Report of the Auditor General on the Financial Statements of the Uganda National Roads Authority for the Year Ended 30Th June 2015

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 2015

OFFICE OF THE AUDITOR GENERAL UGANDA

TABLE OF CONTENTS LIST OF ACRONYMS ...... iv REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE, 2015 ...... v 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 Under Stated Infrastructure Assets ...... 5 8.3 Nugatory expenditure ...... 6 8.4 Fraudulent Advances to ABC Capital Bank ...... 8 8.5 Un accounted for Advance - UGX.47.7bn to contractors to pay Project Affected Persons (PAPs) ...... 8 8.6 Outstanding creditors ...... 9 8.7 Review of Budget Performance – Uncompleted Activities ...... 10 8.8 Procurement Irregularities ...... 13 8.10 Lack of legally binding agreement between UNRA and Kalangala Infrastructure Services Ltd (KIS) ...... 23 8.11 Improperly Budgeted for Expenditure -Support for KIS ...... 24 8.12 Lack of a performance Guarantee on Funds paid for ferry operations (KIS) ...... 25 8.13 Grant Reserves not fairly stated ...... 26 8.14 Delayed contract implementation ...... 26 8.15 Hire of privately owned Road Equipment ...... 27 8.16 Late remittance of deducted taxes to URA ...... 28 8.17 Non - Performing Letters of Credit ...... 28 8.18 Payments to the media houses...... 29 8.19 Use of un-prequalified service providers in procurements ...... 29 8.20 Un accounted for emergency works at 3 UNRA stations ...... 29 8.21 Irregular payment of un-defined Allowances - UGX.50,167,506 ...... 30 8.22 Violation of Sections of the Labour Based Manual ...... 30 8.23 Lack of Procurement Personnel at UNRA Stations ...... 31 8.24 Vehicles not yet boarded off at Mbale Station ...... 32 8.25 Status of Implementation of Prior year Audit Recommendations ...... 33 9.0 TECHNICAL (ENGINEERING) AUDIT OF A SAMPLE OF ROAD CONSTRUCTION PROJECTS ...... 36 9.1 CONSTRUCTION OF THE KAMPALA – ENTEBBE EXPRESSWAY (51.4KM) THROUGH DESIGN AND BUILD CIVIL WORKS CONTRACT ...... 37

9.2 UPGRADING OF KAMWENGE- FORT PORTAL ROAD (66.2KM) FROM GRAVEL TO PAVED (BITUMEN) STANDARD ...... 42 9.3 UPGRADING OF MPIGI – KANONI ROAD FROM GRAVEL TO BITUMINOUS STANDARD (64Km) ...... 49 9.4 EMERGENCY REPLACEMENT OF NTUNGWE AND MITAANO BRIDGES IN RUKUNGIRI/KANUNGU DISTRICTS ...... 52

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LIST OF ACRONYMS

Acronym Meaning RT. Hon Right Honourable UNRA Uganda National Roads Authority CCCC China Communications Construction Company MTEF Medium Term Expenditure Framework IPC Interim Payment Certificate TSDP Transport Sector Development Project SRIV Stores Requisition Issue Form Voucher GRN Goods received Note RFQ Request for quotation $ United States Dollar KIS Kalangala Infrastructure Services PPP Public Private Partnership LBCs Labour based Contracts USA United States of America FYR Financial Year LC Letter of Credit IGG Inspector General of Government RAFU Road Formation Unit TIN Tax Identification Number URA Uganda Revenue Authority NTR Non Tax Revenue KM Kilometre MoWT Ministry of Works and Transport MoFPED Ministry of Finance, Planning and Economic Development PAPs Project affected persons UGX Uganda Shillings Bn Billion SG Solicitor General PDU Procurement and Disposal Unit GOU Government of Uganda URA Uganada Revenue Authority MDAs Ministry, Department and Agencies PPDA Public Procurement and Disposal of Public Assets Authority IFMS Integrated Financial Management System Rd Road CIID Criminal Intelligence and Investigations Department KCB Kenya Commercial Bank LC 1 Local Council 1 Co. Company Ltd Limited LPO Local Purchase Order GRN Goods Received Note M Million PFMA Public Finance Management Act, 2015

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE, 2015

THE RT. HON. SPEAKER OF PARLIAMENT

I have audited the financial statements of Uganda National Roads Authority (UNRA) for the year ended 30th June 2015. 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.

Responsibility of the Directors The Directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, Section 45 of the Public Finance Management Act, 2015 and the requirements of the Uganda National Roads Authority Act, 2006 and for such internal controls 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 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.29,542,978,953 Expenditure totaling to UGX.29,542,978,953 was inappropriately charged on budget lines to fund activities that were not planned for without authority. Mischarge of expenditure leads to misrepresentation of expenditure balances in the financial statements and it is contrary to the intentions of the appropriating authority.

 Under Stated Infrastructure Assets - UGX.9,332,851,200,000 The statement of financial position as at 30th June 2015 reflected the value of Infrastructure Assets at UGX.9,332,851,200,000. I noted that the figure excluded the value of the infrastructure assets acquired during the financial year. In addition; the Authority acquired land through compensations to the tune of UGX.40,948,696,342 during the financial year however; these were also excluded from the amounts disclosed. The assets of the Authority are therefore understated.

Qualified Opinion In my opinion, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements fairly present in all material respects, the financial position of the Uganda National Roads Authority as at 30th June, 2015 and its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and the Uganda National Roads Authority Act, 2006.

Other Matters Without qualifying my opinion further, I consider it necessary to communicate the following matters other than those presented or disclosed in the financial statements:  Nugatory Expenditure – UGX.8,044,936,050 Amounts paid out totalling UGX.8,044,936,050 were considered to be nugatory expenditures as under:- (i) Unwarranted arbitration awards arising from poor management of the contract 6,616,405,658 (ii) Interest on delayed payments 1,116,168,862 (iii) Unwarranted legal fees 254,102,450 (iv) Unwarranted expenditure for due diligence 58,529,080 Total 8,044,936,050

John F.S. Muwanga AUDITOR GENERAL

KAMPALA

11th November, 2015

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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 2015 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 5, Lourdel Road, Nakasero. 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.1,517,626,619,000 were received from Central Government while a total of UGX.550,895,979,000 was received from Development partners. Another UGX.205,804,000 was received as locally generated revenue reflected as other income. Total operating income for the year was UGX.2,068,728,402,000 which constituted 99% of its approved budget

estimates for the year of UGX.2,096,808,783 while total operating expenses were UGX.1,882,568,927,000.

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. 2

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 has been 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 – 29,542,978,953 High 8.2 Under Stated Infrastructure Assets - UGX.9,332,851,200,000 High 8.3 Nugatory expenditure – UGX.8,044,936,050 High 8.4 Fraudulent Advances to ABC Capital Bank- UGX.173,701,000 High 8.5 Unaccounted for Advance - UGX.47.7Bn to contractors to pay Project High Affected Persons (PAP) 8.6 Outstanding creditors - UGX.239,445,625,000 High 8.7 Review of Budget Performance – Un completed Activities High 8.8 Procurement Irregularities High 8.9 Irregularities in compensation of Project Affected Persons (PAPs) High 8.10 Lack of legally binding agreement between UNRA and Kalangala High Infrastructure Services Ltd (KIS). 8.11 Improperly Budgeted for Expenditure -Support for KIS - High UGX.17,882,012,502 8.12 Lack of a performance Guarantee on Funds paid for ferry operations High (KIS) 8.13 Grant Reserves not fairly stated - UGX 8,261,743,000 Moderate 8.14 Delayed contract implementation - Mukalazi Technical services Moderate 8.15 Hire of privately owned Road Equipment UGX.691,950,193 Moderate 8.16 Late remittance of deducted taxes to URA - UGX.348,027,501 Moderate 8.17 Non - Performing Letters of Credit – UGX.218,400,442 Moderate 4

8.18 Payments to the media houses - UGX.809,977,600 and $ 36,429 Moderate 8.19 Use of un-prequalified service providers in procurements Moderate 8.20 Un accounted for emergency works at 3 UNRA stations – Moderate UGX.119,290,000 8.21 Irregular payment of un-defined Allowances - UGX.50,167,506 Low 8.22 Violation of Sections of the Labour Based Manual Low 8.23 Lack of Procurement Personnel at UNRA Stations Moderate 8.24 Vehicles not yet boarded off at Mbale Station Low 8.25 Status of Implementation of Prior year Audit Recommendations Moderate 9.0 Engineering audits High

8.0 DETAILED FINDINGS 8.1 Mischarge of Expenditure Expenditure totaling to UGX.29,542,978,953 was inappropriately charged on budget lines to fund activities that were not planned for without authority. I explained to management that mischarge of expenditure leads to misrepresentation of expenditure balances in the financial statements. The practice is also not in line with the intentions of the appropriating authority.

In response, management acknowledged the challenge and explained that the planning portfolio will be enhanced and this will improve the planning procedures so that funds are allocated in line with ongoing activities.

I await the outcome of the Accounting Officer’s commitment.

8.2 Under Stated Infrastructure Assets The statement of financial position as at 30th June 2015 reflected the value of Infrastructure Assets at UGX.9,332,851,200,000. I noted that the figure excluded the value of the infrastructure assets acquired during the financial year. In addition; the Authority acquired land through compensations to the tune of UGX.40,948,696,342 during the financial year however; these were also excluded from the amounts disclosed. The assets of the Authority are therefore understated.

In response; management explained that the value of the Infrastructure assets was based on the valuation carried out during the financial year 2013/2014 and that management plans to revalue assets after intervals of three (3) years with an indication that a supplementary valuation would be carried out before the end of June 2016. I explained to management that there was no approved policy to support

this treatment and advised that this anomaly is rectified and ensure that proper values of land are captured.

8.3 Nugatory expenditure The Authority paid a total of UGX.8,044,936,050 in outstanding obligations and claims in interest on delayed payments for various payment certificates. I noted that the expenditure could have been avoided had management planned adequately, advised clients, processed the payments in time and/or attended to the contractors’ concerns in time. The expenditure is detailed in 8.3.1 to 8.3.4 below:

8.3.1 Nugatory expenditure- arbitration award A total of UGX.6,616,405,658 was paid to a local firm in arbitration that resulted from a dispute in the Centre of Arbitration and Dispute Resolution against Attorney General regarding a contract for the backlog roads maintenance programme for seven (7) roads in Kampala. The issues for arbitration included wrong information provided and Poor management of the contract by the respondent. I noted that the expenditure could have been avoided had management acted to resolve the issues with the contractor early enough.

In their response, management explained that the arbitration was instituted against the Attorney General who conducted the defence and as such UNRA could not control the practical conduct of the matter. The Attorney General appealed several times in vain until they consented to withdraw the appeal and finally management was asked by the Attorney General to comply with the results of the award.

I advised the Accounting Officer to always follow contractual clauses to avoid losses.

8.3.2 Nugatory Expenditure - Payment of Interest A total of UGX.1,116,168,862 was paid to an International Company as Interest on delayed payments for various payment certificates. Management’s delay to pay the contractors in time coupled with delayed application of funds from the donors was attributed to the unnecessary expenditure. I noted that the expenditure could have been avoided had management planned adequately and processed the payments to the contractor in time.

Management explained that the funds allocated in the Medium Term Expenditure Framework (MTEF) are not sufficient to meet on going commitments as a result UNRA debt position at the end of every financial year. As such UNRA did not have funds at the time the certificates were generated and certified.

I advised the Accounting Officer to always plan adequately to minimise on such unnecessary expenditure.

8.3.3 Nugatory Expenditure – Payment to a legal firm I noted that UGX.254,102,450 was paid to a local firm in respect of legal fees for a an individual the plaintiff who sued UNRA for failing to give final advise on whether to halt or continue building a commercial building on plot No 587, Block 438 at Nkumba due to the on-going road construction. The plaintiff had inquired with UNRA as to his commercial building would be affected by the road construction. UNRA did not respond and the plaintiff sued. I explained to management that this expenditure could have been avoided if management had given appropriate advise and acted promptly.

The Accounting Officer explained that a defense was filed on behalf of the Authority and the case has steadily progressed from mediation process to trial.

I advised the Accounting Officer to always give timely advice to clients to avoid such costs.

8.3.4 Nugatory expenditure on Due Diligence for Katosi Road Payment of UGX.58,259,080 was made to an independent consultant to carry out due diligence on Eutaw Construction Company Incorporation for the road works on Mukono-Katosi Road based on top Management decision to hire an independent consultant. While the contract for the Mukono-Katosi Road was signed on 15th November, 2013 the consultant was paid in July 2014 to travel to the USA for the exercise. I noted that the due diligence was carried out when the road works had already begun. The expenditure was therefore nugatory.

The exercise was for one month and the breakdown of the costs was as follows;

Payment Description US($) Per-diem for 20days 9, 000 Air travel 6,000

Inland travel 4,000 Contingency 3,000 Total $22,000

Further review revealed the following anomalies;  There were no minutes regarding the decision taken by top Management;  There was no due diligence report at the time of writing this report and neither was there any supporting documents to confirm that the consultant travelled for the activity such as a photocopy of the visa or passport;  The payment was made in the names of a person who was not a staff of the Authority instead of the consulting firm as claimed. I explained to management that facilitating a person who is not a staff of UNRA is not only irregular but raises suspicion and could lead to causing financial loss;

I could not establish the terms of facilitation whether the payment was part of the contract sum since he was not a staff of UNRA.

The Accounting Officer explained that the report that was meant to be presented to the Board could not come in because the services of the consultant were already terminated.

I advised the Accounting Officer to investigate the matter further with a view to recovering the funds.

8.4 Fraudulent Advances to ABC Capital Bank The statement of financial position under the value of other receivables showed that UGX.173,701,000 that was transferred fraudulently to a commercial bank has not has not been recovered up to now. There appears to be minimal efforts by management to follow up the matter and recover the held up funds. This issue was raised in my earlier reports to Parliament.

I advised the Accounting Officer to enforce recovery of the funds.

8.5 Un accounted for Advance - UGX.47.7bn to contractors to pay Project Affected Persons (PAPs) During the review of the financial statements; it was observed that a sum of UGX.47,738,040,619 was advanced to and is now held up by various contractors for property compensations to Project affected Persons (PAPs). At the end of the 8

financial year; these advances were not yet accounted for because there was no status report submitted to me to verify the progress of the compensation.

Note 4.13 (i) to the financial statements indicated that the advances to the contractors were based on valuation reports approved by the Chief Government Valuer. However; I noted that UGX.6.5billion advanced to an International Engineering firm for Olwiyo Gulu Project was not based on the valuation report approved by the Chief Government valuer which I found was irregular.

Management explained that the consultant had not begun settling the PAPs due to the fact that the Valuation report was not yet approved by the Chief Government Valuer.

I advised the Accounting Officer to ensure that there are adequate safeguards to avoid loss of Government funds.

8.6 Outstanding creditors I noted that the Authority had outstanding creditors to the tune of UGX.239,445,625,000 as at the closure of the financial year reflecting a slight improvement of 36% as compared to UGX.376,619,216,000 in the previous year. The current year’s balance comprised of a significant portion of UGX.238,301,433,000 for unpaid works and UGX.1,099,191,000 in salaries and wages. I explained to management that outstanding payments on construction works attract interest legal costs if not paid in time and may lead to delayed completion of road projects.

Management explained that UNRA runs development projects which straddle financial years and on average a typical Road upgrading project runs for 3 to 5 years hence the funds allocated in the budget are sometimes not sufficient to meet UNRA’s commitments. The agreed upon performance schedule of the contractor is therefore not met. Additionally, due to the lengthy nature of these contracts, there are significant variations in price that are very difficult to quantify in advance including foreign exchange effects. UNRA shall engage MoFPED on this matter with a view of minimising such payables.

I await the outcome of the Accounting Officer’s plan of action.

8.7 Review of Budget Performance – Uncompleted Activities A review of budget performance for the year showed that a number of activities/programs were partly implemented or had not started at all despite the availability of funds. See the summary below;

SN Projects/ Targeted output Status of Management Activities performance Response/Current Description Status

1.0 Project 1033: 37 hectares of land 4.45 hectares of Compensation Design Hoima - and properties to be land were payment has been Kaiso -Tonya acquired and 2243 acquired and going on and 318.82 (85km) persons to be 2134 persons Ha of land have so far compensated. have been been acquired for the compensated entire project. 2.0 Project 1034 : 160 hectares of land 68.04 hectares To date 289 Ha of Design of and properties of land acquired land have been Mukono - therein to be acquired for the entire Katosi-Nyenga procured project. Acquisition (72km) process is ongoing. 20% of the works to 7.20% of the 11% physical progress be completed. works completed achieved to date.

3.0 Project 1035: 249 hectares of land 61.385 hectares The TIN number Design Mpigi- and properties of land acquired requirement was Kabulasoke - therein to be relaxed by MoFPED Maddu (135 procured and so far 458.84 Ha km) of land have been acquired along the entire project. Acquisition process is ongoing. 20% of works to be 9.11% of the 13.7% of the works completed works completed. This completed represents progress on the entire 174km of Mpigi-Kanoni-Maddu- Ssembabule- Villa Maria road 4.0 Project 1038: 77 hectares 9.87 hectares The Chief Government Design including properties were acquired Valuer approved in Ntungamo - therein to be January 2015. 36.2 Ha Mirama Hills acquired. have so far been (37km) acquired and the process is on-going. 20% of works 11.09% had completed by June been completed 5.0 Project 1040: 250 hectares of land No land was The design process Design acquired. acquired also includes updating Kapchorwa - of the valuation Suam road report. Acquisition will 10

(77km) commence upon approval of the valuation report. 6.0 Project 1041: 500 hectares of land No land was Three Consultants Design and properties acquired have been successfully Kyenjojo - therein to be procured and Hoima-Masindi acquired contracts signed. The - Kigumba Consultants have all (238km) commenced verification for compensation payment. 7.0 Project 1180: 200 hectares and 45.91 hectares The disputes are being Kampala properties therein to of land were resolved overtime and Entebbe be procured. acquired and so far 197.83 Ha have Express properties been acquired and Highway therein Compensation compensated payment is on-going. 8.0 Project 1274: 100 hectares of land No land was A new Consultant was Musita – and properties acquired procured and a LuminoBusia/M therein to be contract signed in July ajanji Road procured 2015. So far no land has been acquired. The Consultant is updating the valuation report and payment will be done once approval of the updated valuation report is obtained from office of the Chief Government Valuer. 20% of road works The work had to be completed not started by end of the financial year. 9.0 Project 1275: 300 hectares of land No land was Valuation report for Olwiyo – Gulu - and properties acquired Olwiyo-Gulu and Kitgum Road therein to be Acholibur-Musingo acquired road was approved on 2ndOctober 2015. Verification for compensation payment is expected to commence in November 5.5%. to be 4.2% had been completed completed 10. Project 1276: 100 hectares of land No land was This is a design and Mubende - and properties acquired build project. Kakumiro- therein to be Acquisition will be Kagadi Road acquired handled through the works contract. No acquisition yet done since it can only be done after design is

completed. 10% of road works No construction to be completed work was done 11. Project 1277: 20 Hectares of land 1.92 hectares The Consultant was Kampala and properties were acquired procured in January Northern therein to be 2015. So far 5.05 Ha Bypass Phase 2 acquired of land have been acquired and acquisition is ongoing 15% of road works 1.77% to be completed completed 12. Project 1310: 100 hectares of land No land was Projects still under Albertine region to be acquired and acquired design. No land sustainable property therein to acquisition activities development be compensated have yet commenced Project 15% of road works No construction to be completed work was done

13. Project 1281: 200 hectares of land No land was No land acquired. Tirinyi – Pallisa and properties acquired Procurement of Kumi/Kamonkol therein to be Consultant still on- i Road procured going. 10%of the works to No construction be completed by the work was done end of the year. 14. Project 1311: 50 hectares of land No land was No land acquired. Upgrading to be acquired and acquired Procurement of Rukungiri- property therein to Consultant still on- Kihihi- be compensated going. Ishasha/Kanun gu Road Contractor and Consultant not Technical evaluation is Supervision procured in progress for the consultant to be consultancy procured and Bidding for Works is advance paid underway and submission is expected on 10th December 2015 15.0 Project 1312: 50 Hectares and No land was No land acquired; Upgrading property therein to acquired process yet to Mbale –Bubulo be acquired commence - Lwakhakha Contractor and Consultant not Road Supervision procured consultant to be procured and advance paid

Overall management indication of low performance was largely due to delays in procurement, inadequate planning and lack of follow up on compensations and valuations. I explained to management that continued delays in land compensations and valuations reflect negatively on the performance of the Authority and service delivery.

Management explained that the most significant issues affecting progress have been policy related and these will be resolved after the restructuring process. Further, management explained that it intends to start on the acquisition process early so that there is a free and unencumbered stretch of not less than 30% of the full road length and where it is not possible to carry out early acquisition, the contractor will be advanced money to make actual payments and embrace the policy of carrying out proper due diligence on all new contractors to ensure ability to mobilize on schedule and take stern action against contractors who cannot effectively meet their contractual obligations. I await the outcome of the Accounting Officer’s plan of action.

8.8 Procurement Irregularities 8.8.1 Failure to carry out due diligence - Procurement for Supply, Installation and Commissioning of Two Multi Deck Weighbridges - US$.978,756.68 I reviewed the procurement for the supply, installation and commissioning of two Multi Deck Weighbridges and noted that an international company was selected as best evaluated bidder and awarded the bid worth US$.978,756.68 to undertake this activity. However it was observed that there was no due diligence process carried out as the capacity of the best evaluated bidder to supply, install and commission was not assessed.

Management explained that the selected company is an international firm operating in Kenya and Uganda in the business of manufacturing weighing scales of various categories and there was evidence to demonstrate that the company had undertaken similar assignments. The firm is competent to carry out the assignment and that the evaluators relied on the information contained in the brochure as submitted together with the bid.

I advised the Accounting Officer to ensure that due diligence procedures are carried out as required by the procurement procedures.

8.8.2 Violation of evaluation guidelines for consultancy services for supervision and Construction of Musita- Lumino, Busia - Majanji Road This procurement was to provide Consulting Services for the design, review and construction supervision of the upgrading of the above road measuring 104kms. The

consultancy was awarded to an international consultancy firm. During the review of the procurement process; I noted the following anomalies;

 There were no appointment letters issued to the evaluation committee members and subsequently acceptance letters by the members were not filed;  The Ethical forms were signed by only three (3) members as opposed to the five (5) nominated earlier;  Section 6 Para 2.5.1, 2.5.7 and 2.5.8 of part 3 of the Bid document required the production of the contractor's mobilization report however; this was not on file at the time of audit.

It appears there were flaws in the procurement of this consultancy. I advised the Accounting Officer to ensure the provisions of the law are adhered to.

8.8.3 Violation of evaluation guidelines (Delays) on consultancy services to design parking areas, walkways, landscaping and fencing of four weighbridges at Malaba, Busia, Mutukulla and Elegu Evaluation Regulation 5 (1) (a) of the PPDA Regulations 2014 provides that an evaluation exercise shall for each type of procurement be concluded within the time period specified in this regulation.

a) Twenty working days for the evaluation of bids for the procurement of supplies or non-consultancy services from the date of opening of the bids; and b) Where an evaluation committee is not able to complete an evaluation exercise within the time specified in sub regulation (1), the committee shall in writing explain to the Accounting Officer the reasons for this and request for extension of the time period for the evaluation exercise.

Contrary to the regulation; I noted that the evaluation of bids for the consultancy services to design parking areas, walkways, landscaping and fencing of four weighbridges at Malaba, Busia, Mutukulla and Elegu, took almost one and half years to complete the evaluation and produce the required report. The evaluation Committee was approved on 19/09/2013 and PDU released the appointment letters to the Evaluation Committee on 17/12/2013 with the stipulated date of 10/01/2014 when the evaluation report was supposed to be forwarded to the Contracts Committee.

The technical evaluation report was finalized on 10/12/2014 and approved on the 13/01/2015 to allow financial proposals from consulting firms to be opened and evaluated. The financial evaluation was completed on the 9th April 2015 and the Contracts Committee approved both the technical and evaluation report on the 09/04/2015 where a consultant with a contracted price of UGX.107,600,000 was awarded.

I noted that between the date when the evaluation Committee was appointed and the evaluation report finalized there were several correspondences addressed to the evaluation Committee by the Acting executive Director regarding the delayed evaluation report and no explanations were provided for the delays. Delays in the evaluation process showed the implementation of the Government planned and budgeted activities took close to two years. At the time of writing this report, the best evaluated bidder had not signed the contract.

I advised the Accounting Officer to put it place measures to avoid unnecessary delays.

8.8.4 Wasteful expenditure (Administrative Review) of UGX.510,256,942 on Tororo-Mbale and Mbale – Soroti Project Section 5 of the PPDA Regulations 2014 (Administrative Review) empowers the Accounting Officer to carry out an administrative review following a written complaint by the aggrieved bidder stipulating the reasons for the review. Furthermore; Section 11 of the same Regulations requires the aggrieved bidder to pay a prescribed fee depending on the value of the procurement/disposal.

During the review of the procurement files; I noted that the procurement value was approximately UGX.100bn and therefore UGX.15m was chargeable based on the schedule of fees for the administrative review. On the contrary; UGX.510,256,942 was paid following a complaint by the contractor and thus a loss of UGX.495,256,942 was registered which I found irregular. I further noted the following anomalies;

 The payment was made in the names of one of the directors instead of the law firm that had a contract with UNRA and no administrative review report was availed to confirm that the review actually took place.  Whereas the Regulations give the Accounting Officer powers to carry out the administrative review, I could not ascertain how the firm was selected.

 There was no evidence to confirm whether the UGX.15m was paid by the contractor for the review as required by the law and besides; there was no acknowledgement receipt from the recipient of the funds to confirm the receipt of the payment. Meanwhile; Withholding Tax of UGX.27,334,129 was not deducted contrary to the Income Tax Act 2003.

There is a risk that payments could have been made for no work done.

The Accounting Officer explained that the individual deceitfully caused UNRA to pay the amount into his personal account. This was discovered and the law firm also raised it. Management decided to suspend the engagement of his services and any further payments till the matter was resolved with fellow partners.

I advised the Accounting Officer to follow up the matter to its logical conclusion.

8.8.5 Weakness in the Purchase and Consumption of Toner I noted that UNRA procures tonner in bulk; the day this tonner is received is the day it is requisitioned and issued. The date of the Goods Received Note (GRN) is the same date on the Stores Requisition Issue Form Voucher (SRIV). Below is a sample of items of tonner that were procured and consumed on the day of delivery and the frequency of purchases.

Payment Goods Date of Goods Amount in Amount UGX Voucher Received Note Received Note Dollars paid through Number (GRN) and Stores indicated on Payment Requisition Issue Goods received Voucher Voucher (SRIV) Note AB412043 87324 & 87324 19/08/2014 $19,417.72 99,687,894

AB412083 90361& 90362 17/10/2014 $20,542.62 220,277,690 AB412083 90365 & 90366 27/10/2014 $18,593.56 AB412083 90355 &90356 8/10/2014 $19,569.34 AB412083 90372 & 90373 12/11/2014 $20,741.68

AB503018 90382& 90383 26/11/2014 $28,094.92 264,527,444.72 AB503018 90385 &90386 22/12/2014 $23,311 AB503018 90388 & 90389 5/12/2014 $17,470.79 AB503018 90398 & 90399 8/1/2015 $20,799.49

AB503154 95376 & 95377 23/02/2015 $21,809.94 266,752,760.94 AB503154 95359 21/01/2015 $21,179.53

AB506029 95392 19/03/2015 $18,078.49 275,282,635.71 AB506029 76658&76659 21/04/2015 $20,573.30 AB506029 76668 &76669 8/5/2015 $22,621,78

AB506029 76653&76654 31/03/2015 $27,139.12

AB506092 76680&76681 27/05/2015 $29,889.40 166,677,293.15 AB506092 76675&76676 18/05/2015 $22,094.91 Total 1,293,205,719

It was observed that the Stores Requisition Issue Form Voucher does not indicate the Location /Office/Department where each item of Tonner is to be used an indication that goods are not taken on charge. I explained to management that failure to indicate the location renders the verification of utilization difficult leading to loss of audit trail. Misuse of procured items cannot be ruled out.

Management explained that the toner is procured under a framework contract and delivered when it is required. Management noted the anomaly and indicated that the specific fields for office location and printer will be included on the Stores Requisition Issue Form (SRIF) as a new procedure.

I await the outcome of the Accounting Officer’s commitment.

8.8.6 Use of non-pre-qualified suppliers on UNRA publications UNRA short list notice provided for advertising and media services/agencies for provision of non-consultancy services for three years. A number of firms were contracted during the year and paid a sum of UGX 77,102,534 to run some publications. However; I noted that there were some four (4) firms under package 4 (Lot 1) that were not properly contracted. These firms were not among the prequalified suppliers and the transactions lacked initiation of the procurement by the user department; there was no contract or call-off orders from management and no Goods Received Notes, acknowledgement receipts and Issue Notes seen.

I explained to management that failure to contract pre-qualified firms is contrary to the procurement regulations.

Management explained that the LPOs were not issued because payments were to be made against copies of the highway code delivered to the targeted schools and verification report by the user department. Each school that received the highway codes signed and stamped as acknowledgement of receipt.

I advised the Accounting Officer to always observe the PPDA law and ensure only Pre-qualified suppliers as engaged.

8.8.7 Doubtful supply of Equipment During the year under review; management acquired IT equipment worth UGX.111,472,265 from two (2) local companies. However, I noted that one of the company was paid UGX.26,310,508 for the supply and delivery of a variety of IT equipment, however, but the transaction lacked initiation of the procurement by the user department and the distribution of the items to the user department was not supported with documentary evidence.

Further, the other company was also paid UGX.85,161,757.87 for supply and delivery of Computers and IP Phones but the transaction lacked initiation of the procurement by the user department, and besides, there was no LPO and no evidence of distribution of the items to the user departments/units.

In such circumstances; I could not confirm whether the equipment were procured. I advised management to always observe procurement and stores guidelines.

8.8.8 Payment to a hotel During the review, I noted that UGX.12,835,200 was paid to a hotel for hall hire for 14 days to accommodate a team that undertook an evaluation for Kyenjojo Kagadi- Kabwoya road. However; the hotel was not on the pre-qualified list of service providers, the evaluation report was not seen and the procurement was not in the procurement plan contrary to the PPDA law. I explained to management that non- compliance with procurement guidelines denies the entity benefits of competition.

Management explained that a request for provision of hotel services was obtained at short notice and given the urgency and sensitivity of this evaluation exercise, management deemed it necessary to dispatch the Evaluation Committee to an undisclosed location which was relatively cheap based on the quotations obtained from the hotel and another hotel. Management further indicated that UNRA prequalification list of providers for hotel services is insufficient. This procurement was a one off and therefore there was no need to include it in the procurement plan.

I advised the Accounting Officer to always observe the Procurement guidelines.

8.9 Irregularities in compensation of Project Affected Persons (PAPs) During the review of the compensation process to the PAPS on two (2) projects; Mukono - Kyetume - Katosi Nyenga Road and LPC Busega, I noted some anomalies as summarised in the schedule below; 18

Observation Implication and Recommendati Management Response on 1. Missing PAPs in the Approved Land & There is a risk that I advised Property Valuation for compensation - compensations were made to management to Mukono - Kyetume - Katosi Nyenga Road non-existing PAPs leading to retrieve the - UGX.361,747,721; loss of Government funds. original I noted that the land and property valuation documentation for compensation final report approved by the Management explained that and avail for Chief Government Valuer and the strip map of the original valuation reports purposes of the road that were provided were photocopies were submitted to the verification. and some names of the PAPs were actually commission of inquiry. missing. Some names of the PAPs appearing in the summary final report with value attached of UGX.361,747,721 could not be traced in the detailed part of the report. I was also not availed the original valuation reports to confirm whether the missing PAPs in the detailed Land and Property Valuation report were genuine. Since payments to the PAPs were based on the summary; it was hard to verify the payments with the details of the land, property, crops and trees that were surveyed and valued. 2. Incomplete Information in the Valuation Paying the PAPs without I advised Report - Mukono – Kyetume - Katosi indicating the correct Block Management that /Kisoga –Nyenga Road - number and Plot number valuation of the UGX.743,980,938 could have resulted into right plots on the compensating non existing block where PAPs Review of the Chief Government valuer’s persons hence loss of properties are compensation valuation report and the strip Government funds. located on Katosi map revealed the following anomalies; road should be The land and the properties of the PAPs in Management acknowledged carried out to Kisoga B and Kisoga Central in Kyabaloga that a number of payments avoid errors. Parish, Nakisunga Sub County were surveyed for titled property/land were and valued but the Plot Numbers that were reflected in the valuation surveyed and valued on Block 256 are report with missing indicated by xxxx without specifying the real information on the plot Plot numbers an indication that the consulting numbers. Surveyor may not have actually carried out a Property with missing search with the Ministry of Lands, Housing and information on plot numbers Urban Development before submitting the is as a must verified by the report to the Chief Government Valuer for consultant on obtaining the approval; original certificate of title for such areas and further the Summary of the land and property searches are conducted at valuation assessment report indicates that the the lands offices to ascertain PAPs were located on Block 256, however, the the ownership status of the detailed land and property valuation for title. It is likely that land in compensation indicates that the PAPs are question has several Kibanja located on Block 252; owners that were also verified and paid. The review of the strip map revealed that PAPs were located outside Block 252 and Block 256 was not located on the strip Map. The land and property valuation assessment report with the 19

important information missing was approved and signed by the Chief Government Valuer. I noted this is what was used for compensating the PAPs;

Under payment summary of expropriation of land for the road reserve, Form B: the payment provides sections where Block number and plot numbers would be indicated before the payment is effected to the PAPs. I noted that the Block number was filled as Block 256 which does not exist on the strip map. The Plot number was left blank for the PAPs that were paid instead. 3 Compensation to Project affected The valuation report that I could not persons with Mailo land titles without does not specify the confirm the above real Plot numbers indicated surveyor’s reference number position as the I noted that land, property, crops and trees for and Plot numbers creates supporting some of the twelve (12) PAPs were ambiguities and could have documents were surveyed and valued but the chainages of the led to loss of Government not availed for road where the land is located was not funds to non-existing PAPs. I verification. indicated and the surveyors reference numbers was not availed with an were also not provided. explanation as to why One of the PAPs had two plots of land that management adopted and were surveyed and valued but were all located used a valuation report on Block 256 however; it was noted that the without specifying the Plot number on Kisoga – Nyenga Section was surveyor’s reference number indicated by xxxx without specifying the real and Plot numbers. Plot number.

Management explained that The Plot number on Mukono –Kyetume –Katosi the Survey reference Section was reflected as encumbered land numbers and chainages are without specifying the Plot number. In some basically used as guiding instances the names of the PAPs were tools for the survey team. reflected as XXX and their respective Plot They are not necessarily very numbers were also reflected as xxx an essential components in a indication that the surveying consulting valuation report. They surveyor might not have actually visited the indicated that what would be sites and payments could have been made to most important in a valuation non-existent PAPs. report are the property I was not availed with the original Land titles references which should and the signed transfer forms to confirm the guide the implementation. T genuineness of the compensation transactions to the PAPs despite several requests made to have these documents availed for audit. 4 Compensation to unknown title holders - Surveying and valuing land, I advised UGX.60,308,602 property and crops of PAPs management to The Consulting Surveyor surveyed and valued to identify the Plot numbers resolve the issues land, Properties and Crops of several Bibanja and the Block number and highlighted and holders at UGX 60,308,602 on Plot 57 Block failing to identify the names ensure title 380 in Ngogwe Town Village on Kisoga – of title holder(s) renders holders are Nyenga Section located on chainage 21 +475 leaves gaps in the valuation disclosed. to 21 +575 however; both the summary of the process. I explained to land and property valuation assessment report, management that in its the detailed land and property valuation for current form; the valuation compensation report indicated that the names report is misleading and of the title holders as un known. unreliable.

The surveyor surveyed and valued the land, Management explained that property and crops of the Unknown title holder verification of individuals is of Plot 57 Block 380 at UGX.17,604,200 on the conducted jointly by the same section Kisoga –Nyenga. The unknown consultant’s team and the title holder was allocated reference number district leadership. KN/1111 in the summary of land and property Management acknowledged valuation for compensation report but that it could be possible that allocated reference number KN/1112 in the at the time of assessment, a detailed land and property valuation for PAP is recorded as Unknown compensation report and the surveyors if he/she is not available on reference number. ground and the names not properly known but There was limitation of scope as I could not recognized as land belonging access the original land title and the transfer to an individual by the local forms to confirm whether the compensation leaders and community was genuine. UNRA management did not avail members. the original title and transfer forms despite the several requests. 5. Change of Project Affected Persons’ This may have resulted into I advised names at payment level. genuine PAPs not being management to Review of the strip map, approved land and compensated creating an review the property valuation assessment report revealed increase in the number of compensations on that some names in the strip map, land and PAPs complaining not to have this project to property valuation assessment reports were been compensated by UNRA ensure that changed at payment stage. Change of names Management. genuine PAPs are was based on the recommendations of the LC The situation is a reflection cleared and all 1 officials. However; I noted that the of the current endless claims outstanding recommendation letters that were from by PAPs on the same project. claims verified different LC 1 had the same format and Management explained that and people fully grammatical English indicating that the letters change of name form was compensated. were drafted by the same person which necessary as in some cases creates suspicion of compensating incorrect the names picked at PAPs. assessment may slightly vary with the actual name of the Meanwhile, I could not verify these complaints PAP. This happens because as management did not avail the PAPs sometimes the affected complaints file of Katosi Nyenga Project for individuals are not present at verification despite several requests and the time of assessment and reminders which translate into limitation of the names picked are based scope. on information provided by the care taker and or local leaders. 6. Non-disclosure of chainages in the Without the chainage I advised valuation report indicated, it becomes difficult management to to match the land on the always supervise I noted that in the valuation report a number strip map. There is a the consultants of beneficiaries from Bulaga A and B, Kikaya, possibility of compensating and ensure the Bulenga A, Kamuli Wabigalo and for wrong plots/pieces of valuation report is Kikuumambogo among others whose land and land. complete before properties were compensated lacked the Consultant is chainages. Further review showed that under Management explained that paid to avoid payment schedule No. 9, on Busega – Mityana the anomaly was due to the challenges. road, Kalema Peter of Bulenga B LC 1 was consultant’s negligence and Information compensated UGX.104,286,778 for land and has since failed to complete captured on the property however, the valuation report did not the work due to delays. strip map and the indicate the chainage on the strip map. There UNRA has requested the Valuation report

is a possibility of double compensations arising Consultant to provide the should always as the valuation report and summary sheets do accountability report and end match. not show the location/chainage of the land. the project.

7. Payments made without land titles and I explained to management I advised sale agreements. that without land titles; and management to without sale agreements ensure the land Section LP 3.2 of Part B of the “UNRA Land processing of the land titles acquired is Acquisition Management System Manual”, by the UNRA would be registered under specifies what those entitled to compensation difficult. the Uganda should present before the payment is made Management explained that National Roads that include; the valuation for Busega- Authority. Valid identity papers (Identity Card, Driving Mityana was carried out in Permit, Voters Card, Passport); if no valid stages. The first valuation identification can be produced a signed letter report approved on from the LC1, approved by the Sub-County 30thNovember 2011, was Chief and the District Chief Administrative carried out on the realigned Officer confirming identity will be accepted, 2 sections due to the urgency Passport size photos for identity verification of the exercise because of and payment confirmation, Land the presence of the title/certificate where land is to be transferred contractors on site while to UNRA and bank account details, where working with the office of payment is to be made by electronic funds Chief Government Valuer it transfer. was agreed that assessment would be done for I noted that the payment schedules attached improvements on land taking to Busega – Mityana road did not have copies the kibanja interest only at of Land titles or sale agreements to confirm that stage. This would enable the clear transfer of title or ownership of land UNRA to deliver the site since from the seller to UNRA representing the the other sections were Uganda Land Commission. In the following the existing road circumstances; I could not confirm whether alignment. the land that was paid for was genuine and existed. 8. Un-declared ownership by Licensees There appeared to be no I advised compensated for land UGX.8,096,230 adequate controls in place to management to According to the UNRA Survey and Valuation verify the licensees. There is always ensure report for emergency works and hotspots for a possibility that may not that land take for road works along Busega – have had interest in the land compensation for Mityana road of 20th may 2014, by Wemo and could have defrauded land is done to consultant planers and surveyors, section 2 the UNRA. In response, PAPs who are the categorizes a licensee as a person who has no management acknowledged real owners of the interest in land for compensation and rather the anomaly in the recording land to be uses land on a short tenancy schedule. This of the details of the two PAPs compensated for category is in most cases for seasonal crops indicating that there was a and can easily and temporal structures such as a makeshift. typographic error but actually transfer the title During the review, I noted that two (2) the two PAPs own land in land/ownership licensees were compensated for land without (kibanja interest) as shown to UNRA. declaring their ownership in the land being on the strip map. However; I occupied. There was no evidence that the was not given evidence to tenancy schedules of the indicated persons support the response. were verified to establish the status before compensation.

Further, I noted that the commission of inquiry on UNRA has been undertaking indepth investigation onto the matter.

I await the outcome of this investigation.

8.10 Lack of legally binding agreement between UNRA and Kalangala Infrastructure Services Ltd (KIS)

KIS is a company operating Ferry transport services between Bukakata landing site in Masaka and Luuku landing site in the Island of Kalangala District. KIS signed an agreement with the GOU on 20th April 2012 to exclusively run and operate the ferry transport services in this water route and additionally maintain in motorable and all weather condition of 38 km of roads on Bugala Island and 66km of roads in Bwendero. The concession granted by the GOU to Kalangala Infrastructure Services (KIS) was for 13 years starting January 2012. A review of the Memorandum of Understanding and implementation agreements signed between KIS and the GOU and the subsequent payments to KIS revealed the following anomalies:

 I observed that there was no legally binding agreement between UNRA and Kalangala Infrastructure Services Ltd (KIS).

 The Public Private Partnership (PPP) signed between the GoU represented by MoFPED and KIS did not provide the details of which Government Agency is responsible to implement certain terms and conditions in the implementation agreement signed.

 UNRA over the last 4 years has been making both annual and quarterly payments to KIS in accordance with the signed implementation agreement with GOU. In the financial year 2014/2015, UNRA paid a total of UGX.17,882,012,502 to KIS as fulfillment of GOU obligation in the implementation agreement. However; a review of the agreements signed between GOU and KIS do not mention UNRA anywhere, besides, there is no documented evidence authorizing UNRA to budget and implement this agreement between GOU and KIS.

 The legal basis upon which UNRA is remitting payments to KIS is questionable since UNRA does not have an agreement with KIS. UNRA management was unable to provide the evidence that MOFPED appointed UNRA as the implementing agency of the GOU with KIS. Interview with UNRA management

showed an expression of lack of knowledge about the relationship between UNRA and KIS.

There is a possibility that UNRA might be implementing an agreement to which it is not party. Management is unlikely to follow up the payments with KIS in form of accountabilities.

In response, management explained that UNRA signed the Right to Use Agreement with KIS in Nov 2009 while Ministry of Finance, Planning and Economic Development signed the Direct Agreement in 2011. Management stated that UNRA worked on the understanding that it is the responsible GOU agency for ferries and national roads. It was indicated that MOFPED in 2012 wrote to UNRA requesting that the Authority follows up the projects on behalf of the GOU. The role of UNRA has been to implement the GOU obligations in the Implementation Agreement which has been discharged however; it is necessary to specify them in a memorandum of understanding between MOFPED and UNRA.

I advised the Accounting Officer to harmonize their positions with MOFPED so that documented evidence is adduced to specify each other’s roles and responsibilities in the KIS project which will help in planning and accounting for this activity.

8.11 Improperly Budgeted for Expenditure -Support for KIS During the year, UNRA remitted a total of UGX.17,882,012,502 to Kalangala Infrastructure Services (KIS) in fulfillment of the obligation of GOU under the implementation agreement with KIS. The agreement required GOU to make such payments for Ferry operations, Road upgrade and maintenance.

UNRA inappropriately charged Account code 231003 (Roads and Bridges) expenditure code in respect of these payments and the payment vouchers had no accountabilities in respect of these expenses. Interview with management indicated that the agreement between GOU and KIS was drafted in such a way that only enabled them to pay but not to account for the funds. There was no evidence to show that the payments are in form of transfers. Instead the expenditure is budgeted for under development expenditure and charged on an expenditure item.

I explained to Management the possibility of accounts and financial statements being misrepresented due to inconsistences arising out of inappropriate treatment and

classification of this transaction including charging inappropriate expenditure codes when the substance of the transaction seemingly looks like a transfer.

In response; the Accounting Officer clarified that this was not a mischarge as the authority and approvals were requested and obtained from the Permanent Secretary/Secretary to the Treasury to incur the expenditure following the modalities on management of the KIS program as included in the agreement.

I advised the Accounting Officer to harmonize KIS operations so that they have a clear business like relationship which should be able to provide a way to deal with how the payments should be disclosed and classified.

8.12 Lack of a performance Guarantee on Funds paid for ferry operations (KIS) Schedule 4 of part 1 Ferry Support Payments (b) of the Amendment No. 1 to the Implementation Agreement between GOU and KIS states that the Ferry Service Support payment will be paid as lump sum in advance prior to the start of each year that the Ferry service is being operated commencing on the commercial operations of the Ferry Services component.

During the year, UGX.8,934,204,538 was paid in respect of Ferry support payments to KIS in advance without obtaining an advance guarantee or performance guarantees from KIS contrary to Good practice that requires advance payments to be supported with an advance guarantee from the beneficiary. I noted that this provision was not provided for in the agreement with KIS. I explained to management that making advance payments without a performance guarantee endangers the safety of Government funds. There is a risk that Government could lose money in the event that KIS fails to perform its obligations under the current agreement.

In response, management explained that the implementation agreement provides for the ferry payments to be made in advance though it was not indicated in the clause that there shall be an advance payment guarantee. Management further indicated that UNRA has never been advised by MOFPED on the matter while KIS indicated that GOU’s fallback position is taking over the investments of KIS. Management noted this was however risky and promised to remind the MOFPED to effect the necessary risk mitigation measures.

I advised the Accounting Officer to review the agreement with KIS to minimize on the potential risks that exposes Government funds to losses and ensure urgent follow up with MOFPED.

8.13 Grant Reserves not fairly stated In the statement of financial position under reserves; I noted that management disclosed UGX.8,261,743,000 as the value of grant reserves for the Assets formerly owned by Ministry of Works and Transport now being used by UNRA. I noted that the values were not fairly stated as the same assets were disclosed with same values since the financial year 2012/2013.

Management explained that these assets were taken on charge in the UNRA fixed assets register and management will carry out a revaluation of fixed assets during the financial year 2015/16 which will ensure that the fair value of fixed assets is included on the UNRA Balance Sheet.

I await the outcome of the Accounting Officer’s commitment.

8.14 Delayed contract implementation UNRA signed an agreement with a construction company on 16th August 2012 for the Supply and delivery of reinforced concrete pipe culverts for road maintenance activities under lot A, for central UNRA Stations that included Mpigi, Kampala, Luwero, Masaka, Mubende at a contract sum of UGX 689,730,702. Review of the contract implementation revealed the following anomalies;

 The Letter of bid acceptance, delivery and completion Schedule in the contract document indicated four (4) months as the delivery period commencing from the date of contract award however; I noted that the actual deliveries were made during the financial year 2014/15, after over 2 years. . I noted that culverts worth UGX.112 M were delivered, however, I could not confirm the delivery of the balance of culverts worth UGX.577M. A possibility that these culverts were diverted cannot be ruled out; . The programmed districts may not have benefited from what was intended as there was no evidence to confirm the deliveries;

. What was described as emergency situation to be addressed in a period of 4 months during the financial year 2012/2013 was not fixed and thus I could not ascertain whether this remained an emergency considering the delayed period of more than a year; . The fact that the payment was made in the current year under review yet the activity was planned for 2012/2013 shows that funds were diverted from the current year's expenditure program to settle prior year’s un completed programmes. I could not confirm whether the culverts were still required by the user districts as the delivery had been overtaken by events.

I explained to management that unnecessary delays in contract implementation fail Government programs while delayed fixing of emergencies creates anxiety among the population.

Management explained that there was a delay but the culverts were later supplied.

I advised the Accounting Officer to always ensure timely contract implementation. Meanwhile, the undelivered items should be accounted for.

8.15 Hire of privately owned Road Equipment I noted that some Stations hired privately owned equipment like motor graders, bull dozers, low bed and others at a total cost of UGX.691,950,193 for carrying out road maintenance work as summarized below;

Station Details Amount Paid (UGX) UNRA ARUA STATION Total hire of Equipment for the FY 44,000,000 UNRA GULU STATION Total hire of Equipment for the FY 109,145,087 UNRA KITGUM STATION Total hire of Equipment for the FY 234,356,000 UNRA LIRA STATION Total hire of Equipment for the FY 629,995,147 UNRA MBALE STATION Total hire of Equipment for the FY 139,204,000 UNRA TORORO STATION Total hire of Equipment for the FY 274,390,193 Total 691,950,193

I explained to management that hiring of privately owned equipment is expensive and does not seem to be sustainable at the current rate.

Management acknowledged the challenge and explained that some privately owned equipment have to be hired due to limited equipment and or break down of such essential equipment during execution of the works. Procurement of various equipment have been done and some have been received while others are expected before the end of the financial year.

I await the delivery of these equipment and assess the impacts on the hire costs.

8.16 Late remittance of deducted taxes to URA - UGX.348,027,501 I await the outcome of management’s commitments.

8.17 Non - Performing Letters of Credit During the review, I noted that a letter of credit with a value of UGX.218,400,442 issued in favour of a private company with a due date of 30/06/2013 did not fully perform. This was opened for the delivery of listed items in the schedule below at a contract price of US$.177,713.00, out of which a sum of $124,399.10 was paid leaving an outstanding balance of US $ 53,313.90. The delivery period was three (3) months after signing of the contract, however, the supplier failed to meet the set timelines. UNRA funds have been held up for longer than expected. I further noted that only supplies worth $.102,644 were delivered as indicated in the schedule below implying USD.75,069 is unaccounted for. Item Contract quantity Deliveries Undelivered Value of delivery made items Cutting edge 5D 1,200 pieces 810 pieces 390 $102,462 -9558 Bolt 3F -5108 17,160 pieces 120 pieces 17,040 $115 Nut 4K – 0367 17,160 pieces 120 pieces 17,040 $67 Total Total $102,644

Management explained that the supplier did not perform due to the loss of three containers at Mombasa port causing a delay to supply the remaining quantities worth US$.75,070.00. Management is reviewing the contractual provisions and contract management documentation to determine the most appropriate recovery measures to take.

I advised the Accounting Officer to consider pursuing the option of terminating the contract and recover the unsettled advance from the advance payment security.

8.18 Payments to the media houses It was noted that UGX.809,977,600, and $.36,429 respectively was paid to 28 media houses that did not appear on the prequalification list of suppliers of the Authority.

Further review revealed that the procurements were not in the procurement plan for the year. I explained to management that executing un-planned procurements leads to diversion of funds besides, use of media houses that may not be known could limit the dissemination of publication of information and thereby limit competition. I advised the Accounting Officer to always ensure compliance with the PPDA law.

8.19 Use of un-prequalified service providers in procurements  Contract to a local construction company A local construction company was contracted under lot 32 to supply and deliver road repair materials at Luwero Station. The company was further contracted under lot 30 to supply and deliver concrete products for spot gravelling works and was paid UGX.125,641,420 during the year however; the contractor was not prequalified. The action was done against PPDA guidelines.

 Contract with an events management firm Funds to the tune of UGX.39,188,600 was paid to an events management firm in February 2015 for various activities/ceremonies on various roads at Mpigi Station however, I noted that the company was not prequalified to carry out the activity of events management at the Authority. I explained to management that Use of non- prequalified suppliers disadvantages the Authority as the company selected could be less competent and may do substandard works. It further translates into flouting the procurement procedures.

I advised the Accounting Officer to always abide by the PPDA law.

8.20 Un accounted for emergency works at 3 UNRA stations During inspection, I noted that three (3) stations namely; Moyo, Kampala and Jinja were paid a sum of UGX.167,803,625 to carry out emergency works at their areas of jurisdiction. My observations are indicated under “remarks” in the table below. Voucher Payee Amount (UGX) Remarks Number AB407069 UNRA - Moyo 8,090,000 No field activity report to substantiate the Station allowances paid to various officers, hire of road Engineer equipment and purchase of road construction material and Fuel (Diesel). 29

No attendance and payment/acknowledgement sheets for the casual laborers and other staff. Funds remained unaccounted for. AB412051 UNRA - 111,200,000 This was a payment in respect of emergency Kampala works along Mukono- Kyetume - Station Katosi/Nkokonjeru –Nyenga - Njeru Road using Engineer a Force Account receipt. The amount remained unaccounted for as there were no attendance sheets, acknowledgement sheets for the casual laborers and other staff. No fuel receipts/consumption statements were availed for audit. Total 119,290,000

In the absence of supporting accountabilities, I could not confirm whether the funds were utilized for the intended purpose.

In response, management explained that the accountability files for Moyo Station were taken by the commission of inquiry while those for Kampala and Jinja stations were available for verification. However during verification ,the documents were not availed. I advised the Accounting Officer to always ensure emergency releases are accounted for separately and promptly to UNRA headquarters and copies retained at the benefiting station. Meanwhile UGX.48,513,625 should be recovered from the responsible officers.

8.21 Irregular payment of un-defined Allowances - UGX.50,167,506 During audit inspections, I noted that funds totaling to UGX.50,167,506 was paid as undefined allowances to 18 staff in the month of May and June 2015. Analysis of payments and responses by management showed that these staff were appointed on the 25th June 2015 yet the 1st allowances paid relate to the month of May 2015. Besides; the payments for June 2015 were made on the 25th June for some ten (10) staff which is the same day of appointment and this is irregular. I explained to management that paying staff allowances before they are employed is irregular.

I advised the Accounting Officer to stop the practice and always follow appropriate recruitment and remuneration procedures.

8.22 Violation of Sections of the Labour Based Manual

During audit inspection of the Labour Based Contract Payments to contractors and other relevant supporting documents of the stations, I noted that the stations of Arua, Lira, Kitgum, Gulu, Mbale and Tororo violated some sections of the Labour Based Manual as indicated below;

8.22.1 Absence of Weekly Instructions and monthly reports on LBCs Article 2.3 of the LBC manual requires that road overseers shall issue weekly instructions to the contractor specifying the nature of work and quantity to be executed. However, during audit inspection, I noted that these weekly instructions were not in place which affects performance by not addressing the problems on a specific road section at a given period of time. There is a risk that substandard work could be done leading to loss of government funds.

In their response; management explained that Weekly inspections and reporting is not possible due to inadequate staff and supervision transport. However bi-weekly and monthly inspections and reporting is done.

I advised the Accounting Officer to enforce weekly instructions and supervision as guided in the LBC manual.

8.22.2 Absence of Weekly Inspection reports Article 2.4 of the LBC manual requires the contractor’s work to be inspected by the road overseer at least twice a week however; there were no inspection reports on file to support the computation of monthly payments to the contractors and also implement the possible recommendations cited. There is a possibility that payments to contractors may not be commensurate with the performance results on the specific road sections.

Management explained that weekly inspections and reporting was not possible due to inadequate staff and supervision transport. However bi-weekly and monthly inspections and reporting is done.

I advised the Accounting Officer to carry out weekly inspections and produce weekly reports as required by LBC manual.

8.23 Lack of Procurement Personnel at UNRA Stations

During audit inspections, of station operations that included Mubende, Hoima, Kabale and all the stations; I noted that the Procurement and Disposal Units are manned by executive Assistants who are not trained in procurement. The procurement function has not been given priority yet it is key in the operations of the Authority. I explained to management that such diversion of manpower could accelerate inefficiencies. This may also accelerate procurement malpractices at the UNRA stations.

In response; management explained that these concerns have been addressed in the new UNRA structure which provides for five regional procurement officers that will handle procurements at regions. Stations will consolidate their procurements at regional level where the procurements will be done. Stations will be left to handle only micro-procurements. Recruitment of the procurement personnel is ongoing.

I await the outcome of the Accounting Officer’s plan of action.

8.24 Vehicles not yet boarded off at Mbale Station Inspection of the UNRA Mbale yard revealed that the following trucks/Vehicles that had been recommended for boarding off basing on their mechanical condition and efficiency were still in the UNRA Mbale yard as per the pictorial description below;

Mitsubishi Tipper Lorry UG 0266W Fiat Iveco Low Bed truck UG 0132W is recommended for boarding off. broken down, aged and un economical to maintain.

Mitsubishi Tipper Lorry UG 0128W had an Mitsubishi Colt pickup single cabin UAA accident on 12/01/2015, grounded now and 729Y is aged and maintenance costs high was recommended for boarding off. and recommended for boarding off

Other vehicles recommended for boarding off were: 1)Mitsubishi P/up double cabin UG 0113W 2)Nissan P/up double cabin UG 0893W 3)Mitsubishi P/up double cabin UG 0121W 4)Mitsubishi Tipper Lorry UG 0952W 5) Mitsubishi Tipper Lorry UG 0127W 6)Iveco Tipper Lorry UG 0229W Ford Ranger Pickup D/cabin UG 1279W is 7)Komatsu Motor Grader UG 0136W aged and maintenance costs high and recommended for boarding off.

I noted that the listed vehicles continue to lose value as they are still in the parking yard without being boarded off. Besides, they consume space that would otherwise be used by other vehicles in use.

In response, management explained that the Board of survey made an assessment and the vehicles have been packaged for sale. The exercise of boarding off vehicles has commenced in Kyambogo (UNRA Headquarters) and will be rolled out to other stations.

I advised the Accounting Officer to board off the vehicles without further delay and ensure appropriate procedures are followed.

8.25 Status of Implementation of Prior year Audit Recommendations Review of the status of implementation of the prior year audit recommendations showed that most of the recommendations were not yet implemented by management as per the schedule below.

Serial Issue raised Audit Status of Audit No. recommendations Implementation Remarks 7.1 Mischarge of Expenditure – Management seeks prior Challenge still UGX.3,501,412, approval for reallocation on. 816 and virement before any Not such expenditure is Implemented incurred. . 7.2 Upgrading of Mukono- Kyetume - Katosi/Kisoga –

Nyenge Road (74 Km)

7.2.1 Advised Challenges management to UNRA management still happen. Limited always comply with complies with the Advertisement the procurement law procurement law 7.2.2 Performance guarantee 7.2.3 Advised Restructuring management to of the UNRA implement the It is now a requirement On going. recommendation of to carry out due the Ministry of diligence on all major Finance, Planning procurements and UNRA and Economic is currently implementing Limitation in Development and all this directive as directed the Scope of major projects to by the Ministry of Work - Due avoid such Finance, Planning and Diligence incidences Economic Development 7.2.4 Due Diligence Not resolved Findings and The case is being Recommendatio handled by IGG and The ns courts of Law 7.2.5 Contract The case is being Not resolved Maneuver by handled by IGG and The Eutaw courts of Law Construction Company Inc. Florida –USA 7.2.6 Inconsistencies The case is being Not resolved in the company handled by IGG and The that bidded and courts of Law one that was awarded the Contract 7.2.7 Unrecovered The case is being Not advance handled by IGG and The recovered payment on a courts of Law yet. failed contract for Upgrading of Mukono – Kyetume - Katosi/Kisoga – Nyenge Road (74 Km) 7.2.8 Advised No evidence management to that ensure valuation of Valuation of Contracting out works executed by the works Construction the failed contractor The contractor will be was carried Works to JV SBI (Eutaw) is carried paid for the works they out. International out to aid the Board executed after proper Holdings Ag and and other certification. Regarding Reynolds stakeholders to recovery, the matter is Construction make informed before the Constitutional Co. Ltd decisions. Court

7.3 Receivables The case is being Held in ABC handled by the UNRA Not Capital Bank Legal Department who Implemented have engaged police and . the office of the Director Money not of Public Prosecution to recovered conclude the matter. yet. 7.4 Budget Performance 7.4.1 Funds not Advised UNRA is going through a Restructuring Utilized management to restructuring exercise. of the UNRA always plan This will improve the On going. adequately and UNRA planning systems ensure full utilization and contract of the available implementation funds procedures 7.4.2 Uncompleted Advised Challenge Activities/Progr management to still on. Many ams always plan activities not adequately, ensure completed effective during the collaborations with current year. other stakeholder UNRA is going through a early enough and restructuring exercise. enforce project This will improve the monitoring and UNRA planning systems supervision for and contract effective service implementation delivery procedures 7.5 Un-refunded Challenge borrowings Advised still on. from Kampala management to Borrowings Station by refund the The outstanding balance still occur. UNRA Head remaining balance to of UGX.232 million at the Quarter- Kampala station and time of audit was UGX.232,022,59 also to reduce on refunded during the 9 cash transactions Financial Year 2014/15 7.6 AUDIT INSPECTION OF STATIONS 7.6.1 MPIGI STATION Tractor tyres Arrangements for Not due for disposal disposal of tyres are implemented being finalized at head office 7.6.2 KASESE STATION Advised Not management to implemented Missing follow up the issue confiscated with police and bitumen – 24 ensure recovery of The case is still with drums the bitumen Regional CID Fort Portal. 7.6.3 MOYO STATION a) Lack of pre- Verification of the ferry inspection parts was done by No evidence report on the Internal Audit seen. 35

former ferry and related issues b) Hiring of The procurement of Challenge still Road equipment is in on. equipment by advanced stages and Not the stations - some consignment has Implemented UGX.5.2bn been received . 7.7 Delayed Advised 13 graders out of 16 Not fully delivery of 5 management to have so far been Resolved. Motor Graders follow up the delivered at Mpigi UNRA undelivered graders Stores while the balance and have them of 3 graders is awaiting delivered tax clearance 7.8 Staff Management has liaised Restructuring Establishment with the Ministry of On going. Gaps Finance and the UNRA Board to address the existing staffing gaps. The Board has initiated the restructuring process to establish the critical numbers required for proper functioning of UNRA and once the process is concluded, further consultations and approvals shall be sought from Ministry of Public Service and Ministry of Finance and the gaps shall be filled 7.9 Payment Advised Procurement without a valid management to challenges still contract - always observe the on. Supervision of PPDA law Restructuring works along on going. Atiak-Moyo- Management Observes Afoji Road the PPDA law

I advised the Accounting Officer to ensure all the recommendations are implemented.

9.0 TECHNICAL (ENGINEERING) AUDIT OF A SAMPLE OF ROAD CONSTRUCTION PROJECTS During the financial year 2014/15, UNRA implemented a total of twenty six (26) development road infrastructure projects whose contracts amounted to UGX 3,560,039,968,569, Euro 168,834,255,107 and USD 476,000,000.

As part of the audit of the financial statements for the year, the OAG undertook a technical audit of a sample of 4 road construction projects implemented by UNRA

constituting a total contract sum of UGX 260,993,077,039 and USD 476,000,000.

The Specific objectives of the technical audit were to:

i. To evaluate the existence and effectiveness of internal controls, which are needed for the application of sound engineering principles and practices ii. To obtain reasonable assurance, that the constructed and rehabilitated/maintained roads, during the stages of planning, design, construction and maintenance, were actually done with reasonable quality, and in accordance with sound engineering principles, practice, technical management policies and specifications. All the four projects were executed by contractors and supervision of the works including design reviews was carried out by Consultants.

The projects selected included;

Sn Project Contractor Contract Amount 1 Construction of Kampala- China Communications USD 476,000,000 Entebbe Expressway Construction Company (51km) Limited (CCCC) 2 Upgrading of Kamwenge – China Railway Seventh UGX 117,942,575,300 Fort portal Road (65km) Group Ltd.

3 Upgrading of Mpigi- Kanoni Energoprojekt- UGX 123,770,604,739 Road Niskogradnja AD

4 Emergency Replacement of Armpass Technical 19,279,897,000 Ntungwe and Mitaani Services - FETL JV in Bridges in association with JM Rukungiri/Kanungu Districts Kariuki Consultants Ltd

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.

KEY AUDIT FINDINGS 9.1 CONSTRUCTION OF THE KAMPALA – ENTEBBE EXPRESSWAY (51.4KM) THROUGH DESIGN AND BUILD CIVIL WORKS CONTRACT i) Inappropriate procurement methods

Supervising Consultant

The procurement of the SR was through Restrictive International Bidding process and the names of the 2 (two) firms to be approached for proposals were provided by the Chinese Embassy in Uganda following UNRA’s request. The names provided were Ms 37

Beijing Expressway Supervision Co. Ltd (BESC) and Wuhanjiaoke Engineering Consultant Co. Ltd. UNRA requested for more names but eventually it was the two firms which were invited to bid for the assignment. The procedure for selecting a firm was stated as ‘Fixed Budget Selection’ and the maximum budget was mentioned as US$5million.

On evaluation of the proposals only MS BECS passed the technical score and their financial offer was opened. After negotiations they were awarded a ‘Time Based Contract’ for supervision of the works for US$4,998,300 under ‘Time Based Contract.

The following matters were observed;

 Approaching two firms only for proposals limited competition and might have resulted in the high cost for the supervision works  It is not understood why the selection procedure used was ‘Fixed Budget Selection’ procedure. This method is supposed to be used when the assignment is simple and can be precisely defined and when the budget is fixed. This is not the case for this project as the project is actually complex and the budget was not fixed.  It is not clear as to why the contract is ‘Time Based Contract’ and not ‘Lump Sum Contract’ while the consultant was selected using ‘Fixed Budget Selection’ procedure.

Civil Works Contract

It was observed that UNRA directly procured the contractor for the Kampala- Entebbe expressway with the justification that it was in accordance with the Loan Agreement conditions whereby the China Exim Bank stated that the contractor should be M/s China Communications Construction Company (CCCC). However, this was found not to be the case because the Design –Build Works Contract Agreement (Conditional) was signed between UNRA and CCCC on 26th October 2010; while the Preferential Buyer Credit Loan Agreement signed between GoU and China EXIM Bank was signed in May 2011. No document was availed to the effect that the contractor was specified by the Exim Bank of China. A project of such magnitude and complexity should have been competitively bided in order to get the best offer for its construction.

ii) Analysis of the project planning and design

Amongst the stated projects’ objectives are: a) Improvement of traffic conditions through decongestion of the urban areas functioning both as bypass and distributor road, and b) contribution of urban development by inducing new land use and betterment of the urban and road environment. However, the following were observed:

 As the expressway starts from Busega it will not reduce the congestion experienced on the existing Kampala – Entebbe road since most of the vehicles using existing Entebbe road from the city centre do not necessarily go to Entebbe. These will continue to use existing Entebbe road and congestion will still be there. The objective of decongesting urban roads might not be met.

 The first 25km of the expressway will be ‘access controlled’ and the traffic will not be able to divert to the surrounding areas. This section can therefore not be considered as a ‘distributor road’. The objective of the road to improve ‘urban development by inducing new land use’ will not be met through this project.

The low number of ESAL on the two sections of the road does not need a very strong pavement as the one adopted for this project.

UNRA should always undertake design audits so as to ensure that the designs offer value for money iii) Analysis of the project costs

In order to establish the reasonableness of the project costs, a comparison of the cost of Kampala- Entebbe Expressway was made with the Addis-Adama Expressway of Ethiopia also constructed by CCCC from 2010 to 2014. The analysis is as shown in the table below:

Item Kampala-Entebbe Addis-Adama Remarks Cost ( million USD) 476 612 Road length , km 51.4 84.7 No. of lanes 4 6 Design speed, kph 50 to 100 100 to 120 Interchanges, No. 1 6 Entebbe was to have 8 interchanges Overpasses, No. 30, not clear 36 Underpasses, No. 43 Main toll gates, No. 3 2 Ramp toll gates, No. 0 13 Link roads,km 14.13 18 Frontage roads, km 7.2 Source: Ethiopian Roads Authority website and UNRA contract documents for Kampala- Entebbe Expressway 39

From the table above, the unit cost of the Kampala- Entebbe expressway is

USD 2.315million per lane kilometre while that for Addis –Adama expressway is

USD 1.204million per lane kilometre. It is also noted that the Addis- Adama expressway has more features than the Kampala- Entebbe expressway.

Cost comparison can also be made using the experience in the East African region where costs for constructing a 2 lane highway with similar pavement structure as Kampala-Entebbe Expressway range between USD800,000 to 900,000 per km. If the higher figure is multiplied by 2.3 to accommodate 4 lanes with a median the cost is USD 2,070,000 per km. Multiplying this with a factor of 2 to accommodate the other infrastructure (over/under bridges, interchanges, toll gates) then the cost is

USD 4.140million per km. This is less than half of the cost of Kampala – Entebbe Expressway project which is USD 9.261 million per km.

UNRA should avoid ‘single source’ procurement for such complex projects. The project costs could have been much lower if the contractor had been procured through competitive bidding. iv) Duplication of Consultancy Services for Kampala- Entebbe Expressway

The supervision of works for Kampala- Entebbe expressway was awarded to Ms Beijing Expressway Supervision Co. Ltd (BESC) and ere referred to as the employer’s representative on site. However, another firm, Ms Mott MacDonald Ltd (MML) of UK in association with Ms Kagga & Partners Consulting Engineers of Uganda was assigned by UNRA to provide Project Management services in July 2013. This assignment was through an Addendum No. 2 to the contract signed between UNRA and Mott MacDonald in mid-October 2011 which was for ‘Consulting Services for Feasibility Study, Detailed Engineering Design, Tender Assistance and Project Management for CAPACITY IMPROVEMENT PROJECTS LOT D: KAMPALA (ZANA) – ENTEBBE ROAD (29KM)’. The reasons for engaging Mott MacDonald to provide Project Management Services was said to be, quote : ‘The Procuring and Disposing Entity has insufficient capacity to provide full time Project Management Services under the Kampala – Entebbe Highway Project as the project is complex and requires regular presence of Employer’s representative on site’ unquote.

Addendum No. 3 to the contract was signed on 5th December 2014 and the objective was said to be ‘for construction monitoring services to ensure that there is full time staff allocation to effectively monitor the onsite construction works on the project’

The earlier Addendum No. 1 to the contract signed end of December 2012 is for ‘Additional RAP Preparation and RAP Implementation including Land Expropriation and Titling Services on the new Kampala – Entebbe Highway (51.4km)’

The following matters were observed;

 Whilst UNRA knew of the planned Kampala – Entebbe Expressway project from early 2010 it continued with the process of procurement of the services for Capacity Improvement Projects Lot D Kampala (Zana) – Entebbe Road (28km) which were no longer required. The procurement of these services should have been cancelled and the process of procuring a services provider for RAP preparation and RAP implementation through appropriate procurement procedures undertaken.

. The scope of services for the supervision consultant BESC as per the Statement of Requirements / Terms of Reference section 3 is ‘furnishing complete engineering services in all respects, including all field and office work in strict adherence to the highest standards of the civil engineering practice and with proper interpretation and full understanding of the duties and responsibilities of the Employer Representative’. This implies that the consultant BESC is considered as Employers representative and there was no need / justification to have another consultant for same position and purpose.

. The rates for the Team Leaders of the two assignments differs by 50% while it is the same person is on the position

Considering the noted duplication of services between BECL and MML, there is a need to review the MML’s contract and take action that will address the shortfall and save unnecessary costs. v) Road Safety Issues and OHS

It was observed that public vehicles are allowed to use the uncompleted works and mixes with construction traffic. There were no adequate warning signs to alert the drivers of the dangers due to ongoing works.

Most of the workers at the site were seen with protective gear (mostly helmets, boots and reflective jackets).

The residents of the areas where the access controlled section passes have been seen crossing the road at various locations. It is not known whether the access will be controlled to these people as well. 41

Barriers/fence should be placed on both sides all along the access controlled section of the road. On sections that the road is not access controlled adequate pedestrian crossing facilities should be provided.

vi) Quality of Works

The audit team conducted field density tests (FDT) using sand replacement method to check the field densities/compaction levels on completed pavement layers. Thicknesses of the pavement layers were checked and compared to the specifications. The results showed that the quality of the subgrade, subbase, base and binder course meets the specifications.

A rebound hammer was used to check the quality of the concrete works and the results showed that the concrete works are of good quality.

The auditors collected a sample of CRR from the stockpile at Kajjansi and cored AC20 from Ch. 1+190 and Ch. 3+600 to check their compliance to specifications. The results showed that the grading is within tolerable limits.

Laboratory tests carried out on the Asphalt Concrete (AC) cores indicated low air voids and indirect tensile strength. Too low an air void content, may lead to flushing, a condition where excess binder squeezes out of the asphalt mixture to the surface. A low tensile strength indicates that the asphalt pavement cannot tolerate higher strains before failing (i.e. cracking). The lower tensile strength of asphalt concrete is related to fatigue cracking and susceptibility to moisture.

UNRA should compel the supervisor to always ensure that the contractor adheres to contract specifications and revised work methods to ensure that the asphalt concrete meets the specified quality.

9.2 UPGRADING OF KAMWENGE- FORT PORTAL ROAD (66.2KM) FROM GRAVEL TO PAVED (BITUMEN) STANDARD i) Delays in the Works Contractor Procurement Process

The procurement process involved prequalification of bidders before final bidding for the works. The 2nd stage of procurement process was delayed until 11th July 2013 due to verification of information related to experiences which should have been done at the Pre-qualification stage.

The World Bank had also advised against pre-qualification citing the delays associated with the process and the fact that there’s a risk of collusion amongst the pre-qualified

bidders. The bank had recommended International Competitive Bidding (IC) with post qualification.

UNRA should ensure that for similar future Procurement arrangement under ICB, the Post-qualification is included in the Evaluation criteria and comprehensively conducted to verify all the information submitted by the best evaluated bidders at the pre-qualification stage before the second stage of the bidding is conducted.

ii) Planning and design for road works

Pavement design

The original design for the road works was carried out by M/S Consulting Engineering Services (CES) of India in Association with KOM Consult (U) Ltd in 2009. The pavement design recommended was as follows:- 20mm first seal and 10mm second seal, 200mm imported crushed stone (CRR fine type) compacted to 100% of BS- Heavy for Base course, 150mm gravel material (natural gravel G30) compacted to 95% BS Heavy for subbase and 300mm improved subgrade with material G15 compacted to 95% BS Heavy.

Tender documents were prepared with BoQs reflecting the pavement structure as per original design which did not consider mechanical stabilisation of sub base. It was however noted that the BoQ in the contract has pay items B38.04 and B38.05 for mechanical stabilization. It is not clear at which point these pay items were added and priced for by the contractor. The rates for these work items may therefore not have been competitively priced.

The design review was conducted by H.P Gauff Ingenieure GmbH & Co.KG-JBG in association with Gauff Consultants (U) Ltd who are supervising the works. The consultants compared three (3) alternatives of pavement designs based on Traffic class, T4 classification Although the three alternatives were all for Asphalt Concrete surfacing, the design review consultant recommended a pavement structure with DBST surfacing due to the potential substantial savings

Whereas the design review consultant recommended a pavement with 200mm natural gravel G30 material, the cost estimate for the works in the design review report includes a cost for mechanical stabilization of the G30 material with crushed stone amounting to UGX 5,001,186,330. This implies that the stabilization of gravel was included in the BoQs without clear basis.

In the BoQ of revised design the pay item 37.02(b) for natural gravel G30 has a quantity of 151,689cum which is approximately the quantity that will be required if natural gravel is used on its own i.e. without CRR. However, with the use of Gravel modified with CRR with proportions of the stabilized material of 67% gravel and 33% CRR, then the quantity of gravel should be approximately 102,000cum, resulting in cost savings of the G30 material of 46,689cumics equivalent to UGX 971,131,200.

iii) Inadequacies in the design review Process

Deviations from the requirements of the Design Manual for Flexible Pavements (2010) were noted in the design review process as follows:

 During the design review the subgrade DCP survey was carried out at intervals of 2.0km. However section 5.8 of the Design Manual specifies an interval of 100m for such surveys. Test pits surveys on the subgrade were done at 5.0km intervals while the Design Manual specifies the maximum interval for test pit surveys as 1.0km.

 One trial pit was excavated for investigation of natural gravel material from a potential borrow pit. This was not enough to know and judge the properties of the materials in the borrow pit. A minimum of four (4) trial pits have to be excavated to check the consistency of the material within the borrow pit.

The above deviations may result into the inaccuracies in estimation of quantities of earthworks i.e. cuts and fills where differences in ground conditions are encountered from those predicted at design review stage.

UNRA or the responsible consultant should provide justification for the inclusion of pay items for mechanical stabilization of the sub base in the BoQ after the tender was floated UNRA should also compel the consultants to always recommend the pavement materials that meet the specifications and whenever stabilization is recommended then clearly explain the reasons for the choice.

The quantities in the BoQ for natural gravel G30 should be checked against the actual requirement since the 200mm of the sub base will contain approximately 33% CRR fine and potential savings documented.

iv) Works Progress

By end of September 2015, the works progress was at 49% against planned progress of 87%. It is therefore certain that the contractor will not be able to complete the works by the completion date of 31st January 2016. The delays are attributed to the following factors:

 Delayed compensation of properties in the right of way; due to lack of prior discussion and agreement with property owners at planning

 Suspension of earthworks and quarry operations from 1st July 2014 due to contractors’ non-compliance to standards and laws in relation to environmental/social issues. Suspension on earthworks was lifted on 27th August 2014.

 The contractor has not mobilized some of the necessary equipment for the works; whereas the work methodology in the contract and Section B3903 (c) of the special specification requires the crushed stone base course it to be laid using a paver; the contractor is currently using a grader

 The progress report for September 2015 indicates that the contractor is currently using old equipment from Kazo-Kamwenge road which has frequent break-downs. The contractor, in his bid, planned to purchase new equipment for the project.

 Whereas the contractor indicated that they would use part of the advance payment to purchase equipment, this has not been the case as indicated in the Engineer’s letter to the contractor dated 13th October 2015.

The contractor has failed to show that he is committed to completing the works on time due to failure to mobilise well-functioning equipment as specified in the contract.

UNRA should ensure that the contractor commits to accelerate works to ensure completion and that he meets his obligations in the procurement of equipment for the works. In addition contractual penalties should be evoked to ensure that the contractor provides adequate resources for the works as indicated in the contract schedules.

UNRA indicated that the contract was being wound up and another contractor will be procured to complete the works.

v) Inspection of Works 45

Drainage Works

It was observed that a few cross culverts were constructed perpendicular to the road and therefore do not allow for easy flow of water from the side drains through them, they should have been skewed to guide water flow.

It was noted that a number of culverts were initially constructed using a wrong alignment and had to be lengthened in order to follow the correct alignment of the road. This has resulted in very long culverts that do not collect water from the side drains along the road; adjustments need to be made to direct water into the culverts. Further, these present higher maintenance costs for UNRA.

It was also observed that these long culverts had been paid for even though they were not constructed according to the design length.

vi) Road safety Issues and OHS

The road alignment in a few section have S-curves which could have been reduced as at most places they were in swamp areas and therefore not expensive to acquire the right of way.

Environment Protection

The contractor is obliged under the contract to formulate an environment action plan, decommissioning plans and reporting. However, there’s no approved action plan. The progress report for September 2015 indicates that the contractor has not fully adhered to the environment protection provisions in the contract as evidenced by the following:

 The contractor had not obtained a water abstraction permit for the borehole at the camp as well as water for construction which is drawn from the swamps along the project road

 Poor management of hazardous wastes which include used oils at mechanical workshops and bitumen spills

The Engineer should ensure that measures are put in place to allow for smooth flow of water in the culverts from one side of the road to the other. UNRA should also instruct

the contractor to correct the unnecessarily long culverts, and payments adjusted in subsequent certificates to cater for only the design length.

vii) Quality of Works

The Supervising Engineers quality control test results were reviewed. These were seen in a file at the site offices. The results showed that most of the works tested met the specifications. The tests conducted on gravel from borrow pits at Ch. 153+660 LHS and Ch.167+577 LHS showed that the gravel has slightly high PI and tests on stone from quarry at Ch. 147+700 showed that it has the qualities required.

The audit team conducted field tests on various completed works to ascertain their quality. The results showed that the gravel used for the subgrade layer is of good quality and the required degree of compaction has been achieved. The blended gravel for the subbase was also of good quality, however a low CBR value (18% instead of 30%) was obtained at Ch.148+740 LHS indicates that the compaction of the road edges/shoulders was not adequate.

A rebound hammer was used to check the quality of the concrete works and the results showed that the concrete works are of quality specified.

Gradation test were carried out in the laboratory for the crushed stone material (CRR) laid for subbase at Km 152+140-153+260 and the grading was found to be within tolerance.

UNRA should task the Contractor to ensure that, the compaction of the pavement layers is carried out uniformly throughout the road width including the shoulders.

The Consultant should also ensure that, the field tests have been taken throughout the road width to ascertain the level of compaction on the shoulders as well. Where

the results do not meet specifications, the contractor should be instructed to re-do the works viii) Overpayment for clearing and grubbing activity

Section 3102(b) of the General Specifications for Road and Bridge Works specifies the area for clearing and grubbing as follows; “The shoulders on each side of existing carriageways are included in the clearing and grubbing, but not the existing carriageway itself”. However, review of IPC 9 for June 2015 shows that the whole width of the road is paid for under clearing and grubbing. The auditors computed quantities for a 2km section from Km 143+100 to 145+000 and it indicated an overpayment of UGX 18,081,931 for that section alone.

Additionally the quantity for clearing and grubbing in IPC No.9 was overestimated due to calculation errors resulting in an overpayment of UGX 12,595,940 for a 2km section between chainage 143+000 to 145+000. These errors will increase over the 66km length if not corrected.

Inadequate checks of the quantities in the contractor’s monthly statements resulted in overpayments for work and unjustified increases in project costs.

UNRA should compel the Consultant to cross check all measurements for this item in previous IPCs to ensure that the quantities are correctly computed. All the errors noted should be corrected in subsequent IPCs.

ix) Computation of Payments for Variation of Price

In the computation of VoP for works up to June 2015, the current indices used were those for August 2014. It is not clear why indices being applied are those from a year back when more current indices are available. Provisional indices are meant to be applied when the current indices are not available and once published, the price adjustment computation should be updated to reflect the actual indices for the periods when the works were executed. No updates were seen on the payment certificates. The auditors cross checked the VoP payment for IPC No.12 and noted that there was an overpayment of UGX 23,915,265 due to errors in calculation of the price adjustment for the foreign component.

UNRA should compel the Consultant to ensure that the indices for computation of VoP are updated and previous payments to the contractor adjusted accordingly to indicate actual price fluctuations experienced. The consultant should also re-compute payments for price adjustment and any errors corrected in subsequent IPCs.

x) Supervision of Works

Whereas the consultancy contract indicates that the consultant’s personnel shall not be changed unless approved, the current Resident Engineer (RE) was not the one stated in the contract, and no approval by UNRA for his appointment was found on the correspondence files.

The contractor had not provided a functional laboratory for the engineer by 22nd September 2014, one year, after project start. No effort on the side of UNRA to ensure that the contractor complies with contractual obligations was seen.

UNRA should avoid having unapproved staff supervising the works and issuing instructions as results of their actions or inactions could have undesirable consequences when things go wrong.

9.3 UPGRADING OF MPIGI – KANONI ROAD FROM GRAVEL TO BITUMINOUS STANDARD (64Km) i) Analysis of the project design

Pavement design

According to the design report, the design consultant had looked at 3 pavement alternatives using the TRL Overseas Road Note, Ministry of Works and Transport design manual and the AASHTO design manual. However, the recommended pavement structure for sub-base layer was not consistent with any of the 3 pavement options. The design consultant estimated costs for the project based on the TRL Overseas Road Note design alternative only and did not provide the costs for the alternatives based on MoWT and AASHTO design manuals as well as for the recommended design. Therefore the selection of the best alternative did not take into account the cost implications of all the options.

It was also noted that for the section of Mpigi-Kanoni, the design consultant had allowed for 1.5km of swamp treatment works. Upon commencement of the works, it has been realised that the length of swamps was more than 7km. It is therefore doubtful that the design was thoroughly done through inspection of the entire project road length and review of the available road data maintained by UNRA.

UNRA should ensure that 49

 the design consultant is tasked to explain the deficiencies in the quantities for the length of swamps. UNRA should also critically review design reports and the basis for designs compared with data maintained by UNRA

 the supervision consultants are engaged before the contractor commences work to ensure that deign reviews are ready for the contractor to execute works

 the recommended pavement structure should be from the alternatives analysed

 the associated costs for all the pavement design alternatives are provided to enable an informed decision making. ii) Works Progress

By end of October 2015, the contract time elapsed was 63.38% against the actual physical progress of 22.74%. The slow progress was attributed to several factors including; Delayed acquisition of land, Change of the geometric design, Poor project management by the contractor and Slow response by the client to the Engineer’s submissions e.g. Client has not approval for changed quantities since March 2015. Delays in execution of works result in additional costs to the project through costs incurred to maintain the supervising consultants and costs due to price adjustments.

UNRA should task the consultant to compel the contractor to execute works within the contractual period. They should demonstrate that efforts have been made to improve progress. iii) Inspection of Works

Drainage

Culverts had been installed at the swamp section at Ch 14+700 and a few other places. Culvert installations in other places already carried out had not been approved by the consultant due to their deficiencies in the quality requirements. However, no instructions from the consultant for removal of the defective culverts were availed to the auditors.

Rejected culverts at Ch 4+000

UNRA should task the supervisor to ensure that defective works are immediately demolished/ removed to avoid them being incorporated in permanent works. iv) Quality of Works

The field densities of completed layers have indicated to achieve good degree of compaction and satisfy the requirements set in the general specifications. The natural gravel materials from borrow pit at km 21+930 has more plasticity (PI=20.5%) than required in the table 3702/5 of Uganda general specifications. The Engineer’s laboratory results indicated that the materials from different stone quarries have good strength and assure the client on durability of the completed works. The auditors conducted snap test checks on the quality of works done and materials used on the road. The results showed good quality of subgrade material and sub base layer and good degree of compaction.

Non-destructive tests using Schmidt Rebound Hammer were done on pre-cast pipe culverts installed at km 14+110to to check the quality of the concrete and the results showed that the concrete structures met the specified quality requirements. v) Computation of amounts for price adjustment

It was observed that the computation of price adjustment due to the contractor was not computed on a monthly basis as specified in the Special Conditions of Contract clause 13.8. This implies that quantities of works were adjusted using indices that are not for the period during which the works were executed which may result in wrong computations where the indices are different for the different months.

UNRA should ensure that the Engineer measures works done on a monthly basis and adjust the value of work done as required. vi) Non-adherence to contract conditions by the contractor

The Consultant has a laboratory to check the quality of works but some equipment for testing compaction was yet to be supplied by the Contractor. The auditors reviewed the documentation on tests conducted by the Consultant’s laboratory and were convinced that the quality of works is being properly controlled.

It is recommended that the client evokes the contract conditions applicable when the contractor does not fulfill their obligation.

9.4 EMERGENCY REPLACEMENT OF NTUNGWE AND MITAANO BRIDGES IN RUKUNGIRI/KANUNGU DISTRICTS i) Analysis of the project planning and design

Foundation Design Depths place opinion after the facts

The audit team noted that the foundations for each of the bridges were designed at a depth of 3.0m. Although UNRA explained that the foundations were laid at 5.7m below river bed level, there was no evidence to this effect .It is the opinion of the auditor that the foundation design depth is shallow compared to the spans of the bridges and the ground conditions. To partly address the problem, the Contractor had made a provision of gabions to protect the foundation against the loss of bearing capacity (stability) due to scoring, weathering, ground water in the foundation.

UNRA should consider the use of deep foundation on soft grounds rather than shallow ones to avoid the necessity to provide protection works which may also be damaged by river action.

It is also strongly recommended that pile foundations be used for bridges of this kind.

ii) Non-fulfilment of some of the Contractual obligations by the Contractor

Review of correspondences, progress reports and instruction notices reveals that at several times, the contractor had failed to fulfil his contractual obligations as detailed below;

 The employer’s requirements for the design and build contract required the contractor to provide laboratory facilities and relevant apparatus for use by the Engineer. These were further costed under item 14.08(a) in the price schedule

for both bridges. However, by the time of audit, these facilities had not yet been provided to the engineer thereby making the engineer unable to control and check the results obtained from the contractors laboratory randomly

 Item 14.07(a) of the price schedule for Mitaano and Ntungwe bridges requires the contractor to provide and maintain survey equipment for the Engineer. Review of the progress report for October 2015 shows that the Engineer was s yet to be supplied with this equipment thus making him unable to check and control the bridge levels and alignment

. The appendix to bid clause 6.5 states that the normal working hours are from 0700hrs to 1800hrs, however in a letter dated 05 May 2015, the Engineer noted that the contractor undertook casting of the pier cap at Mitaano Bridge on 3/5/2015 in the night after 9pm without giving any prior notification to the Engineer. The supervising consultant further noted that the same happened for concrete blinding works for the Mitaano Bridge foundation on 4/5/2015. This also violates clause 7.3 of the contract as work was done without prior notice and Engineer’s inspection

UNRA should ensure that the Client should always ensure that the contractor provides the required facilities to the Engineer timely.

Since the contractor did not provide the laboratory and surveying facilities to the Engineer, UGX.28,000,000 as per bill items 14.07(a) and 14.08(a) should not be paid out to the contractor. It is also recommended that Works undertaken in the absence of the supervising consultant should be rigorously checked to ensure they meet the quality requirements stipulated before being approved.

iii) Delayed Progress of works

The works completed represented 89% of total works as of November 2015. The works were scheduled to be completed on May 1st, 2015. No extension of time had been awarded to the Contractor. This therefore implies that the works had delayed by 6 months. Review of the progress reports shows that the contractor has been using the same set of resources in terms of plant, equipment and manpower for the two bridges thus hindering simultaneous operation of the same activities at both bridge sites.

Review of the Interim Payment Certificate No.4 of June 2015, shows that liquidated damages estimated at shs.1,735,190,730 have not been charged to the contractor as required by sub clause 8.7 of the particular conditions of the contract.Since no

extension of time has been awarded to the contractor, the client should ensure that the liquidated damages amounting to UGX.1,735,190,730 (as of audit time) are charged in accordance with sub clause 8.7 of the particular conditions of contract.

iv) Delayed Appointment of the Supervising Consultant

Whereas the design and build contract for the works was scheduled to commence on 2nd May, 2014 and be completed on 1st May, 2015, the contract for supervision of the works was signed on 17th February 2015 and commencement order for the supervision given on the 9th March, 2015. This therefore implies that the supervision activities by the consultant commenced 52 days before the scheduled completion date for the design and build works.

UNRA should always ensure that for Design and Build contracts; the contract management consultant is engaged on time to review the draft designs prepared by the contractor.

v) Commencement of the Construction Works before Approval of the Final Design Report

Whereas the contractor gave the client notice for the commencement of construction works on 7 January 2015, the final detailed design report for the said works was submitted to the client/engineer for review and approval on 2 April 2015 (i.e. 84 days after notice for commencement of construction works). This is contrary to clause 5.2 (ii) of the general conditions of contract that requires the approval of contractor’s documents by the client/engineer before the commencement of any part of the works.

The monthly progress report for October 2015 indicates that the final design report was submitted at a time when civil works had progressed by 25% and procurement and supply of the modular steel parts had been carried out. In a letter dated 28 March 2015, the supervising consultant noted that the foundation design for Ntungwe Bridge had been modified from the already submitted draft design and works were being carried out without getting any approval from the Engineer.

Considering that the construction works were commenced prior to the submission of the final design report for review and approval, this left almost no room for the consultant to undertake a design review with the aim of improving the final design as was required by the scope of consultancy services. The execution of construction

works prior to the approval of the final designs of the works could result in the construction of poorly designed facilities.

UNRA should always ensure that for Design and Build Contracts, final designs are approved before commencement of works.

vi) Delayed Payment of the Contractor

Clause 14.7(b) of the special conditions of contract require the Employer to pay the contractor each interim payment certificate within 56 days after the Engineer receives the statement and supporting documents. Audit noted that IPC No.2 was submitted to the client on 21/11/2014 and payment made 130 days later on 1/4/2015 thus delaying by 74 days. In a letter to UNRA Ref 2015/s01898/P13-08-29/CL-15 dated August 17, 2015, the contractor complains of delayed payments for IPC’s No. 3&4. The audit team could not access the payment schedule to verify when payment for these certificates was effected by the client. Delayed payment of certified works affects the contractor’s cash flow, contributes to slow progress in execution of works and can also result in the payment of interest on delayed payments as per clause 14.8 of the contract.

UNRA should always pay the contractor within the stipulated contractual time so as not to affect the contractor’s cash flow and be liable to pay interests on delayed payments.

vii)Inspection of works

The Audit team inspected the bridge works on 24/8/2015 accompanied by the Supervising Consultants and on 5/11/2015 accompanied by staff from UNRA, Supervising Consultants and Contractor. The following were observed.

Visual observations of quality.

Poor/uneven concrete jointing was observed on the abutments and wing walls of both bridges

LHS - Poor/uneven jointing on Mitaano and RHS Ntungwe Bridges

The audit team observed that the bolts had not been fixed to the bearing plate at the free ends on both bridges

Bearing plate with missing bolts on Mitaano and Ntungwe Bridges

It was noted that some of the shear connectors on Mitaano Bridge had deformed and if unchecked could compromise the quality of the end product

Deformed shear connectors at Mitaano Bridge

The audit noted that the contractor had not provided a site office for the supervising team at Ntungwe Bridge as required by the contract.

Safety Issues and OHS

With regards to safety issues, it was observed that the contractor had put in place warning signs to alert road users. On the issue of OHS, the audit team noted that the contractor’s personnel were provided with the necessary Personal Protective Equipment (PPEs) and this applied to the visitors to site as well. The ladder constructed for workers to use when going to the bridge slab was made of scaffolding pipes and unsafe.

Unsafe access ladder at Mitaano bridge made of scaffolding pipes

The audit team observed that the site was generally untidy characterised by poor storage of construction material/equipment. Furthermore, it was observed that the pit latrine erected by the contractor was in poor state and susceptible to collapse.

Toilet facility at Mitaano Bridge site in poor condition (L) poorly stored batch boxes (R)

UNRA should ensure that that the Contractor always provides safe facilities on site so as to avoid accidents. In addition appropriate action should be taken by the contractor on the pit latrine facility so as to avoid any calamities

viii) Environmental Issues and Other Social Safeguards

It was noted that the final detailed design report did not include any environment compliance requirements such as an EIA as was required by the Client. The monthly progress for October 2015, reports that the contractor had not submitted any plans or reports in regard to environment management issues. In addition, the contractor was required to obtain a construction permit as per the Uganda Water Act. The presence of this could not be verified by the Audit Team.

The contract requires that the Contractor undertakes HIV/AIDS alleviation and gender awareness activities alongside construction works during the contract period. The monthly progress report for October 2015, reports that no HIV/AIDS alleviation and gender awareness activities had been carried out by the contractor. No reports on these activities were seen by the audit team

UNRA should ensure that the contractor always adheres to the stipulated environmental requirements and all the necessary reports are prepared and necessary permits are acquired on time.Contractors should also implement the required HIV/AIDS alleviation and gender awareness activities as stipulated in the contract

Since the HIV/AIDS alleviation and gender awareness activities had not been implemented, the contractor should not be paid a total of UGX.36,000,000 as per bill items 18.02(a) for Mitaano and Ntungwe Bridges.

ix) Quality of Works

The Audit team reviewed the quality assurance program of the Contractor through the available documents at the UNRA office. It was noted that the available concrete test results were few compared to the quantities of concrete works completed. The three (3) samples of cube tests taken for each day’s work would not give good indicative strength statistically. The contractor should have taken enough samples of cubes for testing as specified in the general specifications section 7205 (g) table 7205/3.

In addition, the auditors did not see concrete design mix which was approved and used for the concrete works.

The field tests for concrete strength using a rebound hammer indicated that the strength of the concrete structures met the specified quality requirements.

UNRA should always ensure that quality control is done according to the specifications.

and concrete design mix are always approved before commencement of concrete works. UNRA should also ensure that all tests are conducted on all the elements of the bridges.

x) Financial Aspects and Quantities Verification

The audit team took measurements of some of the elements on both bridges; these were compared with the measurements as per the approved final design and the 58

client’s requirements. The span length required for Mitaano bridge is shorter than that required by the client by 8.0m however, all the other elements measured by the audit team meet the requirements specified by the client.

UNRA should ensure that the supervisor makes an assessment of the savings in cost due to reduction in the span of the bridge and the amount deducted from the contractor’s dues. Any changes in design which reduces the size of the bridge should take into consideration the design flood and return period of the flood.

xi) Quality Control of the Works

It was noted that the contractor had neither been provided with a fully equipped laboratory nor surveying equipment on each of the bridge sites as required by the contract. As such the Consultant could not independently undertake any quality tests to ensure quality of works executed or check for the levels/alignment of executed works.

UNRA should ensure that the supervising consultant is adequately mobilized as provided for in the contract. In addition the surveying equipment should be provided as soon as possible given that the contractor is already compacting pavement layers.

APPENDIX 1

FINANCIAL STATEMENTS