounting and Internal Control

A review of the system of accounting and internal control was carried out. It was noted that in all material respects, management had put in place adequate controls to ensure proper accountability for the Grant funds.

b) Compliance with Financing Agreement Provisions and GoU Financial Regulations A review was carried out on the project compliance with the Grant agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GOU regulations except for the following matters;

i. Delayed submission of Financial Statements It was noted that management submitted financial statements one (1) year later after the end of the financial year contrary to sect.2.04 (c) of article II of the

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Grant agreement. Failure to submit the financial statements limited my ability to undertake the audit and report within the prescribed timeline. Furthermore, this impacts negatively on the decision making process of stakeholders.

I advised management to prepare accounts in time to enable the audit and timely reporting on the Project financial statements.

ii. Lack of Project work plan It was noted that the project management did not prepare a project work plan to guide in the utilization of the grant funds despite a total budget of USD.547,000. I explained to management that a work plan guides the project in achieving its intended objectives. Without the work-plan, ineligible expenditures could occur and make it difficult to assess performance.

I advised management to ensure that a work plan is put in place and all expenditures of the project is in accordance to the plan.

iii. Lack of interim unaudited financial reports Sect. 2.04 (b) of the project document provides that the recipient shall ensure interim unaudited financial reports are prepared and furnished to the World Bank not later than forty five (45) days after the end of each calendar quarter. During the review, I noted that management did not produce the interim financial reports. I explained to management that failure to provide Interim Financial Reports hinders the assessment of financial stewardship and performance of the project.

I advised management to ensure that the interim un-audited financial reports are in place to guide the financial stewardship and performance of the project.

57.3 DEVELOPMENT OF NATIONAL URBAN SOLID WASTE MANAGEMENT

STRATEGY - 2013/2014

a) General Standards of Accounting and Internal Control A review of the system of accounting and internal control was carried out. It was noted that in all material respects, management had put in place adequate 742 controls to ensure proper accountability for the Grant funds put in place by management was satisfactory. b) Compliance with Financing Agreement Provisions and GoU Financial Regulations A review was carried out to the project compliance with the Grant agreement provisions and GoU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GoU regulations except for the following matters:- i. Lack of project work plan It was noted that the project management did not prepare a project work plan to guide in the utilization of the grant funds despite a total budget of US$.547,000. I explained to management that a work plan guides the project in achieving its intended objectives. Without the work-plan ineligible, expenditures are likely to occur. This issue was raised in 2012/13 report to Parliament.

I advised management to ensure that a work plan is put in place and all expenditures of the project is in accordance to the plan. ii. Lack of interim unaudited financial reports Sect. 2.04 (b) of the project document states that the recipient shall ensure interim unaudited financial reports are prepared and furnished to the World Bank not later than forty five (45) days after the end of each calendar quarter. During the review, I noted that management did not produce the interim financial reports. I explained to management that failure to provide Interim Financial Reports hinders the assessment of financial stewardship and performance of the project. This issue had earlier been raised in 2012/13 report to Parliament.

I advised management to ensure that the interim unaudited financial reports are in place to guide the financial stewardship and performance of the project. iii. Operating beyond the agreed project closing date

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Sect. 3.03 of the grant agreement indicated that the project closing date was 31st December 2013 but operations of the project continued beyond 31/03/2014 when the last payments were made. I noted that the extension was not granted by the IDA. Further, the last tranche was not received. I explained to management that failure to officially close the project in compliance with the project closing guidelines is against the financial agreement provisions and project operations guidelines.

Management explained that there was a delay in seeking for an extension. Management was supposed to undertake study tours, exchange visits, benchmarking best practices and training of officers but the activities were not undertaken because the last tranche was not received. The balance of the Consultancy fees had to be partly settled by World Bank having exhausted all the funds on the Project account.

I advised management to always operate within the agreed period or seek extension in time in case there is need.

c) Status of Project Implementation i. Development of the National Urban Solid Waste Management Strategy - Status of implementation One of the major objectives of the project was to develop a Solid Waste Management Strategy to ensure a cleaner and less polluted environment and have it disseminated to different stakeholders. At the time of reporting, the strategy had not been submitted to cabinet for adoption although a consultant contracted to develop the policy had been paid all his dues amounting to US$377,600 for the services rendered. I explained to management that in case of any suggested changes, there is a risk that the consultant may not revisit the strategy and have the changes effected.

Management explained that the policy was validated at a national stakeholder‟s workshop in May 2014 and the delegates adopted it with some few amendments. Management took it up to harmonize positions relating to the Ministerial mandate 744

of Water, Environment, Health and NEMA. It was indicated that there were issues that the Ministers in charge of Health, Water and Environment had to agree on and when finalized, the relevant Minister will table it to Cabinet for adoption and to Parliament for final approval.

I advised management to expedite the approval process and have the strategy implemented by stakeholders.

INFORMATION AND COMMUNICATION SECTOR

58.0 MINISTRY OF INFORMATION AND COMMUNICATIONS TECHNOLOGY a) Mischarge of Expenditure

The Parliament appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Ministry‟s expenditures revealed that the entity charged wrong expenditure codes to a tune of UGX.193,053,197. This constituted 4% of total expenditure for the year of UGX.4,960,480,667.

Mischarges undermine the importance of the budgeting process as well as the intentions of the appropriating authority and lead to misreporting.

Management explained that the mischarge of expenditure was a result of insufficient budgetary allocations and severe cuts in respect of items referred to as consumptive items by the MOFPED.

I advised the Accounting Officer to streamline the budgeting process to ensure that sufficient funds are allocated to each account. Furthermore, authority should be sought for any reallocations.

745 b) Outstanding Payables

A comparison of the payables balances for the financial year 2012/13 and 2013/14 revealed a significant increase in domestic arrears of UGX.356,261,608 (39.6%) from UGX.900,856,821 in the financial year 2012/13 to UGX.1,257,118,429 during the year under review. I explained to management that the entity risks litigation and payment of nugatory expenditure arising out of litigation costs.

Management responded that the increase in payables was as a result of rent arrears of UGX.350,732,722 which remained unpaid for the period ending 30th June, 2014. The Ministry had budgeted UGX.516,000,000 exclusive of Value Added Tax (VAT) for rent for the period because the Landlord M/s NSSF had not earlier indicated that they are VAT registered. Management further explained that, later in the year, the Landlord submitted a claim for VAT which increased the rent amount beyond the budgeted funds.

I advised management to liaise with Ministry of Finance Planning and Economic development and ensure that the rental arrears are cleared. c) Un-approved Corporate Strategic Plan

The strategic plan is an important tool in steering any organization towards its vision, mission and its overall mandate. Annual activities undertaken by any organization should be derived from the strategic plan. However, it was noted that the Ministry does not have an approved strategic plan in place. Delays in having a strategic plan approved may adversely impact on the Ministry in the achievement of its objectives.

Management explained that the Ministry‟s draft Strategic and Investment Plan (ICT-SIP) was submitted to the Ministry of Finance Planning and Economic Development for a certificate of financial implications so as to enable the Minister of ICT submit it to Cabinet for approval.

I await the outcome of management‟s efforts in having an approved strategic plan in place.

746 d) Staffing Gaps

A review of the Ministry‟s organizational structure revealed that out of the available 93 posts, 76 posts were filled leaving 17 positions vacant. Some of the vacant positions include vital positions below;

Vacant Position Vacancies Scale

Principal Information Scientist 01 U2U

Principal Communications Officer 01 U2 U

Senior Systems Analyst 01 U3SC

Senior Information Technology 01 U3SC Officer

Information Technology Officer 01 U4SC

Information Scientist 01 U4SC

Staffing gaps affect the performance and overall achievement of organizational goals and objectives.

Management explained that the recruitment of staff is constrained by the budget ceiling. Management further explained that the Ministry is faced with the challenge of uncompetitive salaries in the labour market thus there is a high staff turnover in technical ICT positions yet the Ministry may not be able to attract suitable applicants due to lack of competitive wage offers.

I advised management to continue liaising with Ministry of Public service with a view of ensuring that the vacant posts are filled and possibilities of staff retention. e) Budget Performance

Review of the budget performance for the year revealed that one targeted key activity was not undertaken despite release of funds worth UGX.32,162,000 to the entity to perform. The activity was in respect of start up activities for construction of the Ministry of ICT.

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Management explained that the Ministry budgeted for UGX.32,162,000 for surveying the land for the Technology Park. However because the land had not yet been fully secured from the Uganda Investment Authority this activity could not be undertaken.

I advised management to follow up the matter with UIA to secure the land.

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PUBLIC ADMINISTRATION SECTOR

59.0 MINISTRY OF FOREIGN AFFAIRS a) Receivables Included in the statement of financial position and Note 21 of the financial statements for the period under review are receivables totalling to UGX.3,343,141729 an equivalent of USD.1,464,363.81. These receivables relate to the money advanced to Imperial Royale Hotel Ltd for the provision of conference facilities and room accommodation during the CHOGM in 2007.

However, details show that the hotel was not ready for occupation between 26th October, 2007 and 18th November, 2007 when CHOGM activities took place. Although this matter has been referred to the Courts of Law, the outcome cannot be predicted. There is a risk that Government may lose this money which has been outstanding for more than 7 years.

The Accounting Officer explained that the court hearing of this case commenced on 12th August 2014 and after several adjournments.

I advised management to follow up the matter and also provide an update of the current status. b) Retrospective approval of contracts Contract agreements in the sum of UGX.965,470,474 were signed and activities undertaken before award of contracts by the Contracts Committee contrary to Regulation 225 (2) of the PPDA Regulations, 2003 and Regulation 7(1) of the PPDA Regulations, 2014.

The practice negates the role of the Contracts Committee in the procurement process and exposes the Ministry to the risk of contracting sub-standard contractors.

The Accounting Officer explained that these were emergency procurements arising from directives given at short notice to host International summits. The contracts Committee was informed of the procurements afterwards.

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I advised the Accounting Officer to consider using framework contracts for repetitive services and ensure the Contracts Committee performs its duties in accordance with the Regulations. c) Failure to submit progress Reports on Waivers and Deviations Given by PPDA During the course of the financial year, the Ministry hosted a number of summits which included the AMISOM Summit, Tripartite Summit, ICGLR summit and IGAD summit among others. Due to the perceived time constraint the Ministry sought and was given permission to use emergency procurement method. However, though the Ministry was required to submit progress reports to the PPDA within 10 (ten) working days after contract award and signing as per referance to corresponces PPDA/M11/000 for the Tripartite Summit, PPDA /M07/000 for the Amisom summit, PPDA/M11/000 for the ICGLR Summit, there was no evidence that management submitted the progress reports to the Authority.

The Accounting Officer explained that the progress reports on waivers and deviations were usually presented in the monthly procurement reports to the Authority. Evidence to this effect was not availed.

I advised management to ensure that the required reports are always submitted for review. d) Donation to a Foundation A total of UGX.746,659,035 was disbursed to a Foundation A/C no 1000043346052 in February 2014 on the basis of a letter by the Ministry‟s Accounting Officer.

However, the donation had not been budgeted for during the period under review. The payment also lacked an acknowledgement receipt from the beneficairy. Unauthorised reallocation of funds distorts the intentions of the appropriating authority and contravenes budgetary controls.

The Accounting Officer explained that the PS/ST gave authority to re-prioritize contributions to International Organisations so as to accommodate this donation.

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I advised the Accounting Officer to always ensure that additional funding requirements are properly planned through reallocations and supplementaries to avoid distortions in the budget implementation. e) Accomodation for ICGLR The contract for provision of hotel services during the ICGLR which took place from 3rd to 5th September, 2013 was awarded to Munyonyo Comonwealth Resort Limited at a sum of UGX.594,142,019. However the Hotel was paid UGX.682,708,283 VAT inclusive. A reveiw of the procurement file revealed the following matters:  There was an over expenditure on the contract sum of UGX.594,142,019 by UGX.88,566,264. It was further observed that the extra costs were not approved by the Contracts Commitee as a variation to the original contract contrary to Regulation 262 (3&5) of the PPDA Regulations, 2003.  A record of bid opening dated 1/8/13 was not witnessed by a member of the Contracts Commitee. In addition, whereas the price quoted and approved by the Evaluation Commitee was UGX.333,729,487, the contract sum was UGX. UGX.594,142,019 and this eventually rose to UGX.682,708,283. No explanation for the variances was provided.  The contract number on the contract agreement for non consultancy services was changed to read MOFA/SRVCS/13-14/00091 instead of MOFA/SRVCS/13- 14/00051 by hand. There was no explanation for this change.  The attendance list of participants was not availed for verification and confirmation of room occupancy.

In response the Accounting Officer explained that the extra expenditure of UGX.88,566,264 arose as a result of the additional guests and facilities which were not budgeted for.

I advised the Accounting officer to investigate the causes of the variances, provide neccessay supporting documents and ensure that emergency procurements meet the criteria for such procurements.

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60.0 EAST AFRICAN COMMUNITY AFFAIRS a) Irregular tenure of Office in acting capacity Paragraph 9 of Section (A-C) of the Uganda Public Service Standing Orders requires that an appointment on acting basis is expected to last not more than six months and is subject to direction by the Appointing Authority. The Section further provides that any extensions shall not exceed twelve months in total.

A review of personnel files revealed that two officers had been in Acting Positions for a period exceeding twelve months contrary to the provisions in the standing orders. Keeping officers in acting positions for a period longer than the period provided for in the standing orders is irregular.

Management explained that the post of Commissioner Political and Legal Affairs had been internally advertised by the Public Service Commission while the Ministry had continually requested the Ministry of Public Service to deploy a Senior Office Supervisor without success.

I have advised the Accounting Officer to let the officers revert to their substantive positions in accordance with the standing orders as the outcome of the recruitment process is awaited. b) Irregular probationary period of service Examination of personnel files revealed that an Office Attendant at the Ministry had been on probation since first appointment in 2008 contrary to section (A-d) (1) of the public service Standing Orders. There was no evidence of performance appraisal on the personnel files nor efforts made to confirm the Officer. This may negatively affect computation of the officer‟s terminal benefits.

Management ackowledged the anomaly and indicated that a submission recommending the confirmation of the Officer had been made to Public Service Commission. I await the outcome of management‟s action in this regard.

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SOCIAL DEVELOPMENT SECTOR

61.0 MINISTRY OF GENDER, LABOUR AND SOCIAL DEVELOPMENT a) Payables Audit of Financial Statements for the period under review revealed that the Ministry had liabilities of UGX.4,771,858,282, broken down as follows No Item Amount 1 Trade Creditors 220,000 2 Sundry Creditors 4,730,824,170 3 Withholding Tax Payable 40,814,112 Total 4,771,858,282

In response, management stated that requests to MoFPED for funds to settle the liabilities had not been responded to positively.

I advised the Accounting Officer to continue liaising with the MoFPED and other stakeholders to ensure prioritization of funding for the items to avoid litigations and other costs that may arise.

7.2 Mischarge of Expenditure Paragraph 400 (a) of the Treasury Accounting Instructions (TAI), 2003 states that all government transactions shall be recorded in the books of account applying the Government of Uganda Chart of Accounts as prescribed by the Accountant General. In addition, Accounting Officers shall ensure that all financial transactions are properly coded. It was noted that out of the total actual expenditure of UGX.27,871,419,382, a total of UGX. 66,982,475 were mischarged. The practice is a sign of a breakdown in controls over the budget implementation process.

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Management explained that more adherences to the charge codes in line with the Chart of Accounts is now being emphasized.

I have advised the Accounting Officer to streamline the budgeting process so that available funds are properly allocated to the planned activities.

7.3 Advances not accounted for A sum of UGX.25,000,000 advanced to three Districts for purchase of toolkits for PCY activities lacked accountability contrary to TAI and MoU which requires accountability within 60 days. The table below refers:

In the circumstances, I could not confirm whether the funds were used for the intended purposes. In response, management explained that letters reminding the respective Chief Administrative Officers had been dispatched. I advised the Accounting Officer to ensure submission of accountability or recovery of the funds. 7.4 Staffing Gaps I noted that the Ministry was grossly understaffed. Out of 609 posts in the approved structure, only 276 were filled leaving 333 posts unfilled. Among unfilled

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posts were; the Director Social Protection and Director Labour Employment (Occupational Safety & Health), which are key posts in the management structure of the Ministry. Management indicated that submissions were made to the Ministry of Public Service and Public Service Commission to ensure that the staffing challenge is addressed. I advised management to follow up the matter and fill the positions in a phased manner beginning with the critical ones. 7.5 Non-Disposal of Obsolete Assets Section 295 (5) of the PPDA Regulations, 2003 requires a procuring and disposing entity through the board of survey to identify assets for disposal on a periodic basis. A review of the Ministry‟s Asset register revealed a number of old and obsolete assets due for boarding off and these included; motor vehicles, desktop computers, laptops, furniture, tyres and books among others. I also noted that the recommendations of the Board of Survey for disposal in the Financial Year 2011/2012 were not implemented.

Management indicated that it is in the process of updating a Disposal Plan and will dispose of obsolete items in FY 2014/15.

I advised the Accounting Officer that failure to timely dispose of these assets results in further physical deterioration and diminution in value. I await results of management actions.

7.6 Lack of Performance Appraisals for some Staffs Sec. A-m (14) of The Uganda Public Service Standing Orders, 2010 states that “A staff performance appraisal report form shall be completed for each pensionable and non-pensionable officer and a copy submitted to the Responsible Permanent Secretary. It was however noted that 25 staff out of a sample of 45 staff of the Ministry were not appraised during the year under audit. The Accounting Officer explained that strict guidelines and deadlines have been put in place for those that do not comply.

I await results of management actions in this regard.

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7.7 Repayments into the Revolving Fund

According to the YLP Programme Document dated December 2013, the revolving nature ensure sustainability through the cash and kind refunds and re- disbursement. This is further amplified in Part 4.0 of the YLP Project Funds Access Criteria document which requires YLP to be administered as interest-free Revolving Funds to ensure sustainability of the Programme.

I observed that out of 27 districts that had received the funds, only 6 had opened the special collection accounts.

Management indicated that the outstanding 21 districts had been reminded.

I advised the Accounting Officer to ensure that the remaining Districts comply with the regulatory requirements for YLP.

7.8 General Challenges faced in the Implementation of Youth Livelihood Programme:

7.8.1 Determination of the age of the group members According to YLP Project Funds Access Criteria part 2.2 (i) (Beneficiary Selection Criteria) paragraph and program document chapter 2 section 2.4, all intended beneficiary Youths should be persons within the age bracket of 18-30 and evidence was to be provided through birth certificates, immunization cards, passports, baptism cards, marriage certificates, National Identity Cards or community knowledge of the youth. During the period under review, audit noted that birth certificates for beneficiaries on a number of project files were missing, rendering confirmation of the qualification by age difficult. Management indicated that a number of potential beneficiaries did not have documentary evidence for their ages. The Selection Committees relied on the judgement and decision of the community members under the leadership of LC I Chairpersons as provided in the Programme Guidelines. I advised the management to use the National identity cards in determining age of beneficiaries in the successive following phases of the programme.

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7.8.2 Inadequate monitoring of the projects It was noted that the Districts were not closely monitoring the activities of the approved youth projects due to inadequate staffing. For example, there were no monitoring reports for the 16 districts inspected out of the 27 pilot districts. The respective CAOs and the District Focal Point Persons indicated that there is low human resource capacity as opposed to the number of approved projects to allow closer monitoring to take place.

Management explained that the low staffing levels especially of Extension Staff in the Local Governments still remains a challenge. Furthermore, the Accounting Officer indicated that the Chief Administrative Officers have been advised to rationalize the deployment of the available staff to ensure that the youth groups financed under YLP receive technical support. I await results of management actions on this matter. 7.8.3 Lack of sign posts for respective Projects It was observed that a majority of the YIG Projects that were inspected did not have sign posts. Those that had sign posts did not have YLP identity. It was therefore not possible to easily identify them with YLP funding.

7.8.4 Inadequate training of the 3 committees in a group The YLP Programme Document requires each YIG to have at least 3 committees namely; Youth Project Management Committee (YPMC), Youth Procurement Committee (YPC) and Social Accountability Committee (SAC). Audit revealed that the trainings received by the members of these committees were so general and did not address the specific roles that each committee is

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supposed to play in a group. Furthermore, the trainings were conducted under limited time frame. Management explained that any gaps identified during monitoring visits are documented and addressed as part of the routine continuous support to the groups. I advised management to ensure that trainings to the committee members are conducted to enable them appreciate their roles on the committees so as to avert conflicts and failure of groups‟ businesses. 7.8.5 Record Keeping It is good practice for any type of business/project to keep proper books of account, management records among others. I noted that most of the groups visited did not maintain/keep such records including minutes and procurement details. Management indicated that the varied literacy levels of the beneficiaries supported under YLP affects record keeping. However, the Sub-county Community Development Officers (CDOs) have been advised to provide support to weak groups on regular basis as part of their overall mandate in community mobilization and development. I await the results of management efforts in this regard. b) EXPANDING SOCIAL PROTECTION PROGRAMME 2011/2012 f) Lack of National Social Protection Policy It was noted during audit that the program still lacked an approved policy, contrary to the recommendation contained in Expanding Social Protection (ESP) Quarterly report of July to September 2011, requiring an approved policy framework to be in place within the financial year 2011/12. In the circumstances, there is no formal framework to guide the activities of Social Protection in the country. There is also a risk of having social disharmony between the societies that have benefited and those that have not.

Management explained that at the inception of the programme, the design foresaw the development of a Social Protection “framework” which would have simply defined the scope of social protection services in Uganda. However, during

758 the course of the programme, management realized that a full National Social Protection Policy was required along with a comprehensive costed plan of Interventions (PPI) to cover social assistance, social insurance and social care services. Management further stated that according to the revised log-frame, the policy and PPI are due to be finalised by December 2014.

I have advised management to engage the stakeholders involved and expedite the discussions to have the policy finalised and approved. g) Co-funding Section 2 of the Joint Financing Arrangement requires the Government of Uganda (through the MoGLSD) to provide an agreed level of funding to the programme. It was however noted that GoU, which had committed to provide USD.20,030 (about UGX. 70,105,000), did not fulfill its obligation in the period under review. This could have hampered the implementation of the planned activities and may affect the overall attainment of the programme objectives.

Management explained that they were continuing to engage the Ministry of Finance, Planning and Economic Development to fulfill the government obligations towards the programme.

Although management explained that the balance was retained in the MoGLSD ESP operations account for other ESP activities, no documentary evidence was availed to confirm this and how it was utilised.

I have advised management to ensure

759 c) EXPANDING SOCIAL PROTECTION PROGRAMME 2012/2013 i. Co-funding Section 2 of the Joint Financing Arrangement requires the Government of Uganda (through the MoGLSD) to provide an agreed level of funding to the programme. It was however noted in the year under review that GoU allocated only UGX.40,000,000 million as opposed to the FY 2012/13 counterpart commitment of UGX.500,500,000. This could have hampered the implementation of some planned activities and may affect the overall attainment of the programme objectives. I advised management to engage Ministry of Finance Planning and Economic Development so as to ensure that Government fulfils its commitment towards the programme for better implementation.

ii. Doubtful contract award Regulation 90 (g, h & i) of the Public Procurement and Disposal of Public Assets, 2013, stipulates the procurement records that should be maintained by a procurement and disposal unit. However it was noted that a total of UGX.191,666,376 was paid to Property Development Company Ltd for rent, but procurement documents were not maintained, contrary to the requirements of the regulations. In the circumstances, audit could not ascertain whether the procurement was fairly competed for and that there was value for money.

I advised management to ensure that all procurement records are in future maintenance for all procurements undertaken on behalf of the programme.

iii. Un-vouched Expenditure Audit noted that out of a total of UGX.135,369,238 transferred to Kyenjojo District to fund SAGE activities in the months of January and June 2013, a total of UGX.116,152,804 was spent without preparing payment vouchers. The authenticity of the expenditures relating to all the missing vouchers could not be ascertained.

I advised management to ensure that the funds are accounted for.

iv. Mischarged expenditure items

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A total of UGX.11,976,000 was charged wrongly on expenditure items other than those under which it was supposed to have been spent, contrary to the requirements of section 3.1 of the overview of the financial management of SAGE. Failure to comply with the requirements portrays a breakdown of controls in the budget implementation process and it affects the implementation of some planned activities.

I advised management to streamline the budgeting process and ensure that payments are correctly charged on the item codes to enable proper implementation of the programme.

v. Un Accounted for Funds Funds totaling UGX.56,178,500 advanced to various officers in Katakwi district to implement programme activities remained un-accounted by the time of writing this report. In the absence of the necessary accountability, audit could not confirm whether the funds were put to intended use.

I advised management to recover the funds from the officers.

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MISSIONS

62.0 UGANDA EMBASSY, ABU DHABI a) Wasteful Expenditure The Embassy incurred costs totaling AED 2,900 (approximately UGX.2,048,822) as bank charges for failure to maintain a minimum bank balances on the account. This expenditure is considered wasteful as it would have been avoided by maintaining the minimum balance.

Though the Accounting Officer explained that he had communicated to the bank to stop the monthly deductions on non-maintenance of a minimum balance since this was an operational account and not a savings account, there was no action taken by the Bank. As a result the Embassy opened a new bank account that allows minimal bank balance with the authority of the Accountant General.

I have advised Management to recover the money from the bank.

63.0 UGANDA HIGH COMMISSION, ABUJA a) Non Tax Revenue (NTR) Collections Regulation 46 of Public Finance and Accountability Regulations states, in all cases, the gross amount of moneys received shall be accounted for and any charges against the revenue received shall require appropriate authority as expenditure incurred by the Government and shall appear as a charge on public funds in the books of accounts, duly supported by proper voucher.

It was noted that for the period between November 2013 and June 2014, the mission collected and banked NTR of NGN 26,888,703.75 and USD 42,315, however only NTR of NGN 14,637,890 was transferred to the consolidated fund leaving a balance of NGN 12,430,412= unaccounted for contrary regulations. It was also noted that the mission borrowed NGN 9,033,408.5 and USD 41,776.78 at

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source to cater for various commitments but did not provide evidence of refund as shown in the table 1 below.

Period Amount (NGN) Borrowed Repayment Amount (NGN) (NGN) transferred to BoU (NGN) October 1,457,395 0 0 November 804,475 0 0 December 1,328,035 2,922,227 0 January 4,029,283 522,625 0 February 6,298,647.47 0 0 March 2,169,304.66 1,272,735 6,889,588 April 1,428,927 2,414,082.5 0 May 5,362,763.98 256,450 0 June 2,508,670 1,645,289 7,748,302 Closing 1,501,202.64 0 0 balance TOTAL 26,888,703.75 9,033,408.5 14,637,890

Extracted from bank statements for NTR account November 2013 to June 2014

Furthermore there were no records for NTR cash collections to reconcile with actual banking‟s to confirm that all NTR collected was banked intact in accordance with the requirements of the public finance and accountability Act

I have advised The Accounting officer to remit the outstanding NTR balances to the consolidated fund as required by the regulations and also provide the necessary supporting documentation for NTR cash for verification. b) Payments made outside Navision The Accountant General introduced the Navision accounting system in the mission to strengthen the internal controls systems and improve financial reporting.

It was noted that during the month of March 2014, payments totaling to NGN 437,330 (Details in table 2) were made outside the Navision system contrary to the Treasury directives. Payments made outside the Navision financial system render the accuracy and reliability of the financial statements uncertain as such amounts not captured in the ledgers have an effect of understating the expenditure reflected in the system generated financial statements.

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Table 2: Payments made outside the system Voucher Amount Payee PV-1781 16,000 Amb. Maurice Kagina Kiwanuka PV-1782 14,000 Amb. Maurice Kagina Kiwanuka PV-1783 19,200 Joseph Koufionou PV-1784 55,000 Sundry persons PV-1785/3 5,000 Abuja electricity distribution company PV-1786/3 30,000 Katherine Sati PV-1787/3 14,100 Sundry persons PV-1788/3 9000 Katherine Sati PV-1789/3 50,000 Isaac Onali PV-1790/3 68,000 KKONTech PV-1791/3 11,050 Goodness International PV-1792/3 91,000 Sundry persons 30,000 Musa Gimba PV-1794/3 6,000 Jide Sholotan PV-1795/3 16,000 Sundry persons PV-1796/3 2,980 Cash account Total 437,330

In his response the Accounting Officer acknowledged this anomaly and attributed it to a system failure in February 2014 which lasted for a period of one and a half months. I advised the Accounting Officer to have that the necessary adjustments effected in the accounting system to ensure accurate and reliable financial reporting of mission expenditures. c) Unauthorized Over expenditure A review of financial statements revealed that the Mission incurred UGX.232,895,267 in excess of the approved budget of UGX. 1,017,000,072. However, there was no evidence to show that the necessary approval in the form

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of virements/reallocation warrants was granted by the Permanent Secretary/Secretary to the Treasury contrary to section 17 of the Public Finance and Accountability Act, 2003. Under the circumstances, the expenditure is considered not a proper charge to government funds.

I advised the Accounting Officer to always adhere to the approved budget and where necessary liaise with treasury for supplementary appropriation in accordance with the public finance and accountability Act 2003. d) Non Compliance with the PPDA Act regulations The PPDA Act and regulations require every Procurement and disposal unit to amongst other requirements;  Prepare and submit to PPDA an Annual procurement plan based on the annual approved budget for that respective financial year;  Prepare and submit to PPDA quarterly procurement and disposal reports;  Produce a list of prequalified goods and service providers for the next three years. Contrary to the above requirements the mission did not prepare an annual procurement plan and quarterly procurement and disposal reports nor a list of prequalified service providers.

I advised the Accounting Officer to comply with the PPDA regulations and observe the above requirements. e) Progress report on implementation of the Mission Charter The mission was issued a Charter covering a three year period 2011/12 to 2013/2014 setting out key outputs, performance targets and performance indicators; however I was not availed with quarterly progress reports on the implementation of the Mission charter. In the absence of progress reports, it was difficult to establish the extent to which the mission achieved its set objectives

I advised the Accounting Officer to prepare and submit quarterly progress reports on implementation of the Mission Charter to enable its performance to be assessed. 765

f) Office Imprest During the year it was observed that the mission on a regular basis drew various amounts of dollars from the operational account which was then converted to Naira for office imprest.

Examination of returns revealed that N 2,441,620 and USD 36,990 was drawn as petty cash for the period.

Treasury Accounting Instructions Chapter IV, Payments 227 requires that there should be an imprest holder duly appointed by the Accounting Officer and approved by the Accountant General. However, there was no evidence to that effect.

Treasury Accounting Instructions Chapter IV, Payments 214 requires that before replenishing an imprest, the previous one should be properly accounted for and retired. It was noted that all imprest advances drawn as petty cash were not supported with requisitions prepared by the beneficiaries which meant that the basis for the advances could not be substantiated and in other instances petty cash was paid as refunds for activities that had not been sanctioned by the Accounting Officer.

In his response the Accounting Officer acknowledged this anomaly and attributed it to the operating environment in Nigeria where most suppliers and service providers of routine office consumables only accept cash as a medium of exchange.

The Accounting Officer was advised to have imprest holders properly appointed in accordance with the Treasury Accounting Instructions and also ensure that for any petty cash payment effected; the user department should express the need through properly approved requisitions. g) Project Account and Chancery land In the Permanent Secretary‟s letter to the Uganda High Commission – Abuja dated 28th February 2014; four (4) officers from Inter-ministerial Property Management 766

Committee were sent to Abuja to carry out technical study on the mission land earmarked for the construction of a Chancery. The 3 officers were to be facilitated from the funds which remained on the project account. However, there were no clear terms of reference for this exercise and the technical report which was the major deliverable from the exercise was not availed for audit to support this payment. It was also noted that UGX 145,695,932 spent on this exercise was not from the mission‟s approved budget has since been capitalized under Consumption of property, plant and equipment in the financial statements without any justification.

I advised the Accounting Officer to avail the technical report for verification and also provide a justification why this payment was capitalized in the financial statements yet it was extra budgetary. h) Payment of electricity for staff According to the Uganda Public service Standing Orders 2010 governing housing of officers in the foreign service (H - e) para 9(a) , every public officer at the mission shall be responsible for the cost of lighting and water consumed in any house allocated to him or her.. It was however observed that the mission was reimbursing staff 80% of the bills incurred by them contrary to the instructions. A total of N51,120= was paid as per details in table 3 below:

Table 3: reimbursment made for staff electricity bills Amount Voucher Payee Description (NGN) pv1179 Agnes Achen being refund of 80% electricity bills 14,400 pv1237 John Nuamanya being refund of 80% electricity bills 3,600 pv 1487 Kalinaki Hadijah being refund of 80% electricity bills 6,400 pv1518 john Nuamanya being refund of 80% electricity bills 3,600 pv1609 Agnes Achen being refund of 80% electricity bills 8,000 pv1710 John Nuamanya being refund of 80% electricity bills 4,000 pv1829 John Nuamanya being refund of 80% electricity bills 5,200 pv1937 Agnes Achen being refund of 80% electricity bills 5,920

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Amount Voucher Payee Description (NGN) 51,120

I advised the Accounting officer to recover the amounts paid and in future ensure compliance with the requirement of the standing orders.

64.0 UGANDA, EMBASSY ADDIS ABABA a) Exchange Rate Table in Navision not updated daily It is a requirement for all embassies to update exchange rates daily in the exchange rate table in Navision. The rates are obtainable from the Bank of Uganda (BoU) website. A review of the Embassy‟s Navision system however revealed that the exchange rates were not updated on a daily basis. The anomaly was attributed to the intermittent internet connectivity at the Embassy. This casts doubt on the authenticity of the foreign exchange gain reported of UGX.4,927,333 in the financial statements of the Embassy.

The Accounting Officer acknowledged the anomaly and stated that the matter had been rectified as the exchange rates were now being updated daily before transactions on the system are undertaken. The Accounting Officer however hastened to add that there was still a challenge of the BoU exchange rates being updated on the system 2 or 3 days late.

I have advised the Accounting Officer to ensure that the exchange rates are updated on a daily basis, as required and to follow up the issue of delayed updates of the exchange rates on the system with the Navision Support Group at the Ministry of Finance, Planning and Economic Development (MoFPED). b) Unauthorized Over Expenditure Regulation 37(b) of Public Finance and Accountability Regulations, 2003, requires the Accounting Officer to ensure that the provision for services as authorized by accounting warrants are not exceeded, and is held personally and pecuniary responsible for any excess expenditure that is incurred without proper authority.

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A review of expenditure of the Embassy revealed that there was over expenditures on various expenditure budget line items amounting to Birr 1,068,046 (UGX.142,915,235) without seeking appropriate authority in form of reallocations or virement warrants. This contravenes the intentions of budgeting. The Accounting Officer attributed the occurrence to shortfalls on some budget items for which authority to make reallocations within the same accounting warrant was sought but had not been responded to.

I have advised the Accounting Officer to always ensure that payments are only made when authority for reallocations has been granted. c) Unfunded Priorities The Addis Ababa Embassy is strategic and handles both bilateral and multilateral matters which require adequate funding. The capital budget and the Peace and Security budget for the year under review were not funded. Consequently the Embassy was not able to:  Replace the ageing automobiles in the vehicle fleet. The vehicles for the Head of Mission, Deputy Head of Mission and the staff utility van were more than five (5) years old and often broke down. This constrained mobility at the Embassy and consequently the ability to effectively facilitate high level official delegations visiting Addis Ababa regularly to attend meetings at African Union, United Nations Economic Commission for Africa (UNECA) and IGAD.  Renovate the official residence in Mugenagna that was purchased by the Government of Uganda in 2012. The structure was old and required renovation but the available funds were insufficient. There is a risk of the authorities demolishing the structure.  Facilitate an extra officer to deal with the Peace and Security matters where Uganda is serving in the Peace and Security Council for the period 2013 - 2015. This curtails the implementation of peace and security activities.

Management explained that they had requested the responsible authorities severally to address the issues but to no avail. They also stated that though they had budgeted for the activities in the year, funding was not obtained.

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I have advised the Embassy management to continue liaising with the responsible authorities with a view to ensuring that the unfunded priorities are considered in the subsequent financial periods. d) Failure to acquire Plot of Land in Lebu In 2005, Uganda was allocated a plot of land in Lebu by the Ethiopian Government, which land was to be paid for and developed. Audit noted that although the Embassy had been budgeting for this activity, no funds had been released to enable it conclude the purchase and start on the construction. It is worth noting that most of the other countries that had also been allocated land had developed theirs. There is a risk of the said land being withdrawn and reallocated to other interested developers.

In view of the terror threat in the region, coupled with Uganda‟s involvement in peace and security initiatives, the Chancery may become a terror target given the current location in a poorly lit area, off Bole Road.

Management explained that they had engaged the relevant authorities and in the Financial Year (FY) 2014/15, some money was released towards the purchase of the land leaving a funding gap of UGX.417 million which the Ministry of Foreign Affairs (MoFA) had promised to secure and allocate to the Embassy during the financial year 2015/16. Once the land is fully paid for, plans then will be developed for the construction to commence.

I have advised management to continue engaging the relevant authorities so that funds are secured for the purchase and eventual development of the land to house the Chancery. e) Unpaid Education Allowances In June 2011, the Ministry of Public Service communicated to the Ministry of Foreign Affairs concerning the standardization of the Education Allowance to USD.2,000 per child per year for Group B Missions, which includes Addis Ababa. The allowance is payable for a maximum of four biological or legally adopted children between the ages of 4 and 18.

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Audit however noted that the Education Allowance was not being paid to the Foreign Service Officers deployed at the Addis Ababa Embassy ever since it was approved in 2011 and this has the effect of demotivating staff.

Management stated that it had already engaged MoFA and MoFPED in this regard and hastened to add that for the FY 2014/15, a supplementary was provided to cover this item. Consequently for the FY 2015/16, the Embassy budgeted for the allowance and is hopeful that the entitlement shall be honoured.

I await the implementation of management‟s proposals.

65.0 ANKARA EMBASSY a) Representation Car The commentary to the financial statements indicated that the Embassy did not have a representation car for the Head of Mission. Lack of such a suitable representation vehicle portrays a negative image for the country. Management explained that the car had been budgeted for purchase in the Financial Year 2015/16.

I advised management to liaise with MoFA and MoFPED to ensure that necessary resources are put aside to acquire the vehicle. b) Local Staff

Section (A-a) (10) (f) of the Public Service Standing Orders states that “The power to appoint, confirm, discipline and remove officers from office in the public service is vested in the Head of a Mission, subject to delegation in writing, in the case of locally recruited staff for the Embassy.

During the year under review, a sum of TL.79,828 was paid in respect of social contributions for local staff. However, appointment contracts for the staff were not availed for verification. In the circumstances, I could not ascertain the genuineness of this expenditure.

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Whereas management acknowledged the expenditure, the necessary documentation was not availed at the time of writing this report.

I have advised Management to avail copies of appointment contracts and appraisal forms for staff to enable verification of the payments.

66.0 UGANDA, EMBASSY BEIJING a) Outstanding commitments from prior years

It was observed that the consulate had outstanding commitments amounting to UGX.398,313,217 at the end of the financial year under review. The commitments were in respect of utilities and rent in the Mission. Long outstanding commitments could result into halting of provision for services due to non payment.

Management explained that they had budgeted for and included the outstanding rent arrears in the Mission budget proposals submitted to the Ministry of Finance, Planning and Economic Development for the financial year 2014/15. However, funding to the outstanding commitment was not provided in the Missions approved budget for FY 2014/15. Nevertheless, management has requested MoFPED for a supplementary in order to offset the overdue settlement and is awaiting further guidance.

I advised management to ensure that the outstanding commitments are prioritized for settlement. b) Idle motor vehicle

It was observed that mission purchased a motor vehicle (Van) in the year 1996. However over time the use of the vehicle had been outlawed due to its inability to comply with the emission standards in China. As such the vehicle remained unused for over a year.

There is a risk that the vehicle would deteriorate further attracting eventually lesser value.

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Management explained that the motor vehicle in question was uninsurable and declared unfit for usage in China and therefore attracts no value; except as a scrap. I advised Management to consider commencing on the disposal process for the vehicle to avoid further loss. c) Staffing at the Mission

The mission is categorized as 1+3 for purposes of the structure at the mission. However currently the mission is staffed at 1+5, which is beyond the approved structure. The current staffing position implies that the mission is overstaffed and may not access adequate resources to manage the existing staff.

Management explained that they had engaged with Ministry of Foreign Affairs and had made recommendations and sought approval from the Ministry to upgrade the Mission to category A for reasons of the growing volume of engagements with China and enhancing the Missions capacity to effectively cover the whole of China and the four other countries (North Korea, Vietnam, Cambodia and Laos) to which it is also accredited. The response of the Ministry is being awaited.

I advised management to further follow up with the Ministries of Foreign Affairs and that of Finance, Planning and Economic Development to review the structure so that corresponding resources are provided.

67.0 UGANDA EMBASSY, BERLIN a) Unauthorized Over expenditure

A review of financial statements revealed that the Embassy incurred 21,874,544 in excess of the approved budget of UGX. 2,536,000,000. However, there was no documentary proof to the effect that the necessary approval in the form of virements/reallocation warrants was granted contrary to section 17 of the Public Finance and Accountability Act, 2003. Under the circumstances, the expenditure is considered not to be a proper charge to government funds.

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Management acknowledged the anomaly and indicated that they will liaise with treasury to regularize this expenditure . I have advised management to always ensure that approval is obtained prior to spending. b) Mission Charter

It was noted that the Berlin mission charter was issued to H.E. the Ambassador in February 2014 by the Minister of Foreign Affairs; however the following inconsistencies were noted  The charter mentions only 2 countries which is Germany and Austria. The fate of other countries that have hitherto been under the jurisdiction of the Berlin mission which include the Czech Republic, Poland, Hungary, The Holy See (Vatican), Slovakia, Bulgaria, Romania plus UN Organizations in Bonn(Germany) and Austria is not known.

 Although all the Letters of Credence for the countries and bodies mentioned above were signed by HE the President in August 2013, the Current Ambassador has only presented Credentials to Germany, The Holy See (Vatican) and the International Atomic Energy Agency (IAEA) in Vienna.

These conflicting objectives undermine the embassy‟s efforts of fulfilling its mandate. Delays or failure to present Letters of Credence to the respective countries denies Uganda formal representation.

Management explained that upon realizing the omission of most countries in the mission charter the issue was reported to the concerned authorities and is being looked into. Management attributed the non-presentation of letters of credence to insufficient funding. I have advised management to liaise with the Ministry of Foreign Affairs to harmonize the Mission charter so that it‟s consistent with the strategic objectives of the embassy. Efforts should also be made for presentation of outstanding letters of credence to the related countries in order to foster the embassies operations in those jurisdictions. c) Over Expenditure on Telephone Expenses

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Section (H-e) regulation 14 of the Public Service Standing Orders, 2010 states that “All calls at residences, official or otherwise, of Heads of Mission should not exceed USD 500 per month”. However examination of the payment vouchers revealed that a total of USD 6,870 (5,056 Euro) (details in appendix 1) was spent over and above the stipulated limit contrary to public service standing orders. This implies that funds were diverted from some budget lines to finance the expenditure and this negatively impacted on the implementation of some of the planned activities.

Management in response undertook to comply henceforth. I await the outcome of management‟s commitment in this regard. d) Overpayment of Foreign Service Allowances

Section (E-e The Public Service Standing Orders 2010) states that, each Foreign service Officer is entitled to a Foreign Service Allowance. The rates payable to each Foreign Service officer are clearly spelt out in the Permanent Secretary‟s communication of reference COM 95/100/01 dated 16th June 2011.

However examination of the payment vouchers revealed that some officers were paid Foreign Service allowance at a rate higher than the rate stipulated in the permanent secretary‟s communication hence causing unauthorized Foreign Service allowance totaling USD 40,784.1, this is considered irregular and hence recoverable.

Management explained that this anomaly arose because of the standardization of the exchange rate between a Euro and Dollar.

I have advised management to recover the unauthorized amounts paid in respect of Foreign Service allowance and in future ensure that payments are based on the dollar equivalent at the time of payment.

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68.0 UGANDA EMBASSY BRUSSELS a) Budgeting and funding

The Ugandan Embassy in Brussels covers Belgium, the Netherlands, Luxemburg, as well as the European Union and the International Court of Justice (ICJ). For the financial year 2013/14, a sum of UGX.3,278,099,906, was released to implement planned activities in the above areas as per the approved budget.

However, during discussions with Her Excellency the Ambassador, it was noted that due to many special assignments handled by the Mission, this ultimately leads to more frequent travels abroad, which eventually implies that the budgeted funds are always not adequate.

I advised management to bring this matter to the concerned stakeholders, including the ministries of Foreign Affairs as well as that of Finance, Planning and Economic Development, so as to have their budget amounts improved upon. b) Unauthorised Over Expenditure – UGX.390,437,807 Regulations 39 and 40 of the Public Finance and Accountability Regulations, 2003, require the Accounting Officers to adhere to the budgetary allocation per vote or obtain prior permission before an over expenditure is incurred.

Contrary to the above, a review of the financial statements for the year under review revealed that actual expenditure on goods and services exceeded the budgeted amount by UGX.390,437,807. There was no evidence provided to show that authorization for the over expenditure was sought from, and granted as provided for by the regulations. Further noted was that, a sum of UGX.150,514,718 was diverted from capital development budget to cater for travel expenses, which had not been budgeted for under the recurrent budget at the beginning of the financial year. The act may have hampered the implementation of capital development activities.

The Accounting Officer stated that the above was due to unforeseen/unplanned need for foreign travels for which the Embassy had no control over, and that in

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future, the proper procedure would be followed by first seeking authority from the Permanent Secretary/Secretary to Treasury. c) Non Tax Revenue (NTR) reconciliation: Lack of a Visa Issue Ledger A review of Visa stationery was carried out to determine the accuracy of the reported NTR of UGX.283,680,935 collected during the year. Whereas the total NTR collections reconciled with used visa counterfoils, the review revealed that no Visa issue ledger exists to record the movement of the visa stationery, which comprise of Single entry, Multiple, Gratis and Transit visa stickers, and Emergency Travel documents. The only records availed were in respect of receipts of Visas during the year. Under the circumstances, I could therefore not determine the opening stock balances of visa stationery at the start of the financial year as well as the closing balances. Although a board of survey was constituted at the close of the year, there was no report submitted to confirm the closing balances of visa stationery as at 30th June 2014. There is a risk of un-accounted for revenue arising from issuance of unrecorded visa stationery.

In his response, the Accounting Officer regretted this anomaly and indicated that a Visa Issue Register has been opened effective 2014/15 financial year. d) Irregular payments under Foreign Travel The Embassy sought the services of an Architect from the Ministry of Works and Transport to assess the status of embassy buildings on an understanding that it could cater for travel and other allowances for the officer abroad. I noted that, during his first visit, the officers‟ stay was extended for a further seven (7) days, which was not authorized by the Permanent Secretary, Ministry of Foreign Affairs. Similarly, the same officer was again invited on a second visit to finalize the work and as a result the embassy further catered for the officer‟s stay for another three (3) days, including transport refund on train ticket and an additional allowance for two (2) days while travelling from Copenhagen, Denmark.

A review of expenditure documents in respect of the above visits revealed that a sum of Euros.4,469.18 (UGX.15,038,567) was irregularly paid to the officer from

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the Ministry of works and Transport, since the visits lacked clearance from the Accounting officer of the Ministry of Foreign Affairs in Kampala. Details of the payments are indicated in the table below;

Voucher Purpose Amount Comments number in Euros PV1707/12/13 Extra per diem for 7 days 2,135.59 Extension not authorized by MoFA PV2381/06/14 2 days per diem and train 709.17 Travel to Brussels not ticket to Brussels from authorized Paris PV2335/06/14 3 days per diem in 1,624.42 Travel to Brussels not Brussels from Paris authorized TOTAL 4,469.18

In his response, the Accounting officer regretted that authority for the stay and subsequent visit by the Ministry of Works official was not obtained, and stated that in future, authority would first be sought before extending the stay or inviting technical officials from MDAs. e) Human Resource Management matters

A review of staff records and interviews held with management revealed the following; a. Undisclosed contingent liability An interview with the Head of Mission revealed that one of the Embassy drivers had reached his retirement age of 65 years (May 2014) towards the end of the financial year under review. According to the Belgian laws, the driver is entitled to a gratuity covering his entire service period to the Embassy, which amounts to thirty two (32) years. This amount is payable by the Belgian Social Security Fund, to which, according to the Accounting Officer, is equivalent to the employee‟s monthly salary payable throughout the employment period.

However, I noted that the Embassy had only made contributions for the last seven years, implying that the driver is entitled to gratuity for only seven years. This is a contingent liability which should be recognized and settled by the Embassy to 778 avoid being sued by the driver, as well as payment of a heavy fine to the Social Security Fund for the period defaulted.

Management explained that it decided to retain the driver as it handles the matter with the Social security fund through the Embassy lawyers, so as to mitigate the heavy fines associated with the circumstance. The Accounting officer stated that he had written to the relevant authorities requesting for funds to cover the outstanding amounts under domestic arrears. I have advised that this action be expedited, to avoid further exposure by the Mission and to also compute and recognise this contingent liability in the financial statements. b. Absence of employment contracts for local staff An interview with the Accounting Officer revealed that Belgian laws provide for a person to be employed on contract for one year, renewable once, or a non- renewable contract running for two years.

An interview with the local staff revealed that none of the five local staff (including the retired driver) had an employment contract. This implies that they are illegally employed and being paid, with a possibility that some have exceeded the contractible periods.

In addition, it was noted that, according to Belgian laws, a driver is contracted to drive a particular type of car, which should be stated in the contract. However, to the contrary, one driver was switched from driving the official car to a utility van, which necessitated a new contract. This was not duly implemented, exposing the Embassy to the risk of a law suit, as the driver has already notified of his intentions to sue.

The Accounting officer stated that they were discussing with the lawyers on how to resolve the issues raised. I have advised the Accounting Officer to always ensure that all efforts are made to abide by the local laws so as to avoid imposition of penalties and fines. c. Lack of performance plans at the start of the appraisal period

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Management of staff performance requires the appraisees to agree with their supervisors at the start of the period, the activities, key performance indicators, and outputs/target for the appraisal period. The agreed outputs together with the activities constitute staff performance plans, which should form the basis of appraising staff at the end of the appraisal period.

However, it was noted that staff at the Embassy did not have performance plans agreed with the supervisors at the beginning of the period. As a result, there were cases of appraisees not agreeing with the performance appraisal results at the end of the financial year. Lack of performance plans with clear outputs/targets limits the full attainment of the objectives of performance appraisals at the end of the period.

In response, the Accounting officer stated that management was following up on the performance plans to ensure that they are discussed and appraisals submitted at the end of the financial year. I await the outcome of this management commitment. f) Inspection of Government properties The Uganda Government owns three mission properties in Brussels which consist of the Chancery, official residence and a vacant plot on 35 Clos Des Lauriers Woluwe St Pierre, which formerly housed the official residence that was later demolished due to continued non maintenance. Physical inspection of the embassy properties revealed the following;

a. Chancery building During inspection of the chancery building, situated at Avenue de Tervuren 317 in Brussels, it was revealed that the building had not had major renovations of recent and as a result, it was in a state of disrepair requiring substantial provision of money to have it renovated. There was complete lack of routine and periodic maintenance activities required because of the weather conditions. The structure continued to deteriorate with water leakages from the roof destroying the walls and ceiling, the basement floors were in a sorry state and inhabitable, some walls in the building had developed mould which is considered to be toxic and a health

780 hazard, while most of the walls and the ceiling had developed major cracks putting the lives of the users at great risk.

Given the current state of the building, it is not insured, exposing Government to a risk of potential loss should it get seriously damaged, say by fire. Management explained that an assessment of the status of the buildings had been undertaken and recommendations made by the property management team from Ministry of Foreign Affairs. Accordingly, a sum of UGX.450 million was released during the year, out of a budget of UGX.1.18billion to start the renovation works. However by the time of inspection, no major renovations were noted on the plots, except on the current official residence.

The Accounting Officer concurred that the building was not insured because of its state, and commencement of renovations had been delayed by the procurement process, but is expected to start soon. I advised the Accounting Officer to expedite this process so as to have the renovations undertaken. b. Official residence An audit inspection of the Official residence revealed that some renovations had been undertaken mainly on the heating, electric system and paintwork. There were notable defects on the building with mortar peeling off the walls on the outside and heat insulation. The heating system, though improved, still had defects like poor insulation, leading to substantial heat loss during winter. There are also faulty plumbing systems in the bath rooms. There is a risk that the facility may deteriorate further if no major renovations are undertaken.

In his response, the Accounting officer stated that the renovations of the official residence was on going, and funds to pay for them were being awaited. c. Redevelopment of plot of land formerly occupied by official residence Following the demolition of the former official residence at 35 Clos Des Lauriers Woluwe St. Pierre, the asset (plot) was stripped of its diplomatic immunity, which was granted to the current residence occupied by the Ambassador. Consequently,

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the City Authorities have asked the Embassy to redevelop the plot as soon as possible. There is a risk that if the redevelopment is not undertaken within the time frame given, the plot which is located in a very prime area, will be forfeited, as its current state has made the neighbouring properties lose value.

The Accounting officer stated that Ministry of works officials inspected the plot and proposed construction of two houses, and accordingly management submitted the construction estimates to the Ministry of Foreign Affairs for appropriate action, and budgeted for them in the financial year 2015/16. I advised that this matter be followed up to avoid the risk of forfeiture of the plot in question.

69.0 UGANDA HIGH COMMISSION, BUJUMBURA a) Unacknowledged Remittances Included in the statement of financial performance for period ending 30th June 2014 is a transfer to treasury amounting to UGX.13,833,381. However, the transfer was not supported with acknowledgement receipts from Accountant General. The Accounting Officer explained that a bank statement was available to support the transaction.

I advised the Accounting Officer that the Bank statement is not adequate since it lists down various transfers. The acknowledgement receipt corresponding to the transfer should be availed for verification. b) Failure to translate transactions Included in the statement of financial position are receivables amounting to UGX.3,966,456. However, the details/ schedules for the receivables were not translated into English as required by Section (P-b) (7) of the Public Service Standing. Though the Accounting Officer explained that the receivables were tax refunds from Burundi Revenue Authority, verification could not be done since the language used was French.

I advised the Accounting Officer to submit details in the reporting currency for verification.

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c) Arrears of Revenue Included in the statement of arrears of revenue is a total of UGX.3,994,965 being arrears of revenue as at 30th June 2014. However, there was no evidence to show that management made efforts to recover the arrears. Accumulation of revenue arrears may result into bad debts. The Accounting Officer explained that the arrears of revenue were tax refund claims made to Burundi Revenue Authority and the claims would be followed up.

I await management‟s action on this matter. d) Refund of Medical Expenses A total of BIF.3,361,296 (UGX.6,344,068) was refunded to various officials of the Embassy in respect of medical bills because management did not register with a health insurance scheme contrary to sections (M-a) (14) and (F-a) (3) of the public service standing orders. This practice is bound to be abused because it is difficult to verify the correctness of receipts obtained from the various health units. Though the Accounting officer explained that the medical services in Burundi are in a poor state, this was not brought to the attention of the Permanent Secretary Ministry of Foreign Affairs as provided in the standing orders.

I advised management to liaise with the Permanent Secretary Ministry of Foreign Affairs and the Director General of Health Services in Uganda for an appropriate remedy. e) Irregular Power Refunds Section (H-e) (9) of the public service standing orders requires every public officer at the Embassy to be responsible for the cost of lighting and water consumed in any house allocated to him or her. However, BIF.534,000 (UGX.1,007,865) was incurred on electricity bills for residences of staff of the Embassy making this expenditure irregular and therefore recoverable.

The Accounting Officer stated that Burundi was situated in or near the subtropical dry forest biome with a pronounced dry season and long periods of drought that necessitated incurring costs of cooling for officers. 783

I advised management to liaise with MoFA and MoFPED to consider regularizing the expenditure. f) Vehicle Maintenance The Embassy spent BIF.7,284,164.81 (UGX.13,748,041) in respect of vehicle maintenance and equipment repair. However, the payment vouchers were not supported with documents such as requisitions, purchase orders, receipts, pre and post maintenance reports and quotations from at least three garages. The prequalified list of suppliers and minutes of the contract committee were also missing. Unsupported expenditure could lead to misappropriation of funds.

The Accounting Officer explained that public procurement processes were under developed in the country and transactions were basically cash basis.

I advised management to ensure internal procurement processes are adhered to, and all the relevant supporting documents are submitted for verification.

70.0 UGANDA EMBASSY, CAIRO a) Budget Performance - Recurrent

The activities and operations of the Mission are financed through budget support by Government of Uganda. In the financial year under review, the mission received a sum of UGX.1,321,748,000 against an approved budget of UGX.1,321,749,000, which constituted 99.9% budget performance level. However, comparing this performance with previous year, the mission‟s budget declined by UGX.52 Million in recurrent budget support as indicated in the table below;

Analysis of budget performance-Recurrent

Financial Year Initial Budget Revised Actual Budget (UGX) Budge Releas perfor t e mance (UGX) (UGX) (%) FY 2012/13 1,662,518,484 1,373,748,679 1,373,748,679 100% FY 2013/14 1,321,749,000 1,321,749,000 1,321,748,000 99.9% Variance 51,999,679 52,000,679

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With the increased responsibilities of the mission as described in its Mission Charter, the reduction in its budget may negatively affect its capacity to effectively deliver its mandate.

I advised the Accounting Officer to liaise with the responsible authorities, to ensure that the identified priorities in the Mission Charter are adequately funded during the budgeting process. b) Budget Performance-Capital development In the FY 2013/14, a sum of UGX.250 Million was budgeted and released to the Mission to cater for capital development expenditure. However, I noted that out of the funds released, only UGX.140,133,583 was spent on renovation of the Chancery. The balance of UGX.109,866,417 remained unspent at year end. I was not availed any evidence to show that authority was granted to the Mission by the PS/ST to retain the unspent funds as is required under the TAI, 2003.

The Accounting officer explained that the Mission received a directive from the Ministry of Foreign Affairs, to stop the ongoing works at the residence until further notice and this was at the beginning of a new financial year, when funds had already been committed to the said activity. However, Management will ensure that it seeks authority to retain unutilized funds at the close of every financial year. I advised the Accounting Officer to ensure that authority to retain unutilized funds at the close of the year is always sought and obtained as required by the TAIs. c) Non-Tax Revenue The Mission collects its NTR from administrative fees and miscellaneous revenue, which mainly includes proceeds from the issuance of Visas, and travel documents. In the financial year under review, a total of UGX.115,291,861 was collected. However, scrutiny of NTR transactions revealed the following irregularities;

a. Unbudgeted NTR Paragraph 2(c) of the third schedule of the Public Finance and Accountability Act 2003, requires the Accounting Officers to submit to the Accountant General a

785 statement of revenue received during the year, showing the amount contained in the estimates of revenue for each source of revenue, the amount actually collected, with explanation for any variation between the revenues collected and estimated.

Contrary to the above provision, the mission did not provide an estimate of revenue to be collected under NTR in its annual budget for the year under review. As a result, management could not assess and monitor its revenue performance, and submit accurate revenue returns to the Accountant General. This poses a high risk of misuse of such funds.

The Accounting Officer explained that the mission collects Non tax revenue only in the form of Visa fees, Endorsements and Emergency travel documents. These are variable fees and very hard to estimate, however, the mission would seek further guidance on the issue from the concerned departments. I advised the Accounting Officer to start budgeting for NTR as per the provisions of the Public Finance and Accountability Act, 2003 to enable the Mission assess and monitor NTR performance. b. Non remittance of NTR to the Consolidated Fund Paragraphs 98 – 102 of the TAI, 2003 specify how Accounting Officers should account for revenue collected. Included in the specifications is the requirement to transfer money to BoU on an account designated by the Accountant General from which such revenue is periodically transferred to the Uganda Consolidated Fund (UCF) Account. On Transfer of the revenue to the UCF, both the Accountant General and the Accounting Officer are notified by BoU.

I noted that at the closure of the financial year under review, the Accounting Officer did not transfer all the collected revenue to the UCF as required by TAIs, hence leading to the creation of unnecessary arrears of revenue, which stood at UGX.93,194,267. The failure by the Accounting Officer to remit monies to the UCF denies government of the revenue required to implement its programmes, thus affecting service delivery. In addition, it increases the risk of misuse of the funds if

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strict adherence to regulations prohibiting utilization of funds at source is not observed.

The Accounting Officer attributed this anomaly to the political situation in the country and the fact that the Central Bank put restrictions and a limit to the foreign exchange out flow. I advised the Accounting Officer to liaise with the PS/Ministry of Foreign Affairs and the PS/ST to find out a solution to this challenge. d) Irregular Payment of Staff rent - USD.66,500 Examination of payment vouchers revealed that staff were directly paid monies in respect of their rent totaling to USD.66,500 (Approximately UGX.186,200,000) instead of the amounts being paid to the landlords. In addition, the monies were being paid to staff in cash, thus increasing a risk of misuse by staff through fraudulent activities, such as paying for less expensive and unbefitting accommodation, and irregularly saving on the balance of the amount claimed. I further noted that some staff were paid for rent periods that did not fall in the respective financial years being charged without declaring the source of the funds in the budgets.

Scrutiny of the lease agreements further revealed the following irregularities;  The lease agreements were drawn in English by the Mission staff and not translated in Arabic (official language of the host country), thus standing a risk of limited legal enforcement, especially in a foreign country.  Some lease agreements had no dates of expiry indicated, thus leaving them open for unspecified periods. Although they contained a provision of automatic renewal in case the occupant continued using the premises, it is important that the start and end dates be specified in the agreements.  The lease agreements required landlords to furnish the client with a list/inventory of household items, but in most of the agreements reviewed the lists were not provided.  Some agreements lacked the telephone contacts of the landlords, although this was specifically provided for.

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Given the above mentioned irregularities in the agreements and the method of cash payment to the landlords, the rent transactions are susceptible to abuse.

The Accounting Officer explained that;  In the near future the mission shall ensure that contracts are drawn up by a law firm and also translated to Arabic. Regarding the lease period, they had assumed that in the absence of notification from either party, the rent for the next period becomes automatic as stated in the agreement.  The Mission always recommends that all officers rent fully furnished apartments to avoid purchasing of house hold items by the Mission hence all inventory for the officer‟s apartments are available in their respective places of residence. We shall get a copy and attach it on the new agreements accordingly.  Telephone contacts for the various landlords will be added to each agreement.

I advised the Mission Management as follows;  The Accounting Officer should desist from paying cash to landlords and all payments to landlords should be by bank.  The Head of Mission should ensure that legally binding lease agreements are drawn by a reputable law firm in the country to avoid undesirable circumstances that may occur in future. e) Payment of Child Education Allowances Section E-e (Foreign Services Allowances) Paragraph 12-20 of the Public Service Standing Orders, 2010 (Revised), prescribe the preconditions for the payment of Child Education Allowance to mission staff. In particular, Paragraph 19 provides for the payment of education allowance directly to the school and reimbursement from the officer for his/her personal share should be made at source. Furthermore, Paragraph 20 of the same Standing Orders provides for each application for an education allowance to be approved by the Responsible Officer and must be accompanied by a certification by the Head of Mission confirming;  The circumstances provided by the officer are correct;  The period of education to be carried;  The date of birth of the child; and  The evidence of child parenthood/adoption. 788

During the period under review, child education allowance totaling USD.14,000 (Approximately UGX.39,200,000) was paid to staff of the mission. However it was noted that the allowances were paid to the individuals (Mission staff) without evidence on staff personal files of approval of the prescribed conditions by the HoM, and there were no receipts from the schools acknowledging payment of the amounts.

In the absence of certification by the HoM and the relevant supporting documentation, the possibility that allowances were not paid for the intended purposes cannot be ruled out.

The Accounting Officer explained that Payment of child education allowance was standardized by the Ministry of Public Service and it was advised that for all officers who have children between the ages of 4 and 18 must be paid a uniform amount of money (i.e. Us$.2,000) per child every year irrespective of how much the officer is actually paying.

I noted that although the circular standardized the amount to be paid per child every year, it remained silent on the provisions in the Public Service Standing Orders that prescribe how child allowance should be paid and accounted for. I advised the Accounting Officer to liaise with PS/MoFA and PS/MoPS to ensure that the circular directives are harmonized with the Public Service standing orders. f) Staff Insurance and Medical Refunds Section M-a (Medical Attention) Para.14 of the Public Service Standing Orders, 2010 (Revised) requires a Foreign Service officer to be fully covered by a medical insurance. I noted, in accordance with the above provision, that the mission was paying for medical insurance to a few staff and had incurred a sum of EGP.6,845 (Approximately UGX.2,590,000) in the period under review.

However, I further noted that the mission was spending heavily on staff medical refunds and as a result, a sum of EGP.120,489 (Approximately UGX.45,590,360), which was almost eighteen times more than what was paid in staff medical insurance scheme. Those payments were found irregular, given the fact that the

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staff were supposed to send their medical claims to the insurance companies for settlement. Notable incidents included the following;  The treatment of one staff, who is said to be terminally ill, is drawing a significant proportion of staff medical refunds. Given the officer‟s current health condition, the mission cannot continuously sustain payment of his medical bills without suffocating the payment of other financial obligations.  The treatment of HoM, when he was involved in a motor accident in Kampala, has also exerted financial pressure on the mission budget. A sum of USD.6,000 had been spent on his treatment and was still undergoing treatment at the time of the audit (November, 2014). An outstanding claim for medical bills incurred in Kampala of UGX.5,427,160 had not been settled by the Accounting Officer as directed by the PS/Ministry of Foreign Affairs.  The treatment of Administrative Attaché also significantly drained the mission resources.

The above cases and many others, cannot be sustained by the mission‟s meager resources, hence the urgent need for a comprehensive insurance scheme for all mission staff.

The Accounting Officer explained that the above matter was being looked into but it has been difficult to find an insurance company with 100% comprehensive coverage. She further explained that she had written to different insurance companies and was still looking around to make sure this issue is resolved notwithstanding the ailments that are not covered. I advised the Accounting Officer to take up the matter with the relevant authorities to ensure that a sustainable solution is reached. g) Repair of Vehicles A sum of EGP.139,082 (Approximately UGX.52,625,621) was spent on repair of the two utility vehicles and one representation car in the year under review. However, the following anomalies were noted;  Although there used to be a sound vehicle repair system, it has currently broken down, whereby drivers do not report vehicle repair requirements in

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writing; vehicles are not inspected before and after repairs; and garages are being paid in cash other than by cheques or bank transfers.

 The representation vehicle has been involved in a series of accidents more than the other two vehicles since its acquisition in 2005. However the major accident, which cost the Embassy heavily, occurred at Cairo International Airport whereby a substantial amount of EGP.84,370 (Approximately UGX.31,923,783) was paid to a repairing firm. Although the vehicle was comprehensively insured, the insurance company refunded the Embassy only EGP.32,978 (39.1% of the cost incurred), due to the fact that the car was improperly handled by the driver right after the accident. According to the insurance company, the driver tried to drive the car immediately after the accident instead of putting it on a car carrier, thus causing more significant damage than what was caused by the accident itself. Through negligence, the driver occasioned a financial loss of EGP.51,392 (Approximately UGX.19,445,621) to government.

 Although the payments were supported by receipts, invoices and other supporting documents, I could not fully rely on them because of the weaknesses in the vehicle management system.

The Accounting Officer explained that the Mission was in the process of putting up a tightly controlled fleet management system as recommended. I advised the Accounting Officer to restore the vehicle management system to oversee vehicle repairs, fuelling and movements. In addition, all vehicle repair bills should be paid through the bank. h) Management of Imprest Paragraph 20 of the TAIs requires Imprest holders to be appointed by the Accounting Officers on specific approval by the Accountant General. Paragraph 23 of TAIs further specifies that all appointments of Imprest holders must be notified to the Accountant General, Auditor-General and the officer to whom the Imprest Holder is to account. Para 24.of TAIs require that in fixing the amount of the imprest, Accounting Officers appointing Imprest holders will have regard to the 791

facilities available to them for the safe keeping of money, and will not authorize the holding of sums larger than those for which suitable accommodation is available.

I noted that the Accounts Assistant also doubled as the Mission‟s Imprest holder, but contrary to the above provisions in the TAIs, he was not duly appointed. I further noted that large amounts of money would be drawn ranging between UGX.1 million to UGX.50 million as imprest and there was no imprest limit set by the Accounting Officer. I further noted that although the Accounts Assistant properly maintained the imprest cash book and accounted for the imprest advances, some ineligible expenses, such as: vehicle repairs (notably EGP.84,370, which was paid to a garage when the representation vehicle was involved in an accident); staff medical claims and telephone expenses-international VOIP that would be charged from the Mission‟s operation account, were charged on imprest. In his response, the Accounting Officer acknowledged the anomaly and indicated that an imprest holder would be appointed going forward. I advised the Accounting Officer to expedite this action and also ensure that imprest management is in accordance with the provisions under the Treasury Accounting Instructions, 2003. i) Procurement a. Absence of a Procurement Plan Regulation No.96, sections (1) to (3) of the PPDA Regulations, 2003 requires a user department to prepare and submit to the PDU a multi-annual rolling work plan for procurements based on approved budget. The procurement plan should enhance financial predictability, accounting and control over procurement budgets. In addition, the plan should facilitate the entity to plan, organize, forecast and schedule its procurement activities.

A review of the mission‟s procurement files and records showed that the mission did not have a comprehensive procurement plan in a format prescribed by the above regulation. Although the Accounting Officer explained that the Mission had a procurement Plan, the plan availed was a listing of the items to be procured with

792 no details such estimated amounts, procurement method and timing. In addition, there was no evidence to indicate that the mission prepared and filed procurement returns with PPDA Authority.

I advised the Accounting Officer to ensure that procurement plans are always prepared in accordance with the PPDA regulations, to effectively guide the mission‟s procurement activities. In addition, procurement returns should be prepared and filed with PPDA authority. b. Absence of Evaluation Committee Regulation No.169, Section (1) of the PPDA Regulations, 2003, requires an evaluation to be conducted by an Evaluation Committee (EC). Section (2) of the same regulation requires the Procurement and Disposal Unit (PDU) to recommend the membership of the EC to the Contracts Committee (CC) for approval. According to Section (3) of the Regulation, the number of members will depend on the value and complexity of the procurement requirements, but shall not be less than three. Section (4) further requires that the members should be of an appropriate level of seniority and experience depending on the value and complexity of the procurement.

A review of the procurement files for the mission revealed that all awards by the Contracts Committee (CC), were not backed by recommendations of an evaluation committee contrary to PPDA regulations. In some instances, the CC would irregularly constitute itself into an Evaluation Committee in the same meetings of tender award, thus adapting the name “Evaluation/Contracts Committee”.

However, during discussions with the mission staff, it was noted that with the appointment of the CC, the other remaining staff (i.e. HoM, A/O and Accounts Staff) by nature of their duties, would automatically not qualify to serve as members of the EC. I noted the leanness of the Mission staff structure and found out that it hinders the separation of the EC from CC. The absence of a technical evaluation committee not only contravened the PPDA regulations, but also resulted into various irregularities being committed by the CC as discussed in the subsequent paragraphs.

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The Accounting Officer explained that the Mission will seek guidance from relevant authorities regarding the above aspect and also conduct training for staff involved. I await the outcome of this management commitment. c. Botched Renovation of the Official Residence Two companies were invited to tender for renovation works at the official residence. However the following anomalies were noted;  No evidence was availed to indicate that the works were advertised and request for bids sent to bidders. The method of direct procurement as explained by management, was not appropriate given the nature of the contract and the procurement threshold prescribed by PPDA regulations.

 The two companies each quoted for works in different currencies. It was noted that without an evaluation report, the CC went ahead to award the contract to one of the companies.

 The scope and magnitude of renovation works were not first ascertained by the Mission and as a result, each bidder visited the official residence to determine for themselves what the works would entail. This implied that there could not be an effective comparison of the two bids since there was no common stand on the scope of works.

 Due to the threat to sue by the other company which lost the tender, and the decision by H.E the Ambassador to stop the contractor, the CC on its sitting on 8th July, 2014, under minute 1/07/2014, decided to defer the renovation works. However, there is no evidence on the procurement file indicating that the decision was duly communicated to the company that had been awarded the contract.

 In its effort to rectify the situation, management requested for the works to be assessed and sought assistance from government engineers from the Ministry of Works and Transport (MoW&T), who were facilitated by the embassy to the tune of EGP.13,500 (UGX.5,108,108) in air tickets. However, at the time of the audit (November, 2014), the Engineers had not provided

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the Mission with an assessment report and as a result the procurement process had stalled.

 Government had released a sum of UGX.250,000,000 for capital development, but as at closure of the financial year, only UGX.109,866,417 had remained unapplied. There is a risk that the funds may continue being applied on other mission activities if the tender process is not expedited.

The Accounting Officer explained that the Mission will send a reminder to the officials from Ministry of Works to furnish management with a proper works assessment report to allow the procurement process to commence. I advised the Accounting Officer to expedite this action, and ensure that proper procurement procedures are observed in accordance with the PPDA regulations. d. Procurement of Office Laptops Three firms were sourced by the mission through direct physical contact, to supply four office laptops. The following anomalies were noted;  Although the CC opted for the direct method of procurement, there is no evidence that the technical specifications, such as: storage memory, processing speed, monitor size, etc, had been specified, to allow for easy comparison during evaluation. Although the awarded firm had quoted lower than others, the comparison was not done on standard technical specifications.  There was no technical evaluation report on file to back the decision of the CC, despite the complex nature of the procurement.  According to the quotation from one of the firms, it indicated that it was authored on the 17th June, 2014. Comparing this date with the date of CC sitting on 18th June, 2014, it was revealed that the procurement was hurriedly concluded, thus posing a risk that the mission may not have obtained value for money in the procurement due to the opted procurement method.

The Accounting Officer explained as follows;

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 The late award of the tender was as a result of administrative issues in terms of interference in the work of the contracts committee. The committee was not independent hence the delay.  As long as there is no interference in the activities of the contracts committee all future procurements will be concluded according to the plans set in the PPDA regulations.

I advised the Accounting Officer to ensure that future procurements are concluded according to the procurement plan and in accordance with the PPDA regulations. e. Redesigning of the Chancery Reception Three firms were invited for redesigning of the chancery reception and the contract was awarded to one of the firms for USD.10,000. It was noted that the redesign of the chancery reception has improved the general appearance of the Embassy. However, the following anomalies were noted;  There was no evidence on the procurement file to indicate that the evaluation committee report was prepared before the award by the CC.  One firm quoted in a different currency and there is no evidence to show that the CC committee made a currency conversion to enable equitable comparison.  There was no evidence on file to indicate that specifications for the works were prepared and communicated to all firms.  The work of the redesign of the reception was so technical, thus needed a fully constituted technical evaluation committee.  The procurement method used was beyond the PPDA permitted threshold of such works.  No designs were obtained from the other two companies apart from the one that won the tender.

The Accounting Officer acknowledged the above anomalies and indicated that all mission procurements will in future be conducted in accordance with the PPDA regulations. I await the outcome of this commitment by the Accounting Officer.

796 j) Mission Charter and Performance Reporting The Embassy prepared a mission charter to facilitate its service delivery by focusing on three thematic areas: Economic/Commercial diplomacy; Regional/International peace and security; and the well-being of Ugandans. In order to further streamline its focus on the thematic areas, the Embassy developed eight (8) strategic objectives, with clearly defined key outputs, performance indicators, and performance targets, as indicated in paragraph 3.0 above.

In his letter referenced MFA/X/16 of 16th April, 2014, the Hon. Minister of Foreign Affairs, further gave guidance to the HoM to give priority attention to the following specific actions and report on them on a quarterly basis; a) Engage Egypt to be supportive of various peace building initiatives/processes on interest to Uganda and Great Lakes Region; b) Lobby Egypt‟s understanding and appreciation of Uganda‟s position on various important issues, particularly the Nile and regional geo-politics; c) Facilitate promotion of at least USD.200M worth of Uganda exports to Egypt annually; d) Lobby for inward transfer of at least USD.300M worth of investment from Egypt per year; e) Facilitate attraction of at least 150,000 tourists from Egypt per year; f) Handle at least 600,000 requests for Consular services annually; g) Identify and facilitate of appropriate technology from Egypt; h) Engage Ugandan Diaspora in Egypt to actively contribute to development at home; and i) Identify and facilitate acquisition, development and maintenance of at least one Government property in Cairo annually.

A review of the 3rd quarter performance report of the FY 2013/14 submitted to PS/Ministry of Foreign Affairs on 6th May, 2014, indicated promising results and achievements by the mission. Notable achievements included;

 Increased coordination of mission activities, including allocation of duties to staff; 797

 Followed the geo-politics in the countries of accreditation;  Coordinated UPDF and Police trainings in Egypt  Issued 225 visas; and  Received company profiles of firms interested in renewable sources of energy, gas supply and oil refinery.

I did not review the 4th quarter report as it was not availed to me. However, comparing the mission charter strategic objectives, key outputs, performance indicators and targets, with the mission quarterly performance report, the following areas of improvement are suggested;

 Staff activity reports should be prepared in line with their allocated duties, which should also be linked to the strategic objectives of the mission charter.  The quarterly performance report by the HoM should be linked to staff activity reports.  The Quarterly performance report should, to a large extent, focus on the key outputs, performance indicators and targets.

The Accounting Officer has committed to ensure that the Staff activity and quarterly performance reports are improved and adjusted accordingly. k) Cash payments of staff salaries Paragraph 268 of the TAIs and Section B-a 9 of the Public Service Standing Orders, 2010 (Revised), provide for payment of staff salaries into the individual bank accounts of staff. I noted that in most occasions, staff salaries were being paid in cash by the Accounts Assistant, after drawing lump sum amounts from the bank. Such a practice exposes the mission to a risk of loss, given the risks associated with cash. Besides, some officers had financial obligations (loan repayments) with their banks. This implies that payment of salaries in cash may hinder the recovery efforts by banks, which may in turn cause diplomatic embarrassments.

The Accounting Officer explained that the payment method was adopted due to the fact that only two officers hold bank accounts. Since the revolution in the country, the Egyptian fiscal policies tremendously changed. For example, it takes a

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lot of scrutiny just to cash the mission cheques. However, officers without bank accounts have been advised to follow up with the various banks in order to get bank accounts. She further explained that management would make all efforts to minimize cash transactions. I advised the Accounting Officer to ensure that this practice is stopped henceforth and that all salary payments are made through the bank. l) Staff Performance Management of staff performance requires the appraisees to agree with their supervisors on the activities, key performance indicators, and outputs/targets for the appraisal period. The agreed outputs together with the activities constitute staff performance plans, which should form the basis for appraisal of staff at the end of the appraisal period.

However, there was no evidence on staff personal files, to indicate that the staff prepared and discussed performance plans with their supervisors at the beginning of the appraisal period, and that they were appraised at the end of the year. The absence of performance plans, with clear outputs/targets, limits the effective supervision and monitoring of staff activities, which eventually frustrates the objectives of performance appraisals at the end of the period. In addition, this affects the attainment of the objectives in the Mission Charter.

Further noted was that staff activity reports were not specific and did not, on many occasions, contain measurable outputs or targets. They were so narrative and could not be aligned back to the objectives of the Mission Charter. I advised the HoM to ensure that staff performance plans, with measurable targets which link to the objectives of the Mission Charter, are drawn at the beginning of the appraisal period to form the basis of staff appraisal at the end of such periods. m) Physical Inspection of Mission Properties a. Chancery Building The first phase of the renovation of the chancery building had just been completed at the time of audit. The contractors for both the general renovation and redesign

799 of the chancery reception appear to have exhibited good workmanship skills. Below are some of the photographs taken during inspection;

Photographs taken during inspection of the chancery building Photograph Remarks

Photograph showing the front view of the newly redesigned chancery reception

Photograph showing the behind view of the newly redesigned chancery reception.

The photograph showing the recently renovated staff boardroom with new furniture.

b. Official Residence

The general condition of the official residence was generally appalling. The residence is comprised of a storeyed building with servant quarters on the roof top. The following conditions were observed;

 The paint on the walls was peeling off;  The roof top was leaking whenever it rains;  The kitchen facilities including the cookers, fridges require urgent attention; 800

 Electrical switches and sockets were found broken and the wires were exposed, posing safety risk to the occupants; and  Water heaters were not functioning.

The Accounting Officer explained that the Mission was awaiting the MoW&T engineers to finalize the assessment report in order to embark on the renovation works.

I advised the Accounting Officer to liaise with the PS/Ministry of Foreign Affairs to ensure that the MoW&T engineers finalize the assessment report, to enable the commencement of the procurement process for the renovation works without further delay. n) Financial Statements a. Staff Arrears and Other Commitments A review of the financial statements (Statement of outstanding commitments) revealed that, of the total outstanding commitments as at the beginning of the year under review amounting to UGX.158,679,788, the Mission was only able to pay UGX.2,644,082 during the year, leaving a balance of UGX.156,035,706 outstanding for more than a year. It is apparent that the Mission‟s efforts towards settlement of outstanding arrears are minimal. Also noted was that a significant portion of the outstanding commitments is staff social benefits of UGX.106,912,112, which accrued due to failure by the mission to pay the „„13th month‟‟ for the local staff. There is an increased risk of the mission being taken to courts of law if the obligations are not settled and this may tarnish the diplomatic image of the country.

The Accounting Officer explained that the matter was brought to the attention of the Permanent Secretaries in the Ministries of Foreign Affairs and that of Finance Planning and Economic Development. However, although these arrears have been budgeted for in the past financial years, the funds in question have not been availed to the Mission. I advised the Accounting Officer to continue following up this matter until the obligations are settled.

b. Prepaid Rent 801

It was noted that rental payments totaling to USD.9,000 were made in respect of periods straddling in the ensuing financial year, but were not recognized as prepayments in the financial statements as prescribed in the accounting policies Details as per table below;

Prepaid Rent not disclosed in the financial statements

DATE PVR.NO. CHQ.NO. DESCRIPTION AMOUNT (USD) 15/06/2014 PV-2479 CH.1177 Rents for (July-sept14) 4,500.00 15/06/2014 PV-2480 CH.1178 Rents for (July-sept14) 4,500.00 Total 9,000.00

Although the Accounting Officer explained that adjustments to recognize prepaid rent would be effected in the financial statements, by the time of concluding this audit, this had not been effected.

I advised the Accounts Assistant to recognize the amount of prepaid rent in accordance with the prescription in the basis of preparation of accounts.

71.0 UGANDA HIGH COMMISSION, CANBERRA a) Unspent Balances

Section 19 (1) of the Public Finance and Accountability Act(PFAA), 2003 require unspent balances at the end of the financial year to be returned to the Uganda Consolidated Fund (UCF). A review of the statement of financial position for the year under review revealed unspent balances of UGX 107,200,862.60 at the year end. Included in this amount was UGX 43,544,449.10 that remained unexpended on the expenditure account which was not returned to the consolidated fund as required. The authority for retention was not availed for audit.

The balance of UGX 63,656,334.20 related to Not Tax Revenue (NTR) that had not been remitted to the treasury. It was explained that it was remitted on 3rd of July 2014 but the acknowledgement receipt from the Accountant General was not presented for audit verification.

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The Accounting Officer explained that the balance on expenditure account was retained to finance bank standing orders and to cater for a new officer posted to the mission but had not arrived. Regarding the lack of acknowledgement receipt of the NTR remitted to the treasury, the Accounting Officer explained that the mission had sent a reminder to the Accountant General‟s Office.

The Accounting officer was advised to seek authority for retention. Meanwhile the acknowledgement receipt from the Accountant General for the remitted NTR should be obtained and should be presented for audit verification. b) Excess Expenditure

The statement of appropriation account (based on nature of expenditure for services voted) revealed excess expenditure as follows:

Nature of Initial budget Revised Actual (UGX) Excess expenditure (UGX) Budget(UGX) expenditure (UGX) 1 Employee 844,410,903.10 807,555,125.00 844,410,903.10 36,855,778.00 costs 2 Goods and 838,338,427.70 838,338,427.70 842,643,386.60 4,304,958.90 services consumed Total 1,682,749,330.80 1,645,893,552.80 1,687,054,289.70 41,160,736.90

The Accounting Officer explained that excess expenditure was occasioned by insufficient budget allocations on the items namely, medical expenses, electricity and gas, computer supplies and welfare and entertainment.

The Accounting Officer was advised to seek authority from the Secretary to the treasury whenever such shortfalls in the budget occur so that the necessary budgetary revisions are undertaken. c) Procurement of Goods

The statement of appropriation of account reported a sum of UGX 842,643,386.60 incurred on goods and services. Included in the sum was UGX 62,567,529.34 (AUD 25,424.55) incurred on procuring assets for the mission as shown below:-

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Month Purpose Cheque Amount (AUD) 1 July 2013 Furniture 2776 5,584.00 2 October 2013 Various Assets 2875 4,823.85 3 do 2858 939.00 4 do 2846 480.00 5 April 2014 do 3073 7,122.70 6 May 2014 do 3129 5,000.00 7 do 3110 1,475.00 Total 25,424.55

However, procurement files were lacking. Hence it was not possible to confirm that proper procurement procedures were complied with. The Accounting officer explained that the anomaly arose due to absence of the required procurement structures and as such procurement files could not be maintained. She further explained that the mission had only two home based staff and therefore it was difficult to constitute the contract committee and procurement and disposal unit under the circumstances.

However, the Accounting Officer had written to the Permanent Secretary/Secretary to the Treasury regarding the matter.

Management was advised to ensure that the requisite Procurements structures are instituted, staff trained and procurement files kept. d) Renting of Property

It was observed that the mission does not own any residential property .Accordingly the chancery, the official residence and other residences for staff are rented at an annual cost of AUD equivalent to AUD 208,882.80 (UGX 514,039,999.50). Details are as follows: Rented property Rent per Annual rent month(AUD) (AUD) 1 Official residence 7000.00 84,000.00

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Rented property Rent per Annual rent month(AUD) (AUD) 2 chancery 3,823.81 45,885.72 3 Accounting Officer 2715.77 32,589.24 4 Posted foreign service 1,868.45 estimated 22,421.40 officer 5 Administrative attaché‟ 1998.81 23,985.72 Total 17,406.84 208,882.08

This cost would be saved in the long run if an attempt to acquire own property is undertaken. The Accounting Officer explained that the Head of Mission was following up the matter with the Ministry of Foreign Affairs initially to provide funds for purchase of land being offered by the Australian Government and thereafter source for funds for putting up the chancery and official residence.

The Head of Mission was urged to follow up the matter and source for the requisite funding. e) Foreign Service Allowance

It was noted that the Foreign Service allowance (FSA) paid to the home based staff to cater for their cost of living has never been reviewed by the ministry of foreign affairs and public service for a long time. The FSA has now been eroded by the expensive market prices in the economy. As a result management explained that it is becoming increasingly difficult for the staff to live an affordable life. This impacts on staff morale and hence productivity.

It was observed that management is engaging the MOFA to review the grading of the mission so that it is placed in the appropriate category A for purposes of enhancing the FSA to match the price index.

Management should continue engaging the relevant authorities for the possibility of appropriately regarding the mission.

805 f) Review of the Inventory

A review of the inventory of the chancery in the board of survey and verification on a test check basis revealed old furniture and other stores that require replacement. During discussions the Accounting officer explained that capital development funds to enable replacement of the items have started flowing in although minimal. The old items would require boarding off.

The Accounting Officer explained that a board of survey had been formed to carry out the boarding off exercise in the month of October 2014. Management was urged to ensure that the boarding off exercise takes place in accordance with the Public procurement and disposal of assets regulations. g) Under Staffing

According to the Ministry of foreign affairs categorization of missions, Canberra mission is categorized as 1 +2 mission whose structure should have one Head of mission and two Foreign Service officers.

It was observed that the mission has the Head of mission and one Foreign Service officer occasioning one vacancy. The Accounting officer explained that the arrival of the officer to fill the vacancy that had been delayed due to entry visa issues. Management was advised to follow up the matter with the Ministry of Foreign Affairs so that the vacancy is filled.

72.0 UGANDA EMBASSY, COPENHAGEN a) Performance Report

The Accounting Officer under section 14 of PFA is supposed to carry out regular review of embassy operations and establish whether the operations are being carried out as planned for the year. The end of year performance report was not presented for audit verification.

In the absence of the performance report, it was difficult to establish whether the mission activities had been implemented as planned.

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In addition, it was difficult to link the mission, financial performance to the planned activities and outcomes.

The Accounting Officer explained that the at the time of audit, the Embassy had only complied separate activity reports from Q1-Q4 respectively that have been integrated into a comprehensive performance report in line with the Copenhagen Mission Charter 2014.

I advised the Accounting Officer to ensure that performance reports are regularly conducted and presented for audit verification. b) Lack of a Procurement Plan

Section 6 of the PPDA 2007 guidelines for mission refers that entities shall prepare annual procurement plans based on the approval budgets and work plans in accordance with PPDA regulations and submit them to the Authority before the end of the first quarter of the financial year.

The procurement plan is supposed to allow the mission to enjoy economies of scale and to reduce procurement costs.

It was observed that the procurement plan was not submitted to PPDA contrary to the regulations.

The Accounting Officer admitted the shortcoming and explained that whereas Form PP 20 is used to support expenditure on procured goods and services, the Mission requires a proper management plan in line with the PPDA regulations. Accordingly, the mission will be merging digital online shopping to conform with PPDA regulations

I advised the Accounting Officer to ensure that procurement plans are prepared and submitted to the Authority in accordance with the regulations. c) Assets Management Section 14(c) of the PFA 2003 required the accounting officer to ensure that property and resources are properly managed and safeguarded.

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It was observed that all the fixed assets owned by the mission had not been labelled with any unique identification mark. This implies that the items may not be easily identified in case of loss.

The Accounting Officer explained that steps have been taken to engrave all the Embassy assets both at the Chancery and residential quarters.

73.0 UGANDA HIGH COMMISSION, DAR ES SALAAM a) Irregular Procurements

Paragraph 2 of the Public Procurement and Disposal of Assets guidelines for Uganda Missions abroad requires the Missions to pre-qualify providers who shall be maintained on the list for three years. It was observed that the Mission did not have a list of prequalified service providers. Consequently, procurements worth TUGX.116,645,135 were undertaken in contravention of the PPDA regulations as shown below:- Service Provider Category of Service Amount (TUGX)

Viliproma Investment Ltd Fuel, oil and lubricants 29,374,868

Security Group (T) Ltd Security of chancery and 60,433,100 residences

Aichi Supplies Stationery 4,133,400

Meridianna Africa Airline Ai tickets 8,488,767

Naska Lubricant Service Vehicle repairs and 9,215,000 maintenance

TOTAL 116,645,135

The Accounting Officer explained that the Mission used per-qualified service providers of other diplomatic missions in Dar es Salaam.

I advised the Accounting Officer to comply with the PPDA law.

808 b) Understaffing

The Uganda Public Service standing orders (A - a) 15 (a & f) states that the Responsible Permanent Secretary shall determine the terms and conditions of service and the structures of the Public Service in consultation with the Secretary to the Treasury. Accordingly the mission had 15 approved posts and only 11 posts were filled leaving 4 vacant posts.

Inadequate staffing adversely affects service delivery.

The Accounting Officer explained that the Head of Mission has engaged the Ministry on the issue and recently an Officer was posted to the Mission. The Mission still awaits replacement of former Head of Mission by appointing authority.

I advised the Accounting Officer to follow up the matter with the relevant authorities to ensure that the vacancies are filled. c) Inspections

An inspection was carried on the mission properties located in the Diplomatic Enclave of Dar as Salaam revealed the following shortcomings;

Official Residence Plot 65/12 Yasser Arafat Road

 The building is dilapidated and requires renovations of the roof and the external walls.

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 The fence of the wall has a huge crack that requires immediate attention.

Other Residence Plot 10 Kaunda Drive, WARD: Msasani, Street Oyesterbay House no 328

This residence is dilapidated and

requires major rehabilitation.

I advised the Accounting Officer to ensure renovation of the properties.

74.0 UGANDA HIGH COMMISSION, WASHINGTON

a) Outstanding Advances Included in the outstanding advances is a sum of USD 40,000 that was contributed to the Uganda North American Association in 2010 and 2012, and USD 55,000 that was incurred on transfer of two Foreign Service officers in 2006. Long outstanding advances represent idle assets and may not be recoverable. Management explained that the expenditure was incurred on behalf of the Ministry of Foreign Affairs and the refunds were therefore expected.

I have advised the Accounting officer to liaise with the Ministry of Foreign Affairs and the Treasury to either have the amounts refunded or written off in accordance with financial regulations. b) Dilapidated state of Buildings Inspection of the Mission buildings namely: 5909, 16th St., NW and 5911, 16th St. NW revealed water leakages in the foundation and in the ceiling. The air- conditioning facility for the later was also noted to be mal-functioning. Owing to 810

the usual extreme weather conditions in the Washington area, there is risk of rapid deterioration of the buildings and a harsh working environment for staff. Management indicated that requests made to the Ministry of Finance, Planning and Economic Development for capital funds to carry out renovations had not been responded to.

I have advised the Mission to involve the Ministry of Foreign Affairs in seeking the necessary resources for renovation of the properties and air-conditioning. c) Irregular payment of Mileage Allowances Section (E-e) of the Public Service Standing Orders, 2010 outlines the different categories of allowances to which Foreign Service officers are entitled. This is further amplified by Circular Standing Instruction No.4 of 2008, which clearly indicates revised standard rates of allowances payable to all public officers. It was noted that whereas mileage allowance does not fall under the above section, a sum of USD 5,520 was paid to various officials of the mission in this respect. This was therefore not a proper charge on public funds.

Management explained that this was a decision of the Finance committee arising from the use of personal vehicles by staff and that the practice shall be halted with immediate effect.

I advised the Accounting Officer to seek authority from the Ministry of Foreign Affairs and the Ministry of Public Service before payment of undesignated allowances. d) Non-remittance of social Security and Medical Insurance for local staff The mission employs a number of locally based staff who are entitled to a monthly salary in addition to medical insurance and contributions to a Social Security Fund. Examination of payment vouchers revealed that medical insurance and Social Security Contributions were paid to staff personal accounts instead of remitting to the relevant authorities. This practice is irregular because the social contributions constitute their terminal benefits after the end of their employment contracts. There is also a risk that the staff may not remit their contributions to the

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regulatory agencies contrary to the law and this may attract penalties and related fines against the Embassy.

I advised management to ensure deductions are remitted directly to the concerned regulatory agencies. e) Mission Charter The mission charter provided to the Embassy by the Ministry of Foreign Affairs comprises broad goals achievable over a period of time. The charter was not broken down into targets, performance indicators and key result areas for each year.

In the circumstances, it is difficult to assess the annual performance of the Embassy in achieving its broad goals.

The Accounting Officer explained that the mission would liaise with the Ministry of Foreign Affairs and break down the objectives into specific targets and performance indicators by January 2015.

I await the results of this liaison.

75.0 THE PERMANENT MISSION OF THE REPUBLIC OF UGANDA TO THE UNITED NATIONS AND OTHER INTERNATIONAL ORGANIZATIONS IN GENEVA a) Contingent Liabilities reported in the Financial Statements;

The Mission provided for Contingent Liabilities of UGX.811,269,801 representing provisions for two pending court cases of unpaid rent plus repair costs and a claim by a dismissed local staff. The following were noted with regard to the cases;

a) Documents indicated that the contract with the landlord was never terminated since the Mission‟s relationship had ceased in 2007 when the home based staff left the house and it was allocated to the local staff who started paying the rent by herself. There was no justification for this anomaly.

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b) Documents further indicated that the head of Chancery at the time allegedly received CHF.7,800 from the local staff purportedly to pay the landlord the equivalent of three months‟ rent as security deposit. This was never done since the tenancy agreement between the Mission and the land lord was not terminated and the security deposit initially paid was neither claimed by the Mission nor used by the landlord for any necessary repairs. There were no details to show that the money received by the Head of Mission was recorded in the Mission books of account. There is a possibility that this money was put to personal use by the recipient. c) The locally based staff, who was later dismissed from her engagement with the Mission later left the house without paying five months‟ rent of Cf.14,330 with a number of spoilt items that needed repairs. The security deposit which the Mission had deposited was deemed by the landlord as insufficient to cover the repair costs which required an additional amount of CF.7,981. The additional attendant court costs have not been determined given that the Mission has been sued by the landlord. d) The staff in the above observation was hastily dismissed, but delegations from Uganda continued to work with her as a staff of the Mission. As a result, the Mission has been sued by this staff for unpaid salaries and general damages totalling to CHF.251,839.77.

In the above circumstances, the officers appear to have acted outside the normal Public Service practices. The likely payments to the landlord, the staff and the attendant legal costs, in addition to suffering reputational risk by the Mission, could have been avoided had the officers acted within the limits of the Uganda Public Service Standing Orders.

Meanwhile the GoU through the Ministries of Foreign Affairs and Justice and Constitutional Affairs had not assigned a legal counsel to represent Government in court in Switzerland which poses a risk of the cases being determined without any submissions from the GOU side.

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The Accounting Officer explained that the Mission had communicated to the Ministry of Foreign Affairs and copied to the former Head of Mission drawing his attention to the matter. He also stated that he had communicated to the Ministry of Justice and Constitutional Affairs requesting it to assign a legal officer to handle the cases.

I have advised that;  the former Head of Mission refunds CHF.7,800 he is alleged to have obtained from the Local staff and also be held accountable for the outcome of the case regarding the allocation of the house to an ineligible staff in unclear circumstances.  Government through the Ministries of Foreign Affairs and; Justice and Constitutional Affairs takes up the matter and assigns legal representatives to handle the cases in Switzerland. b) Lack of segregation of duties It was noted that the Mission is using a staff employed as a receptionist /Secretary/translator to at the same time manage the finance affairs of the Mission, prepare and sign the Financial Statements as the Mission Accountant. In addition to not being qualified for the Accountant‟s job, the officer was found to be handling a number of other tasks. Performing many tasks including the Accountant‟s role may eventually render the staff ineffective.

Management took note of the matter and explained that they had written to the Accountant General requesting for a qualified accountant to be posted to the Mission.

I await the outcome of management‟s action in this regard. c) Procurements and disposals a) Roles of different parties in the procurement process Procurements regulations require that different roles in the procurement cycle be segregated to enhance transparency in the procurement process. It was however noted that the Mission‟s Contract Committee was performing conflicting functions during the procurement process. For example, identification of the need, 814

Evaluations/negotiations, approvals and communication of the Contracts Committee‟s decision to the best evaluated bidders, were all undertaken by the member(s) of the Contracts Committee. This is not only irregular but could lead to undertaking procurements where the independence of the Contracts committee members may be eroded.

I have advised the Accounting Officer that notwithstanding the limitations of the Mission in terms of staff numbers, efforts should be made to segregate the roles of the Contracts Committee from other roles in the procurement process in order to preserve the Committee‟s independence.

b) Non disposal of Assets: Review of the list of the Assets owned by the Mission revealed a number of old equipment that had been in use for a number of years, most of them for over ten years. Although the list indicated that many of them were still in a good state, others were indicated as either old (procured as far back as 1996), broken, not good or incomplete. These include furniture and fittings and, other household equipment for both the residences and the Chancery. The list had two old vehicles that were bought in 2005 and 2006 but whose costs of maintenance and repair were high compared to others owned by the Mission. A negative image is portrayed about the country by use of old equipment, furniture and other fittings. Management explained that the Mission got funds for replacing the furniture and fittings in the staff residences in the FY 2014/15 budget and had submitted a budget to have the Deputy Permanent Representative‟s (DPR) car replaced in the FY 2015/16.

I have advised the Accounting Officer to constitute a board of survey to inspect the assets and recommend those that should be disposed of. d) Non-disclosure of Security deposits in the Financial Statements During the year, the Mission entered into a tenancy agreement with a new Landlord for the residence of the Deputy Permanent Representative and paid CHF13,500 as security deposit. It was however noted that this deposit was

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expensed instead of treating it as a receivable in the financial statements. Similarly, all the previous deposits (whose details could not be established) had been expensed at the time of payment and they are equally not reported in the financial statements. The interests earned from the banks were also not reported.

There is a risk that these deposits and their related interest earned could be misused when the tenancy agreements end. I have advised the Accounting Officer to ensure that the security deposits are appropriately disclosed in the financial statements and that they are only expensed when the tenancy agreements end and the money is to be used by the Landlords to renovate/repair their houses. e) Payment of Rent for two properties for the Deputy Permanent Representative It was noted that the Mission procured rental services of a house located at de la Majonne 2, 1293 Bellevue in September 2013 when the beneficiary was still occupying another house at Rue de Ferney Grand Sacornex. While CHF.29,400 (4,900 X 6 months) was paid for the new house at de la Majonne 2, 1293 Bellevue, another CHF.25,800 (4,300 X 6 Months) was also paid for the premises at Rue de Ferney Grand Sacornex. This was attributed to the stringent legal regime governing tenancy in Switzerland. The double payment amounts to wasteful expenditure as the second house was not occupied until February 2014 and could have been avoided if there was proper planning and the funds could have been used to finance other priorities of the Mission.

The Accounting Officer explained that Management took note and had put in place a proper plan for procuring accommodation for the staff. I have advised the management of the Mission to ensure that there is proper planning for procurement of accommodation to avoid overlapping payments for the same officers. f) Staff matters a) Lack of performance plans It was noted that there are no performance plans for the staff against which performance should be measured at the time of appraisal. This is contrary to the 816

current Public Service Appraisal system which requires identification of key activities and Key Performance Indicators at the start of the appraisal period, management of the staff performance during the appraisal period and an appraisal based on the performance at the end of the period.

Lack of performance plans therefore makes it difficult to manage staff performance and carry out objective appraisals in accordance with the current Public Service requirements.

I have advised the Management of the Mission to ensure that each staff of the mission has an approved performance plan at the start of every appraisal period to enable and ease staff performance management.

b) Non appraisal of staff It was also noted that most of the Mission staff had not been appraised for the preceding appraisal period. This does not only limit management from monitoring staff performance and staff competencies but also makes it difficult to help staff develop as their areas of improvement are not timely identified.

I have advised management to ensure that the Mission staff are appraised at the end of each appraisal period to help the Mission monitor staff performance and also help them to develop. g) Payments a) Insufficient description of payment details on the payment vouchers Paragraph 181 of the Treasury Accounting Instructions (TAIs) requires that all vouchers will contain full particulars of each service or goods and will be accompanied by such supporting documents as may be required so as to enable them to be checked without reference to any other documents. It was however noted that the payment vouchers for 2013/14 did not have description/details of the payments. Given that all documents attached are in French, it made it difficult to understand why certain payments, especially the non-routine payments, were being made.

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I have advised Accounting Officer to ensure that the payment vouchers contain full description of payments to allow for understanding of the payments by other stakeholders. b) Double payments for insurance The Accounting Officer is expected to design and implement internal controls to assist him/her detect and minimise any errors of omission or commission. Review of the payment files and the expenditure records revealed that the Mission made double payments for three staff insurance amounting to CHF 5,016.

The circumstances under which the second payment was made for the same period were not properly explained. There is a risk that the Mission could lose huge amounts of money through such schemes where double payments can be effected without being detected by internal mechanisms.

Although management stated that they had taken note of the matter and promised to submit a report on the matter, this had not been done by the time of writing this report.

I have advised the Mission Management to investigate the circumstances under which the double payments were effected and institute recovery measures. I have also advised them that the internal controls/mechanisms should be strengthened to ensure that such double payments do not reoccur. c) Compilation and settlement of outstanding bills It is good practice to compile all unpaid bills and plan to settle them as and when funds are available. This practice enables proper management of the budget and planning cash flows. It was noted that the outstanding bills are not compiled and approved for inclusion in the financial statements at the end of the financial year. Instead the practice is that the officers stay with their individual claims/bills and submit them later during the following financial year to be considered and paid by

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the Accounting Officer. The practice is irregular, prone to abuse as it can be used to sneak in fictitious bills and, distorts implementation of the planned activities.

The Accounting Officer was advised to ensure that all outstanding bills/claims at the year-end are approved, compiled and planned for payment in the following year. Bills submitted outside this arrangement should not be considered for payment.

76.0 UGANDA PERMANENT MISSION TO THE UNITED NATIONS, NEW YORK a) Failure to revise Budget

Examination of the statement of appropriation Account based on the nature of expenditure for services voted revealed excess expenditure of UGX.321,435,728 on the consumption of property, plant and equipment. Though management indicated that the excess expenditure had been authorized by the Permanent Secretary/Secretary to Treasury, the budget was not revised and uploaded accordingly.

Management is advised to liaise with the Treasury to ensure that the revised budget is uploaded in the system for proper presentation of financial statements.

b) Outstanding receivables Included in the receivables is a sum of USD.37,825.87 attributed to a foreign mission. Long outstanding receivables represent idle assets which impair the Mission‟s non-tax revenue collections.

The Accounting Officer explained that the debtor had been reminded of the obligations and a commitment letter for settlement of debt was subsequently obtained.

In addition, the mission had instituted a late payment charge of 5% on the monthly instalments to discourage late payments. I await results of the action taken by the Accounting Officer. 819

c) Staffing Structure Whereas the Mission is approved staffing structure is 1+3, the actual staffing is 1+8. The structure comprises the Permanent Representative to the United Nations and his/her officers. It was pointed out that the funding of the Mission was not in tandem with the increased staffing. The Accounting Officer further indicated that the required level of staffing is 1+10 in view of the workload at the United Nations.

In my report for the previous year I advised that close liaison with the Ministries of Foreign Affairs, Public Service and Finance, planning and Economic Development should be undertaken to rationalize the staffing position. Evidence of the results of the liaison was not availed for review. Respective stakeholders are urged to expedite resolution of the matter to enhance performance of the Mission. d) Motor vehicle management The Public Service standing orders require proper management of government vehicles including use of vehicle movement logbooks to ensure monitoring of utilization and fuel usage. The practice also ensures that the vehicles are used for authorized official purposes and that they can be accounted for at any one time. It was however, noted that the Mission last used log books for the vehicles in 2011. Though management explained that vehicle movement guidelines have been put in place, it is noted that these are general procedures that do not serve the purpose of monitoring efficient utilization of the vehicles.

The Accounting Officer indicated that use of log books shall be instituted with effect from January, 2015.

I await evidence of the action taken.

77.0 UGANDA CONSULATE, GUANGZHOU, CHINA a) Mission Charter

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It was observed that the consulate operated without a Charter. Ideally the ministry would formulate a foreign policy through which missions were to contribute by way of well defined charters. In absence on one it became difficult to measure performance of the consulate and as such there was a risk of implementing uncoordinated activities that might not have achieved the objectives of the foreign policy.

Management explained that the Consulate and the Ministry of Foreign Affairs were engaged in the discussion and formulation of the Mission Charter which was only finalized and sent to the Consulate in April 2014, and accordingly the Consulate prepared a detailed work/activity plan and is being used in the current financial year.

I await management action to implement the Charter in the subsequent year.

78.0 UGANDA EMBASSY JUBA a) Improper payments

A total of USD.15,439 paid to individuals was supported with accountabilities from recipients other than the contracted parties contrary to Regulation 254 (1) (2) of the PPDA Regulations, 2003. Payments to unauthorized recipients may result into loss of public funds. Though the management stated that the relevant authorization had been obtained from the contracted parties, there was no evidence to this effect.

I advised management to obtain and submit evidence of authorization for review. In future all payments should be made to the contracted party. b) Procurement shortcomings

In accordance with section 97 of the PPDA Act, 2003, the authority issued guideline referenced 1/2007 to missions for use in their procurement activities. However, the following weaknesses were noted at the Embassy in the procurement function;

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 Lack of designated procurement set up in terms of staff.

 Absence of procurement plan.

 Lack of contracts committee and evaluation committee.

 Unauthorized direct procurements worth USD.13,049.

 Absence of key procurement documents such as LPOs, delivery notes, goods received notes, inspection reports, job cards and acknowledgement receipts for payments.

Unplanned and unsupported procurements expose public funds to abuse. Management indicated that the shortcomings would be addressed in the next financial year with the help of the PPDAA.

I advised management to seek technical guidance from the PPDAA on the setting up of a functional procurement system, so as to operationalize and integrate the relevant regulations in their procurements. c) Mischarge of Expenditure

A total of USD.10,165 was charged on codes other than those under which it was appropriated leading to mischarge of expenditure contrary to paragraph 400 (a) of the TAI 2003.

The practice indicates abuse of budgetary controls and leads to misrepresentation in the financial statements. Management explained that the Embassy had faced inadequate funding since 2011 when it was elevated from a consulate to Embassy.

I advised management to always liaise with MoFPED to ensure adequate funds are allocated to the budget items. In the event of need to reallocate funds, necessary authority should be sought from the Treasury prior to release of funds. d) Transfers received from other Government Units

A total of UGX.479,166,667 was indicated in the Cash Flow Statement as Transfers received from other government units. However, Note 5 of the financial

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statements, which records transfers received from other government units indicated a nil balance. Management in response indicated that an adjustment would be made, which however was not done.

I advised management to adjust Note 5 of the financial statements in this regard.

e) Over Expenditure without authority from the Accountant General

Comparison between Approved budget and Actual Expenditure revealed that management of the Embassy over spent by UGX.1,282,122,285 on two line items namely employee cost and Goods and Services Consumed without authority from the Accountant General as per details below. Item Budgeted (UGX) Actual (UGX) Variance (UGX) Employee Costs 531,000,000 757,576,224 226,576,224 Goods And Services 734,500,000 1,790,046,061 1,055,546,061 Total 1,265,500,000 2,547,622,285 1,282,122,285

Management explained that expenditure was incurred in anticipation of supplementary funding warrant which was however not provided.

I advised management that excess expenditure should only be incurred after authorization by Treasury. In the circumstances there is need for evidence of the supplementary warrant.

79.0 UGANDA EMBASSY, KHARTOUM a) Cash and Cash Equivalents Included in the statement of financial position is cash and cash equivalents totaling UGX.183,248,063 which comprises the following;

Item Amount (UGX)

Cash at Bank 51,305,881

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Item Amount (UGX)

Cash in transit 80,935,889

Cash at hand 51,006,293

Total 183,248,063

However, I could not confirm the accuracy of this figure (UGX.183,248,063) because cash at Bank was not supported with the certificate of bank balances and the bank reconciliation statement for the month of June 2014. In addition, cash in transit and the cash at hand were not supported with electronic transfer document and board of survey report respectively.

I advised the Accounting Officer to submit the missing documents for verification.

80.0 UGANDA HIGH COMMISSION, KIGALI a) Failure to reconcile receipts in the General Ledger (GL) and the Bank

A review of the process of posting of the visa receipts into the system revealed that monthly collections were posted lump sum instead of being entered individually. I was therefore unable to reconcile the individual collections to the bank. It was further noted that the Visa fees collections and TMPS deposits on bank 3 (USD Account) and bank 5 (Local Account) respectively could not reconcile with manual collection ledgers prepared at the High Commission by USD 900.00 in bank 3 and FRW 103,900 in bank 5.

Management attributed this to posting of receipts to cash in transit instead of posting to the bank directly. Management further explained that they had sought assistance from the Navision Support Team to guide the Consular Officer on how to post individual collections to enable a smoother reconciliation.

I advised management to always post the individual collections to the bank to enable reconciliation. b) Non approvals of payments within Navision

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According to the commission cash books generated by the system, payments worth USD 152,191 and FRW 43,970,383 from a local and dollar accounts were not approved by the Accounting Officer even when there was evidence that these payments were actually manually approved before payment was effected. Management could not explain this anomaly and referred this matter to Navision experts at Treasury for further consultation.

I advised management to continue liaising with Navision Support Team at Treasury and have the system issue resolved once and for all. c) Construction of the proposed chancery at Kacyiru Kigali

i. Irregular use of VAT refunds According to one of the (PS/ST) communication dated 11th December 2013, the High commission in Kigali was authorized to utilize VAT refund amounting to USD 101,332 on project activities. The Accounting Officer was also requested to provide a revised implementation schedule showing details of the remaining activities and the cost to end of the project.

At the time of audit, USD 290,172.53 had been refunded indicating that USD 188,836.53 was utilized without the requisite approval by the Permanent Secretary/Secretary to the Treasury. I was also unable to confirm whether the activities on which these funds were spent on had been budgeted for. A revised implementation schedule showing details of the remaining activities and the cost to end of the project was not provided at the time of writing this report.

Management explained that the refund had been utilised in line with Project activities. These included air travel and allowances for the Construction Management Team related to the regular Site Chancery meetings between the Client (Uganda High Commission, the Contractor and the Consultant), Contracts Committee meeting costs related to the various procurement procedures for furniture and security equipment. Management promised to submit a full report on the implementation schedule of VAT refund to the PS/ST once the Chancery construction is completed.

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I advised management to ensure that approvals are sought prior to utilizing the VAT funds. d) Irregularities in the payments to a Supervisor

In June 2009, a supervising company was contracted by Government to undertake consultancy services and supervision of the proposed construction of the Chancellery building at Kacyiru-Kigali at a contract price of UGX.448,400,000 (VAT inclusive). At the time of audit, UGX.369,930,000 (USD 155,644.23) had been paid leaving a balance of UGX.78,470,000. According to special conditions of the contract (page 23), payments should have been effected as per the following schedule;

Table 1: Payment schedule as per the special conditions

Activity to be Comments Fees UGX carried out Provision of 20% Paid against payment request 89,680,000 inception report No. 1 and No 2. Ref MoFA 01 dated 13/11/2010 Feasibility Design 15% Paid against payment request 67,260,000 No. 1 and No 2. Ref MoFA 01 dated 13/11/2010 Scheme Design 15% Paid against payment request 67,260,000 No. 3. Ref MoFA 01 dated 31/05/2011 Final Design and 15% Paid against payment request 67,260,000 Tender No. 3. Ref MoFA 01 dated documents 31/05/2011 Construction 30% Determined at the date of 78,470,000 supervision commencement of construction on 28/03/2013. They had supervised for 7 months as at 4/12/2013 and billed for 7 months. UGX 78,470,000 has been paid based on the assessment. End of defects 5% 0 liability period Total payment 369,930,000

The following were noted; 826

i. Non adherence to special conditions in the agreement According to GCC 8.1 of the special conditions of the agreement the period within which the services may have commenced is June 2010. GCC 18.1 also stipulated that the period within which the services shall have been completed following commencement of the services is 2 years. The above conditions imply that the contract should have expired in 2012. It was however noted that even after the expired contract, the firm went ahead and billed UGX.78,470,000, being construction supervision for the 7 months period supervised (from the date of commencement of construction on 28/03/2013 to 4/12/2013) without an addendum/revised contract terms. At the time of writing this report, the bill had been settled. Ideally, the supervision costs should have been settled after finalization of the construction.

Management explained the procurement process for an addendum to the contract had commenced in consultation with the parent Ministry of Foreign Affairs.

Management effort on the matter is awaited. ii. Failure to Claim for the Tax Refunds No taxes were claimed from payments to the firm worth UGX.148,353,991 thus a loss of government funds.

Management explained that the withholding tax of 6% would be recovered from the firm at the time of effecting the final payment due to them.

I advised management to always deduct taxes considering that embassies are exempted from paying taxes. iii. Failure to trace one of the payments to the firm worth USD 68,288 in the system USD 68,288 paid to the firm being engineering and feasibility design was not posted as a payment in the Navision system. I could not establish how the funds were paid. I explained to management that if this problem is not resolved, double payment cannot be ruled out on future transactions.

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Management explained that they had sought an explanation from the Navision Support Unit regarding the anomaly as to why the payment is not reflected in the system.

I advised management to investigate this anomaly with Navision experts and have it resolve. e) Performance of the Mission

i. Incomplete Mission Charter At the time of writing this report, the mission charter was in a draft form. The Charter outlines the road map that the Mission intends to follow in the future to enable the achievement of its mandate. In the absence of the approved mission charter, there is a risk that the Mission activities are not in tandem with the Uganda Government Foreign Policy. In addition, it becomes difficult to review the performance of the Mission with regard to its strategic goals.

Management explained that in conjunction with the line department of the Ministry of Foreign Affairs, SMART targets had been drawn up in January 2015 reflecting more achievable performance targets. They stated that the draft Mission Charter is pending approval and signature of the Honorable Minister of Foreign Affairs.

I advised management to expedite the approval process and have the charter in place.

81.0 UGANDA EMBASSY, KINSHASA a) Non Tax Revenue a. Unbudgeted Non -Tax Revenue (NTR) – UGX.53,562,240 Paragraph 2(c) of the third schedule of the Public Finance and Accountability Act 2003, requires the Accounting Officer to submit to the Accountant General a statement of revenue received during the year, showing the amount contained in the estimates of revenue for each source of revenue, the amount actually collected, with an explanation for any variation between the revenues collected and estimated. 828

A review of the Embassy financial statements for the year ended 30th June, 2014 (Statement of appropriation account) revealed that the mission collected NTR totaling to UGX.53,562,240 from Passport and Visa entry fees. However, the amount had not been budgeted for by the mission as indicated by the zero amounts in the approved budget column of the Statement of appropriation account. This rendered it impossible to assess the revenue performance of the mission in respect of the NTR and may potentially provide an avenue for misuse of NTR collected.

Although management explained that the Mission budgeted for UGX.41,000,000 as indicated in the work plan (Performance Form A) submitted to Permanent Secretary/Secretary to Treasury, the Work Plan could not be accepted as a substitute for the approved budget. I have advised the Accounting Officer to ensure that all NTR sources are always included in the Mission budget submitted for approval. b. Usage of Visa stickers An analysis of the usage of visa stickers during the year was undertaken during the audit. The comparison of the number of visa stickers issued by the mission and those received from headquarters, showed that there appears to have been an over requisition of visa stickers as shown in the table below;

Table showing analysis of Usage of Travel Documents during the year

Visa Stickers Single Entry Multiple Gratis Emergency Ent Docu ry ment s

Balance b/f 287 0 230 0 Received during the year 1,000 1,450 550 100 Available in the year 1,287 1,450 770 100 Used during the year 357 24 136 4 Cancelled visas 16 3 1 0 Balance 914 1,423 643 96

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The Mission appears not to have properly analyzed its annual visa requirements, thus posing a risk of misuse of a significant number of unutilized visa stickers at year end. I have advised management to always ensure that realistic estimates are always made.

c. Poorly maintained visa records A review of visa records revealed that they were poorly maintained as summarized below:-  For instance, a gratis visa number 16263 issued on 25th April 2014 reflected a sum of USD.15 whereas it should be issued free.  There were cases of cancelled visas, whose cancellation dates appeared earlier than their issue dates, while some visas appeared to have been issued on two different dates.  Some visas posted several cancellations and re-issuances while most of them lacked details of applicants, passport numbers and nationality.  It was observed that there was lack of regular reconciliation of revenue collections and visa stickers. Under the circumstances, there is a risk of miss postings and/or understatement of nontax revenue collection for the year. The Accounting officer attributed the mistakes to the officer who acted in the absence of the Visa Clerk, but that these were rectified, hence the numerous cancellations noted. b) Unauthorized Expenditure - UGX.22,758,031 The Public Finance and Accountability Regulations 2003 (Regulation 39 & 40) require that Accounting Officers adhere to the budgetary allocation per vote or obtain prior permission before an over expenditure is incurred.

However, a review of the financial statements for the year revealed that actual expenditure on employee costs and, goods and services during the period under review exceeded the budget for the two line items by UGX.22,758,031. There was no evidence on file to indicate that authority to overspend was sought from the Accountant General, besides the source of extra funding was not indicated to me. The details are as indicate in the table below:-

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Item Budgeted - Ugx Actual - Ugx Variance - Ugx Employee Costs 959,328,000 963,833,422 4,505,412 Goods & Services 727,398,000 745,650,609 18,252,609 Total 1,686,726,000 1,709,484,031 22,758,031

The Accounting Officer explained that this was due to increased feeding and repatriation expenses in respect of released Ugandans in the absence of alternative means of action. However, the over expenditure on items still exists and remains unauthorized.

The Accounting Officer added that high bank charges and budget shortfall due to exchange rate also contributed to this, and that the Mission had requested for a supplementary funding which was not provided. c) Doubtful Refund of Medical Expenses - UGX.15,841,267 Foreign services Standing Order M-a 14 provides that officers serving with a mission should register with a local National Health Insurance Scheme.

However, there is no evidence that management solicited the services of any medical service provider and consequently, medical refunds totaling USD.6,094.60 (Ugx.15,841,267.158) were made to various mission staff, based on claims that could not be verified due to lack of supporting documents, such as receipts. In the absence of contracted service provider(s) and supporting documents, I could not confirm the correctness and genuineness of the medical refunds.

The Accounting Officer explained that there is no National Health Insurance Scheme in DRC or a credible medical Insurance provider in DRC, and consequently the Mission opted for reimbursement of monies spent on medical services by the various officers, and the Mission had subsequently procured the services of one provider for the Local staff. He added that the Mission has finally contracted an Insurance company during the financial year 2014/15.

The Accounting Officer‟s response that all the claims were accompanied by payment receipts could not be substantiated as the documentation availed did not reflect the payment receipts.

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d) Unspent Balances at the closure of the Financial Year – UGX.761,106,632 Section 54 of the PFAA, 2003 provides that unspent balances at the end of the financial year should be returned to the Uganda Consolidated Fund within 60 days. However, Note 20 to the balance sheet revealed that a balance of UGX.761,106,632, was reflected as cash and cash equivalent at the end of the financial year and verified as follows:-  Revenue account UGX.16,725,811  Expenditure account UGX.633,725,258  Cash at hand UGX.110,655,563

According to the Accounting Officer, these were committed funds in respect of the renovation of the chancery building at Tombalbaye Street, which was ongoing, till the end of October, 2014.

However, there was no authority from the PS/ST allowing the embassy to withhold the unspent balances as explained by the Accounting Officer. In addition, there is a high risk of holding big volumes of cash at hand, given the inherit risk associated with cash, which is highly susceptible to misappropriation.

The Accounting officer explained in his response that keeping large sums of cash at hand was unavoidable, given the fluid security situation in DR Congo, and that the UN had accordingly advised foreign nationals to be on high alert and have adequate cash at all times. e) Unsupported Payments for Education Allowances Section E-e para. 19 of the Public Service standing orders 2010 provides that education allowance be paid direct to the school and reimbursement from the officer for their personal share be made at source. Para 20 of the same standing orders provides for each application for an education allowance to be approved by the Responsible Officer, accompanied by a certification by the Head of Mission in respect of the children‟s details.

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During the period under review, education allowance totaling USD.17,500.00 (Approximately UGX.45,412,500) was paid to staff of the mission. However it was noted that the allowances were paid to the individuals (Mission staff); the period of education to be covered was not stated; and there were no receipts from the schools.

In the absence of the relevant supporting documentation, the possibility that allowances were not paid for the intended purposes cannot be ruled out.

The Accounting Officer explained that the education allowance paid was for the year 2013 and to the two officers who had eligible children whose details were attached. However, whereas details in respect of children were verified, details of school acknowledgment and period of coverage were not indicated. f) Non submission of Quarterly Reports on Procurements and Disposals Section 3.1 of the guidelines for procurements and disposals by missions abroad provides for missions to submit quarterly reports on procurement and disposal to the Authority by the 15th day of the following month using PP Forms 200 and 202 on the micro procurements and DPA Form 201 on disposals. Copies of minutes of the Contracts Committee should also be attached to the quarterly reports.

However, it was noted that management did not comply with the above provision. Failure to prepare and submit the above reports hinders the PPDA from performing its regulatory work over the mission‟s procurements and disposals. The Accounting Officer explained that the monthly returns had always been submitted promptly and consistently and that the mission was finalizing its annual procurement & disposal report for submission. However there was no evidence availed to support the explanation of the Accounting Officer. g) Inspection of Mission Properties An audit inspection of the mission properties on 15th August 2014 revealed that Uganda has two properties in Kinshasa, which included a residence currently hosting the chancery at Avenue De L‟ouganda, Q/Petit Pont, commune de la Gombe, and the former chancery at 17 Avenue Tombalbaye.

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 Plot 17 Avenue Tombalbaye This was the former chancery built in the 1970s. It is a storeyed building comprising four apartments and an office space. The building was vandalized during an attack by the security forces of the Democratic Republic of Congo at the helm of the severe relationship between the DRC and Uganda in 1997. The structure is dilapidated with a leaking roof, shattered floor, and services, such as: electricity, water, and fire-fighting and warning system are all broken down requiring a major overhaul.

At the time of inspection, the property was undergoing renovation and refurbishment, at an estimated cost of USD.1,438,333, inclusive of tax. The works were expected to last 12 months from 8th October, 2013 to 7th October 2014, but this date was revised to 31st December 2014. A total of USD.453,653.47 had been paid to the contractors as summarized in the table below:

Description Activities Cost in USD Percentage FY2012/13 Procurement Process 48,506.06 11% FY 2013/ Advance payment paid 247,,988.40 55% 2014 Contractor s bills 80,809.98 18% Administrative costs 76,349.03 16% TOTAL COST TO 30 JUNE 2014 453,653.47 100%

Inspection of the building revealed that works were at wall plate level, which represented a 60% progress, according to the project report dated 15th May 2014, and payment progress stood at 22.9%. Given the reported progress, there is a high possibility that the project will not be completed within the estimated time.

 Property at Avenue De L‟ouganda-Gombe The premise currently accommodates the Chancery, but is supposed to be the official residence of the Ambassador. The Ambassador is currently being accommodated in rented premises. It is proposed that, with the completion of renovations, the chancery will relocate to its former premises, which will also accommodate the mission staff, and the Ambassador relocates to his official residence.

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However this may expose the mission to the following risks as the premises are in a commercial area:-  It is dangerous and risky for all staff to be under one roof in case of a terrorist attack or accident.  Mixing office and staff residences may infringe on staff privacy.

In response, the Accounting officer explained that management had proposed to the Ministry that the Mission stays at its current location, secures land for construction of official residence elsewhere and rent out part of the premises at Avenue Tombalbaye, to generate revenue. h) Un-Disclosed Outstanding Debt Obligation – UGX.5,957,614 A review of the financial statements revealed payables of UGX.131,225,090 as at 30th June 2014. These are gratuity arrears in respect of the former mission staff. Further review of documents revealed that a local workers‟ social security fund organization (INSS) and a local professional workers body (RPS) were demanding a sum of USD.2,291.39 (UGX.5,957,614) being workers‟ contributions as indicated in the table below:- GRATUITY OF FORMER STAFF-INSS NAME INSS-3.5% RPS-10% NET AMOUNT DUE Mukendi Mbuyi 153.33 428.26 14,513.90 Mbikayi Katshimuena 102.52 282.66 9,77.07 Senkunja James 109.35 301.51 6,577.00 Ditina Matondo 84.80 233.61 5,614.39 Bofoyo Eyenga 49.21 135.67 4,804.86 Muhunda Mudiwa 30.74 84.76 3,524.81 Bantoka Mafuta 35.57 98.08 2.33.31 Moboti Jean 24.23 66.81 1,877.15 Michel 18.17 50.11 1,461.65 TOTAL 609.92 1,681.47 USD 50.486.14

N.B: 2,595* USD.50,486.14= UGX.131,225,090

The failure to provide for the omitted staff contributions and their eventual settlement exposes the mission to the risk of litigation by the workers‟ organizations.

The Accounting officer explained that the staff gratuity had been erroneously computed, omitting the above obligations, hence their omission from the Balance 835

sheet. He added that the deductions of USD.1,681.47 due to RPS cannot be remitted as the union ceased to exist, and that USD.609.92 due to INSS will be budgeted for in 2015/16.

82.0 UGANDA HIGH COMMISSION, LONDON a) Utilization of NTR at Source Paragraph 94 of Part I, of the Treasury Accounting Instructions, 2003, prohibits collectors of revenue from utilising cash collected for any purpose whatsoever unless otherwise authorised in writing by the Accountant General. The High Commission utilized at source GBP 141,547.06 (UGX.627,335,154) out of the Non-Tax Revenue (NTR) collection to renovate the Official Residence and to rent an apartment (GBP 30,266.43) for the High Commissioner for a period of five months, during renovations.

The utilization of NTR at source lacked the requisite authority and was therefore irregular.

Management stated that urgent renovations were required at the Official Residence of which funds had been requested from the Ministry of Finance, Planning and Economic Development (MoFPED) without success.

I advised the Accounting Officer to always seek authority before spending NTR at source. b) Unauthorized Over Expenditure Regulation 37(b) of Public Finance and Accountability Regulations, 2003, requires Accounting Officers to ensure that the provision for services as authorized by accounting warrants are not exceeded, and they are held personally responsible for any excess expenditure that is incurred without proper authority.

A review of expenditure of the High Commission revealed that there was over expenditure of GBP.104,024.91 (UGX.461,037,361) on various budget line items without seeking appropriate authority in form of reallocations or virements. The practice undermines the intentions of the appropriating authority.

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Management indicated that requests for reallocation of funds to MoFPED were not responded to.

I advised the Accounting Officer to always ensure that the operations of the High Commission are within the accounting warrant or else authority to spend over the budget is sought before release of funds. c) Assets of the High Commission The High Commission possesses buildings namely the Chancery, Official Residence and 189 Wardour Street, whose conditions were as follows;

a) Chancery – Uganda House The Uganda House, 58-59 Trafalgar Square WC2N 5DX was renovated prior to inspection. The building is occupied by the Chancery and partly let out to other tenants. The inspection of the Chancery revealed the following;  Although the Chancery was in a habitable state, it required furnishing of the reception area which lacked furniture.  The Chancery requires security locking systems, given the terror threats around the world.

I have advised management to plan and budget for furnishing of the reception and installation of security systems at the Chancery.

b) Official Residence The Official Residence, at 30 Ingram Avenue, whose roof had been repaired during the financial year, was in a fair condition, relatively habitable although the following issues were noted during inspection:  The carpet was in poor condition following the previous water leakages into the house.  The residence lacked security systems like Closed-Circuit Television (CCTV) cameras to improve on security around the residence.  The furnishing at the residence was old and inadequate especially at the kitchen area.  The water, drainage and heating systems were not functioning properly.

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Through interaction with the staff at the High Commission, it was observed that the renovations were being carried out in phases without taking into account the interconnection of various systems of the structure. This resulted in deterioration of the renovated parts requiring repeat repairs in the same areas within a short time. The status of the building portrays negatively the image of the High Commission and the country at large.

Management explained that they had already notified the property committee in the Ministry of Foreign Affairs of the required works and repairs.

I have advised management of the High Commission, to continue engaging the relevant Ministries and plan for the holistic renovation of the Official residence as opposed to piecemeal works.

c) Property at 189 Wardour Street The High Commission owns a commercial property at 189 Wardour Street, housing two tenants. A review of the tenancy documents indicated that the High Commission earns rent of GBP.70,000 per annum, payable in quarterly instalments of GBP.17,500. The High Commission was scheduled to undertake a tenancy review in March 2014, however by the time of audit (October 2014), it had not been undertaken. The High Commission is likely to be charging lower rates in comparison with the market rates.

Management explained that the rent review process, was already underway and all parties had been notified. The process was expected to be concluded by end of March 2015.

I have advised management to expedite the tenancy review process so as to ensure improved NTR collections for the High Commission.

83.0 UGANDA EMBASSY, MOSCOW a) Receivables Included in the reported receivables of UGX.166,819,839 is UGX.46,827,823 (Euros 13,608.72) that was advanced to UPDF students during the year under 838

review. It was noted that the students‟ money had been remitted to a separate bank account operated by the Defence attaché. A refund was not made to the Embassy‟s Account to enable it execute the planned activities by the end of the financial year. As a result, the money was regarded as unspent balances and returnable to the Consolidated Fund. Meanwhile payables of UGX.8.6million remained outstanding.

The payables would have been cleared by 30th June, 2014 if the UPDF students had been paid using the funds meant for them.

The Accounting Officer explained that the funds were remitted by the Ministry of Defence to the Defence Attaché‟s account to urgently facilitate the students‟ travel back to Uganda after graduation. She attributed the anomaly to the Defence Attaché‟s failure to transfer the funds to the Embassy‟s account on time.

I advised Management to ensure proper planning for the students‟ facilitation to avoid similar scenarios in future. b) Unplanned Procurements Paragraph 6 of the Procurement Guidelines for Missions, 2008 requires missions to prepare annual procurement plans based on the approved budgets and work plans in accordance with PPDA Regulation 96 of the PPDA Regulations and submit them to the Authority before the end of the first quarter of the Financial Year.

On the contrary, RUB. 746,686.25 (Approx. UGX. 55,553,457) was paid for procurement of assorted items during the financial year without a procurement plan. Adhoc procurement activities expose the Embassy to the risk of acquisition of non-priority items.

Management indicated that the Embassy used a procurement guide for the year under review. However, due to the unique market environment in Russia, it was rather difficult to attach prices to the items in advance.

I advised Management to always prepare procurement plans in accordance with the budget.

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c) Failure to Translate Documents It was noted that a number of key supporting documents availed for verification had not been translated from Russian to the English language contrary to Section (P-b) (7) of the Public Service Standing Orders which states that “If an officer receives documents written in a language other than English and it is necessary to refer such documents to other departments or officers, he or she should arrange for the documents to be translated by a designated translator or professional and for such translations to be available to other interested departments and officers”. This therefore rendered understanding of the expenditure and the supporting documents difficult.

Management acknowledged the language challenge, and indicated that the Embassy recruited a translator who doubles as a front desk officer but he is overwhelmed with the volume of translation work.

I advised management to ensure that key supporting documents are always translated into English.

84.0 UGANDA HIGH COMMISSION, NAIROBI a) Lack of audited accounts for Uganda House Clauses 2(k) and 9 (f) of the 3-year Property Management Contract with a local property management agent requires the maintenance of proper books of accounts and the audit thereof for Uganda House Ltd. However, audited Financial Statements for the period to 30th June 2014 were not available for review at the time of audit of the High Commission. In the circumstances, there is a risk of under declaration of rental income by the property manager.

Management explained that the High Commission was in the process of procuring an audit firm to carry out the audit of Uganda House Ltd.

I have advised management to ensure that the terms and conditions of the Management Contract are enforced.

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b) Old Utility Van The Mission owns a 2006-Model Mercedes Benz Utility Van which was acquired in 2010. At the time of audit inspection, the vehicle had been in use for over 5 years and had an Odometer reading of 327,083 Km.

Using the vehicle for more than five years and beyond the recommended 200,000 Km does not only make it uneconomical to maintain, but also exposes the Mission to reputational risk.

Management in reponse explained that purchase of the van was provided for in the budget for the financial year 2014/15 as part of capital development, but the funds were not provided.

I have advised management to take up the matter with the Line Ministry with a view to replacing the Van. c) Outstanding Staff Advances The reported receivables of UGX.44,644,765 represent funds advanced to staff in the financial statements as far back as 2009/10 financial year. However, the funds had not been recovered by the time of audit. There is a risk that the money may never be recovered.

Management indicated that they had communicated to the concerned officers with a view to recovering the funds.

I have advised the Accounting Officer to recover the advances from the officials‟ salaries and allowances. d) Non-submission of Quarterly Procurement Reports to PPDA Paragraph 3.1 of the Mission Procurement Guidelines, 2008 require Missions to submit quarterly reports on procurement and disposal to the PPDAA by the 15th day of each month for the previous month on macro procurements, the micro procurements and disposals using appropriate forms with copies of minutes of the Contracts Committee attached thereto. However, no reports were submitted to the

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PPDAA during the year under review. In the circumstances, the Authority is denied vital information necessary for the proper planning of periodic compliance inspections.

Management in response acknowledged the anomaly and undertook to comply with the PPDA laws and guidelines by submitting the reports as required.

I await management‟s action in this regard.

85.0 UGANDA HIGH COMMISSION, NEW DELHI a) Advances

Through a review of the financial statements- Note 21: Receivables, it was noted that UGX 2,409,158 related to staff advances- in the form of their share of utilities bills. This amount however should have been retired by the end of the financial year as is the case for all advances given.

Management acknowledged this weakness and indicated that the staff advances were cleared in the next financial year (2014/15).

I await evidence of the action taken by management b) Procurements

A procurement plan was not prepared. In addition, all the procurements during the year under review were not requisitioned on a PP Form 20. In the absence of a procurement plan, there is a risk of making unplanned and procurements not based on the needs of the Embassy.

In addition, management did not prepare quarterly reports on procurement and disposal as is required by the PPDA guidelines.

Management acknowledged these observations and promised to prepare the reports regularly as required by the PPDA Regulations.

I await evidence of the action taken by management.

842 c) Contracts Committee

Although the Mission had a Contracts Committee and had requested the PS/ST as is required of the Public Procurement and Disposal of Public Assets (PPDA) Regulations to formally appoint this committee, there was no evidence that the proposed committee had been formally approved by the PS/ST. In addition, the contracts committee was also doubling as the evaluation committee which is contrary to the procurement regulations.

I advised the Mission to follow up with the PS/ST regarding formal approval of the Contracts Committee and segregate the contracts committee from the evaluation committee. d) Fixed asset register

The Mission does not maintain a comprehensive fixed assets register. Fixed asset register should show item, date of purchase, value, location, condition, identification number and status for ease of identification and decision making. Although the register maintained included some details like date of purchase, quantity, description, amount, it was not regularly filled. The absence of a comprehensive fixed assets register exposes the Embassy‟s assets to the risk of their loss without detection.

Management acknowledged these weaknesses and promised to have the ledger properly maintained.

I await evidence of the action taken by management.

86.0 UGANDA HIGH COMMISSION, OTTAWA a) Performance Report The Accounting Officer under section 14 of PFA is supposed to carry out regular review of embassy operations and establish whether the operations are being carried out as planned for the year. The end of year performance report was not presented for audit verification.

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In the absence of the performance report, it was difficult to establish whether the mission activities had been implemented as planned.

In addition, it was difficult to link the mission, financial performance to the planned activities and outcomes.

The Accounting Officer regretted the failure to avail the end of year performance report for audit verification but promised to ensure that the performance reports are in future prepared in a timely manner and presented for audit verification.

I advised the Accounting Officer to ensure that performance reports are regularly produced and presented for audit verification. b) Official Residence It was observed that work for the renovation and improved security at the official residence had not yet commenced despite the promise from the accounting Officer that civil works would commence during the year under review. This is an indication that the Mission activities may not have been under taken on schedule and according to work plans. The Accounting Officer explained that the pre-renovation works did commence with the technical team undertaking necessary analysis/ measurements and preparing a report specifying the specific courses of action to guide the official renovation project. In accordance with the Canadian regulation, Peterson Group Inc. Consulting Engineers firm was contracted to undertake the detailed study to determine the presence of designated substances such as asbestos containing materials like lead paints which are harmful to human and the study report revealed presence of designated substances which are hazardous to humans. In addition, the land at 235 Mariposa Avenue was surveyed and the report submitted to the Ministry of Foreign Affairs to facilitate the preparation of the draft architectural drawings.

The draft architectural drawings prepared by Government of Uganda Technical Team were subsequently submitted to a Canadian Architectural firm for review in compliance with the Canadian building guidelines that require all architectural

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designs prepared by non-Canadian Architects to be endorsed by Canadian Architects before submission to relevant authorities for approval. This firm has advised Mission that the “working budget for renovation is Canadian Dollars CAD$ 2.2 million and CAD$ 3.0 Millions for construction of a new building including landscaping, fencing, hard surface, pool and pool house”. This working budget estimate leaves a funding shortage of more than Canadian Dollars CAD$ 1.8 Million for renovation and CAD $ 2.7 million for construction of a new building for the official residence.

After analyzing Canadian laws and historical changes I construction industry , the three levels of laws that govern environment and standards of structures in Rockcliff Village Park as well as the structural state of the Official Residence, LineBox Studio recommended that demolition and reconstruction of the residence was more viable. The cost of demolition and construction of a new building is almost the same as that of renovation. Renovation could end up being even more costly because of the unknown conditions that may be discovered after renovation has started. Should renovation be chosen as the preferred option, there are high chances of ending up with an increment in the funds spent and loss of opportunity to build a residence where government shall save costs in the long term.

Given the preliminary technical advise on the cost-benefits analysis implications by the firm, the Mission is liasing with Ministries of Foreign Affairs and that of Finance, Planning and Economic Development with a strong recommendation that it is in our strategic interest to demolish and redevelop the current official residence building to minimize on spending additional resources for renovation in the long-term.

The matter requires urgent attention.

87.0 UGANDA EMBASSY, PARIS a) Inadequate Funding for the Embassy activities The Uganda Embassy in Paris is accredited to France, Spain, Portugal as well as Permanent Mission to UNESCO, OECD, and BIE. It was also observed that on a 845

number of occasions, the Embassy received state guests who had to be catered for in terms of transport as well as facilitating the Embassy staff to perform extra activities during such visits. Review of the budget ceilings and releases to the Embassy revealed that over the past five years, a total of UGX.14.146 billion had been released to the Embassy (average of UGX 2.8 billion per year). This is against the management of the Embassy regarded as adequate to cover all planned activities at UGX.20,722,200,967 over the same period. The following were noted; i. Inadequate Budget Provisions The Embassy annual budget ceilings were observed to be grossly inadequate compared to the planned activities. For example, the level of funding during the financial year only allowed the embassy to partially cover routine payments without adequate provisions to facilitate the officers to implement planned activities especially those that involved traveling to other countries. During the financial year, the routine payments which include allowances, salaries, medical insurance, utilities and rent consumed UGX.2.567 billion (90%) out of the UGX.2.853 billion received by the Embassy. This may lead to ineffective representation of the country by the Embassy in the three countries and other organisations.

ii. Unpaid Salaries Salaries for the month of June 2014 were not paid until the release of first quarter of 2014/15 financial year was received. This continued to affect the subsequent payments because at the time of audit in mid-September 2014, there was no money to pay September salaries and Foreign Service allowances.

Non-payment of salaries on time may affect the staff performance due to the high cost of leaving experienced in France. iii. Unfunded Priorities A number of priorities remained unfunded: . Renovation of the chancery; . Procurement of representation car; . Replacement of the utility car; . Furnishing the official residence; 846

. Security installations at the chancery.

Inadequate provision of funding to the Embassy to finance priorities affects the achievement of Embassy objectives. Security installations at the chancery were of great concern given the location of the Chancery and the current worldwide terror threats. Review of payment records also revealed that there were frequent disconnections of communication (Wi-Fi, TV, and phones) due to non-payment which inconveniences the users.

The Accounting Officer explained that the Embassy had received funds for replacement of the vehicles and budgets for other priorities had been submitted for consideration during the following financial year.

I have advised management to liaise with the Ministry of Finance and provide adequate funds to finance the Embassy‟s priorities and to facilitate officers to effectively perform their duties in all the accredited countries and organisations. b) Routine Payments not supported with schedules The Embassy makes routine payments in respect of salaries, rent, insurances and medical expenses. It was noted that contrary to the provisions of paragraph 181 of the TAI which requires all payment vouchers to be accompanied by supporting documents, the payment vouchers for all routine payments made during the year lacked the required supporting documents, such as approved schedules and payrolls. There is a risk of duplicating the payments.

The Accounting Officer explained that the Embassy had started on preparation of payment schedules that are approved by the Finance Committee before any payments are effected.

I have advised the Accounting Officer to ensure that payment vouchers for routine payments are always fully supported with the necessary supporting documents. c) Approval of Contracts Committee composition Section 27 (2) of the PPDA Act, 2003 states that the members of the Contracts Committee shall be nominated by the Accounting Officer and approved by the 847

Secretary to the Treasury. However, it was noted that the term of old Committee had expired and communication for constitution of a new committee made in July 2014.

At the time of audit, the approval by the Secretary to the Treasury had not been granted but the proposed members were conducting procurement business. This was irregular and the decisions of these members could be challenged.

The Accounting Officer explained that management would continue to follow up with the PS/ST for approval of the committee.

I await the outcome of the Accounting Officer‟s action. d) Non-remittance of Non-Tax Revenue (NTR) It was noted that the Embassy collected a total of UGX.269,280,450 in form of Non-tax Revenue during the financial year. However audit of the same revealed that contrary to the Government Standing Policy that requires all NTR to be remitted to the Uganda consolidated fund account, there were no transfers to the UCF. Although in some cases the Embassy management wrote requesting to use the funds, citing pressures of inadequate releases and effects of loss on poundage, there were no responses.

There are associated risks of not remitting the money such as spending the money by the Embassy.

I advised the Accounting Officer to follow up with the PS/ST and ensure that request to utilise NTR at source is properly authorised. e) Staff Matters a) Absence of ideal staff structure for the Embassy The Embassy is accredited to three countries of France, Spain and Portugal and as well as Permanent Mission to UNESCO, OECD and BIE. Effective representation in these countries and organisations requires a number of staff to be deployed at the Embassy. However, it was noted that the current structure of 1 + 3 officers,

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Accountant and Administrative Attaché is not adequate to allow effective representation.

There is a risk that the Country may not be well represented in the three countries and the three organizations under the jurisdiction of the Embassy.

The Accounting Officer explained that consultations were on going with the Ministry of Foreign Affairs to improve the staffing levels of the Embassy but that this was limited by the budget constraint. I await the outcome of the consultations with the Ministry.

b) Lack of staff performance plans and appraisal The Public Service Standing Orders paragraph 12 of section A-M states that the performance appraisal system shall involve: a) Performance planning b) Continuous performance monitoring c) Performance assessment/evaluation and d) Performance improvement. However, it was noted that;  There were no performance plans for the Embassy staff for the year under review.  There was no evidence of staff performance monitoring, and  Review of staff personnel files at the Embassy revealed that the staff were not being appraised/assessed annually. Appraisals that are conducted long after the required dates and not linked to the annual performance of staff cannot be used for staff performance improvement.

I have advised the Head of Mission to ensure that staff performance management is undertaken for all staff of the Embassy. f) Status of Government assets a) State of the Chancery An audit inspection revealed that the Chancery building has neither had routine and periodic maintenance, or major renovations in the recent past. As a result, it

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was in a poor state requiring substantial provision of funds to have it repaired. Periodic and routine maintenance activities are required because of the weather conditions which affect buildings, absence of which leads to faster deterioration of the structure and facilities.

There is a risk that continued lack of routine and periodic maintenance activities coupled with delayed renovations will make the building inhabitable and be condemned by city authorities.

The Accounting Officer acknowledged the poor condition of the chancery and explained that, a request to utilise the rental income paid by the Tanzanian Embassy to renovate and prepare the premises for a new tenant had been made.

I have advised management to provide for adequate funds in the Embassy‟s budget for maintenance and renovations and to follow up their request to utilise the rental income for urgent interventions on the building.

b) Lack of Furniture and fittings for the official Residence The Public Service Standing Orders, under Section 11-e, provides for provision of a fully furnished Official Residence for the Head Mission. It was however noted that the rented official residence was not furnished contrary to the requirements of the Public Service Standing Orders. Instead the Ambassador had provided herself with most of the household requirements (furniture, fittings and other equipment) but with visible lack of others or use of old ones.

The Accounting Officer stated that they were going to follow-up the matter with relevant authorities and ensure that the furnishing of the official residence is done.

I have advised management to budget for the required furnishings and ensure that the follow up is done.

88.0 UGANDA HIGH COMMISSION, PRETORIA a) Rent

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The mission incurs a monthly rent of R 43,200 ($ 43,200) for renting accommodation for the home based staff as follows: Landlord Accommodation rented for Amount per month 1 Catherine Susanne Administrative attaché R 7400 2 Broadways Accounting officer R 11,500 3 Dream works Financial attaché R 8600 4 Ditto Third secretary R 9200 5 Ron mark Second secretary R6500 Total R 43,200

This translates into an annual rent 0f R 518,400 ($51,840) equivalent to UGX 126,577,728 would have been saved if efforts are undertaken to acquire own residential properties.

In a written response the Accounting Officer explained that the Mission has engaged the Ministry of Foreign Affairs (MOFA)on the issue.

I have advised management to follow up the matter with the Ministry of Foreign Affairs to ensure that the mission acquire its own residences for its staff. b) The Chancery a) Condition of the Building

Documentary review file regarding the chancery revealed that it was acquired on 25th January 2001 at R, 1,424,000 equivalent to UGX 347,698,080. However since that time its maintenance has been minimal due to lack of sufficient funds in the annual budget allocations.

Its condition requires repair and renovation to save it from further deterioration. For example some of the floor and roof tiles are getting off and the interior wall require painting.

In a written response the Accounting Officer stated that the Ministry of Foreign Affairs was aware of the condition of the chancery and has indicated that funds will be availed in the financial year 2015/16 for its renovation. 851

I urged the Accounting officer to follow up the matter with the Ministry Of Foreign Affairs so that the requisite funds are provided for in the budget.

b) Security Although the chancery has electric steel gates at the staff and visitors entrances and the building fitted with an alarm system there are no CCTV cameras, provision of access control readers and other devices that enhance security. There is a risk that sophisticated security threats may not be adequately prevented and handled.

It was observed that the mission has raised the matter with Ministry of foreign affairs to be allocated funds so that the security at the mission can be strengthened.

In a written response the Accounting Officer promised to follow up the matter with the Ministry Of Foreign Affairs and Ministry Of Finance, planning and Economic Development.

I urged the Accounting officer to follow up the matter with Ministry of foreign Affairs (MOFA) and Ministry of finance planning and economic development (MOFPED) for financial support so that the chancery is adequately secured. c) Renovation of the Official Residence There is a commitment to pay for renovation works going on at the official residence amounting to R 7,261,116.92(UGX 1,772,946,918) and consultancy fees of R 508,098 (UGX 124,062,289) that will fall due in September when the works are expected to be completed. So far R 2,241,163.67(UGX 547,224,933) has been paid leaving a balance of R5, 448,391.25(UGX 1,330,333,692). According to the site meeting held on 20 August 2014 the contractor is committed to complete on the scheduled date of 18 September 2014.

It was observed that the mission has only R 3,071,235.99(UGX 749,903,692) available which is not enough to clear the obligation when it falls due. Unless

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funds of R 2,378,155.26(UGX 580,674,170) are provided this may result in a domestic arrear.

According to the Accounting officer the renovated residence will also require furniture befitting it, rebuilding of the perimeter wall and strengthening of security which have not been provided for.

In addition, reply the Accounting Officer explained that the Mission was following up the matter with the Ministry Of Foreign Affairs and the Ministry Of Finance, Planning and Economic Development.

I urged the Accounting officer to follow up the matter accordingly.

89.0 UGANDA EMBASSY, ROME a) Over Release of Funds by EURO 39,562.96 EURO 39,562.96 was credited on the embassy operational account on 18/09/2013 and was drawn 18 days later (03/10/2013) without the knowledge of either the Accounting Officer or Head of Mission, the substantive signatories to the account. The source and the purpose for which the funds were released could not be disclosed at the time of writing this report.

Management explained that when this anomaly was discovered, the Accounting Officer notified the Head of Mission as well as the Accountant General seeking guidance on the purpose of the funds. As due diligence was on-going, the funds were removed from the Embassy account and made available to the account of the agriculture attaché without the knowledge of the accounting officer or the Head of Mission.

I advised management to establish the source of the funds and how these funds were eventually utilized. b) Navision System Issues The procedure under the Navision system requires that before any payment is made in Navision, the Accountant posts the invoice details of a vendor and 853

payment details for the Accounting Officer initial approval. The Accountant then pays the invoice either by cash or bank. The payment is then resent to the Accounting Officer for final approval. At this level the payment is posted to the General Ledger from which the cash book is generated. A review of the cash book generated from the system revealed the following anomalies;

a) Lack of Vendor/payee details The cash book generated from the system lacked a vendor/payee yet these details are posted at the time of entry of the document. This gap hindered the audit process as it required me to drill the particular payment within the system one at ago.

Management explained that the system cashbook in Navision was limited in detail and could not show certain entries. Management promised that in the upcoming Navision training at the Ministry of Finance, the Mission will raise this anomaly and many more related to Navision. I await the outcome of management effort.

b) Non approvals of payments within Navision According to the cash book generated by the system, 61 payments worth EURO 31,026.66 were indicated as having not been approved by the Accounting Officer even when there was evidence that these payments were actually approved before payment was effected. Management could not explain this anomaly and promised to liaise with Navision support team at Treasury.

I advised management to continue liaising with Treasury and have the system issue resolved once and for all. c) Legal fees a) Former Accounts Assistant A former Accounts Assistant who misappropriated petty cash of EURO 5,185 and unbanked NTR funds of EURO 2,456 all totaling EURO 7,641 (refer to the report to Parliament for the year ended 30th June 2011) was terminated and the officer proceeded to court for wrongful dismissal. In 2012, the court ruled in the Embassy‟s favour and ordered that the funds earlier misappropriated be refunded.

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In 2013, the officer took the embassy to court again this time for unpaid retirement package (Severance package) and the court awarded her EURO 9,527.47. This was based on the fact that once a local staff has been terminated, Severance package has to be paid regardless of the reason of termination. The embassy legal officer claimed EURO 4,700.00 as legal fees. At the time of audit, this case was yet to be resolved. A follow up of the misappropriated funds is also awaited.

b) Former Cook for the Ambassador A former cook of the Ambassadors official residence was hired in February 2010 and services terminated shortly on grounds that she had not been cleared by security from Kampala. The former cook sued the Embassy for non-payment of severance pay and INPS for the entire period of her service. At the time of writing this report, this case had not been resolved.

c) Accident vehicle It was further noted that one of the embassy car attached to the Agricultural Attaché while being driven by a temporary driver (not an official driver) was involved in an accident. At the time of the accident, this car lacked a 3rd party insurance and therefore should not have been on the road. The insurance had expired 3 months prior to the accident. At the time of inspection, the embassy had been sued for involvement in the accident and failure to pay 3rd party insurance of EURO 712. EURO 400 had been paid to the embassy lawyer as legal fees to handle the case whose outcome had not been established at the time of writing this report.

Management explained that in all the above instances, Ministry of Finance and that of Foreign Affairs have been notified of the cases. Management promised to follow up on all the legal matters to conclusion.

Management follow up on the legal matters is awaited. d) Embassy space

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An inspection of the embassy offices and ambassador‟s residence revealed that there was limited space and or store to accommodate a number of procurements undertaken during the year. The corridor to the accounting office and the Agriculture Attaché office serves as a store (see picture below), similarly, the Accounting Officers office served as a store to stationary and other promotional items. There was no board room to facilitate a number of meetings with business community. There was a small reception that could only accommodate two visitors at a time. In the process, the corridor was used to accommodate the extra visitors. There was also no car packing space for the embassy cars as the embassy staffs were competing with the local population for packing space on the street.

An inspection of the ambassador‟s residence further revealed that the procured items worth EURO 3,015.50 mostly furniture for the ambassador‟s office (Sofa set, Meeting table and chairs, functions chairs etc.) were being stored at the ambassador‟s residence garage (see the picture below); Since the assets are not being secured in an ideal environment, the risk of loss of value is evident.

Corridor serving as a store Accounting officers office serving as a stationary store

Furniture stored at ambassador‟s Furniture stored at ambassador‟s residence residence

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Management explained that the Embassy identified suitable premises for the Chancery in August 2014 but was informed that there were no funds to effect the move. Management promised to continue to engage Ministry of Finance with a view of securing funding for this purpose.

I advised management to continue liaising with Ministry of Finance, Planning and Economic Development with a view of securing a good working environment befitting the status of an embassy. e) INPS Arrears INPS is a social contribution paid by the embassy on behalf of the non-diplomatic staff. EURO 62,824.81 was appropriated and released to cater for this contribution. During the year under review, a sum of EURO 62,686 was paid to the INPS office to cater for the above expenditure. At the time of inspection, INPS for the month of May and June 2014 worth EURO 7,982 (UGX 28,735,200) had not been paid and were still outstanding. Management risks paying fines and penalties if the outstanding INPS is not cleared on time.

Management explained that the two (2) months arrears will be paid in Q2 of 2014/15 financial year.

I advised management to ensure that the arrears are paid to the INPS office to avoid eventual penalties. f) Ambiguous targets I noted that almost all the targets set in the mission charter appeared ambiguous and could therefore not be achieved. See the comments in the table below: Comments 1 Promote at least US$ 50m worth of This target cannot be achieved Uganda exports to Italy because a number of exhibitions intended to be carried out could not be achieved because of the limited budget.

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Comments 2 Lobby Italy‟s annual inward investment Statistics at Ministry of Trade of at least US$ 100m indicate that very few investors were attracted from Italy. A lot more has to be done to achieve this target. 3 Facilitate attraction of at least 30,000 Only 504 Visas were issued by tourists from Italy. the embassy during the year under review. 4 Lobby for at least US$ 20m worth of Interactions with investors were budget support from Italy. therefore limited because of the resources. 5 Lobby for at least 20 Rome scholarships Can only be achieved if inland for Uganda students annually. travel, fuel and allowances are up graded. 6 Handle at least 50,000 requests for Management could not explain consular services annually how this target can be achieved. 7 Identify and facilitate acquisition, This target is likely not to be development and maintenance of at achieved considering the capital least one Government property in development budget of only Rome annually. UGX 150,000,000 only during the year under review.

I also noted that the Ministry responsible in setting the targets did not consult the mission on the set targets. Besides, the activities of the 9 (nine) countries and 3 (three) Organizations accredited to the embassy were not included in the mission charter. The excluded countries and Organizations include; Malta, Greece, Serbia and Montenegro, Macedonia, Croatia, Cyprus, Slovenia, Albania, Bosnia and Herzegovina FAO, WFP and IFAD.

Management took note of the challenges involved in attracting inward investment, promoting exports and lobbying for budget support and many others with limited funds. Management however promised to continue engaging Ministry of Finance, 858

Planning and Economic Development to enhance the ceiling of the Mission. Management also indicated that with only EURO 30,000 remaining (after deducting rent, FSA, Salaries for local staff, INPS (NSSF)), it is almost difficult to achieve the above set targets.

I advised management to liaise further with the responsible Ministry and have achievable targets revised in consultation with the mission management.

90.0 UGANDA EMBASSY TOKYO a) Mission Charter The Mission Charter shows the strategic direction of the Embassy. At the time of inspection in October 2014, the approved charter availed was dated 16th Apr 2014. The charter for the part of the period under audit that is July 2013 to April 2014 was not seen. It was also noted that although the charter had key outputs, performance indicators, and targets and required the Embassy to make quarterly progress reports, the quarterly reports availed did not include a measure of the extent of achievement of the output targets as indicated in the charter though they indicated the activities the Embassy had undertaken in the respective quarters.

In the absence of progress being reported in line with the measurable targets, it may not be possible to monitor and assess progress on the strategic objectives of the embassy.

I have advised management to report in line with the mission charter and indicate extent of achievement of the strategic objectives so as to aid in monitoring the performance of the charter. b) Unspent Balances Regulations require that all unspent balances should be returned to the Uganda Consolidated Fund (UCF) at the end of the financial year. Through a review of the financial statements, it was noted from the Statement of Financial Position, that 859

the Mission had an unspent balances of UGX. 604,281,310. Of this, UGX 590,002,808 had been remitted back to the Treasury on 30th June 2014, but still recognized in the financial statements as part of Cash in Transit. I was not provide with evidence of the remittance done by the Embassy.

I have advised management to accordingly adjust the financial statements upon confirmation of the remittance. c) Collection & Accounting of Non Tax Revenue During the year, the embassy received JPY 6,660,812 (equivalent of UGX 169,140,355) as NTR. It was noted that the embassy receives this money in cash and in many cases, there were delays in banking it. For example, although there were NTR transactions between 11th Dec 2013 and 31st Jan 2014, there were no bankings made in this period. The bankings also made in some cases were in portions. With this practice, the likelihood that the NTR is used at source and later reimbursed (teeming and lading) cannot be ruled out and this may lead to misappropriation of embassy funds.

Management explained that to ensure proper accountability, the Accounting Officer reconciles the actual NTR with the NTR on the system before banking and in some cases because the Accounting Officer is attending to other Embassy matters, the reconciliation and banking had been delayed.

I advised management to put in place checks and balances to ensure the NTR is banked intact and immediately as required. d) Procurements A procurement plan was not prepared. In addition, all the procurements during the year under review were not requisitioned on a PP Form 20. In the absence of a procurement plan, there is a risk of making unplanned and procurements not based on the needs of the Embassy.

In addition, management did not prepare quarterly reports on procurement and disposal as is required by the PPDA guidelines.

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Management acknowledged these observations and promised to prepare the reports regularly as required by the PPDA Regulations.

I await evidence of the action taken by management. e) Fixed asset register and stores ledgers The Embassy does not maintain a comprehensive fixed assets register and a stores/inventory records/ledger. Fixed asset register should show item, date of purchase, value, location, condition, identification number and status for ease of identification and decision making. Although the register maintained included some details like date of purchase, quantity, description, amount, it was not regularly filled. The absence of a comprehensive fixed assets register exposes the Embassy‟s assets to the risk of their loss without detection.

Management acknowledged these weaknesses and promised to have the ledger properly maintained.

I await evidence of the action taken by management.

91.0 UGANDA EMBASSY, TRIPOLI a) Rent A total of EUR.113,586 paid to various land lords as rent for residences and chancery lacked copies of the tenancy agreement from land lords contrary to section (H-b) (1) of the public service standing orders. Though the Accounting Officer stated that the tenancy agreements for all the properties rented apart from the official Residence/Chancery in Tripoli were availed for verification, audit revealed that the attachments were merely rent payment forms but not tenancy agreements.

There is a possibility that such expenditure could have been incurred without following proper procedures.

I advised management to avail the tenancy agreements for verification.

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b) Transfers to Treasury A total of UGX.15,778,349 was indicated in the Statement of Financial Performance as a transfer to Treasury during the period. However, Note 18 to the Financial Statements indicated UGX.8,494,854 as a transfer to Treasury resulting into a variance of UGX.7,283,495, which was not explained. There is a risk of overstating the excess of revenue over expenditure and the net worth of the Embassy for the year under review. I advised the Accounting Officer to explain the variance and adjust the financial statements accordingly. c) Lack of Segregation of duties A best practice requires separation of key duties as a measure of effective internal controls. It was however noted that for any Embassy activity that took place, the requisition for funds was always made by the Ambassador to the Accounting Officer. The practice impairs checks and balances within the Embassy and may result into anomalies remaining undetected over a long period. Also noted was non-availability of accountability reports for allowances totaling EUR.32,431 contrary to paragraph 181 of Treasury accounting instructions.

Though the Accounting Officer submitted the reports for verification, the reports availed were not signed rendering their authenticity doubtful.

I advised management to ensure Key functions of the Embassy are performed by different staff to ensure checks and balances in the system. Properly signed accountability reports should be availed for verification.

92.0 UGANDA HIGH COMMISSION, TEHRAN a) Lack of a list of prequalified suppliers Paragraph 2.1 of the PPDA guidelines for Uganda Missions abroad requires the Accounting Officer to prequalify service providers for three years.

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However, the Mission did not have a list of pre-qualified service providers and procurements worth Rail 320,843,000 (UGX.32,084,300) were direct procurements from non-prequalified service providers as shown in the table below;

Documents Date Payee Details Amount Remarks reference (IRR) No

PV -641 11/07/2013 Bridget Servicing Fire 5,200,000 No Quotation from service Safari Co. Extinguisher providers, or written permission from accounting officer or contracts committee PV -630 07/07/2013 Sadaf Consumables 11,285,000 No Quotation from service Supermarket provider, or written permission from accounting officer or contracts committee PV -709 07/07/2013 Sadaf Consumables 12,024,000 No Quotation from service Supermarket provider, or written permission from accounting officer but there is a loose minute PV -707 27/08/2013 Donyaye Purchase of 11,050,000 No Quotation from service Stationary stationary provider, or written permission from accounting officer but there is a loose minute PV -659 22/08/2013 Naeeb Food for 23,000,000 No Quotation from service Restaurant Ambassadors and provider, or written their drivers permission from accounting officer, Payment voucher names is different from cheque names, payment cheque has the names Mr. Alavi Ali which can lead to payment of wrong person PV -776 29/10/2013 Naeeb Food for African 12,140,000 No Quotation from service Restaurant Diplomatic Ladies provider, or written Group permission from accounting officer, Payment voucher names is different from cheque names, payment cheque has the names Mr. Alavi Ali which can lead to payment of wrong person PV -756 30/09/2013 Iran Sport Spare tyre for utility 14,000,000 No quotations from the Car ( Santafei) service providers and no permission from the contracts committee to undertake the procurement PV -800 04/12/2013 Dey Making DVD's on 5,400,000 No quotations from the Computers investments service providers so as to assess the cheapest supplier PV -797 03/12/2013 Dey Making DVD's on 4,400,000 No quotations from the Computers investments for service providers so as to seminar assess the cheapest supplier

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Documents Date Payee Details Amount Remarks reference (IRR) No

PV -850 25/12/2013 Chalak Air ticket for Brian 56,993,000 No evidence of Parvaz co. and Cissy for A/O prequalification or a conference request of quotations from various service providers. This therefore puts the embassy at a risk of over payment for a service PV -849 25/12/2013 Chalak Air ticket for Brian 165,351,000 No evidence of Parvaz co. and Ambassador on prequalification of service New A/c issues provider or a request of quotations from various service providers. This therefore puts the embassy at a risk of over payment for a service 320,843,000

The Accounting Officer explained that initiative has been taken to advertise and prequalify the firms for the mission.

I advised the Accounting Officer to comply with the guidelines and ensure that a list of prequalified service providers is in place.

93.0 UGANDA EMBASSY IN RIYADH a) Refund of Medical Expenses SAR.24,351.86 (approx. UGX.16,729,728) was refunded to various officials of the Embassy in respect of medical bills, while M/S Tuwinaya Health and Rasan Medical Clinic were paid SAR.8,555.21 (approx. UGX.5,877,429) for treatment of staff contrary to Section M-a (14) of the Public Service Standing Orders which requires a Foreign Service Officer serving in an Embassy abroad to be covered by full medical insurance. This practice is bound to be abused because it is difficult to verify the correctness of some of the receipts submitted when requesting for refunds and accounting for advances.

Though the Accounting Officer explained that the insurance policies did not provide full coverage for treatment, the list of services not covered by the policies was not availed for verification. 864

I advised Management to liaise with the Permanent Secretary MoFA and the Director General of Health Services to provide an appropriate solution to the matter.

b) Payment of Bonus Allowances paid to Foreign Service Officers are regulated by section E of the Public Service Standing Orders. Bonus payments are not part of the said allowances. It was however noted that SAR 2,200 (approx. UGX.1,511,400) was paid to various staff as bonus in respect of the Eid Il fitr holidays during the financial year 2013/2014, contrary to the Standing Orders. In response, the Accounting Officer stated that it is a custom in Saudi Arabia to pay the bonus. I advised the Accounting Officer that such payments ought to be authorised under the Government of Uganda regulations if deemed necessary. Otherwise, I consider them irregular.

94.0 UGANDA EMBASSY IN MOGADISHU a) Lack of Mission Charter The Ministry of Foreign Affairs is required to provide every Embassy with a charter spelling out its goals, objectives and activities to enable the Embassy set annual goals and also design strategies to achieve them. However, it was noted that the Embassy operated without a charter. The performance of the Embassy and its staff could not be assessed objectively without key performance indicators. Besides, there is a risk of implementation of uncoordinated activities.

The Accounting Officer explained that a draft copy of the Embassy charter was submitted to the Ministry of Foreign Affairs for review and subsequent approval.

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I advised management to follow up the matter and have the charter approved, and disseminated to all concerned staff for implementation.

b) Poor Filing of Documents It was noted that the payment vouchers submitted for audit were not sequentially numbered and filed, making it difficult to match the payments to the source documents contrary to paragraph 419 of the TAIs.

The Accounting Officer acknowledged the anomaly and explained that ,this was partly attributed to the operating environment which has limited amenities and new staff.

The Accounting Officer is advised to always number and file payment vouchers sequentially for ease of accountability.

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