OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF TOWN COUNCIL FOR THE YEAR ENDED 30TH JUNE, 2015

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MATEETE TOWN COUNCIL FOR THE YEAR ENDED 30TH JUNE 2015

THE RT. HON. SPEAKER OF PARLIAMENT

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

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

Auditor’s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended), section 87 of the Local Governments Act, 1997 and Sections 13, 16 and 19 of the National Audit Act, 2008 is to express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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

1 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 unqualified 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

Unaccounted for funds Funds amounting to UGX.25,475,000 remained unaccounted for at the time of audit contrary to the regulations. Consequently, I could not confirm that the funds were utilized for the intended purposes

Qualified Opinion In my opinion, except for the possible effects of matter(s) described in the Basis for Qualified Opinion paragraph, the financial statements of Mateete Town Council Local Government as at 30th June 2015 are prepared in all material respects, in accordance with the Local Governments Financial and Accounting Manual, 2007, Section 31(6) of the Public Finance and Accountability Act 2003, the Local Governments Financial and Accounting Regulation, 2007 and the Local Governments’ Act cap 243, 1997 (as amended), of the Laws of Uganda.

John F.S. Muwanga AUDITOR GENERAL

4th December, 2015

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PART “B”

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

1.0 INTRODUCTION In accordance with Article 163 (3) of the Constitution of the Republic of Uganda 1995 (as amended), I am required to audit and report on the Public Accounts of Uganda that is to say, all public offices including the courts, the central and the Local Government Administrations, Universities and Public Institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the Mateete Town Council Local Government to enable me report to Parliament.

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

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

3.0 AUDIT METHODOLOGY The following audit procedures were undertaken:-

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

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

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

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

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

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

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4.0 ENTITY FINANCING Mateete Town Council is financed by grants (Conditional and Unconditional) from the Central Government and locally generated revenues from taxes, fees, licenses and charges. During the year, the Town Council received grants totalling to UGX.167,602,382 from the Central Government and UGX.17,167,553 from locally generated revenues. The total revenue of UGX.184,769,935 constituted 60% of its approved budget estimates of UGX.308,498,325.

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

5.1 Unaccounted for funds Regulation 43 (2) of the Local Governments Financial and Accounting Regulations, 2007 requires administrative advances to Council employees to be authorized by the Chief Executive and to be accounted for within a month.

At the time of audit, a total of UGX.27,275,000 had not been accounted for as shown in Appendix 1(a) and 1(b). In the absence of accountability, I could not confirm that the funds were utilized for the intended purposes.

The Accounting Officer promised to account for all the funds.

I advised the Accounting Officer to obtain the accountability or else recover the funds from the responsible officers.

5.2 Non-compliance with statutory obligations Income Tax Act Cap 340 requires that all allowances gained by a resident individual on part time employment be subjected to a tax at 30%. However, during the financial year under review, the Town Council paid UGX.7,970,000 to Councillors and Standing Committees in allowances without deducting PAYE of 30% equivalent to UGX.2,391,000 as required by the law as shown in Appendix 2.

This exposes the Council to fines and penalties from the tax body.

The Accounting Officer explained that management was not aware that the deductions should have been made from those allowances.

I advised the Accounting Officer to recover these taxes and promptly remit them to URA.

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5.3 Failure to remit shared local revenue to Lower Local Governments Part V of the Local Governments Act of 1997 as amended requires a Town Council to remit 5% and 20% of the total local revenue collected to parish and village councils that make up the Town Council respectively.

It was observed that an amount of UGX.4,291,897 had not been remitted contrary to the law. Non–remittance of shared local revenue affects implementation of planned activities which highly inhibits service delivery at the Lower Local Councils.

The Accounting Officer explained that due to the fact that the Town Council earns very little revenue yet it has to offer service delivery in these parishes, it had been resolved in the meeting of all Chairpersons of LCI and LCII that the Town Council retains these funds to improve on service delivery.

I advised the Accounting Officer to ensure that the shared local revenue is remitted as required by law.

5.4 Understaffing The Town Council has an approved staff establishment of 53 positions. However, only 18 (34%) positions were filled leaving 35 (66%) vacant posts.

Understaffing negatively affects service delivery.

The Accounting Officer explained that Council has been liaising with the District Service Commission and some adverts have had been run like that of the Assistant Engineer, but unfortunately no recruitments have been made yet.

I advised the Accounting Officer to follow-up with the District Service commission to ensure that the vacant posts are filled.

5.5 Irregular repair of tractor Section 3.14 (1), (2) and (3) of the Local Governments Financial and Accounting Manual, 2007 provides procedures to be followed for approval of a re-allocation. The procedures require the vote controllers to initiate the process addressed to the Chief Executive who will in turn submit to the Executive Committee for approval.

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If approved, the Chief Executive will communicate accordingly with copies to Head of Finance, Internal Audit and Auditor General.

On the contrary, UGX.5,412,311 was budgeted to be used to construct a slaughter slab but the executive approved that the amounts be used to buy land where a public toilet would be constructed. However, the funds were instead used to repair the tractor without prior approval of the executive. In addition, the procurements were not forwarded back to the District Contracts Committee for approval and there were no re-allocation warrants prepared.

The Accounting Officer explained that the available funds were allocated to the repair of the tractor to avoid commotion which would result from non-collection of garbage and that the Council would look for funds to purchase land for the construction of the public toilet.

I advised the Accounting Officer to comply with the regulations regarding re- allocations.

5.6 Use of direct procurement for the hire and repair of equipment under Force Account Section 2.1 of the Circular No.3 of 2012 To Local Governments on Use of Force Account Mechanism issued by Public Procurement and Disposal of Public Assets Authority on the 21st September, 2012 requires the Procuring and Disposing Entity to procure required supplies using the procurement rules and methods in the PPDA Act, 2003 and the Local Government (PPDA) Regulations, 2006 and the Guidelines issued by the Authority.

It was however observed that Sembabule District had prequalified firms for hire and repair of road construction equipment, the Town Council instead advanced an amount of UGX.14,007,000 to the Engineer to acquire equipment as shown in appendix 3.

The Accounting Officer explained that they had to use direct procurement under the force on account system to acquire the said spare parts/ services for the Town Council to have a bargaining power as the said pre-qualified supplier were quoting higher prices for the same products.

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I urged the Accounting Officer to follow the force on account guidelines for the hire and repair of road construction equipment.

5.7 Failure to maintain master rolls Section 5.3.2 paragraph 3 of the Scheme for maintenance of District and Urban Roads using own equipment and Road gangs Guidelines, 2013,on Setting Tasks, requires the Headman to maintain a record of attendance and the works carried out by the workers on a daily basis in a Weekly master Roll. Similarly, Section 7 of the Guidelines requires the Council to maintain weekly and bi-weekly master rolls.

It was however observed that the Town Council paid road gang wages amounting to UGX.2,000,000 without master rolls contrary to the guidelines. The Accounting Officer promised to maintain the master rolls in the subsequent financial year.

I urged the Accounting Officer to ensure that all payments to road gangs are based on master roll.

5.8 Routine mechanized maintenance of Kabira Macos road The cost for road maintenance of UGX.8,042,491 included; bush clearing, grading and shaping, compaction and purchase of 6 culverts. The audit inspection revealed that the six (6) culverts valued at UGX.1,135,000 had not been installed.

The Accounting Officer explained that the culverts were installed but due to poor drainage system in the Town Council, it was filled up with silt.

The matter requires further investigation.

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APPENDICES Appendix 1(a): Funds Unaccounted for

Documents reference Date PAYE Details Shs Remarks No

Nakakawa monitoring of Not signed by the vote 7-Jan 17/7/14 540,000 Aisha UPE schools controller Not verified

Preparation of Not signed by the vote Nakakawa 8-Feb 5/8/2014 financial 600,000 controller Not Aisha statements verified

Not signed by the vote controller Not 8-Mar 5/8/2014 Kiganda Jude Fuel 500,000 verified No fuel consumption schedule-500,000shs

Nakakawa Wages- Not signed by the vote 8-Apr 6/8/2014 1,070,000 Aisha cleaners controller Not verified

Nakakawa Acting Not signed by the vote 8-May 6/8/2014 1,500,000 Aisha allowance controller Not verified

The requisition had 5 vote books, only one Books of Nakakawa was available, 5 ledger 8-Jun 6/8/2014 accounts and 750,000 Aisha books, only one was catrigde available, 4 abstracts, only one is available

Nakakawa Full council 8-Sep 6/8/2014 630,000 Not authorised Aisha meeting Not accounted for Monitoeing Mukiibi Not signed by the vote 17/8 14/8/14 government 500,000 Luyima controller Not projects verified

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Transport to and back through ssembabule was paid at 100,000shs which is Facilitation for far high above Nakakawa 21/8 15/8/14 preparation of 750,000 average, in addition Aisha annual budget extra 20,000shs was paid as transport to bank on the same day same person same activity The car hire to accountant general's office 260,000shs at Delivering the same time extra general fund Nakakawa 20.000shs to go to the 22/8 15/8/14 account to the 400,000 Aisha bank was not cost accountant effective The car hire general was from a staff Ssemyalo Hamuza who is a tractor operator Purchase of No 3rd party Semyalo hydrolic for documents and no 32/8 22/8/14 300,000 Hamza servicing the Engineer’s inspection tractor report No activity report Mukiibi Fuel- 11-May 15/11/14 300,000 No fuel consumption Luyima monitoring schedule No Engineer’s inspection report on Semyalo this vehicle 11-Aug 18/11/14 Tractor repair 330,000 Hamza Not verified and not charged Not accounted for Monitoring Car hire, stationary not Kiggundu 12-May 22/12/14 government 500,000 accounted for- Jane projects 432,000shs Fuel-500,000shs no Mukiibi fuel for 5-Sep 8/5/2015 1,000,000 third party documents Luyima monitoring No activity report Two No attendance list for Kiggundu outstanding 16/5 18/5/15 1,240,000 this meeting Not Jane council signed for meeting Project No report detailing the Niyitegeka screening in 10-Jan 10/2/2014 100,000 project screening Nelson Mateeta Town exercise Council Transport advanced is Nakakawa Purchase of excessive for 10-Mar 10/2/2014 283,000 Aisha Tonner transporting toner from Masaka to Mateete

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Payment to No activity report roll the five Bitakamire detailing the journeys 12-Feb 12/22/2014 year 395,000 Pius taken to necessitate devlopment fuel among other facts plan No receipt, no acknowledgement of Kiggundu Procuring of 3-Jan 3/19/2015 400,000 receipt of the table, Jane office table item not recorded in the stores ledger. Monitor roads Balikuddembe 9-Mar 9/15/2014 in Mateete 300,000 No monitoring report Joseph Town Council Payment to No receipt from service the above for provider, no post Kirungundha 9-Apr 9/15/2014 repairs and 3,986,000 assessment report, no Godfrey servicing of details of the service the grader provider No consumption Periodic schedules, no receipts maintenance Kirungundha from petrocity. Ugx. 9-Jun 9/17/2014 works on 6,021,000 Godfrey 1,680,000 advanced to Nakasenyi- Kirungudha but no Kyogera road accountability. No receipt from service provider, no post assessment report, no Purchasing details of the service cutting blades Kirungundha provider thus could not 11-May 11/25/2014 and servicing 3,080,000 Godfrey ascertain if they were of Kamatsu pre-qualified to provide grader the services. This may have cost the government WHT Total 25,475,000

Appendix 1(b): Missing Vouchers

Verification remarks Date Payee Amount LGMSDP/ CDD 1/4/2015 Administration 1,500,000 Not seen 9/4/2015 Administration 300,000 Not seen

1,800,000 Total

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Appendix 2: Council and committee allowances not taxed Documents Queried reference Date PAYE Details PAYE Remarks amount No Nakakawa Full council PAYE not 9/8 6/8/2014 630,000 Aisha meeting 189,000 deducted Naluyima Taxes not 2/12 5/12/2014 Council sitting 670,000 Hamida 201,000 deducted Council Council sitting allowance Bitakakaramire 6/12 22/12/14 and cleaners 610,000 610,000shs Pius 183,000 wages taxes were not deducted 3 outstanding Sitting Bitakakaramire executive allowance 7/3 12/3/2015 600,000 Pius allowance and 180,000 600,000shs not tractor repair taxed Executive Bitakakaramire Taxes not 3/4 7/4/2015 sitting 400,000 Pius 120,000 deducted allowance One GPC and 910,000shs Bitakakaramire 1/5 2/5/2015 one council 910,000 allowance not Pius 273,000 meeting taxed Outstanding 4 Bitakakaramire executive 800,000shs not 15/5 15/5/15 800,000 Pius sitting 240,000 taxed allowance No attendace Two list for this outstanding 16/5 18/5/15 Kiggundu Jane 1,240,000 meeting Not council 372,000 signed for meeting Not taxed allowances Bitakakaramire one council 20/5 25/5/15 910,000 910,000shs not Pius and one GPC 273,000 taxed Bitakakaramire 4 outstanding 1/6 12/6/2015 1,200,000 not taxed Pius GPC sittings 360,000 Total 7,970,000 2,391,000

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Appendix 3: Hire and repair of equipment Voucher No Date Payee Details Amount

Payment to the above for Kirungundha repairs and servicing of the 4/9 15-Sep-14 Godfrey grader 3,986,000

Purchasing cutting blades Kirungundha and servicing of Kamatsu 5/11 25-Nov-14 Godfrey grader 3,080,000

Kirungundha 6/2 19/2/2015 Godfrey Repair of road equipment 3,941,000

Hire grader for diversion of Baguma section of Mateete Manyama 1/9 8-Sep-14 Herbert Road 3,000,000 Total 14,007,000

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