Report of the Auditor General on the Financial Statements of the Uganda National Roads Authority for the Year Ended 30Th June 2016

THE REPUBLIC OF UGANDA

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE 2016

OFFICE OF THE AUDITOR GENERAL UGANDA

TABLE OF CONTENTS LIST OF ACRONYMS ...... iii 1.0 INTRODUCTION ...... 1 2.0 BACKGROUND INFORMATION ...... 1 3.0 ENTITY FINANCING ...... 1 4.0 MANDATE AND OBJECTIVES OF THE AUTHORITY ...... 2 5.0 AUDIT OBJECTIVES ...... 2 6.0 AUDIT PROCEDURES PERFORMED ...... 3 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS ...... 4 7.1 Categorization of Findings ...... 4 7.2 Summary of Findings ...... 4 8.0 DETAILED FINDINGS ...... 5 8.1 Mischarge of Expenditure ...... 5 8.2 Domestic Arrears ...... 5 8.3 Outstanding advances to contractors ...... 6 8.4 Non-deduction of Withholding Tax on Projects ...... 6 8.5 Kalangala Infrastructure Services (KIS) ...... 7 8.6 Budget Performance ...... 9 8.7 Nugatory Expenditure ...... 17 8.8 Staffing Gaps ...... 18 8.9 Loss of maintenance funds through garnishment by URA ...... 18 8.10 Compensation of Project Affected Persons (PAPS) ...... 19 8.11 Payments made to Telecom providers without valid contracts ...... 21 8.12 Non-functional Multi-Deck Weighbridges ...... 22 8.13 TECHNICAL (ENGINEERING) AUDIT OF ROAD AND BRIDGE CONSTRUCTION PROJECTS ...... 23

LIST OF ACRONYMS

Acronym Meaning $ United States Dollar CGV Chief Government Valuer EFT Electronic funds transfer FYR Financial Year GOU Government of Uganda GRN Goods received Note IFMS Integrated Financial Management System IGG Inspector General of Government KCCA Kampala Capital City Authority KIS Kalangala Infrastructure Services KNBP Kampala Northern Bypass LBCs Labour based Contracts LPO Local Purchase Order Ltd Limited MDAs Ministry, Department and Agencies MIS Management information system MoFPED Ministry of Finance, Planning and Economic Development MOU Memorandum of understanding MoWT Ministry of Works and Transport MTEF Medium Term Expenditure Framework NARO National research Organisation NITA-U National information technology authority Uganda NTR Non Tax Revenue PAP Project affected person PDU Procurement and Disposal Unit PFMA Public Finance Management Act, 2015 PPDA Public Procurement and Disposal of Public Assets Authority PPP Public Private Partnership PS/ST Permanent secretary/ secretary to treasury RAFU Road Formation Unit Rd Road RT. Hon Right Honourable SG Solicitor General SRIV Stores Requisition Issue Form Voucher TAI Treasury Accounting instructions TIN Tax Identification Number TSDP Transport Sector Development Project UGX Uganda Shillings ULC Uganda land commission UNRA Uganda National Roads Authority URA Uganda Revenue Authority

iii

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE, 2016

THE RT. HON. SPEAKER OF PARLIAMENT

I have audited the financial statements of Uganda National Roads Authority (UNRA) for the year ended 30th June 2016. These financial statements comprise of the statement of financial position, statement of financial performance, statement of cash flows, statement of changes in equity together with other accompanying statements, notes and accounting policies.

Management Responsibility Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of the Uganda National Roads Authority. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance Management Act 2015, and the Financial Reporting Guide, 2008, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatements, 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 audit and express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements.

An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor’s judgment including the assessment of risks of material misstatements of financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity’s preparation and fair presentation 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 controls. An iv

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 qualified 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 and will form part of my Annual Report to Parliament.

PART “A”

Basis for Qualified Opinion

 Mischarge of Expenditure –UGX.150,486,219,673 Expenditure totaling to UGX.150,486,219,673 was inappropriately charged on budget lines to fund activities that were not planned for without authority. Mischarges undermine the budgetary process and the intensions of the appropriating authority as funds are not utilized for the intended purpose. The practice also leads to financial misreporting.

Qualified Opinion In my opinion, except for the effects of the matter described in the basis for qualified opinion paragraph, the financial statements of the Uganda National Roads Authority for the year ended 30th June 2016, are prepared, in all material respects, in accordance with Section 51 of the Public Finance Management Act, 2015, and the Financial Reporting Guide, 2008.

Emphasis of matter

Without qualifying my opinion further, I draw attention to the following matter described in note 19 and 24 of the financial statements, and also in paragraph 8.3 and 8.4 of my report:

 Outstanding Domestic arrears- UGX.283,820,541,567 UNRA had outstanding commitments amounting to UGX.283,820,541,567 contrary to set procedure. Outstanding payables adversely hamper budget performance in the subsequent year and accumulation of debts results into possible interest payments and litigation expenses to the entity.

 Outstanding advances to contractors- UGX.765,673,455,447 Advance payments to contractors amounting to UGX.765,673,455,447 remained outstanding at the close of the Financial Year. I noted that some of these receivables have been outstanding for more than two years which is an indication of slow moving projects. Huge outstanding receivables for advance payments tie up UNRA funds in slow moving projects that would have been utilized for clearance of pending certificates.

Other Matter I consider it necessary to communicate the following matter other than those presented or disclosed in the financial statements:  Non-deduction of Withholding tax- UGX.2,326,841,565 UNRA did not withhold tax to the tune of UGX.2,326,841,565 on payments to several contractors to whom payments totalling to UGX.38,780,692,743 were made during the year contrary to section 120 (1) of the Income Tax Act. The practice could lead to loss of Government revenue and expose UNRA to a risk of fines and penalties from URA.

John F.S. Muwanga AUDITOR GENERAL

KAMPALA

21st December, 2016

REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION

PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE 2016 This Section outlines the detailed audit findings, management responses and my recommendations in respect thereof.

1.0 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 Uganda National Roads Authority to enable me report to Parliament.

2.0 BACKGROUND INFORMATION The Uganda National Roads Authority (UNRA) started its operations in July 2008 as successor to the former Road Formation Unit (RAFU) and its headquarters is located at Plot 3- 5, New Port Bell Road, UAP Business Park, Nakawa, Block C&D. The authority is in charge of development and maintenance of National Roads currently totaling to 21,000 km in length. The operations are managed from the centre with other operational areas which include 22 stations located in different parts of the country.

The Authority’s Vision is “To operate a safe, efficient and well-developed national roads network”. The Mission is “To develop and maintain a national roads network that is responsive to the economic development needs of Uganda, to the safety of all road users and to the environmental sustainability of the national roads corridors.”

3.0 ENTITY FINANCING During the year; the Authority was financed by grants from Central Government, donations and locally generated revenues. Grants totaling to UGX.1,493,072,410,482 were received from Central Government while a total of UGX.468,928,691,913 was received from Development partners. Another UGX.1,142,552,377 was received as locally generated revenue reflected as non-tax revenue. Total operating income for

the year was UGX.1,963,143,654,772 which constituted 94% of its approved budget estimates for the year of UGX.2,084,364,854,517 while total operating expenses were UGX.1,908,896,524,757.

4.0 MANDATE AND OBJECTIVES OF THE AUTHORITY The Uganda National Roads Authority Act 2006 provides for the establishment of UNRA; “For the purpose of managing the provision and maintenance of the national roads network in a more efficient and effective manner; to render advisory services to the Government: and for related matters”. The Authority objectives are as follows:

 To be responsible for the management of the national roads network;  To maintain and develop the national roads network;  To manage its three subsidiary business units (ferries, axle load control and force account);  To advise Government on policy matters concerning roads generally, and to assist in the co-ordination and implementation of the policy relating to roads;  To contribute to the addressing of transport concerns in overall national planning through co-ordination with the relevant ministries, departments and agencies of Government;  To collaborate with international and inter-governmental organizations and agencies of other states and the private sector on issues relating to the development and maintenance of roads;  To enter into agreements or other arrangements with any person for the provision of road services, subject to such charges as may be agreed upon;  To advise and assist the Minister regarding the development of roads, whether the roads are part of the national roads network or not and the establishment and maintenance of road reserves in accordance with the Roads Act.

5.0 AUDIT OBJECTIVES The audit was carried out in accordance with International Standards on Auditing and accordingly, included a review of the accounting records and agreed procedures as was considered necessary. The audit was carried out with regard to the following objectives:-

a. The financial statements have been prepared in accordance with the requirements of the Public Finance Management Act, 2015 and International

Financial Reporting Standards, and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b. All the Authority funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Goods and services financed have been procured in accordance with the PPDA law. d. Evaluating and obtaining a sufficient understanding of the internal control structure of the Authority, assess control risk and identify reportable conditions, including material internal control weaknesses. e. Management was in compliance with the Government of Uganda financial regulations. f. All necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented.

6.0 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:- a. Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements. b. Expenditure The Authority 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 d. Procurement Reviewed the procurement of goods and services under the Authority during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the assets of the Authority during the period under review

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

7.0 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of Findings The following system of profiling of the audit findings is used to better prioritise the implementation of audit recommendations: CategoryN Description o 1 High significance Has a significant/material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. 2 Moderate significance Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. 3 Low significance Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. It is a matter of low risk or low stakeholder interest.

7.2 Summary of Findings No Finding Significance 8.1 Mischarge of Expenditure-UGX 150,486,219,673 High 8.2 Domestic Arrears – UGX.283,820,541,567 High 8.3 Outstanding Advances to Contractors – UGX. 765,673,455,447 High 8.4 Non-deduction of withholding tax –UGX.2,326,841,565 High 8.5 Kalangala Infrastructure Services (KIS) High 8.6 Budget performance High 8.7 Nugatory Expenditure-UGX.244,400,000 High 8.8 Staffing gaps High 8.9 Loss of maintenance funds through garnishment by URA - High UGX1,755,190,306 8.10 Compensation of Project Affected Persons (PAPS) Moderate 8.11 Payments made to Telecom providers without valid contracts – Moderate UGX.1,055,398,202 8.12 Non-functional Multi-Deck Weighbridges Moderate 8.13 Technical engineering audit of road and bridge construction High projects

8.0 DETAILED FINDINGS 8.1 Mischarge of Expenditure –UGX.150,486,219,673 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 authorized account codes. However, expenditure totaling to UGX.150,486,219,673 was inappropriately charged to budget lines to fund activities that were not planned without authority. I explained to management that mischarge of expenditure undermines the intensions of the appropriating authority as funds are not fully utilized for the intended purposes.

In response, the Accounting Officer explained that by end of May 2016, UNRA had exhausted the option for reallocation and yet had accumulated debts incurring interest costs of UGX.138 million per day. As such, management mischarged based on administrative decision to save Government from accumulation of nugatory costs. Further, the Accounting Officer explained that advice was sought from the Ministry of Finance, Planning and Economic Development (PS/ST) on the best way to save Government the huge interest costs and was advised that in the circumstances the best option was to use the available funds to pay contractors.

I advised the Accounting Officer to ensure proper budgeting to avoid the situation of exhaustion of the reallocation limits during the year. This would ensure that she such has sufficient flexibility to handle emergency situations.

8.2 Domestic Arrears – UGX.283,820,541,567 A review of the Authority financial statements revealed that domestic arrears to the tune of UGX.283,820,541,567 remained outstanding at the close of the Financial Year contrary to paragraph 188 Part 1 of the Treasury Accounting Instructions, 2003 that requires an officer authorized to incur expenditure to ensure that no payments due in any financial year remain unpaid at the end of that year.

Outstanding payables adversely hamper budget performance in the subsequent year as achievements anticipated in the appropriated budget cannot be attained due to settlement of arrears during the current year. Besides, accumulation of debts results into interest and litigation expenses to the entity.

Management explained that the MTEF ceiling provided by the PS/ST is not adequate to cover all UNRA budget requirements for ongoing projects thus the accumulation of debts. Further, management stated that they are doing their best to operate within the available resource envelop by not taking up new projects prior to completion of the on-going ones.

I advised the Accounting Officer to liaise with MoFPED to ensure adequate provisions are made for ongoing projects to minimize domestic arrears and its related effects of interest charges on delayed payments. Further, effort should be made to obtain supplementary funding to clear the domestic arrears so that planned outputs for 2016/17 are achieved.

8.3 Outstanding advances to contractors – UGX. 765,673,455,447 Receivables in form of advance payments to contractors to the tune of UGX.765,673,455,447 remained outstanding at the close of the financial year. I noted that some of these receivables have been outstanding for more than two years which is a reflection of slow moving projects.

I informed management that outstanding receivables tie up UNRA funds in slow moving projects that would have been utilized for clearance of outstanding certificates.

I advised management to consider reducing the percentage of advance payment to contractors since they are evaluated on financial capacity (Liquidity) and passed during evaluation. Further, the advance recovery period should be reduced to ensure that contractors minimize delayed works.

8.4 Non-deduction of Withholding Tax on Projects – UGX.2,326,841,565 I noted that UNRA did not withhold tax to the tune of UGX.2,326,841,565 on payments to several contractors to whom payments were made totaling to UGX.38,780,692,743 during the year. This was contrary to section 120 (1) of the Income Tax Act that requires all Government institutions to withhold tax on the gross amount of any payment exceeding one million shillings for any supply of goods and services at a rate of six percent. This action resulted into Government losing revenue thus exposing UNRA to a risk of fines and penalties from URA.

Management explained that all the companies paid were exempted and had presented exemption certificates and those that had errors in registration are making corrections to transfer tax obligations and benefits to the correct company name.

I advised the Accounting Officer to reconcile the position and if that is not the case, management should consider to recover all due taxes from the contractors’ subsequent payments.

8.5 Kalangala Infrastructure Services (KIS) 8.5.1 Lack of binding agreement between UNRA and KIS Kalangala Infrastructure Services (KIS) operates ferry transport services between Bukakata landing site in Masaka and Luuku landing site in the Island of Kalangala District under a Public Private Partnership arrangement with the Government of Uganda. On 20th April 2012, GOU through MoFPED and KIS signed an agreement to exclusively run and operate the ferry transport services on this water route and additionally maintain in motorable and all weather condition 38Km of roads on Bugala Island and 66 Km of roads in Bwendero. The concession granted to KIS was for 13 years starting January 2012. A review of the payments to KIS, Memorandum of Understanding and implementation agreements between GOU and KIS revealed the following:

 The agreement between GOU and KIS does not make mention of UNRA as the GOU agency through which the funds would be budgeted and paid out. In the circumstances, UNRA is facing challenges in resolving certain questionable transactional events due to this inadequacy.

 UNRA paid UGX.28,183,799,997 during the year under audit to KIS. In the last 5 years, UNRA has been making both quarterly payments and full annual payments to KIS in respect of road upgrading and ferry operations without any established control and supervision mechanisms by the Authority and yet UNRA is expected to account for these funds.

UNRA’s mandate provided for in the UNRA Act empowers it to construct and maintain the national roads of Uganda. This mandate includes the roads and ferry operations under KIS as well. It is therefore critical that UNRA is part of the arrangement between KIS and GOU.

Management explained that the contract between UNRA and KIS is the “Right to Use Agreement” and the subsequent Amendment that gave KIS priority to use the UNRA landing site. Further, management explained that the right to use agreement was not in the best interest of UNRA or Government and also noted that at the time of signing, UNRA had raised objections to the Agreement but had been involuntarily compelled to sign by the supervising Ministry of Works and Transport. Management also stated that they were compelled to pay the invoices for the year 2015/16 in order to avert paralyzing transport to and from the island. Going forward, management was in an attempt to streamline the agreements wrote to the Attorney General on the 10th November, 2016, requesting for guidance on the challenges noted in the Agreements.

I advised management to establish the best operating relationship with KIS through the guidance of MoFPED and the Attorney General to ensure service delivery at the least cost.

8.5.2 Lack of Value for money in KIS payments During the year under review, UNRA budgeted UGX.10 billion for the full operation of its 9 Ferries across the country. In contrast, UNRA remitted a total of UGX.14,030,718,000 to KIS for operations of the 2 ferries between Luuka and Bukakata in Kalangala islands. I find this amount exorbitant as compared to the amount UNRA spends for the operations of its 9 Ferries. UNRA is expected to continue remitting to KIS annually which amount increases exponentially at 40% per year. This contract is meant to run for 13 years and is currently in its 5th year of implementation.

According to an interview with the UNRA Ferry master, the cost of acquiring a similar ferry like the one operated by KIS in the market on estimate is around UGX14-18 billion. Management acknowledged that the payments made to KIS are too high to only cover reimbursements for running the ferries.

Further in the agreements signed by GOU and KIS, it is indicated that KIS obtained loans for the investments in the partnership with interest which is being financed by Government of Uganda. However, the payments being made to KIS do not provide for any component that relates to the recovery of the capital invested in the project and a review of the Ferry license agreement between GoU and KIS clearly states in paragraph 6.3.3 that “The Licensee is the owner of the vessels and in no event shall

the termination, revocation or expiry of the license affect the ownership of the Vessels by the Licensee”. This means that even at the end of the concession period (13years), the Government will not possess the Vessels being operated by KIS. It’s not clear as to why Government seems to be paying interest on loans which were purportedly used for capital investment by KIS.

I advised the Accounting Officer to review the contracts and MoUs and advise government on the appropriateness of the venture.

8.6 Budget Performance 8.6.1 Budget Shortfall Section 21(1) of the Public Finance Management Act entrusts the Accounting Officer with the responsibility of planning and managing the entity activities as indicated in the policy statement of the vote based on the annual cash flow plan issued by the Secretary to Treasury during budget execution. Budget estimates are based on outputs to be achieved for the financial year and during implementation effort should 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 out of UGX.2,084,364,854,517 that was budgeted for, only UGX.1,970,634,662,282 was released causing a budget shortfall of UGX.113,730,192,235 representing 5.4% underperformance. Details are in the table below;

Component Revised Budget Releases Shortfall Donor 468,928,691,913 468,928,691,913 - GOU Development 1,263,729,565,134 1,205,021,499,008 58,708,066,126 GOU Recurrent 267,917,000,000 241,561,475,267 26,355,524,733 (URF) GOU Recurrent 52,324,252,147 29,965,347,656 22,358,904,491 (Wage) GOU Recurrent 30,237,764,366 23,930,067,481 6,307,696,885 (Non-Wage) NTR 1,227,580,957 1,227,580,957 - Overall 2,084,364,854,517 1,970,634,662,282 113,730,192,235

Revenue shortfalls hampered Service delivery as indicated in paragraph 8.6.2.

I advised the Accounting officer to continuously engage MoFPED for adequate release of budgeted funds.

8.6.2 Failure to adhere to the annual budget performance contract - Unimplemented activities: I noted that the Accounting officer did not fully abide by the annual budget performance contract entered into with the Secretary to the Treasury in regard to delivering activities in the Work plan of the vote for the financial year contrary to section 45 (3) of the Public Finance Management Act, 2014.

As a result, a number of projects were either not done or partly done despite the fact that funds were remitted for executing these activities. Details are in the table below.

Vote Function Item Description Planned Output/ Amount Budgeted Amount Released Actual Output/ Remarks output Quantity (UGX) (UGX) Quantity

1041 Design 045171 Acquisition 300 hectares of land 10,000,000,000 10,000,000,000 76.4 Hectares UNRA spent UGX.2,018,232,335 to Kyenjojo-Hoima- of land by and properties acquired on Bulima- acquire 76.4 hectares of land and Masindi-Kigumba Government therein acquired Kabwoya and properties. The balance of (238Km) inception report UGX7,981,767,665 may have been completed for diverted and spent elsewhere without Kigumba-Bulima proper explanations from management. 76.4 hectares of land acquired out of 300 hectares is only 25.5% of the planned output and yet all the funds planned were released

045180 National Kigumba-Bulima 25,500,000,000 25,500,000,000 9.78% of works A review of the UNRA payment file in Road (20%) and Bulima- completed on Bulima- respect to this project (1041) Construction/Rehabi Kabwoya (20%) Kabwoyo revealed that UNRA spent litation (Bitumen works completed UGX.6,952,744,382 out of Standard) UGX.25,500,000,000 that was released constituting 27.3%. The balance of UGX.18,547,255,618 (72.7%) may have been diverted elsewhere.

0293 Construction of 045172Government 40% of works on 9,000,000,000 8,766,001,781 Completed evaluation. UNRA diverted these funds for paying RD Agency HQs Building and UNRA Head- road construction projects as follows: Administrative quarters Completed CCCC IPC 27 Infrastructure $.659,[email protected] Nyakahita-Kazo, CCCC IPC 27L Nyakahita-Kazo, Kolin IPC 27L Balance payment less 6% WHT; HO- KA-TO CRBC IPC 32 11

&838,[email protected]. Moroto- Nakapiripirit CRBC IPC 35L Moroto- Nakapiripirit. UNRA paid in total UGX.8,219,175,051 from funds released for construction of RD agency HQs.

1042 Design Nyendo- 045171 Acquisition 100 hectares of land 5,000,000,000 5,000,000,000 RAP report approved A review of the UNRA payment file Sembabule (48Km) of land by property therein and compensation for PAPs shows that there was no Government acquired exercise commenced PAP paid on this section of the road (Nyendo-Sembabule road (48Km). All indications were that Funds were released 100%. Not acquiring 100hechares of land while funds were released is an indication of poor performance.

045180 National 30% Completed, 22,000,000,000 22,000,000,000 30.76% of works A review of the UNRA payment file Road cumulative 35% along Sembabule- did not show evidence of any Construction/Rehabi Vilamaria completed payment related to this project. The litation (Bitumen and 37% cumulative payments seen on file related only to Standard) achieved on Mpigi- Kanoni-Sembabule-Villa Maria. In the Kanoni circumstance, it is likely that these funds were diverted 100% by UNRA management.

1044 Design Ishaka- 045171 Acquisition 100 hectares of land 5,000,000,000 3,200,000,000 PAPs were paid A review of the UNRA payment file Kagamba (35Km) of Land by property therein shows that during the year PAPs Government acquired worth UGX728,148,330 were paid on Ishaka-Kagamba (35Km) out of UGX.3,200,000,000 released by the Treasury for the activity. The balance of

UGX.2, 471,851,670 seems to have been diverted elsewhere by UNRA 12

management. There was no explanation from UNRA management concerning why this happened. 0952 Design Masaka- 045171 Acquisition 36 hectares and 2,000,000,000 2,000,000,000 Compensated 30% of A review of the payment file reveals Bukakata road of Land by properties therein the PAPs that out of Government procured UGX.2,000,000,000 released for land acquisition on Masaka_bukakata road, UGX.209,924,520 was spent on PAPs representing 10.5% expenditure. The balance of UGX.1,790,075,480 seemingly was diverted elsewhere. UNRA had indicated that it had compensated 30% of PAPs out of these funds is misleading since 10.5% was spent on PAPs on this project 045180 National 30% of works 9,600,000,000 5,000,000,000 No works was done A review of the UNRA payment file Road completed, due to delay in shows that UNRA spent Construction/Rehabi Cumulative 30% procurement UGX.36,632,000 out of the total litation (Bitumen funds released of UGX.5,000,000,000 Standard) on this road. UNRA paid a one called Mituland Company Limited on 3/11/2015 on voucher number FS510957. This payment constitutes 0.7% of the amount released. The balance of UGX.4,963,368,000 seems to have been diverted elsewhere.

0954 Design 045171 Acquisition 36 hectares and 4,004,490,810 4,004,490,810 318.67 hectares of A review of the UNRA payment file Muyembe-Moroto- of Land by Property therein land acquired on for the year shows that Kotido (290Km) Government procured Nakapiripirt –Moroto UGX.276,861,394 was spent on stretch acquisition of land by Government on this project which is 7% of the total released. The balance of UGX.3,727,629,416 which constitutes 93% released for land acquisition on

this project may have been diverted elsewhere. UNRA indicated that it spent the whole amount released on the planned land acquisition on this project may be false information.

045180 National 20% of Works 56,900,000,000 56,900,000,000 Moroto town roads A review of the payment file shows Road Completed; 8.9Km, 48.77% of the that UNRA paid a total of Construction/Rehabi cumulative 80% works have been UGX.53,773,613,015 for road litation (Bitumen completed construction/rehabilitation out of Standard) 56,900,000,000 which was released. The Balance of UGX.3,126,386,985 may have been diverted elsewhere.

0955 Upgrade 045171 Acquisition 36 hectares of land 4,500,000,000 4,500,000,000 Along Nyakahita-Kazo A review of the UNRA payment file Nyakahita-Ibanda- of land by and property road 97% of PAPs revealed that UGX.654,600,000 was Fortportal (208Km) Government therein acquired compensated, Along spent on Land acquisition on the Kazo-Kamwenge, Nyakahita-Ibanda-Fortportal road out 80% of PAPs of UGX.4,500,000,000 released. This compensated, Along amount paid to PAPs constitutes Fortportal-Kamwenge, 14.5% of the funds released during 70% compensated the year. The balance of UGX.3,845,399,049 may have been diverted by UNRA management elsewhere.

045180 National Kamwenge-Fort 15,177,816,343 15,177,816,343 70.8% civil works A review of the UNRA payment file Road Portal : 30% of achieved for revealed that UNRA paid Construction/Rehabi works completed; Fortportal-Kamwenge UGX.9,822,210,447 out of the funds litation (bitumen cumulative 80% road 66.2 Km released for this project constituting Standard) 64.7%. The balance of UGX.5,355,605,895 remained unspent and may have been diverted by management

1031 Upgrade Gulu- 045171 Acquisition Gulu-Atiak: 40 5,000,000,000 1,684,006,474 94% complete A review of the UNRA payment file Atiak-Bibia/Nimule of Land by hectares of land and compensation work related to land acquisitions revealed (104)Km Government properties therein no land or property acquired by acquired in Gulu government on this project despite Municipality releasing UGX.1,684,006,474. This fund released may have been diverted by UNRA management without justification

1034 Design of 045171 Acquisition 100 hectares of land 8,328,484,661 8,328,484,661 A total of 32.9 A review of the UNRA payment file Mukono-Katosi- of Land by and property hectares of land revealed that UNAR paid Nyenga(72Km) Government therein procured acquired UGX.5,364,782,277 on land and property acquisition on the Mukono- Katosi-Nyenga Road project even though Ugx8, 328,484,661 was released for the LPC. The balance of UGX.2,963,702,384 released may have been diverted by UNRA management. 045180 National 30% of the works 32,900,000,000 32,900,000,000 19.46% of the works UNRA paid Ugx36, 180,861,302 in road completed, done along Mukono respect of Mukono- katosi- Nyenga construction/rehabili cumulative 40% Katosi Nyenga road which was above the approved tation (bitumen budget. It is not clear where UNRA standard) obtained additional funding from since there were no reallocations done to that project from elsewhere. Management may have undermined some project activities in order to pay these additional funds. The excess expenditure was UGX.3,280,861,302. 1035 Design Mpigi- 045171 Acquisition 100 hectares of land 5,000,000,000 5,000,000,000 Acquired 72.188 A review of UNRA payment files Kabulasoka-Maddu of land by and properties hectares of land, shows that UNRA paid (155Km) Government therein procured supplementary report UGX.2,889,805,142 in respect of land acquisition under project 1035 out of completed and UGX.5,000,000,000 released. The verification exercise balance of UGX.2,110,194,858 may 15

commenced, have been diverted. Valuation reports were approved and compensation payment is ongoing

045180 National Mpigi-Kanoni 39,150,000,000 39,150,000,000 Mpigi-Kanoni (64KM) A review of the UNRA payment file Road (65Km) 30% 37% of works revealed that UNRA paid Construction/Rehabi completed, completed UGX.11,391,492,882 out of litation (Bitumen cumulative 50%, UGX.39,150,000,000. The amount Standard) Kanoni-Sembabule- paid was only 29.1% of the total Villa Maria (110Km) released. The balance of 30% completed, UGX.27,758,507,118 on this project cumulative may have been diverted by management.

Service delivery is hampered and the entity objectives may not be achieved as a result of not performing the planned activities.

Management explained that UNRA has two major challenges affecting its performance, that is, acquisition of the right of way and lengthy Procurement Cycle. Management also explained that the processes for land acquisition is not under the direction and control of UNRA and involves many stake holders making it very difficult to set timelines for the external players. The procurement cycle takes an average 6 months and the contractors require another 3 months to mobilize. This takes about 9 months out of twelve for works to begin which further delays projects. As a result, by 30 June 2016 there were some unspent budget balances on some of the projects and payables on other projects where the Contractors were fast moving.

I advised the Accounting Officer to initiate pre-contract activities including acquiring of right of way and the procurement process early enough to avoid delays.

8.7 Nugatory Expenditure-UGX.244,400,000 I noted nugatory expenditure of UGX.244,400,000 paid to an international media company and a local contractor of UGX.33,776,218.16 and UGX.210,623,782.095 respectively. These funds were paid as a result of interest (1.8% per month) charged on outstanding balance on payments to carry out advertising in the International media and Construction of the new Mbarara Bypass respectively. This expenditure could have been avoided if the Accounting Officer confirmed availability of funds before commitment.

Management explained that payment to the media company was a subject of investigation on how the UNRA was committed to this service and by the time the company provided evidence of offering services it was late thus interest cost. Further, management explained that the funders of the Mbarara bypass (EIB) required assurances for 100% acquisition of the right of way which took long to be attained and yet the contractor had already mobilized and was working.

I advised the Accounting Officer to ensure that contractual obligations are adhered to. With regard to the construction of the Mbarara bypass, the Accounting Officer was advised to ensure adequate compensation is undertaken prior to committing government.

8.8 Staffing Gaps Following restructuring of UNRA in December 2015 the Board approved a staff establishment of 1,740. However, when the Ministry of Finance, Planning and Economic Development approved the budget for 2015/16, the funding that was provided was for only 1,400 employees and by the time of writing this report 1,021 of the positions representing 73% of staff ceiling and 59% of staff structure had been filled. Several critical departments were noted to be far below recommended staffing levels, these included weighbridge operations with a requirement of 33 staff but only 10 staff were recruited representing only 30%. Staffing gaps lead to work overload and affect employee morale.

Management acknowledged the staffing gaps and explained that so far three recruitment phases have been undertaken to fill the gaps.

I advised the Accounting Officer to continue seeking increased funding with a view of filling the vacancies.

8.9 Loss of maintenance funds through garnishment by URA – UGX.1,755,190,306 URA garnished funds to the tune of UGX.1,755,190,306 from two UNRA stations’ bank accounts i.e. Mubende Station Account and Fortportal Station Account. Each station was garnished UGX.877,595,153 of its maintenance funds because the entity did not deduct withholding tax from a payment of UGX.24,790,823,522 advanced by UNRA to Eutaw Construction Company for the construction of Mukono-Katosi road. UNRA later reimbursed these garnished funds to the respective stations using funds from the Treasury Single Sub Account which I considered a loss.

My observation is that the activities in the UNRA stations were delayed and planned outputs could not be achieved.

Management explained that Eutaw Company was paid an advance as per the contract and UNRA objected to the assessment on grounds of non-deduction of tax from advance payments and taxation of fraudulent earnings but URA went ahead and garnished the Bank Accounts by Agency Notice.

I advised the Accounting Officer to consider appealing the matter through Tax Appeals Tribunal.

8.10 Compensation of Project Affected Persons (PAPS) 8.10.1 Failure to Compensate Project Affected Persons on KNBP-2 Section 42(7) b of the Land Act 1998 states that no person from whom land is to be acquired shall be required to vacate that land until he/she has received compensation awarded to or agreed by them.

Review of the Kampala Northern By-pass project (KNBP) valuation report indicated that 889 PAPs were assessed for compensation for the total amount of land of 42.557 acres (17.223 Hectares). The total amount payable for the PAPs was UGX.51,472,971,063.

Review of the payment records revealed that at the close of the year, a total of 362 PAPs (41%) had been paid while 527PAPs (59%) were not paid. UGX.509,740,858 has so far been paid out of the assessed amount of UGX.51,472,971,063 leaving an outstanding balance of UGX.50,963,230,205. Delays in payment could lead to legal battles which may be costly to UNRA and also cause apprehension among the PAPs from the inconvenience for loss of beneficiary property.

Management explained that the delays in compensation of Project Affected Persons were attributed to absentee landlords, disputes of land ownership, appeals and objections and lack of the required documents at verification among others.

I advised the Accounting Officer to prioritize payment of the PAPs to avoid any related costs.

8.10.2 Compensation to an encroacher on NARO-ZARDI land -UGX.273,227,350 I established that UNRA valuation report for the Mbarara By-pass had indicated that land at chainage 5+449 to 5+516 of 3.2 acres belonged to Captain Bashija David (Ngabo Academy). However, review of other related documents and correspondences indicated that this land belonged to NARO-Zardi.

Information availed indicated that Uganda Land Commission (ULC) acknowledged that Captain Bashija was allocated this NARO land in 1999 erroneously after being furnished

19 with false information and subsequently ULC withdrew the Lease to Captain Bashija David during its meeting of 17th May 2007.

The IGG had also reportedly investigated the matter and directed the Minister of Lands, Water and Environment to stop all private developments by Ngabo Academy on the NARO land. NARO has attempted several times to get the encroacher evicted but to no avail.

Despite the disputed ownership, UNRA compensated Captain Bashija David (Ngabo Academy) with a sum of UGX.273,227,350 as the bonafide occupant of NARO land even though UNRA management was aware that the matter had not been resolved yet. The Attorney General (AG) had reaffirmed in a letter dated 26th November 2014, that UNRA should compensate M/S Ngabo Academy after establishing whether the academy had an equitable interest in the said land and UNRA to only compensate the academy for the developments on the land. The AG also indicated that compensation on land should be stayed until determination of the court case on the true ownership.

NARO’s efforts to have its land repossessed have been futile.

Management explained that compensation was made based on the advice of the AG and ULC. While UNRA was in the process of paying Ngabo Academy, 60% of the assessed amount excluding the money that had already been paid, further complaints from NARO emerged that led to suspension of the compensation. Ngabo has since sued UNRA seeking for compensation of UGX.567m but UNRA is vehemently objecting to the compensation. Management further stated that without court determining the rightful owner of the compensation, they will not pay any one to guard against wrongful compensation.

I advised Management to await the court decision and ensure that all orders are implemented thereafter.

8.10.3 Failure to compensate NARO ZARDI for 22.670 acres of Land - UGX.1,836,545,630 During the audit, I observed that Land along the Mbarara Bypass belonging to NARO at chainage 3+775 to 5+349 in Kafunjo Cell (22.7 acres) was valued at UGX.1,836,545,630, but has not been compensated by UNRA.

NARO has been denied its non-tax revenue which has been budgeted repeatedly for the last 4 years making their budgetary projections unrealistic as a result. Delays in payment may render the current valuations which were last done in 2012 not reflective of the current market values of land.

Management explained that NARO has not provided evidence to prove ownership of the said land. The same being a government institution, UNRA thinks that the said land is registered in the names of ULC and the question has been whether it should be NARO to be compensated or ULC. Going forward, UNRA has sought advice of the Attorney General on the aptness of a Government institution such as UNRA paying compensation to another Government institution (NARO/ULC). UNRA has also written to NARO requesting the Institution to present documents in proof of ownership of the said land as they wait for Attorney General’s advice. ULC has also been requested to advise UNRA on whether it has any objection in respect for the same land.

I advised management to expeditiously follow up the matter with the concerned bodies so that a precedent is set to guide on other Government land compensations.

8.11 Payments made to Telecom providers without valid contracts – UGX.1,055,398,202 I noted that UNRA paid UGX.1,055,398,202 during the year to three telecommunication companies for telephone/internet services without valid contracts contrary to section 76 of the PPDA Act and PPDA (Contracts) Regulations, 2014 that requires all supplies for works, goods and services to have valid contracts. I could not therefore ascertain the circumstances and conditions under which the payments were made and in the event of disputes, the parties may not have a fallback position to address the dispute.

Management explained that the services continued under the previous terms prior to expiry of the contracts given that NITA-U had taken over the ICT budget for UNRA and yet its services were inadequate to handle the country wide operations.

I advised the Accounting officer to always ensure that all dealings with service providers are backed by valid contracts. In the meantime, management should engage NITA-U on the challenges they are facing despite government advancing them money to fulfill their mandate.

8.12 Non-functional Multi-Deck Weighbridges In April 2014 UNRA entered into a contract to supply, install, and commission of two (2) Multi-Deck weighbridges at US$.287,832.16 which were installed in Luwero and Mbarara stations. The contract duration was for 7 Months and expected to expire on 1st December 2014.

I noted that in spite of extension of the contract duration twice, the supplier failed to complete his obligations by 31st May 2015. I observed that a payment of UGX.576,207,747.16 was paid to the contractor on 25th April 2015. Further, during inspection, I noted that the two Multi-Deck Weighbridges in Luwero and Mbarara have remained non-functional up to date and yet the certificate of analysis from the Uganda National Bureau of Standards indicated that the two weighbridges passed the test parameters and were functional. Recent developments indicate that the contractor is demanding the balance of USD.71,968.1 to allow an expert to be flown in to put right the machine. There is a risk of loss of Government money.

Management explained that legal advice was provided staying the termination because the contract had already expired and it recommended UNRA to allow the contractor to rectify the defects since the contractor was willing to do so.

I await Management’s efforts in the matter.

8.12.1 Doubtful payments for fuel – UGX.222,210,630 A review of the payment vouchers for fuel at Kampala station revealed that payments to the tune of UGX.222,210,630 made to two local fuel companies lacked fuel consumption statements from the fuel suppliers to justify the payments. Further, the goods received

notes (GRNs) issued by UNRA Kampala station in respect of the fuel were not being recorded in the stores ledgers rendering it difficult to reconcile the fuel payments and consumptions. In the circumstances, the possibility of paying for unconsumed fuel could not be ruled out.

I advised the Accounting Officer to ensure that fuel consumption is accounted for by way of fuel consumption statements, fuel orders, invoices, receipts and up to date fuel stores ledgers. Further, internal investigations should be instituted to ascertain whether the fuel was consumed and where misuse is ascertained disciplinary measures be instituted against the culprits.

UGANDA NATIONAL ROADS AUTHORITY-ENGINEERING AUDITS 2016

8.13 TECHNICAL (ENGINEERING) AUDIT OF ROAD AND BRIDGE CONSTRUCTION PROJECTS

8.13.1 Background

The Office undertook a technical audit of a sample of eight (8) roads and bridges projects with a contracted value amounting to UGX 770,956,159,296.31. A list of the roads and bridges projects reviewed is shown in table below:

S/No Project Contractor Contract Amount 1 Capacity Improvement of the Mota Engil Engenharia E. EURO 67,394,566.56 Kampala Northern Bypass Construcao SA (21km) 2 Rehabilitation works of selected Spencon Services Ltd UGX 54,295,484,495 national roads – Lot 4: Nansana - Busunju (47.6km) 3 Construction of the new China Railway Seventh EURO 48,889,402.01 Mbarara Bypass and Group reconstruction of the existing Mbarara Ntungamo section of Northern corridor route (36km) 4 Construction/ Re-construction of Terrain Services Ltd UGX 14,579,023,789 strategic Bridges in central region Lot 1: Kabaale Bridge 5 Rehabilitation of Kiryandongo – China Communication UGX Gulu Road; Lot 1: Kiryandongo - Construction Company 56,705,761,711.36 Karuma – Kamdini road (59km) Limited (CCCC) 6 Rehabilitation of Nebbi – China Civil Engineering UGX 28,069,772,987 Pakwach Road (54km) Construction Corporation 7 Construction of Multiple Cell Box Armpass Technical services UGX 6,896,949,945 23

Culverts and Drainage Ltd Structures and rising 3km access road in swamp on Leresi- Budaka 8 Construction of Apak Bridge on Rukooge Enterprises Ltd UGX. 4,262,486,479 Lira-Abim-Kotido road

Below are the summarized key audit findings arising from the audit. Details can be obtained in the detailed report which was issued separately and forms an integral part of this report.

8.13.2 Summary of Key Audit Findings (i) Inadequate designs and Planning I observed the following inadequacies in designs and planning;  Inadequate designs and underestimation of quantities was noted on the Kampala Northern Bypass, Kiryandongo – Karuma – Kamdini, Nebbi – Pakwach and Apak bridge projects. This leads to increase in the contract price and distorts cash flows in a given project at implementation stage. Actual quantities of some work items varied by more than 1,000%.  Recommendation of lime stabilised sub base on the Kampala Northern Bypass by the design consultant without performing initial lime consumption tests led to failure in obtaining the materials that could meet the specifications and a design review had to be undertaken.  Inadequate planning by UNRA caused a section of 163m being left out due to different grids of Entebbe expressway Project and Kampala Northern by pass, hence leading to an extra financial demand of Euro 646,213.67 at the implementation stage to incorporate this section.  Construction of concrete lined/stone pitched drains and scour checks, which were not necessary given the gradient at such cited sections (Kryandongo – Kamdini, Nebbi – Pakwach, Nansana- Busunju and Mbarara Bypass).  Despite noting the failure of surface dressed shoulders of the existing Kampala Northern Bypass, the design of the ongoing project on the same road is still for surface dressed shoulders.  Long delays in commencement of works after bid acceptance / contract awards (Nebbi – Pakwach and Mbarara Bypass). The works commenced many months

after bid acceptance/signing of contracts. Such delays cause challenges at implementation stage like; possible increase in scope of works, current and base indices used in the computation of variation of prices.  Decision to change the scope of works on Nansana – Busunju road (to have a higher class of road) after commencement of works resulted in huge increase of works and will make the contract price to increase by almost 100%. The contract price could have been lower if the tender documents had accommodated the revised scope of works.

(ii) Delayed Land acquisition Delayed land acquisition meant for the right of way is among the issues observed, leading to delays in project implementation of Kampala Northern Bypass project.

(iii) Delayed payment of IPCs Payment of interim payment certificates were not on time for some projects hence an increase in project costs in terms of interests on late payments. By September 2016 the contractors for Mbarara Bypass project and Nansana – Busunju project had claimed Euro 60,522.78 and UGX.242,675,436 respectively for this reason.

(iv) Projects not completed on time Some of the audited projects were found to be behind schedule during auditing and these included; Kampala Northern Bypass project, Nansana – Busunju road project and Apak Bridge. While the contract durations for Kampala Northern Bypass and Nansana – Busunju have not elapsed, their progress is far behind the programmes and it will not be possible for the projects to be completed on time. No correspondences were seen as regard to extension of time for these projects.

(v) Quality of works and Materials The quality of the executed works on all projects was found to comply with the specifications when non-destructive testing was conducted at the field. However results from the laboratory tests have showed that the CRR materials used for sub

base and base layers on some of the projects contain high plasticity and shrinkage limits although the strength of the rock meets the specifications. The mechanically stabilized materials using the same CRR have not achieved strength of class G45 materials.

The removed soils at some sections along Nansana-Busunju road which were cut and spoiled are of good quality for use as fill or lower improved subgrade layers.

8.13.3 Key findings per project

A summary of the Key Findings per project and Management responses is presented below:

Summaries of key findings per project

S/No Road Contract / Key findings Management Response Contractor / Amount 1. Capacity  By end of October 2016 the lapsed The Project is behind schedule by 38% (See attached S-Curve). The main reasons for Improvement of contract time was 77% while the the delay are. the Kampala works progress was only 36%. The  Delayed Access to Site; Northern Bypass project is behind schedule by 41%.  The Contractor’s failure to secure approved Rock Fill and Soil Fill Materials at the (21km) by Mota start of the project; Engil (M-E) at Euro  Delayed start of Earthworks and Subbase construction; 67,394,566.56  The SR’s delays in finalizing design changes and drainage review.  There is no current approved The Contractor has been requested on numerous occasions to submit a revised work programme of works. Three months program but has not submitted yet. The Contractor contends that he possesses limited programmes are being prepared information in regards to access to site and projected quantities to enable him provide which cannot provide the Client with an adequate revised program. UNRA is currently expediting the review of the final sufficient information to monitor the quantities and expects to advise the Contractor of the same by 31st January 2017. project.

 Land acquisition for the right of way The progress of Land Acquisition stands at 80%. The total estimate cost of this and relocation of utilities have not component is UGX 75 Billion and UGX 42 Billion has been paid to the PAPs to-date. UGX been finalised and have partially 33 Billion is urgently required to clear all PAPs to enable provision of 100% site access to affected the progress of works. the Contractor. There have been challenges in land acquisition especially for interchanges especially resulting from the following;  Multiple ownership and conflicts among land/property owners: some of these case are in courts of law and other disputes are being handled internally by UNRA and the affected PAPs;  Appeals and Objections from PAPs: Supplementary reports have been made to revise the valuations. The report has been approved by the CGV and is now being implemented;  Absent landlords: These are PAPs that have never turned up for verification. UNRA

S/No Road Contract / Key findings Management Response Contractor / Amount Land Acquisition (LA) team is preparing a list of these PAPs to publish in the media.

 Changes in designs (road bed Detailed traffic surveys were carried in accordance with standards and best practice. The foundation and drainage) resulting traffic projections were also reviewed by the Independent Design checker (IMC) or audit from inadequate design done by the and were deemed acceptable. design consultant will lead to The pavement design was based on design subgrade strength of 15%. escalation of the Contract price and The project has suffered from land use changes in the area surrounding the project, contract duration. The Continuous KCCA recently prepared new designs for the drainage system around the KNBP area design changes on pavement resulting in concentration of storm water flows in areas that were previously not structure and drainage system to foreseen. Changes in design of drainage structures including increase in size of the basically suit the current traffic drainage structures for the KNBP are inevitable. In assessing the proposed design volume and runoff respectively, will changes however, only those that are critical and absolutely necessary will be included. increase contract sum from EUR 67,394,566.56 to EUR 92,875,328 so far, hence a percentage increase of 138%.

 Design Consultant specified a lime  Investigations were carried out at 4 borrow pit sites, with test pits excavated on a stabilised sub base without having 4x4 grid and it was established that all these borrow pits had PI>16%. A detailed confirmed availability of suitable technical audit will be conducted to establish reasons for variance between the two gravels. This led to changes of designs. material for sub base after award of contract.

S/No Road Contract / Key findings Management Response Contractor / Amount  The design is for DSD shoulders. The design for the second carriageway adopted double bituminous surfaced shoulders There are failures of the DSD instead of asphalt for the following reasons: shoulders observed on many  The existing KNBP already had double surfaced dressed shoulders and therefore for sections of the previously uniformity similar construction for second carriageway was proposed; constructed sections of the Northern  It was more cost effective to adopt double surface dressed shoulders instead of Bypass road. asphalt wearing for the full width of the road, carriageway and shoulders.

 The RoP is not being applied by There was disagreement between the Contractor and the Consultant on the scope of using the ‘Mono Material’ formulae. materials that would be subjected to ROP. The Contractor has referred the issue to UNRA for a decision. UNRA shall refer the matter to a dispute board to obtain a neutral opinion  A number of IPCs were not paid in Delayed payment of IPCs was occasioned by inadequate and delayed release of funds by time, hence accumulating interests the Ministry of Finance Planning and Economic Development. to be paid to the contractor. The accumulated interest payment as of end of August 2016 is Euro 60,522.71 (IPC No. 18).  Inappropriate assessment of  The need to increase the supervision staff was as a result of the increased scope requirement for supervision staff which was due omissions in the design. has led to increasing the number of non-key staff by six (6) people and procurement of additional 2 No. double cabin pickups. 2. Construction of the  By end of October 2016 the lapsed Management did not respond to the matter. new Mbarara contract time is 78% while physical Bypass and progress is 76%. The works are reconstruction of progressing well and no delays in the existing completion of works are anticipated.

S/No Road Contract / Key findings Management Response Contractor / Amount Mbarara Ntungamu  The commencement order was Delayed issuance of the commencement order was caused by the delay in fulfilling the section of Northern issued 8 months after the contract Financing conditions precedent to commencement of works. A waiver had to be granted corridor route was signed. The reasons for such by the European Investment Bank) for a commencement order to be issued. (36km) by M/s long delay are not known. China Railway  Protection of the embankment Protection of the embankment slopes is catered for in the contract under the item of top Seventh Group slopes is not catered for in the soiling under the following provisions. However, at the time of the audit inspection, the (CRSG) at Euro contract. Slope erosion may activity had not commenced but is scheduled to be done. 48,889,402.01 undermine the slopes stability.  Long delays in payment of Delayed payment of Interim Payment Certificates was caused by different conditions as contractor’s and consultant’s listed below: - IPCs/invoices. The delays affect (i). For the GoU component there were challenges of inadequate budget and their cash flows and shall attract releases interest payment claims. By (ii). For the EIB component, September 2016 the contractor had  Initially EIB was not releasing funds awaiting UNRA’s compliance with claimed Euro 60,522.78 for interest conditions precedent to disbursement i.e. 100% acquisition of the Right of due to delayed payment. Way. This was later achieved and subsequently EIB released its component of funds.  Currently EIB is not releasing funds awaiting finalisation of the procurement of the required additional supervision services.

 No justifications for many Scour checks were provided on unpaved drains with longitudinal slopes of 3-5% as an constructed erosion/scour checks alternative to lining the drains in accordance with Section 6-2 of the code of practice for and side lined drains geometric design. (terrain/volume of water).  Erosion happening at the edges of  The design provided stone pitching on the sides of the access culvert headwalls as access culverts where only head erosion protection (DRW No. 3-121 wall has been provided (no wing  At the time of the audit inspection, the activity had not commenced. walls)  The activity will be executed in accordance with the Contract.

S/No Road Contract / Key findings Management Response Contractor / Amount  Guard rails provided on top of cut  The Guard rails were provided as a temporary measure to protect the identified slopes to safe guard the people injurious affected families living on top of cut slopes. Ref.: Valuation report living around are not the correct  The Chief Government valuer rejected the proposal to compensate the families for safety protection measure. injurious affection.  UNRA has decided to build a fence parallel to the road and has written to the consultant to propose appropriate designs.  Livestock is crossing the road on the At grade cattle crossings are provided with sufficient road signs. To prevent random Bypass section. This is a safety crossing of livestock, guardrails were also provided at edge of the road as a means to hazard. guide the cattle to the crossing spot. Ramps are to be constructed at the identified cattle crossing points to protect the road against erosion.  Discussions on working on the 5kms The decision to progress with the works on the 5kms of roads Mbarara town roads has of roads within Mbarara town area been affected by the budget shortfalls under this project have not been concluded. It will be more cost effective if these roads will be worked on under this project. 3 Rehabilitation of  Delays in issuing the Addendum No.  The delays were caused by the prolonged provision of information by the consultant, Kiryandongo – Gulu 1 involving change of scope of and the delays in clearance of the addendum during the procurement process both Road; Lot 1: works to include Kiryandongo town internal and external Kiryandongo - roads Karuma – Kamdini  The project has been substantially road – 59km by completed within the contract M/s Chine duration. Communication

construction  No design undertaken to arrive at  The project was initiated as a simple rehabilitation characterized by improvement of company Limited the recommended pavement much damaged sections and repair of potholes in fairly damaged sections. (CCCC) UGX structure. Many work items under  However, by the time of implementation, the road had further deteriorated. 56,705,761,711.36 estimated in the BoQ.  The Supervising Consultant carried out studies including traffic counts and axle

S/No Road Contract / Key findings Management Response Contractor / Amount loads, conditions of the existing pavement layers among others. The findings of the study influenced the choice of the rehabilitation intervention undertaken.

 Almost all IPCs were not paid on This is a correct observation. This was however due to shortage of funds under time with IPCs No.7, 8, 9, 10 and 11 Transport Corridor Vote from which this project was being funded. corresponding to months from October 2015 to April 2016 not yet paid by end of May 2016. Contractor has not claimed for interest.  Payment of Consultant’s staff was The consultant could not raise funds to pay staff because he had defaulted on taxes and still pending since July 2015 hence all payments due were being paid to URA. Consultant seeking legal redress.  Lined drains are being provided These areas have been experiencing heavy volume of runoff and therefore required where they are not required leading lining and urban areas for hygiene purposes. to unnecessary increased cost.  Too many access culverts provided The access culverts provided particularly in the trading centers were necessary as it was on some sections of the road not possible to provide side roads so that the people share. increasing the cost and making the road unsafe (too many conflict points).  Drawings seen in the progress There was a lapse in ensuring drawings are endorsed by all parties involved. This will be report do not show names of people addressed. who drafted, checked and approved them.  Lack of appropriate design has led Management adopted interventions which involved the following: to excessive increased quantities of  widening the road from 6m to 9m, certain work items such as mass  inclusion of 1.2Km of Kiryandongo Town road, concrete class 20/40 increasing from  Swamp treatment and Concrete Kerbing and 80m3 to 3,105.96m3 (>3,000%) as  lining of open channel drains across all town centres along the road project among

S/No Road Contract / Key findings Management Response Contractor / Amount per IPC No. 12. others,  These resulted in increased quantities.

 A few defects/failures of the grouted These will be rectified during defects liability period. stone pitching  Vandalism/theft of road furniture This has consistently been a challenge and is being tackled through multiple initiatives including public sensitization and enforcement by the UNRA enforcement team.  Heavy trucks parking on shoulders This shall be incorporated in enforcement initiatives to protect the road. UNRA will also engage local leaders in affected to provide the parking spaces to address the problem. 4 Rehabilitation of  The project completion date is May The Contractor was given the opportunity to complete the works and be charged Nebbi – Pakwach 2016 but contractor is still on site liquidated damages. Road – 54km by and certain works have not been M/s China Civil completed. Engineering  Delayed commencement of works  The Original commencement date was fixed for 1st September 2014. The Contractor Construction after contract signing, the contract submitted the program for the works to the Consultant on 8th September, 2014. Corporation at UGX was signed on 19th June 2014 and However, the Consultant noted that the Contractor had not yet mobilized and no 28,069,772,987 works commenced on 1st January equipment was deployed to the site more than three months after the 2015. That is; after 5 months commencement date. The Consultant instructed the Contractor to submit a revised opposed to 28 days provided in the programme. special condition of contract GCC.  The Contractor submitted a revised work program via his letter dated 16th December 2015 in which he requested for an extension of the Intended Completion Date. Prior to this request the Contractor had via his letter of 24th November 2014 indicated his mobilization schedule had been affected by delayed payment of advance for more than 5 months and accordingly communicated his intention to claim pursuant to GCC 51.1. The commencement date was revised to 1st January 2015 by UNRA.

S/No Road Contract / Key findings Management Response Contractor / Amount  Advance payment was not paid in The delay was because of limited funds under the budget line, Transport Corridor under time as required in the special which the project is being financed. condition of contract GCC 51.1, despite having met all the requirements. (45 days after presentation of an acceptable advance payment Guarantee)  Big variation of quantities of certain  It is true that prior to the initiation of the procurement no detailed studies were works at implementation stage undertaken to determine the most appropriate treatment for the road. (inadequate design?  The project scope at tender involved reconstruction of much damaged sections and repair of potholes in other sections.  The Supervising Consultant carried studies including traffic counts and axle loads, conditions of the existing pavement layers among others. The findings of the study informed the choice of the rehabilitation intervention undertaken hence the changes in scope.  Communities blocking the side drain  At the time of audit most access slabs and some access roads had not been to provide access to their properties. provided however, the consultant shall provide access slabs where required and sensitize the community about the need maintain drainage unblocked.

 Road users safety – no sufficient  The Contractor was not complying with implementation of OHS. warning signs  The Consultant severally reminded the Contractor to comply.  The UNRA environmental and social safeguards unit will undertake an OHS audit on the project and institute penalties where possible.  Delay in making decision on the The decision to implementation full rehabilitation was taken early what delayed is design intervention for the first 33km from to inform the appropriate intervention. The scope of works and cost has been Nebbi. determined by the consultant and procurement is underway.

S/No Road Contract / Key findings Management Response Contractor / Amount 5 Rehabilitation  Commencement order issued 3  During the project “kick off” meeting, it was agreed between the Contractor and works of selected months after award of contract. UNRA to defer the commencement date. This was further confirmed by the national roads – Contractor in their letter dated 9th February 2016. The contractor further expressed lot4: Nansana - their intention not to claim as a result of the deferred commencement. Busunju 47.6km by  The commencement date was later agreed and confirmed as 26 March 2015. M/s Spencon  The Client has ordered for revision UNRA’s instructions were issued to ensure that the rehabilitation works are based on Services Ltd UGX of scope of works with a view of updated detailed designs with a well-defined pavement lifespan, away from the initially 54,295,484,495 upgrading the road from Class III envisaged maintenance intervention. UNRA will however endeavor to ensure that future paved to Class II paved. The rehabilitation projects have detailed designs before implementation. contract cost is expected to increase by 98%. With only two months before the end of contract the revised scope of works and contract duration has not been defined  A nominated sub-contractor M/S  UNRA approved the engagement of the sub-contractor in response to the China Wu Yi Ltd is on site contractor’s request on condition that the contractor takes full responsibility of the implementing works which will total sub contractor’s activities. Ref.: Letter to the Project Manager 24.7% of contract amount. No  The Subcontractor is displayed on the Project sign boards together with the main recognition of the sub-contractor in Contractor as shown Project Sign boards. the project reports and sign boards  Material that can be used as G-15 is The in-situ test results indicate that the material does not comply with G 15 quality being removed (paid as cut to requirements (see attached laboratory test results) spoil).  Access culverts are being provided The access culverts were existing before the road works were undertaken and the where they are not required leading property owners on many occasions turn violent when these are removed after to unnecessary increased cost and construction of the road. The property owners have on the several occasions written making the road unsafe (too many requesting retention of the accesses to their premises. UNRA is however continuously conflict points) engaging communities along the roads to share accesses to their properties.

S/No Road Contract / Key findings Management Response Contractor / Amount  Delays in payments of IPCs The delay in payment of the IPC was due to limited funds under the transport corridor attracting claims for interest. vote from which this project is funded. Already a total of UGX 242,675,436 as interest has been certified and paid to contractor.  ‘Contractor has expatriate staff UNRA is working towards ensuring that only expatriate staff with skills that cannot be undertaking works that may be sourced locally are engaged on our future projects. executed by local staff (foreman) 6 Construction/Re-  Delays in procurement process. It  The procurement guidelines have been instituted where statutory timelines are construction of took a year to procure a contractor strictly observed. Where timelines are exceeded the bidders are formulated to for strategic Bridges in for the works. The bid submission appropriate extension in line with procurement guidelines. central region LOT date was 14 Feb.2014 and contract 1: KABAALE signing was 4th feb.2015 BRIDGE by M/S  It was learnt that the intention is to Management did not provide response. Terrain Services Ltd pave approach roads totalling to Shs. 1.2Km. 14,579,023,789 7 Construction of  The works are yet to be completed  The Contractor exhibited capacity issues which resulted in the delayed completion of Apak Bridge on four months after contract works. Lira-Abim-Kotido completion date of 15/06/2016.  The contractor will be charged full liquidated damages road Liquidated damages amounting to UGX 213,124,323.95 for the maximum number of 100 days have not been charged.   The investigation report showed,  According to the special specifications, two boreholes were required with one on only 3 boreholes were drilled either side of the river. Boreholes were to be positioned as near as possible to the contrary to the minimum of 6 proposed bridge centerline. Boreholes were to be extended below soft strata in boreholes required according to BS order to identify the depth and nature of any rock. When rock is encountered,

S/No Road Contract / Key findings Management Response Contractor / Amount EN 1997-2:2007 (E) B.3. boring should continue at least 1m deeper to ensure that the rock is not an isolated boulder.  Moreover, the abutment foundation width is 6m with a length of 8.5m, making the confirmatory geotechnical investigations carried out at the construction stage adequate.  The geotechnical investigation Rotary drilling auger was placed directly above the excavated bed of rock to rule out report shows two different levels of possibility of weak rock bedrocks (at 6 and 9m), while log sheets started at ground level  The foundation drawing has shown The weathered rock was removed and structure found on sound rock the abutment was constructed at 1.0m deep which is under laid by weathered rock, hence risk of erosion and scouring may be encountered in future.  The bridge and box culverts The bridges are designed for 100 year service life. The road is earmarked for upgrading constructed are 10.5m wide (2No. to class II paved road whose width is 10m (lane width of 6.0m+shoulder width 4.0) 3.75m lanes and 2No. 1m excluding side slope. pedestrian/cycle paths). This width is not necessary for drainage structures on a class III road whose width is at most 7m (6m carriageway + 2no. 0.5m shoulders). 8 Construction of  The geotechnical investigation was  Geotechnical investigations were planned to be undertaken during the construction Multiple Cell Box not conducted on the swamps to period because the site was inaccessible for the investigations to be carried out at Culverts and ascertain adequate information for tender. This was adequately provided in the works Contract and was conducted. Drainage Structures design. and rising 3km

S/No Road Contract / Key findings Management Response Contractor / Amount access road in  The number of cube test taken were  On average six (6) cubes were made per day of casting concrete. These were swamp on Leresi- inadequate compared to the subjected to 7 day and 28 day tests and all of them passed. Central Materials Budaka requirement of general specification laboratory for Ministry of Works and Transport who were hired to sample and section 7205 table 3 perform tests on concrete didn’t do a professional job. This shortcoming has been brought to the attention of the contractor and central materials Laboratory.

 The bridge and box culverts The bridges are designed for 100 year service life. The road is earmarked for upgrading constructed are 10.5m wide. This to class II paved road whose width is 10m (lane width of 6.0m+shoulder width 4.0] width is not necessary for drainage excluding side slope. structures on a class III road whose width is at most 7m (6m carriageway + 2no. 0.5m shoulders).