OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF DISTRICT LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2015

REPORT AND OPINION OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2015

THE RT. HON. SPEAKER OF PARLIAMENT

Introduction I have audited the accompanying financial statements of Kasese District Local Government 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, notes and accounting policies.

Management’s Responsibility for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Kasese District Local Government. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Governments 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, 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.

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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 internal controls relevant to the entity’s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances but not for purposes of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

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

PART “A”

Unqualified opinion

In my opinion, the financial statements of Kasese District 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 51(3) of the Public Finance Management Act 2015, the Local Governments Financial and Accounting Regulations, 2007 and the Local Governments Act cap 243 (as amended), of the Laws of Uganda.

Emphasis of Matter Without qualifying my opinion, I draw attention to the following matter in the financial statement.

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Supply and Installation of maize mills Included in the statement of financial performance is UGX.113,704,800 that was incurred to install six maize mills in 3 Sub Counties 2 Divisions and 1 Town Council. The maize mills had not been installed by the time of audit inspection due to inadequate power supply. The mills require a three phase power connectivity to enable them operate which was not in place where the machines were to be installed. There is a high likelihood of the mills not being installed leading to waste of resources.

John F. S. Muwanga AUDITOR GENERAL

30th November, 2015

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PART "B"

KASESE DISTRICT DETAILED REPORT OF THE AUDITOR GENERAL FOR THE YEAR FINANCIAL YEAR ENDED 30TH JUNE 2015

1.0 INTRODUCTION In accordance with Article 163(3) of the Constitution of the Republic of Uganda, I am required to audit and report on the public accounts of Uganda and of 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 Kasese District 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 were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. To verify whether goods and services financed have been procured in accordance with the PPDA Act. d. To evaluate and obtain sufficient understanding of the internal control structure of the entity, assess control risk and identify reportable conditions, including material internal control weaknesses e. To verify whether the management of the funds of the entity was in compliance with the Government of Uganda financial regulations.

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f. To verify whether all the necessary supporting documents, records and accounts have 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 Kasese District is financed by grants (Conditional and Unconditional) from Central Government, donations and locally generated revenues from taxes, fees, licenses and charges. During the year, the district received grants totaling to UGX.46,668,237,759 from Central Government, UGX.885,146,532 from donations and UGX.1,388,689,505 from locally generated revenues. The total revenue of UGX.48,942,073,796 constituting 99 % of its approved budget estimates of UGX.49,676,597,180

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

5.1 Irregular Levy of 3% Development Tax Regulation 13(0) of Part IV of the Fifth Schedule of the LGA CAP 243 requires Local Government Councils to seek authority from the Minister of Local Government to levy any other charge or taxes as source of revenue. However, the district collected UGX.38,448,323 as 3% development tax contractors without authority. However, such irregular tax may compromise the quality of work and increase the cost of service delivery. The Accounting Officer explained that it had been approved by Council and was awaiting authority from the Minister. But in the mean time, the Accounting Officer explained further that the collection had been suspended.

I advised the Accounting Officer to seek for appropriate authority prior to implementing any charge or tax in accordance with the regulations.

5.2 Failure to raise demand notes Paragraph 4.5 (2) of the LGFAM (2007) requires that Council shall raise a demand note or an assessment form to each individual revenue payer as per Council’s approved rates. It was observed that the district did not issue demand notes and had an outstanding revenue of UGX.167,284,497 in respect to un-collected at the year end. This deprives the entity cash revenue needed for service delivery.

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The Accounting Officer explained that some revenues could not be collected as the collection was dependent on other factors. For instance, on land fees, the District intended to dispose of some of its land but valuation department of Ministry of lands, delayed the exercise.

I advised the Accounting Officer to ensure that the demand notes are issued and revenue collected.

5.3 Unaccounted for funds Reg. 43 (2 &3) of the LGFARs 2007 requires administrative advances to any Council employee to be authorized by the Chief Executive and be accounted for within a month.

It was however, observed that UGX. 5,000,000 advanced to several Council employees remained outstanding at year end contrary to the regulations. In the absence of the accountabilities, I was unable to confirm that the funds were utilised for the intended purposes. The Accounting Officer promised to be more vigilant in implementing and enforcing regulations on advances.

I advised the Accounting Officer to ensure that the funds are accounted for or else recovery should be made from the responsible officers.

5.4 Failure to report Micro Procurements Regulation 41(8) of the Local Governments (Public Procurement and Disposal of Public Asset, LGPPDA) 2006 requires micro procurements to be reported to the contracts committee on a monthly basis by the holder of the delegated authority.

However, it was observed that micro procurements worth UGX. 12,038,900 were not reported to the contracts committee for ratification as required by regulations. Failure to present the micro procurements to contracts committee may be intended to conceal procurements outside the procurement plan.

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The Accounting Officer admitted the shortcoming and promised to adhere to the Public Procurement and Disposal of Assets (PPDA) regulations.

The Accounting Officer was advised to ensure that monthly micro procurements are reported to the contracts committee in accordance with the regulations.

5.5 Failure to follow the Procurement Plan Regulation 13 (c) of the LGFAR 2007 requires the duties of a head of department in respect of financial management to include being personally responsible for ensuring that all financial commitments of the department are within the commitment limits set by the head of finance or cash received, and in line with approved work plans.

Review of the procurement records made revealed the following shortcomings;  Two procurements worth UGX.88,025,860 were not planned for,  Two procurements worth UGX.125,100,560 were not executed as per plan, and  Three procurements worth UGX.190,976,650 had their estimated values adjusted from UGX.75,500,000 to UGX.191,963,000 without authority. The Accounting Officer attributed this to errors in record keeping, poor coordination between the planning and implementing departments and poor market research which did not take care of inflation for some procurement.

The Accounting Officer was advised to ensure that the execution of the procurements is in accordance with the procurement plan.

5.6 Contract Management and Supervision Regulation 26 (3) of the Local Governments (Public Procurement and Disposal of Public Assets) requires a user department to be responsible for contract management, once a contract is signed. The user department shall inform the procurement and disposal unit of the name of the official responsible for managing each contract.

However, there were no contract managers reports presented for audit verification.

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The Accounting Officer explained that supervision reports were filed separately. However, they were not presented for audit verification.

The Accounting Officer was advised to ensure that all contracts are supervised by the relevant user departments as required by the regulations.

5.7 SERVICE DELIVERY

5.7.1 Education Sector

5.7.1.1 Kiruli Primary School Paragraph 2.1.2 (a) of the Local Governments Management and Service Delivery (LGMSD) Operational Manual for 2009 set the minimum national standard for delivery of Primary Education. Documentation review however, revealed conditions that district standards were below the minimum national standards as shown in the table below:- S/N Teacher Pupil Ratio Standard Current Status 1 Classroom pupil ratio 1:55 1:93 2 Grade III Primary School 1:280-499 1:836 3 Desk Pupil Ratio 1:3 1:9 4 Permanent Teacher At least 4 teachers None Accommodation 5 Latrine Stance Pupil Ratio 1:40 1:39 6 State of school infrastructure. Good shape Poor

The poor standards compromise the quality of education in the district. The Accounting Officer admitted the shortcoming and promised to follow up the matter with the relevant authorities. The Accounting Officer was advised to engage the relevant stakeholders to improve the facilities at the primary schools in the district.

5.7.2 Supply and Installation of six 40HP Maize Mills. The District contracted Mupala Agency Ltd to supply and install six Maize Mills in 3 Sub Counties, 2 Divisions & 1 Town Council at a contract price of UGX 113,704,800 under

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contract number KSE/521/SUPLS/2014/2015/00006. At the time of the audit (July 2015) UGX.113,704,800 had already been paid to the contractor.

The inspection of the facilities revealed that the maize mill had not been installed. This was as a result of inadequate power supply. The mills require a three phase power connectivity to enable them operate which was not in place where the machines were to be installed. It appears the venture was not properly planned. There is therefore a high likelihood of the mills not being installed leading to waste of resource.

The Accounting Officer explained that the mills were installed however, for them to be connected to a three phase power; each beneficiary group had to pay UGX 6,000,000 which the groups could not afford. The matter requires urgent attention.

5.7.3 Health Service Delivery Paragraph 2.1.2 (D) of the Local Governments Management and Service Delivery (LGMSD) Program Operational Manual for local governments sets minimum standards for proper functioning of Health centres. An inspection of selected health centres revealed the following short comings:- a) Kabatunda HC III Minimum Standard HC III Current Status Maternity ward No maternity ward 2 General wards Only 1 general ward 1 Medical waste pit No medical waste pit Placenta pit No placenta pit 8 of 2 stance pit latrine Only 2 of 2 stance pit latrine 18 staff Only 8 staff available Transport No transport available

b) Nyamirame HC IV Minimum Standard HC IV Current Status Maternity ward Non Mortuary Non 1 General ward Non 10 of 2 stance latrines 1 of 4 stance latrine 48 required staff Only 17 staff Transport in case of emergency No transport

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The above shortcomings hinder effective health service delivery in the district. The Accounting Officer explained that council had initiated a vigorous lobbying campaign to raise funds. I advised the Accounting Officer to engage the Ministry of Health to ensure that the issues affecting the health services are addressed.

5.7.4 Construction of the 5Km Road barrier – Mahango Muhokya Road The district embarked on the construction of Mahango Muhokya road under Force on Account at a cost of UGX.137,874,050. According to the Bills of Quantities, civil works included site clearing, blasting of the rock, grading and culvert construction. The works started in November 2014 but the project completion date remained undefined. It was however, observed that an amount of UGX.251,732,500 had been expended by the time of audit in July 2015, implying an excess expenditure of UGX.113,858,450 over budget. This is despite of the fact that only site clearing and blasting of the rock had been done.

It appears the project was not well planned given the capacity of the district to undertake such a project using Force Account Mechanism. The Accounting Officer explained that this was a new road opening to inaccessible Mahango Sub County. He indicated that a lot more would be spent on the project. The Accounting Officer is advised to undertake due diligence on all projects to be undertaken prior to implementation. Meanwhile the project should be properly supervised and be completed.

5.8 Human Resource 5.8.1 Understaffing The District has an approved staff establishment of 180 staff. However, only 136 (75.5%) positions are filled, leaving a staffing gap of 44 (25.5%). Understaffing negatively affects service delivery. The staffing gap is due to a ban on recruitment by the Ministry of Public Service and to some extent failure to attract staff. The Accounting Officer attributed it to a recruitment ban by the Ministry of Public Service.

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The Accounting Officer was advised to continue liaising with the Ministry of Public Service and the Ministry of Finance and Economic Development to ensure that the staff gaps are filled.

5.8.2 Failure to Provide Personal Files for Deleted Staff Regulation 108 (2) of the Local Governments Financial and Accounting Regulations, 2007, states that, the Auditor General shall have rights of access to all documents and information necessary for reaching an audit opinion. During audit, it was observed that some names were deleted from the payroll during the year as detailed in Appendix 1. However, the Accounting Officer did not present the personal files of the relevant staff for audit verification.

I was therefore, unable to determine the financial implications of the deletions.

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Appendix 1 Personal files not provided for Audit Personal Name Duty Station Date of Reason Salary Number Deletion AbenaweBenard Apr, 2015 Transfer 553,954 Ayebare Justice Apr, 2015 Transfer 553,954

750186 Baguma David Apr, 2015 Transfer 553,954

BalukuNyabutundu K. Z Karambi Mar, 2015 Retirement 537,405 398106 Balyebuga Godfrey Hiima Mar, 2015 Deleted 589,350 397087 Basingene William KaghandoBwesu Sep-14 Absconded 226,154 750212 Biira Regina Muhokya HC Feb,2015 Resigned 522,256

398413 Biira Rhoda Mbayahi June, 2015 Died 362,969 396345 Brown Simon Kitoko Nov, 2014 Absconded 260,389 Buringuriza Vivian Apr, 2015 Transfer 743,096

Bwambale Elijah Buzira Mar, 2015 Death 603,801

817102 BwambaleEmmy Bwerahosp Nov, 2014 Absconded 696,209 397949 BwambaleErican Kyamiza Dec, 2014 Absconded 225,493

850651 Bwambale Jackson Bwerahosp Oct, 2014 Absconded 450,607 394281 Bwambale K B Onizious Mbata Sep-14 Absconded 239,646 398115 Bwambale Mathew Apr, 2015 Death 462,000 Musale 700793 Byaruhanga Innocent Rwenzori High Aug-14 197,590

Echelu Joseph Kitswamba S/C Jan, 2015 Death 377,781

735219 KabagambeYusufu Busunga Feb,2015 Absconded 216,374 Kahigwa 398103 KabauBwambale Nathan June, 2015 Died 327,655

399048 KabughoJulieri Mbata Sep-14 Absconded 402,551 Kamagara Hilda Apr, 2015 Transfer 553,954 398798 Kamalha Emmanuel Kamasasa Feb,2015 Absconded 320,088

397518 Kambere Simon Nyangorongo Oct, 2014 Absconded 374,427

395198 Karungi Florence Bweyale P/S Jul-14 Unknown 441,399 Katalikawe James June, 2015 Resigned 267,353

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Kateeba Jolly June, 2015 Resigned 358,987 Katusabe K Apohius Nyakazinga Feb,2015 Absconded 322,451

348897 Kembabazi Loy Rwenzori High Feb,2015 Transfer 826,550

186548 Kemigisa Evelyne Nyabirongo P/S Jul-14 Unknown 423,559

399364 Kiiza Mark Bro Muhokya Sep-14 Absconded 371,927 396789 KimanywedaMaserekaAn Kirabaho SDA Mar, 2015 Absconded 245,338 yasio 399231 Kimulya Adorable Kiguramu Oct, 2014 Absconded 265,062

734332 Kissa Stephen Musasa Jul-14 Unknown 457,822 398949 KitalemireAmza Nyakatonzi Sep-14 Absconded 222,827 397992 Kule Augustine Kakone Jan, 2015 Absconded 467,685 750104 Kule B M John Health Dept Nov, 2014 Abconded 328,334

750130 KuleMubunga Buhuhira HC Oct, 2014 Absconded 0 Kule Pascal June, 2015 Absconded 340,247 394834 Kule Stephen Nyakakindo Sep-14 Absconded 247,606 Kyomukama Olivia June, 2015 Absconded 294,623 398231 Maliro Christopher nyamugasani Mar, 2015 Absconded 327,551 Maliro Christopher May, 2015 Absconded 294,203 392145 Masereka Fredrick Kasenyi P/S Absconded 0 Masereka Fredrick Kasenyi Oct, 2014 RESIGNED 428,592 Masereka Israel Isaac Nyakiyumbu Oct, 2014 Absconded 302,505 395304 Masereka Nelson Kihungu Dec, 2014 Absconded 408,135 Kibungula

Masika Happy Jennifer Kanyangwanji Sep-14 Absconded 249,667 393164 Masika Harriet Rusese (Med) Jul-14 Unknown 301,703 750307 Masika Mary Bwerahosp Oct, 2014 Absconded 80,219 396280 Masika Patience KirabahoMos Feb,2015 Absconded 260,951 394729 Masoud Faisal Jul-14 Absconded 371,927 398084 Matte Abel Kabatunda Feb,2015 Mandatory Retirement 467,685 800657 Mbambu Sylvia Kinyabwamba HC Oct, 2014 Absconded 415,608 396738 MbayahiRabison Buwatha Feb,2015 Illegal Study leave 265,241 392434 Mbusa Ramesh June, 2015 Absconded 388,681 Mbusa Tadeo Karusandara Jul-14 Absconded 227,965 MitsagharuKule Charles June, 2015 Absconded

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452,464 399305 Moshi Huda Kamasasa Mar, 2015 Death 467,685 393234 MubungaZephania Jan, 2015 Absconded 420,703 Mugisa James Apr, 2015 Absconded 626,333 Muhindo Agnes Oct, 2014 Absconded 671,336 399019 MuhindoAlozious June, 2015 Absconded 260,254 397484 MuhindoAnatoceKinanga Kinyateke June, 2015 Absconded 431,309 418291 Muhindo Zephaniah Ighanza Jan, 2015 Absconded 396677 MuhindoZubeda Mpondwesda Mar, 2015 Absconded 410,051 399359 MukonzoMumbere Eric Karambi SS Mar, 2015 598,822 397722 MulekyaYovanBambaleM Kanyangwanji Sep-14 Absconded 222,885 usongya

399051 Mwanamwolho Isaac Nyambuko Jan, 2015 Absconded 228,269 397209 Mwesige Keith Watembo Bwesumbu SDA Sep-14 Absconded 392,802 394194 NzyabakeZebia St. Matia Mulumba Sep-14 Absconded 413,203 Sabiiti Eric Apr, 2015 Transfer 553,954 850579 Sikabyaholho Samuel Bugoye S/C Jan, 2015 Death 377,781 396913 Sunday Annet Kamatsuka Sep-14 Absconded 407,606 392942 TemboLazarious Kakone Sep-14 Absconded 487,882 225642 Twinamatsiko Joshua Rwenzori Jul-14 Transferred 199,927 850409 Wandera Lamech Nyamwamba Jan, 2015 Death 688,450 Division Total 29,335,776

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