Office of the Auditor General

THE REPUBLIC OF UGANDA

OFFICE OF THE AUDITOR GENERAL

ANNUAL REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF STATUTORY AUTHORITIES AND STATE ENTERPRISES FOR THE YEAR ENDED 30TH JUNE 2009

VOLUME 4

STATUTORY CORPORATIONS

LIST OF ACRONYMS AND ABBREVIATIONS AHP Allied Health Professionals AHL Amber House Limited LI Live stock Industries AC Amnesty Commission BOU Bank of Uganda CCL Cable Corporation Limited CMA Capital Markets Authority CAA Civil Aviation Authority COCTU Coordinating Office for Control of Trypanosomiasis in Uganda CDO Cotton Development Organization HTTI Crested Crane Hotel & Tourism Training Institute CAA Civil Aviation Authority DDA Dairy Development Authority PU Privatization Unit EAC East African Community ERA Electricity Regulatory Authority UICT Institute of Communication & Information Technology KCCL Kasese Cobalt Company Limited KML Kilembe Mines Limited KSW Kinyara Sugar Works LVFO Lake Victoria Fisheries Organization LDC Law Development Centre MTAC Management Training and Advisory Centre MNS Mandela National Stadium MEMD Ministry of Energy and Mineral Development NAGRIC National Animal Genetic Resources Centre and Data Bank NWMS Nakivubo War Memorial Stadium NCC National Council for Children NCHE National Council for Higher Education NCS National Council of Sports NCDC National Curriculum Development Centre NDA National Drug Authority NEC National Enterprises Corporation & Subsidiaries NFA National Forestry Authority NHCCL National Housing & Construction Company Limited NMS National Medical Stores NPA National Planning Authority NWSC National Water & Sewerage Corporation NWC National Women‟s Council NYC National Youth Council NHI Nile Hotel International NSSF National Social Security Fund

PLB Public Libraries Board PPDA Public Procurement & Disposal of Public Assets Authority REA Rural Electrification Agency UACC Uganda Air Cargo Corporation UBC Uganda Broadcasting Corporation BC Broadcasting Council UBOS Uganda Bureau of Statistics UCDA Uganda Coffee Development Authority UCC Uganda Communications Commission UDB Uganda Development Bank UDC Uganda Development Corporation UEB Uganda Electricity Board UEDCL Uganda Electricity Distribution Company Limited UEGCL Uganda Electricity Generation Company Limited UEGCL-TA Uganda Electricity Transmission Corporation (Twinning Arrangement) UETCL Uganda Electricity Transmission Company Limited UEPB Uganda Export Promotion Board UIC Uganda Insurance Commission UIA Uganda Investment Authority UMDPC Uganda Medical and Dental Practitioners Council UNBS Uganda National Bureau of Standards UNCST Uganda National Council of Science & Technology UNCC Uganda National Cultural Centre UNEB Uganda National Examinations Board UNMC Uganda Nurses & Midwives Council CASSOA Civil Aviation Safety and Security Oversight Agency MERECP Mount Elgon Regional Ecosystem Conservation Programme KCCL Kasese Cobalt Company Limited PSA Production Sharing Agreement PPP Public Private Partnership SCOUL Sugar Corporation of Uganda Ltd. NIC National Insurance Corporation Ltd. UTL Uganda Telecom Ltd. QCIL Quality Chemical Industries Ltd. UGCEA Uganda Ginners and Cotton Exporters Association CSDP Cotton Subsector Development Credit NHL Nsimbe Holdings Ltd. MEL Mugoya Estates Ltd. JV Joint Venture MCELU Mugoya Construction and Engineering Limited Uganda. MIC Management Investment Committee VPDL Victoria Property Development Ltd. BOD Board of Directors

UPPC Uganda Printing & Publishing Corporation UPHL Uganda Property Holding Limited URC Uganda Railways Corporation USL Uganda Seeds Limited UTB Uganda Tourism Board UWA Uganda Wildlife Authority

TABLE OF CONTENTS

CHAPTER ONE ...... 9 1.1 Mandate and Legal framework ...... 9 1.1.1 The Auditor General’s Responsibilities...... 9 1.1.2 Responsibilities of Public Organisations on the financial statements ...... 10 1.1.3 Representations by management...... 10 1.2 VISION ...... 11 1. 3 STATUS OF ACCOUNTS AUDITED DURING THE YEAR ...... 11 1.4 SUMMARY OF MAJOR AUDIT FINDINGS OF THE REPORT ...... 12 1.4.1 Unremitted statutory deductions ...... 12 1.4.2 Corporate Governance ...... 13 1.4.3 Asset Management ...... 14 1.4.4 Performance Review of Public Organizations...... 15 1.5 REGIONAL AUDITS ...... 16 CHAPTER TWO ...... 18 2.1 AUDIT OPINION (CERTIFICATION OF ACCOUNTS) ...... 18 2.1.1 Unqualified Opinion ...... 19 2.1.2 Unqualified opinion with Emphasis of Matter (EOM) ...... 20 2.1.3 Qualified Opinion ...... 20 2.1.4 Disclaimer of Opinion ...... 22 2.1.5 Adverse Opinion ...... 23 2.2 ACCOUNTS WHERE EXAMINATION OF BOOKS OF ACCOUNTS HAVE BEEN CONCLUDED BUT THE ACCOUNTS HAVE NOT BEEN CERTIFIED ...... 23 2.2.1 COORDINATING OFFICE FOR THE CONTROL OF TRYPANOSOMIASIS IN ...... 24 2.2.2 LAW DEVELOPMENT CENTRE: Year ended 30th June 2006 ...... 26 2.2.3 UGANDA NATIONAL CULTURE CENTRE: Years ended 30th June ...... 26 2.2.4 UGANDA LIVESTOCK INDUSTRIES LTD ...... 27 2.2.5 NATIONAL COUNCIL FOR HIGHER EDUCATION ...... 29 2.2.6 NATIONAL COUNCIL FOR HIGHER EDUCATION: ...... 30 2.2.7 JOINT CLINICAL RESEARCH CENTRE: ...... 31 2.2.8 NAKIVUBO WAR MEMORIAL STADIUM (NWMS) ...... 34 2.3 AUDITS IN PROGRESS ...... 36 CHAPTER THREE ...... 37 3.1 UNQUALIFIED AUDIT OPINION WITH EMPHASIS OF MATTER PARAGRAPHS...... 37 3.1.1 NILE HOTEL INTERNATIONAL LIMITED (31st DECEMBER 2008) ...... 37 3.1.2 UGANDA COFFEE DEVELOPMENT AUTHORITY (30TH SEPTEMBER 2008) ...... 37 3.1.3 NATIONAL DRUG AUTHORITY (30TH JUNE 2009) ...... 38 3.1.4 CABLE CORPORATION LIMITED (31ST DECEMBER 2008) ...... 38 3.1.5 UGANDA NATIONAL COUNCIL OF SCIENCE AND TECHNOLOGY (30TH JUNE 2008) ...... 38 3.1.6 UGANDA NATIONAL COUNCIL OF SCIENCE AND TECHNOLOGY (30TH JUNE 2009) ...... 38 3.1.7 AMBER HOUSE LIMITED (31ST DECEMBER 2008) ...... 39 3.1.8 UGANDA PRINTING AND PUBLISHING CORPORATION (30TH JUNE 2009) ...... 39 3.1.9 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2007) ...... 40 3.2 QUALIFIED OPINIONS ...... 40 3.2.1 NATIONAL WATER AND SEWERAGE CORPORATION (30th JUNE 2009) ...... 40

3.2.2 UGANDA AIR CARGO CORPORATION (30TH JUNE 2008) ...... 40 3.2.3 NATIONAL CURRICULUM DEVELOPMENT CENTRE (31ST DECEMBER 2004) ...... 41 3.2.4 NATIONAL CURRICULUM DEVELOPMENT CENTRE (31ST DECEMBER 2005) ...... 41 3.2.5 UGANDA DEVELOPMENT BANK (31ST DECEMBER 2008) ...... 41 3.2.17 UGANDA PROPERTY HOLDINGS LIMITED (30TH JUNE 2009) ...... 50 3.2.18 UGANDA SEEDS LTD (30TH JUNE 2007) ...... 50 3.2.24 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2005) ...... 54 3.2.25 NATIONAL CURRICULUM DEVELOPMENT CENTRE ...... 55 3.3 QUALIFIED OPINIONS WITH EMPHASIS OF MATTER ...... 55 3.3.1 NATIONAL YOUTH COUNCIL (30TH JUNE 2005) ...... 55 3.3.4 UGANDA AIR CARGO CORPORATION (30THJUNE1999) ...... 57 3.3.5 UGMA ENGINEERING CORPORATION LIMITED (31ST DECEMBER 2008) ...... 57 3.3.6 CIVIL AVIATION AUTHORITY (30TH JUNE 2008) ...... 58 3.3.7 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2008) ...... 59 3.3.8 NATIONAL ENTERPRISE CORPORATION (30TH JUNE 2006) ...... 59 3.3.10 CIVIL AVIATION AUTHORITY (30TH JUNE 2008) ...... 61 3.3.11 UGANDA REVENUE AUTHORITY (30TH JUNE 2009)...... 62 3.4 DISCLAIMER OPINIONS...... 62 3.4.1 LAW DEVELOPMENT CENTRE (31ST DECEMBER 2002) ...... 62 3.4.4 THE HOTEL AND TOURISM TRAINING INSTITUTE (30TH JUNE 2005)...... 66 3.4.6 UGANDA RAILWAYS CORPORATION (31st DECEMBER 2007) ...... 68 3.5 ADVERSE OPINION ...... 70 3.5.1 POSTA UGANDA LIMITED (30TH JUNE 2007) ...... 70 CHAPTER FOUR ...... 72 4.0 ENERGY SECTOR AUDITS ...... 72 4.1 STATUTORY CORPORATIONS ...... 72 4.1.1 UGANDA ELECTRICTY TRANSMISSION COMPANY LIMITED ...... 72 4.1.2 UGANDA ELECTRICTY DISTRIBUTION COMPANY LIMITED ...... 73 4.1.3 KILEMBE MINES LTD. (30TH JUNE 2009) ...... 74 4.1.4 UGANDA ELECTRICTY GENERATION COMPANY LIMITED ...... 75 4.1.5 ELECTRICITY REGULATORY AUTHORITY (30TH June 2008) ...... 76 4.1.6 RURAL ELECTRIFICATION AGENCY (30TH JUNE 2009) ...... 77 CHAPTER FIVE ...... 78 5.0 AUDIT OF INVESTMENTS BY GOVERNMENT IN PRIVATE COMPANIES ...... 78 5.1 Section18. Audit of public monies in private organizations and bodies...... 78 5.2 The third Schedule of the Public Finance and Accountability Act 2003 Accounts ...... 78 CHAPTER SIX ...... 80 6.0 SPECIAL AUDITS AND INVESTIGATIONS ...... 80 6.1 COTTON DEVELOPMENT ORGANIZATION (CDO) ...... 80 6.1.1 Compliance with the Loan Agreement ...... 81 6.1.2 Utilization of the Loan Funds ...... 82 6.1.3 Impact ...... 82 6.1.4 Recovery of Loans ...... 83 6.1.5 Non Compliance with Agreements ...... 83 6.1.6 Repayments ...... 84 6.1.7 Revolving Fund ...... 84 6.1.8 Accrued Interest ...... 84

6.1.9 Capacity to Pay ...... 85 6.2 NATIONAL SOCIAL SECURITY FUND (NSSF) ...... 87 6.2.1 Procurement findings ...... 87 6.2.1.1 IMIS ...... 87 6.2.1.2 Motor vehicle purchase ...... 88 6.2.1.3 Legal services providers’ files ...... 89 6.2.1.4 Private investigations file ...... 89 6.2.2 Payment of salary advances, allowances and loans...... 89 6.2.2.1 Managing Director NSSF ...... 89 6.2.2.2 Deputy Managing Director NSSF ...... 89 6.2.3 Credit card usage by management ...... 90 6.2.4 Issues regarding JVs ...... 90 6.2.4.1 Nsimbe Holdings Limited (NHL) ...... 90 6.2.4.2 Victoria Property Development Limited (VPDL) ...... 91 6.2.5 Listed securities ...... 93 6.2.5.1 Procurement of stockbrokers ...... 93 6.2.5.2 British American Tobacco (Uganda) ...... 93 6.2.5.3 Bank of Baroda (Uganda) ...... 93 6.2.5.4 Development Finance Company of Uganda ...... 93 6.2.5.5 Stanbic Bank (Uganda) ...... 94 6.2.6 Investments in fixed deposit ...... 94 6.2.7 Sale of government bonds before their maturity date ...... 95 6.2.8 Purchase of land ...... 95 6.2.8.1 Temangalo ...... 95 6.2.8.2 Branch offices ...... 96 6.2.8.3 Law firm single sourced ...... 96 6.2.8.4 Investment Policy not followed ...... 96 6.2.8.5 Arua Project ...... 96 6.2.8.6 Gayaza and forest land...... 96 6.2.8.7 Lumumba ...... 96 CHAPTER SEVEN ...... 97 7.0 STATUS OF BUSINESS OF THE STANDING COMMITTEE ON COMMISSIONS, STATUTORY AUTHORITIES & STATE ENTERPRISES ...... 98 7.1 Reports presented to the House ...... 98 7.2 Reports concluded but not yet presented to the House ...... 98 7.3 Reports still under consideration ...... 99 CHAPTER EIGHT ...... 100 8.0 DIVESTITURE ACCOUNTS ...... 100 8.1. Status of Divested Enterprises ...... 100 8.2 Contingent Liabilities ...... 101 8.3 DIVESTITURE AUDIT OF UGANDA ELECTRICITY BOARD (UEB) ...... 101 8.3.1 Introduction ...... 101 8.3.2 Legal Status ...... 102 8.3.3 Ownership ...... 102 8.3.4 Divestiture Process ...... 102 8.3.5 UEB Core Assets ...... 103 8.3.6 Asset valuation ...... 103

8.3.7 Unbundling UEB Assets and Liabilities ...... 103 8.3.8 Findings on Divestiture of Uganda Electricity Board ...... 104 8.3.5 Conclusion ...... 105 Appendix 1 ...... 106 Appendix A ...... 108 Appendix B ...... 110 Appendix C ...... 112 Appendix D ...... 114 Appendix E ...... 118 Appendix F ...... 120 Appendix G ...... 122

CHAPTER ONE

RESPONSIBILITY OF THE AUDITOR GENERAL AND LEGAL FRAMEWORK

This is volume 4 of the Auditor General‟s annual report to Parliament. The report presents a summary of audit reports issued for Statutory Corporations / entities audited during the period from 1st April 2009 to 31st March 2010.

1.1 Mandate and Legal framework The 1995 Constitution of the Republic of Uganda under Article 163 (3) as amplified by the National Audit Act 2008 Section 17, and other various Acts of Parliament establishing Statutory Corporations and State Enterprises require the Auditor General to examine and audit the accounts of these entities and submit annually a report to Parliament on the financial as well as value for money audits. In addition, the Auditor General is mandated to carry out special audits on any matter and report to Parliament. The National Audit Act under Section 18 also states that the Auditor General may inquire into, examine, investigate and report, as he or she considers necessary, on the expenditure of public monies disbursed, advanced, or guaranteed to a private organization or body in which government has no controlling interest.

1.1.1 The Auditor General’s Responsibilities The scope of the Auditor General‟s work when conducting financial audits is to audit and report to parliament by expressing an independent opinion as to whether or not the financial statements, in all material respects, fairly state the results of operations of the entities in accordance with International Financial Reporting Standards and in the manner consistent with the respective Acts and Statutes establishing these entities as well as complying with the relevant laws and regulations applicable to financial matters. These standards require that ethical requirements are complied with and the audit is planned and performed to obtain reasonable assurance as to whether the financial statements are free from material error or misstatement.

The audit also includes obtaining sufficient and appropriate evidence supporting the amounts and disclosures in the financial statements to provide a basis for making an opinion. The audit procedures selected depend on the auditor‟s judgment, including the assessment of risks of material misstatements of the financial statements, whether due to fraud or error. In making risk assessments, the auditor considers internal controls relevant to the entity‟s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances.

An opinion will also be expressed as to whether or not any matters came to the Auditors‟ attention that causes him/her to believe that material errors and non-compliance with laws and regulations, applicable to financial matters, had occurred.

1.1.2 Responsibilities of Public Organisations on the financial statements

It is the responsibility of The Directors of the audited entities to prepare financial statements which give a true and fair view of the state of affairs and operating results of their entities in accordance with International Financial Reporting Standards and the various Acts and Statutes establishing them. This responsibility also includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in their circumstances. The audit of financial statements does not relieve management, or those charged with governance of their responsibility. 1.1.3 Representations by management As part of normal audit procedures, the auditor will where necessary request management of audited entities to provide written confirmations or oral representations that have been received from management during the course of the audit

After conducting audits based on the scope of the auditor‟s responsibility stated above, the auditor shall report to management in writing, any significant weaknesses based on observations on the internal control system and other areas that come to his /her notice which he / she considers necessary to be brought to management‟s attention by way of a Management letter.

1.2 VISION The vision of the office of the Auditor General is “To be an Effective and Efficient Supreme Audit Institution (SAI) in promoting public Accountability in the use of Resources in the enhancement of good governance”. Mission The mission of the office of the Auditor General is “To audit and report to the Public and thereby make an effective contribution in improving public accountability”. Core Values The office of the Auditor General is run on three (3) specific core values which motivate and guide staff in their endeavours to achieve the vision and mission of the office. These core values are:- Integrity Objectivity and Professional Competence

1. 3 STATUS OF ACCOUNTS AUDITED DURING THE YEAR The Office of The Auditor General is responsible for the audit of Seventy six (76) entities comprising of state enterprises, statutory authorities and commissions as listed in appendix 1. The nature of the entities is such that their accounting dates are not co- terminus (do not all end on the same date). Four different accounting dates feature in the accounts of the entities as follows:- Year ending 30th June, Year ending 30th September, Year ending 31st October and Year ending 31st December.

A total of 198 audits were conducted during the year under review. Out of these audits, 111 audit certificates were issued to 65 entities. Forty four (44) other audits were concluded but audit certificates could not be issued to these entities due to their failure to prepare financial statements. The remaining forty three (43) audits in respect of 21 entities were still under progress.

1.4 SUMMARY OF MAJOR AUDIT FINDINGS OF THE REPORT

1.4.1 Unremitted statutory deductions During the period under review, seven public organizations failed to remit statutory deductions amounting to Shs.3,436,170,469 to the relevant statutory authorities. Of these amounts, un remitted taxes to Uganda Revenue Authority in respect of Pay As You Earn, Value Added Tax and Withholding Tax amounted to Shs.2,278,405,227 while deductions for Employee benefits relating to National Social Security Fund amounted to Shs.1,157,765,242. Details are shown in the table below:

No Entity NSSF Taxes Amount Shs Shs Shs 1 Hotel Training and Tourism 68,960,986 71,174,387 140,135,373 Institute 2 Uganda Broadcasting 304,209,915 1,497,662,635 1,801,872,550 Corporation 3 Nakivubo War Memorial 29,376,861 163,818,328 193,195,189 Stadium 4 Mandela National Stadium 638,830,396 11,177,671 650,008,067 5 COCTU - 16,357,500 16,357,500 6 Management Training and 116,387,084 114,188,183 230,575,267 Advisory Centre 7 Uganda National Bureau of 146,612,166 146,612,166 Standards 8 Uganda Export Promotion - 257,414,357 257,414,357 Board TOTAL 1,157,765,242 2,278,405,227 3,436,170,469

Pictorially, the above information can be shown in a pie chart as follows

This is a critical situation of non compliance with the law and remedial measures should be sought to avoid penalties which may be charged by the respective statutory bodies. 12

1.4.2 Corporate Governance The framework for accountability in government specified in Section 15 and 19 of the Public Finance and Divestiture Act (Cap 98) requires Accounting officers and their Boards to be accountable for their entity‟s activities. It is mandatory for management of public entities to put in place effective internal control systems to safe guard assets and resources from mismanagement and fraud. The following commonly recurring corporate governance issues were; Public enterprises operating for long periods of over 2 years without Boards of directors. Late renewal and appointment of new Boards by the respective line Ministers responsible for the Public Enterprises and Organizations. Board members of public enterprises involved in day to day management functions instead of providing policy decisions and supervising management. Public enterprises operating without approved budget estimates. Board members remunerating themselves without approval from the line Ministers. Irregular Board meetings below or exceeding the required minimum.

During the year under review a total of Fourteen (14) Public organizations had governance issues as summarized in the table below; No Entity Governance issues 1 Uganda National Council of Science & Technology Absence of Board of Directors 2 Uganda Air Cargo Corporation (UACC) Absence of Board of Directors 3 Uganda Broad Casting Corporation(UBC) Non approval of Board remunerations 4 National Enterprise Corporation(NEC) Absence of Board of Directors 5 National Council for Children(NCC) Absence of Board of Directors 6 Uganda Export Promotion Board(UEPB) Lack of approved budgets 7 Nakivubo War Memorial Stadium(NWMS) Board indebted to stadium without settling debts 8 COCTU Irregular Board meetings 9 Mandela National Stadium (MNS) Unsigned Board minutes. 10 National Council for Higher Education(NCHE) Board of Directors involved in management functions 11 Uganda Livestock Industries Lack of approved budgets 12 National Planning Authority Absence of Board of Directors 13 Kilembe Mines Limited(KML) Absence of Board of Directors 14 Civil Aviation Authority Absence of Board of Directors

Recommendations Ministers responsible for these entities should ensure that appointment of new boards is timely. In order to avoid conflict of interest, in as far as the oversight function is concerned Board members should avoid performing management functions. Accounting officers of public enterprises should ensure that their budgets are approved by the Board and line Ministers.

1.4.3 Asset Management A review of public organizations revealed that many were noted to have poor or improper management of non current assets. There was apparent lack of ownership to properties as evidenced by absence of title deeds to many of the properties, absence of fixed assets registers or incomplete and outdated fixed assets registers, non revaluation of assets for a long period of time and impairment not tested periodically as required by the accounting standards. During the year under review a total of Nineteen (19) Public organizations had asset management weaknesses as shown below;

No Entity Asset management issues 1 National Water and Sewerage Lease hold land without titles Corporation (NWSC) 2 Uganda Coffee Development Authority Uninstalled Wet coffee processing machines 3 Cotton Development Organization (CDO) Absence of title to seed dressing stations 4 Uganda Electricity Generation Company Impairment of assets (Dams) Ltd (UEGCL) 5 Dairy Development Authority (DDA) Valuation of Property, plant and equipment 6 National Enterprise Corporation(NEC) Non Valuation of Property, plant and equipment 7 Law Development Centre(LDC) Outdated fixed assets register Non Valuation of Property ,plant and equipment Absence of title to properties Encroachment on LDC land 8 Uganda Nurses and Midwives No fixed assets register Council(UNMC) Non Valuation of Property ,plant and equipment Absence of title to properties 9 Hotel Training and Tourism Non Valuation of Property ,plant and equipment Institute(HTTI) Impairment of Property plant and equipment. 10 Management Training and Advisory Absence of title to properties Centre(MTAC) Non revaluation of Property plant and Equipment 11 National Council for Children (NCC) Encroachment on NCC land 12 Uganda Seeds Limited(USL) Non Valuation of land and Buildings

Impairment of Buildings 13 Uganda Property Holding Limited (UPHL) Non Valuation of land and buildings 14 NAGRIC Absence of title to properties Lack of livestock census register No valuation of biological assets 15 Nakivubo War Memorial Stadium(NWMS) No fixed assets register Absence of title to properties No valuation of property plant and equipment 16 Uganda Broad Casting Corporation (UBC) No values to property and assets vested to UBC Absence of title to properties 17 Uganda Livestock Industries No fixed assets register Absence of title to properties No valuation of property plant and equipment 18 National Curriculum Development No depreciation of Motor vehicles Centre(NCDC) 19 Uganda institute of Information and No values to assets vested to UICT from UCC Communication Technology

Recommendations Legal ownership of properties should be secured and land titles/deeds obtained from relevant authorities. Revaluation of assets should be conducted and impairment testing carried out at periodic intervals. Maintenance and update of fixed assets registers should be carried out. Land encroached upon should be secured.

1.4.4 Performance Review of Public Organizations Audit of financial statements of public organizations revealed that some entities have been operating profitably while others have been operating at a loss. Financial standing of these entities has been evaluated basing on the accumulated surplus or deficit as at 30th June, 2009, 31st December, 2008, 31st October 2008 and 30th September, 2008 depending on the year end of the financial years of these entities. An analysis of financial statements of fifty eight (58) entities whose accounts were certified revealed that twenty six (26) made losses while thirty two (32) made profit. This is summarized in the table below;

Public organization Number of loss Number of Total making profit making Regulatory Authorities 7 13 20 Government Institutions 9 6 15 State Enterprises 10 13 23 Total 26 32 58

It was further noted that eleven (11) organisations had continued accumulating losses, the following five (5) entities were singled out for making huge losses

No Entity Losses made in Financial Shs year reviewed 1 Uganda Electricity Generation Company Ltd (25,786,766,000) Dec 2008 2 Uganda Electricity Transmission Company Ltd (57,021,601,000) Dec 2008 3 Uganda Electricity Distribution Company Ltd (42,582,952,000) Dec 2008 4 National Social Security Fund(NSSF) (50,198,093,000) June 2008 5 Civil Aviation Authority (CAA) (11,291,238,000) June 2008

The earlier efforts are made, to reverse this trend the better for the economy of the country. Full details of the performance are shown in appendix A, B and C.

1.5 REGIONAL AUDITS Uganda is a member of the following Regional Intergovernmental Organizations namely; Intergovernmental Standing Committee on Shipping (ISCOS) Northern Corridor Transit Transport Coordinating Authority (NCTTCA); Common Market for Eastern and Southern Africa (COMESA) East African Community (EAC).

The East African Audit Commission consisting of the five Auditors‟ General of East Africa is mandated to audit the East African Community. During the year, the Auditor General of Uganda chaired the audit of the East African Community and its organs, namely the East African Secretariat, Lake Victoria Basin Commission (LVBC), Lake Victoria Basin

Commission Partnership Fund (LVBCPF); Lake Victoria Environmental Management Project II (LVEMP II) , the Civil Aviation Safety and Security Oversight Agency (CASSOA) and Mount Elgon Regional Ecosystem Conservation Programme (MEPECP). The Auditor General conducted the audits together with Auditors General of Rwanda and Tanzania. The audit was completed and accounts presented to the East African Legislative Assembly where it was reported to the Committee on Accounts for scrutiny on 23rd September, 2009.

CHAPTER TWO

BASIS AND TYPES OF AUDIT OPINIONS ISSUED TO PUBLIC ORGANIZATIONS This chapter deals with the basis and types of audit opinions issued to public organizations during the Period 1st April 2009 to 31st March 2009.

2.1 AUDIT OPINION (CERTIFICATION OF ACCOUNTS)

During the period under review, a total of one hundred fifth six (155) audits were undertaken and of these; forty two (42) opinions issued were unqualified, eleven (11) opinions issued were unqualified with emphasis of matter (EOM) thirty (30) opinions issued were qualified, twenty (20) opinions issued were qualified with emphasis of matter (EOM), seven (7) opinions were issued with disclaimers, one (1) opinion issued was adverse, while examination of books of accounts were concluded for forty four (44) accounts but no certification was done.

Chart showing the proportion of audit opinions

2.1.1 Unqualified Opinion An unqualified audit opinion is issued when the Auditor is able to express an opinion and concludes that the financial statements of an audited entity give a true and fair view or are presented fairly, in all material respects, in accordance with the International Financial Reporting Standards of the various Acts and Statutes establishing the state enterprises, statutory authorities and commissions.

In the year under review Forty two (42) unqualified opinions without emphasis of matter were issued to (23) public organizations compared to thirty eight (38) reported previously showing an increase level of 10.5%, this is shown in the table below; No Entity No of Financial year audited reports certified 1 Amnesty Commission 1 30th June 2008 2 Bank of Uganda 1 30th June 2009 3 Capital Markets Authority 1 30th June 2009 4 Management Training & Advisory Centre 4 31st Dec 2004- 31st Dec 2007 5 National Housing & Construction Co. Ltd 1 31st December 2008 6 New Vision Printing & Publishing Corporation 1 30th June 2009 7 Post Bank Uganda Limited 1 31st December 2008 Public Procurement & Disposal of Public 8 Assets 1 30th June 2008 Uganda Institute of Information & 9 Communications Technology. 3 30thJune2006- 30th June 2008 10 Uganda Insurance Commission 1 30th June 2008 11 Uganda Investment Authority 1 30th June 2008 12 Uganda National Council for Higher Education 1 30th June 2006 13 Lake Victoria Fisheries Organization 1 30th June 2008 14 Uganda National Bureau of Standards 1 30th June 2008 15 Uganda National Examinations Board 4 30thJune 2005.-30thJune 2008 16 Broadcasting Council. 3 30thJune 2006-30th June 2008 th 17 Uganda Tourism Board. 1 30 June 2009 18 Uganda Communications Commission. 1 30th June 2009 19 Uganda Air Cargo Corporation. 1 30th June 2009 20 National Women‟s Council. 7 30th June 2002-30th June 2008 21 National Council for Children 3 30th June 2003,2004 and 2006 22 National Planning Authority 2 30thJune2007 to 30th June 2008 23 Uganda Bureau of Statistics 1 30th June 2009. TOTAL 42

2.1.2 Unqualified opinion with Emphasis of Matter (EOM)

An emphasis of matter paragraph may be included in the Auditor‟s opinion to highlight material matters and significant uncertainty which in the auditor‟s judgment do not affect the financial statements of the entity, but may be of such importance that it is fundamental to the users‟ understanding of the financial statements.

In the year under review Eleven (11) unqualified opinions with emphasis of matter were issued to ten (10) public organizations shown in the table below

No Entity No of reports Financial year certified Audited 1 Nile Hotel International Limited(NHI) 1 30th December 2008 2 Uganda Coffee Development Authority(UCDA) 1 30th September 2008 3 National Drug Authority(NDA) 1 30th June 2009 4 Cable Corporation Limited(CCL) 1 31st December 2008 5 Uganda National Council of Science & Technology 2 31st June 2008-2009 6 Uganda Electricity Distribution Company Ltd 1 30th September 200 7 Amber House Limited(AHL) 1 31st December 2008 8 Uganda Printing and Publishing Corporation 1 30th June 2009 9 National Council for Children(NCC) 1 30th June 2007 10 Rural Electrification Agency(REA) 1 30th June 2009 TOTAL 11

2.1.3 Qualified Opinion An auditor expresses a qualified opinion when:

(a) The auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in aggregate, are material, but not pervasive, to the financial statements; or (b) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the

financial statements of undetected misstatements, if any, could be material but not pervasive. In the year under review Thirty (30) qualified opinions were issued to Nineteen (19) public organizations listed below;

No Entity No of Financial year Audited reports certified 1 Dairy Development Authority 4 31st Dec 2005- 31st Dec 2008 2 Uganda Wildlife Authority 1 30th June 2009 3 Kilembe Mines Limited 1 30th June 2009 4 National Water and Sewerage 1 30th June 2009 Corporation

5 Uganda Electricity Generation Co. Ltd 1 31st December 2008

6 Uganda Air Cargo Corporation 1 30th June 2008 7 National Curriculum Development Centre. 3 31st Dec 2004-31st Dec 2006 8 Uganda Broadcasting Corporation 1 30th June 2006 9 Uganda Development Bank 1 31st December 2008 10 National Social Security Fund 2 30th June 2007-30th June 2008 11 Uganda Property Holdings Ltd 1 30th June 2008-30th June 2009 12 Management Training and Advisory 1 31st December 2008 Centre 13 Uganda Seeds Limited 5 30th June 2004-30th June 2008 14 Uganda Broadcasting Corporation 2 30th June 2007-30th June 2008 15 Uganda Electricity Transmission Co. Ltd 1 31st December 2008 16 Electricity Regulatory Authority 1 30th June 2008 17 National Council for Children 1 30th June 2005 18 Uganda Export Promotion Board 1 31st December 2006 19 Law Development Centre 1 30th June 2005 TOTAL 30

In addition Nineteen (20) Qualified opinions with Emphasis of matter (EOM) were issued to Nine (9) public organizations listed below; No Entity No of Financial year Audited reports certified 1 National Council for Children 1 30th June 2008 2 Uganda Export Promotion Board 2 31st Dec 2004-31st Dec 2005 3 Cotton Development Organization 1 31st October 2008 4 Uganda Air Cargo Corporation 10 30th June 1998-30thJune 2007 5 UGMA Engineering Corporation Ltd 1 30st December 2008 6 National Youth Council 1 30th June 2005 7 National Enterprise Corporation 2 30th June 2006-30th June 2007 8 Uganda Revenue Authority 1 30th June 2009 9 Civil Aviation Authority 1 30th June 2008 TOTAL 20

2.1.4 Disclaimer of Opinion The Auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. The auditor shall disclaim an opinion when, in extremely rare circumstances involving multiple uncertainties, the auditor concludes that, notwithstanding having obtained sufficient appropriate audit evidence regarding each of the individual uncertainties, it is not possible to form an opinion on the financial statements due to the potential interaction of the uncertainties and their possible cumulative effect on the financial statements. During the year under review; I was not able to issue an opinion on the financial statements of five (5) public organizations listed below;

No Entity No of reports Financial year certified Audited 1 Law Development Centre 2 31stDec 2002-31st Dec 2003 2 Uganda Nurses & Midwives Council 2 30th June2004-30thJune 2005 3 Hotel Training and Tourism Institute 1 30th June 2005 4 Posta Uganda Limited 1 30th June 2008 5 Uganda Railways Corporation 1 30th June 2009 TOTAL 7

2.1.5 Adverse Opinion The auditor shall express an adverse opinion when the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements.

Public Organization issued with Adverse audit opinions during the year. No Entity Type of audit opinion Financial year issued Audited 1 Posta Uganda Limited Disclaimer 30th June 2007

2.2 ACCOUNTS WHERE EXAMINATION OF BOOKS OF ACCOUNTS HAVE BEEN CONCLUDED BUT THE ACCOUNTS HAVE NOT BEEN CERTIFIED

A total of Forty four (44) audits were concluded for Thirteen (13) public organizations. However, I was unable to certify these audits because signed financial statements were not presented to my office due to the following reasons,

Some entities had no Boards to approve the financial statements. Others had their financial statements rejected by my office because of non compliance with reporting requirement and errors in the financial statements.

The following is a listing of these public organizations; No Entity No of Financial year under years review 1 Joint Clinical Research Centre 4 2005/2006-2008/2009 2 Nakivubo War Memorial Stadium 5 2004/2005-2008/2009 3 Livestock Industries 5 1998/1999-2000/2001 4 COCTU 4 2005/2006-2008/2009 5 Allied Health Professionals 1 2004/2005-2005/2006 6 National Council for higher Education 3 2006/2007-2008/2009 7 National Animal Genetic Resource Centre and 2 2004/2005-2006/2007 Data Bank (NAGRIC) 8 National Forestry Authority 2 2007/2008-2008/2009 9 Uganda Nurses and Midwives 4 2005/2006-2008/2009 Council 10 Uganda National Cultural Centre 7 Dec 2002-Dec2008 11 Uganda Institute of information and 1 2008/2009 Communication Technology 12 Law Development Centre 3 2005/2006-2007/2008 13 Mandela National Stadium 3 Dec 2006-Dec2008 TOTAL 44

The following are audit issues for public organizations whose audits were completed but did not submit financial statements.

2.2.1 COORDINATING OFFICE FOR THE CONTROL OF TRYPANOSOMIASIS IN UGANDA (COCTU) Outstanding issues for the year ended June 30th 2008 Late submission of accounts

Management of the Council did not prepare and submit Final Accounts to the respective authorities within 3 months after the end of the Financial Year as required by the Public Finance and Accountability Act 2003, Sec 31(b) and the Uganda Trypanosomiasis Control Statute 1992 sec 26(2). In addition, the accounts for the financial year ended June 2008 were submitted in August 2009 (i.e. 11 months later). 24

Non remittances of taxes Deductions totaling Shs.8, 514,000 in respect of PAYE from gratuity payment to staff was not remitted to URA.

Outstanding issues for the year ended June 30th 2009 Non remittances of taxes Deductions totaling Shs.7, 843,500 in respect of PAYE from salaries to employees was not remitted to URA. Procurement of goods and services We noted that procurement of some goods and services of Shs.13,250,600 was done without following the Public Procurement and Disposal of Assets Regulations, 2003. Procurement plans based on the approved budget were not made and submitted to the Procurement and Disposal Authority. Instead, procurement was done in an adhoc manner and without requisition from the user department. Besides, there were no contracts committee minutes approving the transactions.

Internal control system We noted that the internal control system of the Organization was weak in the following areas:- o Council did not operationalise the internal audit function as provided for in the Council‟s organization structure. o The entity did not have Accounting and Human Resource Manuals to guide the operations of the Council. o All payment vouchers and their supporting documents were not cancelled with “paid” stamp during the financial years under review. The possibility of duplication of payments could not be ruled out. o The assets register was not updated on regular basis to ensure that all asset acquisitions, disposals, their condition is documented. o Uganda Trypanosomiasis Control Council had only one Board meeting for the whole financial year instead of 4 as stipulated in their Statute of 1992, sec 10(1). o Expenditure totaling Shs.10,635,700 did not have supporting documents such as activity reports and receipts, rendering the expenditure doubtful

2.2.2 LAW DEVELOPMENT CENTRE: Year ended 30th June 2006 Lack of an approved budget

Sec 21 (Cap 132) of the centre‟s Act requires Management to submit to the Minister responsible for finance, for his/ her approval, estimates of its income and expenditure for the next ensuing year before the beginning of each financial year. Contrary to this requirement, the Centre operated without an approved budget during the year under review

Un accounted for funds A total of shs.82,660,000 which was paid to Legal Aid Clinic as students contribution for various activities, remained unaccounted for at the year end.

2.2.3 UGANDA NATIONAL CULTURE CENTRE: Years ended 30th June 2002,2003,2004,2005,2006 and 2007

Comprehensive fixed assets register The Centre does not maintain a fixed asset register. Consequently all information and explanations which was considered necessary to ascertain the completeness, existence, ownership and valuation of property, plant and equipment could not be obtained. Property, plant and equipment balances therefore may not be fairly stated.

Lack of bank reconciliation statements There were no bank reconciliation statements for the bank Accounts maintained contrary to best practice and the Financial Regulations and Accounting Manual of the centre. Besides, certificates of bank balances were not availed for audit. I could not therefore ascertain the correctness of the cash balances at the close of the year.

Revaluation of fixed assets It was noted that a number of assets have unrealistic values while others have no values attached to them at all. This is contrary to IAS 16 which requires assets of the same class to be regularly revalued to reflect their fair values.

Depreciation policy The non current assets were depreciated using the straight line method according to the accounting policies. This is however, contrary to Section 10.7 of the Centre‟s Financial Regulations and Accounting manual which requires non current assets to be 26

depreciated using the reducing balance method. This inconsistency needs to be addressed.

Bad Debts Provision Management did not make a provision for all doubtful debts as a result of the figures for debtors reflected in the financial statements are not fairly stated.

Reserves The reserves figure reflected in the Statement of Changes in Equity for the year ended 31st December 2002 of Shs.135, 855, 077 differs significantly with that reflected in the balance sheet of the same year of Shs.130,069,946 by Shs.5,785,131. This difference was not explained.

Un-receipted income The total collection from plays staged by different groups in the Centre was Shs.139,676,500 for 2004 and Shs.97,706,000 for 2005. These funds were neither receipted nor banked. It was therefore not possible to ascertain and establish the completeness of the total revenue collected and banked. Besides, utilization was not availed.

Bankings not captured in the bank statements A review of transactions on Account number 2060205 Allied Bank, to confirm the authenticity of the bankings reported in the cash books for the periods ended 31st December, 2006 and 30th June, 2007 revealed that although Shs.492,874,589 and Shs.257,391,232 respectively is reported to have been banked, only Shs.387,551,807 and Shs.257,762,151 respectively was credited on the bank statements. This created unexplained difference of Shs.105,322,782 and Shs.370,919 respectively. Bank reconciliations reconciling bank balances at the end of these periods were not availed to audit.

2.2.4 UGANDA LIVESTOCK INDUSTRIES LTD: Five years ended 31st December 1997,1998,1999,2000 and 2001. Lack of company /Ranch annual Budgets For the five year period under review, audit was not availed with approved budgets of income and expenditure.

Rental payments During the period under review, the company paid Shs 9,813,609 to M/S Francisco Opoka estates as rental fees for the period ended December 1999. However, audit noted that these payment lacked supporting documents including rental Agreements.

Un-supported payments During the period under review, the company paid a total of Shs. 49,600,000 to M/S Etatas Ltd to rehabilitate Kiryana and Kyempisi ranches. However audit noted that all these payments were made without any supporting documents.

Trade creditors and other payables Trade creditors and other payables were reported in the financial statements under current liabilities as shown below. 1997- 5,129,502,975 1998- 5,603,699,938 1999- 6,198,252,672 2000- 6,302,862,829 2001- 7,655,853,642 The completeness, existence and accuracy of these liabilities could not be ascertained because detailed creditors schedules confirming the valid amounts and creditors ledgers to confirm their accuracy were not availed for audit.

Property, Plant and Equipment A review of the Company‟s fixed asset values and records for the five year period established the following; i) The Company did not maintain a fixed assets register for the entire five year period under review; as a result audit could not confirm the cost, location, conditions, existence and values of assets maintained. ii) Registration log books for the Company‟s motor cycles and motor vehicles were not availed for audit, as a result audit could not confirm the ownership of these motor vehicles, including the values in the financial statements. iii) Uganda Livestock Industries Ltd does not have title deeds to Ranches at Kilak Kitgum; Lale Soroti and Land at Port Bell Kampala; in this respect audit could not confirm the Company‟s ownership to these properties. 28

iv) The Company‟s Ranch Land at Aswa, Kiryana, Kyempisi, Lale, Maruzi and Pader is not valued. Besides the other assets have never been revalued since 1997. Consequently the entire value attached to property, plant and equipment cannot be confirmed for accuracy and completeness. v) Work in progress was not reflected in the accounts in 2001 yet capital works amounting to Shs.2,730,634,545 were shown in 2000, no corresponding increase in fixed assets to this amount was reflected in the assets schedule.

2.2.5 NATIONAL COUNCIL FOR HIGHER EDUCATION: Year ended 30th June 2007

Non-compliance with PPDA and Regulation It was noted that the Council did not follow laid down procedures required by PPDA in the procurement of goods and services and the council did not have a contract committee and procurements disposal unit in place. As a result payments totaling to shs 10,281,800 for goods and services were made through cash advances.

Maintenance Expenditure A sum of Shs.6,521,700 was paid to Goshem Uganda Limited for painting an office. However, an independent verification of the work done was not carried out. It was therefore not clear whether work done was according to specification.

Irregular payment of per diem A sum of Shs.32,931,100 was paid to participants for residential workshops organized by the council in respect of per diem, out of pocket allowance and transport refund. We however, noted that the payment for these workshops was full board, meaning that participants would be catered for fully. This payment was therefore irregular.

Payment of Gratuity We noted that staff appointment letters indicate a gratuity rate of 15% while the personnel manual stipulated a rate of 25%. Therefore, the correct gratuity balance could not be confirmed in the financial statements.

2.2.6 NATIONAL COUNCIL FOR HIGHER EDUCATION: Outstanding issues for the year ended 30th June 2008

Irregularities in the procurement process/activities

We noted the following irregularities from the examination and review of procurement documents and activities of the Council for the period under review.

User departments did not prepare work plan for procurement based on the approved budget for Submission to the Procurement and Disposal unit to facilitate orderly execution of annually, procurement activities as prescribed in the PPDA Regulations 96(1-3). Although the nominated members of the contracts committee were approved by the Secretary to the Treasury in the Ministry of Finance, Planning, and Economic, there was no formal appointment by the Executive Secretary as required by the PPDA Regulations 2003. An extra member (an accounts assistant) to the Committee was added on the list without following proper procedures. The membership of the procurement and disposal unit did not sign the code of ethical conduct in business using PP form 211 as prescribed by the PPDA regulations.

Under Staffing The council has a provision of 39 technical staff. However, a review of the pay roll and personal files revealed that 15 of these positions had not been filled constituting about 39.5% of the approved structure. Specialized positions in procurement, transport, public relations and human resources had not yet been filled by time of this report.

Lack of internal audit function During the period under review, it was observed that the Council did not have in place an internal Audit Department as prescribed by the NCHE Accounting Manual 2005 Sec 12.0 and The public Finance and Accountability Regulations 2003, 27 and 28.

Nugatory expenditure The council engaged services of solicitors to defend the entity in the court of law in a suit that arose when individuals who were dissatisfied with the grading of their academic qualifications obtained from various academic institutions sued the council. A 30

sum of Shs 194,391,636 and Shs 45,000,000 were paid to the solicitor and individuals as legal fees and fines respectively.

It was further noted that the process through which the legal firm was procured was not transparent while management of the cases were affected by conflict of interest. While the entity won some cases, the amounts that were awarded were not vouched and disclosed in the accounts.

Outstanding issues for the year ended 30th June 2009

Understatement of non current assets in accounts

We noted that a donation of freehold land on plot no M834 measuring 1.216 hectares to the council was only disclosed in the notes to the accounts but was not valued and disclosed in the financial statements.

2.2.7 JOINT CLINICAL RESEARCH CENTRE: Outstanding issues for the two years ended 30th June 2009

Lack of procurement plans

We noted that JCRC procured goods and services from various suppliers without a Procurement Work plan for the period under review. This is contrary to Sec.60 of PPDA Act which requires user departments to prepare work plans and submit them to PDU for implementation and consolidation into a procurement plan.

Contracts Committee Sec 27 (2) of the PPDA Act (2003) requires members of the Contract‟s Committee to be nominated by the Accounting officer and approved by the Secretary to the Treasury. In absence of approval letters from the Secretary to the Treasury; audit could not confirm whether the Contract‟s Committee of the Centre was legally constituted.

Lubowa Construction Contract In 2007, JCRC undertook to construct a modern hospital at Lubowa at a contract price of Shs.6,111,600,964. The Project was to be completed on 20th March 2008. The contract price was revised to Shs.8,185,518,570 resulting into a variation of Shs.2,073,917,606 which is 34% of the original contract sum. The variations of the 31

Lubowa Constructions Contract did not get the approval of the contracts committee and PPDA contrary to regulations.

Outstanding issue for the year ended June 30th 2007 Depreciation Policy The Research Centre‟s accounting manual stipulates that depreciation of assets should be based on the straight line method and that the following rates per year shall be used: buildings 5%, computers 25%. It was however noted that all assets were depreciated at a uniform rate of 20% without regard to the rates for the different classes of assets. As a result of these, the book values of these assets are not fairly stated.

Debtors Review of the financial statements revealed that Shs.337,281,702 remained unrecovered from debtors at the close of the year as compared to shs.364,388,822 at previous year end. Poor recovery of debts from debtors increases the likelihood of some debts becoming bad and doubtful.

Salary advances We noted that received salary advances totaling shs.21,320,312 remained outstanding and un-recovered at year end. Out of this sum Shs.15,392,640 was advanced to staff for six months contrary to the research Centre‟s policy while Ushs.5,927,672 was not reflected in the final accounts.

Repair of vehicles During the audit we noted that repair of vehicles is done without requisition from the users and a verification report by the transport officer. This is a weakness which could result in irregular repair bills being paid.

Valuation of land at Mengo It was noted that JCRC acquired land on plot 616 block 12 comprising of 0.5 acres. However, this property is not recorded in the fixed asset register. Furthermore, the reported amount at Shs.550,815,730 in the financial statements is only in respect of the cost of building on which the Centre‟s head office is located excluding land.

Construction work at Kakira A certificate of completion in respect of construction work by M/s Associated Enterprises Construction (U) Ltd in respect of the Centre‟s Kakira branch built at a cost of Shs.188,611,205 was submitted on 14th February 2008 by the supervising engineer.

A review of the inspection reports and a physical inspection of the site revealed that the work had several defects as noted below:-

i) The floor was poorly done and in some places it has already developed cracks. ii) The roofing timber was rotting. iii) The painting on the outside wall was peeling. iv) Quality of the doors frames is not satisfactory. v) The ceiling of the conference room is sagging.

This was an indicator of poor quality work and weaknesses in supervision by the Engineers/Estates department.

Internal control structure/operation o Fixed asset register: Best practice requires that an asset register be maintained and updated frequently for proper management, custody and maintenance of fixed assets. During the audit we noted that an asset register was still not in place. o Movement of drugs: The drug stores system at JCRC requires that drugs delivered to JCRC are received in the stores while distribution is effected by first issuing out to the pharmacy before dispatch to the respective centres. The stores and pharmacy department each keep separate registers and we noted that a reconciliation of the drugs issued from stores and received/issued by the pharmacy was not carried out. o Exchange rate for forex accounts: The Centre‟s Accounting manual stipulates that conversions of currency shall be authorized by the financial controller and shall be based on the bank rate for transactions with the same bank, otherwise the best ruling rates of the day from the mass media would be used. A review of the internal audit reports of the Centre revealed that the cashier and accountant in charge of TREAT Project were dealing in foreign currency transactions and determining rates being used without seeking approval from the financial controller as required by the Centre‟s regulations. 33

2.2.8 NAKIVUBO WAR MEMORIAL STADIUM (NWMS) Outstanding issues for three years ended 31st December 2007

Lack of an assets register It was noted that management did not maintain a fixed assets register, to record asset cost /value location and condition. Most assets were not engraved. Besides different depreciation rates were used for loose tools at 61.25% in December 2004 and 50% in December 2005 respectively contrary to IAS 16.

Revenue i) Gate Collections

We noted that Turn style, the stadium revenue recording machine at entrances was out of order. As a result ticket tabs could only be reconciled with tickets sold against cash collected by management to ascertain gate collections. This method is prone to errors and makes collusion possible with gate officials who can print their own tickets sell them and not declare the tabs.

ii) Concession fees in respect of Nakivubo Park Yard

The trustees of Nakivubo Stadium (NWMS) entered into an agreement with Kampala city council (KCC) under which KCC was to pay 30% of collections from users of the Market stalls at Nakivubo park yard, however, KCC did not honor this agreement upon which it was sued by the trustee of NWMS. On 26th May 1998, a consent judgment was entered into by KCC and NWMS in which KCC agreed to pay the rebate of 30% of the monthly collections but to date KCC has not remitted any funds.

It was also noted that on 20th July 2000 KCC awarded the tender to M/S equator Towing services to manage the Nakivubo Park yard at a contract fee of Shs.16,500,000 per month for two years. It was noted that payment was only made in 2005 and partially in 2006 and by time of this report a total of Shs.86,927,060 remained unremitted by KCC.

Water Consumption Facilities It was noted that the Stadium was using a water hydrant line for industrial consumption usage contrary to National Water and Sewerage Corporation which

requires hydrants to be used for emergency fire fighting. Consequently NWSC billed the Organization Shs.21,916,854 on the hydrant line and Shs.2,508,467 on the commercial line. A sum of shs.24,425,321 had not been paid by the time of audit.

Non-compliance with PPDA rules and regulations It was observed that management did not follow laid down procedures required by PPDA in the procurement of goods and services during the year. The contracts committee and procurement and disposal units are not in existence; as a result value for money may not have been obtained from hiring out its properties as parking space, Billboards, toilets.

Personnel files A review of personnel records revealed that files for the 16 staff were not up to date. Some files were found to be lacking in several major aspects like not having application, promotional or even appointments letters. We could therefore not ascertain whether the affected employees were transparently recruited.

Doubtful payments to clubs During the financial year 2006 management made payments out of gate collections to Football clubs, but acknowledgement receipts by the following clubs were not availed for audit see table below;

Voucher Number Amount Club 3925/3/06 299,889 Express foot ball club 3924/3/06 299,889 Kampala United 3941/03/6 360,281 FUFA 3920/02/06 369,970 Victor FC 4161/06/06 407,846 FUFA 4020/04/06 262,702 KCC Total 2,000,577

2.3 AUDITS IN PROGRESS Forty three (43) audits were under progress at the time of issue of this report these are listed below;

No Entity No of Financial year under years review 1 Uganda Broadcasting Corporation 1 2008/2009 2 Uganda National Examinations Board 1 2008/2009 3 Uganda National Bureau of Standards 1 2008/2009 4 Uganda Coffee Development Authority 1 2008/2009 5 Cotton Development Organization 1 2008/2009 6 Amnesty Commission 1 2008/2009 7 National Enterprise Corporation and 2 2007/2008-2008/2009 Subsidiaries 8 Electricity Regulatory Authority 1 2008/2009 9 Public Procurement and Disposal of Assets 1 2008/2009 Authority 10 National Council for Children 1 2008/2009 11 National Women‟s Council 1 2008/2009 12 Broadcasting Council 1 2008/2009 13 National Animal Genetic Resource Centre and 2 2007/2008-2008/2009 Data Bank (NAGRIC) 14 Allied Health Professionals 3 2006/2007-2008/2009 15 Uganda Livestock Industries 8 2001/2002-2008/2009 16 Public Libraries Board 9 2000/2001-2008/2009 17 Uganda Insurance Commission 1 2008/2009 18 National Planning Authority 1 2008/2009 19 Uganda Investment Authority 1 2008/2009 20 Uganda Export Promotion Board 2 Dec 2007-Dec 2008 21 National Youth Council 3 Dec 2006-Dec 2008 TOTAL 43

CHAPTER THREE

DETAILED PARAGRAPHS OF AUDIT OPINIONS

3.1 UNQUALIFIED AUDIT OPINION WITH EMPHASIS OF MATTER PARAGRAPHS The following is a detailed listing of the audit issues arising from the audit of the 11 public organizations certified with unqualified opinions with emphasis of matter

3.1.1 NILE HOTEL INTERNATIONAL LIMITED (31st DECEMBER 2008) Unqualified audit opinion with emphasis of matter Common Heads of Government Meeting (CHOGM) advances from Government Shs.1,898,972,476

Government advanced Shs.1,898,972,476 to a local firm on account of Nile Hotel International Limited (NHIL) which was used to carry out refurbishment works at Serena Conference Centre. Of this amount, Shs.1,021,839,175 was considered to be a loan in the financing agreement but the repayment terms were not clearly stated while Shs.877,133,301 was advanced by government but without indicating in the financing agreement whether it was a loan or an increase in government‟s share holding value in NHIL.

3.1.2 UGANDA COFFEE DEVELOPMENT AUTHORITY (30TH SEPTEMBER 2008)