1.0 INTRODUCTION………………………………………………………………………….. 1 2.0 GENERAL OBSERVATIONS……………………………………………………………. 6 3.0 REPORT OF THE AUDITOR GENERAL ON GOVERNMENT OF UGANDA CONSOLIDATED FINANCIAL STATEMENTS……………………………………. 44 4.0 OFFICE OF THE PRESIDENT…………………………………………………………. 65 5.0 STATE HOUSE…………………………………………………………………………….. 67 6.0 OFFICE OF THE PRIME MINISTER………………………………………………… 69 7.0 PUBLIC SERVICE…………………………………………………………………………. 84 8.0 FOREIGN AFFAIRS………………………………………………………………………. 91 9.0 JUSTICE AND CONSTITUTIONAL AFFAIRS…………………………………….. 98 10.0 FINANCE, PLANNING AND ECONOMIC DEVELOPMENT…………………… 106 11.0 AGRICULTURE, ANIMAL INDUSTRY AND FISHERIES………………………. 127 12.0 LANDS, HOUSING AND URBAN DEVELOPMENT………………………………. 156 13.0 WATER AND ENVIRONMENT…………………………………………………………. 159 14.0 EDUCATION AND SPORTS……………………………………………………………. 176 15.0 HEALTH……………………………………………………………………………………… 197 16.0 WORKS AND TRANSPORT……………………………………………………………. 222 17.0 DEFENCE……………………………………………………………………………………. 238 18.0 INTERNAL AFFAIRS…………………………………………………………………….. 249 19.0 INFORMATION AND COMMUNICATION TECHNOLOGY……………………. 253 20.0 LOCAL GOVERNMENT………………………………………………………………….. 255 21.0 TOURISM, TRADE AND INDUSTRY……………………………………………….. 264 22.0 ENERGY AND MINERAL DEVELOPMENT………………………………………… 268 23.0 GENDER, LABOR AND SOCIAL DEVELOPMENT……………………………….. 280 24.0 UGANDA POLICE…………………………………………………………………………. 284 25.0 UGANDA PRISONS………………………………………………………………………. 292 26.0 NATIONAL AGRICULTURAL RSEARCH ORGANISATION (NARO)……….. 298 27.0 NATIONAL AGRICULTURAL ADVISORY SERVICES (NAADS)…………….. 310 28.0 JUDICIARY…………………………………………………………………………………. 317

i 29.0 PARLIAMENTARY COMMISSION…………………………………………………… 323 30.0 HEALTH SERVICE COMMISSION………………………………………………….. 326 31.0 JUDICIAL SERVICE COMMISSION………………………………………………… 327 32.0 ELECTORAL COMMISSION…………………………………………………………… 331 33.0 UGANDA HUMAN RIGHTS COMMISSION………………………………………. 334 34.0 PUBLIC SERVICE COMMISSION…………………………………………………… 336 35.0 UGANDA LAW REFORM COMMISSION………………………………………….. 336 36.0 EDUCATION SERVICE COMMISSION…………………………………………….. 338 37.0 LOCAL GOVERNMENT FINANCE COMMISSION………………………………. 339 38.0 UGANDA BLOOD TRANSFUSION SERVICES……………………………………. 340 39.0 UGANDA LAND COMMISSION………………………………………………………. 343 40.0 UGANDA INDUSTRIAL RESEARCH INSTITUTE……………………………….. 347 41.0 UGANDA AIDS COMMISSION……………………………………………………….. 348 42.0 MAKERERE UNIVERSITY……………………………………………………………… 353 43.0 MBARARA UNIVERSITY………………………………………………………………… 377 44.0 KYAMBOGO UNIVERSITY……………………………………………………………… 379 45.0 GULU UNIVERSITY…………………………………………………………………….. 389 46.0 MAKERERE UNIVERSITY BUSINESS SCHOOL………………………………… 394 47.0 MULAGO HOSPITAL…………………………………………………………………….. 398 48.0 BUTABIKA HOSPITAL………………………………………………………………….. 401 49.0 ARUA HOSPITAL…………………………………………………………………………. 403 50.0 GULU HOSPITAL…………………………………………………………………………. 405 51.0 JINJA HOSPITAL…………………………………………………………………………. 406 52.0 LIRA HOSPITAL…………………………………………………………………………… 407 53.0 MASAKA HOSPITAL……………………………………………………………………… 407 54.0 FORT PORTAL HOSPITAL…………………………………………………………….. 409 55.0 KABALE HOSPITAL………………………………………………………………………. 411 56.0 HOIMA HOSPITAL……………………………………………………………………….. 415 57.0 SOROTI HOSPITAL……………………………………………………………………… 418 58.0 MBARARA HOSPITAL………………………………………………………………….. 418 59.0 LONDON MISSION……………………………………………………………………… 421 60.0 NEW YORK MISSION………………………………………………………………….. 424

ii 61.0 WASHINGON MISSION……………………………………………………………….. 426 62.0 NEW DELHI MISSION…………………………………………………………………. 429 63.0 CAIRO MISSION…………………………………………………………………………. 430 64.0 ADDIS ABABA MISSION………………………………………………………………. 432 65.0 BEIJING MISSION………………………………………………………………………. 433 66.0 OTTAWA MISSION……………………………………………………………………… 434 67.0 TOKYO MISSION………………………………………………………………………… 437 68.0 TRIPOLI MISSION………………………………………………………………………. 438 69.0 RIYADH MISSION……………………………………………………………………….. 441 70.0 COPENHAGEN MISSION………………………………………………………………. 442 71.0 NAIROBI MISSION………………………………………………………………………. 444 72.0 DAR-ES-SALAAM MISSION…………………………………………………………… 451 73.0 ABUJA MISSION…………………………………………………………………………. 458 74.0 BRUSSELS MISSION…………………………………………………………………… 462 75.0 ROME MISSION………………………………………………………………………….. 464 76.0 JUBA MISSION……………………………………………………………………………. 469 77.0 KINSHASHA MISSION………………………………………………………………….. 470 78.0 GENEVA MISSION……………………………………………………………………….. 471 79.0 PRETORIA MISSION……………………………………………………………………. 472 80.0 KHARTOUM MISSION…………………………………………………………………. 477 81.0 KIGALI MISSION……………………………………………………………………….. 478 82.0 MOSCOW MISSION……………………………………………………………………. 481 83.0 BERLIN MISSION………………………………………………………………………… 482 84.0 PARIS MISSION………………………………………………………………………….. 484 85.0 TEHRAN MISSION………………………………………………………………………. 487 86.0 CANBERRA MISSION…………………………………………………………………… 488

APPENDIX: GOVERNMENT OF UGANDA CONSOLIDATED FINANCIAL STATEMENTS

iii 1.0 INTRODUCTION

I am required by Article 163(3) of the Constitution of the Republic of Uganda and Section 13 and 19 of the National Audit Act 2008 to audit and report on the Public Accounts of Uganda and of all public offices including the Courts, the Central and Local Government Administrations, Universities and Public Institutions of like nature and any Public Corporations or other bodies established by an Act of Parliament.

Under Article 163 (4) of the Constitution, I am also required to submit to Parliament by 31st March annually a Report of the Accounts audited by me for the year immediately preceding. I am therefore issuing this report in accordance with the above provisions.

This is Volume two of my Annual Report to Parliament and it covers financial audits carried out on Central Government Ministries, Departments, Agencies, Universities and Uganda Missions abroad. It also includes special audits undertaken upon requests by Parliament and Cabinet.

In this introduction, I give an overview of the financial audit work carried out, status of completion of the audits, summary of the audit opinions issued on the financial statements of the entities audited and my participation in the Public Accounts Committee meetings.

Part II of this report presents the major general observations and cross cutting issues arising from the results of the audits carried out.

In Part III, I present my findings and audit opinion on Government of Uganda Consolidated Financial Statements and all the significant findings made on the other audited entities i.e. Ministries, Agencies, Universities, Referral Hospitals and Uganda Missions abroad.

1 1.1 STATUS OF COMPLETION OF AUDITS (a) Financial Audits The Directorate of Central Government is responsible for the audit of 21 Ministries, 20 Agencies, Commissions, Departments, 28 Uganda Missions abroad, 6 Public Universities, 13 Referral Hospitals, Uganda Revenue Authority and the Consolidated Government of Uganda Financial Statements. All the entities financial statements for year ending 30th June 2008 were audited and audit reports issued separately on each of them.

The status of completion of the audits is indicated in the table below:-

Total Number of Accounts Accounts Audited Ministries 21 21 Agencies, Commissions, 20 20 Departments Missions/Embassies Abroad 28 28 Referral Hospials 13 13 Public Universities 6 6 Uganda Revenue Authority 1 1 GoU Consolidated Financial 1 1 Statements TOTAL 90 90

Out of the total number of entities audited, 32 entities had unqualified opinions 53 except for qualified opinions and 5 had disclaimer of opinion. (Please note that a disclaimer is a qualified opinion).

The table below provides a breakdown of the types of opinions issued. The basis used to arrive at the audit opinion is described in the separate reports issued on individual Ministries, Agencies, Missions/Embassies and Public Universities.

2 UNQUALIFIED OPINIONS

1 Ministry of Public Service 17 Masaka Referral Hospital 2 Ministry of Lands, Housing and Urban Dev. 18 Lira Referral Hospital 3 Ministry of Internal Affairs 19 Kabale Referral Hospital 4 Ministry of Local Government 20 Jinja Referral Hospital 5 Ministry of East Africa Affairs 21 Hoima Referral Hospital 6 Ministry of Energy and Minerals 22 Gulu Referral Hospital 7 Butabika Hospital 23 Fort Portal Referral Hospital 8 Inspectorate of Government 24 Uganda Management Institution 9 Health Service Commission 25 Makerere University Business School 10 Uganda Human Rights Commission 26 Cairo Mission 11 Directorate of Public Prosecutions 27 Riyadh Mission 12 Local Government Finance Commission 28 Brussels Mission 13 Uganda Blood Transfusion 29 Kigali Mission 14 Soroti Referral Hospital 30 Berlin Mission 15 Mbarara Referral Hospital 31 Tehran Mission 16 Mbale Referral Hospital 32 Khartoum

QUALIFIED OPINIONS – EXCEPT FOR 1 Office of the President 28 Mbarara University 2 State House 29 Kyambog University 3 Office of the Prime Minister 30 Washington Mission 4 Ministry of Foreign Affairs 31 Addis Ababa Mission 5 Ministry of Justice and Constitutional Affairs 32 Beijing Mission 6 Ministry of Finance, Planning & Economic Dev. 33 Ottawa Mission 7 Ministry of Agriculture, Animal Industry & 34 Dar-es-Salaam Mission Fish. 8 Ministry of Water and Environment 35 Rome Mission 9 Ministry of Health 36 Geneva Mission 10 Parliamentary Commission 37 Moscow 11 Ministry of Defence 38 Paris Mission 12 Mulago Hospital 39 Canberra Mission 13 Ministry of Tourism, Trade & Industry 40 Education and Sports 14 Ministry of Gender, Labour and Development 41 Works 15 Uganda Police 42 NEMA 16 Uganda Prisons 43 Treasury 17 National Agricultural Research Organisation 44 Makerere University 18 Judiciary 45 London Mission 19 Public Service Commission 46 New York Mission 20 Law Reform Commission 47 Tokyo Mission 21 Education Service Commission 48 Tripoli Mission 22 Judicial Service Commission 49 Copenhagen Mission 23 Electoral Commission 50 Nairobi Mission 24 Uganda Aids Commission 51 Abuja Mission 25 Information Technology 52 GoU Consolidated Financial Statements

3 26 Uganda Land Commission 53 Uganda Revenue Authority 27 Uganda Industrial Research Inst.

QUALIFIED OPINION – DISCLAIMER 1. Arua Referral Hospital 4 Juba Mission 2. Gulu University 5 Kinshasa Mission 3. Pretoria Mission

(b) Special Audits

Under Section 13 (2) and (3) of the National Audit Act 2008, the President on advice of Cabinet, or Parliament may at any time request my Office to conduct a special audit and make a report. During the period under review, I carried out special audits upon requests by Parliament and Cabinet. The special audit undertaken and specific reports issued include; CHOGM, Fisheries Development Project, Procurement of Farm Implements and Seeds by the Office of the Prime Minister, Presidential pledges in the Education Sector and Bank of Uganda Holding Accounts. These have been incorporated in the reports of their respective entities. The special audits relating to Custodian Board and Makerere University were also undertaken. However, final reports for these last two audits have not yet been finalised.

For the period under review, an IT audit was carried out on the IT systems of Makerere University. The audit aimed at obtaining assurance that IT systems are supported by an appropriate set of general and application controls for ensuring data integrity, confidentiality and availability of the implementation.

A report was issued to management of the University and a summarised form is included in this report Part III under Makerere University. A follow up of the status of recommendations will be undertaken during the financial year 2008/2009.

In addition, my Office is undertaking the audit of the Integrated Financial Management System (IFMS) as a follow up of the recommendation contained in my earlier review of June 2006. The exercise also aims at evaluating the

4 adequacy of the IFMS application controls for the various modules. The audit is in its final stages and a report will be issued.

(d) Projects

103 Government donor funded projects under various Ministries, Departments and Agencies were audited during the period under review. The results of the audit have been included in their respective parent entities under Part III of this report.

(e) Tertiary Institutions

Under the Universities and other tertiary institutions Act Section 91 (2), I am required to audit accounts of these institutions. During the period under review, I carried out an inspection of 40 tertiary institutions in the Education Sector. The results of these inspections have been included under the Ministry of Education and Sports, Part III of this report.

1.2 PUBLIC ACCOUNTS COMMITTEE MEETINGS

During the financial year 2007/2008, my office attended Public Accounts Committee meetings numbering to 105 in which the Honourable Members of Public Accounts Committee (PAC) discussed my reports for the financial years ended 30th June 2002, 2003, 2004 and 2006.

In addition, since July 2008 my office has attended 81 PAC meetings where discussions on the outstanding issues relating to previous years and my report for the year ended 30th June 2007 continue to be held.

The Public Accounts Committee has done a commendable job in clearing backlogs relating to the financial years 2003/04 to 2005/06. The Committee is yet to finalise tabling these reports to Parliament. My Office will continue to work very closely with the Committee to promote Public Accountability.

5 PART II

2.0 GENERAL OBSERVATIONS

2.1 SUBMISSION OF FINANCIAL STATEMENTS

As a result of efforts by the Accountant General to enforce preparation of financial statements, there was a remarkable improvement in the timely submission of financial statements by the Accounting Officers for the financial year under review. Unlike the financial year that ended 30th June 2007 where 35 audit entities submitted accounts late, only 3 delayed submission in the year under review and these included only institutions of higher learning; Kyambogo University (21/10/2008), Makerere University (31/10/2008) and Gulu University (19/1/2009).

Delays in submission of final accounts contravens Section 31 (a) of the Public Finance and Accountability Act 2003, and Section 64(2) of the Universities and Other Tertiary Institutions Act, 2001 which require the Accounting Officers to prepare and submit financial statements for their entities to the Office of the Auditor General for audit within three months after the year end (30th September).

2.2 OUTSTANDING ADVANCES

During the year under review advances totaling to Shs 75,166,864,487 and £ 100,000 remained unaccounted for contrary to financial regulations which require all advances to be retired at the year end. It was also noted that, that the trend of outstanding advances has been on the increase as indicated in the table below:-

Year ended 30th June Advances outstanding (Shs) 2006 8,678,034,207 2007 10,21,944,304 2008 75,166,864,487

The bulk of these advances of Shs.75 billion outstanding during the year under review related to outstanding amounts (Shs.49,762,682,821) released to

6 Accounting Officers to carry out activities on behalf of the Ministries and various sub projects under NUSAF.

Delays in accounting for advances are caused by laxity by Accounting Officers to enforce timely accountability and strengthen controls over advances. Such delays may lead to falsification of accountability.

In the absence of the requisite accountability, I was not able to confirm that funds were utilised for the intended activities. The respective Accounting Officers have been advised to enforce strict controls provided in the Treasury Accounting Instructions regarding management and accountability of advances such as enforcing the requirement of not advancing more funds before accounting for the previously advanced monies and eventual recovery on failure to account.

These advances are detailed in the individual reports and accounts of the entities and are summarised here under:-

Ministry/Department Total

Office of the President 88,220,460 Office of the Prime Minister 49,762,682,821 Foreign Affairs 1,453,358,900 Justice & Constitutional Affairs 486,647,298 Finance, Planning And Economic Dev. 5,828,635,530 Agriculture, Animal, Industry and Fisheries 8,185,165 Lands and Housing 19,306,000 Water and Environment 782,292,207 Education and Sports 774,674,611 Health 1,659,051,200 Parliament 3,190,000,000 Works, Housing and Communications 455,415,000 Defence 842,395,935 Tourism, Trade And Industry 98,582,740 Gender, Labour and Social Development 162,490,000

7 National Agriculture Research Organisation 64,978,914 Judicial Service Commission 1,393,000,000 Electoral Commission 534,392,510 Uganda Land Commission 7,450,000 Uganda Industrial Research Inst. 248,875,690 Makerere University 6,656,946,569 Mbarara University 53,999,780 Kyambogo University 499,887,857 Gulu University 95,395,300 London Mission £ 100,000 75,166,864,487 £ 100,000

2.3 DOMESTIC ARREARS 2.3.1 Domestic Arrears Strategy

The objectives of the Domestic arrears strategy of the Government contained in the revised debt strategy of 2007 were;

Clear the existing stock of arrears within 3 years Institute measures to prevent diversion of budgeted arrears resource Institute measures to prevent new arrears creation

There are still challenges in the implementation of the strategy. A review of the domestic arrears position for 05/06 – 07/08 revealed that minimal progress has been made in curbing accumulation of arrears. Although funds have been released to clear the arrears, new arrears incurred for the three financial years 2005/2006-2007/2008 have left the trend of arrears position (excluding pensions and Court awards) increasing.

I advised Treasury to regularly review the implementation of the strategy to address the challenges in its implementation and ensure achievement of the intended objectives.

2.3.2 Domestic Arrears As at 30th June 2008

The domestic arrears position as at 30th June 2008 for Ministries, Referral Hospitals, Departments and foreign Missions stood at Shs.378,141,885,574 (excluding pension) compared to Shs.209,986,752,340 as at 30th June 2007 hence an increment of 80% as indicated in the table below. Arrears for public Universities and Uganda Management Institute amounted to Shs 44,886,137,153 as at 30th June 2008.

In the Ministries of Works and Transport, Justice and Constitutional Affairs, Office of the Prime Minister and Police, the increment was by more than 5 times.

Table: Arrears position for 2007/08 and 2006/07 % Ministry/Department Payables 07/08 Payables 06/07 increament/ (reduction) Office of the President 6,320,766,052 5,795,796,452 9.1 State House 5,214,343,142 4,488,339,468 16 Office of the Prime Minister 6,497,274,926 901,533,958 621 Defence 49,426,794,754 43,978,799,833 12 Public Service 376,440,689 346,666,533 9 Foreign Affairs 30,521,355,645 24,859,666,378 23 Justice and Constitutional Affairs 55,246,821,739 3,512,717,895 1,473 Finance, Planning and Economic 25,636,669,577 23,945,104,070 7 Internal Affairs 2,949,028,547 1,929,658,675 21 Agriculture, Animal Industry and 16,447,967,015 9,466,469,142 74 Lands, Housing & Urban Devt 24,367,151,960 9,071,183,529 169 Education and Sports 2,568,280,526 4,349,495,986 (41) Health 4,403,709,751 2,959,836,104 49 Tourism, Trade and Industry 8,112,620,332 7,902,942,430 3 Works and Transport 47,449,373,097 7,138,979,930 565 Energy and Minerals 4,865,471,136 4,867,560,174 (0) Gender, Labour and 7,138,620,024 4,968,807,747 44

9 Social Devt Water & Environment 15,763,616,148 11,396,099,000 38 East African Affairs 29,501,703 197,795,376 (85) Judiciary 7,611,626,914 5,686,766,752 34 Electoral Commission 1,122,167,137 5,729,311,229 (80) Inspectorate Of Government 617,111,000 1,544,004,360 (60) Uganda Human Rights Commission 1,235,112,558 1,934,592,630 (36) Uganda Aids Commission 110,388,747 115,113,962 (4) Office Of The Auditor General 36,567,512 36,567,512 - Directorate Of Public Prosecutions 127,566,110 231,232,095 (45) National Agricultural & Research Org. 1,883,000 2,284,567,687 (100) Police 33,924,088,499 4,942,826,959 586 Prisons 6,492,978,997 5,413,996,398 20 Public Service Commission 149,556,701 79,889,269 87 Local Govt Finance Commission 726,420 936,816 (22) Judicial Service Commission 22,807,769 25,598,319 (11) Public Procurement & Disposal Of Assets 584,531,085 0 - Uganda Land Commission 1,665,785,317 648,865,014 157 External Security Organisation 2,080,980,000 1,198,000,000 74 Mulago Hospital 3,716,547,881 2,969,363,421 25 Butabika Hospital 3,000 3,000 - Arua Hospital 39,490,695 0 - Fort Portal Hospital 60,902,087 79,902,087 (24) Gulu Hospital 90,956,181 32,572,760 179 Hoima Hospital 56,946,294 17,626,208 223 Jinja Hospital 61,781,563 249,997,135 (75) Kabale Hospital 89,097,807 31,924,727 179 Masaka Hospital 287,519,609 36,185,455 695 Mbale Hospital 383,213,890 230,000,433 67 Soroti Hospital 771,707,300 616,155,410 25 Lira Hospital 45,855,096 75,398,594 (39) Mbarara Hospital 307,570,056 119,580,780 157 Uganda Mission At The UN New York 799,730,292 1,267,084,856 (37)

10 Uganda High Commission in Canada 113,285,837 126,460,542 (10) Uganda High Commission in India 43,382,719 10,438,019 316 Uganda High Commission in Egypt 48,000,000 0 - Uganda High Commission in Kenya 232,870,462 0 - Uganda High Commission in Tanzania 5,316,566 210,318,967 (97) Uganda High Commission in Nigeria 53,312,854 0 - Uganda Embassy, Washington 56,750,502 122,597,214 (54) Uganda Embassy, Ethiopia 2,419,050 13,644,161 (82) Uganda Embassy, China 136,281,089 136,281,089 - Uganda Embassy, Rwanda 46,062,587 42,075,618 9 Uganda Embassy, Japan 24,430,375 0 - Uganda Embassy, Libya 13,583,483 0 - Uganda Embassy, Belgium 83,336,275 399,904,917 (79) Uganda Embassy, Italy 1,412,610,685 1,249,515,265 13 Uganda Embassy, Moscow 25,443,750 0 - Uganda Embassy, Juba 13,793,060 0 - Makerere university 35,196,243,555 26,530,920,895 33 Kyambogo University 4,723,984,865 2,666,271,188 77 Makerere University Business school 787,916,501 910,622,283 (13) Uganda Management Institute 1,135,474,839 874,347,942 30 Gulu University 2,420,389,473 888,278,281 172 Mbarara University 622,127,920 312,496,972 99

TOTAL 378,141,885,574 209,986,752,340

The Accountant General explained that domestic Arrears continue to accumulate due to resource constraints. He further explained that some arrears cannot be controlled by the Commitment Control System such as Court Awards,

11 Compensations, Utilities, VAT payments relating to donor funded projects, gratuity and rent.

2.3.3 Pension Liability

As at 30th June 2008 the pension liability amounted to Shs.161,312,692,735 compared to Shs.210,840,827,822 reported last year. The current liability includes Shs.128 billion owed as pensions arrears under the Ministry of Pubic Service which previously were reported at Shs.190 billion as indicated in the table below. The reduction is a result of the pensions arrears settlement strategy government has been implementing in the last two financial years.

Although the strategy has registered good progress a lot more funding will still be needed to achieve its intended objectives.

I have also advised the Accounting Officers of the Office of the President and NARO to liaise with the responsible authority to resolve and address the matter.

Table: Pension Arrears Position for 2007/08 and 2006/07 % Increment/ Pension Pension (Reduction) Ministry/Department Arrears 07/08 Arrears 06/07 Office of the President 23,610,965,962 15,014,111,038 57 Ministry of Public Service 128,926,985,312 190,841,680,614 (32) National Agricultural & Research Orgn 8,605,982,685 0 Uganda High Commission In The UK 168,758,776 555,158,170 (70) ESO 0 4,429,878,000 (100) 210,840,827,822 Total 161,312,692,735 (23)

2.3.4 Inconsistencies between the Treasury Data base and the Votes Arrears position

Following my report to Parliament for the year ended 30th June 2007 in which variances were reported between the verified Domestic arrears database and the actual arrears reported in the accounts of Ministries and agencies, the Accountant 12 General instructed all accounting officers to ensure that the arrears position in the final accounts of the votes is fully reconciled with the database maintained by the Treasury. On the contrary a review of the arrears position in the vote financial statements and verified domestic arrears database maintained at the Treasury showed there are still variances as shown in the table below:-

Vote Treasury Vote Final position accounts Variance

Electoral Comm. 126,133,252 1,122,167,137 (996,033,885)

DPP 0 127,566,110 (127,566,110)

PPDA 0 584,531,085 (584,531,085)

NARO 0 1,883,000 (1,883,000)

Prisons Dept. 6,081,023,669 6,570,452,355 (489,428,686)

Local Govt. Fin. Comm. 0 726,420 (726,420)

Hoima Hospital 234,011,990 56,946,294 177,065,696

Jinja Hospital 42,997,505 61,781,563 (18,784,058)

Soroti Hospital 725,137,262 771,707,300 (46,570,038)

These variations need to be investigated and records properly reconciled. The Accountant General explained that the database at the Treasury is a memorandum account for management follow up on domestic arrears and that the Treasury database is updated after a thorough Internal Audit verification which creates a time lag and timing differences.

2.3.5 Commitment off the IFMS

Under the IFMS, all commitments should be made through the system and be based on availability of funds. Our review indicates that a number of ministries for instance State House, Ministry of Defence and Ministry of Tourism, Trade and Industry still make commitments outside the system through use of manual orders. This allows them to enter into commitments even when funds are not available. The commitments are later regularized when funds become available by

13 raising system generated LPOs. In a majority of these cases, the commitments are not disclosed in the financial statements hence understating the payables.

This practice is against the commitment control procedures and results in accumulation of arrears.

Accounting officers have explained that they could not disclose the arrears because of the circular by Permanent Secretary to the Treasury barring the Accountant General from accepting the new arrears.

I recommend that:- All commitments should be captured through the IFMS in accordance with the commitment control procedures. All commitments whether made through the IFMS or off the system should be disclosed in the financial statements.

2.4 EXCESS EXPENDITURE

Eighteen votes incurred expenditure to the tune of Shs.55,737,849,895 which exceeded their approved budgetary provisions as indicated in the table below. Excess expenditure is a result of improper budgeting and weakness in controls over budgetary expenditure. For the Uganda Missions, the major cause is unauthorised utilisation of non-tax revenue at source. The Accounting Officers have been advised to have this expenditure properly regularised in accordance with the regulations.

Vote Budget Actual Excess Expenditure Expenditure 1 State House 68,041,369,000 70,162,421,112 2,121,055,112 2 Uganda Police 134,060,270,066 162,486,982,888 28,426,712,211 3 Uganda 41,185,713,023 44,436,212,065 3,250,499,046 Prisons 4 Uganda Land 2,669,500,000 3,562,101,712 892,511,712 Commission 5 New York 4,859,911,000 7,857,273,605 2,997,362,605

14 Mission 6 Washington 2,019,93,700 2,231,799,453 212,702,753 Mission 7 New Delhi 1,634,024,099 1,694,913,671 60,889,572 Mission 8 Cairo Mission 727,162,000 810,965,148 83,803,148 9 Ottawa 1,597,336,000 1,613,483,200 16,187,023 Mission 10 Tokyo Mission 1,474,840,000 1,258,293,107 108,453,107 11 Tripoli Mission 910,121,000 960,353,766 50,232,766 12 Nairobi Mission 1,108,541,000 1,163,784,992 55,233,922 13 Rome Mission 1,204,299,000 1,258,033,007 53,734,007 14 Juba Mission 471,224,000 510,520,664 39,296,664 15 Geneva 1,952,926,000 2,012,721,523 59,795,523 Mission 16 Kigali Mission 1,055,039,420 1,094,765,068 39,725,648 17 Paris Mission 1,768,023,000 2,106,556,377 338,533,377 18 Canberra 791,804,000 97,243,219 115,439,219 Mission TOTAL 55,737,849,895

2.5 UNSPENT CASH BALANCES

The financial statements indicate that at the year end Ministries, Departments and Agencies had unspent balance totalling Shs.11,271,268,788 on their expenditure accounts which by law is remittable back to the Uganda Consolidated Fund.

Nineteen of the entities had over Shs.100 million held on the accounts while four of them had over Shs.1 billion. See table below. Having such huge balances of unutilized funds without clearing existing stock of arrears shows weaknesses in cash flow planning.

Accounting Officers have attributed the unutilized balances to:-

15 Late release of funds by Treasury which does not allow them to properly plan for their utilization. Unpresented cheques before the introduction of the EFT system. Funds allocated to protected items (utilities, taxes and salaries) in excess of their optimal requirements.

I have advised the Ministry of Finance, Planning and Economic Development to ensure prompt release of funds to the Accounting Officers to enable them plan their expenditure in time. It is also recommended that budgeting for the protected items be streamlined.

Expenditure Ministries Accounts Office of the Prime Minister 160,944,577 Ministry of Defence 504,703,912 Ministry of Public Service 468,112,478 Ministry of Foreign Affairs 152,129,158 Ministry of Justice and Constitutional Affairs 185,074,503 Ministry of Finance, Planning and Economic 291,240,177 Ministry of Agriculture, Animal Industry and 1,033,608,653 Ministry of Local Government 182,260,222 Ministry of Lands, Housing & Urban Devt 85,721,840 Ministry of Education and Sports 1,093,070,056 Ministry of Works, Housing and Commun 129,130,118 Ministry of Gender, Labour and Social Devt 93,678,433 Judiciary 1,152,734,515 Electoral Commission 826,301,614 Police 2,375,852,375 National Agriculture Advisory Services (Naads) 98,383,705 Mulago Hospital 97,410,169 Uganda High Commission In India 259,377,668 Uganda Embassy in The Us 116,773,624 Uganda Embassy in Ethiopia 370,774,307

16 Uganda Embassy in Saudi Arabia 123,448,017 Uganda Embassy in Drc Kinshasha 214,193,660 Uganda Embassy in Berlin 156,213,812 Others 1,100,131,195 Total 11,271,268,788

2.6 LOSSES

During the year under review losses relating to cash and stores valued at shs 939,627,019, US $ 10,000 and South African Rands 403,405.05 were reported by various Ministries, Departments, Agencies and Institutions. Out of the above amount, losses worth shs 161,089,175, US $ and R403,405.05 were neither reported by the entities in their financial Statements nor the Consolidated government of Uganda Financial Statements

Loss of property hinders attainment of government objectives. The bulk of the reported losses relates to a computer fraud perpetrated in the Ministry of Works.

These losses should be investigated to their conclusion and properly dealt with in accordance with the Public finance and Accountability Act and the attendant regulations. The details are included in the table below.

Reported losses Ministry Particulars Cash Stores and property NARO Motor cycles (2) 8,167,480 Cash 126,811,100 Forest plantation and 48,997,975 seedlings Justice Property 9,581,000 Works and Cash 521,688,900 Transport Kyambogo (GOU) 35,175,000 Kyambogo (Donor) 27,057,849

17 Uganda Motor Vehicle 53,654,917 Human Motor Cycle 4,934,258 Rights Commission Internal Pass ports 24,500,000 Affairs Water and Cash 78,000,000 Environment Geneva Cash 1,058,540 Losses not reported Kyambogo Cash 6,800,000 University Subtotal 789,791,389 149,835,630

Pretoria Visa Stickers(4 booklets) US 10,000 Cash R82,702.28 Cash (Contingent loss) R320,702.77 Subtotal US $ 10,000 R403,405.05 Grand total Shs Shs 939,627,019 US $10,000 R403,405.05

2.7 BOARD OF SURVEY

A review of the consolidated report of the Board of Survey prepared by the Accountant General indicates that entities continue to keep a large number of items which are no longer useful. Included are quantities of drugs in nine of the eleven Referral Hospitals which pose a danger to staff and the general public. Many vehicles due for board off were found abandoned in workshops and other non-government premises exposing them to vandalisation. In total 399 vehicles and 102 motorcycles were recommended for boarding off.

18 By the time of this report, minimal progress had been made to have these items disposed off. Delays in disposal of these items lead to loss in their salvage value on disposal and wastage of the required storage space. I have advised Accounting Officers to expedite the disposal process in accordance with the PFAA and PPDA regulations. Below is a table showing items identified for boarding off;

S/N Entity Remarks 1 Office of the President -Store not big enough and articles not stored in an efficient manner. 2 Public Service -No store room, items are stored in a room full of electric ducts and power switches, which at the same time leaks, thus making it risky. -10 vehicles grounded.

3 Ministry of Foreign Affairs -19 vehicles and 5 motorcycles grounded 4 Justice and Constitutional Affairs -Internal controls regarding stock movements are not followed and inventory records not properly maintained. 5 Finance, Planning and Econ Devt -10 vehicles uneconomical and old. 6 Agric, Animal industry and Fisheries. -Store room is poor, 9100 expired dozes of CBPP vaccine. 7 Lands, Housing and Urban -Store room is poor. Development -22 vehicles grounded. 8 Health . 100 refrigerators out of use. . 3 vehicles grounded 9 Education and Sports. . 28 vehicles grounded. 10 Tourism, Trade and Industry. . 12 vehicles, one grounded and 11 uneconomical. 11 Works, Transport and Housing . 22 road equipment, 8 motor cycles and 9 vehicles uneconomical and grounded. 12 Energy and Minerals . 2 vehicles grounded. 13 Gender, Labour and Social . 2 vehicles, undisclosed number of Development motor cycles and one forklift all out of use. 14 Water and Environment . 37 vehicles grounded. 15 Judiciary . 14 vehicles due to high maintenance. 16 Parliamentary Commission . 2 old vehicles. 17 Uganda Human Rights Commission . 6 vehicles uneconomical. 18 Uganda Aids Commission -Items recommended for sale in the last Board of Survey are still in the store.

19 -2 vehicles expensive to maintain, two scrap vehicles, 3 old motor cycles and 122 obsolete tyres. 19 National Planning Authority . 1 motor cycle not working. 20 Education Service Commission . 4 grounded vehicles. 21 Health Service Commission . 5 unserviceable vehicles . One Motor cycle. 22 Makerere University . 32 vehicles grounded . 3 motor cycles grounded 23 Makerere University Business School . 1 vehicle-scrap. 24 NARO -The stores at Buginyanya and Bulegeni -urgent repairs. -14 motor cycles and 11 motor vehicles grounded. 25 Uganda Bureau of Statistics -2 vehicles grounded. 26 Uganda Prisons -The store room is rather old and needs renovation. 27 Uganda Police -94 vehicles and 40 motorcycles grounded/uneconomical 28 Public Service Commission -3 grounded vehicles 29 Local Government Finance Commission . 4 vehicles grounded 30 Judicial Service Commission -Store room is inadequate. -1 motorcycle unserviceable 31 Gulu University . The store room leaks . 2 faulty vehicles and 1 faulty motorcycle 32 National Environmental Authority . 1 vehicle not running 33 Uganda Blood Transfusion . Store room is inadequate. . 2 vehicles not working. 34 National Agricultural Advisory Services . 2 vehicles unserviceable . 189 tyres old. 35 Uganda Land Commission -No store room, items being kept in several offices. -1 motor vehicle –high maintenance costs. 36 National Forest Authority -8 vehicles and 3 motor cycles grounded -Items recommended for boarding in the last board of survey are still in store. 37 External Security Organisation -23 motor vehicles grounded 38 Uganda Coffee Development Authority -10 vehicles grounded 23 motor cycles- uneconomical 39 Mulago Hospital Complex -Items recommended for sale in the last Board of

20 Survey are still in the store. 40 Jinja Hospital . 3 vehicles uneconomical 41 Kabale Hospital . 2 vehicles unserviceable. 42 Masaka Hospital 1 vehicle in poor mechanical condition. 43 Soroti Hospital . 3 vehicles grounded

44 Lira Hospital . 1 scrap vehicle 45 Mbarara Hospital -Food store is poorly ventilated, drugs store room is inadequate, and the oxygen store room is not secure. 46 Uganda High Commission in Kenya . One vehicle not serviceable 47 Uganda High Commission in Tanzania . 2 vehicles 48 Uganda High Commission in Ethiopia . One vehicle uneconomical.

2.8 GROSS TAX SYSTEM

The gross tax system was implemented at the start of the 06/07 financial year with the objective of facilitating timely payments of non resource taxes by government Ministries, Departments and Agencies (MDAs). Under the system taxes are appropriated under the respective votes, which then remit the full tax amounts released to them back to treasury-Gross Receipts Account. When the votes incur legible expenditure, relevant documents approved by the Ministry/Department are then forwarded to Treasury where instructions are issued to Bank of Uganda to transfer the equivalent amount to the Gross Tax Payments Account.

A review of the Gross tax payment and receipt system revealed the following matters;

2.8.1 Budgeting

Budgeting for gross tax is not based on actual Vote requirements. As a result a number of Ministries, Departments and Agencies (MDAs) received funds on the tax item that could not be wholly utilized while others such as Information Communication and Technology (ICT) received less than their tax requirements and appropriation.

In MDAs such as Office of the Prime Minister (OPM), Ministry of Agriculture Animal Industry and Fisheries (MAAIF), Defence, Local Government, Works and Transport and Energy and Mineral Development between 58% - 100% of the amounts allocated for gross taxes was not utilized and hence returned to Treasury.

The practice defeats the whole purpose of budgeting.

Ministry/Agency/ Department Releases Spent Taxes Unspent Taxes %age

Office Of The President 1,120,000,000 144,756,850 975,243,150 87 Office Of The Prime Minister 2,236,288,000 936,294,977 1,299,993,023 58

Ministry Of Defence 2,773,592,000 120,177,102 2,653,414,898 96

Ministry Of Public Service 1,580,000,000 0 1,580,000,000 100

Ministry Of Agriculture 11,652,209,717 616,750,779 11,035,458,938 95

Ministry Of Local Govt 4,500,000,000 210,566,549 4,289,433,451 95

Ministry Of Works 25,222,494,293 5,259,282,999 19,963,211,294 79

Ministry Of Energy 196,987,500,000 9,308,286,605 187,679,213,395 95

Ministry Of Gender . 817,500,000 85,487,005 732,012,995 90 Min Of Water and Environment 2,890,000,000 1,227,118,976 1,662,881,024 58

Ministry Of ICT. 2,675,000,000 5,893,429,548 -3,218,429,548

I advise that MDAs only budget for what they are able to consume in taxes based on the budgeted import requirements for which taxes are to be incurred.

22 2.8.2 Tax payments on Behalf of NGOs and Private Companies and Individuals

Government through various Ministries pays taxes on behalf of NGOs and the private sector as incentives or support to the relief efforts being undertaken by the NGO‟s. However, it was observed that because the funds are budgeted for under the budget line meant for taxes on asset acquisitions, the tax payments are treated as asset acquisitions in the financial statements and disclosed as such in the statement of assets acquired. This treatment has the effect of overstating the assets acquired by the Entity and hence the Government of Uganda (GoU).

Ministry Debit to other Items Accounts Debited MOFPED 21,600,000,000 231007 Energy 19,160,151,328 231004 351,069,002 231006 9,908,829,205 231005 Local Government 921,433,087 231004 Gender 188,713,905 231004

I have advised that a separate budget line be created to cater for this type of commitment.

The Accountant General explained that he was in the process of coming up with a policy and also issue guidelines in the financial manual.

2.8.3 Un-returned Funds

Guidelines for the gross tax system require that all gross tax releases to MDAs should be remitted back to the Treasury. On the contrary a total of Shs.712,107,219 released to various votes was not remitted back as shown in the table below. It was also observed that there is no regular follow-up by Treasury to ensure compliance. This practice defeats the purpose for which the system was set up and may lead to diversion of funds. I have also advised the Accountant General to regularly have all releases to entities for gross tax and movements on the receipts and payments accounts properly reconciled.

VOTE RELEASED-SUM ON GROSS UN RETURNED TAX 107 UAC 100,000,000 75,000,000 25,000,000 110 UIRI 800,000,000 454,317,525 345,682,475 133 DPP 110,000,000 96,575,256 13,424,744 134 H SC 19,000,000 9,500,000 9,500,000 142 NARO 362,000,000 181,000,000 181,000,000 150 NEMA 60,000,000 45,000,000 15,000,000 162 BUTABIKA 490,000,000 367,500,000 122,500,000 712,107,219

I advised that compliance with the guidelines be enforced.

2.9 Uganda Revenue Authority Receipts

Ministries face a general problem of obtaining receipts from Uganda Revenue Authority. Remittances by ministries of statutory deductions relating to P.A.Y.E. and withholding tax to Uganda Revenue Authority were not supported with Uganda Revenue Authority receipts, a problem attributed to delays by URA to issue receipts. Management of Uganda Revenue Authority however attributes the problem to failure by ministries and the Treasury to provide adequate details of the Payee for whom remittances are being made so as to enable them (i.e. URA) process the acknowledgements.

In absence of receipts and payment details, reconciliations becomes difficult. Remittances may also be credited by Uganda Revenue Authority on wrong tax payer accounts and tax payers from whom withholding taxes have been deducted may not benefit from the tax credits.

The Treasury should liaise with Uganda Revenue Authority to address the matter.

24 2.10 PROCUREMENT

Government has during the last few years made reforms in the procurement and disposal functions both in Central Government and Local Governments. The overriding objectives of the public procurement reform is to improve service delivery, accountability and effective management of public resources.

A review carried out on various Ministries, Departments and Agencies revealed the following challenges which still need to be addressed in the procurement function.

(i) Procurement Plans

Sections 96 -99 of the PPDA regulations require all entities to prepare annual procurement plans based on approved budgets to facilitate orderly execution of annual procurement activities. It is also a requirement that the plans are accompanied with a schedule of procurements required in their order of priority and timing.

However, during the year under review, it was observed that various entities did not prepare these annual plans, while those entities which had the plans did not adequately follow them. Weaknesses in procurement planning increases the risk of use of inappropriate procurement methods by entities.

I have advised the affected entities to properly plan for their procurements and have their procurement plans interlinked to the approved budget.

(ii) Staffing

Procurement and Disposal Units (PDUs) in government entities were established to assist Accounting Officers (among other functions) in managing and coordinating the procurement and disposal activities of the entity.

However, it was noted that staffing of PDUs is inadequate in some entities. The most affected are the big Ministries/Departments whose procurements take a larger part of their budgets. The recommended structures for the PDUs in these

25 Ministries cannot adequately support the huge workload in the procurement function.

I advised the Accounting Officers to liaise with the Accountant General and Ministry of Public Service to have this matter addressed.

(iii) Training of Staff

It was observed that a number of officers in user departments have not yet appreciated the procurement process as provided for in the PPDA Act and regulations. The most affected are missions abroad where Accounting Officers and staff handling procurement have not been exposed to the PPDA and Regulations. This has been identified as partly the cause of violation and breach of the procurement procedures.

I have advised the Accounting Officers to liaise and always take advantage of the capacity development programmes carried out by the Public Procurement and Disposal of Assets Authority. The Treasury should also draw up a comprehensive programme for training mission staff in procurement.

(iv) Lack of Contract Committees in Missions and Embassies

It was noted that most of the Missions and Embassies have not appointed Contract Committees contrary to the requirements of the PPDA Act and Regulations. In the absence of these committees, it is difficult to carry out procurement in a manner envisaged under the PPDA Act and Regulations.

Accounting Officers attributed this to the inappropriateness of the PPDA procurement guidelines to mission operations. It was explained that in some missions the establishment and staffing position cannot raise the required composition of the various organs of the procurement function required under the Act. They have also emphasised the need for the Treasury and PPDA to come up with more appropriate procurement methods for missions.

26 I have advised that Treasury and the PPDA offer more guidance to the Missions on matters relating to public procurement.

2.11 AUDIT OF PROJECTS

During the year under review, I also carried out the audit of 103 projects funded jointly by the Government of Uganda and development partners, which are implemented by the ministries and other government agencies. I have already issued out separate reports on each of the projects. The following matters were observed that may affect the overall rate of attainment of project objectives.

Shortfalls in Counterpart Contributions

Generally there was failure by government to meet counterpart funding obligations for the projects being implemented. As a consequence, some of the projects have failed to implement all planned activities. In certain instances, it has led to delays in clearing contractor‟s invoices resulting into claims by the contractors for interest due to delayed payments.

I have advised the Accounting Officers to liaise with the Ministry of Finance and Economic Development to ensure timely release of counterpart funds.

Delayed Accountability of Funds

There were several cases of delayed accountability for funds advanced to project staff to implement planned activities. These advances have been reported under the reports of various entities. Delays in submission of accountability can lead to falsification of documents and possibility of loss of project funds.

I have advised the Accounting Officers to institute more effective accountability systems to ensure prompt accountability of loss of project funds.

Non compliance with the Income Tax Act and NSSF Law

It was noted that several projects did not either effect deductions in lieu of withholding tax and NSSF or remit the deductions to the relevant statutory

27 body. This is a violation of the Income Tax Act and NSSF Act and can lead to imposition of penalties. I have advised management to ensure adherence with the relevant laws.

Inadequate Monitoring and Evaluation

It was noted that there was inadequate monitoring and supervision of project activities. In most cases, although funds for undertaking monitoring activities would be released, there were no monitoring reports produced, raising doubts as to whether the activities had been carried out at all. Failure to undertake effective monitoring and supervision activities implies that management is not regularly informed of the progress and challenges in the implementation process of the planned project activities.

I have advised the Accounting Officers to institute strong and robust monitoring and evaluation systems within their projects to ensure that planned activities are effectively implemented and objectives attained.

Delayed Implementation of Planned Activities

In many instances there were delays in implementing planned project activities. Failure to implement all planned project activities may necessitate extension of the project life and hence more administrative costs. I have advised management to ensure that all planned project activities are implemented within the specified timeframes.

2.12 MISSION PROPERTIES (a) Management of Properties In my previous annual reports to Parliament, I have observed that various mission properties are in need of renovation and regular maintenance. Currently most of the properties are not insured nor protected under the diplomatic immunity. Although in 2006 Cabinet directed that all properties abroad be transferred to the Ministry of Foreign Affairs from Uganda Property Holdings Ltd to streamline their management, to date this has not been done.

28 The Accounting Officer, Ministry of Foreign Affairs explained that although Uganda Property Holdings Ltd had initially agreed to handover the properties, this has not been done. Instead the Ministry of Finance, Planning and Economic Development had appointed a new Board for the company but without representation from Ministry of Foreign Affairs. He has accordingly raised the matter with the Permanent Secretary/Secretary to the Treasury.

(b) State of the Properties Uganda Missions are still facing challenges in maintenance of their properties due to the meagre resources allocated for the purpose. For example, Missions like Ottawa, New York and Washington had no budget allocations at all for maintenance yet they require substantial amounts for the purpose. Some mission properties are due for demolition (Belgium, Dar es Salaam and Kigali) but the funds needed to put up new structures have not been secured. The Uganda Mission in Abuja was allocated prime plots of land (2.5 acres) in 1994 for construction of embassy buildings but the offers are about to be withdrawn due to lack of funding for their development (deadline of December 2009). A piece of land which had been allocated to the Kigali Mission had been withdrawn and reallocated to another country because of failure by the mission to develop it. Government should expedite the process of coming up with a clear policy on the acquisition, sale, disposal and management of mission properties. The table below shows the current status of mission properties:

Mission Properties Status London 1.Uganda House/Chancery, 1.Good Condition 2.Official Residence 2.Good condition New York 1.Uganda House/Chancery, 1.Needs regular repairs 2.Official Residence 2.Needs regular maintenance Washington 1.Chancery, 2.2 Residence Houses 2.Need repairs Cairo 1.Chancery(two flats) 1.Good condition 2.Official Residence 2.Renovations required Kinshasa 1.Chancery 1.Uknown 2.Official Residence 2.Uknown Ottawa 1.Chancery 1.Needs regular maintenance 2.Official Residence Copenhagen 1.Chancery 1.Needs major repairs of

29 2.Official Residence balcony($105,000) 2.Needs major roof and Chimney repairs($120,000) Nairobi 1.Uganda House 1.Good Condition 2.Chancery (Recently repaired) 3.Official Residence 2.Good Condition 3.Good Condition(Recently painted) Abuja 1.Official Residence 1.Good condition needs minor repairs 2.Land-8,959 sqm (2.5 acres) 2.Undeveloped since 1994(to be reallocated) Tripoli 1.Chancery 1.Requires major renovations Brussels 1.Chancery 1.Needs repairs(€951,570) 2.Official Residential 2.Condemed, due for demolition(€3m) 3.Villa 3.Needs repairs(€236,000) Paris 1.Chancery Buildings partly 1.Top 4th floor, roof damaged and lifts rented need replacement Pretoria 1.Chancery 1.No Titles 2.Official Residence 2.Repair of Wall & Ceiling cracks, Leakages is needed Kigali 1.KBO Building 1.Not Occupied-Due for demolition(new 2.Undeveloped plot building to cost Shs1.5bn) 2.Reallocated to another mission due to un development Riyadh Two Plots of Land Not Known Mombasa Two Warehouses Not known(Managed by UPHL) Dar es 1.Chancery 1.Recently renovated Salaam 2.Official Residential 2.Recently renovated 3.Residential house 3.Due for demolition Juba 1.Plot of Land 1. Undeveloped

2.13 GLOBAL FUND TO FIGHT HIV/AIDS, MALARIA AND TB PROJECT

The accounts for the year under review (2007/2008) were not presented to me for audit. However, I carried out the audit for the financial years 2004/2005, 2005/2006 and 2006/2007, and issued out reports separately. The summary of the findings contained in the reports have been incorporated in this report under Ministry of Health.

In addition, the Commission of Inquiry into the alleged mismanagement of the project that was appointed by H.E the President of the Republic of Uganda recommended that further investigations be carried out in a number of cases identified in its report. On the basis of this report, Cabinet directed that joint prosecution led investigations be undertaken by the CID, DPP and my Office. I am currently participating in these investigations on a case by case basis.

30 2.14 REFERRAL HOSPITALS

In my annual report for the year 2007, I made a number recommendations arising from the audit of Referral Hospitals. The status of implementation of the recommendations is summarised below:-

S.No Audit issue Previous Audit Current status recommendation 1. Vacant positions Liaise with Ministry of Vacant positions still exist in all Health and Finance to the referral hospitals for ensure recruitment and example ;Soroti(83), Jinja (53) retention of staff Mbarara(102), Kabale(156) and Hoima (200). 2. Basic Capital development Capital development budget infrastructure budget be provided and decentralized. However, funded so as to equip the funding still inadequate. Need hospitals with for additional resources to infrastructure. improve on the infrastructure. 3. Line of credit Need for adequate and Drug shortages persist. for drugs timely provision of drugs to Certificates of non availability the hospitals to enable alternative procurement are not readily provided by National Medical stores. 4. Expiry of drugs Need for policy on receipt Update on the policy not yet and distribution of drugs to received from the Ministry of address the problem of Health. Expired drugs were drug expiry. reported in Kabale. 5. Stores records Proper stores records of Inadequate store records were on drugs receipt and distribution still noted in Lira, Gulu and be put in place. Arua Hospitals. 6. Land titles and Need to secure hospitals‟ Jinja and Arua hospitals lack security of land by acquiring land land titles. Hospital land has hospital titles and fencing. been encroached on in Kabale. boundaries

There is still need for liaison among all stakeholders to have the matters properly addressed to enhance health service delivery.

2.15 COMMON WEALTH HEADS OF GOVERNMENT MEETING (CHOGM 2007)

As I reported in my annual report for the year ended 30th June, 2007, Government released Shs.255 billion for the preparation of the CHOGM activities during the financial years 2005/06 to 2007/08. In December 2007 the Government through Cabinet requested me to undertake a financial and value for money audit of CHOGM expenditure to confirm whether this responsibility entrusted to the Accounting Officers was indeed executed and performed with due regard to the Laws and regulations that govern that public expenditure.

Accordingly, I carried out a financial and engineering audit and the two reports were issued to the authorities in April and September 2008 respectively. Arising from the engineering audit, this office made further follow up of the outstanding issues in February 2009. In accordance with Section 19(3) and Section 19(5) of the National Audit Act 2008, these reports have now been incorporated in my annual report to Parliament as annexes to this volume. A summary of the audit findings is presented below:-

Under the Public Finance and Accountability Act, 2003, the Accounting Officer, CHOGM (Ministry of Foreign Affairs) and the Accounting Officers of the CHOGM implementing Ministries are severally accountable to Parliament for the resources appropriated for ChOGM activities.

2.15.1 Major Findings on Financial Aspects.

It was noted that there were delays in preparations for the event due to late release of funds to implementing ministries. Disbursements to most implementing Ministries were made late. This greatly affected timely implementation of the planned activities particularly those relating to procurement.

32 Lapses in compliance with recommended established procurement procedures were generally noticed and in some instances this was in respect of civil works and transport involving substantial sums of monies.

- Road Works o Direct procurements for roadwork contracts amounted to Shs.21 billion. Use of this method does not allow Government the benefit of competitive pricing and quality. This partly explains the increase and variations in prices for comparable works. The Accounting Officer attributed this to delayed disbursement of funds and late demands of the National Task Force. o A number of roads remained uncompleted after CHOGM despite payments made to various contractors. These should be followed up to ensure that works are completed and accountability tendered. o Some road works were commenced after CHOGM was over, defeating the objectives for which those funds were budget for.

- Vehicles Flaws were observed in the procurement of vehicles for CHOGM. The procurement of executive vehicles did not follow the recommended procurement procedures and some vehicles delivered were not of agreed specifications. It is probable that Government would have made substantial savings if the procurement had been carried out competitively and transparently. Government bought various assets for use during CHOGM. There is need for the Ministry to take an inventory of all that was procured and initiate consultations on how these assets are to be utilized or disposed off to prevent misuse, damage, theft, wear and tear. As at 31st January, 2008, a substantial amount of money was lying on various Ministry CHOGM accounts. However, it is not clear when the accounts will be closed due to lack of requisite guidance. There is need to set up a program for the closure of the activities including a cut off date. Ministries are reporting huge outstanding bills/debts arising out of the CHOGM since some major activities/contracts were still ongoing. It is not clear how

33 ministries intend to finance these bills. The Ministry of Works has bills currently outstanding roughly estimated at Shs.31 billion whilst cash available stands at Shs.1.5 billion. This will impinge on the budgetary ceiling of those ministries for the financial years 2007/08 and 2008/09 and consequently their service delivery in those years. There is need for the Ministry to ascertain the total arrears position relating to CHOGM and plan for its settlement. The bulk of CHOGM funds were utilized on development, renovation and refurbishment of infrastructure. This generally improved the infrastructure that was worked on and the hygienic standards. It is imperative that a strategy be put in place immediately for its maintenance to prevent deterioration. This will necessitate adequate funding. In preparation for CHOGM Government spent Shs.17.2 billion on investments into two private Hotels as a strategy to help them achieve the desired level of preparedness for CHOGM. It was, noted that despite this, one of the hotels never achieved the desired level of preparedness and was therefore never utilized for CHOGM. It was further noted that the land the hotel owners of the second hotel purport to have invested in the joint venture has never been valued and is still in the names of the hotel owners. A further Shs.13.9bn not treated as capitalization was also invested in the same hotel infrastructure. By the time of audit, Government had not been issued share certificates for the investments. Government also spent a total of Shs.6.1 billion on furnishing and Shs.15 billion on construction works of other private hotels. In one of the hotels the Cabinet directive to explore the possibility of turning the expenditure into capitalization has not been followed up while the terms under which Government was made to finance a private venture have not been concluded. It is not clear how Government intends to recover such funds. A private accounting firm engaged to assist in establishing the recoverable funds paid to the designated hotels in respect of self financing delegates/guests ascertained a total of US$ 2,333,121 as being recoverable from the hotels out of US$.4,522,820 leaving US$2,189,699 irrecoverable. There is need to follow up on the recovery of the amount.

34 It was noted that the rates charged by the hotels for both the conference facilities and the rooms were hiked and varied significantly among comparable hotels. Proper negotiations should have been pursued to obtain better prices. The Commonwealth Youth Forum, Business Forum and Peoples Forum, which preceded CHOGM solicited and received various donations and sponsorships from private corporate firms and organizations. I was not able to establish the amounts received and ascertain whether utilization was in accordance with the guidelines. A total of Shs.9.1 billion was diverted from CHOGM funds and utilized on non- CHOGM budgeted expenditure. This could have affected implementation of other planned activities. A consortium of decorators undertook decoration work without any contract or agreement with the Ministry. They have since presented a bill of shs.617,652,120 which has been disputed by the Ministry. A contractor engaged to carry out beautification work on Clock Tower – Nsambya – Gaba – Munyonyo- Salaama – Kibuye Corridor has not completed the works months after the end of CHOGM despite an advance payment. There appears to be very little progress despite reported intervention by the Ministry of Local Government. Publicity and Media Centre o compliance with agreed contract terms/specifications and deliverables could not be verified due to the absence of adequate supporting documentation. The contractor has so far been paid Ug.Shs.7.8 billion out of a contract sum of US$4.5 million. o Another company contracted at shs.2.4 billion to provide publicity services had so far been paid Shs.1.4 billion without adequate supporting documentation. The same company made collections of Shs.360 million which has not yet been properly accounted for.

2.15.2 Engineering Audit of Works undertaken

A review was made of a total of forty eight (48) Infrastructure Activities, including thirteen (13) for Design and Supervision Consultants and thirty five (35) for Civil Works Contracts. There was no consultant for the drive ways and parking at

35 Munyonyo retreat and the Ministry of Works and Transport handled the project in house. From the engineering audit of the projects the following were summarized as the main findings.

2.15.3 Key findings In four cases (Emergency Repairs of Selected Kampala City Council Roads Lots 1 to 4) the selection of contractors was based on the “Pseudo Estimates” method which is not among PPDA methods allowed to be used. The Ministry of Works and Transport evaluation and Contracts Committees were not specific in their recommendations on awarding of contracts leaving the responsibility to the Accounting Officer to determine the final contract price. 35.42% (17 of the 48 audited activities) of the contracts lacked the Engineer‟s estimates to guide the evaluation Committee during their assessment of the bids, and where the estimates were available they were far below the bids received from bidders .

A total of thirty three (33) project activities had addenda or variations issued, seven (7) of which were signed after implementation, twenty four (24) were still pending signature by audit time and two (2) (in CAA) were not yet approved by the Contract Committee.

In seven (7) cases, payments to contractors were effected prior to concluding (signing) of the contracts.

It was noted that there was inefficient retrieval and management of financial documents within the implementing authorities. This was witnessed in the length of time it took for auditors to receive documents and in some cases documents were not received.

Payments to contractors for infrastructure projects were particularly noted to have inadequate attachments. Such attachments included interim certificates, measurement sheets, and other supporting documents. In many instances, contractors did not issue receipts in acknowledgement of payments received.

36 This case was common in CAA where the payments were not accompanied by proper payment vouchers and other relevant documents.

There were delays in processing and effecting payments to contractors due to bureaucracy and poor documentation. This could have affected the timely performance of services providers by limiting their cash flow.

2.15.4 Technical Aspects The roads that were improved by providing a full seal of asphalt concrete or surface dressing on them were in good condition. Minimal routine maintenance and enforcement of axle load limits on these roads will keep them in a good condition for a considerable period of time. Roads that were repaired by patching potholes and road edges repairs only within Kampala served the purpose of improved mobility during CHOGM. However, due to the age of the roads new potholes are appearing fast and unless a more appropriate remedial measure such as full re-sealing is taken to reduce the ingress of water from the surface, they will deteriorate fast.

Building works and facilities installed at both new and old terminals at Entebbe airport have improved the appearance of the airport and should serve their purpose for many years to come if they are properly maintained.

The beautification projects have greatly improved the look of Kampala City, Entebbe Municipality and along road corridors where the projects were implemented. However, a sustainable programme to maintain the beauty has not been put in place.

Out of twenty six (26) physically audited projects, fifteen (15) were physically tested and the results showed that seven (7) of them followed the specifications and eight (8) were below the specifications.

On certain projects the quantities paid for certain work items, as of latest payments certificates availed to the auditors, are higher than the approximate

37 quantities actually found at sites e.g. Construction of the VVIP Terminal and Associated Civil Works.

There were big differences between the Engineer‟s Cost Estimate and the bids submitted by most of the contractors for CHOGM infrastructure projects. This could have been due to vast amount of works tendered out at the same time and lack of competition in the sector due to limited capability of the local contractors. However, for CAA, Engineer‟s estimates were based on funds availability before securing a commercial loan.

For some projects, funds utilised were excessive in respect of the purpose for which the facilities were intended to serve. E.g. Munyonyo Marina Construction concrete thickness of 200mm and Paving of Driveways, Parking and walkways at the Munyonyo Speke Resort for the asphalt thickness of 50mm. Thickness of 100mm and 30 mm respectively could have sufficed.

The costs for most of the infrastructure works undertaken in preparation for CHOGM were high compared to the engineer‟s estimates. High rates quoted by the contractors for certain work items such as granular material, bitumen and drainage works contributed to this effect.

Many variations on a number of projects in the course of their implementation e.g. Domestic Terminal at Entebbe Airport and Munyonyo Marina, are a result of inadequate undertaking of a needs assessment to ascertain the full requirements or end use of the facilities.

There were projects where major works were still on-going by audit time e.g. Lukuli – Buziga – Munyonyo road and Munyonyo Marina.

Four Contractors had more than one major CHOGM Infrastructure contracts to execute (under MoWT and CAA) i.e Spencon Services Ltd, Stirling Civil Engineering Ltd, Dott Services Ltd, Cementers Ltd, Energo Ltd. This contributed to completion of some of the works after CHOGM.

38 2.15.5 Follow-up on Engineering Audit

The engineering audit report on CHOGM activities issued in August 2008 indicated various outstanding and on-going works attributable to ministry of works and other entities. During February 2009 this office undertook a follow-up of the works specifically undertaken by Ministry of Works to determine extent of completion of the civil works and to assess the progress in implementation of the recommendations made during the engineering audit. A separate detailed report has been issued.

Findings

Some road repairs have not been completed due to purported delayed payments to contractors. This is causing the roads to deteriorate and will escalate costs of completing the works. This also delays issuance of final accounts. There are many certificates, which have been received but are not yet paid by the Ministry. The failure to have all CHOGM bills cleared despite additional resources provided to the Ministry for the purpose may result in loss of Government funds due to interest charges. Some road construction materials and items used, such as asphalt, sand, stones, steel gratings and paints were, in some instances, are less than the specified quantities and of a poorer quality. The corresponding amount recoverable from the contractors is estimated at over Shs.1 billion as indicated in the table below:- The Accounting Officer has promised to effect recoveries from the respective contractors. Addressing some of the shortcomings above, through recovery of money in lieu of materials/items may not address the long term, social and economic effects resulting from the deteriorating quality and strength of the roads. Contractually, the relevant contractors should have rectified the works according to the original agreed specifications and design. The Consultants and the Ministry Supervising Engineers should be made liable for failure to ensure quality assurance. I have advised the Accounting Officer to ensure that in future works are rectified according to agreed specifications. Management has proposed to recover some moneys from retention. However, this would undermine the purpose for which retentions are made i.e. to rectify defects. I have advised the Accounting Officer to ensure that recoveries are effected from

39 outstanding payments and that retentions should be earmarked to serve their intended purpose. The Ministry of Works and Transport should further develop its capacity to effectively manage, monitor, supervise and evaluate works carried out by consultants and contractors. The Ministry should further come out with measures to ensure value for money in carrying out roads‟ projects. This may be through initiating policies that will build the capacity of the players in the delivery of good quality roads. Such players include consultants, contractors and providers of construction materials and services. The Accounting Officer explained that the Ministry had come up with a draft National Construction Industry Policy awaiting consideration by Parliament.

TABLE – FOLLOW UP – MINISTRY OF WORKS – SUMMARY OF OUTSTANDING MATTERS

Lot/Package Recommendations as per Current status after Accounting Audit remarks Engineering Audit report audit follow up officer’s response verification Package 1 lot 1: 1. Ascertain installation of 1. 70.85 sq.m 1. Shs. 12,474,000 1. Actual recovery to Kibuye-Zana,Zana- 118sq.m of pre-cast slabs confirmed installed. to be recovered in be verified in Entebbe Airport, along Lido Beach and around Other slabs reported final account. payment vouchers Aki Bua, ministry of works or recovery stolen. and final certificate. Binayomba road of Shs. 15m. Shs. 12,474,000 agreed as recoverable.

2. Jointly verify surface 2. Joint verification 2. Shs. 12,459,410 2. As above. dressing at Junctions or found most junctions to be recovered in recover shs. 231.87 m. dressed. Shs. final account. 12,459,410 agreed recoverable.

3. Re-measure guard rails. 3. 74.7m of guard rails 3. Shs. 18,450,900 3. As above. found missing. to be recovered in Recovery of Shs. final certificate. 18,450,900 recommended

4. Verify PPDPA authority for 4.No PPDPA authority 4.PPDPA declined to 4. Variation was variation of contract by shs. availed give retrospective irregular.

40 1,645,145,325(24.52% of authority original sum)

Package 1 lot 2: 1. Verify PPDPA authority for 1. No PPDPA authority 1. PPDPA declined to 1. Variation was Salaama road variation of works by Shs. availed give retrospective irregular. 2,858,623,270( 132% of authority original contract) Package 2 lot 1: 1. Verify PPDPA authority for 1.No PPDPA authority 1.PPDPA declined to 1. Variation was Queen‟s way, variation of contract by Shs. availed give retrospective irregular. Kampala road, 5,001,567,515( 134% of authority Mackinnon , Jinja original contract). road and an addendum of 30 2. Verify existence of 2. Un completed works 2. A total of Shs. 2. Actual recovery to other roads manhole covers, steel were valued at shs. 234,972,179 is to be be verified gratings, regulatory signs, 234,972,179 which is recovered in final informatory signs, recoverable. certificate. Some unpatched potholes and incomplete works thickness of Asphalt layer. were attributed to delayed payments. Package 2 lot2: 1. Recover shs.608,014,573 Agreed to recover a Funds to be Actual recovery to be Yusuf Lule and due to shortfall in Asphalt total of Shs. recovered in final verified. Wampewo Avenue thickness on Lule road 735,539,492 including certificate 2. Recover Shs. 63,219,825 shs.62,300,550 on due to shortfall of Asphalt on road markings and shs. Wampewo Avenue 1,994,544 on missing 3. Recover shs. 16,244,000 steel gratings. due to anomalies in road markings. 4. Verify number of steel gratings. Package 3 lot 1: 1. To verify actual length of 1. 672.7 m of drains Funds to be Actual recovery to be Kampala road, covered drains. were found covered recovered in final verified. Mugwanya road, and yet payment was certificate. Circular road for 1,341m.Recovery of Shs.109,901,898 was recommended.

Drive ways and 1. To re-measure the 1. The shortfall in The total shortfall of Actual recovery to be Parking lot at covered drains and the PVC length of covered Shs.41,425,040 shall verified. Munyonyo pipes. drains was valued at be recovered in the

41 Common Wealth Shs. 18,465,040. final certificate. Village 2. Re-count concrete slabs. 2. The shortfall in number of concrete slabs was valued at shs. 22,960,000.

3. To recover funds from 3. Speke Resort 3. No contractor can 3.The Ministry should offending contractors responsible for the be singled out to pursue the recovery regarding damage of Paving loss. take responsibility of the amount from blocks and Sand for the damage. Speke Resort as they were responsible.

4. To recover amounts 4.Designs and Bills of 4. The amount was 4. Architectural regarded as over Quantities provided. the contract price designs and Bills expenditure on Main arrived at after provided. entrance canopy. -Recoverable amounts negotiations. Amount now estimated at recoverable Shs.103 million. estimated at Shs.103 million. Recovery to be followed up.

Munyonyo 1. 88.4 cubic m. of concrete 1. Works should be 1. Works had been Site verification in Marina had been over paid. completed or re-started and to be February 2009 Shs.44m was recoverable. payments recovered. completed by end of revealed on going March 2009 concrete works and installation of guard 2.506m of guard rails had 2. Guard rails be 2. Installation of rails. A been over paid without installed or recovery be guar rails had comprehensive review installation. Shs. 56m was made. resumed and to be shall be undertaken recoverable. completed by end of after completion of all March 2009. works.

3. Expansion joints were 3. The joints should be 3. The joints had widening and needed to be stabilized. stabilized. stabilized.

42 4. Temporary dredging 4. Usage of dredging 4. The private fingers were found under fingers be stopped to operator had use for docking boats yet avoid accidents. rejected advise of this was dangerous. non –use of the temporary fingers claiming he will take full responsibility

43 PART III

3.0 REPORT AND OPINION OF THE AUDITOR GENERALON THE GOVERNMENT OF UGANDA CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE, 2008

I have audited the Government of Uganda (GOU) Consolidated Financial Statements as set out on pages 10 to 74 of the financial statements. These financial statements comprise of the Statement of Financial Position, Statement of Financial Performance, Statement of Changes in Equity, Cash flow Statement, Statement of Outstanding Public Debt, Statement of Outstanding Advances and Loans issued by Government, Statement of Investments held by the Government together with other accompanying statements, notes and accounting policies. Under Article 164 of the Constitution of the Republic of Uganda and Section 8 of the Public Finance and Accountability Act, 2003, the Accounting Officers are accountable to Parliament for the funds and resources of the entities. Under Section 31 of the same Act, the Accountant General is responsible for the preparation of GOU consolidated financial statements which conform to generally accepted accounting practice and the Public Finance and Accountability Act. It is also a responsibility of Secretary to the Treasury to ensure effective application of the Act.

My responsibility as required by Article 163 of the Constitution of the Republic of Uganda 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.

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

44 PART "A" 3.1 BASIS OF OPINION I conducted my audit in accordance with International Standards on Auditing and Government of Uganda Legislation. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.

3.1.1 Loan from Bank of Uganda A loan of US$ 18,000,000 obtained from the Bank of Uganda was not disclosed in the financial statements of the ministry‟s vote and consequently the consolidated financial statements.

3.1.2 Receivables Shs.512,477,040,135 of overall government receivables is non-performing. Minimum progress has been made towards its recoverability despite the request for intervention by the Solicitor General. Included in the amount is Shs.21,091,491,676 recoverable from a private company, the recoverability of which is likely to be difficult because of uncertainties on its existing mortgage.

3.1.3 Government Investments Government acquired a 35% shareholding in a private company through sale of a company in which it had substantial investment. However, in the absence of the valuation report of the company sold, I was not able to confirm that GOU shareholding was a fair representation of government investment into the company. Besides, the share certificates were not availed. Government is yet to obtain share certificates in respect of Shs.2,210,000,000 paid as share contribution in a privately owned hotel.

45 3.1.4 Bank Charges In the absence of supporting documentation, I was not able to confirm the accuracy and completeness of bank charges of Shs.10,336,126,771 stated in the financial statements.

3.1.5 CHOGM Expenditure Expenditure relating to CHOGM activities was not properly consolidated in the accounts of ministries and GOU consolidated accounts, accordingly misstating government‟s overall financial position and performance. Similarly, entities operating special funds did not prepare financial statements in respect of these funds for audit and subsequent consolidation.

3.1.6 Grant of Credit The donor component of development expenditure amounting to Shs.1,199,404,480,000 was not approved by way of a grant of credit issued by the Auditor General as required by the PFAA. Accordingly, the affected votes incurred expenditure without authority.

3.1.7 Dividends Government share of dividends amounting to Shs.5,178,574,222 declared by two state enterprises was not received by government as it was offset from the outstanding liabilities purportedly owed by government to the two enterprises. I was not able to confirm that the dividends retained represented the actual amount outstanding from Government because of inconsistencies in the figures reported as outstanding in the Treasury database and the amounts reported as outstanding by the enterprises. Besides, this procedure of offsetting is not in accordance with Government regulations.

46 3.2 OPINION

In my opinion;

Except for the effects of any adjustments, if any as might have been determined to be necessary had I been able to satisfy myself on the matters noted above;

The financial statements fairly present in all material respects the financial position as at 30th June, 2008 and the results of its operations and cash flows for the year then ended, and comply in all material respects with Generally Accepted Accounting Practice and the Public Finance and Accountability Act, 2003.

The expenditure and receipts have been applied in all material respects for the intended purposes.

3.3 EMPHASIS OF MATTER Without qualifying my opinion further, attention is drawn to the following additional matter which is also included in Part B of this report and my annual report to Parliament.

3.3.1 Proceeds of Sale of UCB Shs.26,000,000,000 realised from the sale of Uganda Commercial Bank Ltd was withdrawn from Bank of Uganda account and partly spent without proper authorisation.

John F.S. Muwanga AUDITOR GENERAL

KAMPALA

31ST MARCH, 2009

47 PART "B" DETAILED REPORT OF THE AUDITOR GENERAL This Section outlines the detailed audit findings, management response, and my recommendations in respect thereof.

3.4 Loan from Bank of Uganda Bank of Uganda provided a loan of US$ 48,200,000 to government. As at 30 June 2008, US$ 18,000,000 of the loan had been disbursed to the supplier by the Bank of Uganda on behalf of government.

This debt is not disclosed in the financial statements of the ministry‟s vote and the consolidated Government of Uganda financial statements. This omission has a material effect on the results reported at the year end.

The Accountant General explained that the Accounting Officer had been requested to initiate the process of regularizing the book entries.

I have advised the Treasury to have the loan regularised and accordingly have it recognized in the GoU consolidated financial statements.

3.5 Receivables: 3.5.1 Deferred Accounts In 2003 government obtained a credit facility worth US$ 11,575,000 from BoU to be on-lent to a private company to help the company pay-off (in full settlement) debts owed to a number of local commercial banks that had accumulated to US$ 21,760,000. To secure the debt, the company deposited various land titles with BoU.

To-date, government has not been able to recover the funds from the company. Accordingly, the company‟s indebtedness continues to appear in government accounts as a receivable.

In an effort to have this money recovered, in 2007 government appointed Uganda Development Bank Ltd (UDBL) as the Collection Agent in the matter. Todate, the

48 process of drafting an assignment deed for purposes of assigning the debt by BoU to UDBL has stalled.

Records also indicate that the properties which the company had presented as security had their caveats fraudulently cancelled and the properties sold by the company. This implies that the loan is no longer secured and hence government stands to lose in the event of the company failing to pay back the loan. At the time of audit, BoU was still investigating the matter.

I have advised government and BoU to expedite the investigations with a view of revocation of the cancellation of the caveat and hence the purported sale of the mortgaged properties. There is also need for the GoU and BoU to immediately pursue the recovery of the loan from the company.

3.5.2 On-lent: Recovery of loans on-lent by GoU In my report to Parliament for the year ended 30th June 2007, I reported that Government loans totaling Shs.1,205,608,734,946 to state enterprises and private entities was outstanding. Shs 311,218,006,526 was repaid during the year leaving a balance of Shs.961,780,652,476 outstanding as at 30th June 2008 after prior year adjustments (Shs.19,450,590,337) and foreign exchange gains (Shs.47,939,333,718). A review of this years on-lending portfolio revealed that a total of Shs.491,385,548,459 worth of loans to State Enterprises, agencies and private companies have been in arrears for over 5 years without any repayments.

3.6 Investments 3.6.1 Bank Guarantees Between 2003 and 2004, following instructions by Ministry of Finance, BoU deposited US $ 6,037,986 with the Development Finance Company of Uganda Ltd. (DFCU) as government guarantee to enable a private company access credit facility from the bank. During the same period, the company was also loaned a sum of US $ 3,060,636.77 by Uganda Development Bank (UDB) on government guarantee in order to purchase machinery, sewing machines and to provide initial working capital. In both instances, the company wholly failed to honor its credit obligations with the banks. Indeed BoU has confirmed that this debt is no longer

49 recoverable from the company. As a guarantor, GoU is under obligation to make good these loans to BoU and UDB.

o In June, 2007 GoU signed a Memorandum of Understanding (MoU) with a foreign company. In the MoU, it was agreed that all assets of the private company be vested into the foreign company at book value where government would have a shareholding of 35%.

It was also agreed that GoU assumes the responsibility to pay off the private company creditors.

. I was not able to determine the book value of the private company assets vested into the foreign company as no audited accounts or company valuation reports were availed for review. Thus, I cannot provide assurance that government‟s shareholding in the foreign company fairly represents the value of assets taken over. . A schedule showing all liabilities of the private company taken over by GoU has never been prepared, verified and the verified balances disclosed in the financial statements.

3.6.2 Foreign Investments (a) Unreliable Confirmations Confirmations were in certain instances not backed by additional collaborative information such as audited accounts of the respective organizations and therefore could not be wholly relied upon. For example, while the confirmation from the Islamic Development Bank showed the value of the investment as US $ 2,770.00, details show that the value of this investment for the previous year was reflected as US $ 11,464,987.04. This variance was not explained.

(b) Increase in Values not properly explained Two investments are shown on the list of investments having increased from US$ 21,356,145 in 2006/07 to US $ 24,103,687 in 2007/08 as shown below;

50 Organization Value in 06/07 Value in 07/08 Increase ($) ($) ($) IDA 2,180,825 2,498,250 317,425 ADB 19,175,320 21,605,437 2,430,116 21,356,145 24,103,687 2,747,541

Although the increments are shown as new shares, the number and value of each of these shares is not known.

Meanwhile a number of other investments are shown on the schedule at the previously stated values of 2006/07 without the current year‟s valuation.

I have advised the Accountant General to ensure that all investments made by Government be ascertained and properly disclosed in the financial statements.

The Accountant General explained that he had written to IDB, IDA, and ADB seeking an explanation on the variances

3.7 Bank Charges The bank charges in the statement of Financial Performance are stated at Shs.10,336,126,771. However, this balance was not properly supported.

Besides, in the consolidation work sheet for Cash and Cash Equivalents, an overdraft totaling Shs 13,547,728,783 was reported as a Project Accounts Bank Charge. The treatment of this project accounts „Bank Charge‟ in the statement of financial position was not properly explained. This scope limitation has a material effect on the consolidated cash position stated in the financial statements.

3.8 Unconsolidated Transactions 3.8.1 CHOGM Accounts Shs.254,983,309,610 was released during the years 2005/06 to 2007/08 to cater for the CHOGM meeting, of which Shs.119,983,309,660 was released during the year under review. However, it was noted that all CHOGM expenditure was not properly consolidated by either Ministry of Foreign Affairs or the respective

51 implementing ministries/agencies nor the Government of Uganda consolidated financial statements. The Ministries explained that they were advised by the Accountant General not to consolidate the CHOGM expenditure in their accounts since CHOGM was treated as a Project. As a result, all the cash balances on the CHOGM bank accounts were not disclosed in the accounts. It was also observed that some ministries were allowed to transfer unutilized cash balances on CHOGM accounts to the new financial year (2008/09) in contravention of the Policy guidelines which required all bank accounts to be closed and the balances transferred to the consolidated funds.

I have explained to the Accountant General that treating CHOGM as a project would still require full consolidation of its expenditure in accordance with the stated accounting policy which requires consolidation of fully funded government projects. I have accordingly advised that a proper consolidation be undertaken. The Accountant General explained that the CHOGM expenses were accounted for under Ministry of Foreign Affairs (MOFA) and that he had accordingly written to MOFA to follow up the accountability and ensure that all unutilized funds are returned to the Consolidated Fund account.

3.8.2 Project Accounts The Policy adopted for project expenditure requires consolidation of project expenditure to the extent of government funding to the Project. Under this accounting policy, all donor funded expenditure is not consolidated in the GOU financial statements. In view of the fact that a sizeable proportion of the GoU budget is externally funded, the GOU financial statements prepared using this policy may not present complete information required for budgeting and financial planning.

The Accountant General explained that government intends to consolidate the project donor flows through the implementation of the projects‟ accounting solution that will be added onto the Integrated Financial Management System (IFMS). He further explained that the system will be implemented on a pilot basis initially for six projects in the financial year 2009/2010. After a successful pilot phase, the system will be rolled out to the rest of the projects.

52 I advise that the development and implementation of the project consolidation module to be used for the purpose be expedited.

3.9 Special Funds A number of ministries are now operating some special funds which serve specific purposes as defined by the instruments establishing them. For example, the Ministry of Energy has the Energy Fund while the Ministry of Local Government has a District Revolving fund. By law, ministries are required to prepare separate financial statements for the funds which should be audited by the Auditor General. However, it was observed that they do not prepare financial statements nor do they disclose the fund balances in the financial statements. This practice has led to huge amounts of cash advances outstanding in various ministries.

There is need for guidance to be given to accounting officers for accounting and reporting on all special funds.

3.10 Grant of Credit It was observed that the donor component of development expenditure amounting to Shs.1,199,404,480,000 lacked an audit warrant (grant of credit) by the Auditor General contrary to section 12(b) of the Public Finance and Accountability Act 2003. Accordingly, the affected votes incurred expenditure without this authority.

I have advised the Treasury to ensure that all recurrent and development expenditure appropriated by Parliament be approved by the Auditor General by way of a Grant of Credit as required by the Public Finance and Accountability Act, 2003.

The Accountant General explained that treasury is in the process of integrating donor numbers into the MTEF and also introducing donor financed project oracle solution. He further explained that as a stop gap measure the office shall request for a warrant to the extent of what has been appropriated and for a supplementary for the extra disbursements.

53 3.11 Dividends Records indicate that government was due to receive Shs 1,305,600,000 as dividends from New Vision Printing and Publishing Company Limited for the year ended 30/6/2007. However, management of the company withheld Shs.723,978,143 purportedly to „offset amounts owed by government agencies‟ to it.

On the same premise, between 2005 and 2008, National Housing and Construction Company (NHCC) retained Shs.3,872,974,222 government‟s share of declared dividends to offset debts owed by government claimed by NHCC to be amounting to Shs.4,815,296,833. According to official records, government owed only Shs.792,187,745 by the time of sale of part of government interest in the company.

This practice contravenes Public Finance Regulation 46 which requires that in all cases government revenue should be accounted for in gross and any charges against such revenue require appropriate authority as expenditure incurred.

Besides this debt settlement mechanism is vulnerable to abuse because of its incomplete recording in Government accounts, lack of appropriation by Parliament and the subsequent release of funds by the Auditor General and above all susceptibility to double payment.

The Accountant General explained that government is in the process of enacting debt regulations that will guide Debt Swaps to avoid such shortcomings. It is also anticipated that the Debt Regulations will guide future government on-lending programmes which have been victims of debt swaps. The outcome of this effort is still awaited.

3.12 Proceeds from Sale of Uganda Commercial Bank Limited (UCBL) On 30th June 2008, proceeds from the sale of UCBL amounting to Shs.26,000,000,000 were still held by the BoU. According to available information, this money has since been withdrawn and part of it spent without the benefit of having it appropriated by parliament and authorized by the Auditor General by

54 way of a Grant of Credit (Audit warrant) as required by the Public Finance and Accountability Act, 2003. I was not able to verify the validity of these transactions.

3.13 Government Monetary Policies For a very long time, government has been operating on a deficit budget. Unfortunately, as indicated in the table and graphs below, the operating deficit has been increasing resulting in an increased dependence on external debt assistance.

The increasing dependence on foreign cash inflow for deficit financing has an effect on the government monetary policy. The inflationary pressures associated with these foreign cash in flows have to be contained by moping out of circulation the excess cash liquidity through sale of Treasury Bills and Treasury Bonds by the BoU. Accordingly interest paid on these Bills/Bonds by government has increased significantly as indicated in the table and graphs below.

Year Interest on Bills/Bonds Operating Deficit Mop-Out (Shs) 2008 268,227,830,000 818,956,378,836 2,444,509,000,000

2007 196,807,269,000 774,586,795,382 1,840,742,000,000

2006 359,867,372,847 1,685,126,000,000 604,545,717,961 2005 241,262,529,000 417,427,438,902 1,370,950,000,000

2004 167,303,082,000 388,971,063,496 1,386,776,000,000

3000

2500

2000 Treasury bills 1500 Cash deficit 1000

Amount Amount in billions 500

2004 2005 2006 2007 2008 Year

3000 2500 2000 Treasury bill 1500 Cash deficit 1000 500 0 2004 2005 2006 2007 2008

The operating deficit is projected to reach 1,505.5 billions by the end of 2010/11.

56 In my discussions with Ministry of Finance, I made the following recommendations;

Expand Tax Base In 2007/08 URA was able to collect only Shs.3,372,091,348,000 in tax revenue. At 13 % Tax-GDP ratio, this performance is well below even the sub- Sahara average of 18 %. There is need to expand the tax base and hence limit the dependence on external sources for fiscal financing which is apparently the core driver of inflation.

Control Expenditure There is need for government to commission efficiency studies to identify potential areas for savings without necessarily compromising policy interests.

The Ministry explained that this is a collective responsibility of all stakeholders and highlighted a number of measures that could be undertaken to address the matter. These include;

Concentrate government focus on a few core areas. Strengthening monitoring of expenditure across all government. Improvement of budgeting and financial management system in government.

Enhance Absorption Capacity There is need for government to revisit its investment priorities as detailed in the Public Investment Plan (PIP), in favour of projects that enhance productivity and wealth creation. This will expand the absorption capacity of the economy to cope with the global economic trends. Unfortunately, recent initiatives to do this have not been successful, mainly as a result of failure to subject investment decisions to rigorous appraisal and selection criteria.

3.14 Supplementary Budget The PFAA, 2003, Section 16 (2) requires a supplementary requisition to indicate any effects on the financing requirements of Government.

During the year, three supplementary schedules, all totaling to Shs.224,301,614,000 were presented to Parliament for approval as shown below.

Supplementary Expenditure rec 90,692,000,000 (Schedule 1) of 2007/08 Supplementary Expenditure dev 51,699,000,000 (Schedule 1) of 2007/08 Supplementary Expenditure 81,910,614,000 (Schedule 1) of 2007/08 Total 224,301,614,000

However, contrary to the provision under the PFAA, 2003, no source of funds (financing requirements) were indicated in the supplementary schedules. This could result into the Uganda Consolidated Fund Account being perpetually over drawn.

In a response from the Ministry, it was explained that Supplementaries are funded through Budget cuts on discretionary budgets, additional revenue and savings within the budget. In effecting budget cuts, efforts are made to protect critical expenditures such as those directly addressing poverty (PAF), statutory expenditures, funding for Local governments and security related expenditures. He further explained that the above sources of funding are submitted as part of the documentation when requesting Cabinet to approve the Supplementaries.

It is recommended that for any supplementary budgeting, the proposed expenditure should always be supported with corresponding financing sources in order to provide complete information to all the responsible authorities so that they make informed decisions.

3.15 Release of Funds Review of the releases report shows that a total of Shs.1,492,779,084,448, representing 35% of the annual amount released, was released in the last quarter

58 of the financial year with Shs 705,801,133,593 being released in June alone. Details are indicated in the table and graph below; A review of the UCF account shows that Shs 324,052,373,484 was drawn from the account in the last two weeks of the month of June with Shs 52,903,870,515 drawn on the last day of the month.

The Table and Graph below indicates monthly releases made to entities.

Period Total Jul 07 150,668,741,530 Aug 07 259,134,650,031 Sept 07 302,852,457,349 Oct 07 447,007,992,692 Nov 07 378,532,334,531 Dec 07 200,398,235,548 Jan 08 461,199,331,228 Feb 08 298,850,271,797 March 08 311,149,579,134 April 08 438,670,225,634 May 08 348,307,725,221 June 08 705,801,133,593 Total 4,302,572,678,288

59 Total Monthly releases

800 700 Total amount

Billions 600 500 400

300 Amount Amount in 200 100 0

Jul 07 Jan 08 Aug 07Sept 07Oct 07 Nov 07Dec 07 Feb 08 April 08May 08June 08 March 08 Month

The release of the bulk of budgeted funds to entities at the end of the year does not allow Accounting Officers to properly plan for their expenditures and procurements. As a result, resources can be misused and procurements may be rushed and in the process procurement regulations may be circumvented. Entities also fail to utilize all the funds resulting into unspent balances despite having outstanding commitments. Indeed a number of entities were not able to utilize the funds released by year end and this had to be returned back to the consolidated fund as required by the law.

To enable entities plan properly for the use of resources and to avoid misuse of resources and circumvention of procedures, I advised treasury to ensure that funds are released early enough to the MDAs

It was explained that the smooth release of funds was hindered by absence of work plans and procurement plans during the first quarter, hence affecting the release performance during the subsequent quarters. This ultimately also led to larger releases in the fourth and last quarter. He also explained that the Ministry had issued new guidelines requiring the spending entities to have a Ministerial

60 Policy Statement, Annual Work plans and Procurement plans by 30th June so as to enable them project the limits and releases for the following year.

3.16 Recording of Project Support Grants In order to ensure that all government receipts are properly recorded and optimally safeguarded, the Accountant General keeps a record of all grants extended to the country by developing partners. It was however noted that in many instances, Treasury records were not regularly updated and as a result a substantial amount of grants were shown as un-disbursed as at the time of expiry of their final disbursement dates. Indeed, the records show that Shs.1,341,427,887,364 worth of grants were not disbursed to government during the period under review although further review and other corroborative evidence from the recipients shows that a number of grants were disbursed directly to them.

I advised Treasury to ensure that a complete record of all disbursements/grants are captured and properly recorded for control and monitoring purposes.

The Accountant General explained that many disbursements to these projects were done directly to the beneficiaries by the donors without confirming to the AGO. He further explained that starting 2008/2009, regular reconciliation exercises will be undertaken across all grant funded projects to confirm all their disbursements.

3.17 Statement of Performance The Public Finance and Accountability Act, 2003 requires the production of Statements of Performance by Accounting Officers which show the outputs achieved during the year. Implementation of this requirement was deferred until a suitable mechanism was established by the Accountant General for its implementation.

With the introduction of Results Oriented Management (ROM) by the Ministry of Public Service and the requirement by Ministry of finance for all accounting officers to produce quarterly performance reports, Treasury should liaise with the two

61 institutions to work out and agree on a suitable reporting framework for the statement of performance.

The Accountant General explained that with the recently introduced performance contracts for Accounting Officers his office intends to develop a guideline for votes to prepare this statement.

I await the results of this implementation.

3.18 Closure of Tax Accounts at the Year End

Review of the Development Budget analysis report shows that a total of Shs.19,443,449,512 remained as balances on the tax item 312204 under various ministries. The error arose from wrongly posting the end of year Manual JVs for 2006/07 on wrong projects other than those projects where the releases for taxes were made. This gave rise to perpetual debits and credits on this item for the various vote cost centers and projects that were affected.

VOTE PROJECT ACCOUNT PAYMENTS OPM 14 312204 1,567,716,180 OPM 922 312204 265,480,745 Tourism, Trade & Industry 248 312204 217,000,000 Energy 325 312204 312,300,941 Energy 328 312204 134,783,352 Energy 329 312204 77,911,093 Energy 330 312204 3,814,219,118 Energy 331 312204 208,682,234 Energy 940 312204 12,845,355,849 Total 19,443,449,512

Similarly, a number of Ministries wrongly closed the gross tax item 312206 for the financial year 2007/08 on Vote cost center 00 and project 0000 with the total amount of Gross tax release instead of the individual cost centers and projects. This cost center remained with credit balances while the individual cost centers that received the Gross tax transfers remained with debit balances. These include:-

62 Ministry of Local Government (4,500,000,000) Trade and Industry (499,412,905)

The Accountant General explained that the error arose from posting of Journals at aggregate level rather than individual item level.

I advised the Accountant General (Treasury) together with the respective ministries to pass proper journal entries to close off the outstanding balances on the respective vote cost center and projects on the system as part of end of the year closure procedures.

3.19 Cash Clearing Balances

The equivalent amount of the unpresented cheques, for the period ending June 2007 was credited on the system account (Cash Clearing Account) to cater for unpresented cheques that had not cleared during the year. In the event that some cheques are not presented at all and become stale, the balances on the cash clearing accounts in the various Votes should be transferred back to the UCF Account and the statement of Changes in Equity (Net worth) adjusted by Debiting the Cash Clearing account and Crediting the Reserves.

However, the following votes still had balances on the Cash clearing accounts for 2006/07 outstanding.

Vote Name Amount Adjustment as per Vote accounts 002 State House 61,406,544 0 003 Office of the Prime 465,252,450 519,571,671 Minister 004 Defence 44,989,889,981 0 007 Justice and Const. Affairs 76,491,380 0 009 Internal Affairs 4,592,535 1,605,683 015 Tourism Trade and 106,661,376 0 Industry 017 Energy and Minerals 11,330,494 30,670,856 018 Gender 19,579,037 0 45,735,203,797

63 I recommend that the respective Votes should be advised to pass the necessary JVs and transfer the balances to the Consolidated Fund Account.

3.20 Basis of Accounting

Some votes like NEMA, NARO, PPDA etc, have adopted accrual basis of accounting in the preparation of their financial statements although the general policy requires use of cash basis with modifications.

Discussions with the Accounting Officer revealed that authority has been given to some while others have been denied.

There is need for guidance on transitional arrangements for the move to full accrual basis of accounting.

64 4.0 OFFICE OF THE PRESIDENT

4.1 Payables A total of Shs.29,931,732,014 is disclosed as outstanding liabilities at the close of the year. The bulk of the amount relates to pension liabilities. Of that amount, shs.51,241,934 was incurred during the year contrary to the commitment control procedures, and Shs.18,392,910,924 was a result of an adjustment of previous arrears which had not been recognised in the financial statements. The adjustment lacked supporting documentation. There is very little progress being made to clear the outstanding arrears. Commitments which remain outstanding for a long time expose the Ministry to the risk of litigation.

The Accounting Officer explained that for the pension‟s arrears, the problem was caused because of the law allowing ISO staff to be paid even if they are on leave. This has led to the accumulation of the arrears.

4.2 OIC Conference A total of Shs.1,054,272,640 was disbursed to the Ministry by the Ministry of Foreign Affairs to cater for activities relating to the Islamic Conference. The amount was subsequently paid out to the Inspector General of Police to facilitate activities of the security and accreditation committee. By the time of issue of this report accountability documents for Shs.724,528,700 and Shs.241,523,480 (classified) had been presented to the Office of the President leaving documents involving expenditure of Shs.88,220,460 still being awaited from the Police Department.

A status report arising out of examination of the accountability will be given in due course.

4.3 Unrecovered funds from UBC At the close of the year Shs.24 millions remained un recovered to the Office by Uganda Broadcasting Corporation (UBC).

65 The Accounting Officer explained that despite numerous communications to management of UBC no response has been received. Intervention by the Permanent Secretary, Office of the Prime Minister has not yielded any results. She promised to seek guidance from other appropriate authorities on the way forward.

4.4 Unacknowledged payments It was observed that the Office made a number of payments to various service providers including Uganda Revenue Authority.

However, a further scrutiny of the documents supporting payments revealed that the service providers did not acknowledge receipt of funds by way of issuing receipts. Payments to Uganda Revenue Authority amounting to Shs.65,316,216 in respect of Withholding Tax were also not acknowledged.

In absence of acknowledgements (receipts), it was difficult to confirm whether the intended beneficiaries received the funds. The Accounting Officer explained that with the introduction of EFT payment system challenges were met in ensuring providers issue acknowledgements. I advised the Accounting Officer to seek guidance from the Accountant General on the enforceability of receipts.

4.5 Motor Vehicles in Garages Physical verification of the motor vehicle fleet reveals that there are a number of government vehicles which have been abandoned at various garages around Kampala. These vehicles have been in garages for as long one or more years without being repaired.

Abandoned vehicles face a risk of being vandalized in the garages which may lead to losses to government.

The Accounting Officer explained that 20 vehicles were in garages because the Office does not have enough parking space. She also stated that the disposal process was underway for the boarded off vehicles.

66 4.6 Off IFMS Processes It was noted that job orders for repairs and procurements were incurred off the IFMS.

In addition, items were received before the issuance of Local Purchase Orders, which took as long as 4 to 5 months. The issuance of LPOs off the IFMS is irregular as it can lead to over-commitment of funds resulting in domestic arrears.

The Accounting Officer explained that this was done in cases of urgent repairs needed for vehicles of entitled officers.

5.0 STATE HOUSE

5.1 Excess Expenditure The Ministry incurred expenditure in excess of appropriation of Shs.2,121,055,112 without relevant authority. This is majorly a result of weaknesses in controls over budgetary expenditure.

The Accounting Officer is advised to further strengthen the controls over budgetary expenditure as excess expenditure can negatively impact on the implementation of other planned activities.

5.2 Cash and Cash Equivalents and Statement of Changes in Equity The cash and cash equivalents of the previous year (2006/2007) were stated net of cheques that were not presented by 30th June 2007. The equivalent amount of the unpresented cheques, Shs.2,917,508,327, was credited on the system account (cash clearing account) to be utilised for purposes of bank reconciliation when the cheques eventually cleared in the bank. However, a balance of Shs.61,406,544 remained outstanding on this system account by 30th June 2008, representing cheques that were never presented to the bank for various reasons.

The cash balances should have been adjusted and the balances transferred to the Consolidated Fund and the reserves accordingly adjusted. However, this was not done.

It is recommended that appropriate adjustments to the financial statements be made and balances transferred to the Consolidated Fund.

5.3 Nugatory Expenditure A local firm sued the Attorney General in the High Court of Uganda, Commercial Division, under civil suit No.556 of 2003 for failure to settle outstanding bills owed to the firm. Judgement was entered in favour of the Plaintiff for the sum of Shs.99,814,600 being the principal amount together with interest thereon at the rate of 6% per annum from 23rd March, 2003 when the last invoice was raised. The firm was paid Shs.30,539,793 as interest and costs of consent judgement entered into on 20th July 2004.

The expenditure is considered nugatory as it could have been avoided had the commitment control system been adhered to and the amount due to the firm settled promptly.

The Accounting Officer explained that the unsettled bills arose out of inadequate funding.

It is recommended that commitment control procedures be followed to avoid unnecessary nugatory expenses.

5.4 Domestic Arrears The commitment control system requires Accounting Officers to make expenditure commitments only when the budget for such expenditure is sufficient and the funds are actually available for commitment. However, State House incurred a total of Shs.2,160,003,674 in domestic arrears for goods and services consumed during the financial year.

The Accounting Officer explained that during the year inspite of the reallocations and supplementaries, they still experienced budgetary pressures on items that were under-funded, making it impossible to live within the budgetary provisions hence giving rise to arrears.

68 5.5 Purchase of a new Vehicle (Caravan) An agreement was signed on 3rd December 2007 between the Government represented by State House and M/s Rutenkolk Caravanning Gmbh and Co- Germany for supply of a new Caravan at a cost of Shs.736,920,020 (Euros 289,555) with a special condition of the contract providing for 50% down payment on order and the balance after inspection and confirmation of satisfactory works.

The Contracts Committee allowed the use of the direct procurement method (Minutes of 5th meeting on 23rd August 2007) because of security reasons and recommended the award to be made to M/s Bimobil at €450,000. However, I was not provided with proper explanation on how another firm Rutenkolk Caravanning Gmbh & Co, claiming to be the sales and service representatives of the former, came to sign the contract with State House.

In the circumstances, I was not able to confirm that the procurement complied with the recommended procurement procedures.

6.0 OFFICE OF THE PRIME MINISTER

6.1 Funds Not Accounted For

The Ministry paid a total of Shs.29,600,471,000, to other Accounting Officers to cater for services to be carried out on behalf of the Ministry. An additional amount of Shs.920,330,000 was paid to the Chief Administrative Officers to cater for the restocking project. The money was to cater for the Northern Uganda Post War Recovery Plan (project code 0932), the Resettlement and Restocking project (project code 0017) and the Humanitarian Assistance Project (project code 0922). However, there were no progress reports in respect of works carried out. There was also no evidence that the intended beneficiaries received the money. Only one district (Kiboga) attempted to account for the funds advanced. However, the accountability lacked supporting cash receipts for the re-stocking items reported to have been purchased. All other districts did not submit accountabilities and by the time of audit, a total of Shs.30,520,801,000 had not been accounted for.

69 In his response the Accounting Officer stated that he had written to all the concerned Accounting Officers including Chief Administrative Officers (CAOs) who received the funds to submit the relevant accountabilities for audit.

6.2 Payables

There were no creditors' ledger accounts being maintained, electronically or manually, to keep track of the outstanding commitments, contrary to the requirements of the Treasury Accounting Instructions, 2003, Part I - Finance. In addition, the payables balance of Shs.7,094,608,972 stated in the balance sheet, is not supported by relevant documentation. As a result, I was unable to verify the amounts stated as payables in the accounts.

6.3 Withholding Tax (a) Non-Deducted Withholding Tax Withholding tax (6% WHT), amounting to Shs.58,159,240, was not deducted from payments made to a number of suppliers contrary to the requirements of the Income Tax Act, 1997.

The Accounting Officer explained that the anomaly was caused at the time of setting up these suppliers on the IFMS whereby their WHT codes were not activated by error. He also stated that he had written to all the affected suppliers for purposes of recovering the tax not withheld.

I await to be advised on the recoveries made.

(b) Withholding Tax Certificates Paragraph 260 of the Treasury Accounting Instructions (TAIs) requires the Accounting Officer to issue individual certificates to the suppliers for the withholding tax deductions made. Uganda Revenue Authority is also under obligation to issue certificates (receipts) for payments made. However, there were no records of those certificates at the Ministry. It was explained that it is difficult to get those certificates from Uganda Revenue Authority. This state of affairs is

70 unfair to the companies wishing to account for their income tax obligations. It is also a breach of the regulations.

The Accounting Officer explained that the delay to issue the Tax certificates was regrettable and promised to follow up the matter with Uganda Revenue Authority to ensure that all payments made are acknowledged and all companies involved will be informed.

I have advised the Ministry always to liaise with Uganda Revenue Authority and the Accountant General‟s Office for purposes of obtaining withholding tax certificates for the companies whose taxes have been paid.

6.4 Non-award of Annual Salary Increments

Chapter 1-B-d-1 of the Standing Orders states that officers who hold offices graded in an incremental scale will, subject to the maximum of the scale, receive an annual award of increment. However, it was noted that a number of officers who qualify have not received their annual awards.

The Accounting Officer explained that a list of all staff whose annual increments had stagnated was being compiled with a view of rectifying the anomaly with Ministry of Public Service.

6.5 Northern Uganda Social Action Fund

6.5.1 Excessive Bank charges (shs.193,042,107) It has been noted that the following charges were debited onto the project special account by Bank of Uganda in respect of the costs of effecting transfers of Project funds to other banks:- Date Charges($) Exchange rate Charges(Ushs) 8-Aug-07 970.00 1,723.90 1,672,183.00 6-Sep-07 43,599.34 1,782.22 77,703,615.73 27-Dec-07 20.00 1,702.29 34,045.80 16-Jan-08 45,035.00 1,717.35 77,340,857.25 1-Mar-08 20.00 1,697.31 33,946.20

71 10-Apr-08 21,285.00 1,701.92 36,225,367.20 10-Jun-08 20.00 1,604.64 32,092.80 Total 110,949.34 1,739.91 193,042,107.98

The above charges appear to be high and had not been budgeted for. This can lead to failure to implement all the planned project activities as a result of such charges.

Management is advised to negotiate lower rates with the Bank of Uganda.

Management has explained that the matter was taken up with the Accountant General who in turn took it up with Bank of Uganda. Bank of Uganda refunded all the Bank Charges they had deducted from the Project‟s Special Account, totaling to $460,837 (United States Dollars Four Hundred Sixty Thousand, Eight Hundred Thirty Seven Only). The matter will be followed up again in the next audit since it was an issue which had also occurred in the previous year.

6.5.2 Fixed Assets Management A review of the fixed assets management of the project revealed the following:- During the year under review, a fixed asset register was opened up as recommended in the previous year‟s audit report. However, it was noted that the register did not capture important information regarding these assets such as date of purchase, location and condition of the assets.

Further still, some of the assets inspected at the NUMU headquarters had not been engraved at the time of inspection. This can make it difficult to identify such assets in case of loss.

Management is advised to include all the important asset details in the fixed assets register. In addition, all project assets should be engraved with both the project name and unique identification numbers.

Management agreed to follow up the matters and take necessary action.

72 6.5.3 Accountability for Advances It has been noted that some project staff delayed to submit accountabilities for funds advanced to carry out project activities. An age analysis of the advances outstanding at the end of the financial year was as follows:-

0-3 3 - 6 6 - 9 9 - 12 MORE THAN TOTAL NAMES MONTHS MONTHS MONTHS MONTHS 1 YEAR (Shs) Activity Advances Ebitu James 817,476 817,476 Adukule Jimmy 470,000 470,000 Owori Esther Othieno 6,000 6,000 Elizabeth Lukonji 1,090,000 2,573,500 3,663,500 Malinga John Calvin 2,331,700 2,331,700 Kisira Simon 4,746,000 4,746,000 Lubanga Timothy 21,395,000 21,395,000 Ouma Richard Onyai 280,000 280,000 Ocheng Robert 150,000 150,000 To DISTRICTS ADJUMANI 139,880 139,880 APAC 7,641,407 7,641,407 ARUA 1,122,248 1,122,248 GULU 3,709,908 3,709,908 KABERAMAIDO 30,000,000 10,199,870 40,199,870 KATAKWI 8,370,263 8,370,263 KITGUM 1,624,366 1,624,366 KOTIDO 5,309,513 5,309,513 KUMI 16,928,001 16,928,001 LIRA 7,453,299 7,453,299 MOROTO 7,284 7,284 MOYO 8,501,279 8,501,279 NAKAPIRIPIRIT 13,694,275 13,694,275 NEBBI 76,807 76,807 PADER 1,872,234 1,872,234 PALLISA 6,366,883 6,366,883 SOROTI 7,675,450 7,675,450 YUMBE 5,782,894 5,782,894 TOTALS 126,160,017 2,331,700 20,448,820 - 21,395,000 170,335,537

It was noted from the above analysis that advances amounting to shs.41,843,820 had been outstanding for more than six months by the end of the financial year. Delays in submission of accountabilities can lead to falsification of documents.

73 Management is advised to obtain the accountabilities to enable a verification by this Office and ensure that in future advances to project staff are promptly accounted for.

Management has explained that the concerned officers were contacted and all the accountability had been provided for necessary verification. The Advances to Districts were still on the Project District Accounts as at 30th June 2008.

6.5.4 Stores Management It was noted that there was no stock taking/board of survey carried out at the end of the year as is required under section 7.4.1.5 of the Financial Management Handbook. This implies that any errors and omissions (whether intentional or otherwise) may go undetected.

Management is advised to carry out periodic stock taking to provide an independent check on the completeness of the store records.

Management has promised that this anomaly will in future be managed through early planning and coordination.

6.5.5 Project Staffing Position It has been noted that the following key staff positions were vacant at the time of audit in October 2008:- Executive Director Director Finance & Administration NUSAF District Technical officers (6) District accounts assistants (7) Lack of adequate staff can lead to failure to implement all the planned project activities. Management is advised to ensure that the above key positions are filled.

Management has explained that the positions have been filled, though in acting capacities, as detailed below:

74 . Executive Director The Director of Systems was appointed as Ag. Executive Director, with effect from 1st November, 2007.

6.5.6 Subprojects i) Accountabilities for Advances to Subprojects It has been noted that several subprojects delayed to submit accountabilities for advances obtained from NUMU. Some advances remained outstanding for a period of more than one year. Accordingly, a total of shs.18,659,946,284 remained outstanding by the end of the year as summarised below:-

Disbursement Unaccounted % District (shs) Accounted (shs) (shs) Age analysis of amounts unaccounted for (shs) age Unac 12 Months coun 0-3 Months 3-6 Months 6-9 Months 9-12 Months and Above ted Adjumani 3,528,680,535 3,329,039,753 199,640,782 - 199,640,782 - 6% Apac 14,851,465,209 13,736,231,096 1,115,234,113 614,418,014 - 500,816,099 8% Arua 17,236,806,496 14,872,906,667 2,363,899,829 545,985,364 1,817,914,466 14% Gulu 10,964,786,120 9,726,460,554 1,238,325,566 339,291,123 899,034,443 - 11% Kaberamaid o 4,320,478,593 4,270,975,390 49,503,203 49,503,203 1% Katakwi 9,138,616,230 7,748,226,878 1,390,389,352 136,325,987 616,897,911 637,165,454 15% Kitgum 11,953,197,426 10,940,141,890 1,013,055,536 79,781,826 587,265,381 - 346,008,329 8% Kotido 6,841,953,057 5,337,052,940 1,504,900,117 705,358,340 799,541,777 - - 22% Kumi 11,273,112,217 8,928,082,250 2,345,029,967 459,380,381 298,496,484 1,587,153,102 21% Lira 13,693,911,809 12,162,832,800 1,531,079,009 503,487,965 730,707,979 296,883,065 11% Moroto 5,680,595,463 3,843,201,025 1,837,394,438 1,317,253,258 295,133,350 - - 225,007,830 32% Moyo 3,207,073,383 3,044,489,239 162,584,144 162,584,144 - 5% Nakapiripirit 3,984,731,404 3,186,186,308 798,545,096 310,716,752 272,522,189 - 177,807,895 37,498,260 20% Nebbi 6,703,097,534 6,013,443,452 689,654,082 629,354,676 60,299,406 10% Pader 8,014,350,615 6,632,121,951 1,382,228,664 - 1,018,685,295 350,293,363 13,250,006 17% Pallisa 12,372,110,619 11,965,079,636 407,030,983 287,629,509 119,401,474 3% Soroti 9,009,440,143 8,930,449,902 78,990,241 35,410,938 43,579,304 1% Yumbe 3,475,016,524 2,922,555,361 552,461,163 83,999,000 468,462,163 - 16%

Total 156,249,423,376 137,589,477,092 18,659,946,284 6,260,480,479 8,227,582,404 3,372,311,083 537,066,229 262,506,090 12%

75 Delays in submission of accountabilities can lead to falsification of accountabilities and a possible loss of project funds.

Management is advised to ensure that all subprojects are closely monitored and followed up to ensure that accountabilities are submitted promptly.

Management has attributed it to several factors including difficulties in documenting paper accountability, and delays in certification of works by the technical persons at the District. ii) Field inspections The audit also included an inspection of activities being implemented by the districts and the subprojects. However the most common findings included the following:- . Incomplete structures/buildings due to delays in disbursement of funds . Defects on structures already completed . Sub standard physical works . Misuse of funds by community subprojects . Several subprojects having problems with ensuring sustainability of investments done. For example purchase of drugs for treatment of cows, purchase of feeds for poultry, etc. . Delays in accountability for funds by subprojects . Delays in disbursement of funds from NUMU especially the GOU contribution The same issues had also been pointed out in the previous audit report.

The above matters require urgent management action. Regarding incidences of alleged misuse of funds by the subprojects, management should properly investigate the cases and report the culprits to the appropriate authorities.

In their response, management explained that the irregularities cited in the sub- project implementation in the different districts ranging from incomplete structures, defects on structures already completed, sub standard physical works, misuse of funds by community subprojects, and problems with ensuring sustainability of investments done, are being addressed through regular

76 consultative meetings with District Engineers and other technical staff. NUMU has, at such fora pointed out the different roles and responsibilities of the different stakeholders especially in the districts (where the local government officials are responsible for supervision and technical advice to the communities) on implementation of the NUSAF sub-projects.

iii) Supervision Mission Recommendation On Sub Projects It was noted that during the World Bank supervision mission that was held between 5th to 9th May 2008, an amount of shs.160,017,268 that had been advanced to a total of 32 sub projects that were categorized as „problematic‟ was to be refunded by GoU to the special account by 30th June 2008 (this amount is part of the amount outstanding as at 30th June 2008 as noted under paragraph e(i) above). However, this amount had not yet been refunded by the end of the financial year under review.

Failure to implement the donor recommendations can result into suspension of the loan.

Management has explained that GoU made the refund through funds it had sent on the NUSAF GoU Uganda shillings account. The instruction to Bank Of Uganda was made on 1st July 2008, with a follow on letter dated 8th July 2008. Bank of Uganda effected the transaction on 18th July 2008, as shown on the copies of letters to Bank of Uganda, Bank Statement, as well as the payment vouchers.

This matter will be verified in the subsequent audit

6.5.7 Status of Prior Year Key Audit recommendations The status of the recommendations included in the previous year audit report was as summarized below:-

Issue raised Remarks 1 Delays in remitting taxes deducted at source Not repeated 2 Excessive bank charges not budgeted for Repeated as explained under paragraph 5.1 3 Delayed submission of accountabilities by staff Repeated 4 Failure to carry out board of survey Repeated

77 5 Vacant staffing positions Repeated 6 Anomalies at the subprojects Repeated as shown above

6.6 Procurement Contract - OPM/SSPI/2006/2007/00019

On the request of the Criminal Investigation Division vide letter CID/C40/2007 Fraud an audit was carried out regarding the alleged embezzlement of Shs.1,300,000,000 (one billion three hundred million shillings) meant to facilitate internally displaced persons in the North and Eastern Region. The request specifically highlighted procurement contract number OPM/SSPI/2006/2007/00019. Accordingly the audit was carried out and a report issued to CID. In the report, I highlighted various irregularities in the procurement and management of the contract.

The exercise aimed at ascertaining whether there was compliance with the procurement laws during the procurement of seeds and farm implements and also to ascertain whether farm seeds and farm implements were actually delivered and in accordance with the approved samples. In addition it was also aimed at ascertaining whether there was abuse of financial regulations.

FINDINGS

6.6.1 Variations from the JMC’s Decision

According to available communication, funds allocated to Office of the Prime Minister were supposed to be spent as indicated below:

i. Purchase of resettlement kit (hoes, pangas, axes, sickles, 3,300,000,000 seeds) ii. Purchase of ox-ploughs 1,762,000,000 iii. Mobilization & Transport 500,000,000

5,562,000,000

78 The plan was based on the Emergency Humanitarian Action Plan for Northern Uganda with a budget of Shs.18,601,690,000.

However, it was noted that ox-ploughs were not purchased. Instead funds for the ox ploughs of Shs.1,762,000,000 were diverted to other expenditure items. I was not provided with evidence regarding the authority to divert the funds from the intended activity.

Management explained that the purchase of ox-ploughs although originally in the plan was subsequently dropped because it was not envisaged as an immediate action which was needed to address the needs of the affected population at the time.

6.6.2 Change of bid requirements –lot 2: Purchase of Beans and Pangas

Under the provisions of section 148 (3), of the PPDA Regulations, a request for clarification from a bidder can lead to an amendment of the solicitation documents by way of issuing an addendum. Under section 148 (5) the addendum shall be issued in writing and the same information shall be passed to all bidders. However, the Ministry amended the requirement after the receipt of the bid documents by changing the sample to be supplied from certified seeds to standard seeds and solicited directly quotations from two firms. Under the provisions of section 117 (3) of the PPDA Regulations, at least three firms should have been contacted to supply or a waiver obtained from PPDA .

It was also noted that the contracts committee changed the approved sample of pangas from the curved type to that of pointed 16” type of pangas on request of the contracted supplier after failing to fulfill his obligation under the contract. The change would ordinarily require a competitive approach to generate fairness as required by the Procurement Regulations.

Management has explained that the Committee after going through the bids realized that there was no bidder qualified to supply the required seed and that the certified seed was not available in the market. The Committee then decided

79 that the two qualifying seed companies be asked to quote for the standard beans after considering that the other firms did not have the basic requirements.

The Committee also considered the time left to the planting season and the fact that it would not be cost effective to re-advertise the tender which would still attract the same bidders since the number of seed suppliers in the country are limited and majority had already bidded. With regard to the pangas, management stated that the supplier withdrew the request of a variation and proceeded to supply the pangas as earlier specified.

I advised management to always comply with the provisions of the PPDA Act. A waiver could have been sought from PPDA under exceptional circumstances.

6.6.3 Contract amendments

A local firm was contracted to supply farm implements worth Shs. 1,400,700,000. The terms of payment agreed upon were that payment shall be made after delivery. However, after delivery of items worth Shs.25,090,000 (1.2 % of the entire contract value), the supplier requested for a contractual review on clauses regarding payment of supplies and inadequate funding. The Addendum to suit the financial requirements of the supplier was accordingly made and this seemed unfair to other firms that participated. I was not satisfied that the firm‟s financial capability was properly considered at the procurement stage. Management explained that the company is a reputable Firm in Uganda and the sole manufacturers of Hoes in the country. I advised management to comply with the provisions of the PPDA Act.

The following anomalies were identified with regard to contracts for supplies:

6.6.4 Rejected Poor Quality Goods: - Ground nuts

During the inspection of Gulu District stores it was noted that 40,835 kilograms (21,600 for Amuru and 19235 for Gulu) of ground nuts seeds worth Shs.97,677,320 delivered between February 2007 and May 2007 were still in stock un distributed. According to the District Management and technical reports issued

80 by the district, it was observed that the seeds were of poor quality. As a result management decided against distributing the seeds and was now seeking advice on how the seeds can be disposed. It was further noted that despite the shortcoming, the firm was further rewarded with an additional 15% of the original contract to supply more items.

Management explained that the germination capabilities of the seeds provided kept on varying from one District to another. In some districts the seeds germinated while in others the same seeds failed to germinate, a failure attributed to a combination of factors. Further investigations should be carried out by management with a view of establishing whether the right supplies were made and if not, remedial action should be taken against the supplier.

6.6.5 Mixed Deliveries

Under the provisions of section 9, of the contract entered into between a local company and the office of the Prime minister dated 13th March 2007, 300,000 (Three hundred thousand) pieces of crocodile hoes were to be supplied. Through an addendum, the quantities were increased by a percentage of 15% hence making it 345,000 pcs. A stock take exercise conducted in Gulu district stores (ministry of works stores) on 11th June 2008 revealed that 29,000 pcs of hoes were delivered and taken on charge. However, a physical count of the balances at hand revealed existence of mixed deliveries with three types of hoes all on the same bundle awaiting to be distributed to various IDPs.

Out of the 904 hoes found in the store, 189 pieces were not of the recommended type. Similar deliveries of a mixed nature were in all the other districts which benefited from the supplies. I could not verify stocks in the other districts as all hoes had already been distributed to IDPs.

It was further noted that out of a total of 345,000 pieces worth SHS. 1,207,500,000 which were to be delivered as per the contract agreement only 216,840 pcs worth Shs.758,940,000 were delivered, leaving 128,160 worth

81 Shs.448,560,000 not delivered. Of this 45,335 pcs (21%)worth Shs.159,377,400 did not meet the specifications.

Management has explained that:- (i) The decision to increase supplies by 15% was a management decision prompted by the demand for hoes. A mix in deliveries was because, NGOs, were also supplying hoes. It was not possible to separate the stores since storage facilities were inadequate. (ii) The local company was not able to meet its contractual obligation to supply the items “at a go” due to the inability of the firm to procure the desired quality.

Management is advised to follow up the matter of un delivered items and ensure that all the quantities are delivered.

6.6.6 Unvouched Expenditure Examination of IFMS records revealed that Shs.1,156,103,872 was paid out to suppliers with no documentary evidence in form of vouchers and supporting documents.

Management explained that the contracts referred to above were concluded towards the end of the Financial Year, i.e. March 2007. It was foreseeable at that time that these deliveries would be completed in the remaining three months, yet there was a possibility of returning the money to the Consolidated Fund.

Management is advised to provide the necessary documents and in future to adhere to the requirements of the Treasury Accounting Instructions.

6.6.7 Payment for Undelivered Supplies

Section 1 of Addendum number 1 of the contract agreement between the Ministry and the suppliers dated 17th May 2007 required that payments be made as and when goods are delivered on presentation of invoices and certified delivery notes.

82 However, it was noted that Shs.1,316,658,000 (net of tax) was paid out to a local company in respect of full delivery of the contracted quantities for hoes and pangas.

Management explained that as a cushion for undelivered supplies, the local company gave the office of the Prime Minister cheques worth Shs.421,137,000 (Four hundred twenty one million, one hundred thirty seven thousand shillings only). During discussions, it was stated that the cheques were taken by Police during investigations. I advised the Accounting Officer to follow up the matter to ensure that the amount is recovered from the firm.

6.6.8 Over Payment

Three local companies were contracted to supply various items for delivery to IDP‟s. A total sum of Shs.3,110,608,658 was paid out via different cheques to the suppliers. A reconciliation of the payments however, has revealed an over payment to the suppliers equivalent to Shs. 174,659,658.

Management has explained that the issue of over payments has been noted and steps will be taken to recover the money overpaid.

6.6.9 Unaccounted for Funds

Shs.5,062,000,000 was released for the procurement of seeds and farm implements for distribution in the IDPs. A reconciliation of amounts contracted revealed that a total of Shs.4,650,400,000 was committed to the procurement of items for which the monies were released. This leaves a balance of Shs.411,600,000 unaccounted for. There was no budget availed for inspection regarding the expenditure proposals for the amount at hand.

Management is advised to provide accountability for audit verification.

6.6.10 Storage Conditions

It was observed in all the beneficiary districts that there were inadequate storage facilities for the bulk deliveries made. In addition the conditions under which the

83 seeds were kept were inappropriate for the purpose for which they were to be subsequently used.

It was also observed that there were very scanty records available for my verification. In Pader district, all records were not availed as the officer responsible for the stores was on interdiction by the time of audit.

6.6.11 Lack of District Involvement

The inspection revealed that the district storekeepers were not adequately prepared to receive goods from the suppliers. Neither samples nor any kind of briefing regarding deliveries was made hence making them prone to receiving whatever was being delivered regardless of the quality. In addition, the store keepers were not technical enough to assess quality of deliveries of such nature. This omission provides for loopholes that might otherwise be used to deliver sub standard products.

6.6.12 Logistical Support

Whereas the items were delivered to the district headquarters for onward distribution to various IDPs, the districts were not prepared in terms of logistics to receive the bulk deliveries of the seeds and the farm implements. The inability to provide for logistical support to the district administrators created some kind of emergency and greatly impacted on the way items were stored and distributed as funds necessary for the efficient distribution were not readily available. This resulted into a number of beneficiaries receiving the items late.

Management is advised to consider the logistical issues before dispatching items to the districts.

7.0 PUBLIC SERVICE 7.1 Pension Arrears Settlement Strategy

On 1st July, 2007, the overall pension liability (including a contingent liability of Shs.107,000,000,000 in respect of army veterans) was reported as

84 Shs.297,841,680,614. Shs.186,462,900,000 of this liability was paid during 2007/2008 leaving a balance of Shs.111,378,780,614 outstanding. Pensions amounting to Shs.124,548,204,698 were accrued during the year while Shs.107,000,000,000 of the contingent liability was written off altogether, bringing the overall pension liability as at 30th July 2008 to Shs.128,926,985,312.

In the budget estimates for the financial year 2008/2009, Shs.100,000,000,000 has been allocated towards settlement of the outstanding pension arrears. While it was anticipated that shs.286,000,000,000 allocated for the two financial years would almost be sufficient to off-set the overall pension debt, a lot more funds will be required to have the arrears fully settled as explained below;

(a) Local Government Pension Arrears

In the budget estimates for the financial year 2007/2008, the Ministry was allocated Shs17,500,000,000 to settle the Local government pensions arrears. According to a report on the Local government pension arrears verification exercise, only 2,766 out of 6943, (approximately 40 percent) claimants have so far been paid as at 30th June, 2008. Apparently the budget allocation was not based on the actual arrears position for local governments. The Accounting Officer explained that the budget allocation was based on a position that was arrived at in 2001 and yet payment was made in 2007. Due to passage of time there are additional claims of pensions arrears in local governments that came in.

(b) Inadequate Budget provision for recurrent pension expenses

According to management, the annual pension expenditure is estimated at Shs.152,200,000,000. However, only Shs.78,390,000,000 is allocated each year for the past 3 years. Accordingly, excess monthly pension expenditure is defrayed from funds released to clear pension arrears while newly verified gratuities translate into escalating pension arrears. This matter was also raised by internal audit in their 2007/08 annual report.

85 I advised management to regularly review the implementation of the pension arrears settlement strategy to ensure that challenges are addressed and additional resources mobilized to meet the stated targets.

7.2 Integrated Personnel and Payroll System (IPPS)

IPPS is a computer based system being introduced by government for use by Ministries, departments and local governments to undertake human resource management processes from recruitment to termination including payroll and pension processing. It was formulated and designed through a system study which was carried out in August 2002 – April 2003.

The project is to be implemented in 3 phases. The first phase comprising the IPPS study was completed in April 2003. It is to be followed by a pilot implementation Phase (1st July 2008 – 30th June 2009) and a rollout implementation (1st July 2009 – June 2011).

Review of the progress of implementation revealed that project implementation has been affected by undue time overruns. While the IPPS study was concluded in 2003, implementation started in July 2008 (5 years later). Besides, although it was anticipated that pilot runs should have commenced by July 2008, procurement of soft and hardware have not been concluded.

In the IPPS work plan US $720,000 is provided for procurement of consultants. However, some of the consultancies such as procurement and payroll appear wasteful in that their duties are normal routines of public officials already in establishment.

The Accounting Officer explained that the consultancy team is based on the recommendations by Ernst and Young study 2003 which determined the organizational and resource planning for the IPPS. He further explained that the

86 procurement of the IPPS was stalled by failure to recruit a procurement specialist to offer technical guidance during the evaluation process hence the time overruns.

Management is advised to make a review of the implementation to ensure that project implementation proceeds according to the agreed work plan.

7.3 Salary Arrears

Government is indebted to its employees to a tune of Shs.5,065,795,272 in salary arrears comprising Shs.4,166,552,092 and Shs.899,243,180 for teachers and traditional civil servants respectively.

According to existing guidelines, once a salary arrear claim is not paid in the financial year it is incurred, it is processed by the ministry as a residual arrear. Residual arrears for all government votes are appropriated under the ministry of Finance vote. Unfortunately, these arrears have not received sufficient policy attention resulting into undue delays in settlement. The period for which the arrears are being claimed for dates as far as 1993/94 financial year yet some of the claimants have since been deleted from the government payroll as a result of death, retirement or resignation rendering the possibility of getting paid doubtful.

The Accounting Officer explained that the delays are a result of incomplete and/or delayed submissions of arrears claims by accounting officers and promised to enforce deadlines for submission of the claims, train payroll managers and develop payroll user manuals.

7.4 Public Service Reform Programme

7.4.1 Memorandum of Understanding with UBOS A review of the project records revealed that there was no contractual arrangement between the Ministry of Public Service and Uganda Bureau of Statistics (UBOS) regarding the National Service Delivery Survey. The amount budgeted for this activity is Shs.1.2 billion. The Terms of Reference for the survey

87 did not cover financial reporting and auditing issues relating to the funds. This may cause misunderstandings between UBOS and Ministry of Public Service on who should account and how.

The management of Ministry of Public Service and UBOS should come together and formulate reporting requirements for the funds transferred to UBOS. These terms should also cover audit requirements and how any unutilised funds should be treated.

Management has promised to enter into a memorandum of understanding with UBOS or any other third parties which receive PSRP funding prior to disbursement. This will streamline the accounting relations and obligations with the Ministry of Public Service and such agencies.

7.4.2 Expenditure Relating to the National Service Delivery Survey A reviewed was made of expenditure of Shs.700,000,000 relating to the National Service delivery survey. It was noted that the funds were spent according to the agreed work plan and budget. However, the following weaknesses were observed with regard to the management of accounting records:- Fuel returns from Petrol stations were not received on time creating delay in reconciliation of fuel consumed against the fuel funds advanced. There was no set time limit within which accountabilities were to be submitted by field Officers. This created some laxity in submission of accountabilities. In addition, accountabilities are not checked by the Accounts Staff. This creates risk of inaccuracies and errors. The accountabilities reviewed were not properly filed. This made it tedious to track accountabilities to the payment vouchers.

Failure to improve the organisation‟s monitoring and book keeping could lead to misuse of resources available because it would be easy to manipulate the system by staff taking advantage of the flaws.

I have advised management to liaise with beneficiary institutions to undertake the following:-

88 All fuel reports should be obtained monthly from the petrol stations and reconciled to the fuel book used by the organisation. Reports should also be prepared clearly showing the performance of each vehicle in terms of fuel consumption and maintenance. A time limit should also be set for submission of accountabilities for field advances. For example, all officers should fully account for field advances within a week of completion of the activity. Filing of the accountabilities should be properly done. All accountabilities should clearly indicate the voucher number and cheque number to ease the verification.

Management explained that the weaknesses and recommendations have been communicated to the Executive Director, Uganda Bureau of Statistics (UBOS) for remedial action.

7.4.3 Unutilised Balance on the Uganda Civil Service Retrenchment Account No. 227.207005.1

The balance on the retrenchment account of Shs.605,870,304 has remained intact for the last three years. This amount is a balance of the retrenchment funds allocated by the Development Partners.

Management should liaise with the Development Partners to ensure that these funds are utilised on any pending retrenchments or reallocated to other activities.

Management has explained that the Ministry sought permission from the Development Partners to expend the funds in question but no response was received and therefore it has not been possible to expend the funds in question. A follow up with the Development Partners to utilise these funds should be made.

7.4.4 Engraving Fixed Assets

The PSRP acquired fixed assets during the period under review. It was noted that some of these assets are not engraved with unique PSRP codes. This exposes

89 programme assets to a risk of not being easily identified in case of theft or change of office numbers.

Management should Endeavour to have all the project assets engraved and each asset should be assigned a unique identification code. This will minimise the risk of loss in case of theft or any other eventuality.

Management has promised to address the matter accordingly.

7.4.5 Follow up of Prior Audit Recommendation

Issue Detail Status Project Management Comments Manual PSRP is still No action has It had been envisaged as Government Accounting using a manual been taken policy, that all projects would be System accounting integrated and operated on the IFMS system software. However, to date the MoFPED has not yet integrated all project accounts on the IFMS. Management is exploring the possibility of acquiring software to operate the project accounts. Unexplained Transactions on No action has Follow up with the Bank of Uganda is transactions the special fund been taken being done by the Accountant General on the special account that account require an explanation Appointment All PSRP No action has The implementation of the 3rd phase is of a activities are been taken mainstreamed in the activities of the Coordinator coordinated by Ministry of Public Service and other the Permanent implementing agencies. The Director Secretary of Research and Development is the Public Service liaison officer with the Development Partners. The PSRP co-ordination arrangement requires the Task Managers to make monthly reports to the Permanent Secretary and quarterly reports to the PSRP Development Partner Group Overpayment There was an No action has A letter was written to the Accountant of Bank of overpayment been taken General requesting the Bank of Uganda Uganda from Bank of Management to refund the overpaid Uganda to the amount. In response, the Accountant special account. General took action on this matter. A letter was written to have this amount reversed.

90 8.0 FOREIGN AFFAIRS 8.1 Payables 8.1.1 Overstatement of Payables Included in the payables is Shs.6,861,693,013 due to Kagera Basin Organisation which had wound up. Verifications of records relating to the liquidation have established that the government was only liable to pay gratuity for its staff who were working with the organisation. As at the close of the year, the actual outstanding amount was only US$ 16,000 payable to two (2) former employees as gratuity. The overstatement has not been explained and it has a material bearing on the payables position as disclosed in the financial statements.

8.2 Commonwealth Head Of Government Meeting (CHOGM) and Organisation of Islamic Conference(OIC)

8.2.1 CHOGM Expenditure

Due to conflicting guidance on the accounting for CHOGM expenditure, the Ministry of Foreign Affairs did not undertake a proper consolidation of all CHOGM expenditure. The Ministry expensed all transfers of funds to CHOGM implementing Ministries. This treatment assumes that all funds had been fully spent as at end of year whereas this was not the case as some Ministries had balances at the year end. Both the Ministry of Foreign Affairs and other Ministries that implemented CHOGM claim that consolidation was the responsibility of the other. I was not able to confirm that the amount disclosed as expenditure on CHOGM is properly stated.

8.2.2 CHOGM and OIC Arrears

At the meeting of the Commonwealth Heads of Government held in Uganda in November 2007 and Organisation of Islamic Conference (OIC) held in June 2008 the Ministry, under the Protocol, Immigration and Secretariat Committees, incurred arrears of Shs.7,514,728,023 which were still outstanding in respect of CHOGM (5,509,980,441) and OIC (2,004,747,582). It is not clear when government intends to clear these bills. Included in that figure, is an overdraft amount of Shs.573,430,142 on the CHOGM account. This overdraft was not authorised by Ministry of Finance, Planning and Economic Development as

91 required by the law. The Accounting Officer explained that this was caused by the time constraint within which certain commitments had to be made and the insufficient funds available at that time. He has now requested for a Supplementary funding to settle the bills.

8.2.3 Closure Activities In my earlier report to Parliament on the audit of CHOGM expenditures, it was agreed that the Ministry of Foreign Affairs would coordinate and communicate to the various accounting officers/head of committees of the decision to ensure that all CHOGM activities had to end by 30th June 2008 and a report therefrom be submitted to the ministry. However by the time of audit various committees had not yet closed their accounts. Although the Accounting Officer had requested them to transfer all balances to the UCF and declare any outstanding commitments to the Accountant General, there was no evidence that this was done by the time of our audit.

A status report on closure of CHOGM activities has not yet been provided.

The Accounting Officer explained that a status report on all CHOGM activities was prepared by the National Task Force and forwarded to the Cabinet Sub-Committee for approval and that any recommendations therefrom will be forwarded to my Office.

8.2.4 Recoverable Deposits from Hotels

As at the time of writing the report an amount of US$ 1,501,927 due from the CHOGM hotels had not been recovered from the various hotels. Another amount of Euro €20,562 in respect of revenue due from a media company had also not been received. The delay to pursue such funds denies government its needed revenues. This receivable has also not been disclosed in the financial statements. The Accounting Officer explained that he was still pursuing the recovery. I have stressed to the Accounting Officer of the need to ensure that government dues are promptly recovered.

92 8.2.5 Organisation of Islamic Conference

The Ministry was also in charge of organizing the Organization of Islamic Conference which was held in June 2008 and an amount of Shs.9,653,180,513 was approved for the event and disbursed through Ministry of Foreign affairs.

The funds were allocated and paid out as below:

Institution Name of Committee Approved budget Disbursed (U Shs) (U Shs) Ministry of Foreign Secretariat 2,339,227,000 2,599,227,000 Affairs Min of Foreign Affairs Protocol & Immigration 632,270,000 632,270,000 Min of Foreign Affairs Conferences 135,791,000 135,791,000 Munyonyo CWR Accommodation & 2,071,732,273 2,071,732,273 Venues Min of Works, Transport 1,119,468,600 1,119,468,600 Transport Min of ICT ICT 608,130,000 608,130,000 Min of Health Health 76,000,000 99,000,000 Min of Gender Occupational safety & 20,000,000 20,000,000 Health Office of the Prime Media and Publicity 264,694,000 264,694,000 Minister President‟s office Security & Accreditation 1,051,272,640 1,051,272,640 Min of Local Beautification 96,000000 96,000,000 Government Min of Energy Min of Energy 3,000,000 3,000,000 Meteorological Dept Weather/Aviation 5,000,000 5,000,000 Min of Tourism, Trade Uganda Export 10,595,000 10,595,000 Promotion Board OIC Business Forum OIC Business Forum 1,220,000,000 960,000,000 TOTAL 9,653,180,513 9,676,180,513

Out of the amount disbursed, documents for Shs.8,199,821,613 were presented for audit leaving a balance of Shs 1,453,358,900 which had been advanced to

93 various committees not accounted for contrary to government regulations. An additional amount of US$ 31,613 which was sent to the Embassy of Uganda in Saudi Arabia has not been acknowledged and accounted for. Consequently in absence of accountability I was unable to confirm that the funds were put to proper use. The Accounting Officer stated that he had written to the responsible Accounting officers to avail the accountabilities but by the time of reporting none had been got.

8.3 Procurements

A total of Shs.1,034,884,129 was paid to various firms for the supply of goods and services to the Ministry. Of that, Shs.694,132,120 was not accompanied with details like procurement plans, solicitation and bid documents, evaluation and contract committee award details. I could therefore not ascertain whether the procurements were actually needed and competitively sourced. Although the Accounting Officer promised to avail the procurement documents by the time of this report this had not been availed.

8.4 Payments to Uganda Revenue Authority

(a) Unacknowledged Tax

An amount of Shs.239,695,344 paid to Uganda Revenue Authority in respect of PAYE for Ministry staff lacked acknowledgement by URA, I could not confirm that the Money was received by the beneficiary. Payments to URA are inherently risky and prone to abuse. Management is advised to ensure that all payments are promptly acknowledged and receipts regularly reconciled

(b) Gross Payment Account An amount of Shs.49,844,707 was returned to the Treasury by the Ministry as unutilised tax at the end of the financial year. A scrutiny of URA debtors list however revealed that the Ministry had outstanding tax arrears to the tune of shs.101,603,715. These were in respect of import duties. Management should ensure all outstanding taxes are cleared before funds are returned to Treasury.

94 The Accounting Officer promised to follow up the matter with Uganda Revenue Authority.

8.5 Undisclosed Donor Funded Project The Ministry operates a project called the National Coordination Mechanism/International Conference on Great lakes Region fully funded by the Germany Technical Cooperation (GTZ). At the close of the financial year it had a bank balance of Shs.19,149,130. However, it has been noted that this has not been disclosed in the accounts. Although it‟s a policy not to consolidate fully donor funded projects in the government accounts, it is important that some disclosure by way of a note be included to give useful information to the users.

8.6 Ministry Policy Statement Implementation A review of the planned activities by the Ministry in the 2007/08 Ministry policy statement revealed that many activities were not implemented despite the fact the Ministry received 99.9% of its approved budget. The unrealized activities include:

(a) Unopened consulates and missions The Ministry had proposed to open up a consulate in Mombasa, Kenya and a mission in Abu Dhabi, United Arab Emirates to assist in the speeding up of clearing of imports and improve trade, consular and investment relations with these countries. This was however not achieved. Continuous delays in opening of missions abroad, especially with such strategic countries, denies the country opportunities in terms of trade, tourism and investments besides providing consular services to the many Ugandans leaving in these countries.

The Accounting Officer explained that for the last three years due to inadequate funding he had failed to open up these Missions and Consulates.

(b) Follow up on Various Projects

The Ministry had intended to follow up on various investment projects proposed by the various foreign countries but there was no evidence that these were followed up. Details below:

Development of a free trade zone in Njeru Town (Iran) Implementation of US$ 10m line of credit to be increased to US$ 46m from Iran. Establishment of a fruit growing and processing project in Kasese (China) Establishment of a Sino-Uganda Trade, Tourism and Investment Centre in Kampala (China) Enhancement of Broadcasting and Television coverage in Uganda (China)

Lack of follow up of investments and projects defeats the purpose for which investments are solicited.

The Accounting officer explained that some projects are still hindered by the lack of land while for others, consultations are still ongoing.

(c) Transfer of Property from Uganda Property Holding to MOFA Uganda owns properties abroad in London, New York, Washington, Cairo, Kinshasa, Ottawa, Copenhagen, Nairobi, Abuja, Dar es Salaam, Brussels, Paris, Pretoria, Kigali, Rhiyadh, Mombasa and Juba. Through a directive by HE the President in 2006, the Ministry of Foreign affairs was to effect the transfer of all properties from Uganda Property Holdings to the Ministry of Foreign Affairs for efficient and better management. To date however this has not been done.

The Accounting Officer in his response stated that although Uganda Property Holding had initially agreed to handover the properties this has not been done. Instead Ministry of Finance, Planning and Economic Development appointed a new Board without the representation of Ministry of Foreign Affairs. He has accordingly raised the matter with the Permanent Secretary/Secretary to the Treasury.

8.7 Super Vision and Monitoring of Missions Abroad

(a) Uniform Visa Policy

The Ministry through a communication dated April 2006 has introduced a Uniform Visa Policy directing all Uganda missions abroad to charge a uniform visa fee of

96 US$ 50 per person for foreigners intending to visit Uganda. This is however against the international diplomacy protocols which state that member countries would set visa fees on a reciprocal basis depending on what other countries charge.

The Uniform visa policy is not only unfair on the part of our citizens but also affects the NTR collections for the year.

The Accounting Officer explained that the reciprocity arrangement and multiple entry visas is still hampered by inadequate systems at Immigration Department due to lack of capacity to print as many types of stickers as there are different rates.

(b) Unrealistic Mission Charters

It was noted that although the Ministry sets performance targets and goals for Missions in form of Mission charters, their actual performance is not evaluated. The charters state that the missions should have achieved certain percentages like “improve tourists by 30%”, “increase investments by 40%” and “trade by 30%”. There was no evidence of any actual performance appraisal at the Mission level as a whole to establish levels of performance. Lack of a performance appraisal system for the Missions renders targets set irrelevant. Besides, the targets set appear too ambitious for the Missions taking into consideration the meagre resources remitted to them. The targets aim at promotion of trade, tourism and investments yet funds released are for only costs like salaries, rent and utilities. There is no line item on promotion of trade, tourism and investment. The ministry is also supposed to distribute tourism promotional materials to the embassies but this is not done.

The Accounting Officer explained that during the Ambassador‟s annual retreat, new targets will be set with measurable indicators and outputs to be used for performance monitoring.

97 I also advised him to liaise with the Ministry of Finance, Planning and Economic Development to create line items and source for funds for the promotion of Trade, Tourism and Investment by the Missions.

9.0 JUSTICE AND CONSTITUTIONAL AFFAIRS 9.1 Financial statements for Companies in Liquidation Account Ministry of Justice manages three accounts in trust for the beneficiaries. It was however noted that the Ministry has continuously failed to produce financial statements for these trust funds. As a result I was not able to examine the three accounts and ascertain the financial position, performance and cash flows.

Records have also indicated that the ministry has in various instances borrowed huge sums of money from this fund to clear rent and other obligations. As at the close of the year the Ministry had borrowed an amount of shs.3,122,939,950 from this fund and only shs.300,000,000 had been refunded by the time of writing this report. This unauthorized borrowing affects the cash flow of the fund and ultimately the payments that would otherwise have been made to the beneficiaries of the liquidation.

I advised the Accounting Officer to ensure that the borrowed funds are refunded and to liaise with the Accountant General for guidance on preparation of financial statements relating to the Trust funds.

9.2 Consumption of Property, Plant and Equipment Financial statements indicate that during the financial year under review, the ministry spent Shs.6,941,570,649 to purchase property, plant and equipment. However, in absence of a Fixed Assets Register and schedule detailing all assets purchased and disposed, I was not able to confirm the existence, completeness and valuation of the assets. The Accounting Officer explained that most of these assets are purchased under the Justice Law and Order Sector Development budget and are procured, owned controlled and maintained by the various institutions under this sector. I informed him that since funds were budgeted and released under his vote then the ultimate accountability should be his responsibility.

98 Where assets are held by beneficiary institutions, the register should have a record of their acquisition and disposal. He promised to avail the details. However, at the time of writing this report none had been provided.

9.3 Case Backlog Project Fund not accounted for Payments totaling shs.486,647,298 were made from the above mentioned account during the financial year under review to carry out various activities. However the following issues have been noted.

i) Contrary to regulations, expenditure amounting to shs.221,772,320 was either not supported by a payment voucher or lacked supporting accountability, or did not appear to be related to case backlog project.

ii) Shs.177,581,211 was paid to a company in respect of work for the contract of construction of Gulu regional offices. However this expenditure does not appear to have been budgeted on this expenditure item and authority to charge this programme was not availed at the time of audit.

The Accounting Officer was advised to trace the supporting documentation and also have the mischarge regularized in accordance with the regulations.

9.4 Contingent Liabilities The statement of accounting policies provides that contingent liabilities are recorded in the statement of contingencies when the contingency becomes evident. However, while the policy is not clear as to the point at which the contingency becomes evident, accounting standards require recognition of contingent liability when there is a possibility of a future obligation. The standards further require that a reasonable estimation of contingencies is determined after an assessment by a competent authority. In practice, it has been noted that, any amount claimed is captured as contingent liability irrespective of the possibility of government winning the case. In many cases, the figures quoted by the lawyers of the complainants are exorbitant and when subjected to trial, much lesser figures are awarded. In absence of evidence of the assessment process, the figure presented in the statement of contingencies may not represent a reasonable

99 estimate of the contingencies that existed as at 30th June 2008. Improper assessment of liabilities has implications on the planning and budgetary process.

It was further noted that during the year under review contingent liabilities increased by 344% (from shs.73, 207,478,866 to Shs.325,175,486,269). While this appears to be a worrying future situation, there is no evidence that management properly investigated the causes of such variances. A commentary by the head of accounts indicates the causes of such increment as; increase in public awareness of citizens to litigate, insufficient budget allocation and interest bearing awards, these causes would however appear secondary and the basis for the conclusions have not been provided. Management should institute a proper system of assessment of contingent liabilities. The primary causes of variances need to be investigated and addressed.

Management explained that they have appointed desk officers in various government institutions as contact persons to provide relevant information to the Attorney General regarding cases against them. The ministry is also still advocating that each government institution be responsible for paying awards against them instead of centralizing them.

9.5 Statement of losses The statement indicates a loss of shs.9, 581,500. However, details of items lost have not been provided. There is also no evidence that the losses were dealt with in accordance with the regulations. The Accounting Officer explained that this was a loss incurred in the previous financial year but had not been reported on. He promised to avail the details of the loss.

9.6 Inadequate staffing levels The Ministry‟s established structure provides for 320 employees. It was however noted that only 260 positions have been filled. It was further noted that in the last two years, the Ministry has lost the following high ranking officers: Solicitor General, Administrator General, Ag. Director Civil Litigation and Commissioner in the Department of First Parliamentary Council.

100 Inadequate staffing may lead to low service delivery and thus non fulfillment of Ministry objectives.

The Accounting Officer explained that this mainly affected the departments of Administrator General and the Law council and attributed it to the freeze by the Ministry of Public Service and the high levels of staff turnover especially for lawyers. Steps are underway to recruit 15 more state attorneys although the numbers are still not adequate to fill the gaps. I advised the Accounting officer to liaise with Ministry of Finance, Planning and Economic Development and Ministry of Public Service for a longer lasting solution.

9.7 The Mission Statement Review of the mission statement for the Ministry indicates that the statement is not in line with the mandate of the ministry in a number of areas. The Mission statement includes providing a legal framework for good governance and delivering legal advice to the general public. These appear to be outside the ministry mandate. It would appear that the role of providing a legal framework is a parliamentary role by constitution. Delivering advice to the general public would also appear to be the public's practitioners‟ role. This non alignment of mission to the mandate, goals and objectives of the Ministry creates confusion among staff and various stakeholders as to the strategic focus of the Ministry.

The Accounting Officer promised to review the Mission Statement.

9.8 Inadequate Controls in Purchasing Function A review of internal controls relating to purchasing revealed the following;

(i) During the F/Y 2007/8 the ministry did not carry out pre-qualification of companies to determine the eligibility and competence of suppliers. The ministry operated with unauthorized service providers. No evidence of approval by the contracts committee has been provided.

(ii) Procurement of goods and services are also not properly planned. There was no procurement plan. It‟s noted that during the year under review,

101 36% of the procurement transactions were approved by contracts committee on retrospective basis without satisfactory explanation.

Lack of a procurement plan and non prequalification of firms exposes the ministry to use of un qualified (briefcase) companies and denies the government the opportunity to obtain competitive rates for goods and services procured/obtained through bulk purchases (economies of scale).

The Accounting Officer is advised to carry out procurement planning annually and ensure that the plan is implemented in accordance with the PPDA Act and regulations.

9.9 Inadequacies in management of Contributions to International Organisations Shs.40, 071160 was spent on clearing the obligations towards international contributions. It was however noted that the payments were made against a budget provision of only shs.1, 000,000 and no explanation was given as to the source of the extra funds paid.

In addition, the Ministry is indebted to various international bodies to the tune of shs.729, 913,100. It is not clear how the Ministry intends to clear these bills.

Management has been advised to liaise with Ministry of Finance to ensure funds are availed to clear the international obligations.

9.10 Uncollected Revenue in Court Awards to Government A review of a report on cases won by the Attorney General revealed that during the period 1st September, 2003 to 28th October 2008, the Attorney General won 236 cases covering total claims of approximately shs.725 billions. Further analysis revealed that

(a) Of the 236 cases won, only 42 cases are supported by copies of judgments. Judgments for the rest cannot be traced. I am therefore unable to assess the extent of the potential revenue earned and collectable.

102

(b) From the 42 available judgments, a total amount of shs.27,956,000 was awarded to government in costs but there is no evidence that efforts are being made to have this revenue collected.

In his response the accounting officer indicated that some of the individuals genuinely lack the money to pay costs and so it becomes difficult to enforce the court awards against them and it was also difficult to trace some of the individuals in case one needs to enforce the court awards since they do not have addresses.

I informed him that non enforcing of awards from individuals creates room for unscrupulous and crafty lawyers to unnecessarily sue government and at times encourage fraudulent cases. I advised him to ensure punitive recovery measures are instituted as a deterrent.

9.11 Outstanding Bills for the Private Lawyers Payments of shs.37, 000,000 relating to liability incurred by the ministry in 2003 were made during the year under review. The payment relates to lawyers in private practice who assisted the Attorney General in constitutional petition No5 and 7 of 2002. Further review of the history of the transaction led to the following observations.

(i) The total amount incurred was approximately Shs.800m. Contrary to accounting policy which requires that commitments arising from non– cancellable contractual or statutory obligations should be included in the balance sheet as payables and in the statement of outstanding commitments, this was not done.

(ii) The Ministry does not have proper guidelines regarding procurement of legal services. Currently the Attorney General just appoints lawyers. Without properly documented guidelines, I could not ascertain that competent and competitive legal services were sourced.

103 (iii) The extent of outstanding liability is not clear due to incompleteness of the available records. It was observed that while 14 lawyers were hired at shs.800,000,000, payments relating to only 3 lawyers amounting to shs.133, 000,000 are on file.

The Accounting Officer noted the need to adopt guidelines for procurement of legal services and explained that consultations are on going between PPDA and Office of the Solicitor General.

9.12 Unclear Payment of Rent Arrears Payment of Shs.200, 000,000 was made to Meera Investments in respect of rent arrears for the premises that had been occupied by the department of Registrar General for the period between 1/12/2002 and 30/11/2004 (a period of 2 years) before it relocated to Amamu House.

The Ministry did not maintain a ledger to record rent transactions. I was therefore unable to trace previous records of any payments made so as to ensure no double payments arose.

In addition, although management promised to avail information relating to the tenancy agreement this was not availed by the time of audit. I was thus unable to verify the tenancy and termination terms.

9.13 Inadequacies in IT Controls The following shortcomings were identified in relation to the management of IT in the Ministry.

Management has not formulated an IT Security Policy.

There is no evidence that risk assessment is carried out to identify the threats to the systems, the vulnerability of system components and likely impact of an incident occurring and hence counter-measures to reduce the level of exposure to an acceptable level.

104 Management has not established a framework for adequate preventive, detective and corrective control measures to protect the IT systems from malicious software, such as computer viruses.

There is no evidence that a report of computer usage is produced and scrutinized by management. I could not rule out the possibility of under utilization of computers.

There is no indication that Information Systems Administration and Network Administration are monitored by management.

Except for IFMS, there are no documented operational procedure manuals for some of the programmes.

The ministry does not have Technological Infrastructure plans No evidence that IT strategic planning process is undertaken.

Except for IFMS, there is no documented disaster recovery and business continuity plans in place.

Lack of proper IT Management procedures may lead to:- Possibility of unauthorized access to information and breach of systems integrity is high.

IT resources may not be efficiently and effectively utilised in achievement of organizational objective.

In the event of any disruption, data may be lost, its recovery difficult and the impact on the business may be high.

Management expressed regret over the above inadequacies and explained that the inadequacies arose due to lack of IT staff in the Ministry. However, the Ministry has now secured 2 Information Scientists.

105 I have also advised the Accounting Officer to liaise with the Ministry of Information and Communication Technology for further guidance on the matter.

10.0 FINANCE, PLANNING AND ECONOMIC DEVELOPMENT

10.1 Funds Advanced to Uganda Post Bank (UPB)

Records at the Ministry show that in June 2008, the Ministry released Shs.3,499,998,200 to the Uganda Post Bank under the Sub County Development Grant/Strategic Intervention for on-lending to Saving and Credit Cooperative Organizations (SACCOS). Under the Sub County Development Grant/Strategic Intervention, these funds were appropriated for procurement of „goods and services‟. Having funds budgeted for goods and services being utilized on “on- lending interventions”, is a diversion of funds being used for activities for which they had not been appropriated for by Parliament.

Besides, the guidelines on how the proceeds were to be utilized, recovered and remitted to the Consolidated Fund were not availed. The Accounting Officer explained that the funds were actually not meant for on-lending to SACCOS, but for land acquisition for the landless. However, details regarding procurement of the land, its beneficiaries and criteria of selection were not provided. Besides, this explanation was found not to be consistent with the payment records.

10.2 Transfers to Microfinance Support Centre (MSC) Ltd

During the period under review the Ministry released a sum of Shs 5,842,114,492 to the Microfinance Support Centre (MSC) Ltd, in respect of funds for on-lending to SACCOS. Although the transactions are by nature transfers to other organizations, the payments were charged in the accounts as „supply of goods and services‟. Accordingly, Shs.5,842,114,492 in respect of procurement of goods and services was not used for the purposes for which it had been appropriated for by Parliament.

As at 30/06/08, only Shs.1,280,000,000 of the Shs.5,842,114,492 released to MSC Ltd had been on-lent to SACCOS. The MSC Ltd and recipient SACCOS seem to

106 lack sufficient capacity to absorb these project funds. On two of its operating bank accounts, MSC Ltd had a balance of Shs 6,610,352,448 as at 30/06/2008, an indication of excess liquidity relative to its loan portfolio. The Accounting Officer attributed this to the process of appraising recipients SACCOS that takes some time.

In a related development, MSC Ltd extended Shs.2,000,000,000 to Post Bank Uganda Limited (PBU) as a capitalization grant. I was not able to confirm whether capitalization of other organizations falls within the mandate of MSC Ltd. Besides, Share Certificates in respect of the capitalization were not availed for audit.

I have advised the Accounting Officer on the need for the Ministry to come up with a clear policy and funding structure for the MSC Ltd. Government funding interventions into the company should be properly planned and channelled through agreed procedures for the company‟s capitalization.

10.3 Development of Industrial Parks Government of Uganda took a strategic decision to purchase land in various districts to be developed into industrial parks. Through Uganda Investment Authority (UIA), a total of 5,614 acres of land has been acquired in eight districts. During the year under review, MoFPED released Shs. 9,261,000,000 to UIA for acquisition of 12.6 acres in Mbarara and 619 acres in Mbale, and development of Namanve, Luzira and Bweyogerere industrial parks. Audit inspections of these parks were carried out and the following matters were observed;

a) Mbarara Industrial Estate 12.8 acres of land, comprised in Block 1 Plot 207 Kashari, was procured at Shs.2,616,000,000 from a company. Included in its valuation is: 5 single storeyed blocks of workshops/offices, 1 proposed sixth block, (at dump proof course level), 1 generator house, and 1 gate house.

It was noted that the 5 single storied blocks of workshops/offices were being occupied by several businesses from which government was not earning any

107 rental income. There was also no evidence that the purchase followed the recommended public procurement procedures as prescribed by the PPDA Act.

In addition, Shs.2,616,000,000 used to purchase Mbarara Industrial Estate was diverted from Sub County Development Grant/Strategic Intervention Project 0998 without authority.

The Accounting Officer explained that she had written to PPDA Authority for a waiver to regularize the procurement.

I advise management to expeditiously acquire ownership of the title and work out modalities of collecting rental income from the occupants including arrears. b) Mbale Industrial Park 619 acres of land comprised in Freehold Register, Volume 307 Folio 6 Central Bugisu – Bugisu district were purchased from Bugisu Cooperative Union for Shs.3,095,000,000. There was also no evidence that the purchase followed the recommended public procurement procedures as prescribed by the PPDA Act.

Although title has been transferred to UIA, government may not obtain possession of the land because almost ¾ of the land is occupied by squatters (over 250 of them) who have since taken UIA and BCU (Bugisu Cooperative Union) to court for trespass.

Three of the squatters actually have titles to their plots measuring 94.229 acres in size. The accounting officer explained that UIA has written to Ministry of Lands to have the 3 titles cancelled.

It was also observed that Shs.1,357,169,000 transferred by the Ministry to UIA in respect of development of this park has not yet been accounted for.

I have advised the Accounting Officer to ensure that in future acquisition of Government land follows the recommended procedures. The problem of the squatters should also be addressed.

108

10.4 Advance to Plan for Modernization of Agriculture (PMA)

Consequent to H.E. The President‟s proposal to the Minister of Finance, Planning & Economic Development to carry out nine (9) market research studies, on strategic agricultural commodities namely: Cotton, Bee keeping, Maize, Sun flower Oil Seeds, Rice, Fruits, Diary, Aloe Vera, along the Kampala – Mbarara highway the Ministry advanced Shs.830,000,000 to Plan for Modernization of Agriculture under Sub–County Development Project 0998 to initiate and supervise the research studies. PMA subsequently advanced these funds to researchers and consultants based on the inception reports submitted to them. However, research findings are yet to be submitted to the Ministry as fulfillment of the accountability requirement. As a consequence I am unable to confirm that the funds achieved its intended objectives.

The Accounting Officer explained that the research findings were submitted to PMA and were undergoing review at the secretariat and that preliminary results will be prepared and shared with the relevant stakeholders. I await copies of these reports.

10.5 Poverty Alleviation Programme An amount of Shs.1,000,000,000 was appropriated by parliament to transform poor communities into self sustaining entities through best practices of agriculture, market led production, value addition and to support science and technology innovators. A total of Shs.798,748,000 was released to implement the programme. A review of the programme revealed the following matters;

a) Payments to State House Comptroller Shs.300,000,000 was directly paid to the Bank of Uganda‟s State House Comptroller Account to help various groups of farmers to build capacity for income generation. I was however not availed with the Memorandum of Understanding on the utilization of those government funds. I could therefore not ascertain whether the funds were put to proper use.

109 The Accounting Officer explained that she had written to the State House Comptroller reminding him of the need to account for the above funds.

b) Payments to Uganda Gum Arabic Cooperative Society Ltd The above programme was initiated in February 2006. It was aimed at improving the quality of life of the Karamajong by creating and diversifying alternative sources of earning, sustainable livelihoods through harnessing and gainfully exploiting natural dry land resources which are abundantly existent in Karamoja region. Currently the programme is executed by Uganda Gum Arabic Cooperative Society Ltd (UGACS) registered with the Ministry of Trade, Tourism and Industry and operating in 5 districts of Karamoja region. Amongst the objectives was the strengthening of UGACS with primary branches at sub-county level in all districts of Karamoja, and mobilization and registration of a minimum of 2000 fully paid up members of the society, training them on how to harvest, handle, process and package gum Arabic.

During the financial years 2004/5-2006/7, this project was being handled under the vote for State House but was later transferred to MoFPED on condition that a Memorandum of understanding was drawn between State House Comptroller and Ministry of Finance. Indeed during the year under review, Shs 498,748,000 was paid to UGACS through the State House Comptroller to cater for the above objectives. However, despite PS/ST directive to have the Memorandum of Understanding drawn, this was not done. Besides only Shs 150,000,000 was accounted for leaving Shs 348,748,000 not accounted for contrary to the financial regulation.

10.6 Salary Arrears During the year under review, a sum of shs.6,006,615,424 was spent in respect of salary arrears. Included is Shs.4,648,830,718 advanced to various accounting officers and Shs.1,357,784,706 paid to BoU for which Shs.2,992,718,530 is yet to be accounted for.

110 Also included is Shs.5,204,996 paid to a teacher at Wakiso whose receipt was contested by the claimant. This matter is being investigated by the Criminal Investigations Department according to the Accounting Officer.

Accountabilities for Shs.2,992,718,530 yet to be accounted for should be obtained and filed for verification.

10.7 Procurement of Upland Rice Seeds

Due to the unprecedented demand of rice from Uganda by some of the African countries with severe food shortages, government decided as an emergency plan to procure upland rice seeds, herbicide and fertilizers and distribute to farmers in various districts with the aim of increasing upland rice seed production. In June 2008, the Ministry released Shs.1,002,000,000 to the National Agricultural Advisory Services (NAADS) to procure the seeds, herbicides and fertilizers for distribution (to the farmers) for planting in the September/October rain season. These funds were paid from Sub County Model project 0998.

It was noted during inspection in November that only Shs.849,531,250 worth of the farm inputs were delivered to the Districts i.e., between October and November 2008. The balance worth Shs.152,568,750 is yet to be accounted for.

According to crop husbandry experts, it is quite unlikely that the rice seeds will have a good germination when planted in the March/April rain season. For optimal performance, rice seeds should not be kept for more than 60 days before they are planted. Thus, government is at risk of not meeting fully the intended objectives of the intervention.

I advise management to ensure that in future release of funds and subsequent deliveries of rice seeds, herbicides and fertilizers are properly planned in time for the planting season. Meanwhile deliveries should be pursued without further delays and funds properly accounted for.

111 10.8 Presidential Initiative on Banana Industrial Development (PIBID)

Commissioned in 2005, the programme PIBID operates a pilot banana processing industry in Bushenyi district. The objective of the programme is to assess overall project impact on economic wealth, and livelihood of poor households in the district, and to build capacity for entrepreneurship training and development, through establishment of an Industrial Technology Park near Lake Mburo. Between 2006/07 and 2007/08, Government extended to the project a total of Shs.11,271,083,333 to cater for Recurrent and Development expenditures. Included in the amount is Shs.4,810,922,682 incurred on procurement of equipment/services and renovation of former Bushenyi DFI buildings.

A review of the expenditures and a site inspection carried out between 25th -26th November 2008 at PIBID Project site at former Bushenyi DFI revealed the following matters:-

10.8.1 Site Inspection at PIBID- Bushenyi (Equipments & Chemicals)

It was observed that while Shs.700,820,953 spent on Civil Works & Renovation of DFI buildings was for the purpose of storage of equipment and chemicals, the laboratory equipment, some Supplemental Irrigation Water Equipment and a Rapid Visco Analyzer that were procured (for Shs.1,161,652,279) were still packed in containers in which they were delivered. In my opinion, the likelihood of loss due to obsolescence, expiry, and ware-and-tear is quite eminent.

The Accounting Officer explained that the process of construction of the pilot plant building had just started. She further explained that the project was negotiating with the suppliers to extend their obligations beyond the warrant period in order to minimize loss.

I advised management to expedite the construction of the plant to avoid obsolescence, expiry, and wear-and-tear.

112 10.8.2 Lack of Approved Structural Plans and Bills of Quantities (BOQs)

A number of structures were under construction including a new building to store fertilizers, renovation of the Director‟s office, former residential houses e.t.c purposely to create more laboratory rooms, research offices and training rooms. However, during site inspections some structural plans from the Building Consultant and BoQs approved by District Building Engineer were not provided to enable me ascertain the costs involved and also confirm compliance to contractual conditions.

10.8.3 Lack of Land Title for PIBID Land at Bushenyi Site

Although PIBID has erected a number of structures, carried out renovations/extensions on buildings, and established a demonstration banana plantation at the inherited Bushenyi DFI land, the Land Title has not been secured yet.

The Accounting Officer explained that consultancy services to survey and map the Technology Business Incubator (TBI) and Industrial Technology Park (ITP) land were advertised and bids closed.

I advise management to expedite the process of acquiring the land titles.

10.8.4 Approval of extra/extension Civil Works by PPDA

Whereas renovations/extensions and construction of new buildings were being carried out at PIBID site, records availed by the contractor‟s site Engineer/clerk revealed that, renovations worth Shs.1,071,761,619 had been initially approved by the contracts committee and PPDA. At the time of audit, the value of the civil works had accumulated to Shs.1,828,980,742. This resulted into extra works of Shs.757,219,123 i.e., far in excess of 15%, without requisite approval.

I have advised the Accounting Officer to have all the extra works handled in accordance with the recommended procurement procedures.

113

10.9 Coordination of MSE & Micro Finance Outreach

The main objective of the Coordination of MSE & Micro Finance Outreach project is to facilitate the establishment, strengthening, and outreach of the savings and Credit Cooperative Organizations (SACCOS) to reach more clients and sub-counties and ensuring that SACCOS are linked to commercial financial institutions. I carried out an audit of the project and observed that Shs.1,500,000,000 was released from Micro Finance Support Centre on 21/5/2008 specifically for Uganda Cooperative Savings and Credit Union (UCSCU) in assisting communities start their SACCOS and also revamp those that are ailing. At the time of audit (October 2008), the funds were still held on BoU account.

The Accounting Officer explained that the funds were still held on the account because they had just been received and that UCSCU had not yet finalized the modalities of accessing the funds.

I advise management to expedite the modalities and have the funds utilized for the intended purpose and accounted for.

10.10 Medium Term Competitiveness Strategy (MTCS) MTCS was formulated to create a favorable environment for the private sector to grow, become profitable and compete both locally and abroad. As at 30.06.08, a sum of Shs 184,688,000 had been released by the Ministry to MTCS.

Accountabilities in respect of Shs 184,688,000 released revealed that:

Shs.7,310,000 paid to cater for workshops were not accompanied with attendance lists and acknowledgments of allowances.

PAYE totaling Shs.75,411,600 deducted from employees‟ salaries was never remitted to URA. A total of Shs.1,039,172 in respect of 6% WHT was not deducted from payments made to suppliers for services rendered by the project contrary to

114 the existing tax regulations. This may have resulted into loss of government funds.

Shs.16,444,000 advanced to the Coordinator to cater for the operation activities was not accounted for contrary to the existing accounting instructions.

Delays in accounting for project funds can lead to possibility of loss of funds. The Accounting Officer is advised to enforce prompt accountability of the advances and where necessary recovery be made.

10.11 Revenue Arrears

The Ministry together with Uganda Telecom Limited (UTL) signed a lease agreement on 15th December 2000 regarding hosting of the UTL communication Equipment on top of the Ministry building. It was agreed that the rental payable to the Ministry shall be USD 500 per month. As at 30th June 2008, UTL had not paid rent worth US$ 21,000.

I advise Management to ensure that the outstanding revenue arrears are recovered forthwith.

10.12 Tax Expenditure

The Government incentive granted to Hotel developers for the exemption of import taxes and duties expired on the 31st March 2008 after an extension of 9 months (July-December 2007 and January-March 2008). According to an official communication at the Ministry setting out the criteria/requirement for renewal, any extension would be subject to progress made on the individual hotel construction. To-date, no such reports as to the level of completion and physical progress on the various hotel projects were submitted to the Ministry for review nor was the responsibility assigned for receipt and analysis of these reports if at all they were to be submitted. It was further noted that no post implementation review/assessment has been carried out to assess value for money as a result of this Government policy,

115 intervention nor is the actual level of investment as a result of this government policy known.

10.13 Follow up of Internal Audit Recommendations There is still limited follow up of internal audit recommendations. I reviewed the Internal Audit reports for the years 2006, 2007 and 2008 and observed that the following matters had not been fully addressed by the Ministry.

10.13.1Maintenance Contracts Most Ministry equipment and assets did not have service/maintenance contracts. For example, there was no evidence to show that service contracts for the Ministry generator, computers and other equipment were in existence. As a result, maintenance of equipment was not done and or was being handled in an adhoc manner. This could result in sub optimal services being rendered, equipment breakdown and incurring replacement costs that could otherwise have been avoided had the equipment been properly maintained/serviced.

Management should ensure that maintenance contracts are drawn out for all critical assets of the Ministry including but not limited to computers, generators, lifts, fire extinguishers, photocopiers etc. In addition contract performance deliverables/outputs should be identified and monitored for conformance to set contractual terms.

10.13.2 Fire prevention and detection The Ministry has deployed a number of fire extinguishers as one of the measures to guard against the risk of loss through fire outbreaks. Audit inspection revealed that there were adequate measures to maintain and service fire extinguishers as evidenced by how regular the service was being carried out. While the installation of fire extinguishers is an indicator of management‟s recognition of the existing risk, comprehensive fire preventive procedures and measures do not exist as noted hereunder:-

. Fire alarm systems are out of order. . There is/are no fire assembly point(s) in case of any fire outbreaks.

116 . Fire exists have not been designated as would be expected. . There is no evidence that staff training in the use of fire extinguishers and other fire prevention and response measures has been conducted.

As a result of the above, the exposure to the risk of fire and its potential consequences to assets remain very high.

It is recommended that fire alarm systems be synchronized and repaired in cases where there are out of order. Fire assembly points and exists need to be designated and staff training/fire drills needs to be conducted to ensure staff readiness in case of fire outbreaks.

10.13.3 Project assets Accountability A material amount of money is expended in the procurement and acquisition of project assets. A review of the asset register showed that project assets were not included in the Ministry‟s stock of assets. The assets inventory records are not separately available with the Ministry. This is mainly because most projects operate almost independent of the main stream Ministry activities. Lack of a proper stock of project assets undermines accountability during and post project implementation. There is also a risk that there will be misuse/improper use of assets, Loss through thefts, wastage, misappropriation, and incomplete/improper financial reporting.

During audit inspection, it was observed that project office equipment formally used by a now closed UNDP project was lying idle. There was no evidence of a formal handover of project assets to the Accounting Officer at the time of its closure. There is a high risk of loss of assets and obsolescence arising out of non usage especially for computers.

It is recommended that the Ministry maintains an inventory of all project assets including an indication of the assets present location(s). As required by Treasury Accounting Instructions (para 451), proper and formal handover of assets for projects whose lives have expired should also be enforced.

117 10.13.4 Uganda Computer Services (UCS) Audit inspection of Uganda computer service (UCS) assets and equipment revealed that there are no maintenance contract(s) for all its assets and computer equipment. This has been so for the last three (3) years. The following was further observed during the audit inspection at UCS Treasury building:-

. Lack of service of critical equipment like servers, computers and other related equipment.

. Many computers had broken down as a result of viruses, lack of service and technological obsolescence. A case in point is that of ICL computers that can no longer run some Programmes say on Windows XP.

. Although a new inverter was recently procured to support the servers, it was observed that only two(2) of the existing six(6) UPS‟s were functional.

. The only fire extinguisher in the centre was last serviced in July 2007.

. The tape drive on the back up server was not in a good working condition and it was reported that it had been so for a long period of time.

. The main access door to the UCS is a glass door without any burglar proofing. No other specific preventive/ detective controls or compensatory measures to mitigate the risk of unauthorized access were in place.

As a result of the above conditions, the following centre is exposed to the following risks:-

. Loss of data in case of total break down . Loss of equipment . Disruption of services due to equipment loss, breakdown etc . Risk of fire; there are no adequate fire prevention and detection measures . Unauthorized access due to lack of elaborate controls

118 There was no evidence to suggest that a Business Continuity Plan in case of a major disruption of service was in place.

Management should urgently hold discussions with the Department to draw out an action plan to address the various risks.

10.13.5 Information sharing Network (ISN): Lack of Service Level Agreements The information sharing network (ISN) of the Ministry of Finance, Planning and Economic Development (MFPED) has been in operation for the past five years. As a result of this; there has been an increase in the value and volume of equipment procured by the Ministry. The ISN provides a number of services ranging from Email, internet, online storage, the integrated Financial Management System (IFMS) etc. The basis of an effective and reliable ISN depends on how well the system addresses vulnerabilities so as to ensure confidentiality and integrity of information and availability of services. During audit review, we noted that there are no service level agreements for all the ISN related services. In particular, the internet connectivity- SLA has not been renewed. SLA‟s provide a framework upon which the various performance obligations are measured. Lack of an SLA increases the exposure to service disruptions and outrage without formal recourse. In addition, incident response times cannot be enforced without specific provisions stipulating the Service provider‟s performance obligations. Lack of maintenance contracts (SLA‟s) increases the risk of loss of equipment through breakdowns and high maintenance and replacement costs.

It is recommended that service level agreement (SLA) for the Ministry‟s ISN internet provider (IP) be renewed. Currently, the ISN operations are being run on non-existent or expired terms and conditions. There is no framework for enforcement on mutual performance requirements.

10.13.6 Ministry Establishment

The Ministry undertook a re-organization process of the departments under the Directorate of Accounts aimed at streamlining the key business processes in order to enhance efficiency, effectiveness and to remove any role conflicts. The review

119 process revealed that the Ministry continued to budget for and pay salaries under the Uganda Computer Services department; a department not reflected in the new and approved structure under the Accountant General‟s office. In the circumstances above, the payroll costs could not be matched to the establishment and the approved structure. It is not even clear whether the continued payroll costs in this regard are transitional and if so for what period. Payroll costs that are not directly a reflection of approved establishment weaken budgetary control and could be construed as irregular.

It is recommended that payroll costs reflect the structure and approved establishment to enhance the integrity of the payroll. A transitional plan on how the phasing out should be done should be developed, operationalised and monitored for budgetary control.

10.14 Project Strengthening Evidence Based Decision Making in Uganda Programme 10.14.1 Management Committee According to the Programme documents, a management committee was to be set up to be responsible for overseeing the implementation of the strategy outlined in the programme document. The management committee was to be chaired by the Director, economic Affairs with representation from Economic Development, Policy and Research Department, Budget policy Department, DFID and any other relevant stakeholders. However, as reported in our previous report, this committee appears to be non functional. The failure of the committee to meet since the inception of this project may jeopardize the implementation of the planned activities. I advised that the committee meets regularly to fulfill its role of overseeing the implementation strategy of the programme.

Management has promised to address the matter in future.

10.14.2Ineligible Expenditure

It is a requirement under section 6 of the MoU that the Project funds should not be used to pay for any taxes. However, it was noted that Value Added Tax (VAT)

120 amounting to shs.2,020,862 was paid from the Donor funds Account contrary to this requirement. This implies that the expenditure was not a proper charge to the project funds and the amount involved appears recoverable. Management is advised to ensure that the project account is refunded with the amount in question. In addition, management should comply with the financing agreement provisions in future.

Management has promised to address the matter accordingly.

10.14.3Status of Programme Implementation It was noted that the programme budgeted to spend a total of shs.2,607,297,600 on the following activities during the year under review:-

Item Budgeted Actual Variance Amount Amount Spent (shs) (shs) (shs) Staff salaries 393,710,600 393,710,600 0 Overhead costs 119,312,800 92,790,509 26,522,291 Consumables 81,727,699 76,446,550 5,281,149 Communication fund 907,488,805 573,227,314 334,261,491 Policy research fund 852,923,916 275,760,779 577,163,137 Training 224,933,780 132,424,436 92,509,344 Technical support fund 27,200,000 26,818,681 280,319 Total 2,607,297,600 1,571,178,869 1,036,118,731

However, the programme spent a total of shs.1,571,178,869 representing about 60% of the budget. This implies that the programme had a low absorption capacity and that some activities were not implemented on schedule and in accordance with the work plan. Management should ensure that activities are implemented on schedule to enable timely achievement of programme objectivities.

Management has attributed the delays to the long procurement processes.

121 10.15 The Microfinance Support Centre Limited Project NO.F/UGA/RUR-MIC- SUP/004/41 AND F/UGA/GR/RUR-MIC-FIN-SUP’00/18

10.15.1Variances between the loan amounts per head office records and the loan ledger cards at the zonal offices

A comparison of the loan balances between the head office records and the zonal office loan ledger cards for loans outstanding as at 30th June 2008 revealed differences between these two sets of records. There were no reconciliations for the differences. For example the following variances were noted:-

Patner organisation Disbursed Outstanding Balance Difference per head per Ledger office card Bukesa Kwagalana SACCO 15,000,000 5,503,806 4,503,864 999,942 Kabaawo Mutundwe SACCO 20,000,000 7,333,327 5,999,993 1,333,334 Kawempe SACCO 25,000,000 8,340,002 6,673,436 1,666,566 Makindye Community 25,000,000 8,333,340 6.672,924 1,660,416 Dev.SACCO Naguru SACCO 15,000,000 5,500,000 4,500,000 1,000,000 Sheema Financial Service 20,000,000 20,000,000 18,888,889 1,111,111 SACCO 7,771,369

Unreconciled records may lead to recognition and reporting of inaccurate information.

I advise that Monthly reconciliations be made between the zonal office records and the records at the head office. Any variations noted should be resolved immediately.

Management has promised to address the matter accordingly.

10.15.2Long Outstanding Reconciling Items And Inadequate Review Of Bank Reconciliations

A review of the bank reconciliations revealed that there are long outstanding reconciling items for Iganga, Lira and Fort Portal collection accounts dating as far 122 back as November 2006. The reconciling items total up to Shs.11,648,065 in deposits that were recorded in the cash book but not reflected on the respective bank statements.

Additionally, there were differences noted on the Kampala collection account reconciliation statement where there was a difference between the cash book balance per the reconciliation statement and the balance per the cash book in Pastel.

This could result into inaccurate information being presented to the users of financial statements. Delay in following up reconciling items could also lead to non detection or late detection of irregularities and hence loss of company resources. I advise long outstanding reconciling items be investigated and cleared in a timely manner. Additionally, adequate review should be made of reconciliation statements to ensure that they are correctly performed.

Management has promised to address the matter accordingly

10.15.3Risk management policy It was noted that although the company is in the business of granting credit and is therefore exposed to credit risk (possibility that a borrower is unable or unwilling to perform on an obligation) resulting in an economic loss to the company, there is no risk management manual in identifying the various risks likely to be faced by the company, their causes and measurers to be under taken to mitigate such risks.

Without a risk management manual or formal risk management framework in place, management may not be able to adequately and timely identify, monitor and respond to risks.

Management should design and document a risk management framework that takes into consideration all the risks to which the company is exposed.

Management has promised to address the matter.

123 10.15.4Poverty Alleviation Project Bank Accounts

The poverty alleviation project bank accounts are not reconciled on a monthly basis. This has been attributed to the fact that these accounts are considered dormant. However, the bank accounts had balances of Shs.12,114,910.

In the absence of bank reconciliations, some transactions like bank charges and direct transactions may go unnoticed and therefore not recognized in the company‟s financial statements.

Bank statements should be obtained and reconciliations performed for all bank accounts, including dormant accounts. In addition, it is recommended that a review is carried out of dormant bank accounts to ensure that any accounts that are no longer required are identified and closed as soon as possible.

Management has promised to take appropriate action including transfer of the balances to the PAP collection account after change of signatories.

10.15.5Inadequate segregation of duties The loan ledger cards are filled in by either the Financial Services Officer (FSO) or the Zonal Office Manager (ZOM). However, there is no review or evidence to indicate that the ledger cards have been reviewed by someone else other than the individual who filled in the card.

Errors within the ledger cards will go unnoticed where there is no appropriate or adequate review.

Loan ledger cards should be completed by the FSO and reviewed by the ZOM to ensure accuracy. Management has explained that it will give proper guidelines to zonal staff to address the matter.

124 10.15.6Policy on penalty fees was not adhered to The operations manual specifies that all late repayments attract a penalty fee of 1% on any amount which is over due (principal and interest) or in arrears of more than 1 day. It was noted however that no penalty fees were charged for all Partner Organisations that are in arrears.

Failure to follow the operational policies and procedures is a breach of the company policies. The company losses out on income for those clients who are not charged penalty fees when in default.

I advise the Operations Department to emphasize the requirement to charge penalty fees on late repayments as required by the company‟s policies.

Management has also promised to address the matter in future.

10.15.7Unresolved PPDA findings in the Company Procurement Process

The public Procurement and Public Disposal of Assets (PPDA) authority undertook a procurement audit during the year and in their report dated 23 October 2008, they highlighted a number of issues which have not been fully followed up. Some of the recommendations made by the authority that have not been addressed include: Preparation and submission of an approved procurement and disposal plan to the authority; Adoption of frame work contracts for repetitively procured items; and Initiation of supplier appraisal/performance among others. Out of the 18 recommendations made by the authority, nine (9) of them have been resolved, two (2) are ongoing and seven (7) are yet to be embarked upon.

The company risks incurring penalties for non compliance with the PPDA Act or the financiers to the company may hold back their funds for non compliance with the provisions of the loan and grant agreements which stipulate that the company has to abide by the set procurement guidelines.

125 Management should follow up on the outstanding recommendations made by the PPDA authority. Additionally, a mechanism should be put in place where regular or periodic checks are made to ensure that the procurement procedures followed are in line with the PPDA Act.

Management has explained that the PPDA report was received late but it was in the process of addressing all the issues contained there in.

10.15.8Lack of Backups of Data in the Information Technology General Controls The following weaknesses were noted from our review of the information technology (IT) environment: Back ups are not regularly made. There was no back up log to evidence the regular back up of critical information. Back ups of financial information are kept on site; and Tests of back ups are not made to ensure that backed up data can be restored to its original state.

Failure to maintain back ups of vital financial information may result into loss of financial data in the systems or any other unforeseen disaster.

Regular back ups should be made and logs maintained as evidence of doing so. Back ups should be kept offsite to reduce the risk of losing both the original and backed up information in case of a disaster affecting the entire office premises.

Management has explained that the company is in the process of procuring services for backing up data as soon as the new Management Information System becomes operational.

126 11.0 AGRICULTURE, ANIMAL INDUSTRY AND FISHERIES

11.1 Domestic arrears

The Ministry had outstanding arrears of Shs.16,447,967,015 by end of June 2008. Included in the domestic arrears is a sum of Shs.11,796,818,668 that was not previously recognised in the accounts. Whereas a schedule of domestic arrears was provided, actual bills were not submitted for verification. I was therefore not able to confirm the correctness and completeness of the payables balance disclosed in the financial statements. I advised management to avail the actual bills for verification.

The Accounting officer explained that poor book keeping and reporting at the time and insufficient funds in the budget caused non recognition and accumulation of arrears respectively.

11.2 Payments To Uganda Revenue Authority

Out of a sum of Shs.337,027,625 remitted to URA in respect of 6% withholding tax and pay as you earn (PAYE) deductions, only shs.82,339,986 was supported with acknowledgement receipts from URA leaving a balance of Shs.254,687,641 unsupported. I advised the Accounting officer to obtain the acknowledgement receipts from URA to enable confirmation of the remittances.

11.3 Government assets

In my report to parliament for the year ended 30th June 2007, under paragraph 11.3 (a) and (b), I raised concern over government land under the Ministry that was not surveyed and titled. Since then the Ministry instituted a task force which was assigned the task of identification of verification of all Ministry land countrywide and establishing the status of encroachment.

Available records indicate that an inventory of land under the Ministry of Agriculture, Animal industry and Fisheries was compiled based on the information submitted by the Chief Administrative Officers (CAO) in the year 2002. The following matters were observed:-

127 (i) Only land in the Western region has been identified and verified leaving land in other regions unverified.

(ii) The land identified has never been surveyed and there were no land titles processed to confirm ownership.

(iii) Available correspondences indicate that Government land has been subjected to severe encroachment by the surrounding communities or outright grabbing by unscrupulous people. In one of the correspondences with the subject of the matter “land at Kazinga – Ngoma subcounty Ntungamo Districts”, it is indicated that land measuring approximately 100 acres, which has been known to belong to the Ministry, was not secured and some neighbours decided to take advantage and grab the land. They have since disagreed and have been in court and recently the High Court ruled in favour of one of the parties.

In addition, the Ministry of Agriculture, Animal Industry and Fisheries has complained to the Rt. Hon. Prime Minister about the “unfair ruling on MAAIF land at Entebbe Livestock Experimental Station which CAA want to use”.

Civil Aviation Authority (CAA) obtained a land title for the land belonging to MAAIF. The matter was brought before the Office of the Prime Minister and has not yet been concluded.

This implies that a big chunk of government land under the Ministry is still not surveyed, lacks title deeds and in some instances unknown. This state of affairs exposes government land to the risk of being taken by fraudsters and encroachers.

I advised management to identify, survey and obtain title deeds for all government land under the Ministry‟s jurisdiction. Where illegal encroachment has occurred, caveats should be sought and also evictions should be enforced on encroachers.

128 The Accounting Officer explained that the task force will continue addressing issues of identification, but verification of Ministry land is constrained by lack of sufficient funds.

11.4 Pay roll Management Staff and Employer NSSF deductions not acknowledged A total of Shs.21,628,177 was paid to National Social Security Fund (NSSF) in respect of staff contributions in compliance with the NSSF Act. It was however, noted that there were no acknowledgement receipts to confirm that the funds were received. In addition, I was not provided with the monthly schedules of staff and employer‟s contributions for all qualifying staff to enable confirmation of the stated amount.

I advised management to obtain acknowledgement receipts from NSSF and to submit monthly supporting schedules for contributions of all qualifying staff for the period.

11.5 Office Accommodation for the Ministry Headquarters The Ministry headquarters is located at Entebbe town about 24 kms from the centre. It was noted that the buildings were constructed during the colonial days and are now dilapidated and not fit for a Government Ministry. There has not been any major repairs undertaken to give a face lift that befits a Government institution. Both electric and telephone cables are hanging and uncovered in a number of places which puts both human life and government assets at risk.

In addition, having the Ministry headquarters far away from other government institutions makes co-ordination of the various Ministry projects and the sector difficult, and unduly expensive due to the greater use of vehicles and their related costs.

The Accounting Officer explained that plans are underway to shift the Ministry Headquarters to Kampala. He indicated that several procedures had been initiated to procure office space but due to financial constraints it was not possible to shift by the close of 2008 as had been planned.

129 11.6 Audit Inspection of Government Establishments/Facilities 11.6.1 Mubuku Irrigation Settlement Scheme The following matters were observed during an audit inspection of the scheme:-

(a) Understaffing An Assistant Agricultural officer who is the only established officer available presently heads the station. Due to lack of funding from the Ministry, there is no support staff to complement the work of the officer.

The absence of sufficient manpower at the station is likely to stifle service delivery and makes it difficult for the station to function effectively.

It is recommended that the staffing gaps at the station be addressed in order to improve service delivery.

(b) General Appearance of the Station The station is not well maintained. It is in a bushy environment. This was attributed to lack of funding for the station from headquarters. Apart from the salary of the acting officer in charge, there was no imprest for the station to facilitate its operations.

It is recommended that a revolving imprest for the station be introduced to enable it function properly.

(c) Infrastructure at the Station All the buildings owned by the scheme are in a poor state, the roofs are leaking. Similarly the furniture/machinery and farm equipment comprise of mainly scrap which should be boarded off. In addition, all the workshops are dilapidated and abandoned.

It is recommended that buildings be renovated and all scrap and old stores be boarded off in accordance with existing regulations.

130 (d) Encroachment of Government Land It was further noted that over 400 hectares of land earmarked for the scheme is occupied by squatters who pose a serious threat to the development plans of the scheme. The situation arose due to the failure by the Ministry to enclose/fence off all its land.

In addition, the occupants of the staff quarters are unknown since all former staff were laid off.

It is recommended that all land belonging to the scheme be fenced forthwith, while those areas occupied by the squatters be secured.

(e) Power Bills for the Scheme All power bills for the scheme consumed by the schemes, workshops, stores, staff accommodation and all other facilities are paid by Government yet some of the facilities are being rented out to the farmers and the private sector who should be responsible for settling their power bills. Examples of rented out facilities include the rural information centre, which provides secretarial services to the public, and the produce stores used by the farmers to pack pepper for export. In addition, the terms of the tenancy for the facilities rented were not availed to enable me confirm whether they were being complied with.

It is recommended that tenancy agreements be provided for verification and arrangements should be made to install separate meters for the facilities rented out.

(f) Rehabilitation required on the existing irrigation scheme The following require immediate rehabilitation in order for the scheme to operate smoothly:- Re-alignment of Sebwe river and the repair of the intake diversion dams to stop the frequent flooding Repair of the 8 km main water canal to phase 1 in Rukooki Drainage system and water logged farms and Farm roads

131

(g) Absence of Tenancy Agreements for Farmers on the Scheme All farmers who were officially allowed to settle on the scheme were required to sign tenancy agreements with the managing agency that had been assigned by the Ministry. The tenants were also required to pay a development or administrative charge. However, details of the signed agreements and charges levied were not provided for audit.

There is need to regularise official settlement of authorised farmers and maintain proper records for future reference.

11.6.2 Nshaara Dairy Cross Breeding Ranch Ruhengyere Field Station and Rubona Stock Farm

(a) Dilapidated Facilities All the facilities at the three (3) stations were found in a poor state. For instance, the roads constructed at their inception are all now impassable with potholes, office blocks have cracks, leaking roofs with sub-standard furniture and fittings. The fences, garage and fuel pump at Nshaara are non functional while some of the dexion houses were blown off by wind.

It is recommended that urgent interventions be made to renovate the buildings and improve the condition of other infrastructure for better station‟s operations.

(b) Absence of operational and Maintenance Funds During inspections, it was noted that all the stations had no operating imprests to enable the officers in charge manage the day to day operations effectively. At Rubona Stock Farm where an imprest was provided, it was in some months inadequate and in others not paid at all.

I recommended to the Accounting Officer to introduce an imprest at these stations to enable the in-charge execute the daily operations.

132 (c) Stores due for Boarding off A lot of stores due for boarding off were found at stations but no action had been made by management to initiate the boarding off process. At Nshaara Dairy Cross Breeding Ranch, 1600 big water pipes of six inches, which were supposed to be used to connect water from Lake Kakyeka to the ranch, were found on the compound and had been abandoned there since 1976.

I advised the Accounting Officer to expedite the process for disposing off these stores.

(d) Under-utilisation of the Ranch During inspection, it was noted that Nshaara and Ruhengyere ranches are under- utilised as the recommended number of animals that could be accommodated at the ranches far exceeded the current stock at sites. However, the under- utilisation was attributed to the current breakdown in the infrastructure at the ranches.

It was further noted that Nshaara ranch is not fenced. As a result, illegal grazers find their way to the ranch. This has had serious repercussions. For instance, between August 2008 and October 2008, over 49 animals (cattle) were reported dead. It is probable that infected animals which illegally graze on the ranch might have transmitted diseases to the animals on the ranch.

I urged management to urgently intervene and have the ranches properly fenced to avoid encroachments and illegal grazing.

11.7 Absorption Capacity for Project Loans

Absorption of project loans and grants still remains a big challenge to the Ministry. My review of the Treasury records revealed that during the period under review, 4 projects implemented by the Ministry had their “agreed dates of loan disbursements‟ expired with loan disbursements amounting to Shs.6,116,725,671 still outstanding as indicated in the table below:

133 Loan ID Amount % Agreed Date Undisclosed Undisbursed Date of Signed (Shs) Disbursem ents Vegetable Oil 20598000 99,989,757 45% 30/6/08 26/5/98 Project Agricultural 20730000 221,804,357 40% 31/12/08 7/5/01 Advisory Services North-West 21534000 5,787,217,12 13% 31/12/08 20/11/00 Small Holder 8 Agricultural Project Agricultural 20732000 7,714,429 6% 31/12/08 15/2/02 Modernisation Project

Although some of the loans may have been extended, failure to implement projects in accordance with approved investment plans results in heavy loss of public resources not only in terms of commitment fees on un-disclosed balances but also sunk-costs resulting from failure to achieve project objectives.

The Accounting Officer attributed the low absorption capacity to weak capacity of project implementation units in the Ministry, bureaucratic procurement and disbursement regulations, weaknesses in design of the projects and, inadequate budgeting for taxes and government counter part funding to projects and conflict between government of Uganda and donor regulations.

11.8 National Livestock Productivity Improvement Project ID NO.P-UG-AA0- 019; ADF Loan No. 2100150007005 and Grant No.2100155001880

(a) Payment of Taxes Using Donor Funds The financing agreement stipulates that payment of taxes is the responsibility of Government of Uganda. A review of a sample of payments made during the year under review revealed instances where donor funds amounting to shs.9,156,066 were used to pay Value Added Tax (VAT) to suppliers of goods and services. Failure to abide by the provisions of the financing agreement may compel the donors to withhold further funding to the project, thereby affecting implementation of activities.

134 Management is advised to ensure that the donor funds account is refunded with the amount in question and to avoid the practice in future.

Management has indicated that it will be reimbursed to the loan account from the project GOU account.

(b) Counterpart Funding Although GoU has been providing counterpart funding to the project since its inception, the amounts provided have been falling short of the budgeted amounts as shown below:-

Financial Amount in Actual Shortfall Percentage Year approved amount (shs) shortfall annual disbursed to budgets (shs) project (shs) 2004/2005 400,000,000 132,000,000 268,000,000 67% 2005/2006 837,799,000 502,000,000 335,799,000 40% 2006/2007 800,000,000 421,000,000 379,000,000 47% 2007/2008 500,000,000 407,000,000 93,000,000 18.6%

This affects timely implementation of Project activities.

I advised management to liaise with the Ministry of Finance, Planning and Economic Development regarding the matter. Management explained that they had taken this up with Ministry of Finance and a commitment had been received from the Ministry to avail funding for the purpose.

(c) Non Remittance of Statutory Deductions Withholding tax amounting to Shs.26,921,935, though deducted from the service providers, was not remitted to Uganda Revenue Authority. This can attract penalties from URA.

Management is advised to remit the deducted taxes promptly and obtain proof of remittance to URA of the deducted taxes.

135 Management explained that the taxes are supposed to be paid from the GOU contribution but this has not been always possible due to limited GOU contribution and that all tax arrears had been compiled and presented to Ministry of Finance for consideration.

(d) Variance Analysis Management did not carry out budgetary analysis (variance analysis) during the period under review. This implies that monitoring of implementation of the budget may not have been undertaken properly.

Management is advised to ensure that variance analysis is carried out in future and reasons for any major deviations explained. This enables corrective action to be undertaken before its too late.

Management has attributed the weakness to lack of a full time accountant during most of the period up to January 2008 and explained that the project had since recruited a full time accountant.

(e) Delayed Accountability It was noted that some activity implementers delayed to account for funds advanced to them to carry out project activities. For example, funds amounting to Shs.30,787,524 as highlighted in the table below were yet to be accounted for, at the time of audit in November 2008:-

Cheque No. Payee and Purpose Amount (Shs.) 000644 PC - NLPIP for W/shop on Animal 19,965,000 movements Vr 876 Jacaranda Centre 10,822,524 Total 30,787,524

Delays in submission of accountability can lead to falsification of documents and a possible loss of project funds.

136 Management is advised to ensure that advances are promptly accounted for in future.

(f) Personnel Records A review of a number of staff files revealed that these files contain scanty information with only a copy of appointment letters available on file. Other important information such as testimonials, performance appraisals forms, training information and bio- data are not on file. Failure to have this information, readily available on file renders it difficult to assess the suitability of staff appointed on the project. Staff files should be updated with all the relevant information.

Management explained that the Project Implementation Unit is to work closely with the Personnel section to correct the mistake/oversight.

(g) Inspection of activities at the districts The project implements activities through 42 Districts spread in various parts of the country. During the course of the audit, a number of Districts were sampled and inspected and the status of accounting and bookkeeping was found to be satisfactory. The following matters were also observed:-

It was noted in Masindi District that a firm (i.e. M/s Minimax Enterprises Ltd) was contracted by the PMU to execute works at two sites in Ntooma Parish. Inspections were carried out at both sites and the following observations were noted;

At Kijunjubwa cattle crash site, there were incomplete structures of the cattle crash and a 2-stance pit latrine. There was also on site, PVC pipes that were supposed to be used to construct the cattle crash. It was explained that the contractor had reportedly abandoned the works for non Payment of certificates due to him by the project.

At the site for the proposed Bwijanga cattle market, the contractor had constructed two market offices up to roofing level, where construction works appear to have stalled. An incomplete structure of a 3-stance pit latrine, with

137 plinth walls about 1 foot above the foundation was also on site. The contractor had also abandoned these works for non payment of his certificates.

Failure to complete contractual works as planned may negatively impact on the attainment of project objectives and may also attract interest from the contractors.

Management is urged to ensure prompt settlement of contractors‟ invoices to avoid such incidences.

Management has explained that the company applied for a 20% advance payment, which has not been paid by ADB due to the fact that a reconciliation of the committed loan funds for civil works was being undertaken at the time by ADB and the PIU. The reconciliation has since been completed and the contract for Mini max has been approved by the Bank. Payments have been effected and contractor has resumed work.

It was noted that the PMU maintains a cattle register that records all the cattle that have been procured by the project and where the cattle have been distributed to. However, inconsistencies were noted between the register and the actual animals that were received in some districts. For example, in Amuria District, the cattle register shows that the following cows had been distributed in the district:-

Date GRN No. Quantity Supplier 19/9/06 2104 200 Forgotten Community 20/11/06 2106 237 Forgotten Community 6/7/07 2107 300 Forgotten Community

138 The above deliveries appear not to have been received in Amuria district. There were no copies of the GRN and distribution schedules to support the transactions. In addition, in Budaka district, the Goods Received Note no.0104 of 13/11/07 showed that 103 animals had been received by the district whereas the cattle register at PMU shows that 163 animals had been supplied to the district by Opua Alex on the same date and that the supplier (Opua Alex) was paid for the 163 cows supplied. Such inconsistencies may imply that the deliveries were actually never made.

Management is advised to investigate the incidences noted with a view to ascertain whether the intended beneficiaries actually received the cattle.

(h) Undelivered Items

The project procured assorted inputs (including fencing posts, hay boxes, U-nails, barbed wire, etc) for rangeland improvement. The suppliers of the items were required to deliver the items according to a distribution schedule provided by PMU to the districts. It was noted however that not all the items were delivered to the districts. For example the following items were not delivered:-

District Item Qtty to be Qtty Amount delivered delivered undelivered Amuria King posts 630 0 630 Amuria Standards 1200 0 1200 Amuria Hay boxes 4 0 4 Sironko King posts 630 327 303 Sironko Hay Boxes 4 0 4 Sironko Standards 1200 0 1200 Sironko Fodder 4 0 4 choppers Palisa King posts 630 0 630 Palisa Standards 1200 0 1200 Katakwi King posts 630 0 630 Katakwi Standards 1200 0 1200

139 Such inconsistencies may imply that the deliveries were actually never made.

Management is advised to investigate the incidences noted with a view to ascertain whether the right quantities were delivered and that the items were received by the correct beneficiaries.

Management has explained that the company was contracted to supply a number of poles of different categories, however, owing to the failure of the supplier to deliver the items in the time specified in the contract, the Ministry cancelled his contract and will only pay for items delivered within the contractual time.

(i) Missing Land Titles Section 5.01 of the loan agreement required Government of Uganda to submit to the Bank, certified copies of letters of land allocation from Uganda Land Commission or the relevant District Land Board confirming government ownership of the sites where livestock marketing infrastructure are to be built. However, no certified copies of title deeds for these plots of land were made available for audit inspection, although it was understood that some civil works were already being undertaken on some of these sites.

Failure to provide evidence of ownership of the land on which civil works are being undertaken poses a risk on the investments on such sites in the event that it turns out that the land is owned by another party other than Government.

I have advised management to expedite the acquisition of title deeds for these sites in order to secure the developments thereon.

Management has explained that although it was earlier required that certified copies of land allocation be acceptable, the Bank Supervisory Mission at Midterm (February 2007) advised that instead of certified copies from either the districts or Uganda land Commission, the districts should present copies of actual land titles from one source - Uganda Land Commission. The project has been receiving copies of land titles from only the Uganda Land Commission confirming ownership

140 of the sites by the Local Governments. The matter will be followed up in the next audit.

(j) Delayed implementation of project activities The following activities that were planned to be implemented during the year were not fully undertaken:- Civil works:- o Water reservoirs o Market Livestock census

Delays in implementation of project activities can lead to extension of the project life and unnecessary administrative project costs.

Management is advised to ensure that all planned activities are always implemented according to the work plans.

Management has attributed the delays to the following:- There were delays in the procurement of Consulting firms to design supervise civil works The districts delayed to secure land and title it, this delayed commencement of construction of markets, slaughter sheds, dips and cattle crushes. The Livestock Census activity was delayed by the inadequate budget of 1.7bn in Appraisal report. An adjustment to 2.9bn had to be awaited at Midterm review of August 2007 to commence the census.

Status of prior year key audit recommendations By the time of audit, the following key prior year audit recommendations were still outstanding:-

141 Issue raised Remarks 1 Ineligible expenditure Not addressed 2 Non remittance of deducted taxes Not addressed 3 Lack of an Accounting software Not addressed 4 Delayed implementation of project activities Not addressed

11.9 Northwest Smallholder Agricultural Development Project

F.UGA/AGR-DEV/00/42

(i) Non compliance with the VAT statute It was noted that a total of Shs.16,756 million was spent on civil works and other expenses excluding staff costs. The VAT component on these expenses amounting to Shs.2,276 Million had not been paid over to URA by the time of the audit and is still outstanding. This action is unlawful and can attract interest from URA.

Management is advised to adhere to the requirements of the law.

Management has explained that submissions regarding the outstanding VAT payments of Shs.2,276 million have been made to the Ministry of Agriculture, Animal Industry and Fisheries which in turn submitted it to Ministry of Finance, Planning and Economic Development for action.

(ii) Non compliance with the withholding tax law The project had an accumulated withheld tax of Shs.404 million over the period; Shs.221 million was still on one of the Projects Bank accounts but had not been remitted to URA. This can attract interest from URA.

I have advised management to adhere to the requirements of the law.

Management has explained that the payment of Shs.221 million of WHT that had been held on the Project accounts has been effected to the respective service providers after they had paid the equivalent amounts to Uganda Revenue Authority (URA). The matter will be followed up in the next audit.

142 (iii) Non deduction of Pay As You Earn (PAYE) and NSSF from employees salaries

A review of the June 2008 payrolls revealed that employees were paid gross amounts without deducting PAYE and NSSF.

Non compliance with the NSSF and PAYE statutory deductions exposes the Project to penalties.

Management has explained that neither PAYE nor NSSF can be paid directly from the Project Accounts. The respective employees therefore pay the relevant authorities and present the evidence to the project before the next salary is paid.

(iv) Unaccounted for advance payments on civil works It was noted that the amount of funds paid were higher than the completed works for some civil works. This implied that advance payments in excess of completed works had been made but in the accounts these were not reflected as such. Examples include;

Contract No. % of % of Total Payments Completion Payments Made Ush. 000 Made

1. NSADP/ADJ/04-A.B 50% 98% 192,067 Construction 2. NSADP/MOYO/18-Dynamic 80% 98% 427,133

3. MKT/AP/ADJ/01-Kadam 60% 79% 956,679

4. WS/L/YBE/06-Biosca 50% 84% 277,612 Consultants

Failure to clearly account for Payments in excess of Completed works as advances exposes the Project to the risk of non recoverability of advances on Civil Works.

All Payments on Civil Works in Excess of completed works should be reflected in the accounts as advances.

143 Management has explained that advance payments were made to Contractors who requested for it and recoveries are being effected as per the terms in the contract document.

(v) Delayed completion of civil works It was noted that during the field verifications, a significant number of Civil Works Projects were greatly lagging behind schedule. Examples include:-

Details Component Original date Extended Audit Remarks of date of Completion Completion 1. Aberi Zombo Roads 13 March 07 13 July 08 Visited 21st Oct (16Km) in Nebbi. 08 & found work not completed 2. Tete – Ogolo Roads 13 March 07 13 July 08 Visited 30th – Liri 13 Km Adjumani Oct 08 & found work not completed 3. Dzaip Market Market 21 Nov 07 - Visited 30th in Adjumani Oct 08 & found work still not completed 4. Kubala & Market 21 Nov 07 - Visited22nd Oct Nyadiri in Arua 08 & found work still not completed 5. Moyo DFI DFI 29 Nov 07 - Visited 29th Oct 08 & found work still not completed 6. Alangi Water 31 May 08 - Visited 21st Oct Market & Zeu DFI Supply and 08 & found water supply system Sanitation work still not completed

For the Roads and Bridges Personnel and Equipment of Contractors were no longer on sites

Delayed execution of civil works may lead to costs exceeding the original budget and thus impacting other project activities. In addition, if works go beyond expiry

144 of the credit agreement, the project may fail to obtain funding for the delayed works.

Management should devise possible ways of expediting these works so that completion is within the existing credit duration.

Management explained that the monitoring and supervision of civil works contracts has been stepped up at district, national co-ordination and line Ministry level.

(vi) Inadequate internal audit services in some districts During the period under review, there was no evidence that Internal Audit Services were extended to the Project for the districts of; Nebbi, Koboko, Yumbe, Moyo & Adjumani.

Failure to make use of District internal Audit services, the project may not detect internal control weaknesses at the appropriate time.

Management should ensure that the Project benefits from the various District Internal Audit services where it operates and this should be evidenced by internal audit reports that management should follow up.

Management has promised to address the matter in future.

(vii) Variations to Civil Works Contracts Not Approved by the Projects Contracts Committee

The field visits to the markets under construction (including Kubala & Nyadiri markets in Arua & Abugi, Warr and Nyaruvuru markets in Nebbi) revealed that variations were made to the original contracts. Only one pit latrine was provided instead of three per market as per original contract. These variations had not been approved by the Projects Contracts Committees.

The above variations imply less work for the same amount of contract funds at the expense of the Project.

145 All civil works variations should be properly approved by the Projects contract committee. Management should ensure they pay only for the works delivered.

Management has explained that only certified works shall be paid for in future.

(viii) Lack of Land Titles for Markets, District Farm Institutes and Water Supply Systems

All Markets, DFIs and Water Supply Systems under construction in the six districts under the project i.e. Nebbi, Arua, Koboko, Yumbe, Moyo and Adjumani had no Land titles.

In the absence of Land titles, the district could be legally challenged in terms of ownership of these projects. The districts should Endeavour to process the land titles to these projects.

Management has explained that the Chief Administrative Officers have been asked to secure land titles for all the infrastructure investments under the project and this should be in the names of the respective district or sub-county level.

(a) Lack of Routine Maintenance on Rehabilitated Roads It was noted that while the project had worked on some roads in the period under review; the districts had demonstrated lack of sustainability as the roads were in state of disrepair already.

Lack of a maintenance strategy for the roads on the part of the districts will impact the success of the project in that area.

The project should liaise with the district in an effort to ensure that there is sustainability by the districts on the roads that the project has worked on.

Management has explained that sustainability of all project initiatives has been a subject of discussion with the districts. In the case of the roads in particular, the districts are taking some of them on under the district quota for which funds are

146 provided for from the Centre while the Sub-county is to manage some. Nonetheless, additional funding for the maintenance of these roads will still need to be considered and the districts are to take it up with the MOWT.

(b) Lack of an Accounting Package to Help With Book Keeping Issues It has been noted that Books of accounts were maintained on simple spreadsheets in Microsoft excel. Maintaining books of accounts on spreadsheets exposes the project records to manipulation, errors and data corruption that may go undetected for unreasonable length of time.

The project should acquire accounting software and maintain appropriate back up.

(c) Remuneration of Monitoring Engineers It has been noted that remuneration for District Engineers in terms of monitoring civil works were in built in the contractor‟s contracts. The fact that the contractors were responsible for paying supervising Engineers, this could seriously impair the Engineers independence and objectivity and thus compromising the quality of works.

The project should devise means of paying the supervising Engineers at the districts directly, in that way the project would exercise reasonable control over them.

Management has explained that remuneration of supervising engineers was inbuilt in the civil works contracts as a standard practice being applied by the respective line ministries of Works and Transport, and Water and Environment.

11.10 Creation of Sustainable Tsetse and Trypanosomiasis Free Area – Uganda Component (STATFA) Project No.P-ZI-AZ0-006; Loan No.2100150009197 Grant No.2100155003920

(i) Lack of an Accounting Package It was noted that the accounts were processed manually, thereby spending more hours on the accounting information processing, and making the accounts more prone to inaccuracies.

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Management should consider the acquisition of competent accounting software.

Management has explained that the process of acquiring a competent software is underway.

(ii) Delays in implementation of project activities According to the Project Appraisal Report, the terms of reference (TOR) for the baseline survey would be submitted and approved by the fourth quarter of the first year of the project. The effective date of project implementation was 24th January 2006 but the contract for the survey had not been signed by the time of our audit. The baseline survey is supposed to propel other project activities. This is likely to deter the project from achieving its objectives.

Management should consider speeding up this activity.

Management has explained that the contract agreement is waiting signing by the Accounting Officer. Baseline surveys will be conducted immediately thereafter and implementation of the field activities will be carried out.

(iii) Delayed Accountability of Funds Advanced for the Seed Colony Development

It was noted an advance of Ushs.27,963,000 was made to the National Livestock Research Institute (NaliRRI) on 1st April 2008, for the establishment of a seed colony on Buvuma Islands. By the time of the audit, there was accountability for only Ushs.19,777,835 leaving Ushs.8,185,165 not accounted for. Lack of accountability violates the financial regulations. I have advised management to follow up/investigate this matter.

Management explained that there was a delay in utilizing the funds sent to NaLIRRI because of stringent procurement procedures regarding the establishment of a field insectary building in Lukoma Island, Mukono District and

148 that the balance of shs.8,185,165 is deposited on the NaLIRRI Stanbic Bank Account, Tororo branch.

11.11 Fisheries Development Project P-UG-AAF-002

(i) Government of Uganda (GOU) counterpart funding It was noted that GoU counterpart funds were not being deposited on the local currency account. As a result, the project had limited control over the GOU counterpart funds that are controlled by the executing Ministry. As a consequence that GOU counterpart remittances were not wholly being applied to the project. A total of shs.259,955,001 released for the project as counterpart funding for the financial year 2007/08 had only Shs.60,743,499 applied to the project leaving a total of Ushs.199,211,502 diverted by the executing Ministry. This implies that Project objectives may not be adequately achieved as a result of continued diversion of project funds by the executing agency. This is likely to adversely affect project implementation

In order to ensure timely and smooth implementation of the project activities and to eliminate diversion of project funds, it is recommended that the proceeds of GOU counterpart contribution be deposited to the local currency account to be operated and maintained by the Fisheries Development Project management.

(a) Non remittance of statutory deductions It was noted that there is lack of remittances of statutory deductions in respect to withholding tax, VAT, PAYEE and NSSF. Evidence revealed several cheques for withheld tax that were not remitted and were still in the possession of the project of which some had stalled by the time of audit. A few examples of the non compliance to that respect include various cheques amounting to shs.24,271,337.

This may result into penalties being imposed to the project which would adversely affect the project. I have advised management to adhere to the requirements of the law.

149 Management has explained that all outstanding tax payments are to be compiled and submitted to Ministry of Finance for review and settlement.

(b) Enactment of the Fish Act The loan agreement required the Project to enact the Fish Act not later than two (2) years from the date of loan effectiveness. However, no revised Fish Act has been enacted. Lack of implementation of loan agreement conditions in a timely manner may result into non achievement of project objectives or may constitute breach of loan agreement

Project management should ensure implementation of loan conditions in a timely manner.

Management has explained that due to delays in getting the project started and the urgency that was attached to the enactment of the new bill at that time, funding for this activity was obtained from another project. This project therefore withdrew from enactment of the new Fisheries Bill.

As pointed out in the previous report, I noted non compliance to the loan agreement and the National Environmental Management Authority (NEMA) in respect to obtaining clearance of NEMA certification prior to construction of the fish landing centres and fish markets. No NEMA certification has been obtained to date despite construction works done to a tune of Shs.9,644,038,100. I have again advised management to adhere to the requirements of the law.

Management has indicated that the delay was as a result of failure to provide proof of land ownership for the sites but the matter had been handled

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(d) Book keeping There were inadequacies in the effectiveness of the project accounting and book keeping system in the recording, and monitoring of the project expenditures. The following weaknesses were observed:- - Cash book for Special Foreign Exchange Account was not up-to-date.

- No cash book was maintained for the Revolving fund Account. - No ledger was maintained for GoU counterpart expenditures - No manual journals and ledgers were maintained to provide audit trail to the financial statements as required by the Banks disbursement handbook. - No fixed assets register was maintained contrary to the requirements by the Bank‟s disbursement hand book.

The effectiveness of the project accounting and overall internal control system was found to be lacking to adequately safeguard project assets. The risk of loss of project assets is greatly enhanced resulting from poor accounting controls.

I have advised management to ensure that all the required books of account are opened up and maintained up-to-date.

Management has promised to open up all the required books of account.

(e) Cash Management It has been noted that there was poor cash management at the project. The following anomalies were noted:- - No bank reconciliations for Special Foreign Exchange Account were prepared during the year. In addition bank reconciliation for Special Local Currency Account were only prepared during the time of audit. - Instances were noted where cheques ready for issuance to suppliers are not distributed. No follow-up is carried out on cheques that have been outstanding for a long time. - No evidence of independent review is made on accountabilities submitted.

151 - A number of cheques were prepared and signed but remained in the possession of the Accountant and most became stale and no reversal had been done in the books of accounts:

The above anomalies increase the risk of errors in bank reconciliations going undetected. In addition, deliberate delay in issuance of cheques to payees may result into interest and penalties being imposed to the project.

In order to enhance effective project cash management, I have advised project management to institute the following measures:- - Bank reconciliations should be prepared, reviewed and approved on a timely basis. - Timely issuance of supplier cheques should be ensured. A delivery system of cheques to suppliers should be established. In addition, reversal of stale cheques in the book of accounts should be done - Timely follow up with suppliers‟ cheques and outstanding bank reconciliation items should be done on a monthly basis.

Management has promised to address the matters in future.

(f) Project Monitoring It was noted that the project did not have an appropriate monitoring, evaluation and reporting system as evidenced from several questionable expenditures made by the project for monitoring activities These included the following:-

In particular, there are instances where funds were advanced to the Executing Ministry departments, Commissioner and Minister of State in the pretext of monitoring of the Fisheries Development Project activities, a role that was not for the executing agency. A few examples of such instances were as follows:- Voucher Payee Amount (shs) Purpose Remarks 133 State Minister 8,300,000 to carry out no evidence by monitoring of way of monitoring project activities report. 161 21 members of 7,545,000 undertake no evidence by parliament monitoring and way of monitoring evaluation of report. fisheries project 152 D119/03/08 National Project 2,044,572 undertake no evidence by Coordinator monitoring and way of monitoring evaluation of report; no fisheries project accountability D120/03/08 Accounts 408,915 undertake No accountability; department of monitoring of the no evidence that the executing project monitoring was Ministry actually undertaken. D121/03/08 Procurement 204,448 undertake no evidence by department of monitoring of the way of monitoring the executing project report; no Ministry accountability

It was also noted that there was lack of adequate monitoring, control and surveillance of fisheries activities by use of the fisheries patrol boats. No evidence was available for use of patrol boats to carry out their intended objectives. We were made to understand that only one patrol activity had been undertaken since the acquisition of the patrol boats and that this was due to the high fuel consumption of the patrol boats.

I have advised management to institute appropriate monitoring mechanism of its activities and to effectively enforce fisheries regulations in order to be able to achieve project objectives.

Management has promised to rectify the above anomalies henceforth.

(g) Project Disbursements There was no advance register maintained to monitor Project advances; advances were not accounted for in a timely manner as was evidenced by advances o fShs.1,640,000 and US $354 that were outstanding

The above anomalies increase the risk of loss of project funds through unaccounted for advances going undetected.

Allowances totalling to shs.6,729,200 were paid to staff while conducting their routine normal duties; these included the following:- Payment of unauthorized allowances to project staff is irregular and tantamount to diversion of project funds.

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Payments out of counterpart amounting to Ug.Shs.60,743,499 were not supported by payment vouchers but rather by loose minutes. This implies that there‟s no evidence of the approval process being properly followed.

The evaluation and selection process for a clearing and forwarding company was not in line with the approved procurement procedures. The supplier was paid Ug.Shs.42,089,068 in respect of clearing and fisheries patrol boats. No solicitation of bids was done from the various pre-qualified suppliers. Appointment of the supplier was only done by allocation without any basis or criteria for the selection and there was no evidence of negotiation of fees. It was noted that the Contract with supplier stated agency fees to be charged were to range between 1% and 1.5%. No fixed percentage of charges was agreed. This therefore resulted into the supplier charging the project 1.5% all the time without any justification for charging the ceiling. This therefore could have resulted into loss of project funds amounting to Ushs.16,555,033.

Award of contracts to suppliers without any justified basis may foster manipulation of project funds.

Five (5) inflatable dinghy and seven (7) outboard engines paid for fully (Ug.Shs.38,850,269) had not been delivered at the time of audit in November, 2008. Project disbursements made for purchase of goods not yet received puts project funds at greater risk of loss.

A total of shs.1,731,060 and Ushs.1,913,960 on PV#s D54/11/07 and D55/11/07 respectively that were used to repair non project vehicle, UG 1432A by the executing agency.

I have advised management to undertake the following:- Ensure immediate recovery of the project advances not yet accounted. In addition there should be timely update of the advance register to monitor project advances.

154 Payments of sitting allowance to project staff while conducting their normal routine duties should be stopped henceforth. Counterpart disbursements should be supported with payment vouchers duly approved by Project Management In order for the project to achieve value for money, adherence to procurement procedures should be ensured. Bids should always be sought from pre-qualified suppliers, evaluated and selected in accordance with the procurement procedures Project Management should ensure immediate follow up of the goods paid for fully and not delivered. In their response, management has promised to address the above matters in future.

(h) Project Staffing It was noted that the Ministry made a number of appointments that were considered unnecessary and not in line with the approved staff structure of the Project. These included the following:- Post Number Number posted required Drivers 3 7 Secretaries 1 2 Office attendants 1 4 Telephone operator 0 1 cleaner 0 1

The above implies that project funds are not being utilized with due attention to economy and efficiency.

I have advised management to adhere to the approved staffing structure.

Management explained that additional staff were found necessary during project implementation to ensure effectiveness and efficiency.

155 Fixed asset register is not being updated by the project to record assets of the project on a timely basis as required by the Bank‟s disbursement hand book. The fixed asset register was only prepared on request by the audit and this was found not to reconcile to the financial statement figures.

Lack of update of the asset register may result into loss of project assets going undetected. I have advised management to regularly update the register.

Management has promised to address the above matters in future.

12.0 LANDS, HOUSING AND URBAN DEVELOPMENT

12.1 Payables The statement of Outstanding Commitments shows that the ministry incurred domestic arrears to the tune of Shs.18,432,611,815 during the financial year contrary to the commitment control policy of Government. The bulk of the arrears relate to compensation for land acquisition and contribution to international organisations.

I have advised the Accounting Officer to ensure that before undertaking such big government interventions, funds are available in the budget and will be released for the purpose.

12.2 Non-transfer of Certificates of Title (a) Compensation to ranchers During the year, the ministry paid over Shs.1.2 billion to various ranchers whose twenty two ranches had been taken over by government for resettlement of squatters. However, land titles relating to 18 ranches have not been surrendered to government for transfer into the names of Uganda Land Commission.

Although the Accounting Officer explained that the titles had been surrendered by the various ranchers, they were not presented for audit.

156 (b) Compensation for Plot 1 Block 32, Bunyaruguru, Toro Shs.930,000,000 was paid to an individual in two instalments in respect of land compensation for Plot 1 Block 32, Bunyaruguru, Toro. Documents available show that the land title was surrendered and transfer forms signed by the vendor. However, at the time of audit, there was no evidence to confirm transfer of ownership to Uganda Land Commission.

The Accounting Officer is to expedite the transfer of all the titles into Uganda Land Commission (government) names.

12.3 Unaccounted for funds Shs.489,770,000 was released to the Ministry to carry out the land amendment bill sensitisation under the Land Tenure Reform Project. However, Shs.19,306,000 paid for various activities remained unaccounted for. In absence of accountability, I was not able to confirm that the funds were utilised for intended purposes.

12.4 Budget Performance for the year under review A review of the performance of the Ministry revealed that a number of activities were not implemented as planned such as;

Development and dissemination of National Land Use Policy Production of the draft national land policy Preliminary Land Information System design National Housing Policy and Bill and 15 year strategic plan Training of District Land Boards. Design of the Land Information system Rehabilitation of district land registries Procurement of digital cameras and computers.

Failure to carry out planned activities implies that the Ministry is not executing its mandate effectively.

It was also noted that the Ministry does not have a proper information system to enable measurement and evaluation of performance of the planned activities. As

157 a result, I was not able to ascertain actual outputs achieved under various activities.

12.5 Follow up of Previous Year’s Key Recommendations Review of progress made by the ministry in implementation of some of the key recommendations showed that little progress has been made as detailed in the table below:

Observation Status (Nov 2008) Accounting Officer’s Response Land acquisition (Mutungo Matter is still in court The matter is beyond the Land) Caveat and no title control of the ministry The pool housing fund Legal status of the fund Fund not yet legalised. Cabinet paper and Parliamentary resolution being prepared. Bank account at Stanbic Not yet transferred to the No objection to transfer the Bank, IPS branch. UCF account. balance to the UCF account. Untransferred balances on the account Rent payments Action taken Status established to be 660.5 million in arrears by Sept 2008 Reduced to Shs.571.9 yet to be collected.  No mortgages executed Mortgages still not Number of properties for 261 properties and executed. has risen to 302 and Shs.5.06 billion outstanding amount outstanding from this reduced to 4.36 billion. portfolio. Titling in process.  95 property allocations Mortgages Remaining beneficiaries have offered to public executed. been called upon to execute servants but have not 36 new cases. their mortgages. applied for mortgages valued at 4.9 billion.  456.5 million deposited 300 offerees for Values to be obtained by end

158 by 343 offerees for properties and Shs.830.4 of June 2009. properties whose value million deposited still had not been outstanding. determined.  150 properties offered No action taken for 44 Reminders sent to the affected to public servants who public servants. persons to effect the required have not opened up deposits. bank accounts with HFCU and 8% deposits not made.  131 offered to public 44 still outstanding. 28 beneficiaries still have their servants who have not grace period not expired while fully paid the initial 8% the others have been reminded deposit and grace of their obligations. period expired.  Sale of plots of land. Shs.19,494,500 is still outstanding from total offers of 63,600,000. No deposits for allocations worth Shs.67,410,000.

13.0 WATER AND ENVIRONMENT

13.1 Domestic Arrears

At the end of the financial year, the Ministry had arrears of Shs.15,763,616,148 of which Shs.4,360,205,299 was incurred during the financial year contrary to the commitment control system of Government.

The total domestic arrears of Shs.15.7 billion stated in the financial statements exclude the VAT arrears of Shs.11 billion (eleven) awaiting verification and reconciliation and another Shs.70.7 million owed to a closed project, Joint Partnership Fund (JPF) now operating as Joint Water and Sanitation Sector

159 Programme Support (JWSSPS). I was therefore not able to confirm the accuracy and completeness of the payable balances stated in the financial statements.

13.2 Gross Tax Payments

Shs.2,418,886,387 was paid to URA as tax payments incurred during the year through the Gross Tax settlement system. However, no acknowledgement receipts were obtained by the Ministry from the tax body. Included in the payments is a total of Shs.1,014,237,730 that lacked supporting documents such as custom entry forms, commitment forms by the Ministry etc. While the Ministry disclosed Shs.1,794,725,820 as outstanding tax obligations which also lacked supporting documentation such as BPAFS, other records show that the Ministry owes Uganda Revenue Authority Shs.11,031,932,485 in form of VAT from donor funded activities that has not been verified and was excluded from the domestic arrears figure stated in the financial statements.

13.3 Unspent balance At the close of the previous financial year, the Ministry had a closing unspent balance on the expenditure account of Shs.297,280,150. However, there was no evidence to show that the above balance was transferred back to treasury as required by law.

The Accounting Officer is advised to liaise with the Accountant General to ensure that the funds are transferred to the Consolidated Fund.

13.4 Payment for Security Services

Shs.5,400,000 was paid to a security company in respect of security services for the months of July, 2007 to September, 2007. However, there was no valid contract between the Ministry and the firm. The previous contract had expired by June, 2007 and had not been renewed at the time of audit.

It was also noted that this is the same firm which was guarding the Ministry premises when the accounts section was broken into and a number of valuables including cash and computers were stolen in June 2008.

160 13.5 Use of Inappropriate Procurement Methods The Public Procurement and Disposal of Public Assets Regulation 2003, provides for thresholds that should apply to the various procurement methods. However, a review of a sample of files for procurements during the year revealed that in a number of cases, procurements were carried out in contravention of the recommended procurement procedures.

Contract Bidder Services Amount Remarks Number Provided MWE/SRVCS/07 Warner Consultancy 72,850,000 Restricted bidding -08/00019 Consultant Ltd used instead of open domestic bidding. MWE/SUPLS/07 Technology Computer 31,443,200 Request for -08/00230 Associates accessories ($18,496) quotation used instead of Restricted bidding.

Use of inappropriate procurement methods expose the Ministry to low quality and costly services and products.

It is recommended that where circumstances dictate otherwise, the Ministry seeks authority from the PPDA as required by the PPDA Act and regulations.

13.6 Project 0146: Unaccounted for Advances

Shs.40,375,000 that was drawn in cash to cater for official advances and imprest and Shs.17,331,000 deposited with Standard Chartered Bank in respect of fuel to carry out various activities for the project remained unaccounted for at the end of the financial year. In the absence of the accountability, I was not able to confirm that the funds were utilised for their intended purposes.

161 13.7 Support to Small Towns Water and Sanitation Project (O164) 13.7.1 Construction Works at Kamwenge Water Supply (MWE/WRKS/06- 7/00119.

(a) Delayed Completion The intended completion date for the construction works should have been 30th September, 2008. However, at the time of inspection in October 2008, most of the works were incomplete. Gabion Construction across the river Mpanga was not yet done at the time of inspection as the contractor was waiting for the water levels to go down for the work to begin. This is likely to contribute to further delays in completing the works.

According to minute 8.9 of the 2nd October, 2008 site meeting, it was reported that 75% of the work was already completed implying that 25% of the work was behind schedule.

There was information that the consultant had prepared and submitted to the client a draft review report on the contractor‟s claim for time extension with costs which was due for discussion with the client.

The Accounting Officer attributed the delays in completing the construction works to reduction of the budgeted amount from 3.1 billion to 2 billion by the Ministry of Finance, Planning and Economic development when the project was running several other contracts for construction of water supply systems. The delayed payments resulted into the contractor scaling down the speed of construction and delayed procurement of some materials especially those that had to be imported.

(b) Outstanding Bill

Out of the contract sum of Shs.2,529,857,011, Shs.1,332,695,081 (53%) had been paid leaving a balance of Shs.1,197,161,930 (47%). The outstanding balance has so far accumulated interest due to the contractor of Shs.42,040,229.

162 I advised management to settle the outstanding balance to avoid further accumulation of interest.

13.7.2 Construction works at Kibaale water supply (MWE/WRKS/06-07/00102)

(a) Delayed Completion

The contractual completion date was planned to be 16th June, 2008. However, at the time of inspection in October, 2008, the construction works were incomplete and the percentage completion was estimated to be about 87%. There was no evidence to show that the contract period had been extended. Without extending the contract, the on-going construction activities are rendered illegitimate.

The delay of works was attributed to late payments of the interim certificates as result of the reduction in the budget by the Ministry of Finance, Planning and Economic Development.

Under the contract for Kibale Water supply, Shs.1,201,871,079 remained unpaid for a long time and has so far attracted interest of Shs.12,867,179.

13.7.3 North Eastern towns’ Water and Sanitation Project Lack of Land Titles

The Ministry entered into a Performance Management Contract with Sironko water supply and sewage authority to manage the water supply system. However, the Ministry does not have a land title for the land on which the water plant is situated. In the absence of the certificate of title, I could not confirm ownership of the land.

The Accounting Officer explained that the land in the project area was availed by the local authorities and that they were in the process of securing the land title.

The Accounting Officer has been advised to expedite the process of acquiring the title.

163 13.8 Farm Income Enhancement And Forest Conservation Project Project ID NO.P-UG-AAC-001; ADF LOAN NO. 2100150008296; ADF GRANT NO.2100155003172; AND NDF CREDIT NO.441

13.8.1 Project Financing Donor funding According to the financing agreement, the project was supposed to be funded as follows:- Source Amount (UA) Percentage AfDB loan 31,600,000 62 AfDB grant 9,900,000 19 Nordic Development Fund (NDF) 4,200,000 8 GoU 5,600,000 11 TOTAL 51,200,000 100 However it was noted that, for the second fiscal year running, no contribution was received from the NDF. Failure to receive funding from project funders as planned may not only affect timely implementation of project activities but may also lead to project extensions and therefore extra administrative costs.

13.8.2 Ineligible Expenditure It has been noted that the project incurred expenditure in lieu of Bank charges amounting to Shs..36,029,280 on the special accounts held at the Bank of Uganda as summarized below:-

Component Amount (Shs.) Agric. Enterprise Dev. 9,237,318 Forestry 24,060,842 NPCU 2,731,120 TOTAL 36,029,280

However, the expenditure had not been budgeted for. Such expenditure is therefore considered ineligible and can result into sanctions by the donor.

Management is advised to make a follow-up with Ministry of Finance, Planning and Economic Development for the refund.

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Management has explained that the ADB supervision mission of August 2008 recommended that projects compile all bank charges deducted by BOU and request for immediate refunds to the special accounts. The project management of FIEFOC compiled the bank charges and requested Ministry of Finance Planning and Economic Development to take up the matter with Bank of Uganda.

13.8.3 Commingling of Funds (Forestry Component) A review of the project work plans and budgets revealed that procurement of agricultural inputs was supposed to be undertaken using funds from the grant component. However, it was noted that Shs.150,000,000 was drawn from the loan special account to procure the agricultural inputs.

Such action is tantamount to commingling of funds and may result into sanctions being undertaken by the donors. The practice also makes it difficult to monitor expenditures on activities relating to the Project.

Management is advised to refund the Loan Special account with the amounts withdrawn and to avoid the practice in future.

Management has promised to ensure that the Forestry Component transfers the funds withdrawn from the loan special Account.

13.8.4 Office Accommodation for the NPCU

The loan agreement requires that GoU provides adequate office space for the Project to operate. This was one of the conditions precedent to disbursement of project funds. However, it was noted that the NPCU was still accommodated in two rooms that are shared by the 5 NPCU staff. The space does not appear adequate for the Project operations.

It is recommended that GOU expedite the process of acquiring office space for project operations.

165 Management has explained that the GoU through the Ministry of Water and Environment has identified an office block for the NPCU which needs to be renovated. The office block is expected to be renovated and ready for occupation by the end of March 2009.

13.8.5 Budget Management and Control

It was observed that each component of the project prepares work plans/budgets and spends the funds as a separate entity. However, there are no vote books maintained to monitor how the budget allocations have been utilised. This implies that funds may be spent without proper control. In addition, there was no budget variance analysis carried out by the project to ascertain the extent of deviations from the budget as well as providing explanations for the deviations.

Management has promised to address the matter in future.

13.8.6 Advances to Districts

Delays in submission of accountabilities Several Districts delayed to submit accountabilities for advances relating to Project activities. Accordingly, a total of Shs.724,226,207 remained outstanding by the end of the year as summarised below:-

Source Amount (Shs.) Remarks Agricultural Enterprise Development component 448,164,939 Advanced to participating districts Forestry Component 276,061,268 Advanced to participating districts Total 724,226,207

Delays in submission of accountabilities can lead to falsification of accountabilities and a possible loss of project funds.

In addition, management did not carry out an age-analysis of the advances to ascertain the periods for which the advances have remained outstanding. This implies that monitoring of the advances may not have been properly undertaken.

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Management is advised to ensure that all districts are closely monitored and followed up to ensure that accountabilities are submitted promptly. Management should also compile an age-analysis of the advances to enable proper monitoring and control.

Management has regretted the anomaly and has promised to address it in future.

13.8.7 Status of Project Implementation

The following activities that were planned to be implemented during the year were not undertaken:-

Component Activities NPCU Renovate office and maintain NPCU premises Procure office furniture Procure Office electronic equipment(camera, scanner, power point projector) Procure computers and printers Procure Generator set Procure and operationalise use of Accounting software Recruit Procurement Assistant

Forestry Carry out a participatory situational analysis of the selected - Community watersheds Watershed Produce Community Watershed Action Plans (WAPs) to Management address the different land uses and gradients in the selected sub- watersheds component Procure Service Providers (SPs) and construct nursery water points. Select and identify 10,000 ha of degraded natural forests (private and critical sites) for protection Develop guidelines for community mobilization, situational analysis and action planning Identify additional 143 willing farmers to host on-farm demonstration plots for SWC technologies Complete 27 FMPs for the LFRs with the involvement of stakeholders

167 Agricultural Collect baseline data in 12 sample districts on status of soil Enterprise and water conservation, existing options for SWC, and Development production levels for selected crops/varieties - Soil fertility Establish 64 on-farm learning sites (Demonstrations) Management Provide suitable Soil Fertility and Water Management sub- extension services to 6 farmer groups in each of the 45 component districts. Train 50 farmer groups on Soil and Water Conservation. Procure Farm Planning Equipment Procure monthly programmes for farmers on FM radio stations to enhance awareness on SFM, FP, CA and Gender. Support a consultative process for finalizing the Organic Agriculture policy 5 regional workshops to be organized. Agricultural Finalize procurement of Consultancy firm to design and Enterprise supervise construction of irrigation schemes. Development Complete identification and selection of 24 irrigable sites in - Irrigation and the new 8 districts crop Train selected 60 district staff in gender (40 males and 20 development females). In gender specific issues in SSI&CD and WH. Finalize procurement process and distribute 27 Motorcycles to SSI&CD SMS in 27 districts. Facilitate districts to develop and sign MOU with Land owners where irrigation structures are to be established. Engage districts to Start on construction of the 53 Valley tanks of 5,000m3 capacity Assess crop development needs in the selected SSI sites Complete training of district staff and farmers in SS technologies Agricultural Develop a national training manual Enterprise Train selected TOT (beekeepers and Entomologist) in group Development dynamic - Apiculture Confirm 21 sites for Apiculture the demonstration promotion Support new districts to identify demonstration site for sub- Apiculture component Facilitate districts to assess number of existing colonized beehives per type and production capacities Facilitate districts to design strategies to increase the number of most colonized and farmer preferred type bee hive Complete procurement of demonstration beekeeping equipment and tools Agricultural Train 60 producers and marketers in best practices to Enterprise enhance export of horticulture products Development Carry out Baseline study in 33 districts - Agricultural Assess existing market systems, opportunities and potential marketing for selected crops in 33 districts sub- 1,200 smallholder farmers received marketing extension component support Six farmer groups/exporters operating out grower schemes and other private/public producers/marketers supported in certification and quality control by PY 5

168 15 Market infrastructure constructed Produce 2,500 Training Manuals for farmer training in improved production and marketing practices of horticulture products Procure consultants to provide expertise in entrepreneurship/ international marketing Establish 30 demos of selected high value crop

Failure to implement planned project activities can imply the following:- The project has a low absorption capacity Poor planning May necessitate extension of the project lifetime and hence more administrative costs

I have advised Management to ensure that all planned project activities are implemented according to the work plan.

Management has explained that the project components by themselves do not have sufficient capacity to implement the project. The project has proposed to the Bank to recruit consultants to support the component staff and in addition a number of draft Memorandum of Understanding with collaborating institutions have been submitted to the Bank for a No Objection.

13.8.8 Supervision mission recommendations It has been noted that the following recommendations were made during the supervision mission held between 6th to 14th April 2008:- Provide adequate office accommodation for the NPCU Recruit a procurement assistant to accelerate procurement processes. One is yet to be recruited. Recruit watershed management advisor to train and organize District Forestry officers. The advisor should have been recruited by November 2007. Set up of a task force to review the activities under the Agricultural marketing component. Conduct training courses to enable District Accountants comply with financial management guidelines.

169 Procurement of an accounting package

Management was requested for an updated status of the progress of implementation of the recommendations. These will be followed up in the next audit.

13.9 Lake Victoria Environment Management Project II PPF CREDIT NO-Q5630-UG 13.9.1 Status of Project Implementation The Project budgeted to spend a total of Shs.836,315,000 during the period under review. However, actual expenditure amounted to Shs.198,328,341 representing about 24% of the total budget as detailed below:-

Activity Budgeted Actual Variance Expenditure Expenditure (Shs.) (Shs.) (Shs.) Civil Works 100,300,000 - 100,300,000

Consultancies & Audit 535,500,000 198,328,341 337,171,659 Goods & Equipment 200,515,000 - 200,515,000 Totals 836,315,000 198,328,341 637,986,659

The above analysis shows that some planned activities (including civil works and procurement of goods and equipment) were not undertaken at all. Failure to implement all planned project activities may necessitate extension of the project life and hence unnecessary administrative costs.

I have advised Project Management to resolve the outstanding matters so that activities are implemented according to the workplan.

13.10 Small Towns Water Supply And Sanitation Project Funded By GOU AND ADF Project ID No.P-UG-E00-002 Loan No.2100150008849 and Grant No.2100155003571

13.10.1Preparation of Accounts The Protocol agreement between GOU and ADF requires that financial statements should be submitted for audit in good time to enable a copy of the audit report to

170 be furnished to the Bank by 31st December. However, it was noted that management did not prepare these accounts in time. The draft accounts for audit were submitted at the end of November 2008. Failure to prepare financial statements, in good time may delay the audit process leading to failure to meet the stipulated deadline.

Management is advised to ensure that in future financial statements are prepared and submitted for audit in good time to allow for adequate time for the audit exercise to be undertaken.

Management has attributed the delay to lack of a dedicated accountant.

13.10.2Project Financing

The project is financed by the African Development Bank and the Government of Uganda and the total project cost is estimated at UA 20.92 million (approx. Shs.58.049 billion without taxes).

However, the disbursement of GoU counterpart funding was found to be slow and lower than expected. As at close of the period under review, GoU had contributed UShs.976 million out of a possible UShs.3 billion. Failure to provide counterpart funds as planned may adversely impact on the pace of implementation of project objectives. Management is advised to liaise with the Ministry of Finance, Planning and Economic Development regarding the matter.

Management has explained that the delay was caused by budgetary constraints on the side of Government.

13.10.3Delayed Settlement Of Invoices For Civil Works

It has been noted that as at the close of the period under review, contractor‟s invoices amounting to Ush.2.029 billion were outstanding. It was also noted that specific conditions of contract with contractors for civil works provide for payment of interest on contractors invoices not settled within 28 days. This implies that the

171 delayed settlement of the invoices may result in wasteful expenditure, in case the contractors invoke the clause alluded to above.

Management is urged to expedite the process of settling the contractors invoices to avoid payment of penalties.

Management has explained that the delay to settle the GoU portion of the contractors‟ invoices arose out of the lack of funds to the project from the GoU within the budget.

13.10.4Bank Reconciliations

Although reconciliation statements for the grant and loan accounts were prepared by the Accounts Assistant, these statements were not independently reviewed by either the Principal Accountant or Internal Auditor. Failure to subject these reconciliation statements to independent checks may result into errors and omissions in the cash books and bank statements passing undetected.

Management is urged to ensure that bank reconciliation statements are reviewed by a senior official.

13.10.5Status of Implementation of Supervision Mission Recommendations

The following AFDB Supervision Mission recommendations were made during the mission that was held in April, 2008:- Address the outstanding works Complete the construction works Complete the delivery of the equipment for solid waste collection systems Provide evidence of reimbursement of the ineligible payments previously made from the special account GoU was to ensure that construction of school sanitation activities to the required standards were to be made by 31st August. Contractors were to rectify some snags identified in some of the schools. GoU was to replace the projects Excel based accounting system with a specialised accounting software package.

172 Management was requested for an updated status of implementation of the mission recommendations. These will be followed up in the next audit.

13.11 The New Partnership For Africa’s Development (NEPAD) ENVIRONMENT Action Plan (Sub-Project No. BPL/2328-2740-4799, PMS: BP/6010-04- 3)

13.11.1Taxes It was noted that the following payments were made without deducting the 6% withholding tax:-

Cheque No. Payee Amount (Shs.) 000059 Benis Limited 4,248,000 000050 Yakobo Olima Associates 1,500,000 000030 Total Computing Services Ltd 1,240,000

In addition, there were cases where withholding tax and PAYE were deducted from suppliers and staff respectively, but was not remitted to Uganda Revenue Authority contrary to the tax law.

Management has promised to address the matter accordingly.

13.11.2Delayed Remittances of NSSF Deductions

It was noted that there was delayed remittance of deductions in lieu of National Social Security Fund (NSSF). Eleven cheques amounting to Shs.2,883,606 had not been remitted by 31st December, 2007 yet some had been raised as early as January, 2007. This can attract penalties from the statutory body.

Management has indicated that action has already been taken.

13.11.3Lack of a Vote Book

There is no up to date vote book to track expenditure and ensure that budget lines are not overspent. Failure to properly maintain a vote book leads to

173 spending in a haphazard manner, and can lead to over expenditure on some budget lines..

I have advised management to open up a vote book henceforth.

Management has promised to address the matter accordingly.

13.12 Joint Partnership Fund

13.12.1Late remittance of Funds to Umbrella Organisations It has been noted that there was late remittance of funds to the Umbrella organisations during the period under review.

Management should ensure that umbrella organizations‟ funds are remitted within the required programmed time.

Management has promised to address the matter in future. 13.12.2Excess Expenditure on Some Budget Lines

It was noted that there was over expenditure amounting to Shs.52,925,048 on several budget lines during the year under review. In the absence of approved reallocations, the above expenditure was therefore unauthorized.

Management should ensure that all expenditure is incurred within the budget guidelines and according to the work plan.

Management has promised to address the matter in future.

13.12.3Delayed remittance of Statutory Deductions It was noted that there was late remittance of the statutory deductions (PAYE & NSSF). Delayed remittance of statutory deductions can attract penalties and interest from the relevant statutory body resulting into expenditure which is not budgeted for.

All statutory deductions should be remitted within the required statutory time.

174 Management has attributed this to late release of funds to the programme.

13.12.4GoU Obligations

It has been noted that GoU did not fulfilled its obligation to contribute towards the project by way of tax refunding. There is a high accumulative long outstanding VAT amount of UShs.2.3 billion. This can lead to suspension of the donor funding.

Programme management is advised to take up the issue with the Ministry of Finance, Planning and Economic Development.

Management has explained that this matter has been raised in previous audits and discussions have been held between JPF Programme management committee and Ministry of Finance Planning and Economic Development. However, a solution as how to obtain the refund from GoU has not yet been determined.

13.12.5Inadequately Supported Expenditure It was noted that expenditure amounting to Shs.151,390,539 was not adequately supported with third party supporting documents. I was therefore unable to verify its validity, accuracy, existence and completeness. Programme management should ensure that amounts disclosed in the expenditure reports are adequately supported with third party documentation. Management has regretted the anomaly and promised to address it in future.

13.12.6Delayed Accountability for Funds Advanced to Staff Most advances to staff were accounted for later than the stipulated period of two months by the regulations. This implies that the programme is not complying with the established GoU regulations and Memorandum of Understanding.

Management should ensure that GoU regulations and Memorandum of Understanding are consistently complied with by accounting for advances within two months of issuance.

Management has regretted the anomaly and promised to address it in future.

175 13.12.7Understated Cash Balance the WRMD

The WRMD reconciled amount of UShs.81,116,573 as at 30th June 2008 did not reconcile with the cash book balance of UShs.79,703,442. Reconciling the closing cash book balance was rendered difficult. This could result into misrepresentation of the financial statements. My review reveals that cash and bank balances were understated by UShs.1,413,131 and an explanation is accordingly sought.

Accurate monthly bank reconciliation statements should be prepared regularly when preparing cashbook balances for financial statement presentation.

Management has promised to address the matter accordingly.

13.12.8Payee Signatures

It was noted that expenditure amounting to Shs.281,980,361 had no evidence of acknowledging receipt of Funds by the payees by way of signing on the payment vouchers and /or issue of receipts.

I was unable to ascertain whether the expenditure incurred was valid, complete, and accurate and that the payees existed. This also contravenes the Fund‟s operational guidelines. Management should ensure that payees regularly sign on all payment vouchers and obtain receipts as evidence of receipt of payments. Management has promised to follow up with the matter accordingly.

14.0 EDUCATION AND SPORTS

14.1 Bank Reconciliation of Treasury General Account

The reconciliation statement had numerous transactions marked as errors totaling to Shs.611,678,553 which were not properly explained.

I advised the Accounting Officer investigate the causes for the errors and take appropriate action.

176 14.2 Over Expenditure

The statement of appropriation Account based on services voted by Parliament indicates that the Ministry incurred expenditure of Shs.59,310,608 in excess of the approved budgetary provision for the Business Technical and Vocational Department. This arose as a result of having only Shs.10,944,410,064 as the approved budget, whilst incurring expenditure totaling to Shs.11,003,720,672 hence the over expenditure of Shs.59,310,608.

I advised the Accounting Officer to spend within the allocated resources and in case additional funding is required authority should be obtained from Parliament through the Ministry of Finance, Planning and Economic Development.

14.3 Review Of Budget Performance 07/08

The total recurrent budget was Shs.105,933,031,251 and the amount released was 111.5% of the approved budget including a supplementary. The development budget was Shs.37,853,744,000. During the review of the budget the following matters were noted:-

(i) Under Performance

Although the Ministry received approximately 99% of its development budget, there were variations between expected outputs and the actual. Major variations were noted under the School facilities grant (SFG) where actual output was below expectation as indicated in the table below

Activity Budget Expected output Actual Variance (Shs. bn) Output School 16.41 823 new classrooms 653 170 facilities grant 12,783 class room furniture 9424 3,359 1279 latrine stances 991 280 24 teachers houses 14 10 26 teachers latrines 16 10 18 kitchenettes 10 8

177 The Accounting Officer explained that the releases are sometimes not on time and some local governments only sign contracts for works equivalent to funds released. As a result the 4th quarter activities had not been completed at the close of the year.

I have advised the Accounting Officer to follow up the matter and ensure that all planned activities are implemented.

(ii) Works not Undertaken

Under the Emergency construction and Rehabilitation of primary schools programme, Shs.1,800,000,000 was provided to construct and renovate 14 primary schools and also to meet allowances. The performance report for the year ended 30th June 2008 indicated that whereas monies had been disbursed directly to schools, construction works had not commenced. The affected schools include Mabonwa catholic PS in Ibanda, St Achilles Mwererwe catholic PS Wakiso, kitanda COU PS in Luwero, Bubiro COU in Mukono, St Jude Kasudde PS in Wakiso, Nyamisambya PS in Kabale district, and St Jude PS in Nagulu-Kampala.

The Accounting Officer explained that funds were released towards the closure of the financial year and the process of procurement had not been completed by the time of audit. I have urged the Accounting Officer to expedite the process of undertaking the outstanding works.

(iii) Incomplete Procurement

Under project 0984-: Relocation of Shimon PTC and Demonstration school project, Shs.3,838,000,000 was approved for expenditure in respect of allowances, general supply of goods and services, purchase of transport equipment and construction of non residential buildings.

At the end of the financial year under review, the procurement process for the acquisition of the land had not been finalised and therefore no buildings had been erected. Where as allowances and other administration costs had already been incurred including a diversion of Shs.677,000,000 to the Development of

178 Secondary Education project activities, the major activities had not been carried out.

The Accounting Officer has explained that the delay was caused by prolonged consultations between the Ministry and PPDA on the appropriate method to adopt in procuring the land. He further clarified that the process was completed and the land purchased. The construction is expected to commence soon. I await the progress of the implementation.

(iv) Non compliance with Contract Requirements Uganda Norwegian Schools Cooperation Project

A cooperation agreement was signed between Telemark County Municipality of Norway and Ministry of Education in September 2002. The agreement provided cooperation between three secondary schools in Norway and three institutions in Uganda. The cooperation became operational in 2005 and has been renewed four times since.

An annual amount of NOK 20,000 has always been remitted to fund the cooperation. Under the Agreement, MOES is responsible for submission of audited accounts certified by a Norwegian licensed accountant before the 31st of May.

However, since the operationalisation of the cooperation, MOES has not submitted audited accounts as per the agreement.

The Accounting Officer has indicated that process of having the audit undertaken is underway.

(v) Inconsistent Contract Management Policy

Construction contracts are usually managed at the Headquarters, however, in some cases funds are sent directly to the schools and in the process contract management becomes the responsibility of the school management committee. This approach is likely to generate challenges as many of the schools lack technical expertise to source for contracts and effectively supervise and monitor works.

179 I was also not provided an adequate explanation of the basis used to determine which school had the technical competence to manage the works. I have advised the Accounting Officer to develop guidelines that should apply to all schools when construction is undertaken.

14.4 Advance Payment to Kyambogo University

Kyambogo University was contracted to supply Braille materials in March 2006 for Shs.338,445,990. It was further observed that three years later the Univerisity had failed to supply the items as per the contract.

It was explained that the delay was caused by the failure to raise the advance payment. However, my verification established that a 40% advance payment was made worth Shs.135,378,396 to the supplier‟s account in Stanbic Bank Kyambogo Branch.

I advised the Accounting Officer to follow up the matter and consider invoking Section 135 of the contract agreement regarding recovery of the monies advanced to the university.

14.5 Cash Management

In my management letter for the year that ended 30th June 2007, I reported that no advance register was in place to keep track of advances and their accountability. It has been noted during the current audit that no register has been opened for the purpose.

I have again advised the Accounting Officer to put in place an advance register.

14.6 Payroll Audit

An audit of the Ministry Payroll during the year revealed the following matters:

(i) Staff whose Appointments have not been Regularised

A number of staff transferred from other ministries during the restructuring of the Education Sector have not had their appointments regularized. I recommended that management regularises the appointments.

180 The Accounting Officer explained that a submission had been made to the Education Service Commission requesting the Commission to regularize these appointments.

(ii) Retired/Deceased Staff Still on Payroll

It was noted that staff who had retired or died were still on the payroll at the time of audit. Payments relating to such “staff” amounted to Shs.19,095,622 as at 30th June, 2008. This is irregular. The Accounting Officer is advised to delete all the names and where possible amounts should be recovered from terminal benefits. The Accounting Officer should also investigate the matter and take appropriate action.

14.7 Inappropriate Procurement Methods

The PPDA Regulations require that the choice of the procurement method shall be on the basis of the estimated value of the requirement, the circumstances pertaining to the requirement in accordance with the threshholds issued by the PPDA guidelines.

Contrary to the above provisions, it was noted that in most cases the procurement method used in most procurements was restricted bidding under regulation 110 (1) which relates to procurement under emergency situations. The reasons advanced for the use of the restricted bidding procurement method in some cases do not fall within the circumstances highlighted under the regulations.

The continued use of inappropriate procurement methods indicates weaknesses in procurement planning. It also deprives government of the advantages which would accrue from an open competitive bidding process.

The Accounting Officer explained that in some instances, the choice of the procurement method is determined by the circumstances dictated upon by the donors to avoid monies being lost.

I advised the Accounting Officer to adhere to the requirements of the law.

181 14.8 Unaccounted for Funds: Contributions to International Organizations

Shs.351,065,000 was paid to international organizations to which the Ministry subscribes. However, it was noted that there was no acknowledgement receipts from the beneficiaries.

I have advised the Accounting Officer to provide the necessary documentation.

14.9 Special Audit Report on Presidential Pledges in the Education Sector

A special audit was carried out on the implementation of Presidential pledges in the Education Sector. His Excellency the President had raised concerns over the unit cost of classroom construction of Primary Schools under Presidential pledges in the Education Sector.

According to the Ministry of Education and Sports, the estimated cost of Presidential pledges that had been covered as at 22nd February, 2008 amounted to Shs.10,109,004,449 for 35 Schools and Institutions countrywide. A sample of 17 pledges involving Shs.8,721,148,103 (86% of estimated cost) implemented from FY 2003/4 to FY 2007/8 was selected for the audit and the following were the audit findings:-

14.9.1 Unit Cost of Classrooms It was noted that the unit cost used in the construction of schools under Presidential pledges varied between Shs.18,113,036 and Shs.55,420,560 and this was higher than that of SFC (between Shs.6,390,596 and Shs.8,692,628). The differences were largely due to adoption of other additional specifications outside SFG guidelines, changing price levels of building materials and the fact that the contracts under Presidential pledgers were awarded to VAT registered companies whose prices were VAT inclusive.

14.9.2 Recording and Filing Procedures

It was noted that the Presidential pledges were not properly recorded at both the Ministry and State House. Communication letters on Presidential pledges at State

182 House were not filed according to Government sectors and Presidential instructions to Ministry could also not be easily located. It was also noted that contract files were incomplete. Important records on procurement, contract management, payments, certificates and engineer‟s inspection reports were not readily available in a single file.

This rendered reconciliation of pledges difficult and could make monitoring and follow up difficult.

The accounting officer has been advised that the data base being maintained should be supported with a proper filling system both at the Ministry and State House. Contract files should also be maintained in accordance with the existing procurement guidelines.

14.9.3 Budgeting for Presidential Pledges

A review of the MOES approved budget estimates for the period covering Financial Years 2004/05-2007/08 revealed that the Ministry did not have a dedicated budget line to cater for implementation of Presidential pledges under its discretion.

It was explained that the Ministry funded the pledges through diversion of funds from other budgeted programmes, like the Emergency Fund meant for rehabilitation of Schools under emergency circumstances. The practice may affect the achievement of the Ministry objectives.

It was further noted that the Ministry did not have procurement plans against which constructions for the Presidential pledges were implemented.

Management has explained that H.E the President has now directed that from financial year 2008/09, the pledges be budgeted for under the relevant Local Governments and the Ministry supervises the implementation. Accordingly the Ministry of Education and Sports has taken up the matter and drawn up guidelines for the streamlining of implementation of the Presidential pledges.

183 The Ministry is advised to liaise with the Ministry of Local Government and Finance, Planning and Economic Development to ensure that constructions of primary schools under Presidential pledges are duly incorporated in the respective local Governments‟ annual budgets. Monitoring arrangements should be put in place to monitor implementation.

14.9.4 Implementation Frame Work

It was noted that the implementation frame work for the construction of primary Schools under Presidential pledges was not in accordance with the decentralization policy guidelines which designate management of Primary Education to Local Governments. The Ministry centrally managed the construction of these primary Schools. Procurement of contractors was done by the Ministry‟s contracts committee (MCC) and construction projects managed by the Construction Management Unit (CMU) of the Ministry. Construction costs relating to plant mobilization and demobilization, central supervision and some direct material costs would have been saved if construction was managed at a Local Government level.

It was also noted that, although the MOES has an approved policy and guidelines on construction of primary Schools referred to as School Facility Grant (SFG) guidelines, these guidelines were not followed in implementing constructions under Presidential pledges.

The deviation from these guidelines resulted into higher unit cost of construction of Schools under Presidential pledges as compared to those constructed under SFG guidelines.

The Accounting Officer attributed the deviation to the fact that Schools under presidential pledges had to look different to depict the Presidential status hence the higher unit cost.

184 The Ministry has been advised to facilitate the process of developing suitable guidelines for implementation of the Presidential pledges and put in place effective supervision and monitoring mechanisms during execution.

14.9.5 Lack of Needs Assessment

It was noted that the Ministry did not carry out needs assessments or feasibility studies in all schools, except Laroo P.S, prior to commencement of construction works. Lack of needs assessment resulted into a standard drawing and design of a 7-classroom structure being imposed on all construction sites without regard to the specific requirements of the locality. Instances were also noted where electrical fittings were installed in schools located far away from the national power grid. For example, Kihuna, Kyemamba, Busalamu and Namukunyu primary schools are approximately 40 km, 20km, 10km and 3 km away from the nearest power line respectively.

The Accounting Officer is advised that construction of Primary Schools and any facility under Presidential pledges should be carried out after assessment and feasibility studies involving all stakeholders such as the community, grass root leaders, school management, district and other relevant officials. The results of the needs assessment should be formally communicated to H.E the President and all stakeholders as feedback information.

14.9.6 Inadequate Supervision

According to implementation procedures of the CMU, construction projects are required to be supervised by engineers from the Ministry on a monthly basis and by, Ministry engineering assistants based at the districts, on fortnightly basis.

It was noted that supervision at different construction sites was not regularly done. As a result, defects at Rwekanja and Masindi Army primary schools were not detected in time. There was also non compliance with specifications in the BOQs at Masindi Army, Rwenkanja and Busalaamu Primary schools.

185 Management explained that the inadequate supervision was as a result of lack of sufficient staff as a number of vacancies in the CMU have not been filled.

It was further observed that the engineering assistants who are deployed to supervise the works in the districts did not have job descriptions and did not keep standardized supervision records thus rendering audit verification difficult. The Accounting Officer is advised to liaise with the Public Service Commission to address the staffing needs of the construction management unit. It is also recommended that job descriptions of engineering assistants be clearly spelt out and standardised supervision records established to facilitate supervision, monitoring and control.

14.9.7 Lack Of Engineer’s Estimates

Best practice requires preparation of an engineer‟s estimate prior to solicitation of bids of construction works. It was noted that apart from Laroo and Shimoni primary schools, engineering estimates were not prepared in all the other projects. Lack of engineer‟s estimates impairs the evaluation and subsequent award process as the price quoted by the lowest bidder may not necessarily be within the engineer‟s estimates.

The accounting officer is advised to ensure that in future Engineer‟s estimates are prepared to guide the budgeting, contract evaluation and award process.

14.9.8 Unjustified Procurement Methods

It was noted that restricted domestic bidding was the preferred method of procurement in a number of cases such as the consultancy for construction of Shimoni P.S, purchase of Nkumba and Mbale University buses and construction of classrooms at Rwekanja P.S.

The reasons advanced by the Ministry for the use of the restricted method of procurement do not comply with the provisions in the procuring regulations. The use of such a method disables competition and all the benefits that accrue from it. Management is advised to adhere to the PPDA requirements.

186 14.9.9 Unauthorised Variations

According to PPDA regulation 261 (2), a contract variation or change order may be issued by a competent officer with the approval of the contracts committee.

It was noted that variations shown in the table below worth Shs.225,680,385 did not have MCC approval:- S/NO. PRIMARY SCHOOL AMOUNT (SHS) 1. Rwekanja 14,119,345 2. Nyakiju 26,607,230 3. Masindi Army 9,000,000 4. Shimoni 127,732,836 5. Nawanyago 35,517,992 6. Matua 12,702,982 TOTAL 225,680,385

The Ministry should follow laid down PPDA regulations and seek MCC approval for all contract variations.

14.9.10Lack of Performance Security

According to PPDA regulation 232 and General Condition of Contract (GCC), contractors were supposed to provide a performance security, which is meant to be valid until a date 28 days from the date of issue of a certificate of completion.

Management did not comply with this regulation in certain instances. For instance, no performance security was tendered by the contractor of Masindi Army P.S and performance security tendered by the contractor of Rwekanja P.S was invalid. Absence of a valid performance security exposes public funds to risk of loss in case of non performance by contractors.

The Accounting Officer stated that a system has been put in place to check completeness in documentation before contracts are signed.

Contract managers should ensure that the procedures regarding performance security are strictly followed.

187 14.9.11Irregular Procurement Process

The following anomalies on procurement were noted in the schools inspected: No procurement records were provided in Kirema Primary School Bid documents were not presented to the contracts committee prior to the placement of adverts in the newspapers. This was noted in Busalamu Primary School Selective bidding was the preferred method in Gulu Boarding Primary School without proper justification Evaluation committee was not approved by the contracts committee in Nawanyago and Namunyu Primary Schools

The accounting officer has been advised to ensure that procurements guidelines are adhered to.

14.10 Audit Inspections: Tertiary Institutions

During the year, I carried out inspection of various tertiary institutions under the Ministry of Education. The following were general matters observed during the audit:-

14.10.1Final Accounts for Tertiary Institutions

Section 91(1) of the Universities and other Tertiary Institutions Act requires that the "Governing Council shall keep proper books of accounts and prepare the annual financial statements of accounts for the period immediately preceding the financial year.

However, it was noted that all the institutions inspected had not complied with the requirement. The accounts for the prior financial years were also not prepared.

I advised the Accounting Officer to take up this matter and ensure that Accounts are prepared and submitted for audit.

188 14.10.2Inadequate Funding of Institutions

All institutions, schools and colleges are directly funded by the Ministry headquarters through a quarterly release in form of capitation grants.

It was noted that capitation Grants are based on the number of the enrolled students at each school and a rate of Shs.1,500 per student per day is applied. This rate was determined several years ago and has not been revised. Given the changes in the cost of living, the pre-determined rate appears too low to enable the colleges run effectively.

The Accounting Officer explained that the Ministry of Finance issues Budget Call Circulars, MTEF ceilings and guidelines on the costs to be used for Budgeting purposes. He further indicated that it is not possible to vary remittances on prevailing market rates until a revision on costs is done and the budget ceiling revised to meet the demands.

I advised him to follow up the matter with the Ministry of Finance, Planning and Economic Development to have the issue addressed.

14.10.3Unaccounted for Funds

A total of Shs.774,674,611 was paid out to a number of institutions to cater for various activities. However, contrary to financial regulations, the funds amounting to Shs.774,674,611 remained unaccounted for by the time of writing this report.

The Accounting Officer should follow up the matter and ensure that accountability is presented for audit.

14.10.4Non Deduction of Withholding Tax

Contrary to Section 120 (1) of Income Tax Act 1997, Withholding tax amounting to Shs.45,414,920 by various institutions was not withheld/deducted.

Non deduction and remittance of government taxes attract penalties and denies the government of revenue needed to run various programmes.

189 I have advised the Accounting Officer to follow up the matter and ensure compliance.

14.10.5Violation of the Universities and other Tertiary Institutions Act

Section 91(2) of the Universities and other Tertiary Institutions Act, 2001, provides that “The Statement of Accounts of the Institution shall, in respect of each year, be audited by the Auditor General or an Auditor appointed by the Auditor General.

Contrary to the above provision, the audit inspections conducted in some colleges and schools revealed that some Institutions appointed private audit firms to audit their books of accounts without the authority of the Auditor General. I informed the Accounting Officer that the practice is irregular and should be stopped.

14.10.6Non Compliance with Procurement Regulations

Contrary to Section 26(a) of PPDA which provides for contract committees, four colleges paid out Shs.309,974,162 to various firms for procurement of various items without this Committee in place. This implies that the institutions may not have taken advantage of all benefits which would accrue from competitive bidding process.

I advised Management to ensure that all relevant Committees as required by the PPDA Act and Regulation are established and any further procurement be done in accordance with these laws.

14.10.7Poor Staffing

It was noted that a number of Institutions had an inadequate number of staff. The Accounting Officer explained that he had written to the Education Service Commission to address the staffing problems in the institutions and that the recruitment process was under way. I await the outcome of the efforts.

190 14.10.8 Inspections of Tertiary Institutions (Specific Findings)

Name of tertiary Findings institution 1 School of Clinical There were accumulated unpaid bills amounting Officers - Fort Portal to Shs.198,448,700 Nugatory expenditure of Shs.2,551,600 in lieu of litigation costs against a case of non payment of suppliers/creditors Cash salary payments amounting to Shs.25,357,690 were made by the school I was not availed records for the 2006/7 because they had been taken for audit by an auditor appointed by the bursar 2 Public Health The college apparently received more than what Nursing College it should have received in capitation grants compared to other institutions of similar size The school does not have a contracts committee as required by the PPDA Act Wasteful expenditure of Shs.3,477,000 for construction of a kitchen that is due for demolition because of its inappropriate location 3 Busikho PTC Inadequate facilities for the 300 students including no dining hall, no electricity, no administration block and the Principal‟s office is within a room in the library block. Students are crowded in the halls of residence and there are very few beds with some students sleeping on the floor The audit exercise was not done as the bursar who was entrusted to work with the auditors ran away

191 4 Nakawa VTI No documentation was provided to support the

reported accumulated salary arrears and domestic arrears of Shs.99,952,400 and Shs.38,919,918 respectively Un Explained Money Transfer of Shs.34,297,000 remitted to the Institute vide EFT number 34,297,000 on 30th February 2008 5 Lugogo VTI No government sponsored students during the period under review and yet the institute received a total of Shs.48,029,789 capitation grants from the Ministry 6 Rakai PTC Poor book keeping: no cash book in respect of Account Number 6020002160 with Centenary Bank Kyotera Branch which had a credit balance of Shs.23,577,450 as at 30th September 2008. For the entire financial year, payment vouchers for this account were also not available for verification; Hand over report available despite the fact that there was a change in the management of the institute with a new Principal taking over office on 20th September 2008 lack of utilities (water and electricity) 7 Busitema University I was unable to undertake the audit of the University because the accounting software used by the University crushed in March 2008. And no hard copies were available Payment of Shs.13,500,000 as house rent for the Vice Chancellor despite there being no valuation report from the Chief Government Valuer and no tenancy agreement; The Vice Chancellors‟ appointment among other benefits entitles him to a housing allowance of

192 Shs.750,000 per month. This appears to be a double benefit to the VC and is recoverable. 8 Kisoro PTC Construction of a library block at the college delayed beyond the contracted 4 months; contractor stopped due to poor workmanship despite payment settlement of interim certificates amounting to shs. 81,618,946; The floor had developed cracks, the ceiling was leaking and poorly done, while the walls had visible cracks, the wiring was incomplete with some fittings hanging loosely Inadequate facilities including hostels, tutors houses and electricity Books of accounts were not up to date Supplies amounting to shs.16,140,000 could not be traced in the stores ledgers Chaining of Payments; Payments to suppliers were deliberately made below one million so as to avoid deduction of with holding tax 9 Santa Maria PTC Very old, dilapidated buildings and require renovation, having been constructed in the 1920‟s; inadequate facilities for the high student enrollment No cash book was presented for audit Shs.9,750,000 was collected as ICT fees and spent at source by the bursar contrary to financial regulations, and there were no records for this expenditure 10 Bukalasa Inadequate accommodation facilities Agricultural College The college was fined Shs.10,000,000 by URA for non remittance of deducted withholding taxes and payment was accordingly effected. I consider this expenditure nugatory

193

11 Kabulasoke PTC The college paid Shs.9,385,000 in cash to two drivers for the repair of college motor vehicles, however, no repair orders, certificate of repairs or pre and post inspection reports were availed for audit The college paid Shs.49,213,500 in cash to suppliers for food supplied to the college, this is irregular and contrary to financial regulations There was no contracts committee Stores records such as goods received notes, stores ledgers and store issue vouchers were not availed for audit verification 12 UCC PAKWACH The college paid out Shs.3,500,000= to a private audit firm, as audit fees for audit of the college books without my authority Transferred staff are still appearing on the college payroll 13 Masaka School of It was noted that the Chairman of the governing Registered council was acting as the accounting officer Comprehensive approving all requests for payments and Nursing authorizing payment vouchers contrary to the provisions of the Tertiary Institutions Act 14 Bushenyi Technical The college is headed by an acting principal who College has been in that capacity longer than the provision as per the standing orders The water pump for the college was stolen and no replacement has been made; Students are made to walk several kilometers in search of water No original bills or any document available to support unpaid bills totaling Shs.88,284,171 accumulated over a period of time

194 Poor book keeping: no cash books for some bank accounts, there were no creditor‟s ledgers, advance ledgers, nor asset register at the station 15 Kabale Bukinda Core Inspection of the already commissioned class PTC room blocks 1A and 1B, and also Block 2A and 2B showed evidence of poor workmanship by the contractor appointed by the ministry HQ; all the blocks had already developed cracks on the walls Supplies worth Shs.22,369,050 could not be traced in the ledgers 16 Wild Life Training Poor workmanship in construction of two Institute classroom blocks; cracks developing on the walls and the floors All the three vehicles and the three motor cycles are grounded and appear to be unserviceable; the institute has no transport 17 Rukungiri PTC Inadequate accommodation facilities The college truck is grounded There is lack of segregation of duties in the stores; the store keeper is responsible for receiving and also issuing of the food items in addition to being the college caterer 18 DIT Lugogo Although the Chief Government Valuer recommended a monthly charge of Shs.1,400,000 for DIT premises at Uganda Manufacturers Association (UMA) showground, the Ministry contracts committee lowered the fee to Shs.1,000,000 19 Mulago Paramedical The infrastructure at the school is old and School dilapidated and not adequate to house the high number of students; the school lacks most of the necessary training equipments and a number of

195 programmes are not being run 20 Masulita VTI Shs.2,696,280 was paid to the bursar despite the fact that he has been away from the station without official leave since March 2008 21 Mulago School Of Non deduction of withholding tax Nursing And shs.64,420,295 Midwifery Wasteful expenditure of Shs.77,743,825 paid to a consultant for supervising the construction works whereas the Ministry of Education and Sports has a fully fledged Construction Management Unit with qualified engineers who supervise all construction works under the Ministry 22 Butabika School of The school has for a long time had low student Psychiatric Clinical enrollment Officers The school is located in Butabika village adjacent to Butabika hospital on a 7 acre piece of land which is not titled this has attracted encroachers who have uprooted part of the school fence 23 Kibuli PTC Shs.1,680,000 was paid out to a private audit firm for audit of the college books without my authority

24 Bulera The college benefited from a consignment of laboratory equipments and reagents such as autoclaves, centfridges, and microscopes all of which have remained redundant due to lack of a laboratory technician at the college 25 School of Shs.9,813,600 was paid to various landlords for Comprehensive accommodation for the Principal, deputy Nursing Kabale Principal and students.; No tenancy agreements were presented for audit and no valuation report from the Chief Government Valuer was availed

196 26 Mbale School of Poor book keeping: no proper cash books were Clinical Officers maintained, no regular bank reconciliations, the filing system was also inadequate, paid vouchers were not sequentially filed, 27 Elgon Technical a number of staff are occupying offices in acting College capacities with some dating back to the last 15 years 28 UCC Tororo The college has an old pickup that is not adequate to meet the needs of the college given the high enrolment The college lacks a sick bay 29 Soroti School Of Two generators supplied in July 2007 at a cost Comprehensive of Shs.82,000,000 had not been installed yet the Registered Nursing supplier was fully paid including cost for installation An askari who was supposed to have retired in February 2006 is still appearing on the payroll drawing salary of Shs.134,538 per month 30 Uganda Cooperative Most of the buildings at the College were roofed College -Kigumba using asbestos sheets that was condemned by health experts Poor book keeping; no cash book for the entire financial year.

15.0 HEALTH

15.1 Outstanding Advances The law requires that all administrative advances should be retired by the end of the financial year. Contrary to this, administrative advances amounting to shs.1,656,359,200 paid to staff and other health agencies to cater for various activities remained unaccounted for by 30th June 2008. Delays in accounting for advances can lead to possibility of loss of funds.

197 The Accounting Officer explained that he had sent notifications to all the affected officers to account for the funds and had stopped advancing money to officers who have not accounted for the previous advances.

15.2 Cash and Cash Equivalents The Board of survey report on cash shows a bank balance of shs.4,644,060,096. The IFMS general ledger reconciliation shows an unreconciling difference of Shs(3,318,641,481) and does not show how the balance stated in the Board of Survey was reconciled to arrive at the final balance of shs (2,522,421,020) reflected in the financial statements under cash and cash equivalents. Similarly the balance of shs.37,390,616 on the account, “expenditure other” is not supported by a bank certificate and bank reconciliation statement. I was therefore not able to confirm the accuracy of the cash position stated in the financial statements.

15.3 Disposal of Public Assets During the year under review, the Ministry planned to dispose off 70 boarded off vehicles by public auction. While 45 vehicles were sold at shs.116,500,000, the status of the 25 vehicles could not be ascertained in the absence of the auctioneers report.

Although the records relating to the sale of the 45 vehicles were supported with receipts, other records relating to the disposal process e.g. copies of solicitation documents, copies of bids evaluated, Report of auctioneer on the sale, were not availed. As a result, I was not able to establish whether the disposal process was carried out in accordance with the recommended disposal procedures.

The Accounting Officer was requested to provide the documents for necessary verification.

The Accounting Officer explained that some of the reports had been taken by the office of the Inspector General of Government.

198 15.4 Tax Payments The Ministry through the Gross Tax system paid import duty and VAT taxes of shs.124,119,437 on behalf of third party organisations that are within the category of exempt supplies contrary to the Value added Tax Act Cap 349. In addition, Gross tax payments amounting to shs.138,227,690 were not supported by suppliers' invoices, airway bills, and other necessary documents from the beneficially institution.

The Accounting Officer explained that the taxes being referred to are import VAT which is levied on every item that is imported. I have advised her to consult Uganda Revenue Authority for necessary guidance on the matter.

15.5 Organisation Structure It is good practice for management to establish an appropriate organizational structure to support the various functions of the Ministry.

Although the Ministry has an organization structure, the nine departments shown on the structure do not appear to be well aligned to the ten programmes and the thirteen development projects reflected in the approved estimates. It is not clear where the thirteen independent entities that the Ministry oversees fall under the structure. Besides, the approved established structure of the Ministry headquarters has been irregularly filled with an overstaffing of 6 posts and understaffing of 43 posts.

Staffing gaps hamper effective service delivery in the health sector. There is a risk that management may not efficiently play its monitoring and supervisory functions particularly with regard to the semi autonomous agencies falling under the Ministry. Management is advised to properly align the various departments to the roles of the Ministry.

The Accounting Officer attributed the problem of staffing gaps to an inadequate organization structure and explained that there is an ongoing restructuring exercise intended to address the shortcomings.

199 15.6 Un acknowledged Payments to URA Payments worth shs.867,547,766 made to Uganda Revenue Authority in respect of withholding tax and P.A.Y.E. lacked acknowledgement from the tax body. I was not able to confirm that the funds were received by URA.

The Accounting Officer explained that most of the un-acknowledged payments were made by the Treasury on behalf of the ministry and that the schedule had been generated and sent to URA and a response is awaited.

15.7 Purchases not taken on Charge Inventories are accounted for by value as well as quantity; as such it was necessary to record the cost of each inventory item or have them taken on charge to facilitate reconciliation of stock with financial records. However, purchases amounting to shs.59,400,000 were not taken on charge as required. It was not possible to confirm the occurrence and validity of such expenditure.

15.8 Field Inspections 15.8.1 Supply and installation of VHF/FM Transmitting Stations Under the Sexually Transmitted Infections Project that started in 1994, there was a component for the supply and installation of VHF/FM transmitting stations and uplink/downlink satellite system. Some of the project's aims were to use the radios to pass on health messages related to HIV/AIDS and other opportunistic diseases to the population in the targeted districts as well as to assist the then Ministry of information to increase FM radio coverage to those parts of the country that were under served.

The agreed sites for the project were; Arua, Lira, Masaka, Hoima, Masindi, Soroti, Moyo, Kotido, Moroto, Kitgum and uplink station at Uganda broadcasting in Kampala. I carried an audit inspection of the programme activities and the following matters were observed;

(a) Uncompleted Contract The contract was awarded to two contractors who failed to fully execute their obligations under the contract. During one of the contractor‟s term, the project

200 was extended twice from the 17th April 2002 to the 31st August 2002 and further to 31st October 2002. The financier (World Bank) could not give further extensions, and as a result the project stalled and was never completed. There is no evidence that the contractor made a formal handover.

(b) Loss of Assets The Ministry is estimated to have lost VHF equipment valued at $124,201.17 (approximately shs.240 million) before the handover to UBC in 2008.

Station Audit Remarks Hoima The station was vandalized and all the equipment stolen, except for the satellite dish and the tower. The whole of the transmitter unit was stolen leaving only the rack.

However there was no evidence as to whether the theft was reported to police.

Moyo Station is not functional; VHF receiving antennas supplied at $631.29, and Pedestal for the satellite dish were not available at the site. There were no installation services done, only some civil work was done partially on the foundation of the tower and the down link.

Some equipment supplied were not engraved, abandoned and lie unused in the yard. These included, 45 meters of tower equipment, Container valued at

201 $2,013.00 and 200 watts FM transmitters without ACU 3 valued at $8,997.00. Government risks losing the equipment without any chance of recovery.

Soroti Station is situated at Opuyo approximately 4kms from Soroti town. At the time of audit the station was functioning. However, a 45 metre tower indicated as one of the equipment to have been supplied at a cost of $22,230.78 was not seen.

Kotido Site is within town at Lomkur ward. Some equipment were supplied but lay idle in the yard. These included: one container, 200 watts fm transmitters without ACU 3, RF changeover units E2014, Feeder cables and splitters, and 45 meters tower.

VHF transmitting antennas and receiving antennae worth $2,497.79 and $631.29 respectively were not supplied.

No installation was carried out except for civil works on the down link foundation and the tower valued at $6,613.11.

Moroto Site is located 3kms from Moroto town on a hill called Katikekile. Equipment supplied but not installed included one container valued at $ 4,355, (it has been invaded by termites), 200 Watts for transmitters without ACU3, RF change over units E2014, Feeder cables and splitters, 45 meter tower.

202 Items not seen although alleged to have been supplied included, VHF Transmitting antenna worth $2,497.79 and VHF receiving antennas worth $631.29.

Kampala Two stations were visited; these included, UBC site Kololo Station and UBC site Uplink site;

UBC site station at Kololo serves all other stations in the country. It is functional but the equipment is housed in a container.

Equipments not seen at the UBC uplink site included; Mandatory spare parts valued at $6,669.60, Mandatory tools valued at $13,338.14; A set of operating and maintenance manuals in English valued at $3,663.59; and Training manual valued at $40,952.28

The accounting officer explained that the office of the Prime Minister constituted a committee consisting of officers from Office of the Prime Minister, Ministry of Health, and Uganda Broad casting Cooperation (UBC) to facilitate a smooth hand over of the equipment to UBC through the Office of the Prime Minister.

Management is advised to follow up the matter.

203 15.8.2 Rehabilitation of Itojo Hospital The Government signed a memorandum of understanding with the Egyptian fund on the 14th day of March 2007 for technical cooperation with Africa (EFTCA) for the rehabilitation of Itojo Hospital to improve quality of care. The contract was then awarded to a construction company to: Rehabilitate and Re-equip the pediatric ward, Maternity ward/Labor ward and the operating theatre; Rehabilitate the sewerage, plumbing, water supply and drainage systems associated with the rehabilitation facilities; Construct additional three staff houses for the three medical officers to be provided by EFTCA.

Inspection of the works carried out revealed the following matters.

Pediatrics Ward According to the contract the existing soft board was to be removed and replaced with new ones on the existing metal framework. At the time of inspection, the ceiling board in this ward was falling apart and in other areas depressions in the ceiling were observed. The toilet and bathroom ceiling in this ward was also collapsing.

The existing flush doors were to be replaced with solid flush doors. However the new replaced doors do not close properly.

The contractor was supposed to prepare and apply two cots of paint to surfaces of painted metal frames. Metal baby cots were ferried away from the hospital premises for repainting. However three months later after their return, the paint on all the newly painted

204 beds was peeling off.

Maternity Ward: Old Private Ward 1 and 2 sanitary fittings were to be dismantled to receive new ones with flushing cisterns. In private ward 1 the new toilet was poorly fixed and was leaking. The patient toilets and the entire drainage system were not functioning.

Main Theatre Sluice/ The main door to the theater was replaced Sterilization with a new one, however it was not closing, the paint on this door was peeling off, and all keys to this door broke, implying they could have been weak. According to the medical personnel the previous old flush door functioned better. The trench in the sluice room was not functioning.

The walk way from the wards to the administration block was re-roofed. However it was leaking and floods would make it impassable during the rains.

Two Bed-roomed These were newly built from the ground floor Staff Houses: (3 in slab to plinth finishes. At the time of the audit number) inspection however all the floors to the new houses had cracked and showed signs of fresh repairs. Cracks were also seen in the ceiling of the houses.

Accounting Officer explained that work was still in the liability period and the contractor will work on all the defects.

205

The Accounting Officer is advised that the hospital is inspected by officers independent of the infrastructure department and the defects rectified before the liability period expires.

15.8.3 Construction of Maternity Ward at Bulidha Health Center III An agreement was made on the 22nd day of February 2008 between the Ministry of Health and a construction company at Bulidha health center III in Bugiri district for a contract sum of shs.203,974,154 inclusive of VAT.

An inspection of the civil works revealed the following matters:-

The payment terms provided for 50% advance payment and the balance paid on completion. A total of shs.190,187,960 equivalent to 93% of the total contract amount was paid to the contractor before completion contrary to the terms of payment. Evidence of bank payment advance guarantee was also not made available for audit. The agreed period for completion of the works of 8-12weeks from 9th January 2008, was not met by the contractor.

The Accounting Officer was advised to review the performance of the contractor to ensure that the works are completed.

The Accounting Officer explained that the contractor submitted an advance payment guarantee issued by the standard chartered bank. Evidence of advance payment guarantee was however not made available for audit.

15.8.4 Rehabilitation of Medical Wards 8 and 9 in Mbale Regional Referral Hospital The ministry entered into an agreement with a company for the rehabilitation of medical wards 8 and 9 in Mbale regional referral Hospital for a contract sum of

206 shs.495,089,338. However, Ministry of Health committed only Shs.302,012,549 to the project. As a result, progress of work has been significantly slow and has stagnated at the window level.

The Ministry had written to the hospital management requesting for the top up of the difference from their current capital budget. There is risk of failure to complete construction of the wards in time since the hospital's development budget is already committed to other priority areas. Any uncertainty on the part of the contractor over payments may result into litigation.

Management attributed the delay to limited funds available to cover the contract amount and further explained that the Vote for rehabilitation this year was transferred to respective hospitals.

The accounting officer has been advised to ensure that contracts are entered into after confirming availability of funds as required by law. It is further recommended that the ministry makes good the payment obligations under the agreement to avoid risk of possible litigation.

15.8.5 Proposed Renovation of Jinja Hospital Laboratory The Government entered into a contract with a construction company in July 2008 for the renovation of the laboratory at Jinja Hospital at a contract sum of shs.440,721,882. However, inspection of the site revealed the following matters;

During the financial year under review, only shs.232,038,254 was paid to the contractor. Although the contract was between the Ministry and the contractor, management has written to the management of the hospital to take over the bill under their development Budget. It is not known whether the hospital has adequate resources in the budget to finance the activity.

According to the bidding documents and the bills of quantities the contractor, was supposed to provide for 'water for works', 'light and power for works', and a 'sign board' valued at shs.6,200,000. However, this was overlooked during construction. According to the Hospital Administrator, the contractor uses the

207 hospital water and power. In addition there was no sign board seen at the site.

The Accounting Officer explained that the available funds were not sufficient to cover the contract amount.

The Accounting Officer is advised to link up with the hospital administration to avert possible litigation in case of breach of contract.

15.9 Danida Health Sector Programme Support Phase III (HSSP III) 15.9.1 Bank reconciliation statements are not reviewed by a senior official Although the Ministry of Health prepares bank reconciliations on a monthly basis, there is no independent review of the bank reconciliations. This is further evidenced by an arithmetic error that appeared on the January 2008 MOH/DANIDA Construction account bank reconciliation, as illustrated in the example below:-

Amount (Shs) Amount presented on the MoH bank 1,741,970,331 reconciliation as the bank statement balance Actual/Correct bank statement balance 1,790,253,209 Error Difference 48,282,878

In addition, there are long outstanding items that appear on the bank reconciliations. For example, the HOH/DANIDA Construction account bank reconciliation shows an un-presented cheque of Shs.48,282,878 that has been long outstanding for 9 months. The Ministry of Health-Danida Funds account bank reconciliation also contains a long outstanding draft of Shs.9,443,000 since August 2006.

Errors or irregularities could go undetected through the absence of an independents review of the bank reconciliations and the long outstanding items on the bank reconciliations could be avenues for fraud.

208 Management should ensure that there is an independent review of the bank reconciliations.

Management has explained that the error in the bank reconciliation has been rectified. Remainders for the two outstanding figures (Shs.48,282,878 and 9,443,000) have been sent to the bank. MoH will continue following up with the bank.

15.9.2 Wrong computation of PAYE PAYE was computed wrongly in a number of instances. The PAYE was calculated after deducting NSSF of 5% instead of being calculated on the gross pay. This indicates lack of adequate review of the payrolls. Specific examples include:-

Mr. Khalid Abdul Actual Computation as Correct Variance Mohammed per the payroll Computation Shs. Shs. Shs. PAYE for the month 1,291,731 1,363,796 72,065

There is a risk of potential tax penalties.

PAYE should be computed on gross pay and this should be reviewed by an independent officer to always ensure accuracy of the amounts charged.

Management has explained that the understated PAYE has been recovered from individual staff members and remitted to Uganda Revenue Authority.

15.9.3 Un accounted for Fuel advances Fuel advanced during the facilitation for capacity building, to an officer of Shs.2,692,000 was partially supported by receipts of Shs.492,000. The bulk of the expenditure of Shs.2,200,000 was therefore unsupported.

There is a risk that the fuel might not have been utilised for the intended objective since it is not adequately supported.

209 Management should ensure that all fuel advances are supported adequately with genuine receipts.

Management has explained that supporting documents for the outstanding Shs.2,200,000 have been submitted to the Ministry of Health Accounts Department and are being reviewed by the Accountant in-charge.

15.9.4 Kabarole Regional Workshop A regional planning workshop in Kabarole took place from the 22nd-23rd February 2008 at Kenneth Inn. The full payment for board charges was Shs.11,389,000. The payment was done in 2 phases 75% and 25% amounting to Shs7,970,000 and Shs.3,419,000 respectively. As a result of this, 2 invoices were issued for the 2 payment phases on the same date, on 24th February 2007. However, the rates charged for lunch, dinner, soft drinks and accommodation on the 2 invoices are different.

The inconsistency in the rates implies that the accountability is not authentic. There is a risk that the rates could have been grossly exaggerated in invoice 1.

Management should provide a thorough explanation of the inconsistencies noted in the transaction.

Management has promised to review this transaction and initiate the process of recovering the inflated funds.

15.9.5 Purchases not approved by Contracts Committee Although, all purchases above Shs.2 million are supposed to be awarded by the contract committee, there was no evidence to show that suppliers for goods and services amounting to Shs.85,950,618 were approved by the contracts committee.

Purchasing goods and services from suppliers other than those selected by the contracts committee presents a risk of purchasing goods at non competitive prices.

210 All suppliers of goods and services for items above Shs.2 million should be selected by the contracts committee as required by the procurement procedures.

Management has promised to adhere to the requirement in future.

15.10 Support to the Health Sector Strategic Plan Project (II) ADF LOAN NO.2100150013194 15.10.1Training of medical personnel A total of Shs.36,489,900 was paid out as fees for three students who were sponsored by the project to attend a two year MSc in clinical psychology. However, it was noted that no bonding arrangements were put in place prior to the sponsorship. This implies that the project may not reap any benefits from the sponsorship, in the event that the trained personnel do not come back on completion of the training. Management should ensure that bonding arrangements are in place prior to commitment of project funds to long term training.

Management has promised to address the matter henceforth.

15.10.2Maintenance of personnel records A review of the staff files revealed that these files contain scanty information (only copy of appointment letters is available on file). Other important information such as testimonials, staff performance appraisals, and bio- data are not on file. Failure to have this information readily available on file renders it difficult for me to assess the suitability of staff appointed on the project. Management should ensure that the necessary information is included on these personal files.

15.10.3Status of project implementation There were noticeable delays in implementation of a number of activities critical to the attainment of project objectives/goals. A number of activities that appeared in the project approved work plan and were meant to be implemented during the year under review were still outstanding by closure of the financial year. Details are highlighted in the table below-

211 Activity Remarks Design and supervision of civil works at Mbarara Consultancy behind teaching hospital schedule. Civil works – Mbarara Hospital Behind schedule. EIA at Mbarara hospital and selected Health centres Behind schedule Delivery of 5 Units- project vehicles Delivered late Recruitment of a technical Assistant for reproductive Not recruited Health

Failure to implement activities on time, negatively impacts on attainment of project objectives. Management should ensure that project activities are implemented as planned.

Management has promised to address the matter in future.

15.11 Construction and Equipping of Health Centres in Kamuli and Kisoro Districts Project 15.11.1Payments to a Contractor It was noted that a contractor was paid a total of shs.2,452,343,881 during the period under review for construction and equipping of health centres in Kamuli and Kisoro districts. According to the final certificate Number 13, the project owed the contractor shs.609,877,787 inclusive of VAT implying that the contractor was overpaid by shs.1,842,466,094. There was no supporting documentation presented for audit to justify the excess payment.

Management was requested to provide a justification for the excess expenditure to the contractor.

Management has explained that the contractor was paid a total of shs.2,452,343,881 by the ministry to cater for funds owed under Kamuli/Kisoro project plus part of the funds owed on other projects. This was because the solicitor general had directed the ministry of health to pay the contractor all the outstanding payments.

212 I have advised the Accounting Officer to request for the necessary supporting documentation for additional claims by the firm for further audit examination.

15.11.2Outstanding Claims It was noted that payments to contactors amounting to shs.1,486,897,756 remained outstanding at the end of the financial year as shown below;.

Contractor Amount (Ushs) Arab Contractors 320,637,165 Excel Construction Ltd 545,151,491 Dragados S.A 544,329,007 M/S Kagga and Partners 76,780,093 Total 1,486,897,756

Delays in clearing outstanding bills are a breach of the contract agreements and may attract legal fines and penalties. Management is advised to promptly clear all outstanding invoices in order to avoid unnecessary penalties.

Management has attributed this to delays in releasing of funds by GoU and indicated that in the financial year 2008/09, shs.1,223,628,000 was provided for payment of arrears.

15.12 Partnership Fund (Health Sector Wide Approach Account) 2007/8 15.12.1Funding (i) Donor funding According to the Memorandum of Understanding, a total of 16 development partners committed to funding the programme. However, it was noted that contributions from a number of partners were not readily forthcoming. For example during the year under review funding was received from only 4 partners as shown below:-

213 Name of Development partner Amount contributed SIDA Shs.532,000,000 Belgian Embassy EURO.40,000 DANIDA Shs.181,000,000 DANIDA Shs.181,000,000 Italian Embassy Us$.32,466

Failure to realize funding as planned may render it difficult for the programme to attain its objectives. Management is urged to ensure that all contributing partners are informed/reminded of their due contributions as agreed upon in the MoU.

Management has explained that the Health Policy Advisory Committee (HPAC) will take the necessary steps to ensure that all contributing partners are informed/reminded of their obligations to contribute to the partnership Fund.

15.12.2National Health Assembly (NHA) The MOU specifies that the government should continue to hold the NHA at least once in every two years. The NHA‟s terms of reference are largely advisory and has the participation of districts, urban authorities, central government ministries, NGO‟s, and other stake holders including the Development Partners.

It was however noted that the programme has instead opted to hold the NHA annually with the related expenditure compared to the overall programme expenditure summarized as below:-

2005/6 2006/7 2007/8 Total Programme 823,285,919 1,123,130,000 719,403,246 expenditure Expenditure on NHA 413,582,344 439,814,861 404,428,000 PERCENTAGE 50.2 39.2 56.2

This expenditure appears wasteful and gives an impression that the NHA is the most important activity of the programme as opposed to the other activities that

214 the programme is meant to undertake. Management is advised to adhere to the terms of the MOU i.e. at least once every two years.

In their response, management has explained that it has realized that it is very costly to hold the NHA annually and it will now be held once every two years.

15.12.3 Budget Performance It has been noted that management did not undertake budgetary analysis to ascertain variances from the budget that occurred (if any) and the reasons for their occurrence, during the period under review. This is contrary to best accounting practice. Management is advised to undertake variance analysis with a view of ascertaining the reasons for any major deviations from the budget.

Management has explained that all accounts prepared in future will incorporate this analysis.

15.12.4 Direct payments by Development partners Some development partners effected payments directly to some service providers. This information has not been reported since the funding was not channeled through the Partnership Fund account. I have not been able to obtain complete information regarding such payments. Examples include:-

Name of Amount Service Purpose Development paid provider Partner (shs) Belgium 99,900,000 Child Health Client satisfaction Development Centre – Makerere DFID 70,000,000 Business Synergies Drug trucking study Belgium 60,000,000 Dr. Elizabeth Echoku – Supervision and (Quality Health monitoring of International) health services

215 This implies that not all the funding that has been provided by the development partners has been fully recorded by the programme. In addition, it is difficult to ascertain the amounts provided and that value for money was obtained in the absence of the necessary documentation used during the engagement of the service providers. Management is advised to provide all the related documentation regarding the direct payments to service providers to enable proper verifications.

Management has explained that direct payments to some service providers were approved by the HPAC and these were mainly in respect of technical assistance. The Ministry and development partners have now agreed to harmonize the technical assistance.

15.12.5Procurement Procurement plan PPDA regulations require that procuring entities prepare procurement plans to guide their purchasing functions. However, it appears that no harmonized comprehensive Procurement plan was formulated and used in the procurement of goods and services during the period under review. This implies that the programme does not enjoy the benefits of undertaking coordinated procurements such as economies of scale.

Management is urged to ensure that annual procurements plans are prepared and utilized in future.

Management has explained that it has since reorganized the procurement unit through hiring of additional staff including a procurement advisor. The Ministry now has a comprehensive procurement and disposal plan, tracking system which helps to trace the flow of requisitions.

216 15.12.6Prior years audit issues and recommendations The prior year‟s audit issues are summarized as follows:- Financial year Issues raised

2006/7 Delayed preparation and presentation of accounts for audit Non contribution of funds from some development partners Irregular transactions with commercial banks Anomalies in the accountability for Joint Review Mission expenditure of Shs.379,636,397 Anomalies in the procurement of stationery worth Shs.71,304,100 Failure to undertake budgetary analysis Absence of a harmonized comprehensive procurement plan for the sector Anomalies in the procurement of consultants 2005/6 Delayed preparation and presentation of accounts for audit Non contribution of funds from some development partners Failure to undertake budgetary analysis Absence of a harmonized comprehensive procurement plan for the sector Inadequate monitoring and evaluation

The above recommendations have not yet been addressed by management since the audits of 2005/06, 2006/07 was carried out along with that of the year under review. The follow up will be undertaken in the next audit.

15.13 Uganda Global fund to Fight Aids, Tuberclosis and Malaria Project: GRANT NOS: UGD-102-G01-H-00, UGD-202-G03-T-00, UGD-202-G02-M- 00, UGD-304-G04-H AND UGD-405-G05-M

The project accounts for the year 2007/08 were not presented for audit. For the years ending 30th June 2005, 2006 and 2007 accounts were presented for audit and separate reports have been issued out to Parliament. The project accounts for the year ending 30th June 2005 were qualified (disclaimer of opinion) on the basis of inadequate record keeping, and financial irregularities including improperly

217 supported expenditure at the PMU of Shs.243,949,630; doubtful accountabilities (Shs.48,240,000), ineligible expenditures (Shs.50,097,260); questioned payments for travel (Shs.53,714,200) at the Malaria Control Programme and a total of Shs.8,780,748,431 advanced to sub grantees that remained outstanding and unaccounted for at the end of the year.

The accounts for 2005/6 and 2006/7 were also qualified, because I was unable to satisfy my self as to the correctness of the opening balances; failure to provide the necessary documentation relating to the refunds and sub grantee outstanding advances amounting to shs.6,459,125,603 and shs.5,091,671,997 respectively. The audit issues contained in the reports are summarized as follows:-

Financial year Audit Observations

2004/5 Poor record keeping and book keeping, including failure to prepare regular bank reconciliation statements, failure to maintain cheque registers, failure to prepare timely financial statements, etc. Audit of sub recipients revealed failure to adhere to established criteria in recruitment of sub recipients; lack of 3rd party documentation in accountabilities submitted; doubtful expenditures; poor financial management systems; and un accounted for funds by the year end shs.8,780,748,431. Examination of expenditure at the Project Management Unit (PMU) revealed Payment of allowances not in accordance with the requirements in the Project Implementation Manual (PIM); Incomplete accountability; and Falsified accountabilities (shs.243,949,630). Questioned accountability of funds spent on supervision by political leaders (shs.76,505,000). Questioned accountabilities submitted by the Malaria Control Programme (shs.48,240,000), and Aids Control Programme (shs.275,733,500).

218 Inadequate monitoring and evaluation. Inadequate controls in petty cash management. Funds transferred to bank accounts of project staff. Wasteful expenditure in lieu of demurrage charges shs.17,032,642. Weak internal audit department. No specific guidelines were issued or designed by PMU to guide the various implementers on how to implement the activities of the project. Weaknesses in the motor vehicle management system. Shortcomings in staff training including failure to carry out needs assessment, haphazard training, no training committee, and expensive trainings. Inconsistencies in the project implementation manuals Borrowing of funds by the Ministry of Health (shs.30,805,280). Inadequate data on personnel files. Anomalies in the procurement of several project items including apparent conflict of interest, failure to display approved shortlists; mentioning source of the product in the bid documents; and overpayment of US$.8,750 for the consultancy services for preparation of procurement plans. Outstanding issues to be implemented as a result of the Commission of Inquiry into the alleged mismanagement of the project that was appointed by H.E. the President of the Republic of Uganda. 2005/6 No records were availed to me regarding the refunds from sub recipients that were banked on bank account no.299- 227044-1 opened in Bank of Uganda in February 2006. Overpayment on clearing and related charges for 300 motorcycles (shs.3,700,000). Overpayment to National Medical Stores - $ 19,276. Un budgeted procurement of a motor vehicle.

219 Anomalies in the pre-shipment inspection of condoms. Payment for training the consultants personnel ($.5,900). No internal audit arrangements. Anomalies in the drug storage and distribution system including no independent records maintained at the global fund offices to keep track of supplies held by NMS; and no agreement nor a memorandum of understanding between GOU and the NGOs carrying out the distribution. Delivery of expired drugs by National Medical Stores (NMS). Doubtful delivery of drugs to Soroti Hospital (shs.124,368,220). Grantee Balances un accounted for shs. 6,459,125,603 No monitoring arrangements were carried out during the year under review either by the CMF or the MOH. Anomalies in the procurement of the Caretaker Management Firm (CMF) including; method of selection of the caretaker management firm was not done in accordance with Government of Uganda procurement regulations, payment of an additional $.31,284 for the forensic preservation of computer data that was not authorized, draft agreement was not reviewed and approved by the Solicitor general, un authorized extensions and no addenda to the original agreement. Violation of grant agreements including payment of Value Added Tax amounting to $ 6,509 out of donor funds; and use of project funds to pay un deducted withholding tax of Shs.24.213.354. Payment of ineligible allowances (Shs.57,984,556). 2006/7 Anomalies in the procurement of the Caretaker. Management Firm (CMF) including un authorized contract extension, and payment of Us$.71,006 for services rendered during November 2006 and yet the original contract period had expired at the end of October 2006.

220 Anomalies in the procurement of microscopes including purchase of extra 15 un budgeted for microscopes costing $ 30,810 and non utilisation of all the procured microscopes. Failure to provide documentation regarding procurement of ARVs by UNICEF- $ 1,913,468 Failure to distribute procured Home Based Care Bags and Bed Sheets. Anomalies in the procurement and Distribution of Bed Nets including un accounted for 2,793 nets valued at Shs.29, 882, failure to deliver 19 bales containing 760 LLINs valued at Shs.8,131,240 by M/S Transami Overpayment for Distribution Of Motorcycles (Shs.1,500,000). Overpayment to National Medical Stores - $ 44,014. No internal audit arrangements. Anomalies in the drug storage and distribution system including no independent records maintained at the global fund offices to keep track of supplies held by NMS; and no agreement nor a memorandum of understanding between GOU and the NGOs carrying out the distribution. Delivery of expired drugs by National Medical Stores (NMS). Doubtful delivery of drugs to Soroti Hospital (shs.375,519,365). Grantee Balances un accounted for shs. 5,091,671,997. No monitoring arrangements were carried out during the year under review either by the CMF or the MOH. Delayed submission of accounts for audit.

The follow up of the recommendations made in the reports will be undertaken during the presentation of the accounts for the financial year ending 30th June, 2008.

221 16.0 WORKS AND TRANSPORT

16.1 Nugatory Expenditure

Out of Shs.2,439,657,344 paid to a constructing company as settlement of contract fees in respect of Kapchorwa –Sironko road, Shs.763,914,478 and US $ 594,706 was in respect of interest charges that accrued due to delayed payments. This expenditure is nugatory as it could have been avoided if arrangements had been made to promptly settle the obligation. Management explained that delayed settlement of the liability was due to budgetary constraints.

Management is advised to make arrangements with the Ministry responsible for Finance to promptly settle contractor obligations to avoid further escalation of interest. 16.2 Non-Deduction of Withholding Tax

In my report for the year ended 30th June 2007, I observed that withholding tax on payment to a foreign based construction company, carrying out civil works for redevelopment of statehouse- Entebbe was not deducted. During the year under review, payments amounting to US $.16,505,515.46 were made to the same company without deducting withholding tax of US$ 990,331. This contravened the Income Tax Act Cap 340 as no exemption certificate was obtained from Uganda Revenue Authority.

The Accounting officer explained that the non-deduction was based on the request by the Hon. Minister of Finance, Planning & Economic Development to Uganda Revenue Authority for a tax waiver to the company. He added that Uganda Revenue Authority had clarified that no waiver had been granted but an audit was being undertaken to ascertain the firm‟s tax liability.

16.3 CHOGM Expenditure (a) Disclosure of Balances The cash balance on the CHOGM expenditure account was not disclosed in the financial statements because of lack of proper guidance on accounting and consolidation of CHOGM expenditure. According to the Ministry, consolidation was

222 a responsibility of Ministry of Foreign Affairs. I have advised the Accounting Officer to liaise with Treasury for proper guidance on the matter.

(b) Civil Works A financial and engineering audit of works undertaken by the Ministry in preparation for CHOGM revealed various irregularities in implementation of some projects:

o On certain projects, the quantities paid for certain civil works were higher than the approximate quantities ascertained. Recoveries amounting to over Shs.1 billion that have been agreed with management should be effected accordingly. o The contract sums of which most of the infrastructure projects awarded were high compared to the engineer‟s estimates. Some of the contracts lacked engineer‟s estimates. o A number of procurements were carried out using inappropriate procurement methods and some had contract variations in excess of the authorised limits without the authority of PPDA. Details of the matters are contained in the financial and engineering audit report issued separately.

The Accounting Officer is advised to address the recommendations I have made in the reports to ensure that works are completed, recoveries made and capacity of the Ministry of Works developed to effectively supervise and monitor implementation of civil works.

16.4 Fraudulent Withdrawal Of Ministry Funds

A total of Shs.521,688,900 was fraudulently withdrawn from the ministry‟s account at Bank of Uganda through circumvention of controls in the integrated financial management system (IFMS). Apparently a fictitious contractor was created on the system and subsequently paid on 25/10/2007 and 12/12/2007 amounts of shs.267,407,700 and shs.254,281,200 respectively.

223 The Accounting Officer was advised to address the recommendations arising from the report on the investigation into the fraud. He explained that the suspects were charged in courts of law, granted bail and the outcome of court proceedings is awaited. He also explained that some short term recommendations had been implemented while the long-term recommendations required input of other stakeholders.

I advised him to liaise with Ministry of Finance to address the identified weaknesses in the IFMS. There is also need to pursue the matter in court to its conclusion.

16.5 Review of Performance against Set Targets for Financial Year 2007/08

A total of Shs.147,410,062,084 was approved for national roads construction and other capital projects for the year under review. Actual releases amounted to shs.143,495,214,328 representing 97% performance during the year 2007/08. However, comparison of a sample of fourteen (14) planned activities against actual achievements revealed negative variances ranging from 10%-75% as indicated in the table below. Specific management responses are outlined in the matrix. Failure to undertake all planned activities for which funds have been released implies lack of absorption capacity or possibility of diversion of funds. It is necessary that works are expedited to achieve intended objectives.

16.6 Review of Performance Against Set Targets For FY 2007/08

S./ Planned Planned Budget Annual Achieve Varian Management No activity output release ments ces Responses spent by end of May 08 1.2 Nyakahita- 100% 0.381 0.372 25% (75%) Ibanda- - Variance Kamwenge Percentage due to delay – Fort road design in Portal Rd commencem designed ent of services; - Final Design Report is expected by

224 S./ Planned Planned Budget Annual Achieve Varian Management No activity output release ments ces Responses spent by end of May 08 April 2009. 1.3 Kabale- 30% 6.77 6.571 10% (20%) Variance is Kisoro- attributed to:- Bunagana Percentage rd upgrade a) Increased upgraded earth works

b) Bad weather

c) Fuel Crisis due to Kenya political crisis. 1.4 Atiak-Moyo 80% 0.081 70% (10%) Due to Rd variation of designed Percentage scope of works. road Engineering design

1.5 Kawempe- 1.220 60% (20%) Variance is Luwero- 80% attributed to Kafu rd Percentage fuel crisis rehabilitatio rehabilitation arising from n/ resealed Kenya political crisis at the time.

1.6 Busega- 10% works 1.236 1.203 0% (10%) - There was Mityana rd completed no reconstruct performance ed Percentage because of reconstruction insufficient funds on the World Bank credit under which the project was supposed to be implemented

1.7 Kampala 25% of 4.598 4.466 20% (5%) Variance was Northern works due to Bypass completed suspension of asphalt laying Percentage by the completed contractor in January 2008 as a result of

225 S./ Planned Planned Budget Annual Achieve Varian Management No activity output release ments ces Responses spent by end of May 08 technical disagreements. 1.8 Carry out 0.086 0.069 0% (100%) No detailed 100% of the performance at engineering design study all because of design of completed failure to the second secure an Nile bridge interested at Jinja financier on time. 1.9 Kabale- 30% 6.77 6.571 10% (20%) Variance Kisoro- attributed to:- Bunagana rd Percentage a) increased upgraded upgrade earth works b) Bad weather c) Fuel crisis

1.1 Kampala- 35% Work 3.275 3.207 0% (35%) Variance is 0 Gayaza- completed attributed to Zirobwe delays in (43km): Works obtaining “no strengtheni completed objection” to ng existing award of paved road contract from financiers and changes in the original design. 1.1 Accident 80% of 0.764 0.764 10 spots 3 spots 1 black spots works improved not Delay is on Jinja- completed improv attributed to Kampala i.e. 13 spots ed defects Road & (23%) identified Kampala- during the Entebbe 17 spots construction. improved 1.1 a)Construct 5.088 5.088 1 Ferry The delay is 2 ion of ferry for attributed to landing No. of Nabugan long sites at landing sites yi procurement Mbulamuti, Constructed purchase process for the Nabuganyi d study and and 1 Ferry design of the Namasale 1 Ferry in landing sites b)Ferry procured transit and ferries. procured No. of ferries procured

226 S./ Planned Planned Budget Annual Achieve Varian Management No activity output release ments ces Responses spent by end of May 08 1.1 Jinja-Bugiri 50% of 3.025 2.993 40% (10%) The variance is 3 rd works attributed to: rehabilitate completed a) Increase in d scope of work Percentage b) Kenya post election crisis that led to shortage of inputs. 1.1 Matugga- 10% 1.074 1.041 0 (10%) The cause of 4 Semuto- variance was Kapeka Percentage delay in upgraded approval of from gravel detailed to bitumen engineering standard design and inadequate funding for the project.

1.1 Soroti- 20% 3.444 2.935 10% (10%) Underperforma 5 Dokolo nce caused by (602.5km) Percentage the floods in upgraded completion eastern Uganda from gravel which delayed to bitumen commencement standard, of works by 2 Dokolo-Lira months. (60.5km)

16.7 Variation of Contract Sums from Engineering estimates on Selected Road Contracts Review of a sample of ten (10) road contracts revealed variations of contract sums from engineering estimates amounting to shs.3,920,716,825 above the latter. This implies that contracts were overpriced, or the estimation was not properly undertaken. Failure to undertake proper engineering cost estimation, creates loopholes in the evaluation process and this can lead to loss of funds. The Accounting officer explained that the variances were due to unrealistic unit cost rates which had been approved in June 2006.

227 Table indicating variation of contract sums from engineering estimates. S. Contract description Contractor Engineering Actual Quantum and N estimate contract sum percentage o Variation 1. Selected roads: 79.7km MML road 800,704,615 1,472,206,320 (671,501,705 ) (Lugazi-Buikwe, construction (84%) Kyetume-katosi and co.ltd others). Site clearance, swamp filling, regravelling and drainage repairs.

2. Karugutu-Ntoroko : 50km Kasese Nail 496,494,931 722,620,000 (226,125,069) Grading, and wood (46%) gravelling and industries drainage repairs ltd 3. Akisik-Nadunget road Mulowooza 727,948,713 959,968,600 (232,019,887) :74km &Brothers (32%) Grading,gravellin ltd gand drainage works 4. Fort portal- Kamwenge : Energo (u) 940,22,304 1,035,851,964 (95,629,660) 75km ltd (10%) Grading,gravellin gand drainage works 5. Rushere-Kazo-Ibanda : EFRA LTD 2,260,404,350 2,290,645,600 (30,241,250) 73km (1%) Grading, gravelling and drainage works 6. Kilak- Adilang: 64km Excel 564,455,029 851,740,000 (287,284,971) Grading,gravellin construction (50%) gand drainage ltd works 7. Busolwe- Nabumali, M/s 642,997,670 758,953,563 (115,955,893)

228 Busolwe-Budumba: Mulowooza (18%) 51.6km & Brothers Grading,gravellin gand drainage works

8. Muhanga-Ntungamo: Nicontra ltd 408,487,969 640,590,150 (232,102,181) 47km (59%) Pavement repairs and drainage improvements 9. Nyakahita-Rushere- BCR General 1,161,171,171 1,925,119,125 (763,947,954) Rwakitura: 45km ltd (68%) Grading, regravelling and drainage improvement 10 Fortportal-Kyenjojo road, Zimmwe 2,344,274,545 3,610,182,800 (1,265,908,255) . improvement of parking enterprises (54%) aprons and parking areas around Mpanga market

16.8 Unaccounted For Funds

A sum of shs.455,415,000 that was advanced to various districts and an individual remained un accounted for at financial year end contrary to financial regulations. The Accounting officer stated that the district accountabilities had been received and that the individual was still being pursued. However at the time of writing this report accountability had not been submitted for verification.

S.No Recipient Amount Purpose 1. Moyo 378,000,000 Road maintenance 2. Moyo 24,165,000 Ferry maintenance 3. Masindi 19,000,000 Ferry maintenance 4. Isingiro 5,000,000 Road maintenance

229 5. E.Ndagije 29,250,000 Workshop on earthquake disaster preparedness Total 455,415,000

16.9 Award of Contracts to Second and Third best Bidders

Regulation 198(8) of the PPDA Act requires that award of contracts be given to the best evaluated bidder. However, two road maintenance contracts were awarded to the second and third best evaluated bidders. The explanation that a bidder could only be awarded one contract in line with tender requirements was found unsatisfactory because in one case, two contracts were given to one of the bidders for the same lot. Besides this practice exposes government to risk of litigation. I advised management to always abide by the evaluation results.

In instances where the next evaluated bidder is considered, the decision should be in accordance with the solicitation document and PPDA regulations.

S.no Contract Engineering Bidder Tender sum Evaluation Contract description estimate ranking award 1. U.shs. 727,948,713 Routine Bid (a) 695,971,000 1 maintenance of Akisim- Nadunget road (74km) ,, Bid (b) 959,068,600 3 Awarded contract. ,, Bid (c) 725,325,000 2 2. 940,222,304 Routine Bid (a) 921,236,648 1 maintenance of Fortportal- Kamwenge road Bid (b) 1,035,851,964 2 Awarded contract.

16.10 Road Inspection Reports

Inspection of works on selected roads in Central and Western Uganda was carried out during the year. The specific roads were; Busega-Mityana, Kanoni-Misigi- 230 Mityana, Masaka district engineering station, Katunguru-Ishasha, Karugutu- Ntoroko and Kakabara-Rwebisengo. District engineers were interviewed, works were inspected and physical evidence in form of photographs was obtained. The following common weaknesses were revealed; a) Delays in commencement of works after contract signing, for instance Busega – Mityana road. b) Delays in provision of advance payments to contractors, for instance in the contract for Karugutu – Ntoroko and Kakabara – Rwebisengo road. c) Inadequate provisions for drainage, silting of drainage channels and completion time overrun, for instance, Kanoni-Misigi-Mityana road.

16.11 Ministry Vehicles/Equipments in Garages

As at September 2008, fifteen (15) vehicles and earth moving equipment belonging to the Ministry were lying in various garages unrepaired. Eleven (11) of the vehicles had been in garages for more than 1year. Long stay of government vehicles in the garages exposes them to risk of pilferage and vandalization.

Management explained that vehicles were dismantled in the garages for assessment of defects and that they have now been retrieved. I advised management to carry out a comprehensive review of the ministry fleet to determine viability of repair vis-à-vis boarding off vehicles.

16.12 Non Refund of Borrowed Money

A sum of shs.4,500,000,000 was borrowed from state house redevelopment account for opening Letters of Credit for procurement of CHOGM vehicles during the year under review. However by the end of the financial year 2007/2008, there was no evidence that the funds were refunded. This practice may affect implementation of planned activities. Although the Accounting Officer indicated that the amount had been refunded, there was no supporting evidence of refund at the time of writing this report.

231 16.13 Subsidy to Private Operator of MV Kalangala Ship

In his communication of 9th March 2006 to the Ministry, the Secretary to the Treasury directed that MV Kalangala should be run on commercial basis without recourse to Treasury for any form of subsidy. However review of a financial report on performance of the ship for the year revealed that revenue collections amounted to shs.897,963,500 while expenditure amounted to shs.2,396,636,469 resulting into a subsidy of Shs.1,498,672,969 during the year. Besides there was no provision in the approved budget for subsidy for operations of the ship. It was also noted that lack of ticketing offices, toilets and security perimeter at the landing sites impacts on the marketability of the ship. Management explained that funds for the subsidy were obtained from a project run by the ministry and that plans were underway to provide the facilities. I advised the accounting officer to review the contract provisions with the private operator to ensure adequate revenue accounting procedures are put in place. Besides, an operations subsidy requires budgetary allocation from the Ministry of Finance, Planning and Economic Development and Parliament.

16.14 Staff Performance Appraisal

The public service staff appraisal guidelines require annual appraisal of all staff with a view to achieving five objectives namely; improving staff performance, providing constructive feedback, increasing officer‟s motivation, identifying development needs so as to develop potential and determining extent to which set targets are achieved.

It was however observed that out of a sample of 94 staff in the scale U4 and above, only 39 staff representing 41% had been appraised over the last three financial years. Of these 15 (16%), 23(24%) and 1(1%) were appraised in the years 2005/06, 2006/07 and 2007/08 respectively.

Management explained that the ongoing restructuring exercise of the Ministry had partially demoralised employees in filling appraisal forms because they were uncertain about their fate.

232 I advised management to regularly carry out appraisals to enable achievement of performance objectives.

16.15 Review of previous year’s recommendations on East African civil aviation academy

Issue Management response Audit remarks Legal status and The Accounting officer explained that the I await results of institutional International civil aviation academy (ICAO) the study. framework of East had been contracted to carry out a study on African civil aviation the viability of the academy and to provide Academy guidance on its institutional and legal framework. Vacant Staff Positions -Specifications for the Director have been To be followed including that of modified and submitted to Public Service. up. Director -Submissions have also been made for the other staff.

16.16 East Africa Trade and Transport Facilitation Project (EATTFP) IDA CREDIT NO.4147 UG

16.16.1Implementation Arrangements

Schedule 4 part 3 (b) of the development credit agreement provides for a Project Steering Committee (PSC) that is charged with the responsibility of providing overall oversight and policy guidance. The agreement further requires that the PSC meets at least once every quarter to deliberate on matters pertaining to the project. However, it was noted that the PSC only met once during the period under review. The oversight body‟s inability to meet regularly may result in inadequate supervision of project activities.

The Accounting Officer, who is Chairperson of the PSC, is advised to ensure that meetings are held regularly and the required reports sent to the Bank within the specified timeframe.

233 Management has explained that the Project Steering Committee had not met because the level of project activity has been low. Coupled with the busy schedule of the members of PSC, forming a quorum had been hard to achieve.

16.16.2Loss of Funds

A total of Shs.27, 057,800 was advanced to PWTC- Kyambago to cater for a workshop for updating the project implementation manual that was supposed to be held between 23rd- 28th June 2008. The money was reportedly stolen by an accountant who was attached to the training centre at the time.

Management is advised to follow-up the matter for purposes of recovering the funds.

Management explained that the loss was promptly reported to the Accountant General and Police. Although the suspect was arrested and charged in court, the final outcome is pending. Management is advised to follow up the matter to recover the funds.

16.16.3Status of Implementation of Project Activities

According to the disbursement schedule in the project implementation manual, a total of $.11.53 million (representing about 43.7 % of the entire project credit of $.26.4 m) should have been received from the World Bank, by close of the year under review.

However, it was noted that only $.2.5 m (representing 9.4 % of the credit) had so far been received from the bank. This delayed implementation of project activities. For example, no activity has been undertaken in the Investment support for trade and transport facilitation component of the project, inspite of the fact that this component is the biggest and most critical to the Project.

Delays in implementation of project activities may necessitate extension of the project duration which leads to unnecessary administrative costs.

234 Management should expedite implementation of activities in order for the project to attain its objectives in a timely manner.

Management has explained that as a remedial measure, MoWT has proposed the rescheduling of the project implementation calendar to make-up for the lost time of 18 months.

16.17 Uganda National Roads Authority – Road Sector Support Project I ADF Loan Nos.2100150009644 & 2100150013494 and Grant No.2100155004668 Kabale-Kisoro – Bunagana/Kyanika Road

16.17.1Delays In Releasing Counterpart Funding

It was noted that GoU delayed to counter fund a number of contractors‟ certificates as shown below:

Date of Invoice on Value of GOU portion certificate certificate certificate - Ugshs 18-02-2008 Supplier Invoice 502,88,593 164,492,242 CERT 10L – CERT 10 21-04-2008 Supplier Invoice 1,500,717,415 490,884,666 CERT 11L – CERT 11L 13-05-2008 Supplier Invoice 1,388,380,042 454,139,112 CERT 12L – CERT 12 10-06-2008 Supplier Invoice 1,962,673,133 641,990,382 CERT 13L – CERT 13 30-06-2008 Supplier Invoice 617,690,887 202,046,689 CERT 14L – CERT 14 Total 1,953,553,091

Delaying to provide counterpart funding is a contravention of Gou commitment to the funding agreement with ADB. This also has the implication of stalling some activities of the project. Government should endeavour to meet its portion of the financing agreement so that the project can be completed within the stipulated time.

Management explained that this is a perennial GOU budgetary support problem/ constraint. It was also reported that in the financial year 2008/09, GOU

235 significantly increased its funding to the sector with the aim of addressing this constraint.

16.17.2Inter Project Borrowing

Funds were paid out of the project account to other projects managed by the Uganda National Roads Authority. The drawings were made in 2006 and amounted to shs.603,627,325. At the time of the audit, the amount had not been recovered.

Inter project borrowing deprives lending the project of the much needed funding which ultimately affects the timing of some of the project activities, and also infringes on the terms of the agreement with ADB.

In future management should endeavour to avoid inter project borrowings.

16.17.3Non Remittance of Withholding Tax

It was noted that tax amounting to shs.229 million was withheld on paying the consultants; however the amount has not been paid over to Uganda Revenue Authority.

Uganda Revenue Authority would normally impose penalty for delayed payment of tax withheld when paying suppliers of services.

Management is advised to remit all deductions to Uganda Revenue Authority promptly to avoid any penalties.

Management has attributed this to insufficient GOU counterpart financing at the time the taxes were withheld. This has however been paid during the Financial Year 2008/09.

16.17.4Slow Pace of Execution of Works by The Contractor

According to interim certificate No.19 of October 2008, the work completed was worth shs.40,399,894,683 representing 27.47% of the total contract sum. The

236 Resident Engineer noted that the quality of work carried out to-date is satisfactory. However the pace at which the contractor is executing this work was slow. The contractor is yet to respond to a request for the new schedule for the completion of work.

Uganda National Roads Authority (UNRA) and the Consultant should closely monitor the contractor to expedite the implementation of contract.

Management has explained that following the revision of the Bill of Quantities during November 2008, resulting in an increase in the volumes of earthworks, the contractor in collaboration with the consultant, has been requested to provide a revised program of works to indicate revised targets. This revised program is expected to be available to UNRA by the end of January 2009.

16.17.5Delayed Settlement of Compensation to Verified Claimants

The land and property compensation liaison office in Kalengeyere was visited and a meeting was held in order to obtain an update of the progress on the land and property compensation process being carried out by the consultant. The process of compensating the property and land owners has been slow. At the time of the visit on 9th December 2008, the exercise was still on-going and accountabilities were yet to be submitted to UNRA office.

As of 30 June 2008, a total of shs.1,861,464,631 had been advanced to the consultant for land and property compensation on the project.

It was also noted in the monthly progress report of October 2008 that where compensation for buildings and structures within the road reserves had been paid, no demolition of structures had started yet. More especially from the first said segment of km 0 + 000 to 4 + 400 and km 4 + 400 to 19 + 400.

Delayed payments to already verified claimants creates suspicion and mistrust of the contractors by the population in the road reserve which may result into withdrawal of cooperation.

237 The payment process should be streamlined and both the land office and the beneficiaries should be availed with the compensation programme. UNRA should give guidance to the consultant regarding details of notices to be made to claimants who have received their payments yet they have not vacated the compensated premises to be demolished.

Management has promised to address the matter.

17.0 DEFENCE

17.1 Somalia Operation Amison

The Ministry has continued to incur expenditure in relation to Somalia operations which is refundable by the African Union. At the time of writing my report, Shs.26,000,000 incurred on acquiring engine boats and Shs.93,114,990 used to procure food for Amison operation had not been refunded.

It was noted that the Ministry maintains two bank accounts in Bank of Uganda on which funds for the African Union are deposited and utilized for Somalia operations. So far the Ministry has received Shs.5,100,000,000 from the African Union to cater for all the operations. However, the funds are disbursed directly to the Ministry without going through the Treasury. The accounts were not disclosed in the Ministry financial statements at year end nor audited by my office.

I have advised the Accounting Officer to consult Treasury to work out procedures to ensure that all inflows of funds to the Ministry pass through Treasury and are recorded in the financial statements.

17.2 Arrears

The Ministry incurred arrears amounting to Shs.15,256,288,975 in contravention of the commitment control procedures as reflected in the statement of outstanding commitments. Arrears are a result of weaknesses in control over budgeted expenditure. 238

The Accounting Officer attributed the arrears to unforeseen additional operations in the region which had not been planned for.

17.3 Funds not Accounted for

By the end of the year, a total of Shs.842,395,935 advanced to various staff to carry out official activities had not been accounted for. Due to delays in submission of accountabilities, I was not able to verify the accountability. By the time of writing of my report, some documents had been presented to my office and were being verified. A status report will be provided.

The Accounting Officer is advised to ensure that in future all advances are accounted for promptly as delays in accounting can lead to possibility of loss of funds.

17.4 Unauthorised Transfer of Funds

Towards the end of the financial year, the Ministry made a transfer of Shs.4,161,892,905 and shs.322,747,938 from the Treasury General Account to the Construction and Computerisation accounts respectively. The funds were transferred to avoid the transfer of unutilized cash balances at year end back to Treasury as required by regulations. The amounts were subsequently utilized in the new financial year to clear outstanding commitments. This practice is irregular and should be discouraged.

17.5 Transfer to the Uganda Consolidated Fund Account

At the beginning of the financial year 2007/2008 the Ministry had unspent balances amounting to Shs.20,696,727 on the Bank of Uganda Expenditure Account which was supposed to be transferred to the Consolidated Fund Account in accordance with PFAA Act, 2003. However, there was no evidence to show that the transfer had been made. The Accounting Officer explained that she had

239 informed Treasury of the need to have this money transferred to the consolidated fund.

I advised the Accounting Officer to follow up the matter and ensure that the transfer is effected.

17.6 Purchase of Land at Lunyo (Entebbe)

The Ministry purchased land located at Lunyo, Entebbe from an individual in June 2007 at Shs.5 billion. Review of the documents revealed that the land in question was originally leased to Oriental Products Company Ltd. By the time of expiry of the company 49 year lease, the land was being occupied by UPDF. Under unclear circumstances, the land was leased to an individual by Mpigi District Land Board, who later sold it to the Ministry of Defence at shs.5 billion after valuation by the government valuer and negotiations between the two parties. By the end of the financial year, the Ministry had paid Shs.3.4 billion to the individual.

I have explained to the Accounting Officer that on expiry of the 49 year lease, the Ministry should have applied directly to Mpigi District Administration for allocation of the land since the land was already occupied by government. This way government would have avoided the cost of acquisition of the land.

17.7 Payment to Associated Architects Shs.203,752,366 was paid as arrears to M/s Associated Architects for consultancy services rendered to Ministry of Defence. However, I was not able to verify the validity of the expenditure as supporting documents such as the consultant fee note (claim) indicating how the charge was arrived at was not presented for audit. Besides, the claim was not declared in the arrears list of 2006/07. A review of the consultancy agreement signed on 28th July 1999 also revealed that the consultant was to be paid an amount not exceeding USD 9,715 per month within a maximum of 30 days. I was not provided with explanation on why the arrears remained outstanding for a long time.

240 The Accounting Officer was advised to trace the necessary supporting documentation.

17.8 Renovations by Internal Labour

During the year, the Ministry carried out a number of renovations on various sites using internal labour (department of construction). Although the amount involved required the Ministry to advertise as per PPDA regulations, there was no evidence to show that this was done.

The Accounting Officer explained that this was undertaken because of the greater savings and flexibility offered by the Engineering Brigade (department of construction).

I advised the Accounting Officer to adhere to the required law and where use of force on account is warranted, seek necessary approval of the contracts committee and PPDA.

17.9 Audit Inspection (a) Land and Building Inspection of Army General Depot Magamaga, 1st Division Headquarters Kakiri, 409 Brigade Arua, 3rd Division Gulu and Mechanized Brigade Masaka revealed that all land for these facilities is not surveyed and some of the land has been encroached on. In addition most of the buildings require renovation.

The Accounting Officer explained that titling and opening of boundaries for the Ministry land has been identified by Top Management as one of the priorities. A directive has been issued to source funds from the budget and ensure that the exercise takes off. It is anticipated that by closure of the F/Y 2008/09, six (6) pieces of land will have been surveyed and titled. I await the outcome of the effort.

241 (b) Stores Inspection of stores in various facilities of the Ministry revealed that most stores are leaking, have poor electrical installation and fire extinguishers in place are expired. There are also no pallets in place implying that all items are placed on the floor.

Most buildings are dilapidated and infested with bats and rats. In Magamaga, storage of some items such as engine parts were mixed up with uniforms. Spare parts for M.18 American trucks were found in stock yet two of the same trucks were grounded for lack of relevant spares. I have advised the Accounting Officer to liaise with the Ministry of Finance, Planning and Economic Development for purposes of providing funds to renovate the dilapidated structures. In addition, the Accounting Officer should institute proper measures relating to stores management.

(c) Senior Command and Staff College Kimaka The land title for the college and residential quarters at Nalufenya was not availed for verification.

It was also noted that the contracts for two staff working as drivers had expired in March 08 and had not been renewed.

(d) Junior Staff College Jinja The medical centre is in a bad state in that it lacks most of the equipment needed for the operation of a medical centre such as sterilizers, gloves, needles and syringes, infusion stands, trays and trolleys, clinical coats e.t.c.

It was also noted that the old mortuary is also in a bad state. As a result, dead bodies are sometimes kept in the wards. The maternity ward was also noted to be in a poor condition and inadequately staffed with no running water, one midwife and one nursing assistant.

The centre has no incinerator. The Placenta pit has not been functioning for 7 years. An old pit latrine is being used for the purpose.

242 (e) 1st Division Headquarters Kakiri The Division headquarters has underground fuel storage tanks, however fuel delivery is still made at Total Nansana although Delivery Notes indicate destination as Kakiri.

The receiving committee acknowledges receipts of fuel even when the fuel has not reached the division headquarters. The same fuel is posted to the fuel ledger as though physical delivery had been made to Kakiri. Verification of fuel at the fuel station which is not government premises was not possible.

(f) Military Police Barracks Makindye The pump for PMS has been faulty for over one year now. The meter does not function and as such the quantity dispensed cannot be ascertained. The Supplier Fuelex Company is responsible for maintenance but has not responded.

It was also noted that Makindye Health Center is in a bad state. The infrastructure is very poor and cannot admit any patient. The 18 bed ward has only two serviceable beds. The hospital is also under staffed with only 2 registered nurses. It has no ambulance and basic requirements like protective wears.

It was also observed that the hospital receives only Shs.100,000 monthly for maintenance which is very little compared to the requirements of this health centre.

(g) 3rd Division Gulu The underground storage tank for fuel has not been in use for a period over 2 years. Fuel is stored both in the Service Stations in Gulu and in drums. The fuel stored in drums is kept where there are no fire extinguishers.

It was also noted that the division has adequate storage capacity in form of Drums that can store up- to 10,000 litres, however, delivery of fuel to the stations outside the barracks remained the preferred option. With regard to other facilities, the division lacks computers, furniture, toilet facilities, fire extinguisher and phone connection. The office block is overdue for renovation with walls cracked and dirty.

243 It was also noted that Gulu Hospital receives Shs.500,000 (five hundred thousand shillings only) monthly as funds for maintenance which is used for buying stationary, cleaning materials, and other minor repairs within the hospital. However, the amount is too little to cater for the hospital requirements. The hospital has no X-Ray department which makes it difficult to manage some cases which require X- Ray investigation. There is a need to construct a maternity ward to cater for soldiers‟ wives as the existing one is used as an office and is also too small to be used as a maternity and besides the equipment available is inadequate.

The theatre requires renovation as termites have destroyed part of the roof, some door shutters and frames. The theatre also lacks basic surgical equipment like forceps and sterilizers.

Drugs supplies are not adequate to cater for all soldiers, their families and the army schools.

(h) 5th Division – Acholi Pii Pader (i) Land, buildings and furniture The division headquarters is on un surveyed land and has no land title. It is not fenced and is currently under threat of encroachment from area residents including a Member of Parliament. There is need for the ministry to quickly address the issue.

(ii) Maintenance of vehicles A brand new Toyota Prado Land Cruiser registration number D05DF019 was involved in an accident and appears to be beyond economical repair. I was not provided with the details of the driver for purposes of verifying their competency.

Equally the Division has a maintenance section responsible for repairs and maintenance of vehicles. However, I was not provided with details of staff in the division for purposes of verifying their competency.

244 (iii) Medical Like other military hospitals the hospital is understaffed, drugs are not adequate, medical equipments are lacking and the mortuary lacks basic items like SV, formalin and gloves.

(i) Golf Battalion Lira The land title for Lira barracks was not availed for audit. Management at Golf battalion reported extensive encroachment of their land. The army school has lost more than half of its land to churches, top civil servants and even area politicians.

It was reported that the Lira District Land Board allocated plots where the school playground is situated to the District Police Commander, the chief Magistrate and an honorable Minister. It was further observed that some other encroachers have put up permanent structures.

It was also noted that the battalion has only one troop carrier when it should ideally have 5. There isn‟t a single vehicle for the operation of the commander of the battalion.

(j) 2nd Division Mbarara Some of the drivers do not have valid driving permits and therefore are not permitted to drive under the road traffic Act. The drivers explained that subsistence allowance is not paid whenever they go for safaris and that is the reason why they can‟t renew their expired permits.

(k) Chieftaincy of Mubende Rehabilitation Centre The land at Mubende rehabilitation centre/barracks does not have land title and the boundaries have not been opened. The centre also has another piece of land of unknown acreage at a place called Ntungamo along the road to Kabamba. However, this land is neither fenced nor surveyed and was reported to be encroached on.

245 It was also noted that the Centre is inadequately funded. Whereas the centre had a budget projection of 1.3 billion, the approved budget was 513 million out of which only 98 million was received.

The centre had also planned to retire 400 patients to productive life but only 26 were retired due to financial constraints.

(l) Motorised Infantry Division Nakasongola A visit to the Hospital revealed the following challenges:

The Hospital serves a big area including part of Teso, Bukedia, Migyera, Kitugo and Kakoge but drugs are not enough to sustain the number of patients from all the area. The bed capacity of the hospital is only 35 which is very small compared to the number of admissions from this area.

It was also noted the hospital is poorly staffed. The hospital has only 3 doctors compared to the recommended number of 7 and it has no enrolled nurse. It has only one registered nurse against a recommended number of 5 (five).

This Referral Hospital has no Ambulance, has no X- Ray and dental equipment supplied by SINO Africa Medicine and Health Ltd has not been installed.

(m) Rubongi Military Hospital Rubongi Military Hospital is a referral Hospital in the Eastern part of the country. It was noted that the Hospital is understaffed with only 2 doctors, and no enrolled nurses and midwives. The hospital serves not only the Army but also the surrounding local population of Tororo town but the drug supplies are inadequate. The reservoir tank is not functioning. Water supply lasts up-to 10:00 a.m and thereafter the hospital has no running water. The ambulance is very old and cannot work effectively and the Hospital receives a meager funding of only

246 Shs.820,000 for operations monthly. There is need to address the funding and assess its adequacy in view of the challenges being faced.

(n) Moroto - 3rd Division (i) Land, Buildings, furniture and fittings The division headquarters land at Moroto barracks is surveyed however the land title was not availed for verification.

Apart from the administration block, the majority of the staff houses are in a poor state. The buildings are cracked and require immediate renovation. Some of the buildings are still roofed with asbestos sheets which were banned by World Health Organisation.

The barracks lacks cesspool emptiers and as a result shallow make shift pit latrines are used.

(ii) Water project M/s Sumadhura was contracted to install 10 watering points. Audit verification however established that only 5 watering points were installed.

Contract documents were not availed for audit and it was not possible to establish if the entire contract sum has been paid.

The division has an engineer who is also the contract supervisor. However, he was not able to provide bills of quantities of works in progress. One of such examples was the construction of quarter guard. There was neither a site book nor any records of materials delivered. Funds for construction are disbursed in cash from the Directorate of construction and no records are maintained at the site.

It was further observed that the Division‟s central store newly renovated by direct labour was leaking and the entire floor was cracked. Shoddy work was also observed in the hospital where the aqua pravea system pit latrine is no longer functional. The contractor did not cement the pit so as to contain the water.

247 The division‟s management reported that little attention is given to capital works. The reason given is that funds are unavailable as such the division is unable to maintain its facilities.

(o) Butiaba School of Field Artillery and Air Defence (i) Financial constraints The school receives monthly release as shown below:- - Imprest - 1.1 Million - Routine Funds - 1.1 Million - Instructor Allowance - 1.95 Million

The funds released fall below the requirements and the effect could be seen. The School has up-to 4 class rooms but with no furniture and students sit on the floor. The Dormitories also lack beds and as such the students have to sleep on the floor.

There is no power at the school and as such the computers are powered by a generator. The fuel allocated ranges between 300 – 700 litres of diesel and about 70 litres of petrol. The same fuel is shared by fleet of 7 vehicles, water pump and the Generator.

(ii) Other Challenges The school does not have a fax machine, internet, library and the effects are that research is limited to locally available information.

It was reported that oil exploration within the area has brought in settlements within the shooting range and as a result shooting practices have to be shifted to Kabamba

The Aqua system toilet requires constant supply of water. However, due to lack of water and insufficient power, the system was found to be un-operational.

The Health centre receives only 100,000 per month for its operation.

248 There is no power at the health centre and there is no kerosene fridge for storage of reagents and vaccines. Drugs are received on a push system which doesn‟t reflect the actual demand of the school.

(p) 309 Koboko The stores building is dilapidated, full of cracks and leaking. The armoury which was on the same building had similar problems and without adequate burglar proofing. There was also no stationary at the station. The stores lacked pallets and food was put on trunks that were improvised by the officers and the other items were placed directly on the floor hence standing risk of damage.

18.0 INTERNAL AFFAIRS

18.1 Legality of the Government Analytical Laboratory The Government Analytical Laboratory provides government and the general public forensic and general chemical and biological analysis and tests. Although its establishment would require an Act of Parliament, there is no such enabling Law with regard to its establishment and operations.

The institution operates under implied mandate from other acts like the Magistrates Court Act, UNBS Act, NEMA Act, NDA Act and National Agricultural Chemical Board Act.

There is need to enact a law to govern the operations of the laboratory.

The Accounting Officer explained that a joint team of Uganda Law Reform Commission and Government Analytical laboratory Officials was constituted to study the existing laws and regulations and draft a law establishing the institution. He indicated that by the end of June 2009 a draft will be in place.

18.2 The Directorate of Citizenship and Immigration Control 18.2.1 Citizenship Verification The activities of the directorate of Citizenship and Immigration Control include verifying citizenship of Uganda Nationals on Application of travel documents and

249 issue of travel documents. Non-citizens identified based on citizenship verifications are denied travel documents.

However, it was noted that although the directorate is mandated to follow up on the non citizens, there is limited follow up made if any on these individuals. Verification of citizenship by the directorate is only done when a person applies for a travel document or citizenship. The Accounting Officer explained that the Directorate has a system that handles verification of non-citizens on a routine basis but is hampered by various constraints. He further explained that Government had revived its effort to build a population data bank that will be used among others to verify Citizenship.

There is need to strengthen the Directorate‟s capacity to monitor non citizens and also expedite the implementation of the system of the National identity in order to be able to identify at ease those who are bonafide citizens.

18.2.2 Inadequate Funding During the year, a total of Shs.18,915,261,777 was realized by the Ministry from revenue relating to immigration activities. With increased funding/facilitation, the directorate has the potential to generate much more government revenue.

The department should be adequately facilitated to carry out its activities at its full potential. Earmarking a portion of the NTR generated by the Ministry to cater for immigration activities would be a step in the right direction.

18.2.3 Immigration Strong- Room The strong room is the passport processing centre where printing of passports is done. An audit inspection carried out on 23rd October 2008 revealed the following:-

(a) Broken down Printing Machine for East African Passports: It was observed that the printing machine for the East African Passports broke down three years ago and no repairs have been made since. The machine broke

250 down leaving 75,000 passports un-utilized. As a consequence the Ministry is now not issuing East Africa passports.

I was neither provided with information on the cost of the machine nor the procurement contract. I was therefore unable to establish whether any warranties existed. The Accounting Officer explained that the Directorate was carrying out a cost benefit analysis on whether to repair the old printing machine or to procure a new one and improve on the East African passports to the new digital type.

I advised management to speed up the process and have it concluded to avoid occurrence of more losses.

(b) Registry The tracking system for movement of files between respective offices is not adequate. It was observed that officers and others pick files without documenting the file movement. This creates a possibility of files getting misplaced/lost.

(c) Embossment Limits The Treasury is responsible for the embossment of the passports and other documents. According to the strong room staff, the manual embossing system in treasury is almost obsolete. It embosses a document at a time. It was also observed that temporary movement permits are not embossed and yet it is a requirement that this should be done.

The Accounting Officer stated that he will liaise with Treasury to address the issues raised.

18.2.4 Returns from Missions The returns from missions are made to a different accounting officer (Ministry of Foreign Affairs). This renders reconciliation of passports issued and used by Missions difficult.

251 In his written response, the Accounting Officer stated that this is a policy issue which government needs to address. I advised him to initiate the process of coming up with a policy that will address concerns of all stakeholders and ensure proper accountability.

18.2.5 Damaged Passports There are a number of damaged passports that are attributed to machine error, power surge and human error. A number of passports were also spoilt due to factory error. According to the statement of losses, the damaged passports during the year are valued at Shs.24,500,000. Although some records were availed regarding monthly damaged passports it was not possible to verify the actual damaged passports for the financial year because of inadequate record keeping system.

Management should have a proper records management system with a view to minimizing time spent on retrieving documents.

18.2.6 Storage Facilities An inspection at the Immigration Department revealed that there are various saleable documents which include work permits, certificates of identity, certificates of residence and other related documents which are stored and stacked in sacks and shelves without any documentation of the physical stocks, their receipt and utilization. The stock of documents is so huge and was apparently acquired long time ago.

It was also observed that the stores are generally dirty and dusty. It was not possible to ascertain the quantities held and hence its value, due to the poor state the stores are in.

The Accounting Officer explained that the Directorate had carried out stock taking of all saleable documents and had identified spoilt lots for board off and disposal.

252 18.3 Office facilitation and staff accommodation Inspection of a sample of boarder stations revealed that office and staff accommodation was inadequate. For instance, at Malaba boarder point, staff units were in a very dilapidated state and require urgent renovation while staff at Mutukula reside in mud and wattle houses in the neighborhoods. There is no staff accommodation in Katuna boarder point while at Mpondwe, the office is accommodated in a unipot. Generally uniports are characterized with high temperatures during hot seasons hence are unsuitable for working environment.

Office facilities were also noted to be inadequate. Some stations had no money safes, money checking machines and lacked vehicles for transport. A poor working environment demotivates staff and has a direct effect on the quality of service delivery of the Ministry.

The Accounting Officer explained that the Ministry is aware of these problems but is constrained by inadequate funding.

19.0 INFORMATION AND COMMUNICATION TECHNOLOGY

19.1 Gross Tax A total of Shs.7,533,743,056 was spent on gross tax by the Treasury on behalf of the Ministry. However, only Shs.2,675,000,000 had been approved leading to an excess expenditure of Shs.4,858,743,056 which lacked relevant authority. It was also observed that the expenditure was not disclosed in the Statements of Appropriation.

The Accounting Officer explained that he had communicated to PS/ST seeking for retrospective supplementary allocation.

19.2 CHOGM Account By 31st December 2007, the CHOGM Account had a balance of Shs.391,748,307. I was not able to ascertain the balances on the account as at 30th June 2008 as they were not disclosed in the financial statements.

253

The Accounting Officer is advised to provide a status report on how the balances were utilized, and make appropriate disclosures in the financial statements.

19.3 Procurement of a Vehicle A firm contracted at Shs.77,365,300 to supply a vehicle to the Ministry had not made delivery by March, 2008.

The Accounting Officer attributed the delay to have the vehicle delivered to price changes requested by the supplier and indicated that he was making consultation with the Solicitor General on the matter.

19.4 Staffing and Payroll Out of an approved establishment of 110 posts in the Ministry only 55 posts had been substantively filled by the close of the year. As a result of poor staffing many officers are in acting positions. This impacts on the delivery of services. The Accounting Officer explained that the recruitment exercise to fill the vacant posts is ongoing and that other posts will be filled when the wage bill ceiling is increased.

The Accounting Officer is advised to ensure that all the approved posts are filled to allow the Ministry carry out its mandate effectively.

19.5 Procurement Plan A procurement plan guides a procuring entity to procure and dispose in a rational manner and avoid rushed procurement. It was however observed that the Ministry did not have a Procurement Plan during the year under review contrary to the PPDA Act and regulations, 2003 although a number of procurements were made during the year.

The Accounting Officer explained that procurement planning could not be carried out because the Ministry was pre-occupied with CHOGM activities.

254 It is advised that procurement planning be carried out annually in compliance with the PPDA Act.

19.6 Payment of Utility Bills A total of Shs.64,800,000 was paid to the Ministry‟s Landlord - National Social Security Fund-in respect of utilities (electricity and water) consumed during the year.

Inspection of the premises revealed that the Landlord has one shared meter for water and one for electricity from which bills should be apportioned, but the method of apportionment was not explained.

The Accounting Officer explained that the money was advanced to the landlord as the ministry waited for the determination of the method of apportionment. It is recommended that arrangements be made with NSSF to have the Ministry‟s bills paid directly to service providers based on actual consumption.

20.0 LOCAL GOVERNMENT

20.1 Irregular Leasing Of Plot No.113 Sixth Street Industrial Area To A Private Developer

The above named plot was registered in the names of Uganda Land Commission under FRV 209 Folio 16 and held in Trust for the Ministry of Local Government with effect from 24/10/1957. This facility has since then been used as a Store for the Ministry of Local Government.

However, on 15/02/2005, the Uganda Land Commission wrote to the Ministry of Local Government seeking advice regarding leasing of this already dilapidated property as several firms had indicated interest. The ministry wrote back indicating "a no objection" on the action that the Commission wished to take. The plot was subsequently leased to a private company under Min.13/2005(a)(157) of 25.02.2005. The minute has not been available for verification.

255 The following anomalies were noted:

Apparently, the Permanent Secretary to the Ministry of Local Government who is accountable for all the resources of the entity was never consulted while the leasing decision was being undertaken. His communication expressing displeasure over the transaction to the Secretary Uganda Land Commission dated 15.06.2005 and another to the Solicitor General requesting that his office takes up this matter in Court to cause the Cancellation of the lease to the company were all ignored.

Whereas the Public Procurement and Disposal of Public Assets Act, Regulations and Guidelines clearly stipulate the methodology to be followed while dealing in transactions of this nature, these were not followed. Details pertaining to selection of the successful Lessee and the actual amount of lease rentals were not disclosed.

An Intervention by the Ministry of Local Government to have this facility renovated and remodeled by another company on terms which would allow the Contractor to occupy part of the renovated premises whose rental would be swapped with the costs incurred for repairs while the Ministry retain the remainder, were similarly ignored.

In his response the Accounting Officer stated that the matter had been referred to the Solicitor General for advice and further action. I await results of action taken.

20.2 Community Agricultural Infrastructure Improvement Programme 1(CAIIP-1) (ADB LOAN NO.2100150013795 & IFAD LOAN NO.724-UG)

20.2.1 Non deduction of NSSF The NSSF Act (1995) requires that 5% of the basic pay be deducted from employee‟s monthly pay. The law further requires that the employer contributes 10% of the employee‟s basic pay.

256 It was noted that social security deductions amounting to shs.658,000 were not effected from employee salaries during the month of June 2008, while the employer did not contribute shs.1,316,000 towards the employees social security during the same month. Failure to deduct and remit statutory deductions within the required timeframe may result into otherwise avoidable fines and penalties.

Management is advised to ensure compliance to the NSSF Act in future.

Management explained that deductions were not made because the employer contribution of 10% was not secured from Government. However, the Employer Contribution has now been secured and deductions are being made accordingly.

20.2.2Budgetary analysis It has been noted that management did not carry out budgetary analysis (variance analysis) during the period under review. This implies that monitoring of implementation of the budget may not have been undertaken properly. Management is advised to ensure that variance analysis is carried out in future and reasons for any major deviations explained. This enables corrective action to be undertaken.

Management took note of the observation and promised to ensure that a variance analysis report is prepared and included in the subsequent Financial Statements.

20.2.3 Personnel records Prudent HR policies require that a personal file be maintained for each member of staff in an entity. The files act as a repository for important information such as copies of academic testimonials, Bio data, staff appraisal details, sponsorship for training etc. relating to a given member of staff. However, it was noted that no individual personal files were opened for project staff. Failure to have these files in order may result into management making inappropriate human resource decisions.

Staff files should be put in place and regularly updated with the relevant information.

257 Management explained that separate files for each staff will be maintained in future.

20.2.4 Status of programme implementation It was noted that IFAD did not disburse any funding to the programme during the year under review because the activities supposed to be funded were still in the procurement stage. The following activities that were planned to be implemented were not undertaken:-

Hire of consultants to design prioritized community access roads and markets. Baseline study on the programme.

Failure to implement planned programme activities can imply that the programme has a low absorption capacity which may necessitate extension of the programmes lifetime and hence extra administrative costs

Management was advised to liaise with the concerned authorities with a view to expediting the processes so that planned programme activities are implemented according to workplan.

Management attributed the delay to engage consultants to the long time it takes to advertise, prepare a Short-list and then invite for proposals from short-listed firms. This process has now been concluded and awaiting the ADB‟s clearance to award the Contracts.

20.3 District Livelihoods Support Programme (DLSP) (IFAD LOAN NO.707-UG & GRANT NO.895-UG)

20.3.1 Baseline Survey The financing agreement between IFAD and Government of Uganda requires that grant proceeds amounting to Us$.400,000 be used to conduct a baseline survey in all the 13 project districts. These funds were received on the special account during January 2008. However, by close of the period under review, no baseline survey had been held.

258 Failure to abide by conditionalities of the financing agreement may lead to withholding of further funding to the programme.

Management should always abide by provisions in the financing agreement.

Management has attributed the delay to the change in the strategy and priorities of the programme. Both the project and IFAD agreed that the Parish Committee/Agency capability study be carried out first. The findings of this study would then input into the baseline survey.

20.3.2 Programme Funding During the period under review, the programme budgeted to receive funding as follows:-

Funding Budget for Actual Amount not Percentage Source 2007/8 received in received not 2007/8 received IFAD LOAN US $.27,440,000 US $.1,087,030 US $.26,352,970 96% IFAD GRANT US.$.400,000 US.$.400,000 0 0% BSF GRANT 1,748,712,000 NIL 1,748,712,000 100% GOU COUNTERPART 3,100,000,000 3,094,077,000 5,923,000 0.19%

It was noted that not all the budgeted funds were received by the programme. This affects timely implementation of Project activities.

Management should ensure that the various funding agencies are reminded of their obligation to enable timely release of all the committed funds.

Management explained that it was not possible to utilize all the funds that had been budgeted for because the initial funding was received five months towards the end of the financial year.

259 20.3.3 Budgetary Analysis It has been noted that management did not carry out budgetary analysis (variance analysis) during the period under review. This implies that monitoring of implementation of the budget may not have been properly undertaken.

Management is advised to ensure that variance analysis is carried out in future and reasons for any major deviations explained. This enables corrective action to be undertaken.

Management regretted the anomaly and promised to carry out budget analysis effective financial year 2008/09.

20.3.4 Personnel Records Prudent Human Resource policies require that a personal file be maintained for each member of staff in an entity. The files act as a repository for important information such as copies of academic testimonials, Bio data, staff appraisal details, sponsorship for training etc. relating to a given member of staff. However, it was noted that no personal files were opened for individual project staff.

Staff files should be put in place and regularly updated with the relevant information.

Management explained that they had filed the data for all the project staff in one box file since the recruitment process of the National Liaison Office staff had been on going and promised to isolate the data into individual staff files.

20.3.5 Guidelines for operations at the Districts The project implements activities through 13 Districts spread in various parts of the country. During the course of the audit, the Districts were inspected and the status of accounting and bookkeeping was found to be satisfactory. However, there were no guidelines for the management of the DLSP funds by the districts to ensure uniformity of operations and reporting.

260 Management should urgently develop guidelines for use by all the implementing districts to ensure uniformity of operations.

Management has explained that the NLO was developing simplified financial management guidelines to re-enforce the Project Implementation Manual (PIM) and facilitate proper management of DLSP funds, uniform operations and reporting.

20.3.6 Status of implementation of supervision mission recommendations It has been noted that the following recommendations were made by the supervision mission of the programme activities that was done between the 30th June to 14th July 2008:- Develop district guidelines for management of DLSP funds. Prepare district guideline on agricultural component. Prepare district guideline about pilot community land management activities Manage parish capability study to ensure satisfactory product Manage Bunyoro Toro Company Ltd financial management study to ensure satisfactory product

Management was requested for an updated status of implementation of the mission recommendations for follow up in the next audit of the project.

20.3.7 Status of Programme Implementation It has been noted that the following activities that were planned to be implemented during the year were not fully undertaken:- Procurement of Motor vehicles, motor cycles and equipments Base line study Parish agency capability study BUTO strategy development study

Delays in implementation of programme activities may lead to extension of the programmes life and un necessary administrative costs.

261 Management is advised to ensure that all planned activities are implemented according to the workplans.

Management has attributed the delay to the procurement timeframe and approval procedures coupled with the late commencement of project implementation (March 2008)

20.4 Kampala Integrated Environmental Planning and Management Programme (KIEMP)

20.4.1 None remittance of statutory deductions It was noted that PAYE deducted from salaries and allowances of the programme staff (amounting to Euros.29,696) was not remitted to Uganda Revenue Authority (URA) contrary to the tax laws. This can lead to imposition of penalties from URA. Management is advised to adhere to the requirements of the law.

20.4.2 Bank reconciliation statements It was noted that project cash books were not periodically reconciled to the bank statements. This implies that there is a risk that errors or fraud may not be detected promptly.

Management is advised to prepare monthly bank reconciliation statements. Management has promised to address the matter in future.

20.4.3 Fixed assets management During the physical verification of the project assets, the following matters were noted:- A motor cycle at the project office was reportedly stolen just before the physical examination; no police report was available. A laptop was reported stolen and a police report availed A motor cycle at the Makindye Division could not be traced and no clear explanation was given by the Focal Person at the Division. A motor cycle at Central Division was taken to Kawempe Division by the outgoing focal person who was transferred but he refused to hand over the motor cycle.

262 The project has three vehicles but we were availed logbooks for only two. No logbook was maintained for the project manager‟s vehicle. Motorcycle logbooks were not being maintained.

The above anomalies appear to indicate laxity in the management of project fixed assets.

Management is advised to institute more measures to protect the assets of the project and ensure that they are utilized for project activities.

20.4.4 Execution of planned activities It has been noted that most planned activities for environmental and housing components were not executed, particularly construction of roads, core dwelling, construction of public stand posts and construction of drains. This implies that there is a risk that the project activities may not be implemented by the scheduled project closing date.

I have advised that efforts be made to implement all activities on schedule. Management has promised to address the matter in future.

20.5 Kampala Institutional and Infrastructure Development Project (KIIDP) Project Preparation Facility (PPF) IDA PPF NO.Q 457 – 0 UG AND Q 457 - 1UG

20.5.1 Delayed remittance of PAYE It has been noted that management deducted PAYE totaling to Shs.42,198,455 from staff salaries but did not remit it to URA as required by the Income Tax Act.

Failure to remit deducted taxes can attract interest and penalties from URA. I have advised management to adhere to the law. Management has attributed the delay to lack of funds.

263 20.5.2 Delayed release of counterpart funds It has been noted that the counterpart funds from KCC did not flow consistently. The project did not receive funds from KCC for 7 months. Delays in release of funds lead to delays in implementation of project activities. Management is advised to remind KCC management of its funding obligations.

20.5.3 Preparation of accounts It has been noted that the projects prepared its financial statements using spread sheets which is not well streamlined to generate descriptive analytical and management accounts. Although the project has a sun accounting software, it was not utilized as the license had not been renewed.

Management is advised to renew the software license to enable utilisation of the accounting package.

20.5.4 Internal audit review It was noted that the internal audit department did not carry out comprehensive reviews of project internal control systems to check effectiveness of the controls and their compliance with relevant financial regulations.

This implies that errors and omissions may not be detected and timely corrective action taken. I recommend that management should ensure that the internal audit carries out regular reviews of the systems in place. Management has promised to address the matter in future.

21.0 TOURISM, TRADE AND INDUSTRY

21.1 Funds Unaccounted for Advances to staff for operations, travel abroad and workshop expenses totaling Shs.98,582,740 were not accounted for at the time of audit contrary to Treasury Accounting Instructions which require all advances to be accounted for by the year end as indicated below:-

264 Operations 18,729,300 Travel abroad 44,338,440 Workshop expenses 35,515,000 Total 98,580,740

Delays in accounting for funds can lead to falsification of documents and possibility of loss of funds.

Management is advised to enforce prompt accountability of advances and where necessary seek recovery as required by law.

21.2 CHOGM Account The balance on the CHOGM account as at 30th June 2008 was Shs.367,080,759. These balances were not recognized in the Financial Statements hence understating the cash position at the end of the year. The balances were also rolled over for utilization in the following financial year without authority.

The Accounting Officer explained that at the close of the financial year, eight (8) months after the end of the CHOGM meeting some of the CHOGM contracts had not yet been finalized which necessitated the roll over of the balances to the new financial year.

21.3 Jua Kali Programme During the year, Shs.2 billion was budgeted for under the Jua Kali Programme in respect of Luzira land lease and the construction of Jua Kali Park and Common Facilities Centre, as well as constructing production cells for Katwe Artisans at Makindye. According to the contract signed between the Ministry and Plan Systems, the consultants were required to submit final designs for approval before moving on to the next stage of producing bid documents.

A review of available documents revealed that although the consultants produced the „Architectural and Engineering‟ designs, the implementation of the plans has not commenced. The Ministry instead bought more land in Makindye during the

265 financial year at a cost of Shs.190 million contrary to the planned schedule for the programme. Title deeds for the said land have also not been obtained.

The Accounting Officer explained that the procurement process had been finalized and a contractor selected at a contract price of 14 billion. He further explained that the decision to buy extra land was necessary for expansion.

21.4 Domestic Arrears The ministry incurred new outstanding commitments totaling Shs.2,284,478,361 in 2007/2008. Domestic arrears result from committing the Ministry beyond the available resources in contravention of the commitment control procedures.

21.5 Procurement Plan Section 58 of the PPDA Act requires an entity to plan, organize, forecast and schedule the procurement activities in a rational manner. However, it was observed that no procurement plan was prepared for the year under review. Weaknesses in procurement planning can result in rushed procurements, unauthorized excess commitments and stock outs.

The Accounting Officer explained that the plan was not prepared due to staff gaps in the procurement unit.

Management should ensure that a procurement plan is prepared and followed annually in accordance with the PPDA Act and Regulations.

21.6 Stores Management Section 119 of the TAI requires all deliveries in the stores to be verified by the storekeeper in the presence of another responsible officer (wherever possible, an internal auditor) who must check the items against receiving documents (delivery notes). It was however noted that there was no evidence that deliveries were being witnessed by the responsible officials. Further, the Stores ledger was not properly maintained. In addition, receipts of purchases were not entered on GRNs as required in the TAI.

266 The Accounting Officer attributed the weaknesses in stores management to lack of qualified store cadres in the Ministry.

Management should ensure that all deliveries of stores are witnessed by a responsible official and stores records properly maintained. There is also need for the Ministry to liaise with the Ministry of Public Service and Accountant General to have stores cadre posted to the Ministry.

21.7 Vehicle Maintenance A review of controls over vehicle maintenance revealed that vehicle maintenance services were in a number of cases not requisitioned using the PP Form 20 and as such the Accounting Officer was not approving the services before they were ordered for.

This also implies that the requirement for confirmation of availability of sufficient funds before commitments are entered was not complied with. As mentioned in the internal audit report there has been continued use of manual Local Purchase Orders (LPOs) despite the Ministry being on IFMS. This may lead to over- commitments leading to domestic arrears.

A review of a sample of log books revealed that some vehicles were frequently repaired during the year as compared to others. This according to management was due to the old fleet of vehicles. As mentioned in the internal audit reports there are many unserviceable vehicles which constantly break down leading to huge bills.

Management should ensure that commitments are captured through the IFMS in accordance with the commitment control system procedures.

267 22.0 ENERGY AND MINERAL DEVELOPMENT

22.1 Understaffing

The Ministry‟s approved structure provides for 351 posts. However, by June, 2008, only 215 posts had been filled resulting into 136 vacant posts. Staffing gaps impact on the Ministry‟s ability to render the necessary services.

The Accounting Officer explained that requests to fill the posts were submitted to Ministry of Public Service and Public Service Commission

I have advised the Accounting Officer to urgently follow up this matter with the Ministry of Public Service and the Public Service Commission to ensure that the vacancies are filled.

22.2 Understatement of Non-Tax-Revenue A review of the Ministry financial statements shows an understatement of Shs.93,388,059 arrived at as follows; Bankings on URA accounts 4,017,912,096 Bankings on MEMD Revenue Collection Account 1,380,890,266 5,398,802,362 Less figure stated in Accounts (Notes 7 & 8) 5,305,414,303 Under statement 93,388,059

The Accounting Officer explained that the understatement was due to a timing difference between banking on URA accounts and receipting by the Ministry.

I recommended to the Accounting Officer to have the amounts properly reconciled and where necessary appropriate adjustments made to the financial statements.

22.3 Jinja Storage Tanks Jinja Storage Tanks have been operated as a unit within the Petroleum Supplies Department. It comprises of three tanks each with the capacity of 10 million litres to store paraffin (BIK), Diesel (AGO) and Petrol (PMS). They are treated as national strategic reserves (safety stocks) used to mitigate fuel crisis in the

268 country. In my previous reports to Parliament I pointed out weaknesses in the management of facilities and called for intervention by the Ministry to address these weaknesses. The weaknesses include:

Poor maintenance of records relating to receipt, storage and issue of fuel. Poor filing of records. Absence of proper system for the receipt and recording of guarantees which act as security for fuel loaned out. Inadequate security of the facility. Poor fuel measurement facilities. Inadequate segregation of duties. Outstanding fuel loan obligation due to government.

By the close of the year, the depot had been closed and the Ministry was in the process of valuing the assets to form part of the country‟s contribution to the Kenya – Uganda Oil Pipeline project share allocation of US$4.8 million.

In a status report to my office, the Accounting Officer explained that the Ministry suspended all operations of JST and Cabinet had approved their handover to M/S Tamoil subject to valuation by the Chief Government Valuer. He has also indicated that by the time of closure:

Two companies were indebted to the Ministry and the cases were in court as indicated below:

Company Products PMS B.K AGO Litres Litres Litres Rio Oil 1,192,603 214,769 - Case in court UPET 2,294 227,548 80.051 Case under arbitration

269 The Ministry was indebted to four companies by 193,949,litres of PMS and 37,738 litres of AGO. There were stock levels of 1,691,731 litres of BK.

It was also noted from records that hospitality fees of Shs.32 million were still outstanding from one company.

I have advised the Accounting Officer to expedite the recovery of the amounts and also have the outstanding obligation to companies properly cleared after a proper verification. I also advised him to ensure that the proposed handover of the facility to a private investor is carried out in accordance with government regulations.

22.4 Regulations Operationalising the Petroleum Act The Petroleum Act, 2003 allows the Minister of Energy to make regulations providing for forms and fees or charges to be made under the Act, and prescribing penalties in respect of any contravention of the regulations. It was noted that the Regulations have not yet come into force.

The Accounting Officer explained that the draft regulations, have been prepared and forwarded to the Technical Petroleum Committee for review.

I have advised him to expedite their approval and operationalisation.

22.5 Sustainable Management of Mineral Resource Project – (IDA Credit No. CR3835-G, ADB Rant No. 2100155003467 and NDF Credit No. 424 22.5.1 Project Funding The financing agreement between GOU and the donors provides for funding as outlined in the table below:-

Source Amount (UA) Percentage IDA 17.37 58.6 NDF 4.86 16.4

270 AFDB 5.35 18.0 GoU 2.08 7.0 TOTALS 29.66 100

However, it was noted that although the project is in its 4th year of operation no funding has been received from the Nordic Development Fund. Failure to receive all the budgeted and approved funds as planned may negatively impact on implementation of project activities. Management is urged to expedite the arrangements to enable the NDF to be utilised.

Management has explained that a number of packages to be funded by NDF are in advanced stages of implementation awaiting for the approval/harmonization of the Project extension of two years that was agreed upon during the mid term review.

22.5.2 Supply Of Surveying Equipment

M/s Data Grid Africa was awarded a contract for the supply of 2 pieces of Bentax surveying equipment at a contract sum of Shs.111,500,000. The equipment was delivered in April 2008. The terms of offer included a requirement that the supplier trains staff on the use of the equipment. Although management explained that the training was conducted, it was noted that the equipment was still in the stores unutilized.

This implies that the equipment procured may not have been necessary as the project has not made any use of the equipment so far. Management is advised to provide the necessary requirements so that the equipment in question is put to use.

22.5.3 Stores Management

A physical inspection of the project stores revealed instances where items were entered and removed from stores without any documentation; for example, upon fitting of new tyres on project vehicles, old tyres were purportedly returned to stores, as required by treasury accounting instructions. However, there was no trace of such tyres returned in the stores‟ records.

271

Further still, inspection of the stores carried out on 16th April 2008 revealed that two digital cameras serial nos. So1- 6623349-J and So1- 6623347-H were missing from the stores and were reportedly with the Project Technical Officer. I was not provided evidence in form of an issue voucher to confirm that the items were with the officer. Similarly, no documentation was raised in relation to a dell projector that was missing from the stores but reportedly taken to Kampala for repairs.

Failure to maintain adequate stores‟ records may render stores items vulnerable to risk of loss through theft, by unscrupulous persons. Management is advised to ensure that proper stores records are maintained to record all project assets.

Management has promised to address the matter.

22.5.4 Budgetary Analysis

It has been noted that management did not make any budgetary analysis (variance analysis) during the period under review. This implies that monitoring of implementation of the budget may not have been properly undertaken.

Management is advised to ensure that variance analysis is carried out in future and reasons for any major deviations explained. This enables corrective action to be undertaken.

Management has explained that the non-existence of a written variance analysis report was a big regrettable omission and have promised to address it in future

22.5.5 Procurement Plan (ADB & IDA Funding)

A review of the procurements undertaken by the project revealed that these were carried out in accordance with the bank procurement guidelines in all material respects. However, it was also noted that although the project had in place a 5 year procurement plan spanning the entire project lifetime, no annual plan was made in respect of the financial year under review. This makes it difficult to ascertain which procurements should have been completed during the period and

272 whether the overall procurement plan was timely accomplished. Management is advised to prepare annual procurement plans in future.

Management has explained that the World Bank advised that the Procurement plan should be broken into periods of 18 Months and any updates on the plan should be subjected to a “No objection” from World Bank before commencement of the procurements. Management is to implement the recommendation of preparing the annual Procurement plans out of these Approved Procurement plans.

22.5.6 Status of Implementation of Project Activities

The status of project implementation indicated that the following activities included in the work plan for the year under review were not undertaken during the year:-

Air borne Geophysical Data Processing and Interpretation, Design and Construction Supervision of civil works under SMMRP, Restoration and Establishment of Laboratories rock storage, rural training centers and Uganda National Seismological network, Establishment of GIS Internet/ Intranet, Review and Enhancement of the Legal and Regulatory Framework, Consultancy for establishment of a Modern Documentation Centre, Consultancy for Design of Mining Cadastre and Registry System, Management and Coordination of small Grants Programme, Design of Institutional Model for DGSM, Geological Mapping, Geochemical Surveys and Mineral Resources Assessment (funded by NDF), Geological Mapping, Geochemical Surveys and Mineral Resources Assessment (Funded by IDA), Establishment of a Minerals Promotion Unit, Establishment of Environmental and Social Management Framework, Consultancy for Management of Mineral Resources by Communities, Consultancy for Monitoring and Evaluation of SMMRP,

273 Consultancy for Decentralization of Mining Taxes.

Failure to accomplish all planned activities may necessitate extension of the project life which may lead to extra administrative costs. Management is advised to ensure that all planned activities are implemented and reasons for non- implementation are properly documented.

Management has explained that the delayed implementation of these activities was mainly caused by the time lag between the approval and the effectiveness of the Project. Further more, the Project was further delayed by two (2) years while trying to get all the Financiers on board.

22.6 Energy for Rural Transformation Project

22.6.1 Delays in Releasing Counterpart Funding by GoU Gou counterpart funding was not revealed on a timely basis. As at 30th June 2008, GOU had not remitted US $ 61,926 and US $ 7,829 in respect of the IDA credit and GEF grant respectively. Lack of timely counterpart funds contravenes the IDA DCA and the GEF Grant agreements and a likelihood of a delay in the implementation of project activities was sighted.

Funding project activities should be in accordance with the requirements of the IDA DCA and the GEF Grant agreements.

22.6.2 Independence of the Rural Electrification Board It was noted that the chairman of the REB, the statutory body that plays the oversight role over the REA is also the accounting officer for the REA. A self- review risk was sighted with its likelihood to impact on the effectiveness of the oversight activities of the REB.

I have advised management to ensure that appropriate safeguards are put in place to ensure independence of the REB.

274 Management has explained that the matter of granting legal autonomy to the Rural Electrification Agency is being addressed within the framework of amending the Electricity Act 1999. To this end, Management has already prepared and submitted a cabinet paper dealing with requisite aspects of the amendment pertaining to governance issues of REF, REB and REA.

22.6.3 Failure to adhere to the Funding Mechanism by the Ministry of Finance, Planning and Economic Development (MOFPED)

It was noted that all ERTP expenditures were financed 100% from the project special account, instead of 90% from the special account and 10% from GOU counterpart funds account as stipulated in the DCA, thereby violating the DCA.

Counterpart funding and allocation of expenditures should be in accordance with the DCA and the prescribed expenditure categories.

Management explained that the component spends 100% expenditure of the project funds and reflects this in the FRM at the end of each quarter. REA is responsible for refunding counterpart funds to the bank.

22.6.4 Outstanding Reconciling Item of Shs.8,995,049

It was noted that there was a reconciling item of Ushs.8,995,049, as result of a wrong entry passed in the bank statement by the Bank of Uganda. Management wrote to Bank of Uganda seeking the rectification of the entry, but it remained outstanding for the entire accounting period. The implication is that a wrong bank balance is reflected on the bank statement.

I have advised management to continue to follow up the issue.

Management has indicated that errors originating from the bank and their resolution are usually beyond the control of the project. The bank has in this case rectified the error and passed the correcting entry on the bank statement. This will be verified in the subsequent audit.

275 22.6.5 Anomalies in the Management of Project Schemes It was noted that contractors did not fulfill certain obligations in the following contracts for the construction of power lines:- Contract of US $ 3.08 million to M/s Ferdsult Engineering services for the construction of a 33KV power line in the areas of Kyotera, Mutukula and Kasensero. Contract of Ugx 10.89 billion to National Contracting Company for the construction of a 33KV power line in the areas of Mbarara, Kyabirukwa, Kikagati, Kyamate and Ntungamo.

The obligations included the following:-

Insurance Obligations Under both contracts, it was an express requirement that contractors provide in joint names of the contractor and the employee, insurance policies from start date to end of the defects liability period, covering loss or damage to works, plant and materials and equipment, and personal injury or death. There was no proof of contractors having fulfilled these insurance obligations.

Sectional Completion Obligation in the National Contracting Company Contract A sectional completion was required for the Kyabirukwa – Kikagati Section three months after the start date. Works started in May 2008 when the contractor got the advance payment. By the time of audit in October, no sectional completion report or certificates of works in respect thereof had been issued.

Management should review the status of these projects with a view to ensuring that works are executed in accordance with contract terms.

Management has indicated that it has notified the contractor to comply fully with the contract provisions and provide in joint names of the contractor and the employer, the required insurance covers.

276 22.6.6 Engraving of Project Assets

It was noted that the binding machine and two HP printers at the Ministry of Energy and Mineral Development (MEMD) were not engraved. This makes physical identification difficult and renders movable assets easily stolen.

All assets should be engraved and uniquely identified.

22.6.7 Internal Audit Reports

The Ministry used the pre-audit internal audit approach instead of the risk based approach. There was also no proof of internal audit reports having been communicated to the project management at the ministry. It is also noted that lack of internal audit reports or lack of their being communicated undermines the role of Internal Audit in the internal control.

The role of the internal audit should be reviewed so that the internal auditor is not involved with the authorization of transactions. Internal audit reports should be prepared and communicated regularly.

Management has stated that they had earlier reviewed the role of internal audit and were in the process of setting up a risk bank, which will be the basis of a risk- based approach. The internal audit staff at the Ministry have undergone various training to be able to effect the risk based approach.

22.6.8 Committee Minutes on Procurement for Solar Systems at the Ministry of Health (MOH)

It has been noted that a payment of Ushs.7,920,000 was made to M/s Raider Hotel for full board charges for 12 days for 5 members of the evaluation committee for the evaluation of solar systems and pricing schedules. I was not availed with minutes of committee proceedings, thereby being unable to ascertain actual time spent on this activity and whether the cost was justified.

Proceedings of the evaluation committee should always be properly documented.

277 22.6.9 Status of Previous year Recommendations

The status of the issues raised in the previous year audit report is summarized below:-

Issue raised Remarks 1 Lack of review and approval of bank Not addressed reconciliation statements 2 Lack of accountability for project Still outstanding funds amounting to shs.25,804,000

22.7 Energy For Rural Transformation (ERT) Project – SIDA Grant

22.7.1 Lack of Review of Time Sheets By an Independent Person It has been noted that the Consultants‟ time sheets submitted during the period under review were not reviewed by an independent person. These included the following:- Consultant Period Monica Gulber March 2008 Thomas Engell October 2006 Jan Klevas October 2006 Grounlunds C October 2006 Paul Wagubi July 2006 Namukwana Percis October 2006 Fowler Harriet October 2006

In addition, the time sheet for Jan Klevas for October 2006 did not indicate the nature of work done neither was it reviewed by an independent person.

Lack of review of time sheets by an independent person does not foster proper accountability. Errors in time sheets by way of inaccurate work hours may go undetected. In addition lack of completion of time sheets with the nature of work done as required by agreement may result into reimbursement for non executed services

278 All individual Consultants‟ time sheets should be reviewed and approved by an independent‟s person preferably by the Team Leader. In addition all time sheets should be completed with details of nature of works done.

Management has promised to address the matter in future.

22.7.2 Delays in Submitting Invoices for Reimbursement It has been noted that there was a delay in the submission of invoices for reimbursement as required by the Consulting agreement between the Government of Uganda and Carl Bro. The following invoices were noted to have been submitted after the deadline of 15th following the end of the month:

Period Invoice Date submitted December 2007 27/02/08 January 2008 25/03/08 February 2008 08/04/08 March 2008 05/06/08 April 2008 01/07/08 May 2008 14/07/08 June 2008 03/09/08

This is a breach of agreement and may call for imposition of interest payment as required by the Consulting agreement

I have advised management to ensure that submission of invoices should be made within 15 days after the end of each calendar month as required by the Consulting agreement.

Management has attributed this to the delay in submission of the invoices to SIDA for payment is usually caused by the verification process arising from the need to get from the consultant more information or further clarification on the documentation supporting the invoices.

279 22.7.3 Status of Previous Year Audit Recommendations

The status of the prior year audit recommendations is summarized below:-

RECOMMENDATION STATUS

1 All individual Consultants‟ time sheets should be Not implemented reviewed and approved by an independent‟s adequately. person preferably by the Team Leader.

All time sheets should be completed with details of nature of works done Implemented

2 Consultants‟ time sheets should be signed by Implemented the staff member

3 Submission of invoices should be made within Not implemented 15 days after the end of each calendar month as required by the Consulting agreement

23.0 GENDER, LABOUR AND SOCIAL DEVELOPMENT

23.1 Un accounted for Advances Regulations require that advances be accounted for by the end of the financial year. Contrary to the regulations, Shs.162,490,000 advanced to National Youth Council remained unaccounted for. I was therefore unable to confirm that the funds were utilized for intended purposes. The advances should be accounted for or recoveries made in accordance with the financial regulations.

23.2 Domestic Arrears The Ministry incurred new outstanding commitments totaling to Shs.3,801,041,521 in 2007/08. Domestic arrears result from committing the Ministry beyond the available resources in contravention of the commitment control procedures.

280 23.3 The Industrial Court The industrial court is established under 7 (1) of the Labour Disputes (Arbitration and Settlement) Act, 2006. Section 10 (1) stipulates the composition, appointment and tenure of members of the industrial court as follows; a) a Chief Judge b) a Judge c) an Independent member d) a representative of the employers e) a representative of employees The following observations arise out of the above:

(a) Un constituted Industrial Court The tenure of office of all the previous members (Chief Judge, the Judge and the three members) expired during 2005/06. Since then no new members have been appointed, the Judicial Service Commission advertised the position of the Chief Judge during November 2007 in the print media (New Vision, Monitor) and no outcome has been declared.

Labour disputes are sometimes volatile and the non operationalisation of the Industrial Court could escalate/explode any simmering/latent disputes in the making.

The Accounting Officer explained that the appointments are awaiting response from the Judicial Service Commission and Public Service Commission. Meanwhile, as a stop gap measure, a request for secondment to the court has been sent to his Lordship the Chief Justice.

(b) Remuneration of the Chief Judge and the Judge. Although Section 10 (1) and 10 (2) sets out the appointments and qualifications of the two Judges, the Act is silent as to their remuneration. The previous incumbents; were being paid salaries and allowances pegged to those of a High Court Judge.

281 It is recommended that the payment of the Judges‟ remunerations be backed by enactment of a relevant law. The Accounting Officer was also advised to consult the Attorney General on the matter.

23.4 Inadequate Non Wage Funding It was noted from the analysis of departmental budgets, releases of funds and expenditures that while there was effective budgeting for staff salaries coupled with corresponding releases, the budget figures for the non wage appear to be symbolic rather than realistic and yet this is what facilitates the staff to perform their duties effectively. The budgeted amounts for non-wage were not released as planned.

Whereas the budget appears to be large enough and releases made, it mostly relates to transfers to other autonomous institutions (Uganda National Library; National Council of Women; National Council for Disability; National Council of Children; National Youth Council and Uganda National Cultural Centre). Similarly, these institutions‟ non wage subventions from the Ministry appear also to be symbolic.

Consequently, salaries are paid to both Ministry‟s staff and its autonomous institutions and yet they are not being facilitated to perform duties for which they are being paid. Payment of salaries to staff without provision of funds to facilitate their performance results into nugatory expenditures.

The Accounting Officer explained that efforts are made to budget for non-wage activities but budget estimates are always limited by the MTEF ceiling provided by the Ministry of Finance, Planning and Economic Development.

It is recommended that adequate funds be provided in the budget to enable staff perform their duties and to allow the Ministry execute its mandate effectively.

23.5 Lack of Policy on Government Support to Traditional Leaders A sum of Shs.500,000,000 was paid to a member of a cultural institutions as government contribution towards the purchase of residential house in Kampala. It

282 was noted that this undertaking was done without policy and legal framework for guidance. In her explanation, the Accounting Officer indicated that the Constitution of the Republic of Uganda, the Uganda National Cultural Policy, 2006 S 7.10.1., obliges government to support traditional/cultural leaders. I have however advised the Ministry puts in place policy guidelines for government intervention in such institutions.

23.6 Policies and their Legal Frameworks It was noted from the Policy Statement for the Financial Year 2007/08 that, instead of formulating relevant policies which spell out clear objectives in a sub- sector and/or a particular service delivery drive concern, the Ministry sought enactment of their legal frameworks first before the actual policy was put in place. Thus, laws were being enacted without policy objectives which would form the basis for enacting the legal framework. There is need to expedite the formation of various policies to harmonise them with the laws.

Policies to be formulated Laws Enacted The National Policy on Elimination of The National Council for Children Act (Cap Child Labour 60)2000

The National Employment Policy The Employment Act The Labour Disputes (Arbitration and Settlement) Act 2006; The Labour Union Act 2006;

The Minimum Wages and Wages Council 2000; The Workers Compensation Act (Cap 225) 2000.

The National Library Policy The National Library of Uganda Act (Cap 136) 2003;

The National Occupational Safety and The Occupational Safety and Health Act Health Policy 2006;

The National Library Policy The National Council for Children Act (Cap 60)2000

283 The Accounting Officer explained that efforts are being made to ensure that policies are developed before enactment of legislations.

23.7 Human Resource Management According to the staff list, overall staff establishment is at 593 positions out of which 259 (43.7%) were filled as at April,2008 leaving 334 (56.3%) not yet filled. Inadequate staffing may impact on the service delivery of the Ministry.

It is recommended that these vacancies be filled.

The Accounting Officer explained that a submission was made to the Ministry of Public Service to make wage provision for the vacant posts to be filled in 2009/2010 financial year.

24.0 UGANDA POLICE

24.1 CHOGM Balances It was noted that the CHOGM bank account operated by Police Department had a bank balance of Shs.4,309,506,887 as at 31st December 2007. I was not able to establish the purpose for which the amount was applied because supporting documents were not availed for audit. The closing balances as at 30th June, 2008 were also not disclosed in the financial statements.

The Accounting Officer explained that the funds were to pay for activities that had not been fully concluded by the time of holding CHOGM 2007.

24.2 Excess Expenditure According to the Statement of Appropriation, a total of Shs.28,426,712,211 was incurred in excess of the approved budget without Parliamentary approval. Unauthorised excess expenditure is a result of breakdown of controls over budgetary expenditure. This expenditure should be regularized in accordance with the Public Finance and Accountability Act, 2003.

284 24.3 Stalled Construction Projects 24.3.1 Procurement/Construction of four Accommodation Blocks A company was contracted to construct four accommodation blocks at Bundibugyo Police Barracks at a cost of Shs.384,611,998 and a total of shs.231,239,496 (approx. 60%) was paid to the contractor. Although approximately 60% of contract sum was paid, it is highly unlikely that the contractor will complete the works within the agreed period. Included in the contract sum are extra costs totalling to Shs.40,174,091 charged in February 2008 even after the works had long stalled. I did not get the supporting details for the extra costs that were charged.

A follow up should be made to ensure that the contractor fulfils his obligations under the contract or seek remedies in accordance with the provisions of the contract. There is also need to mobilise resources needed for the completion of the works. The Accounting Officer explained that work stalled because the contractor raised the rates of items during contract implementation, an action that necessitated a review.

24.3.2 Renovation and Alterations at Nsambya Maternity _Nsambya Barracks

A company was awarded a contract of Shs.89,605,638 for renovation and alteration of Nsambya Maternity clinic and works were to be completed latest by March 2006. A variation of UShs.13,441,700 was made and the contractor partly paid shs.46,000,000. At the time of the audit, the works had stalled and had not been competed, three years after commencement of the contract.

The Accounting Officer explained that the works stalled due to fresh claims by the contractor resulting from rising market prices.

The Accounting Officer should seek remedies in accordance with the provisions of the contract.

285 24.3.3 Construction of Temporary and Semi-Permanent Structures Twelve temporary structures for emergency accommodation during CHOGM were constructed by a company at a cost of shs.159,000,000. However, the structures were found to be sub-standard and were rejected by the Police force. It is not known whether management sought remedies in respect of the rejected structures.

The Accounting Officer explained that the issue has been handed over to the legal department for arbitration.

The Accounting Officer is advised to make a follow up of the case to its logical conclusion.

24.4 Irregular VAT Payments recoverable During the year, the police force paid VAT totalling Shs.52,076,390 to various suppliers. However, the expenditure was effected against invoices that had no VAT registration numbers thereby contravening Cap 349 of the VAT Statute. This is considered an irregular charge on Public funds.

It is recommended that the Accounting Officer recovers the funds.

24.5 Arrears By end of June 2008, the department was indebted to its creditors by a total of Shs.33,924,088,499, of which Shs.31,847,761,540 were incurred during the year contrary to the commitment control procedures. Included is Shs.723,653,592 owed to Namboole Stadium management. The delay to have the amount paid has made it difficult for the stadium to refurbish what was spoilt during the period of occupation of the facility by the Police Trainees.

The Accounting Officer should accord the matter priority in view of the national importance of the facility. The Accounting Officer explained that she had requested supplementary funds from Ministry of Finance to address the matter.

286 24.6 Statement of Losses It was noted that shs.175,765,960 was recognized in the Statement of Losses as amount brought forward from the previous years. This loss was reported in the year 2005/06, but the case has stalled in a court of law for now more than two (2) financial years. There is a risk that government may lose the case if no follow up is made. Management should show interest in this case to ensure that it is adequately handled to its conclusion.

The Accounting Officer explained that delays in the case have been caused by matters beyond management control.

24.7 Police Establishment and Standing Orders A review of establishment records and standing orders revealed the following matters in the department's operations:

● Standing orders have never been reviewed since they were instituted but are re-printed for use with irrelevant sections relating to mode of operations, rates of surcharge, mode of salary payment and acquisition of logistics.

● Admission to pensionable establishment is by application after completion of 12 years of service, attaining the age of 40 and passing medical examination. There is need to harmonise this with the Public Service Standing Orders.

Change of name of Special Branch directorate provided for by the Police Act, (Police Council Act 16/2006) without Parliament approval.

● Punishments meted to officers appear to be indefinite thereby leaving several officers on interdiction indefinitely.

● Some Police posts are run by single Police Constables, in some cases a police post is manned by Special Police constables without a supervising police constable contrary to the Police Standing orders.

287 The Accounting Officer is advised to expedite the process of reviewing the standing orders and ensure that abolition of Special Branch which was established by Act of Parliament is done through a Parliamentary procedure.

The Accounting Officer explained that reviews of the Force are being done the result of which will be used to update the standing orders, disciplinary courts have been constituted to reduce on the cases of interdicted officers and recruitment and promotions are being undertaken to enhance staffing.

24.8 Acquisition of Interceptor Surveillance Boat It was noted that Four Speed Interceptor Surveillance boats were acquired at shs.17,232,799,446; the expenditure was to be spread over a period of five years. However, the decision to acquire these boats appears to have been made without due consideration of their sustainability. For instance, fuel consumption is too high at 160 litres per hour and a full tank of each boat takes 850 litres of fuel (approx. Shs.2,040,000). The high operating and maintenance costs may make the equipment redundant unless sufficient resources are allocated for the purpose.

The Accounting Officer was advised to always consider the feasibility and long term financial implications of assets acquisitions of that nature.

The Accounting Officer explained that the maintenance costs are inevitable and MOPFED has been requested to increase the budget to cater for the increased Police operations.

24.9 The Training Policy The 2004 training policy does not have current data on professional programmes. The training budget appears to address only training in Police training schools; it does not cover other professional training programs. It was also observed that most training programmes tend to be over stretched beyond the planned period, for instance, the training of Probationary Police constables was stretched by five months while that of cadet officers was stretched by over four months and is still running.

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There were also other training programs running concurrently that had not been budgeted for. This practice leads to unnecessary virement and reallocations which can impact on the budget performance.

A proper training policy to professionalise staff should be adopted. There is also need for proper planning of the training programmes so that they do not affect implementation of other planned activities.

The Accounting Officer indicated that the available training policy provides general training guidelines which then are used to make annual training plans.

24.10 Audit Inspection:Wandegeya, Old Kampala, Busia, Kapchorwa, Kasese, Kyenjojo, Sironko Police Posts, Wuartermaster Stores and Kabarole Region

24.10.1Land It was noted that the status of ownership of land accommodating the various police stations/posts (Busia, Kapchorwa, Kasese, Kabarole, Kyenjojo, and Sironko) could not be ascertained because of lack of land titles. There is a risk that such land may be encroached on or given away to other individuals or organisations. For example, land at Kapchorwa police station which occupies an area of 0.75 acres had been encroached on by an individual who constructed part of his building on it.

It is recommended that all Police land be identified, surveyed and titled.

24.10.2Staffing The stations are all understaffed. In many instances, Local Administration Police Officers are in-charge of some Police posts. Currently the ratio of Police to population is 1:5000 as opposed to 1:500 as per UN standard. The low staffing levels could be attributed to an inadequate establishment for the police force as a whole.

289 It was explained that the problem is being addressed by phased recruitment in the medium term.

24.10.3Imprests Generally stations face a problem of inadequate facilitation and funding. Stations are supposed to receive imprest monthly but it is not paid regularly, making it difficult to run the stations‟ daily operations. The amount is also too little to cover the operational needs.

24.10.4Office and Staff Accommodation Office and staff accommodation is still inadequate. Stations lack spaces for storage of office documents and accommodation for inmates is in a state of disrepair. The officers share small rooms/housing units including unipots. The unipots have their foundations loosely fitted due to old age and erosion. This has prompted officers to make mud and wattle/wooden structures for themselves. Congestion in the barracks is a major problem that can also breed moral decay. In Kyenjojo where there is no barracks, officers are forced to pay rent from their meagre salaries while others were found staying in an Ecosun toilet where cleaning materials were being stored.

It was also observed that the barracks sewage system for some police stations broke down several years ago and have not been repaired. The Accounting Officer explained that due to budget constraints, renovations are being handled in a phased manner.

24.10.5Medical facilities Some police stations have clinics and small drug stores which are inadequately stocked. Transportation of drugs is often a problem as the officers have to request for free transport from the bus operators. Drugs that are recommended to be kept in cool dry places were found to be kept in hot environment (unipots). There is need for improvement of medical facilities at all the police posts.

290 24.10.6Fire brigade section: In case of fire outbreak, districts have to rely on distant fire brigade sections which are equally ill-equipped and take a long time to respond to an emergency.

There is need for well equipped fire brigade sections in the up country regions. Although this is a responsibility of local governments, traditionally the citizens have associated the fire brigade services with the Police force.

24.10.7Garbage Disposal There is no systematic disposal of garbage at the various barracks visited. The authorities that are supposed to collect garbage especially around Kampala have allegedly declined to provide containers and have also failed to collect garbage due to fuel increase. As a result the general hygiene of all the stations is poor and needs to be addressed. 24.10.8Utilities (Water & electricity) Most barracks face a problem of flowing water. At Kyenjojo police post, there was an outstanding water bill of about Shs.23 million and as a result the police post has been threatened with disconnection. No explanation was provided for this outstanding bill yet there has been adequate provision for payment of utilities.

24.10.9Quartermaster Stores The Stationery store at the Quartermaster stores is responsible for all stationery used by the police except Headquarters. Observed in the stationery store are bulk stocks of stationery (various police forms) of un-known value that had been procured several years ago in huge quantities, and have subsequently because obsolete but have not been boarded off yet there is a problem of inadequate storage space.

It is recommended that all stationery needs be properly planned and utilised to avoid obsolete stocks. The existing obsolete stocks of stationery should be quantified and boarded off in accordance with the regulations.

291 25.0 UGANDA PRISONS

25.1 Excess Expenditure

Uganda Prisons Service made excess commitments of Shs.3,250,499,046 beyond the approved budget. The amount includes farm produce valued at Shs.1,824,753,267 produced by Prisons farms and consumed by prisoners. However, this expenditure lacked the approval of Parliament. Management is advised to operate within the budgetary provision. The unauthorized expenditure should be regularized in accordance with the PFAA 2003 regulations.

The Accounting Officer explained that he had requested the Secretary to the Treasury to regularize the expenditure and was waiting for the reply.

25.2 Inappropriate Control Procedures for Fixed Assets

It was observed that control procedures for safeguarding fixed assets are inadequate. For instance, there is no fixed asset register to record ownership details, state and movement of fixed assets as required by the Treasury accounting instructions. The risk is enhanced by the fact that Uganda prison services assets are located across the whole country. It was also noted that fixed assets are not engraved with unique identification codes.

This exposes the Department‟s fixed assets to possibility of misuse and misappropriation.

The Accounting Officer explained that they are in the process of implementing the new computerized fixed register introduced by the Treasury.

25.3 Payments For 6% Withholding Tax to Uganda Revenue Authority

Deductions of withholding tax amounting to shillings 505,009,542 in respect of payments to various suppliers were remitted to Uganda Revenue Authority. However, in the absence of acknowledgements from the Uganda Revenue Authority, I was not able to confirm that the funds were received by the tax body.

292 The Accounting Officer agreed to follow up with URA to obtain the certificates.

25.4 Improper Procurement Procedures in Procurement of Agricultural Inputs

Uganda Prison Services procured agricultural inputs from two firms at Shs.280,900,000 under Procurement UPN-Supplies 2007-08- 56752-03. However, scrutiny of the procurement file and other relevant documents revealed that the procurement was not properly handled as further explained below:-

The use of the restricted procurement method was not appropriate. Although the entity requested for a waiver from PPDA, the waiver was granted when delivery had already been effected.

Bids were invited and received from bidders before the Prisons Contracts Committee approved the Bid document. Bid opening was done in the absence of all the bidders contrary to the procurement regulations.

The evaluation report was signed by one person who was not on the approved evaluation Committee contrary to the evaluation procedures. Contracts were signed two months after delivery of the items.

According to the Delivery and completion schedule, the delivery point was Murchison Bay farm stores but one of the firms delivered only 11,000 kg out of 18,000kg of lounge 6H at Murchison Bay Farm stores and the balance of 7000kg was delivered directly to the Prison farms, while for lounge 4, only 500kg were delivered at Murchison Bay and the balance of 5,500kg was delivered directly to Ibuga Prison farm.

The Accounting Officer explained that initially the appropriate procurement method was used but it did not raise sufficient response and since the planting season had started the department opted to use reputable firms who had supplied the department before.

293 25.5 Electronic Funds Transfer

A review of the electronic funds transfer system revealed that identification codes allocated to suppliers and staff could easily be interchanged because there is lack of procedures for authorization of changes to the database. The master data base file was not accurate and is therefore not reliable. Several files existed with duplicate data. When an update is made on the database the old record appears together with the update.

It was also observed that the supplier‟s identification codes were not unique. The supplier‟s EFT codes were based on vote number as well as the calendar year in which a record was captured on the data base. While pegging it on the vote is desirable as it identifies all EFT payments from the Department, it was not clear why the Codes could be based on a calendar year given that the supplier may transact with the department for several years as long as he/she remains prequalified.

These control weaknesses can lead to EFT supplier‟s data base being manipulated without the system detecting it. There is also a risk of using wrong data for transactional processing entering unauthorized data to the master data file.

Management is advised to put in place proper procedures for updating the master data file. Any changes to the database should be authorized and the system should be able to provide an audit trail for all changes made in form of logs that can be accessed for audit purposes.

25.6 Audit Inspections

Audit inspections were was carried out on Masindi, Isimba, Hoima, Kagadi, Butiti, Fort Portal, Ibuga, Bushenyi, Kakiika, Mbarara, Masaka, Kumi, Soroti, Mbale, Tororo Bugiri and Bufulubi prisons between 12th August 2008 and 20th August 2008 and the following matters were noted:

294 25.6.1 Buildings and Infrastructure

Some renovations were carried out in Soroti, Tororo, kitgum,Masaka and Masindi prisons during the year. However, the general state of buildings and infrastructure in other prisons is still very poor. The Prisons wards, staff houses and other buildings are in a state of disrepair and thus require major renovation.

The Accounting Officer explained that through the Justice, Law and Order Sector (JLOS), the rehabilitation of the prison units along side the construction of the new prisons was being systematically handled.

25.6.2 Farm Produce and Animal Farm

107,260 kg of Maize grain worth shs.96,534,400 representing about 42% of the total production from Bufulubi prison farm meant for prisoners consumption was diverted and sold and the proceeds used to finance prisons operations such as milling charges, repair of machinery and others without authority. Management attributed this to inadequate funding for Prison stations.

I have advised management to seek appropriate authority before engaging in such activities.

It was also observed that management of farm animals at some of the Prison stations was poor. For example at Tororo Prisons farm, whereas one would expect the number of animals to be progressively increasing the numbers were declining. Comparison of ledger balances against physical count revealed big variances which were not properly explained.

Management explained that the variations were partly caused by disease outbreak and keeping of private animals on the farm. I have also advised that the private animals be removed from the farm.

25.6.3 Delay in delivery of Farm Inputs

In an effort to address the problem of inadequate funding, the department embarked on revitalizing its prison farms to improve the production of its own

295 grown food. However, there were always delays in delivering farm inputs to the farms leading to delayed planting. All the four prison farms visited, had their fields ploughed and ready for planting but had not received inputs although the planting season had started a week earlier. This has an effect on the crop yield.

The Accounting Officer explained that the delays were due to elaborate procurement procedures that could not allow them to have the inputs in time for the planting season.

Management is advised to always plan for the procurement of inputs early to avoid the associated risks resulting from delays in acquiring inputs.

25.6.4 Understaffing

Prison stations still face a problem of understaffing. In all the stations inspected, the ratio of uniformed staff to inmates stood at between 1:5 to 1:13, against the recommended 1:3. This matter has featured in my previous reports to Parliament but apparently minimal progress has been made to address it. Management should recruit more staff so as to raise the ratio of uniformed staff to inmates to the recommended level.

Management explained that 650 prison warders/wardresses had been recruited, trained and posted to various Stations in the F/Y 2007/08 and another 500 warders/wardresses 20 Cadets had been recruited and were under going training in the prisons Training School.

25.6.5 Overcrowding in the Wards/Poor sanitation

There is overcrowding of inmates in Bushenyi, Mbarara, Kakiika, and Masaka Prisons. For instance, while Bushenyi Prison has a capacity of 120 inmates, at the time of the inspection the lockup had 507 inmates. Masaka,Mbarara, Kakiika prisons had between 470-520 in excess of the recommended capacity. Overcrowding leads to poor sanitation.

296 Sanitation is still poor in most of the prisons with some still using the night-bucket system.

Management attributed the problem of congestion to limited designed accommodation capacity and high remand population. Regarding sanitation, he explained that in almost all prisons, sanitation systems have collapsed due to old age and over capacity as they were designed for smaller populations.

Management should explore all possible ways to decongest the prisons and improve on the sanitation systems.

25.6.6 Land Irregularities

The Prison stations inspected did not have copies of land titles to confirm ownership. It was also observed that the land purportedly owned was grossly underutilized. As a result, much of this land had been encroached on.

Part of Masindi Prison land was swapped with Masindi Town Council land without authority. The memorandum of Understanding between the two parties lacked details and yet the Council had already allocated part of the land to private Developers.

Part of the land in Isimba prisons was leased to the Kinyara sugar works without authorization. The issue of lack of land titles should be addressed to mitigate the risk of encroachment.

The Accounting Officer explained that the Ministry of Lands had contracted a firm to undertake the survey of all Government land.

25.6.7 Transport and Communication

Kumi, Masindi, Hoima, Butiti, Ibuga, Bushenyi, Mbarara and Bugiri Prisons did not have any means of transport, while Stations like Fort Portal, Soroti, Masaka, Kakiika and Mbale had a lorry each but with no funds allocated for vehicle maintenance and operation. Similarly, inadequacies in communication facilities

297 such as Radio Calls have compelled Prison stations to rely on the Uganda Police Radio Call Network to receive and transmit messages. This hampers effective communication and compromises confidentiality.

Management attributed the problem to inadequate funding. Management is advised to solicit for more funds for the procurement of vehicles to ease the transport problem currently being faced by some of the stations.

26.0 NATIONAL AGRICULTURAL RESEARCH ORGANISATION (NARO)

26.1 Pension Liabilities Disclosed in the financial statements are pension liabilities of shs.8,605,982,685. However, no details were provided to support the disclosure. I could therefore not confirm the accuracy of the amount stated in the financial statements.

26.2 Loss of Cash Reported in financial statements are losses amounting to Shs.183,976,555 including a cash loss of Shs.126, 811,100 incurred at the KAWANDA based ARIS centre. A review of the books of accounts revealed that the fraud had been committed over a period of 17 months. The loss is largely attributed to lack of proper segregation of duties with the cashier undertaking all the accounting and book keeping functions. In addition there were no compensating controls in form of independent checks on the posting of the books of accounts maintained at the centre. The continued commitment of the fraud by the officer over such a long period of time showed laxity on the part of management in supervision of staff.

The Accounting Officer explained that the issue was being investigated by the police. I await the results of the process.

26.3 Unaccounted for funds Funds amounting to Shs.64,978,914 advanced to various officers were not accounted for by the time of this report. In the absence of the accountability, I could not confirm that the funds were used for the intended purposes.

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26.4 Transfers to the treasury- Gross Taxes Account A total of Shs.362,000,000 was released to the entity to cater for the taxes incurred on the acquisition of assets during the period. All the funds received were remitted to the treasury gross taxes account with the exception of the November remittance of Shs.90,500,000 which was still outstanding in the reconciliation by the end of the period. A review of the procurement documents, showed that whereas taxes of Shs.116,854,106 had been incurred, the instructions by the Accountant General to BOU to debit the NARO accounts amounted to Shs.110,779,134. The financial statements further indicate a sum of Shs.94,734,486 as having been incurred and thus a balance transferred to the treasury under this item of Shs.267,265,514. These inconsistencies were not properly explained. I was also not provided with the details of the vehicles and scientific material imported together with the benefiting institutes.

As a result, I could not confirm the accuracy of the amounts stated in the financial statements and whether the taxes paid were a rightful charge to the entity.

The figures stated in the financial statements should be reconciled with the supporting documentation and where necessary appropriate adjustments should be made.

26.5 Unreceipted Revenue The entity collected rent from its staff living in staff houses in various institutes amounting to Shs.110, 216,000 in the period under review. The 10% of the proceeds is retained at the headquarters while 90% is transferred to the institutes. However it was noted that the proceeds at the headquarters were not being receipted and recorded as revenue and thus not reflected in the financial statements. Non tax revenue collected during the period is therefore understated in the financial statements.

All revenue should be receipted and disclosed as non tax revenue in the financial statements.

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26.6 Lack of an IT Strategic Plan A preliminary review of the IT environment of the organisation revealed that there is no Information Technology (IT) strategic plan. Implementation of the organisation‟s IT activities currently is not based on an approved plan. This partly explains the uncoordinated implementation of IT activities of the organisation. For instance, in a bid to enhance the finance department operations, the entity procured servers in the FY 2006/07 (more than 2 years ago) but to date the software for their operation have not been procured. The servers still lie idle at some institutes and at the headquarters while those being used serve as desk tops at the institutes.

The Accounting Officer explained that the organisation was in the process of engaging an IT consultant to guide in the development of the policy. I await the outcome of this effort.

26.7 Under Staffing According to the core functional analysis report of the new NARS, a new organisation structure came into place to cater for the revised needs of the organisation. It is however noted that the staffing levels for the technicians and the scientists has not been achieved. Most of the institutes are understaffed in this category of staff. Given the mandate of the organisation, understaffing in these categories poses a big challenge in terms of service delivery. On the contrary the support staff category is over staffed.

The recruitment of the technical staff should be expedited to ensure that the posts are filled to enable better delivery of the services.

26.8 Staff Terminal Benefits Every financial year the entity prepares the salary estimates including the 10% to cater for the staff gratuity for the period. It is noted that government releases the entire amount for the gratuity which is transferred to the terminal benefits accounts and expensed in the financial statements as contract staff salaries. Only

300 staff who retire during the period are paid and the balance is retained on the account.

26.8.1 Computation of terminal Benefits Para 7.12.1 of the Uganda Agricultural Research Scheme of service provides that gratuity will be paid at a rate equivalent to one month‟s salary per year of service where the last month of service in each contract will be applied to calculate the amount of gratuity during that contract. By the time of retirement or resignation, staff have had various contracts during their employment with the organisation and thus the gratuity would be calculated according to each contract.

On the contrary, the organisation uses the latest contract monthly salary across the entire period served without consideration of the prior contracts where salaries were lower. This leads to overstatement of the gratuity claims.

There is need to revisit the staff gratuity operations and consider budgeting for only estimated gratuity to be paid out to the retiring staff per financial year. Calculation of the gratuity should be done according to the contracts the staff have had during their employment with the entity.

26.9 Fixed Assets Management (a) Unexplained Short Fall In the Disposal Proceeds The procurement and disposal unit disposed off several assets at the headquarters and at the institutes during the period under review. However I could not substantially review the process as we did not get access to the relevant documents like auctioneers reports and some bid forms. A review of the eighteen (18) items auctioned revealed that the bidders had paid less money than the highest bidded price leading to an unexplained short fall of Shs.140,735,000. It appears that the disposal process lacked transparency and value for money may not have been achieved from the disposals.

The Accounting Officer explained that the exercise was done by an independent auctioneer. I have informed him that the disposal process is a responsibility of the Procurement and disposal unit and as such it should properly supervise the

301 disposal process carried out by the independent auctioneers. The matter should be investigated further to establish whether there was no loss incurred.

(b) Non Refundable Fees Not Accounted For In the advert for the disposal of the assets it was indicated that interested bidders would pay a non refundable fee of Shs.20,000 per lot to the auctioneers and this was duly collected as evidenced by some of auctioneers‟ receipts on file. Over 600 items were lotted by the auctioneers though there are no records of the number of bidders who participated. Whereas this forms part of the non tax revenue for the disposing entity, it‟s not clear why the responsibility was totally divested in the hands of the auctioneers and as a consequence there was no control by the entity on the collections.

The monies were not remitted to the Treasury as required by regulations governing non tax revenue. It was not clear why government revenue was collected and retained by the auctioneers yet the agreements for their engagement expressed that they would be paid a 1% sales commission and the expenses incurred in the process should be accounted for and remitted to the Treasury.

The Accounting Officer is advised to have all the funds accounted for by the auctioneers and remitted to Treasury.

26.10 Irregular Salary Payment To a research officer A research officer attached to Agricultural engineering and appropriate technology research centre (AETREC) was sponsored for a one year Master of Science degree in Mechatronics at the Kings College London (UK) beginning September 2002. The officer completed his course by December 2003. After his course, the officer decided to continue with an apprentice training with a UK company instead of practicing at his institute and later enrolled for a PHD.

This was contrary to the bonding agreement which stated that the officer would return immediately after his course and that he would not seek an extension of the period of the programme. The bonding agreement also required that the

302 officer would re-imburse all NARO expenditures associated with the training; including the salary paid to him during the training period should he fail to return to his employment after the training programme.

There is also no proof that council approval was sought for the study leave. The officer has now taken six years of leave and by the time of this report, the officer had not returned to duty. To date, the officer still draws his monthly salary. I was not provided with any disciplinary action taken by the management on the matter.

Management should take appropriate action in accordance with the bonding agreement and the Human Resource Manual.

26.11 Inspections 26.11.1National Fisheries Resources Research Institute- NAFIRRI (a) Non Compliance With NSSF Act All the non NARO employed staff at the institute are not registered with the National social security fund or any staff contributory scheme. Although management explained that the staff contracts are temporary and depend on availability of funds, it was noted that the work these contract staff do is of a technical nature (e.g. laboratory technicians and research assistants) and their salaries are budgeted for a period of twelve months a year. Further still the staff have been with the institute for a long period of time. Non registration of the staff to the social security providers could lead to penalties being imposed on the entity.

Management should consider having the staff registered with NSSF.

(b) Grounded Vehicles During the inspection of the institute assets, several vehicles were found grounded for more than two years at the institute park yard and the vehicles had been vandalised.

Management should consider boarding off vehicles.

303 26.11.2National Semi-Arid Sources Research Institute –NASARRI Board Off Of Assets Several assets were boarded off and auctioned on December 17th 2007. However it was noted that proceeds from the disposal of 7 motorcycles and 2 vehicles were not included in the director‟s remittance report to Treasury.

26.11.3Mbarara ZARDI Encroachment on Institutes Land 31.8 hectares of the institute‟s land have been occupied by an encroacher for years now. Despite the matter being raised in m previous reports, management has not been able to demonstrate any progress towards the recovery of the land from the illegal occupant. The illegal occupant has now obtained a title to the institute land from the land commission.

The Accounting Officer explained that he had taken up the issue with the Uganda Land commission to have the land title issued to the encroacher cancelled. I await the outcome of the effort.

26.11.4MUKONO ZARDI Procurements Outside the Contracts Committee The institute procured services of a security company (Security 2000 Limited) and a cleaning company (Haughty Culture Limited) at Shs.1,000,000 and 3,000,000 per month respectively. The NARO procurement regulations require that procurement of goods and services above Shs.2million should be referred to NARO contracts committee. There is no evidence that this was done. Non compliance with the procurement regulations exposes the institute to the risk of high pricing and poor service delivery.

26.11.5National Agricultural Crop Resources Research Institute Grounded Vehicles Management has continued to ground vehicles, despite the fact that some were recommended for board off. Vehicle number UG 0788A a Toyota land cruiser for instance was boarded off in January 2007 and was to be auctioned in December 2007 but management did not take action, claiming they had allocated funds to

304 repair the vehicle. The practice may reduce the salvage value of the vehicles as they are exposed to vandalism.

Management should consider boarding off the vehicles.

26.11.6National Forestry Resources Research Institute Procurements outside the Contracts Committee The institute procured services of a security company (Security 2000 Limited) and a cleaning company (M/S SEKA ENTERPRISES) at Shs..900,000 and Shs.885,000 per month respectively. The annual amounts payable during the period were Shs.10,800,000 and 10,620,000 respectively. The NARO procurement regulations require that procurement of goods and services above Shs.2, 000,000 at institutes should be referred to NARO contracts committee.

Although management, explained that the contracts for security services were on a monthly basis, and therefore below the threshold, the substance is that the services were contracted throughout the year and required the contracts committee‟s approval.

26.12 National Agricultural Research Organisation (NARO) IDA CREDIT NO.3204 – UG 26.12.1Lack of Consolidated budgets by the NARO Institutes

Whereas a number of NARO Institutes have other sources of donor funds apart from ARTP II, it was noted that no single institute had a consolidated budget combining all the expected sources of Funds. It was noted that some institutes got funds from other sources which were about 2 times more than what they received from G.O.U & ARTPII, examples being NARL - Kawanda & NACRRI- Namulonge & NAFIRI-Jinja. Institutes only make segmented budgets based on each source of funding.

Not having consolidated budgets makes it difficult to evaluate financial performance and coordinate funding efforts of such institutes. There is a likelihood

305 of funding duplication as officials responsible for secluded budgets don‟t share and coordinate their efforts.

Institutes should annually prepare consolidated budgets including funds expected from different donors for both income and expenditure.

26.12.2Lack of guidelines to operationalise the NAR Act 2005

With the coming into effect of the National Agricultural Research Act 2005, Public Research Institutes were established as semi-autonomous agencies (Sec. 28) but autonomous in their operations, with policy guidance by NARO Secretariat. However up to present, the Act has not been operationalised and there are no guidelines to that effect. For example, it was noted that the institutes do not have functional contracts committees. Whereas some procurement was referred to NARO Secretariat, a number of procurements are done by the institutes. Some institutes management complained about delays of procurements referred to NARO Secretariat. Many aspects of the Act need guidelines to be operationalised. Carrying out procurements with out contracts committees contravenes the PPDA Act and regulation.

Institutes management should ensure that contract committees are constituted and submitted to the NARO-council and Accounting Officer for approval. NARO secretariat should also ensure that the committee members are oriented, trained and monitored.

Management has explained that NAROSEC through the PDU has a plan of forming sub contracts committees at all institutes. Most of the institutes are in the process of hiring procurement officers/assistants to manage all procurements at the institutes. To date Kakwekano ZARDI, Ngetta ZARDI, NAFIRRI, NARL, NACRRI and NAFORI have sub committees in place.

306 26.12.3Leasing of land to Energo Projekt

It was noted that ten (10) acres of land at Kawanda were leased to EnergoProjekt in May 2007 by the Institutes‟ Management Committee. The lease was for 5 years and renewable. The Committee did not follow government procedures on leasing out this land and there is no such a mandate in the Agricultural Research Act 2005.

The current Institute‟s Director observed that the transaction was not proper and sought advice from NARO Director General. On the advice of the Director General he canceled the lease on 14th January 2008 and requested for re-negotiation and regularization of the lease process. However, this has not yet been done yet the “lessee” is occupying the land, has put up permanent structures covering approximately 2 acres of land and yet, not a single coin has been received by the Institute since July 2007, when they occupied this prime land. The occupancy is irregular and the institute is not getting any value from the land being occupied.

Management should ensure that the lease is regularized immediately, recover arrears in rent and make sure that in future proper procedures are followed before the institutes‟ resources/property are committed. Since the Institute is a Government entity, there is need to consult the Government Valuer on pricing.

Since the lease was meant to be short term, for the duration of the Bombo Road project, the permanency of the structures being built on site should be reviewed as this could result in the temptation to request/claim/arrange for long term occupation, even after the road project is completed.

Management has explained that to date the negotiations with the road company are not yet completed. It is expected that arrears will be paid once the legality of the lease is regularized.

307 26.12.4Construction of Green houses

The Institute spent over Ushs.400 million to construct two green houses at NAFORI. They were completed in early 2007. These structures have since never been put to the intended use. The facilities are wearing away without any value to the institute. If not utilized, the funds that were spent on them will be a big loss to the institute and for that matter to the tax payers. Funding for the utilization of the Green Houses should be taken as a priority. If not, it will be presumed the project was not necessary and hence a waste of Government resources.

Management has explained that the facility has not been operationalised as the basic requirements are not in place. Funds have been secured under the ARTP II extension to furnish the facility. To date they are awaiting the completion of the procurement process which will see the facility fully equipped and operationalised.

26.12.5Property Rates owed to Jinja Municipal Council

It was noted that there are demand notes issued to National Fisheries Institute by Jinja Municipal Council of about Ushs.90 millions in property taxes that has been outstanding for some time. The director indicated that there is no budget for such funds and that he is trying to negotiate with the Municipal council. However, according to the Local Government Rating Act 2005, Educational institutions are exempted from such taxes (2nd Schedule, sec 5, & 8 (c)).

The current position may disrupt the institute‟s activities in case the municipal council decides to forcefully recover the taxes owed. The institutes‟ management should get a legal opinion from NARO Secretariat legal officer with the aim of applying sec 5 (2) of Local Government Rating Act, if National Fisheries Institute could be interpreted as an Educational Institute.

Management has explained that the matter has been taken up by the legal officer who is in communication with Jinja municipal. It is expected that this will amicably be handled.

308 26.12.6Payment of monthly cash allowances that were not subjected to PAYE

It was noted that NARO Secretariat was not fully complying with the Income Tax Act on PAYE. Whereas PAYE on the salaries was well calculated and paid accordingly, it was noted that NARO Secretariat pays monthly cash allowances for welfare (all staff) and transport (senior staff) that is not subjected to PAYE. These allowances amounted to about Ushs.7 million and Ushs.10 million respectively per month.

This was contrary to Sec 19 (1) of the Income Tax Act that classifies such allowances as employment income subject to PAYE. This is likely to attract penalties from Uganda Revenue Authority which would disrupt the Organization‟s finances and operations. Management should comply with the provisions of Income Tax Act to avoid penalties.

Management has promised to address the matter in future.

26.12.7Emoluments to the NAR Council Chairman

The NARO Council, in its ordinary meeting held on 4th September 2007, decided that the chairperson of the Council be paid a consolidated salary of Shs.700,000 net per month. On 20th March 2008, Shs.4,900,000 was paid as salary for the period September 2007- March 2008. However, under Sec 12 of The National Agricultural Research Act, 2005, the power to determine remuneration for the council members is vested in the Minister and not the council.

Setting of remuneration by the Council for its members is contrary to the provisions of The National Agricultural Research Act. There is need for an operational manual as per Sec 57 (1) of the Act, to help in the operationalisation of the Act. Unless the minister, in writing, delegates his/her responsibilities on such a matter, the power to set council remunerations remains with him/her.

309 Management has explained that, the Minister‟s approval will be sought for the retainer being paid to the chairman NARO council.

27.0 NATIONAL AGRICULTURAL ADVISORY SERVICES (NAADS)

(a) Delayed remittance of statutory deductions

The following statutory deductions were not remitted within the required statutory timeframe.

Payee Months Statutory Date deduction remitted UGX PAYE July- August, 2007 47,693,546 26/09/07 PAYE October –November, 2007 51,221,045 03/01/08 PAYE March 2008 24,943,802 30/04/08 NSSF August 2007 13,414,026 04/07/08 NSSF October-November 2007 27,663,291 16/01/08 WHT August- September 2007 2,883,100 22/01/08 WHT October, 2007 2,234,172 22/01/08 Total 170,052,982

Non- compliance with statutory requirements results into penalties being incurred which are not budgeted for. Programme management should ensure that all statutory deductions are remitted within the required statutory time frame.

Management has attributed the delay to the suspension of NAADS activities during the first half of the year.

(b) Commingling of funds

Programme funds on NAADS Basket Fund Account No. 208.209192.1 are commingled with Funds for Africa Forum for Agricultural Advisory services (AFAAS), received from International Development Agency - CANADA. This contravenes the MoU operational guidelines and may result into misallocation of NAADS programme funds.

310 Management should ensure that a separate and identifiable NAADS activity account is regularly maintained without commingling of other funds.

Management has promised to address the matter in future.

It has been noted that there was failure to meet the required co-funding obligations at all levels of the programme as summarized below:-

Amount (shs)

Districts 99,175,493

Sub-counties 461,691,018

Farmers 147,684,146

Total 708,550,657

Non – compliance with the co – funding requirements impairs the available resources for the programme and hence its implementation. This also violates the MoU and can lead to withdrawal of funding by the Participating Partners. Programme management should ensure that co – funding is adhered to regularly.

Management has attributed this to the low revenue collections at the districts which could not allow them to fulfill their co-funding obligations.

(d) Failure to remit deducted withholding taxes

It was noted that an amount of shs.16,521,655 and shs.8,523,296 deducted in lieu of withholding taxes at the districts and sub counties respectively, was not remitted to URA. This contravenes the Income Tax Act.

Programme management should ensure that 6% withholding tax is promptly remitted to URA.

311 Management has explained that this was an oversight and promised to rectify this in the subsequent payments.

(e) Failure to comply with the required procurement procedures

It was noted that there were several instances of failure to comply with the required procurement procedures at all levels of the programme. Non- compliance to the procurement procedures results into misuse of programme funds and eventual withdrawal of funding by Participating Partners. Ineligible expenditure can consequently be incurred. Programme management should ensure that all procurement procedures are adhered to regularly through out the financial period.

Management has promised to address the matter henceforth.

(f) Inadequately supported expenditure

The following expenditure did not reconcile with third party supporting documents:-

Amount (shs) Secretariat 44,744,590 Districts 262,316,655 Sub-counties 402,001,861 TOTAL 709,063,106

I was unable to verify the validity, accuracy, existence and completeness of this expenditure. Management should ensure that amounts disclosed in the expenditure reports regularly reconcile with third party supporting documents.

(g) Failure to have an audit committee

It was noted that there is no audit committee. Audit matters are handled by the Finance and Administration Committee. In addition, the NAADS Act (Section 11 and 1st Schedule) specifies the number of Full Board meetings which ought to be held annually. Except for the board sub-committees and extra-ordinary board meetings, scheduled meetings were not held regularly in accordance with the NAADS Act.

312 To ensure appropriate oversight of the NAADS activities, the board has to meet in accordance with the requirements of the Act. Lack of an audit sub – committee of the board relegates audit matters (internal and external audit issues) to a non – specialized committee. The audit committee is an essential part of the corporate reporting process. Its primary responsibility is to oversee on behalf of the board the integrity of the financial reporting controls and procedures implemented by management to protect the interests of all stakeholders in the NAADS Programme.

I have advised management to ensure that Board meetings are held in accordance with the NAADS Act. An audit board sub – committee should be set up to handle the following matters:-

Receive and follow up internal audit reports and recommendations; Handle risk management and aspects on behalf of the board and ensuring that internal controls over NAADS programme are effective, focus on fraud risks in the entire NAADS Programme; External audit function – responsible for ensuring that issues raised by the external auditor are followed up; . Ensuring that all regulatory, legal and MoU requirements are adhered to and; Any other specific roles as the board may direct.

(h) Delayed release of funds to the districts and sub-counties

There was delayed release of funds to several districts and sub-counties. Implementation of the programme activities within the required timeframe becomes difficult with the late release of funds. GoU in liaison with the MoFPED should ensure the timely release of funds to the districts to enable a timely implementation of programme activities.

Management has promised to address the matter in future.

313 (i) Failure to make formal handover of NAADS

District authorities transfer Sub - County Chiefs and Sub - accountants regularly and there is no formal handover of NAADS activities to new officers.

The practice leaves a lot of uncompleted assignments in the S/Cs and Districts and the new appointees face a lot of problems to complete the assignments. This often results into disclaiming responsibilities over issues raised.

Management should ensure that all authorities that are responsible for the financial period under review are available at the audit site during the audit exercise and formal handover reports should be prepared to enable a smooth tracking of NAADS activities.

(j) Fixed assets management

It was noted that several districts did not have and/or maintain an asset register for NAADS Programme assets. In addition, several districts did not engrave the programme fixed assets. This implies that programme assets may get lost without any record to refer to. Tracing of programme assets may become difficult in case of loss, if they are not engraved. Programme management should ensure that a separate assets register in relation to NAADS assets is introduced and regularly maintained. In addition, all fixed assets should be engraved.

(k) Failure to maintain motor vehicle movement registers

Several districts either did not have log sheets to record vehicle movements or the log sheets were inaccurately recorded. There is no basis to ascertain whether or not all movements of the vehicles and the related maintenance costs were for the benefit of the programme. Log sheets should be introduced and particulars of vehicles, movements should be accurately recorded regularly.

Management has promised to undertake all measures to ensure that the log books are maintained and updated on a regular basis as recommended.

314 (l) Incomplete financial reports by some districts

Several districts and sub-counties either had incomplete financial reports or did not prepare financial reports. This is a contravention of the NAADS operational guidelines.

Management should ensure that all required reports are prepared regularly in accordance with the financial management guidelines issued by the NAADS Secretariat.

(m) Quarterly internal audit reports

Quarterly internal audit reports were not availed for review in the several Districts and / or the frequency with which internal audit was carried out was insufficient.

I was unable to ascertain whether the internal auditors‟ recommendations were implemented in the period. Insufficient reviews by the internal audit department can lead to misallocation of funds since the provision of checks and balances is being eroded.

Management should ensure that internal audit reviews are regularly undertaken, reports filed and actioned upon.

Management has promised to ensure that, internal audit department verify the District accounts on quarterly basis and provide timely reports before they are paid facilitation fees.

(n) Un authorized expenditure

It was noted that that several transactions were not authorized by the NAADS coordinators at several districts and sub-counties. This is a contravention of the NAADS operational guidelines and can lead to loss of programme funds.

Management should ensure that all expenditure incurred in the implementation of the programme is approved or authorized by the NAADS coordinator.

315 Management has promised to address the matter hence forth.

(o) Status of prior year audit recommendations

It was noted that most of the issues pointed out in the previous audit report were again repeated during the current financial year as summarized below:-

Issue raised Remarks

1 Non-deduction of statutory 6% withholding tax Repeated

from payments that are above shs.1,000.000

2 Failure to hold regular Board meetings in Not repeated

accordance with the NAADS Act

3 Failure to meet co-funding obligations Repeated

4 Delays in release of funds to districts Repeated

5 Delays in remittance of deducted PAYE and Repeated

NSSF to the relevant statutory bodies

6 Inadequately supported expenditures Repeated

7 Non verification of expenditures by the Not repeated

Internal audit department

8 Payment vouchers and supporting documents Repeated

not stamped „PAID‟

9 Frequent transfers of subcounty staff by the Repeated

districts

10 Bank reconciliations not signed by senior Repeated

316 officials at the districts

11 Failure to maintain fixed assets registers Repeated

12 Failure to engrave all project assets Repeated

13 Failure to use motor vehicle movement Repeated

registers

14 Incomplete financial reports by some districts Repeated

15 Ineligible expenditure at some districts Repeated

16 Expenditures not authorized by the NAADS Repeated

Coordinators at some districts

17 Failure to comply to procurement guidelines by Repeated

some districts

28.0 JUDICIARY

28.1 Over Expenditure The Statement of Appropriation (based on nature of expenditure) shows that the department incurred expenditure of Shs.1,389,736,325 in excess of the approved budget provision for goods and services without authority. The over expenditure results from failure to comply with reallocation and virement procedures prescribed by the law.

The Accounting Officer is advised to have the over expenditure regularised in accordance with the law.

317 28.2 Irregular Transfer of Funds The law requires that all unexpended balance of any moneys withdrawn from the consolidated fund shall be repaid to the consolidated fund at the end of every financial year. It was however noted that a sum of shs.3,974,000,000 which had not been spent at the year end was transferred from the treasury general account to a project account meant for the purchase of vehicles, furniture and fitting . This is in contravention of the Treasury regulations. The irregular transfer was intended to use those funds to effect purchase in the financial year 2008/2009 although the appropriation was for the year 2007/2008.

The Accounting Officer explained that the funds were released towards the end of the financial year to cater for the requirements of the newly appointed Judges noting the procurement process was lengthy and had not been completed by the year end.

28.3 Arrears At the close of the year the department had arrears of Shs.7,611,626,914. Included are commitments of Shs.4,117,547,655 incurred during the year in contravention of the commitment control procedures. Over commitments distort financial planning and expose the department to the risk of litigation.

The Accounting Officer was advised to operate within the available resources.

28.4 Staff Performance Appraisal for Judges. Standing orders require all public officers holding established posts both pensionable and non-pensionable regardless of rank to complete staff performance appraisal reports annually. It was however noted that all Judges of High Court, Court of Appeal and Supreme Court do not complete appraisal reports.

Failure to observe the above requirements denies both the Judiciary and the individual judges the benefits associated with an effective staff appraisal system which include performance improvement and training needs identification.

318 The Accounting Officer explained that the Public Service forms are not used to appraise Judges because evaluation could often lead to questions of independence of individual Judges and independence of the entire Judiciary. He added that this matter was extensively discussed in the Judges‟ conference and it was agreed that Judges should be evaluated in order to make them accountable. A consultancy firm is to be hired to come up with a suitable appraisal system.

28.5 Re-employment of Pensionable Judges Public service standing orders state that; „In the event of a pensionable public officer who has retired from service on reaching the age being required or allowed to continue in the public service, any period served beyond the retirement age shall, subject to the direction of the appointing authority be on non-pensionable terms of service. It is also stated that re-employment of pensioners will be subject to periodic restrictions.

It was noted that three pensioners were recently appointed as Judges, one as a Judge of Court of Appeal and the others as a Judges of High Court on permanent and pensionable terms. I recommended that these appointments be regularized in accordance with the rules and regulations of the public service. The Accounting Officer has drawn the attention of the Ministry of Public Service to the above anomalies. I have not been provided with a response to the matter.

28.6 Low Rates of Fees Charged It is good practice to recover the service cost for any activity performed. A review of the fees structure levied for court services offered revealed that they are very low and incomparable. They range from Shs.300 for taking an Oath to Shs.1, 500 for issuing a complaint. This is far less than the bank charges of Shs.2,500. It was noted that these fees have not been revised for sometime now.

I advised management to consult with the Accountant General and other stakeholders with a view of setting a reasonable fees structure.

The Accounting Officer noted the concern and observed that the pending draft bill No. 2 of 2004 would address the fines and other related financial matters.

319 28.7 Official Residence of the Chief Justice The Chief Justice by appointment, is entitled to a fully furnished house which is the official residence located at Nakasero. Since the appointment of the sitting Chief Justice in February 2001, numerous renovations have been made on the main house and a new guest house built at the end of 2005. However, the residence remains unoccupied. According to the Estates Manager, the problem stems from the fact that work on the perimeter wall had not taken off since 2005 when the renovation process started.

The Accounting Officer explained that no construction work has been undertaken since 2005 due to lack of funds and that the construction of the wall fence estimated to cost shs.254,958,209 had resumed.

28.8 Selective Payment of Disturbance Allowance According to Public Service Standing Orders, officers may claim disturbance allowance when the there has been compulsory transfer from one station to another and the distance between the new and previous quarters is not less than 32 kilometers. During the year under review various officers were transferred and a sum of shs.219,600,000 was selectively paid to only 12 Judges at a rate of shs.18,300,000 each in respect of disturbance allowance. It was however noted that other judicial and non judicial officers transferred during the year and therefore entitled to disturbance were not paid. Such selective payments cause tensions and ultimately affect morale and performance among staff.

The Accounting Officer explained that due to inadequate resources, priority was given to Judges only. However, a supplementary budget requesting for more funds has been forwarded to the Ministry of Finance to pay for other categories of staff.

28.9 Audit Inspections Audit inspections carried out in various Courts around the country revealed the following matters;

320 28.9.1 Lack of Exhibit registers Courts are mandated to keep Exhibit registers to record exhibits tendered in courts. However most courts visited did not maintain registers. These include Mpigi, Kitgum, Matugga, Lugazi, Sembabule. As such, details of tendered exhibits could not be verified. In Mpigi there was no key to the exhibit store as the person who was in-charge left the job without hand over to any body. In Matugga no store existed at all. Lack of registers and stores renders reconciliations difficult and items deposited vulnerable to misappropriation.

28.9.2 Books of Accounts Courts of Luwero, Pader, Sembabule did not maintain basic cash books to record revenues and bail deposits collected. I could not ascertain and confirm actual collections.

28.9.3 Cases completed without warrant of commitment to prison In courts like Makindye, Gulu, Lira, samples taken on some completed case files revealed that most of them had the litigants convicted to a specific period in prison but there was no warrant of commitment to imprisonment. This made it difficult to determine where the litigant had served the sentence.

In Apac Grade 1 Magistrate Courts Culprits were released on bail without proof of bail payments totalling shs 3,900,000. Another 6,800,000 which was supposed to be paid as fine by 22 litigants before their release was not collected.

28.9.4 Mpigi Chief Magistrate Court (a) NTR utilised at source An audit inspection carried in the court revealed that Shs.11,270,000 was collected as Court fees and fines. Shs.150,000 was for Bail deposits. However Shs.4,327,000 was remitted to High court leaving Shs.6,945,500 utilized at source contrary to Treasury Accounting Instructions.

(b) Staff matters Two employees (cleaner and night watchman) were identified to be non established staff since the beginning of the financial year 2007/2008

321 28.9.5 Mwanga 11 Court Examination of records revealed that Shs.37,806,000 was collected as bail deposits and Shs.27,431,801 as revenue.

(a) Civil cases The requirement of a plaintiff to pay filing fees before the hearing of any case was sometimes not complied with. From a sample of ten (10) case files tested, six (6) did not pay filing fees before hearing. Among them one used a photocopy receipt which had been used in another case but whose date had been altered.

(b) Family court Filing fees are not receipted at all yet family court register reflects cases registered.

28.9.6 Gulu Chief Magistrates Court During audit inspection it was observed that a cashier was reported to have absconded from duty with effect from 1st October 2007, but this cashier continued being a signatory to the operational funds account by the time of the audit exercise (10th Sept 2008).

It was also observed that the cash book was first opened in Feb 2008 and there were no accounts records maintained prior to that date making it difficult to determine how much was collected before February 2008.

28.9.7 Pader (1) Magistrates Courts Cash Survey: A sum of Shs.300, 000 was found at hand but I could not confirm its source since there were no books of accounts. The station does not maintain cash books for both revenue and bail deposits and does not have general receipt books. All their collection for both bail and revenue are received without issuing receipts. Collections totalling to Shs.6,152,000; (shs.1,900,000 for bail and shs.4,252,000 for revenue) were recorded in the counter book. Out of the total collection shs.4,043,000 was remitted to Apac Grade one magistrate‟s court and is supported

322 by receipts, shs.890,000 was reported stolen, shs.300,000 was at hand, leaving shs.919,000 not accounted for.

28.9.8 Luwero Chief Magistrates Court There was a deficit of Shs.3,650,000 as shown here below:-

Total cash from general receipts 9,252,600 Less: Banking 5,081,000 Cash at hand 521,500 5,602,500) Deficit 3,650,100

The cashier alleged that the deficit was caused by advances to staff. I have advised the Accounting Officer to ensure that the deficit is made good.

29.0 PARLIAMENTARY COMMISSION

29.1 Constituency Development Facility In every financial year, the parliamentary commission pays each Member of Parliament a fixed sum of money meant for constituency development, to enable the individual members facilitate development projects/activities in their respective constituencies.

During the financial year, the Commission paid Members of Parliament a total of shs.3,190,000,000 as Constituency development funds. The Funds are budgeted and released under Capital Development. No accountabilities were availed for audit and therefore it was not possible to confirm that the funds were actually spent on Capital Development purposes.

The Accounting Officer explained that the beneficiaries are aware of the accountability requirements of the fund and that only members who will have accounted will access the funds for the release of April 2009.

323 29.2 Staffing of Internal Audit Department For long, the Parliamentary Commission has had only one internal auditor previously seconded by Ministry of Finance to run the internal audit function. The Commission later recruited its own Internal Auditor to manage the Internal Audit function.

The current functional structure of the Commission places the internal audit department well above the other functions of the Commission apart from that of the Speaker/Deputy Speaker and Parliamentary Commission/Coordination. However, in reality it was established that the Internal Auditor actually reports to the Director, Finance and Administration. This is considered not to be good internal control practice.

It was also noted that no Audit Committee has been formed as required by the Public Finance and Accountability Act, 2003.

I advised the Accounting Officer of the Commission to review the current structure of internal audit unit with a view of recruiting more internal audit staff and to have the post of the head of internal audit elevated to an appropriate level in the organisation structure and appropriate salary scale. There is also need for formation of an Audit Committee to which the Internal Auditor should report.

29.3 Contributions to Parliamentary Pension fund The Parliamentary Pensions Fund was established by the Parliamentary Pensions Act of 2007. The membership of the scheme consists of members of Parliament (MPs) and members of staff of parliament (section 5(1) of the act).The monthly contributions to this scheme consist of members contribution of 15% of the pensionable emoluments and government contribution of 30% of the monthly pensionable emolument paid to each member (section 6(1) (2) of the act).

324 It was noted that;

While deductions were made at the rate of 15% from Members of Parliament as their contributions, no deductions were made from the staff/employees of the Commission for the entire 2007/08, .as required by the Act.

Section 24 of the Act further requires that the Commission may make Regulations for the effective implementation of the Act. A consulting firm was hired to draft the regulations and a draft was presented. However, at the time of writing this report, the draft was yet to be adopted by the Board of Trustees.

The Accounting Officer explained that deductions from staff could not commence because the status of the commission staff in the Act was not clear and the matter required further consultations with the Ministry of Public Service regarding the fate of pensionable service that most staff had earned under the Public Service pensionable scheme.

On the Regulations, he explained that the consultant who handed in his report in October 2008 to the Board of Trustees for scrutiny had observed that various parts of the Act are unclear and open to misinterpretation and lack clarity on the benefit design and structure of the scheme, with conflicting provisions in various parts of the Act.

Such matters, as raised by the consultant may lead to uncertainties and conflicts within the scheme if not handled in time.

29.4 Contract Variations for the Rehabilitation of Parliamentary Building

The Contracts committee sitting on 15th June 2007 authorised a contract award to a company to carry out emergency rehabilitation works of the Parliamentary Building at a contract sum of shs.2,087,684,304 inclusive of VAT, ahead of CHOGM. Documents show that the contract was varied from the initial contract sum to shs.3,076,785,185 resulting into total variations of shs.989,100,934 (47.4%). 325

The Public Procurement and Disposal of public Assets Regulation 262(6) provides that, where a contract is amended more than once, the cumulative value of all contract amendments shall not increase the total contract price by more than 25% of the original contract price. The increase of the original contract price by 47.4% was contrary to this provision. There was no clearance from the PPDA Authority.

30.0 HEALTH SERVICE COMMISSION

30.1 Strategic Plan The Commission had a four year strategic plan covering the period 2004/05 to 2007/08 which expired on 30/06/2008. This should periodically be reviewed to address the continuous changes within the organisation and its external environment.

The Accounting Officer explained that the process of review and development of a new strategic plan to cover the period 2008/09 to 2012/13 was underway.

30.2 Lack of a Training Plan The Commission sponsored members of staff for various courses during the year at shs.17,000,000. However, there was no documented training plan to guide management on training activities to be carried out and the expected outcomes of such training. The expenditure was based on staff applications rather than the training plan.

Lack of a training plan may lead to duplication of training and uncoordinated Ministry activities.

30.3 Motor Vehicles Although 3 currently grounded motor vehicles were recommended for boarding off, no action had been taken on the matter. Some of the vehicles are kept in private garage workshops thus exposing them to vandalisation. Delays in disposing off such items may lead to further deterioration in their value.

326

The Accounting Officer explained that he had written to the chief mechanical engineer on the matter. He was then advised to expedite the process.

30.4 Stolen Motor Cycle (UG 0143B) There was no information regarding a motor cycle that was stolen two years ago. It is not known whether action was taken to either recover it or apprehend the culprits.

The Accounting Officer explained that the case was reported to Police and had requested them to report on the status of the investigation, but no response had been received.

30.5 Staffing gaps Seven posts are vacant at the Commission. Among them, was the post of the Secretary for the Commission who should be the head of the Secretariat and responsible among other duties, for carrying out the policy decisions and the day to day administration, management and control of the other staff. The post fell vacant at the beginning of the financial year 2007/08 and had not been filled.

Implementation of the Commission activities may be hampered by lack personnel in the established positions.

Management is advised to liaise with the appropriate authority to have the vacant positions filled.

31.0 JUDICIAL SERVICE COMMISSION

31.1 Unaccounted For Funds By the close of the year the Commission had not accounted for an amount of Shs.1,393,000,000 advanced to them by Ministry of Justice and Constitutional Affairs as indicated below: (a) Recruitment of Judicial Officers Shs 100,000,000 (b) Collection and Processing of Public Complaints Shs 196,000,000

327 (c) Education and Public Awareness on the admin. of Justice Shs 1,037,000,000 (d) Installing of suggestion boxes Shs 60,000,000 Total 1,393,000,000

In his response the Accounting Officer explained that the expenditure vouchers were not available because they had been sent to the Ministry of Justice and Constitutional Affairs for accountability purposes. I have advised him to retain copies of the accountability at the Commission for any other audit purposes. In addition, on submission of accountability back to Justice, the Commission should request for acknowledgement from the ministry.

31.2 Composition of the Commission The Judicial Service Commission was created under Article 146 (1) of the 1995 Constitution of the Republic of Uganda. It is a requirement under the Constitution for the commission to comprise of nine members. It was however noted that the Commission is not yet fully constituted as the ninth member has never been appointed. Lack of a fully constituted commission contravenes the constitution and may be impeding the operations of the Commission especially when it comes to voting on important matters. The Accounting Officer explained that submission had been made to the appointing authority for nomination of one public member to take up this position but no response had been received.

31.3 lack of Corporate Plan The Commission does not have its own corporate plan. The Accounting Officer in his response stated that commission‟s corporate plan was within the Justice, Law and Order Sector (JLOS) Strategic Investment Plan II 2006/07 – 2010/11. I recommend that since the Commission is an autonomous entity, it should prepare its own corporate plan to guide management in the achievement of the Commission‟s strategic objectives. This should then be integrated into JLOS at the sector level.

328 31.4 The Commission’s Mandate And Functions (i) Advisory Role of the Commission to the Government According to JLOS‟ Report on the Joint Evaluation of the Chain-Linked and Case Backlog Project 2002-2007 published in March 2008, it was noted that, as at June 2007, there were 74,066 backlog of criminal cases in the courts.

In my report of 2004/2005 to Parliament, I reported the huge backlog of criminal cases in the courts of law resulting into a number of suspects languishing in prisons despite heavy funding of the institutions involved in clearing of these cases. Since the late 1990s, money have continued to be channeled to justice institutions to clear the backlog cases but there has been little success being made as the backlog continues to increase.

The Accounting Officer attributed the build up of case backlog to various reasons including the shifting of some of the cases from the high courts to the magistrate courts.

There is need for regular reviews of the programme to ensure that factors which contribute to the build up of the backlog are investigated and addressed.

(ii) Collection and Processing of Public Complaints and Recommendations (a) Registration of Complaints It was observed that complaints reported go through four processes of registration; investigation; hearing and recommendation; and decision making. Both registration and investigation are carried out by the Department of Planning, Research and Inspections (PRI), while the Disciplinary Sub-Committee of the Commission handles the hearing of the complaints and submits its findings and recommendations to the plenary of the Commission for final decision on each complaint case.

However, it was also observed that, except for the main register maintained at the registration desk, there is no other register maintained at each stage of investigation; hearing; and the final decision to enable monitoring of each case

329 that passes through the process of complaint resolution. The main register at the registration desk does not indicate whether a complaint has been resolved or not. Furthermore, it was observed that records in the main register do not tally with the information on the computer which is maintained by the Principal Legal Officer.

The Accounting Officer explained that the system was currently being automated and this would solve the problems in relation to the complexities of data entry and management.

(b) Complaints Resolution Management Twenty case files were selected to test check for their status in complaints resolution process and to evaluate the complaint resolution system. The findings were as follows: Only eleven (11) files out of twenty (20) files were obtained from the registry, the remaining nine files (9) could not be traced.

Three cases that had been declared closed continued to appear among the list for pending cases as at 30thJune 2008

One (1) case effectively concluded on 11th April 2006 was not endorsed by the Chairman of the Commission although it had been claimed that all cases are always closed by the Chairman himself.

Three (3) cases were referred to other institutions of the JLOS because they lacked merit to be handled in the Commission.

Three (3) complaint cases that were still pending investigations were omitted from the list of pending cases.

Only one (1) case was fully processed and the complainant was fully informed about the commission‟s decision.

330 Except for one complaint case which was fully resolved and the complainant informed of the outcome, it was noted that complainants were not being informed of status of their complaints. In his response the Accounting Officer stated that the automated system that is currently being implemented would solve all the issues highlighted above.

32.0 ELECTORAL COMMISSION

32.1 Misallocation of Expenditure The commission budgeted Shs.1,320,000,000 for legal costs and petitions but spent Shs.1,586,555,208 for the activity during the financial year. Analysis of the expenditure revealed that the excess of shs.266,555,208 over the budgeted amount was charged under other expenditure items without the necessary virement authorization from the Treasury. The practice can lead to misstatement of the financial statements. In addition, other programmes may not be implemented as planned due to diversion of funds.

The Accounting Officer is advised to strengthen controls over budgetary expenditure.

32.2 Funds Unaccounted for

(a) Advances

A total of Shs.289,875,900 advanced to various officers to carry out Commission‟s activities remained unaccounted for as at 30th June 2008. Most of these funds were for activities related to by-elections in various districts, imprest for day to day activities and allowances to staff for festivals within the year.

Although the Accounting Officer stated that the funds had been accounted for, the relevant accountabilities were not presented for audit. I was therefore not able to confirm that funds were put to proper use.

331 (b) Lack of Un-acknowledgement Receipts The Commission did not have acknowledgement receipts for payments of Shs.244,516,610 made to Uganda Revenue Authority and NSSF in respect of PAYE deductions, withholding tax deductions and social security contributions. I was not able to confirm receipt of the funds by the intended beneficiaries.

Management should ensure that receipts are always followed up in respect of remittance of all statutory deductions.

32.3 Cash and Cash Equivalents

The commission operates bank accounts in districts for various electoral activities. Balances relating to 70 bank accounts operated in the districts were not disclosed in the Accounts and neither were the respective bank statements as at 30th June 2008 availed for audit. Authority from the Treasury to open the bank accounts was not availed. I was not able to confirm the correctness and completeness of the cash balances reflected in the financial statements.

Management explained that the funds transferred to these bank accounts are meant for specific activities which are paid for after every electoral activity and promised to seek retrospective authority for opening the bank accounts.

32.4 Domestic arrears

The Commission incurred and accrued domestic arrears of shs.577,586,847 during the year contrary to the commitment control system. Shs.472,324,176 outstanding from the previous years for data entrants lacked supporting documentation to justify their inclusion in the accounts. Meanwhile, the other unsettled bills include costs that were arrived at through consent judgement that may attract additional costs if not given priority and settled early.

32.5 Uncollected Revenue

The Commission is owed shs.313,163,341 by various individuals in the form of court awards. There is still laxity on the part of management in collecting this

332 money from the respective debtors as some of these awards date as far back as 1996 and yet the Commission pays colossal sums of money every year in legal costs.

It was also noted that there are delays in filing bills of costs for taxation by the Commission. The schedule provided by management shows costs amounting to shs.1,067,317,500. Some of the cases date as far back as 2001 and yet the bills of costs were filed for taxation in 2008.

Management should have recovery enforced and also ensure that bill of costs are filed promptly as this can be a deterrent measure against individuals who unnecessarily sue government.

32.6 Refund of money meant for elections not conducted Shs.1,247,544,000 was released to various Districts‟ Returning Officers to conduct elections for Administrative units, Youth and Women Councils. (Auditor General‟s Report to Parliament for 2005/06). The elections were not conducted and management was directed by the Public Accounts Committee to recover the funds. Management took action and most of the funds were transferred back from the districts accounts to the Electoral Commission general account with Bank of Uganda. However, by the time of writing my report, shs.181,797,043 was yet to be transferred to the Consolidated Fund account.

In addition, shs.114,335,044 from the districts of Mubende, Nebbi, Busia, Mukono Arua and Masindi had not been recovered from the former District Registrars.

Management explained that the Registrars were dismissed from service and their cases reported to police for investigation and prosecution. I await the outcome of this process.

32.7 Lack of Audit Committee The law requires the establishment of an Audit Committee to assist the Accounting Officer in carrying out his/her oversight responsibilities relating to financial practices, internal controls, corporate governance, compliance with laws,

333 regulations and ethics and all audit matters. However, it was observed that the commission has not put in place an audit committee as required.

The Accounting Officer is advised to consult the Treasury for necessary guidance on the matter.

33.0 UGANDA HUMAN RIGHTS COMMISSION

33.1 Over Expenditure The Statement of Appropriation based on services voted by Parliament shows that the Commission incurred expenditure of Shs.59,800,907 in excess of the approved budget provisions for non-wage. Authority for the over expenditure was not provided.

33.2 Violation of the Commitment Control System By close of the year, the Commission had arrears of Shs.1,235,112,558. Included are arrears of Shs.59,893,602 incurred during the year contrary to the commitment control procedures. The Accounting Officer attributed the arrears to inadequate funding and further explained that arrangements have been made to stop the practice.

33.3 Organisation Structure The Commission has a new organisation structure which was approved by the Ministry of Public Service in 2007. However, the structure has not been fully implemented up to now.

At the time of audit 90% of the structure had been filled. Management attributes the problem to lack of funds.

33.4 High Turn Over of Senior Management During the Year During the year under review, a total of eight (8) senior members of staff left the Commission. High turnover of staff can result in loss of skilled and experienced personnel and this can impact on the achievement of the entity objectives.

334 Management attributed the turnover to its inability to offer competitive pay due to the ceiling on the wage bill.

I advised that the Commission should come up with retention policy to ensure that it does not lose its valuable human resource.

33.5 Un-utilised Assets An inspection carried out in the regional offices revealed that the Commission continued to keep sets of defective Radio Communication equipment in its 5 regional stations despite the fact that the equipment was not being utilised. The equipment was procured to enhance internet communication (office to office) to address the communication gaps but the radio communication equipment did not function as expected.

Efforts should be made to have the equipment usable.

The Accounting Officer stated that the radio equipment had a coverage of 50 km radius yet his operations require equipment that operate further than that. He further explained that the project which donated the equipment wound up so he could not get additional funds to procure accessories to enhance its functionality. A decision had been reached to transfer the equipment to other areas where they can be used consequent to additional funding. I await this action.

33.6 Inconsistencies in the Salary Scales and Salary Figures A review of the payroll indicated inconsistencies in titles, scales and the basic salary figures for employees. In some instances a senior officer would earn less than a junior officer. In others, staffs who were promoted to senior positions replacing leavers did not take up the salaries previously attached to the scales of the leavers.

Management explained that the inconsistencies would be addressed when the new structure is fully operationalized. I advised that this should be expeditiously handled to avoid staff complaints.

335 34.0 PUBLIC SERVICE COMMISSION

34.1 Over Expenditure The statement of appropriation based on services voted by Parliament shows that the Commission incurred expenditure of Shs.111,585,900 in excess of the approved budgetary provision for Programme 01 – Headquarters without relevant authority.

Over expenditure should not arise if the recommended procedures for virements/reallocations are properly forwarded.

The expenditure should be regularized in accordance with the regulations.

35.0 UGANDA LAW REFORM COMMISSION

35.1 Tax remittances not acknowledged PAYE deductions totalling Shs.80,515,414 allegedly remitted to Uganda Revenue Authority had not been acknowledged as received by the tax body by the time of my audit. Therefore, the remittances remained unaccounted for.

It is recommended that tax remittances be accounted for in form of acknowledgement receipts from the authority.

35.2 Delayed appointment of commissioners According to section 3 of the Uganda Law Reform Act, the Commission should consist of a chairperson and six other commissioners appointed by the President on the advice of the Attorney General. Section 5 of the Act requires a quorum of three commissioners, two of whom have to be lawyers.

A review of the Commission‟s records and in particular the Minutes of the Commissioner‟s meeting revealed that the last meeting of a fully constituted Commission was in 2005. This was attributed to the delayed re- appointment/appointment of Commissioners which has created a vacuum in the Commission‟s operations.

336 The Accounting Officer explained that the contract terms of the commissioners expired in 2005 and that he had notified the appointing authority of the need to renew their contracts.

I have advised the Accounting Officer to remind the appointing authority of the need to have Commissioners urgently appointed in order for the Commission to effectively execute its mandate.

35.3 Unfilled vacancies: A review of the Commission‟s organisation structure revealed that out of an approved establishment of 65 posts only 43 are filled leaving 22 positions vacant.

It was also observed that some of the key senior positions including that of Secretary of the Commission are not substantively filled.

Failure to fill vacant posts may hamper the overall Commission‟s performance. Existing members of staff may also be overworked leading to staff demotivation and probable staff turnover.

Management should endeavour to have the vacancies substantively filled.

Management explained that the commission has been carrying out recruitment of some staff in phases as advised by Ministry of Finance. He explained that some posts had been advertised and that the appointments Board had carried out interviews and identified suitable candidates to fill the posts.

35.4 Absence of Internal Audit function in the structure It is good practice for organizations to have an internal audit function in their organisational structure for effective internal control system. However, the Commission‟s organizational structure does not provide for an internal audit function. This is a major internal control weakness which calls for the review of the oganizational structure to address the matter.

337 The Accounting Officer explained that the matter would be addressed during the planned restructuring exercise by the Ministry of Public Service.

35.5 Asset Register It is a requirement that an organization maintains an asset register where all assets are recorded indicating the type of asset acquired, its cost, location, its label and how it is depreciated. It was however noted that the asset register was poorly maintained and not up to date. This exposes the Commission to the risk of assets getting lost without being detected.

It is recommended that a Fixed Assets register be properly maintained and updated.

36.0 EDUCATION SERVICE COMMISSION

36.1 Unappropriated Funding (IRISH Aid) The commission obtained support from the Irish Aid to the tune of shs.304,320,000 to implement the scheme of service for the teaching personnel. The expenditure was not appropriated by Parliament.

The Accounting Officer was advised to regularize the expenditure and also ensure that all funds in future are appropriated by Parliament.

36.2 Gaps in the Organisation Structure A review of the organization structure revealed that out of the recommended 67 posts in the Commission, only 51 were filled at the time of audit. Staffing gaps cause work pressure on staff leading to low service delivery.

The Accounting Officer explained that inadequate office space was the cause of the problem. However, despite the conditions facing the Commission, six (6) additional staff have since been recruited.

338 36.3 Budget Performance A review of the organisation‟s policy statement, budgets and annual reports revealed that some planned activities either registered low progress or were not implemented at all despite their existence in the budget. These activities include; evaluation and enforcing discipline in education service recovery procedures on recruitment, deployment, transfer and discipline of teachers and building relevant information for management decision making and stakeholder reference.

The Accounting Officer explained that the activities could not be undertaken due to extra workload at the Commission.

37.0 LOCAL GOVERNMENT FINANCE COMMISSION

37.1 Irregular Payment of Allowance A total of Shs.60,000,000 was incurred when five part time Commissioners continued to be paid a monthly consolidated allowance of Shs.1,000,000 each during the financial year 2007/2008, irrespective of whether they sit or not. This contravenes 58 (1) and (2) of Local Government Finance Act 2003. The same Commissioners were also paid sitting allowances whenever they attended the Commission meetings. This matter was pointed out in my previous audit report but no action has been taken to address it.

The Accounting Officer is advised to follow up the matter with the appropriate authority in order to regularize these allowances.

37.2 Purchase of Motor Vehicle (TOYOTA PRADO) The Commission awarded a tender to a company to supply one station wagon Toyota Prado. Under the general and special conditions of the Contract the payment was supposed to be made in full after delivery of the vehicle.

However, it was observed that the whole amount of Shs.94,944,747 was paid before delivery. At the time of audit in November, the Vehicle had not been delivered.

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The Accounting Officer is advised not to make advance payments before goods and services are performed. Where permitted, advance payment guarantee should be sought. Meanwhile the delivery of the vehicle should be pursued with the supplier.

38.0 UGANDA BLOOD TRANSFUSION SERVICES

38.1 Inadequate Legal and Operating Environment

The entity was made self accounting and its activities separated from the ministry of Health in 2005/06. However there is no law to define its mandate and operations. It operates with the structure overseen by an interim Board whose term expired.

Although the entity is a vote, it is not fully independent of the Ministry of Health as it submits its annual budget though the accounting officer of the Ministry. As a result the entity suffers major budget restrictions, and inadequate funding. A final draft bill for the entity was prepared in March 2006 but minimal progress was made to have it enacted into law.

Meanwhile the entity‟s annual budget requirements and operations are funded by donors to the extent of 60%, a state of affairs not sustainable in the long term.

The Accounting Officer explained that the draft bill was ready and was awaiting presentation by the Ministry of Health to Cabinet for approval.

38.2 Grounded Vehicles

(a) Vehicles due for disposal

As reported in my annual report for the financial year ended 30th June, 2007, the organization still has 14 vehicles and three motor cycles have been grounded at

340 its premises for many years without being boarded off. Delays in disposal of such assets may lead to loss in their salvage value.

The Accounting Officer explained that the disposal process was to be forwarded to the contracts committee for consideration and promised to have the exercise completed by the end of March, 2009.

I have advised that the process be expedited.

(b) Accident Vehicle

All accidents to Government motor vehicles must be reported to the Accounting Officer concerned and to the Police. The damaged vehicle should be examined by a garage and repairs to the vehicle accordingly estimated. If the estimated cost of repairs is below 50% of the original cost and in the opinion of the officer responsible is worth repairing, this may be done forthwith (TAI part ii appendix.).

Motor Vehicle No UG 2995M, a Toyota Land Cruiser belonging to the entity but under the charge of the Principal Medical Officer of Mbale regional blood bank was involved in an accident on October13, 2007 at Atiri Tororo- Mbale road. At the time of the accident, the vehicle was being driven by a driver of Uganda blood transfusion services. Records also indicate that the vehicle is beyond repair.

However, the police and inspection report does not describe fully how the accident occurred. It estimated the repair costs at shs.15 million but to-date no repairs had been carried out.

The Accounting Officer explained that she had communicated to the Ministry of Works and Transport to assess the cost of repairs and was awaiting their reply.

341 38.3 Unexplained Credits on Cash Flow Statement

The cash flow statement for the year ended 30th June 2008 reflects an adjustment to the opening cash balance of Shs.1,733,586 that was not properly explained.

The Accounting Officer explained that she had written to bank of Uganda to provide her with the statements that would enable her carry out further investigations into the matter.

38.4 Split of Purchases

Shs.14,757,040 was paid to various suppliers by splitting up purchases apparently to avoid use of the recommended procurement methods. Most of the purchases were delivered within one to three days difference using the same supplier but on different invoices.

The Accounting Officer explained that such practices were due to emergencies. Verification however could not support the claim, and She was advised to plan for Her procurements.

38.5 Purchases not taken on Charge Inventories are accounted for by value and quantity as such it is necessary to record the unit cost of each inventory item or to have them taken on charge, to facilitate reconciliation of stocks with financial records (TAI part I par171h). However, purchases of items worth Shs.6,336,237 from various suppliers were not taken on charge. I was therefore not able to confirm that the items were delivered and utilized for the intended purpose. The Accounting Officer is advised to strengthen inventory control procedures to ensure that all purchases of inventories are recorded and inventory records properly maintained.

The Accounting Officer explained this was an isolated case that was due to a ledger folio that had not been posted. He was however advised to strengthen the internal controls and to ensure that all procured items are taken on charge. 342 39.0 UGANDA LAND COMMISSION

39.1 Excess Expenditure The commission incurred expenditure of Shs.892,511,712 in excess of the approved Parliamentary appropriation without relevant authority. This was a result of over expenditure on various budget lines relating to goods and services as indicated in the statements of appropriation account. The Accounting Officer attributed the excess expenditure to property rates incurred during the year which had not been budgeted for. The excess expenditure should be regularized in accordance with the Public Finance and Accountability Act, 2003.

39.2 Undeclared Domestic Arrears 39.2.1 Land Procurements Records show that a total of Shs.4,551,050,000 is owed to a private individual in respect of eleven (11) land titles that were purchased by Government. However, there is no evidence that these funds have been paid nor has it been declared as unpaid bills in the Financial Statements. Further, in absence of all records relating to the purchase, I was not able to ascertain whether the procurement/acquisition was made in accordance with the recommended procedures.

The accounting officer explained that it‟s the Ministry of Lands which is responsible for the transaction. He was advised to avail all the documents relating to the procurement.

39.2.2 Accumulated Domestic Arrears For the second year running the commission had not budgeted for payment of domestic arrears relating to property rates on government buildings located in town councils and municipalities. At the time of audit, the cumulative figure was estimated to be Shs.1.5 billion and was expected to increase as they accrue annually.

The Commission is at a risk of being sued for non payment and may in the process incur unnecessary expenditure.

343 The accounting officer explained that the Commission on average needs over Shs.500 million annually to pay for the property rates but this could not be obtained due to the budget ceilings by Ministry of Finance.

There is need for the Ministry of Finance to avail resources to the Commission to enable it clear these arrears.

39.3 Non-Transfer of Certificate of Titles Shs.379,544,000 was paid during 2006/07 financial year for land acquisitions from absent landlords and another Shs.332,154,000 was spent during the year under review. This brings the overall total expenditure to Shs.746,271,000 spent on land acquisitions. To-date, eighty one (81) certificates of titles have been surrendered to the Commission together with dully signed transfer forms by the previous owners.

However, it was noted that although some payments were made and transfer forms signed as early as June 2003, these titles had not yet been transferred into the Commission‟s names to ensure transfer of ownership contrary to Sec.49 of the Uganda land Act Cap.227, 2000 which requires the Commission to procure certificates of titles for any land vested in or acquired by the government. It was also noted that there are no proper guidelines for a transparent, equitable and efficient distribution of the acquired land as guided by Sect. 41 (5) (b) of the above Act.

The Accounting Officer explained that the responsible officer was to travel to Fort Portal to follow up the matter on Land transfer, and that the Commission was not responsible for the Land distribution policy.

The management of the Commission is advised to expedite the process of securing titles for all the land acquired as required by law. In addition the Commission should come up with proper guidelines that allow transparent and efficient distribution of the acquired land as required by the law.

344 39.4 Unaccounted for advances Shs.7,450,000 advanced to commission officials remained unaccounted for at the time of audit. Delays in accounting for funds may lead to falsification of documents and possibility of loss of funds.

The Accounting Officer is advised to strengthen controls over advances by having the amounts recovered, if no accountabilities are presented within the time period stipulated by the regulations.

39.5 Unpaid lease premiums (a) Non payment of premiums for leased land Recent allocation of the Namanve land revealed that some lessees to whom land was allocated had not paid the required premium which is necessary before titles can be processed.

According to the terms of the allocation, this amount is payable within one year of allocation. Although many of these were allocated as far back as 2007, premiums have not been paid todate. In the absence of a proper system for tracking debtors, I could not ascertain how much was outstanding from these transactions as unpaid premium at the end of the financial year.

It was also observed that although the allocatees are supposed to acknowledge the offer in writing, this was not done in a majority of cases.

(b) Valuation According to the current procedures followed, after the land has been allocated to the applicant, the lands officer requests the Chief Government Valuer for determination of premium for the land to be paid. On the same request forms, the Chief Government Valuer indicates the premium payable and the annual rentals.

However, no valuation reports are presented in support of the valuation made by the Chief Government Valuer for the amount of premium and annual rental to be paid.

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(c) Disposal Method Used In the absence of records, I was not able to ascertain whether the disposal of Namanve land was carried out in accordance with the PPDA Act and regulations.

The Accounting Officer explained that they cannot use the PPDA Act because they are governed by the Land Act Cap.227.

I advised the Accounting Officer to ensure that the principles of transparency are followed whenever disposal of government assets is carried out as provided for in the PPDA Act and Regulations.

39.6 Budget Performance for the year under review Whereas the Commission budget was approved by parliament along with that of the Ministry of Lands, Housing and Urban Development, a review of the performance of the Commission revealed that a number of planned activities were not implemented.

Performance indicator Actual output Number of hectares compensated, target 4276.801 hectares of land were is 6000 ha. compensated Several town councils be paid Only 2 town councils were paid i.e. lira, Mbale municipal councils

The Accounting Officer explained that many of the activities within the mandate of the commission could not be carried out due to lack of funding.

The Accounting Officer is advised to liaise with Ministry of Finance, the parent Ministry, Parliament and other stakeholders to ensure that adequate resources are mobilized to enable it carry out its mandate.

346 40.0 UGANDA INDUSTRIAL RESEARCH INSTITUTE

40.1 Funds Not Accounted for Expenditure totaling Shs.185,361,766 was not accounted for. Included is Shs.121,847,844 in respect of supplies which lacked supporting documentation such as supplier‟s invoices, Delivery Notes, and inspection/goods received notes, while the balance of Shs.63,513,924 relating to travel abroad lacked supporting documents such as receipts, air tickets, visas and travel coupons.

In the absence of supporting documentation I was not able to confirm whether the supplies procured were delivered and that the journeys in respect of travel abroad were undertaken.

The Accounting Officer is advised to provide the required documentation.

40.2 Non-Adherence To PPDA Laws and Regulations. Payments for goods and services totaling to Shs.108,650,241 were made without complying with the requirements of the PPDA Act and regulations. The funds were paid to members of staff of the Institute instead of applying the recommended procurement procedures where companies are pre-qualified and procurement carried out using the PPDA Unit and the Contracts Committee.

The Accounting Officer explained that most of the materials procured by the Institute are unique and that at times running a bidding process may be a waste of time. I advised the Accounting Officer to always adhere to the law since it caters for all types of procurements.

347 41.0 UGANDA AIDS COMMISSION

41.1 Over Expenditure According to the Statement of Appropriation based on services voted by Parliament the Commission incurred expenditure of Shs.260,308,079 on various budget lines in excess of the approved provisions without authority as indicated below:

ITEM EXPENDITURE DETAILS AMOUNTS 211103 Allowances 200,269,214 221003 Staff training 6,262,000 223001 Property expenses 132,130 223005 Electricity 1,868,870 223006 Water 663,331 228002 Vehicle Maintenance 42,024,538 231001 Non residential buildings 9,087,996 Total 260,308,076

I was not provided with evidence that the expenditure was authorized by the responsible authority.

Management should always spend within appropriated amounts and where necessary, authority be obtained for virements or reallocations. There is also need to have the expenditure regularized in accordance with the Public Finance and Accountability Act, 2003.

41.2 Staffing It was observed that the Commission for the last five years has not filled 5 key posts in the approved structure comprising the Coordinator Partnership Affairs, Coordinator Monitoring and Evaluation, ICT Officer, and Coordinator, Planning.

The positions are now being manned by technical assistants funded by development partners, a situation which cannot be sustainable in the long run.

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Management is advised to liaise with the appropriate authorities to fill the staffing gaps.

The Accounting Officer explained that they have made several attempts through Ministry of Public Service to have the recommended positions filled through external recruitments but all the attempts have failed.

41.3 Wasteful Expenditure It was noted that the Commission paid Shs.2,687,630 to a Clearing firm as demurrage charges. The amount accumulated as a result of delays by the Commission to clear a motor vehicle. The charges could have been avoided if there was prompt action on the part of management.

Management should ensure that in future all importations are promptly cleared to avoid unnecessary costs.

The Accounting Officer explained that the said vehicle was not imported by the commission itself but bought and consigned to the commission by the Great Lakes Initiative, a World Bank Regional Project. He added that the Commission was notified very late about the arrival of this vehicle in the country.

41.4 HIV/AIDS Partnership Fund

41.4.1 Cash and Bank

41.4.1.1 Cancelled Cheques

It was noted that some cancelled cheques were not attached to the cheque books. These include cheques numbered 00739, 001169 and 001199. Failure to attach cancelled cheque stubs leaves room for possible manipulation of such documents for fraudulent purposes. Further still, most of the cheque books were not adequately filed with the necessary transaction details but rather left blank.

349 It is recommended that all cancelled cheques should be attached to the cheque book for clarity and elimination of manipulating such documents for fraudulent transactions.

Management promised to ensure that all cancelled cheques are attached to the cheque stubs and cheque books adequately filled with the necessary details.

41.4.2 Fixed Assets

41.4.2.1Fixed Asset Register

It was noted that management paid for a three phase generator from Southern General Electronic and Machinery Limited worth UShs.27,531,638 however, it was never delivered to the UAC premises. This amount has been recorded under receivables as the item has not been received but the amounts were paid out. The fund balance has accordingly been adjusted to reflect the effect of the adjustment.

41.4.2.2Insurance

Partnership Fund Assets not comprehensively Insured

Observation

We noted that some of the Partnership Fund Assets were not comprehensively insured. In case of damage or theft of the assets, the organisation would experience total loss of the assets with no insurance cover to guard them. Efforts should be made to safe guard the assets of the Company by having them comprehensively insured.

Management explained that they have not been able to insure Partnership Fund Assets due to budget constraints. The Government budget is not adequate enough to pay for all expenses.

It is recommended that the Government sets an adequate provision for insurance of at least highly valued Partnership assets.

350 41.4.3 Grants and Expenditure

(a) Budget and Work Plans

(i) Budgets and Work Plans Not Endorsed

It was noted that the Partnership Committee did not sign on the actual budget and work plans to confirm its approval but rather on the Board Minutes. This leaves room for manipulation of the documents in relation to evaluation and control procedures carried out in the course of the year. Furthermore, we were not availed with the Board Minutes to confirm as to whether the work plans and budgets availed were valid.

It is recommended that the Partnership Committee should sign the approved work plans and budget for validity purposes.

(ii) Expenditure Items not Aligned to Work Plans

It was noted that expenditure ledgers were prepared in a summarised format and could not be realigned to the work plans since the latter were more detailed with more expenditure lines. As a result, I was unable to critically analyse the work plans in relation to the expenditures recorded in the accounts.

It is recommended that an expenditure ledger be prepared in a more detailed format that is similar to the work plans. This eases the comparison of actual results achieved against set targets for the various components under the major expenditure lines.

(iii) Work Plans Lack Timeframes

It was noted that although work plans were prepared for the financial period under audit, these did not contain actual timeframes of achievement of planned activities at the end of the period. This greatly limits management‟s ability to evaluate its performance in terms of efficiency and effectiveness in meeting set targets and improvement made where necessary.

351 It is recommended that work plans prepared should be reviewed periodically and actual timeframes of achievement of set targets recorded on them for better analysis.

41.4.4 Refunds It was noted that refunds of unutilised funds on expenditures were recorded as refund income and not discounted against the respective project advances and their expenses. This led to the supporting documentation showing lower accountabilities than was stated in the project accounts. It is recommended that under utilised funds on expenditures be recorded as discounts against the respective expenses when returned to the cash and bank accounts and not recorded as income so as to march/trace recorded expenditure to their supporting documentation accountabilities.

41.4.5 Donor Grant Agreements/M.O.U

We noted that apart from the Memoranda of Understanding between U.A.C, DFID and Irish Embassy, no other agreements were presented for review. This limited our ability to ensure compliance of the actual expenditure against the Donor Agreement Guidelines.

It was recommended that all signed/approved Donor Agreements and Memoranda of Understanding between U.A.C and the project Donors be available for review by the Auditors (Internal and External) as well as the project staff to ensure inherence to the Donor Guidelines.

41.4.6 Chart of Accounts

The organisation does not have a chart of accounts by which income and expenditure items are coded. The chart of accounts classifies accounting data in a way that promotes the use of such data, leads to better management and achieves more meaningful accountability.

352 It is recommended that a chart of accounts be developed as it forms a useful basis for reports of income and expenditure to produce meaningful comparisons of planned and actual performance.

42.0 MAKERERE UNIVERSITY

42.1 Advances Not Accounted For Advances amounting to shs.6,656,946,569 remained unaccounted for at the close of the financial year under review. The total advances outstanding as at the close of previous financial year were Ushs.4,191,914,698 leading to an increase of shs.2,465,031,871. The increase indicates that there is a weakness on the part of management in enforcing advances recovery and accountability.

The Accounting Officer attributed accumulation of advances to industrial training, field work and school practice activities that take place during June and July every year.

I urge the Accounting Officer to ensure that these advances are accounted for and presented for verification.

42.2 Over Expenditure The Statement of Appropriation based on services voted by Parliament shows that Shs.7,988,544,143 and Shs.6,008,372,460 was spent over and above the budgeted amounts on items for subventions – recurrent and domestic arrears respectively. This over expenditure indicates a breakdown of control over budgetary expenditure. It also implies that the funds were re-allocated from some items and spent on others without authority.

It was also noted that the budget variance on arrears of Shs.6,008,372,460 was not consistent with Shs.6,753,243,759 reflected in the Statement of appropriation based on the nature of expenditure. The two statements need to be reconciled.

353 The Accounting Officer explained that the over expenditure is a result of the budgetary provisions not being adequate to cover the services provided by the University.

The Accounting Officer is advised to adhere to the budgetary controls and where there is need for additional funds, then reallocation and/or virements should be made in accordance with the regulations.

42.3 Domestic arrears The University incurred new outstanding commitments amounting to shs.16,938,983,019 during the year under review. Domestic arrears are a result of committing the University beyond the available resources. This also contravenes the commitment control system.

The Accounting Officer explained that unpaid bills are due to those services the University could not control as long as it remained open.

42.4 Lack of Procurement Plan The Public Procurement and Disposal of Public Asset Regulations2003, provides that a user department(s) shall prepare a multi annual rolling work plan for procurement based on the approved budget which shall be submitted to the PDU to facilitate orderly execution of annual procurement activities. Contrary to the above provisions, the University did not have a comprehensive procurement plan.

The Accounting Officer explained that some of the University units prepared the plans while others failed.

It is essential that the University prepares a comprehensive procurement plan in compliance with regulations and also to achieve cost savings arising from large procurements.

42.5 Late Submission of Final Accounts The Universities and Other Tertiary Institutions Act, Section 64 (2) states that “The University Council shall ensure that within three months from the end of each

354 financial year, a statement of accounts is prepared and submitted to the Auditor General for auditing”. The statement of accounts for the financial year 2007/08 was submitted to the Auditor General one month later than the statutory period. The Accounting Officer explained that the delay was caused by the change of chart of accounts by Ministry of Finance which was received late.

I urge the Accounting Officer to comply with the reporting requirements.

42.6 Approval of University Budget Although the University budget for this financial year was approved by the Council, it was not approved in its entirety by the Ministry of Education and Sports and Parliament as required by the Universities and other Tertiary Institutions Act 2001. This issue has been reported in my previous audit reports. Expenditure incurred without proper approval is irregular.

Management explained that a request was made to the Minister for Education and Sports seeking authority to spend but no reply was received. Management further elaborated that the budget was approved as part of the national budget. The Accounting Officer is informed that the law requires the whole University budget including its internally generated resources be approved by both the Minister and Parliament.

I have again advised the responsible Ministries to consult all stakeholders to work out procedures of how this approval process should be carried out.

42.7 Board of Survey 42.7.1 Items Recommended for Disposal The report of a Board of Survey on stores for the financial year under review indicated that the University holds a lot of obsolete and expired items at various faculties, halls of residences, schools, departments, institutes, estates department, library, central stores and at various commercial units.

355 The University also has a number of vehicles and motorcycles that have been grounded for a very long time some for more than ten years. Despite previous recommendations, the items have not been disposed off. The Accounting Officer explained that various actions have been taken but the items accumulate every year and that the Chief Mechanical Engineer, Ministry of Works has been requested to facilitate the process of auctioning vehicles.

42.8 Social Security Contributions A sum of UShs.6,439,345,089 was accrued as Social Security Contributions at the end of the financial year under review. The records indicating the accrued amounts were not availed. In addition, non remittance of Social Security Contributions contravenes the law and may result in penalties.

The Accounting Officer explained that the University was under funded during the financial year 2007/08 and yet the salaries went up and 20% was applied on the total package as employee contributions. It was further indicated that negotiations are going on with the staff associations to accept Government position of a 10% contribution on gross pay as per NSSF Act, 1985.

I advised the Accounting Officer to comply with the NSSF Act to avoid incurring penalties.

42.9 Stale Cheques not replaced The amount of stale cheques not replaced is stated at Ushs.85,314,968. The supporting schedule was not availed for audit and the same amount was not reflected in the cash flow statement for the year ended 30/06/08. The reconciliation of movement in cash during the year is therefore not properly done.

I advised the Accounting Officer to make the necessary adjustments, however this was not undertaken.

356 42.10 Statement of Contingent Liabilities and Statement of Non-Quantifiable Contingent Liabilities as at 30 June 2008 The University has a number of pending court cases. One of them relates to termination of contract for managing parking of the University with Equator Touring Services Limited where a total of shs.159,000,000 is being claimed. At the time of writing this report, the update of the total number of court cases the University is involved in had not been received from the legal office. The final accounts for the financial year 2007/08 should have disclosed those cases which qualify to be contingent liabilities. Failure to disclose the cases renders financial statements incomplete.

The Accounting Officer promised to provide for this statement in the preparation of the subsequent financial statements.

I advised the Accounting Officer to always disclose all contingent liabilities in accordance with the stated accounting policy.

42.11 Lack of a Human Resource Manual The University employs various categories of administrative, academic and support staff. Good practice requires that such an institution should have a Human Resource Manual containing the terms and conditions of employment of the various categories of staff. However, it was noted that the University has been operating without a human resource manual for a long time. The terms of employment as approved by Council are contained in the minutes which are discrete.

The Accounting Officer explained that the University has a draft human resource manual which is yet to be approved by the University Council.

The University is advised to expedite the development and approval of the manual.

357 42.12 Temporary Staff Appointments Available records indicate that 45 persons were appointed as temporary staff by the Vice Chancellor. This is contrary to the Universities and Other Tertiary Institutions Act which stipulates that staff of the University shall be appointed by the University Appointments Board on terms and conditions that may be determined by the University Council in respect of the categories of academic staff, administrative staff and support staff.

The Accounting Officer explained that the reality on the ground renders it impossible for the appointments board to handle all appointments and because of this, the University Council passed a statute authorising the Vice-Chancellor to appoint staff on temporary terms up to one year.

I have requested the Accounting Officer to give an update of the staff on temporary appointment and ensure that they are regularized by the appointments board in accordance with the Act

42.13 Security of Property at the University It was noted that the access to the University is open and this has led to risks of loss of property at the University. There are frequent thefts of property and many vehicles have been vandalized including those of the University which are parked at the Estates department.

The Accounting Officer explained that there has been attempts to have a perimeter wall fence which exists in some parts and the police post at the University has been upgraded to a police station.

I advised the Accounting Officer to continue to strengthen security of the University by guarding the entry points and also providing guards to protect property within the University.

42.14 Water Bills Shs.2,271,298,752 was paid to National Water and Sewerage Corporation for water bills incurred by both the University and employees of the University who

358 occupy University houses. The bulk of the bills were those incurred by the staff of the University but recoveries from them were not made. The staff for whom the water bills were paid are not entitled to this service under their terms of employment. This causes unnecessary financial burden to the University.

The Accounting Officer explained that a process of installing meters on the various buildings of the University including staff houses is being undertaken.

I recommend that payments for the non-entitled staff of the University should be recovered.

42.15 Contributory Schemes 42.15.1Management of Deposit Administration Plan (Dap) Scheme: As reported in my earlier report of 2005/06, the University operated a retirement benefit scheme (DAP) which was managed by NIC from July 1996 and the contract expired on 30/06/2005. Under the scheme, staff made contributions of 5% of their salaries and the University made 20% contribution which was also being remitted to National Insurance Corporation (NIC). During October 2005, the University Council however resolved to halt contributions to NIC.

According to the position presented by NIC in August 2007, the total amount contributed to NIC by Makerere University is 17,499,995,434 whereas the actual calculations by Alexander Forbes state the amount at 17,884,817,804 as at June 2005. The management of the University has put in a claim through Kateera and Kagumire Advocates of Ushs17,123,007,498 to NIC. The actual amount outstanding has not been ascertained as a result of the three conflicting positions.

The Accounting Officer explained that NIC was privatized and as a result the staff of Makerere University demanded that the scheme be disbanded. I have advised the Accounting Officer to expedite the negotiations to recover the funds from NIC.

42.15.2Un-authorised Expenditure on Staff Group Life Insurance Scheme During the year under review, the University paid a premium of UShs285,891,593 (out of Shs.815,349,561) to Insurance Company of East Africa (ICEA) for Staff

359 Group Life Assurance Scheme. However, it was noted that the expenditure incurred was not budgeted for which amounts to un-authorized expenditure. It was further noted that the scheme was abandoned and the status of the premiums paid was not established during the audit.

The Accounting Officer explained that it was an oversight that the funds for the year were not specifically indicated in the budget.

The Accounting Officer should endeavour to spend within the approved budget and also provide information regarding the premiums with ICEA.

42.16 Travel Abroad UShs.34,214,350 was spent on various foreign travels but was not accounted for. It was not possible to establish the genuineness of the journeys.

In a related instance, an amount of shs.3,150,400 was incurred on accommodation and subsistence on foreign travel yet the hosting entity had undertaken to cover the expenses. This amount is recoverable.

The Accounting Officer explained that the excess mount was paid in error and promised to deduct it from the beneficiary. The action is awaited.

42.17 University Land and Houses The University owns properties in form of land and houses in various locations around Kampala and up-country. Inspections were carried out and the following matters were observed;

42.17.1 Land Without Titles Records availed by the estates department which is charged with overseeing University properties indicate that the following land is not titled: ● Land in Mbale town-allocated to the University by Local Authority. ● Kibaale biological station-allocated by Government of Uganda. ● Buyana Farm-allocated by Government of Uganda. ● Nyabyeya.

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The Accounting Officer explained that the University intends to recruit a surveyor on retainer basis to pursue the titles. The action is awaited.

42.17.2 Land on Lease The following land was reported by the estates department to be under lease:

● Nsibirwa grounds ● Africa/Livingstone ● Lira ● University Hospital

The details regarding the leases were not availed for audit. I was not able to confirm ownership of the properties.

42.17.3Land in Kololo. The University owns undeveloped plot of land on plot 34, 36 and 40, Prince Charles Drive, Kololo which measures 2 acres. A physical inspection established that the land was abandoned and an undisclosed person is growing crops on the upper part while the lower part is a bush. The upper part of the plot appears to have been encroached on by the adjacent neighbour.

42.17.4 Land at Makindye The land at this location measures 14 acres and is occupied by two houses and one condemned structure which is still occupied by some University staff. The rest of the land is vacant and is now occupied by unknown encroachers. The University management appears to have failed to have them vacate the premises. In addition, one of the houses is being rented out to USAID but the details regarding the tenancy agreements and the rent per month were not availed for audit.

The University is putting to waste a property that may be valued at Ushs.2.8bn in this area according to current KCC valuation. The continued stay of staff in a

361 condemned house creates risk of loss of lives to the occupants and the University‟s image.

I recommend that the management of the University considers reviewing its policy regarding utilization of University land to create value for money.

42.18 University Houses Records availed indicate that the University owns a total of 446 houses occupied by senior staff of the University and 370 houses occupied by junior staff. An inspection of the houses revealed the following:

42.18.1Houses in Kololo There are 30 houses on an area of 6.04 acres occupied by senior staff. Of these, 6 houses are still roofed with iron sheets, house 30 was abandoned and houses on plot 4&5 (Ekobo Avenue) are condemned though people continue to occupy them.

Most of the houses require renovation. The compounds are now used to grow maize, cassava, bananas, onions and rearing of chicken and keeping dogs.

42.18.2 Houses in Katalemwa There are 50 houses on an area of 31.058 acres. The inspection of the houses revealed that some are roofed with asbestos iron sheets which are very old and are a health hazard while others are dilapidated and overdue for renovation. It was noted that considering the financial position of the University, such renovations may never be carried out and the houses will continue to deteriorate.

It was also observed that part of the land is occupied by a nursery school that is operated by a private individual. The details regarding the agreement entered into between the University and the nursery owner were not availed for audit. I was therefore unable to ascertain the terms under which the nursery school is operated and how much is paid to the University.

362 42.18.3Houses Occupied by Junior Staff-Bwayise Quarters The 50 units in this location are small, contain one single room, are dilapidated and occupied by group employees who are neither eligible nor entitled to housing. The place occupied by the units is now a slum with some space now used by charcoal and “malwa” sellers. The whole area appears unfit for occupation by University staff and is a health hazard to the neighbourhood. The area where the units are located measures 7.02 acres and is close to the main road and hostels. Valuation of an acre in this area is in the region of Shs1.5bn to Shs.2bn. The Accounting Officer explained that the state of disrepair of the houses is due to lack of funds. However, the estate has been recommended to be developed commercially and the Department of Planning is assessing the investment option.

I have advised the Accounting Officer to consider developing the mentioned areas for investment.

42.19 Commercial Units 42.19.1Guidelines for Operation of Commercial Units The University has five commercial units which include University Printery, University Bakery, University Maize Meal, University Guest House and the Building Unit. The units were established to transact business and operate as commercial enterprises. The controls and operations of the commercial units are managed by a board which is also supposed to operate under guidelines issued by the University Council. However, this has not been done yet. In addition, it was observed that the procurement transactions of the commercial units do not comply with PPDA Act.

The Accounting Officer explained that the procurement authority is to be consulted on the operations of the commercial units and the guidelines for each unit are to be documented.

42.19.2Indebtedness to the Commercial Units. Records indicated that the University and its various faculties, institutes, schools and other various units owed the Commercial units a total of Ushs1,259,279,139 as at 30th June 2008

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The indebtedness affects the operations of these entities.

The Accounting Officer explained that efforts are being made to minimise the indebtedness. I await results of management efforts.

42.20 University Printery –Trade debtors Trade debtors of the printery increased from Shs.809,394,139 in previous financial year to Shs.937,123,285 during the year under review, an increase of 15.78% compared to a increase of 0.13% on creditors. This indicates a weakness in debt collection which may be attributed to lack of the financial procedure manual for running the commercial units. In addition, the University is the biggest debtor covering 86% of the total debtors of the Printery and there is no evidence that efforts were made to recover these debts. It was also noted that debtors to the tune of Shs.177,380,563 (19% of total debtors) did not service their debts during the financial year as their opening balances remained unchanged.

The Accounting Officer explained that the cause of increase in debtors is mainly due to under-funding of the University but efforts to collect debts are being undertaken. It was further stated that a credit policy has been proposed which is awaiting approval by the University Council. He hopes that it will go along way to improve the debtor collection.

42.21 Makerere University Building Unit 42.21.1 Accounts Records. The Commercial Units did not maintain all the necessary books of account. Important books such as cashbook, debtors and creditors ledger, inventory book and stores ledger were not maintained.

The Accounting Officer explained that the cause was due to lack of staff at the unit but an Accountant had been posted to these units to deal with the situation.

I advise the Accounting Officer to ensure that the missing records for the year are put in place.

364 42.21.2Un Accounted for Advances of Ushs71,876,800 Shs.71,876,800 was advanced for various purposes to an officer formally working as the Director. Receipts amounting to Shs.74,324,950 were availed as accountability but the receipts could not be related to the advances. This implies that the advances remain unaccounted for. The Accounting Officer explained that the Director was terminated from service and management recommended that the matter be handled by CID. The action is awaited.

42.21.3Bank of Africa Account The records regarding this bank account were not availed for verification. In addition, the current management of the unit does not have access to this bank account.

The Accounting Officer explained that the Board of Commercial Units is handling the matter and has requested the former Director to respond.

42.22 Dean of Students 42.22.1Hire of Space Wardens of the halls of residence rent out space for various activities like groceries, hair salons, telephone booths, canteens and kiosks. There is neither criteria for rental determination nor formal agreements between the halls and tenants. Currently, revenue from rental charges is shared as follows:-

Hall (70), collection account (20%) and students common room (10%). This is contrary to University Council Minutes of 26th April 2005 which prescribed 30% share for the income generating units.

It is recommended that proper accounting procedures are put in place to cater for revenue from these sources.

42.22.2Accommodation Fees A total of Ushs.608,691,401 was transferred to the Dean of students account and distributed as follows:

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% Accommodation for halls of residence------38 Food Account------29 Halls------19 Dean of students ------9 SCR------5

The rates used to calculate the transfers should have been approved by the University Council but this approval was not availed during the audit. The Accounting Officer explained that the University Council has formed a committee to streamline income apportionment. The outcomes of the committee are awaited.

42.23 Procurements 42.23.1Non-Segregation of Duties The Public Procurement and disposal of Public Assets Regulations 2003 provides for independence of functions and powers of the Accounting Officer, Contracts Committee, PDU and user departments. Contrary to the above requirement, procurements worth Ushs352,385,939 and US$ 34,782.76 randomly selected, were solicited, selected and approved by the user departments and were only taken to the Contract Committee for certification. As a consequence, PPDA regulations were not followed and the principle of segregation of duties was flouted. I was unable to ascertain whether value for money was obtained in the procurements.

The Accounting Officer explained that there is inadequate staff at the University to handle all the procurements by all the units of the University and that‟s why decisions were made in the units.

Management is advised to adhere to procurement regulations.

366 42.23.2Contract for Managing Parking in the University A sum of Shs.159,000,000 was reported owing from a private company following termination of a parking management contract as a result of breach of contract. No alternative arrangements have been made to manage traffic and generate revenue from this source

It is recommended that the outstanding claim be followed up and alternative traffic management processes be put in place.

42.23.3Contract for Cleaning of the University Compound The University contracted a private company to carry out compound clearing at an annual cost of Shs.182,749,200. The contract however lacks definition of “University compound” that would enable determination of specific responsibility. In addition, it was also observed that payments were made without certification of works done. During a physical inspection of the University compounds, it was observed that the compound was bushy and the roads littered.

The Accounting Officer explained that the estates department has now been directed to ensure certification of work before payments.

42.23.4Construction of exhibition house in the National Agricultural Show Ground Jinja An officer in the Faculty of Agriculture was advanced a sum of Shs.41,032,00 for construction of an exhibition house at Jinja Show Ground. Examination of documentation for the expenditure revealed that payments were not supported by completion certificates from the Estates Department. In addition, the internal audit findings indicated existence of poor workmanship. The explanation of setting aside PPDA Act and regulations due to inadequate time is not satisfactory since initial work began in 2006.

I advised management to adhere to procurement regulations especially with regard to public works.

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42.24 Faculty of Medicine 42.24.1Non-Compliance with the PPDA regulations An assortment of items comprising of computers, air conditioners and stationery worth Shs.88,557,739 were procured without authority of the University contract committee. Included in the above amount, is a procurement of Shs.34,850,120 that did not meet principles of fair competition as only one prequalified firm was short listed together with two non-prequalified firms contrary to Section 45 and 46 of the PPDA Act and regulation 118(3). I could not ascertain whether the Faculty paid fair prices for the goods. The Accounting Officer explained that the Faculty had been warned to desist from this practice.

42.24.2Contract Between the Faculty of Medicine and Sharp Electronics Technology Ltd Shs.4,045,800 was overpaid to a private firm in respect of photocopying services rendered to the Faculty.

The Accounting Officer explained that instructions had been made to the Dean of the Faculty to recover the funds. I await evidence of recovery.

42.24.3Cash Procurements A sum of Shs.36,375,950 in cash was advanced to staff to procure goods and services for office use contrary to Cap. 4 Section 12(3)a of the Treasury Accounting Instructions 2003, which prohibits cash payments. In addition, accountability for the funds has not been submitted for audit.

It is recommended that procurement regulations be adhered to. An imprest management system should also be put in place in accordance with regulations. In the meantime, I await for accountability.

368 42.25 Transport Management The University has a fleet of over 400 motor vehicles and motorcycles. An examination of the transport section of the University revealed the following matters;

42.25.1Transport Management Policy Although the University has a transport section headed by a transport officer with relevant qualifications in mechanical engineering and transport management, it does not have an approved documented transport management policy. As a result, vehicles are procured and managed by faculties, schools, institutes, departments, projects, units without the involvement of the transport officer. The management of the transport system at the University is done by the units without the involvement of the centre. Under these circumstances, supervision and follow up of vehicles, motor cycles and other transport facilities in the University becomes difficult and this may result into loss and misuse of the University transport facilities.

The Accounting Officer agreed with the audit observations and stated that the transport management policy is still under discussion.

It is recommended that a transport management policy be put in place to harmonize the management of University fleet of vehicles, motor cycles and other transport facilities.

42.25.2Log Books The logbooks are not under the custody of the transport officer but are reportedly under the custody of the users. It was not possible to verify the ownership and existence of most of the vehicles and motorcycles. There is a high risk of ownership of these vehicles changing without the knowledge of the university.

369 The Accounting Officer explained that most of the vehicles are project vehicles and that the advice to keep all the logbooks at the centre will be implemented. The action is awaited.

42.25.3Motor vehicle repairs Irregularities in motor vehicle repairs worth Shs.49,546,596 in the Faculties of Medicine, and Central Administration (Internally Generated Funds) were noted. Most of these repairs lacked supporting documents like the requisitions, pro-forma invoices, and local purchase orders. Some repairs were not subjected to competition by getting comparative quotations from different garages to achieve value for money, and un pre-qualified garages were sometimes used contrary to Sec.58 (d) of the PPDA Act.

Lack of complete supporting documents for motor vehicle repairs makes it difficult to ascertain that repairs were actually carried out.

In the Faculty of Medicine, Shs.4,252,640 was paid to a local garage for repair of motor vehicles. Scrutiny of the supporting documents revealed that the repairs on vehicle no. 049 UZU totalling to Shs.2,856,780 included panel beating, spraying, gas welding and new roof cover which imply that the vehicle got an accident. No Police report was however availed to establish the cause of the accident. In addition, the repairs were split as evidenced by the different requests and invoices raised on similar dates which is contrary to sec.58 (d) of the PPDA Act.

The Accounting Officer explained that the faculty has no administrative staff to follow up on the required steps for repair of vehicles.

I advised the Accounting Officer to adhere to set procedures for repair of vehicles and appoint staff to strengthen the internal controls related to vehicle repairs.

370 42.25.4Abandoned Motorcycles/Vehicles that Could not be Traced As result of lack of centralized transport management system, a number of vehicles and motorcycles could not be physically traced by the transport section or were found abandoned although they appear in the records as below:

Sn Reg. No Make Mod Remarks el 1 UM 0374 Suzuki -Being investigated by the management of (IPH) S/Wagon the University. Outcome awaited. 2 UM 0646 Suzuki -Vehicle had been taken to a non pre- S/Wagon qualified garage by driver with no documents and the mechanic at the garage drove it and caused an accident. -No police report is available and the vehicle is abandoned in the garage being vandalised and engine has been removed. 3 UPU 353 Honda 1994 Missing IACE Motorcycles 4 UXY 551 Vehicle------1983 Missing and under investigation by the IACE ------management of the University. 5 UPQ 406 Yamaha 1998 Missing IACE Motorcycle 6 UPQ 407 Yamaha 1988 Missing IACE Motorcycle 7 UPQ 408 Yamaha 1988 Missing IACE Motorcycle 8 UE 0919 Sunny 1984 -Vehicle was vandalised at unknown Dean of Estate garages and towed to the Estates students Department parking after the query was raised. It is scrap. 10 UAA Nissan -At Gatsby garage which is not qualified. 592R Double -Was being driven by a casual

371 Universit Cabin driver(recruited by Library) on a weekend y Library and got an accident and was damaged beyond repair on 31/05/2008. -The records regarding how the vehicle was sent to garage are not available.

The Accounting Officer explained that with the decentralisation process at the University, each faculty/department was going to be asked to explain the observations raised. This action is awaited.

42.26 Allowances Review of a sample of allowances indicated that a total of Ushs939,301,050 was irregularly paid during the year for claims of extra load allowances ranging betwen 12 hours to 200 hours per month which implied that employees were working 5 to 8 extra hours per day which is unrealistic. Other allowances such as Script recording allowances, data entry allowances, per-diem for teaching allowances, departmental expense allowances and application forms verification allowances were irregularly paid as they were not under categories of those approved by the University Council. Further, various terms were found to be used to refer to similar allowances and there are no standard rates for allowances at the University for all the units.

The lack of standard rates and terminologies for allowances for all the units of the University may lead to abuse of the allowances paid under different faculties, schools, institutes and departments.

The Accounting Officer explained that the descriptions of the allowances may be misleading and a process to harmonise all the various descriptions of the allowances and their rates within the University had began. The action of the Accounting Officer is awaited.

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42.27 Un-banked Revenue by University Library. Out of Shs.91,128,408 collected as revenue by the University Library, Shs.60,250,650 was banked leaving a balance of Ushs.30,877,758 which was utilised at source contrary to the financial regulations.

The Accounting Officer explained that the head of the Library had been directed to stop the practice and to provide accountability for the spent funds.

42.28 Advance of GBP. 10.500 to Makerere University Private Sector Foundation (MUPSF)

An equivalent of Shs.34,597,500 was advanced to MUPSF to pre-finance project preparatory activities for the establishment of Makerere African Institute of Sustainability from Faculty of Economic and Management (FEMA). In the agreement with FEMA, MUPSF was required to pay back the funds in three months starting with 1st May 2008. However, it was noted that two separate reminders dated 4/9/2008 and 8/12/2008 sent through Vice Chancellor to MUPSF did not yield any response. This is likely to stifle the operations of the Faculty.

The Accounting Officer explained that the funds were to be recovered in March 2009 and the action is awaited.

42.29 Faculty of Science 42.29.1Un cleared Staff Personal Advances University regulations require staff to clear their personal advances before the financial year elapses. According to faculty advance personal ledgers for financial year 2007/08, shs.5,502,000 remained un-recovered.

I recommend that all outstanding personal advances be recovered as provided for by regulations.

373 42.29.2Unaccounted For Deposits The faculty receives funds from various entities in form of deposits to execute activities on their behalf. Although such deposits extended to the faculty are supposed to be accounted for, shs.138,636,410 deposited with the faculty during the financial year under review has not been accounted for.

I could not confirm whether the funds were utilized on intended purposes.

42.30 Audit Inspection of University Halls of Residence The following general findings were observed:- Inadequate controls in Hall stores and kitchens regarding movement of food stuffs. Poor state of dining halls Poor state of plumbing and electrical systems.

It is recommended that management puts in place maintenance arrangements for existing facilities and implements internal controls over food stuffs.

42.31 Faculty of Social Sciences 42.31.1Un-authorised Operation of a Bank Account The faculty operated a dollar account with Barclays Bank Kampala Road Branch which had a credit balance of USD 35,239.80 as at 30th June 2008. There was no evidence that authority was obtained to operate the bank account as required by the regulations governing the University.

I have requested the Accounting Officer to avail the authority for operating the bank account.

42.31.2Funds for Makerere University Private Sector Forum Makerere University Private Sector Forum (MUPSF) is a cross sectoral forum established in 2006, to link the Public and Private Sectors in human development. It is a legal entity with tripartite membership from the University, Public and Private Sectors. The University has taken a lead in nurturing its growth and development. During the financial year 07/08, a total of shs.145,871,427 was

374 availed to MUPSF to pay emoluments of the employees and also cater for various activities. The funding was based on claims made by the University. There was neither approved budget of the forum nor the records relating to the programme expenditure.

42.32 System Audit of the Integrated Tertiary Software (ITS) Makerere University initiated and implemented a project aimed at improving the effectiveness and efficiency of financial management, Human resource management and Students registration, through computerisation. The project was funded by Norwegian Aid for Development (NORAD) together with Makerere University council. An audit of the ITS revealed the following;

42.32.1Summary of Audit Findings There was no documentation to show that a comprehensive feasibility study was under taken by the University to determine the existence of the problem and accordingly identify viable courses of action and to recommend a suitable course of action that is cost effective.

Examination of records revealed that the supplier did not meet all the obligations under the contract as a number of modules were not completed as per the contract.

The project plan specified the time frame for the project to run from February 2004 to October 2004(nine months). However by the time of the review of the system in April-May 2008, the project had not been finalized i.e. 4 years later.

It was observed that the user acceptance testing was not properly carried out as required in the criteria against which the testing was to be done.

Despite the fact that all modules were not fully implemented, the contract sum was fully paid to the vendor.

375 There is no strategy for the gradual change over from ledger works to FINIS. This was attributed to inadequate training given to the Finance Department staff. Although fire detectors are in place for purposes of protecting system Hardware, the fire extinguisher had not been serviced for the last two years. It was further noted that users have not been trained in the environmental control procedures, no dehumidifier was installed, and there was no documented policy assigning responsibilities and duties to staff for supervising the maintenance of equipment. Management has no security policy and has not established a security management structure within the information technology establishment to ensure that the security procedures are implemented, monitored and reported on a regular basis.

It was noted that the University does not have an entity- and activity-level risk assessment framework that is used periodically to assess information technology related risks.

Although DICTS is responsible for providing IT support to all users, it was observed that the support is not carried out effectively due to limited staff in the directorate.

It was observed that not all LAN managers are adhering to using Sophos as a University-wide Anti-Virus measure and this may pose a risk to the entire University net work.

It was noted that the University has not set up a data recovery site to enable the University continue with normal operations with minimum disruptions in case of any calamity.

It was noted that the IT assets register was last updated in January, 2008 and only hardware assets were recorded excluding all the software licences and even the ITS software.

376 Details of the above findings are in a separate report issued to the University, wherein I also made various recommendations to management intended to address the above shortcomings. Management is advised to study the report and take appropriate action. A follow up will be made in the subsequent audits.

43.0 MBARARA UNIVERSITY

43.1 Payables Shs.622,127,920 was disclosed in the statement of financial position as outstanding liabilities at the close of the year. However, only Shs.420,000,000 were verified leaving a balance of Shs.202,127,920 without supporting documentation.

I could not therefore, confirm the accuracy of the payables balance reflected in the financial statements.

It was also noted that the University incurred new outstanding commitments totaling to Shs.622,127,920 in 2007/08 contrary to established commitment control procedures.

43.2 Receivables There were no up to date students‟ ledgers to support the outstanding fees from the students. As a result, I was unable to confirm that the balance of Shs.806,898,747 reflected in the Statement of Arrears of Revenue and the Statement of Financial Position is accurately stated and represents fees due to the entity.

Although the Accounting Officer stated that the outstanding amount was maintained in a separate spreadsheet which is kept for each student, on verification of the softcopy the outstanding amount differed from the amount disclosed in the financial statements. It is recommended that student ledgers be properly maintained to keep track of student fees payments.

377 43.3 Cash and Cash Equivalents Included in the cash and cash equivalents figure are amounts totaling to Shs.84,886,439 relating to the balances on the MUST Academic Registrar Foreign exchange and the Clinical Laboratories accounts. However, there were no cash books being maintained for the two accounts hence making it difficult to verify the accuracy of the stated figures.

It was also noted that MUST operates a Savings bank account but its balances were not disclosed in the financial statements.

In absence of records I was not able to confirm the accuracy of the cash balances stated at year end.

43.4 Nugatory Expenditure A total of shs.52,637,807 was paid to cover legal costs to NSSF lawyers and interest on VAT arrears to Uganda Revenue Authority. The legal fees were paid to lawyers who were appointed by NSSF to collect the arrears of contributions for the period January 2005 to September 2007 arising from under deductions from the staff. The interest on VAT arrears accumulated over a period of 5 years from 1999 to 2004 as a result of the university inn's under declaration of the tax due to URA.

Management should always comply with the regulations to avoid penalties associated with non compliance.

43.5 Unaccounted for Salary Enhancement for Academic Staff A total of Shs.242,575,317 was released to the University to enhance academic staff salaries during the period. However payments to staff amounted to only Shs.188,575,537 leaving a balance of shs.53,999,780 that was utilized for purposes which were not explained.

378 43.6 Non Maintenance of Asset Register The University does not maintain an asset register contrary to the Treasury Accounting Instructions. In the absence of an asset register, it becomes difficult to keep track of the assets held by the University.

The Accounting Officer explained that the asset register was computerized but had been affected by a computer virus and that the process of opening up new files using back-up was underway.

44.0 KYAMBOGO UNIVERSITY

44.1 Unauthorised Expenditure The University incurred an unauthorised expenditure of Shs.1,536,448,462 on employee costs and Shs.130,048,000 on goods and services without relevant authority.

Unauthorised excess expenditure incurred in excess of the approved budget provisions is a result of weaknesses in controls over budgetary expenditure. This can negatively impact on the implementation of other planned activities.

The Accounting Officer is advised to further strengthen the controls over budgetary expenditure, where necessary virements/reallocations should be made in accordance with the financial regulations.

44.2 Nugatory Expenditure The Tax law requires Institutions to deduct „Pay-As-You-Earn‟ from their employees‟ emoluments and remit it to the tax body promptly. However, it was noted that statutory deductions totalling to shs.2,212,086,769 for the period, July 2006 to April 2008 were not remitted to the Authority. As a result, it attracted interest of shs.318,969,664, bringing the total amount due to the Authority to shs.2,531,056,433. The accrued interest of Shs.318,969,664 eventually paid as penalties for delayed remittances of PAYE deductions is considered nugatory expenditure.

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As a result of non-payment, during the month of May 2008, Uganda Revenue Authority attached 10 University accounts and recovered a total of shs.2,315,977,328 which was meant for other activities including payment of salaries, utilities, student allowances, supply of goods and services, teaching materials among others. The Accounting Officer explained that delayed remittances were due to inadequate wage bill after the merger of the three institutions. He stated that the University had to use the available funds to pay staff net salaries to avoid unrest by staff.

I have advised the Accounting Officer to always remit statutory deductions within the stipulated period to avoid penalties and other measures that can stifle the operations of the University.

44.3 Funds Not Accounted for (a) Cash Advances and Imprest not accounted for Laxity by University management in enforcing accountability led to imprest and advances totalling Shs.365,180,610 and Shs.134,707,247 respectively remaining unaccounted for. Delays in accounting for funds can lead to falsification of documents and possible loss of funds.

The Accounting Officer explained that he had given a deadline of 31st December 2008 to all staff affected to account or else recoveries from their salaries will be effected from the month of January 2009. I await the outcome of this effort.

(b) Missing Payment Vouchers Section 60 (1) of the Public finance and Accountability Regulations requires all disbursements of public monies to be properly vouched on payment vouchers prescribed by the Accountant General. However, expenditure amounting to Shs.650,154,640 was not supported by payment vouchers and hence not accounted for. Unvouched expenditure may be a result of breakdown of the institution‟s payment control procedures and could lead to loss of funds. I was therefore unable to confirm that funds were utilised for intended purposes.

380 44.4 West-End Stores 44.4.1 Foodstuffs not accounted for Examination of the stores ledger, the menu book and the stores issue vouchers relating to the West-End Stores revealed that foodstuffs worth shs.108,072,655 were not accounted for as a result of shortages in delivery to the kitchen.

It respectively was also observed during inspection of West-end stores in October that foodstuffs worth Shs.36,381,620 allegedly issued for cooking were not received by the Domestic Bursar, hence rendering the issues doubtful.

Management should investigate the apparent loss/non delivery of the food items in the university stores and take appropriate action

44.4.2 Fraudulent alterations of figures It was noted that the store keeper of west end stores borrowed the menu book of the Domestic Bursar with the aim of reconciling his issue vouchers with ledger cards. However, he instead altered figures of food items recorded in the menu book and used the altered figures to record his ledger and issue vouchers with the aim of ensuring that the records reconcile.

The Domestic Bursar explained that this anomaly occurred when she was asked by the store keeper to surrender her menu book to him but instead he ended up fraudulently altering her figures.

In his response the Accounting Officer explained that investigations were ongoing and that he had written to the staff concerned.

44.5 Revenue (a) Public Cafe (i) Unbanked Cash Out of Shs.87,660,450 cash collected including a balance of shs.44,009,790 brought forward from previous year, only shs.9,898,000 was banked, leaving a balance of shs.77,762,450 unbanked and not accounted for.

381 Further analysis of the cash book revealed that an attempt was made on 30th June2008 to clear this balance by treating Shs.41,064,154 as money advanced to an individual. This transaction is however, not supported by any documentation hence rendering this entry doubtful.

The Accounting Officer explained that he had written to the officer responsible to provide explanation and the relevant accountability.

(ii) Book keeping- Cash Book It was noted that the public Café Cash book totals for monthly cheque receipts were altered to read different figures from the actual totals. Consequently a short fall of shs.9,304,965 was created in the cash book balances.

(iii) Public Café Stores Records An audit inspection of the Cafe stores revealed that there is poor record keeping despite there being a full time staff employed as a store keeper. The stores requisition notes, issue notes and ledger cards are not properly maintained. This rendered it difficult to ascertain whether all the food items received as per the Goods Received Notes were actually received and properly issued.

(b) Revenue from other sources The University has three other sources of revenue (i.e. Small Units, Guest House and Medical Center) from which a total of shs.43,126,950 was realised during the year. The table below gives a summary of the collections and balances brought forward from the previous year. The analysis however, shows that a total of shs.69,244,854 remained unbanked and unaccounted for.

Unit Bal B/f Collected Banked Unaccounted Small 48,000,004 10,071,200 10,150,200 47,921,004 units Guest - 17,003,000 2,006,700 14,996,300 House

382 Medical - 16,052,750 9,725,200 6,327,550 Center Total 48,000,004 43,126,950 21,882,100 69,244,854

Further analysis of the cash book for Small Units revealed two entries of shs.10,549,200 and shs.58,046,804 entered as bankings for which no corresponding amounts could be traced on the bank statements. These two entries are highly doubtful and need to be properly explained.

The Accounting Officer is advised to investigate the matter and take appropriate action.

44.6 Approval of the University Budget

The total University Budget was not approved by the Minister of Education and Parliament as required by the University and Other Tertiary Institutions Act, 2001. It was noted that although the University administration submitted its estimates to the Minister on 4th October, 2007, there is no evidence that approval was granted by the Minister.

The non approval of University budget by the Minister is sometimes due to the failure by the University to submit the budget to the Ministry within the stipulated time period to enable the Minister review it for her approval.

It is recommended that in future the whole University budget be prepared and approved by the Council early to allow the Minister ample time for review and approval.

44.7 Employee Costs The terms and conditions of service for members of staff of the University put the mandatory retirement age for all staff at sixty (60) years. It was however noted that management continued to employ and pay 15 staff members who had reached mandatory retirement age and had not been engaged on contractual appointment. A total of shs.478,282,173 was paid to this category of staff as

383 salaries. This expenditure is rendered irregular. The amount excludes any other allowances that were paid to them.

It was also noted that twenty seven (27) officers whose contracts had expired continued working and they were paid a total of shs.449,547,251 by October 2008 contrary to the terms and conditions of service which provide that contractual appointments should be 2 years and can only be renewed once. Management explained that they had to continue employing the staff because of the prevailing staff unrest at that time. Following investigations the Cabinet Sub- Committee advised Council not to take major decisions regarding staff until they finalised their work.

I advised the Accounting Officer to have the recommendations of the validation exercise implemented and in future follow the stipulated terms and conditions of service.

44.8 Membership to University Council A review of membership to the University Council revealed that an individual who reached mandatory retirement age of 60 years in September, 2007 presented himself to the Academic Staff Association for election to Council and was subsequently elected. By virtual of his age and the fact that he is not on contractual employment, the individual ceased to be a member of the Academic Staff Association and therefore did not qualify for election on the ticket of Academic Staff Association. His membership to the University Council may be challenged.

The Accounting Officer is advised to cause a review of the membership of the individual to the University Council, as it may have far reaching implications on the decisions taken by the Council.

44.9 Violation of Terms and Conditions of Service (a) Payment of housing and transport allowances The University‟s terms and conditions of service state that „A member of staff who is not housed by the University shall be paid a monthly housing allowance and

384 transport allowance at such rate as Council may determine from time to time”. It was noted that members of staff who are housed by the University starting from January 2008, were paid transport and housing allowance without Council authority. By November 2008, a total of Shs.309,725,000 covering a period of 10 months i.e January 2008 to October 2008 had been paid in this respect, this expenditure is considered irregular and recoverable.

Management is advised to comply with the current terms and conditions of service as approved by the University Council. In his response, the Accounting Officer explained that the University was in the process of harmonising the allowances and that the Council had directed that the housing units be valued by the government valuer for the purpose of determining the rent.

It was also noted that staff members who ceased to be employees of the University continue to occupy the houses that were allocated to them by virtue of their being employed by the University many years ago. Apart from requests made to them to leave the houses, management has not made any serious attempt to force the occupants to leave these houses. As a result the current University employees entitled to University accommodation have been deprived of their right to occupy these houses.

The Accounting Officer explained that the matter is going to be addressed through the Council‟s decisions arising out of the validation exercise.

(b) Appointments to Directorship and Deanship The University and Other Tertiary Institutions Act 2001 (as amended) stipulates that “A candidate for Deanship or Directorship or Head of Department shall be a full time senior member of staff not below the rank of senior lecturer, with a Master‟s Degree or above and a minimum of three years experience in University service. Where there is no such person, the faculty members shall elect one from among themselves to be appointed in an acting capacity,‟‟ However, it was noted that this procedure was breached in the appointment of a Dean of one of the departments. As a result the University was sued by the eligible senior lecturer(s)

385 and in the process incurred legal costs amounting to Shs.17,712,500. This expenditure is considered nugatory as it could have been avoided had management adhered to the procedures of appointing Directors and Deans prescribed by the law.

Management is advised to always comply with the procedures prescribed in the laws and regulations governing Public Universities. (c) Responsibility Allowance The University terms and conditions of service provide for responsibility allowance, which may be paid to Senior Administrative staff, Heads of schools, Heads of Institutes, Deans of Faculties and Heads of Departments or Sections at such rates as may be determined by council from time to time. It was however noted that the University Council never pronounced itself on the rates to pay for each category of staff as required by the University terms and conditions of service.

During the year under review, a total of Shs.733,888,250 was paid as responsibility allowance to all staff including those who do not qualify for the allowance in the offices of the Academic Registrar, Administration and the University Bursar. In the absence of Council approval for the applicable official rates the payment of the allowance is irregular.

The Accounting Officer explained that the allowances were approved by the Council through budget. I have however advised that the rates need to be presented separately, reviewed and approved by the Council.

44.10 Validation exercise for the University staff Following the frequent strikes by the teaching staff at the university, Cabinet directed that a validation exercise be undertaken with the aim of restructuring and re-organising the University in order to have effective and efficient service delivery. The validation reports by both public service commission and Education service commission made a number of recommendations. One of the major findings was that some members of staff were found to be unsuitable to continue with the service and therefore, had to be retired in accordance with the terms and

386 conditions of employment. However, 5 months after receiving the reports, management has not taken any action to implement the recommendations.

The Accounting Officer explained that the validation reports were presented to University Council in September 2008 for consideration. The Council sat and its decisions were communicated to staff on 3rd December 2008. The University management was yet to implement the Council‟s decisions.

Management is advised to effect the implementation of the council‟s decisions for the smooth running of the University.

44.11 University Assets

44.11.1Buildings

Inspection of University buildings revealed that 119 University residential houses and other University buildings are in a dilapidated state and require major repairs such as complete roofing, painting, ceiling works and electrical overhaul. The renovation works were estimated to cost the University shs.3,462,950,000 by the Estates Manager. By the time of writing this report management had not come up with a plan to have the structures renovated.

Management should come up with a comprehensive plan for the renovation of the infrastructure so as to provide a face-lift to the University.

The Accounting Officer explained that management would like to carry out major renovations on the structures but it is constrained by inadequate funding.

44.11.2Motor Vehicles It was noted that out of the 31 University vehicles, only one vehicle Reg. No. UAJ 084X Mitsubishi Pajero Model 2007 is in good condition. 13 vehicles are parked, 4 vehicles were lost (burned) during the students strike and the other 13 vehicles are not in good condition although they are running.

387 The Accounting Officer attributed this problem to inadequate funding and indicated that the University had made an appeal to the Ministry of Education and Sports for assistance.

44.12 University Land The University owns land estimated at 141.601 Hectares of which about 17 acres are being occupied by a cultural institution. By law the cultural institution qualifies to be a bonafide tenant.

The Accounting Officer explained that by the time the University acquired land title, the cultural institution was already occupying the 17 acres of this land.

The Accounting Officer is advised to pursue the matter either through the courts or a negotiated settlement.

44.13 Statement of reported losses of public moneys It was noted that cash amounting to Shs.6,800,000 was stolen by a former cashier for the Medical Centre during the financial year 2006/2007. This loss was neither reflected in the statement of losses for the year in which the loss was incurred nor in the statements for the current year. In absence of information, I was not able to establish whether the loss was handled in accordance with the Financial Regulations.

The Accounting Officer is advised to have the loss properly recorded and also provide the status of how it was dealt with.

44.14 Payables As at 30th June 2008, the University had arrears (payables) amounting to shs.4,723,984,865, of which shs.2,801,959,468 represents arrears incurred during the year contrary to the commitment control system. Included in the accounts payable is Shs.1,606,307,876 of which Shs.480,986,455 owed to Uganda Revenue Authority in respect of PAYE and Shs.1,125,321,421 to National Social Security Fund in respect of statutory deductions. The University risks being further penalized for non remittance of PAYE deductions and NSSF contributions to the

388 institutions promptly as required by the law. The Accounting Officer attributes the problem to under-funding of the institution.

It is recommended that the outstanding statutory obligations be given priority to avoid penalties and further litigation. The University also needs to be supported by way of additional resources so that it can meet its employee costs.

45.0 GULU UNIVERSITY

45.1 Inadequate Book Keeping Systems The financial statements of the University for the year ended 30th June, 2007 were qualified (disclaimer of opinion) on the basis of various unexplained errors, misstatements and inconsistencies in the financial statements resulting from inadequate book keeping systems.

In his response, the Accounting Officer explained that the University management got concerned with the opinion expressed by the Auditor General and undertook a reconstruction of financial statements to correct the errors caused by poor bookkeeping. He stated that all subsidiary books that did not measure to the standard were re-written, and the exercise was to be completed and a reconstructed set of financial statements was soon to be produced. By the time of this report, the reconstructed set had not been submitted for verification. Therefore uncertainty still exists regarding the accuracy and completeness of the financial statements for the year ended 30th June 2008 that were submitted for audit.

45.2 Outstanding Statutory Deductions Included in the payable balance of Shs.2,420,389,473 is Shs.702,608,580 and Shs.354,306,014 in respect of NSSF contributions and PAYE deductions respectively. The University faces a risk of being sued or penalized for failure to remit statutory deductions

The Accounting Officer attributed the problem to budget constraints. He explained that funds released are not sufficient to cater for the wage bill.

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45.3 Expenditure on Fuel The University spent Shs.131,379,254 on fuel consumption from m/S Caltex New Star Service station, Gulu. The following matters were observed from the review of fuel expenditure:-

Fuel orders or requisition forms were not presented for audit. The University does not make deposit payments for fuel but makes monthly payments after consumption. The invoices are sent direct to the Bursar‟s Department for payment and are not verified or certified by Estates Transport Officer and the user departments. It was difficult to establish whether all vehicles issued with fuel were official vehicles because the Transport Officer did not provide registration numbers of vehicles and logbooks were not provided for audit purposes.

In absence of this documentation, I was not able to verify the utilisation of the funds.

Management is advised to introduce advantage cards and put in place proper procedures for accountability of all fuel expenditure.

45.4 Medical Treatment A total sum of Shs.32,824,690 was paid to three hospitals where the employees of the University get treatment viz, Gulu Independent Hospital, St. Mary‟s, Lacor and Mulago Hospital. The payments are effected on presentation of monthly bills. However it was noted that the two private hospitals were not pre-qualified as service providers resulting into breach of Procurement Act and Regulations.

Besides, I was not provided with an explanation as to why employees were not being referred to a government hospital (Gulu Referral Hospital) which is free.

Management was advised to consider paying staff medical allowance as opposed to reimbursing them medical expenses. Further, the services of the Gulu

390 government hospital should be sought to minimize the high cost of private medical services.

45.5 Advances A total of Shs.95,395,300 advanced to staff to purchase stationery, vehicle spare parts, travel and maintenance of buildings and machinery and equipment remained unaccounted for. It was observed that staff mainly in Accounts and Estates Departments were routinely advanced funds before accounting for previous advances contrary to financial regulations. In addition the procurement office was not consulted to have the items supplied or vehicle spare parts fitted by approved service providers resulting into breach of procurement and disposal guidelines.

Delays in accounting for funds can lead to falsification of documents and possibility of loss of funds.

The Accounting Officer explained that he had appointed a verification committee to review the accountability and address shortcomings identified in advances management.

It is recommended that advances be minimised by having bulk procurements properly planned for and effected in accordance with the PPDA regulations.

45.6 Incompletely Vouched Expenditure Expenditure amounting to Shs.30,467,600 lacked adequate supporting documentation like Local Purchase Order, Goods Received Notes, and Delivery Notes. In many instances, the purchases were not witnessed or verified by Internal Audit and stores. In the absence of the relevant supporting documentation, I was not able to establish whether the items were delivered and utilized for the intended purpose.

391 45.7 Procurement

The University employed the services of a local firm for compound maintenance at a monthly fee of Shs.1,000,000 for the main campus and Shs.270,000 for the official residences, Guest house and NUPI. However, it was noted that the procurement was not approved by the Contracts Committee.

It was further noted that payments amounting to Shs.62,908,814 were made to various service providers that were not on the pre-qualified list of providers contrary to the procurement regulations.

Use of un-prequalified providers exposes the institution to the risk of not obtaining value for the funds spent.

The Accounting Officer is advised to have the maintenance contract regularised and also ensure that procurements are to a larger extent carried out with prequalified firms.

45.8 Salary Increments The non academic staff were paid 15% salary increments amounting to Shs.86,396,002. I was not provided with the Council‟s approval for the increment.

Although the Accounting Officer explained that the University Council approved the increment, evidence of approval was not provided.

The Accounting Officer is advised to provide the evidence of approval or have the matter regularised with the Council.

45.9 The University Library A review of the library activities/plans and physical facilities revealed the following matters; The library is poorly stocked and may not serve its purpose.

392 During the financial year under review, a total of 2,620 private students were charged US $ 40 each and other students Shs.40,000 per semester as library user fees. I was not appraised on how the funds were utilized.

The library is poorly equipped, has donated computers mainly P11 and P111 which can no longer support the latest technologies. Its current internet connection of 64 kbs is also inadequate.

It is recommended that management puts in place measures for improvement of library facilities.

45.10 The University Printery During the inspection of the printery it was observed that since the University opened, no efforts have been made to expand the printery by purchasing new machines. The existing machines were inherited from the former District Farm Institute Gulu and are inadequate given the level of business.

As a result all the printing requirements including vouchers and receipt books are printed by a service provider in Kampala. The printery should be upgraded to cut down on the printing costs.

45.11 The Guild’s General Assembly held on 24th October 2008 During the student guild general assembly held in October, 2008, the students pointed out 21 problems/complaints that the administration had to address in order to ensure smooth running of the University.

I was not provided with evidence on how the administration addressed the issues raised.

393 46.0 MAKERERE UNIVERSITY BUSINESS SCHOOL

46.1 Legal ownership of land MUBS occupies approx. 43.24 acres of land existing in two locations: Nakawa campus (approx. 41 acres), and Bugolobi Annex (approx. 2.24 acres). The School also owns another unsurveyed and undeveloped piece of land located on Plot 1, Kireka Hill View Road, Luzira whose size is not known to management. The assets list provided did not include this piece of land. The school is yet to acquire land titles for all the plots of land.

In the absence of land titles the institution cannot claim legal ownership of the land. There is also a risk of land encroachment given that the boundaries are not known.

The Accounting Officer explained that the school is pursuing the titling process with the Uganda Land Commission.

Management should expedite the process of securing the land titles and fence off the land to protect it from encroachment.

46.2 Retirement Benefit Scheme with NIC

The business school operates a Deposit Administration Plan (DAP) with National Insurance Corporation. As at 30th June 2008, the deposits with the NIC in respect of the scheme totalled to Shs.1,371,678,585

It was observed that management has not signed and registered the Trust Deed for the DAP scheme. This may have legal implications.

Management should formalise the scheme by signing the Trust Deed to avoid any legal consequences.

394

46.3 PAYE Penalty A total of Shs.10,743,646 was paid to URA as penalty for late remittance of PAYE deductions. This expenditure is considered nugatory as the expenditure could have been avoided had MUBS made PAYE remittances in time.

I have advised management that in future, returns to URA should be submitted within the statutory time frame to avoid penalties.

46.4 Vacant positions at the School The school has a total staff establishment of 940 posts. However, it was observed that there are still 321 vacant posts.

Lack of adequate staffing may impact on the operations of the schools and hence the ability to deliver the necessary services. The Accounting Officer is urged to ensure that all positions are filled.

46.5 Failure to timely effect staff changes on the payroll On leaving employment, employees should be deleted from the payroll and payment of emoluments stopped. A review of a sample of staff personal files revealed that the Human Resources Department does not timely effect payroll changes when staff leave employment. For instance an employee who absconded from work in August 2007 was paid salaries for the months of August and September 2007 totalling shs.2,687,374. To-date this amount has not been recovered.

In future all employees who leave employment or abscond should be immediately deleted from the payroll to avoid loss of public funds. Management has indicated that a system to mitigate such occurrence has been enhanced.

395 46.6 Absence of an approved Human Resources Manual The school lacks a Human Resource Manual that would specify the policies and procedures to guide staff administration, recruitment, discipline, training, promotion, allowances determination, and staff entitlements for staff. The matter was raised in the Auditor General‟s report for the year ended 30th June, 2007 but no action was taken.

This may lead to use of inappropriate procedures and methods in staff recruitment and remuneration.

I have advised management to develop and put in place an approved human resource manual

46.7 Lack of Accounting Manual Makerere University Business School lacks an Accounting Manual. This implies that there are no clear procedures for budgeting, accounting and reporting. In addition, the basis of sharing revenues and costs between central and administration and other income generating units is not documented. Similarly, there is no guide as to how provisions for non cash items such as depreciation are made.

The Accounting Officer explained that the manual will be developed in consultation with the Accountant General.

The Accounting Officer is advised to expedite the process of developing the manual.

46.8 Stalled construction of a Library and Lecture Halls In 2005/06 Financial year, MUBS planned to construct a library and lecture halls. Invitations for pre-qualification were run in newspapers in July, 2006. The pre- qualification and evaluation process was completed on 7th July, 2008 in which Seyani Brothers & Co (U) Ltd emerged the best evaluated bidder at a contract price of shs.5,532,792,302 (for lecture halls) and shs.10,464,124,052 (for library). In August 2008, the PPDA launched an investigation into the procurement process

396 citing complaints from one of the unsuccessful bidders (Babcon) who applied for a pre-contract administrative review. Although the review was carried out by the PPDA, the recommendation that the bids be re-evaluated has not been implemented. This has led to stalling of the project.

The Accounting Officer explained that the procurement process had been reactivated and was nearing conclusion.

I have advised him to expedite the implementation of the recommendations to allow the school carry out the projects within the planned costs.

46.9 Socketworks IT Project MUBS entered into a Memorandum of Understanding (MOU) with M/S Socketworks Uganda in which it was agreed, among others, that the service provider installs and manages ICT infrastructure. A software was to be customised to the School's requirements to serve a full range of key audiences, i.e prospective students, current students, faculty, staff, administrators, alumni, etc.

The project was planned to be commissioned in January, 2008. During the implementation stage, it was agreed that each student pays shs.40,000 per semester which translates into shs.936,720,000 that was collected in the academic year 2007/2008. However, the schedule of the payments made to the service provider since inception of the project was requested for but was not provided for audit.

Review of the implementation plan and inquiries made with management revealed that the project has to-date not taken off. The project has had major delays yet the students continue to be charged for no service rendered.

Management explained that the Council set up an ad-hoc committee to carry out an investigation into the project. Following the Committee's report, Council engaged a technician to carry out a technical audit after which a legal audit of the project would also be undertaken. The report is still being awaited for review.

397

47.0 MULAGO HOSPITAL

47.1 Over Expenditure The Statement of Appropriation (based on nature of expenditure) shows that the budget items for goods and services, and that of employees costs were overspent by Shs.1,940,401,721, and Shs.957,462,522 respectively. This implied an unauthorized reallocation from other activity items of Shs.2,897,864,243. This can negatively impact on the implementing of other planned activities.

The Accounting Officer is advised to strengthen the budgetary control procedures, where necessary virements or reallocation should be sought in accordance with the regulations.

47.2 Disposal of Assets Although during the year some assets were disposed off, the statement of disposal of assets for the year reflected nil proceeds from disposal. No adjustments were made to reflect the transaction in the financial statements.

47.3 Flouting Procurement Procedures There was no annual procurement plan prepared during the year contrary to the PPDA regulations. In addition procurements worth Shs.572,814,260 had their LPOs issued after deliveries.

Lack of procurement planning can lead to stock outs of essential drugs and this can result in rushed procurements, and their associated risks. The Accounting Officer is advised to prepare an annual procurement plan and implement it as required by the PPDA Act and Regulations.

47.4 Uncollected Non Tax Revenue The financial statements show that the hospital had uncollected non tax revenue arrears amounting to Shs.1,571,812,176 by the end of the financial year. The bulk of the amount is owed by Ministry of Defence.

398 Measures should be put in place for the recovery of these arrears.

The Accounting Officer explained that management has strengthened the private patients service though developing a credit management guidelines and making effective follow-up on debts.

47.5 Staff Quarters (a) Dilapidated Staff Quarters The hospital has about six hundred (600) staff houses (quarters). However, most of the houses are in a dilapidated state with weak structures and broken down and blocked plumbing systems. Many of the houses have actually been condemned by the City authorities and hence considered unfit for human occupation. Due to their appalling state, officers have in certain instances improvised by building temporary structures.

I have advised the Accounting Officer to come up with a long term strategy for renovation and utilization of the houses.

The Accounting Officer explained that an estates manager had been recruited and assigned the task of drawing up a strategy to address the matter. It was also explained that the hospital was also making savings to cater for the renovations.

(b) Renovation of Staff Quarters Shs.18,216,500 was refunded to officers who chose to repair their own houses without authority from administration. Besides work was never supervised by the Engineering and Works Department who are responsible for routine maintenance of the hospital and the staff.

It is recommended that procedures/guidelines for repair of houses by staff be drawn up and circulated to all staff. The guidelines should ensure that the repairs are approved and supervised by the estates department.

399

47.6 Maintenance of lifts The hospital lifts have been operating for close to 40 years, are now too old and require replacement. Due to the old age they are now too expensive to maintain. A total of Shs.20,606,180 is paid per year for repair and maintenance of the lifts. It was also noted that of the nine (9) lifts in the maintenance agreement, only two were occasionally functioning, but the maintenance company is paid for all the lifts. While the contract for maintaining the lifts was drafted on 1st January, 1996, it was not endorsed and validated by the Solicitor General.

In addition the log book in which all defects and details of work done as per the repair and maintenance agreement was not availed. Besides, there was no standby technician at the premises capable of repairing faults in case of emergencies as provided in the agreement.

Management is advised to review the agreement to ensure that payment is made based on actual work carried out. There is also need for regular servicing and monitoring of the performance of the maintenance firm.

47.7 Staffing The hospital still faces a problem of staffing gaps. Out of an establishment of 2,144 as per the staffing list, 2,015 posts are filled leaving 203 posts vacant by June 2008. The affected disciplines include Neurology, Endocriminology, Nutritive, Peadriatics, Surgery, dental surgery, Orthopeadic, Anaesthesia, Radiology, Supplies, Accidents and Emergencies, Community Health, Pathology and Clinical Oncology.

The Accounting Officer explained that submissions had been made to the Ministry of Public Service and the Health Service Commission for their necessary action. He also highlighted some challenges facing the hospital which include;

New medical specialized disciplines always come up which are not provided for in the organization structures. Regularizing it takes time. This forces

400 personnel to join Makerere University where their disciplines are recognized and appropriate remuneration provided.

The establishment of a single spine and restructuring of the hospital resulted in abolition of some offices. A category of staff who should have been retired is still working with the hospital. The Health Service Commission has not addressed the matter despite requests by management.

48.0 BUTABIKA HOSPITAL

48.1 Vacant Positions According to the staff list, out of 426 approved posts, 74 posts are still vacant. Some important posts like the 4 approved posts for Consultants have not been filled.

Staffing gaps can result in high patient/staff ratio, staff demotivation leading to poor service delivery. This matter was raised in annual report of the Auditor General for the year ended June 2007, but little progress has been made in addressing it.

The Accounting Officer explained that submissions have been made to the Health Service Commission for necessary action.

Management is advised to further pursue the matter with the Health Service Commission.

48.2 Un-approved Posts According to the staff list, although the posts of Warden/Quartermaster, Assistant Supplies Officer, Principal Clinical Officer and Senior Orthopedic Officer are not in the approved structure for the hospital, they are filled.

This contravenes Uganda Government Standing Orders (1991) which provide that all appointments be subject to there being vacancies against an establishment.

401 The posts should be regularized and the current organization structure reviewed to address the current needs of the hospital.

The Accounting Officer attributed the anomaly to a constricted staff structure and further explained that the cases were retained due to shortage of staff in the hospital. A proposal for restructuring of the hospital had been made to create more posts.

48.3 Staff Overstaying on Interdiction According to the Internal Audit report some members of staff had overstayed on interdiction as a result of inconclusive investigations.

A review of the Disciplinary Committee‟s File revealed one of the officer was charged of murder, whilst another was accused of theft of government property and the third one of forgery, impersonation and abuse of office.

The Accounting Officer explained that delays are due to the uniqueness of the cases and delays in investigation.

Management should expedite the investigation and take appropriate action. 48.4 Unfenced Hospital Land Out of the original 656 acres of land, the hospital remained with 190 acres. However, not all the land is fenced. This exposes it to the risk of encroachment. It is recommended that all land belonging to the hospital be fenced to avoid encroachment.

The Accounting Officer has indicated that the land would be fenced during the financial year 2008/09 subject to receipt of funds.

48.5 Loss of Lagoons According to available correspondences, the hospital has lost the lagoons that served the staff quarters and Psychiatric Nurses Training School to a private investor. As a result, the hospital is likely to incur additional capital costs to put up septic tanks or another lagoon to be used for the purpose. The Accounting Officer

402 explained that the lagoons were part of the land allocated to the investors by the Uganda Land Commission and that they were assured by the Commission that if the new developer wanted to relocate the lagoons, the developer would provide an alternative lagoon for the purpose.

I have advised that this understanding be properly documented by way of an agreement.

49.0 ARUA HOSPITAL

49.1 Board of Survey Although a Board of Survey was constituted, no report was availed for audit and therefore, the cash and cash equivalent of Shs.3,618,321 indicated in the financial statements could not be independently confirmed.

49.2 Inadequate Accounting Records There were no ledgers maintained and therefore verification of the financial statements to the originating source documents could not be undertaken. In the absence of accounting records as well as supporting documents, I could not obtain sufficient assurance on the fairness and validity of the account balances.

49.3 Staffing Levels Currently the Hospital is understaffed especially the senior medical personnel. At the moment, there are 5 consultants as opposed to 14; only 4 specialty Medical Officers as opposed to 12; and 6 Medical Officers as opposed to 10.

Staffing inadequacies is not unique to Arua Hospital but applies to all referral hospitals in the country. The problem is aggravated by lack of accommodation for staff among other factors.

The Accounting Officer has explained that this matter has been brought to the attention of the supervising Ministry but with little response.

403 The Accounting Officer is advised to continue following up the matter with the Ministry of Health and other relevant authorities to ensure adequate staffing. Meanwhile proper utilization of the capital development funds be made to enable provision of accommodation for staff.

49.4 Unaccounted for funds A sum of Shs.32,638,222 was paid to various officers of the Hospital to carry out hospital activities. By the time of writing this report, it was not yet accounted for. I was not able to confirm that the funds were not utilized for the intended purpose.

I advised the Accounting Officer to strengthen control over advances by ensuring that recoveries are made against officers who delay to retire their advances. The practice of advancing more funds to officers who have not accounted for the previous ones should be discouraged.

49.5 Un procured equipments It was observed that Joint Medical Stores was paid Shs.1,917,761 for purchase of ENT equipment. However, inspections revealed that the equipment was not delivered.

I advised the Accounting Officer to follow up of the matter with the company or have the funds recovered.

49.6 Inspection 49.6.1 Land Title Although the hospital land has been surveyed, management did not have the title at hand for inspection. The Accounting Officer explained that the process of acquiring the land titles was at an advanced stage.

49.6.2 Wards It was noted during the audit that most of the wards are crowded and that some patients were sharing floors with attendants at night, while others were being

404 accommodated in the Doctors examination room. There were no delivery beds nor incubators.

Management attributed the congestion to the fact that one ward was condemned and further explained that a storied structure is under construction to avert this situation. He further explained that the development budget to procure equipment like incubators and hospital beds was still not provided in the current year under review.

50.0 GULU HOSPITAL

50.1 Lack of Capital Development Budget It was observed that the regional referral hospital did not have a Capital Development Budget. As a result basic infrastructure and equipment like X-ray could not be provided to the patients. The Hospital ward which is very old and dilapidated could not be renovated.

The Accounting Officer explained that although the capital development funds have been provided in the financial year 2008/09, they are not adequate to address the needs on the ground.

I advised management to prioritise their needs and apply the funds sparingly over the year.

50.2 Poor Control Over Drug Delivery and Utilization (Drug Management) It was observed that contrary to Treasury Accounting Instruction (stores), drugs and sundries could not be traced from the time of delivery to the store then to the final consumers/patient files. This anomaly was due to the absence of an updated store records. The ledgers for the main store were posted up to September 2007 only. The goods received note and issues vouchers used were very old and faint as a result of using old carbon papers repeatedly rendering the recording of information to be poorly done. Procurements were done without requisition and the drugs store was being manned by a trainee student who needed guidance.

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The management admitted to the irregularities and explained that due to limited number of staff, volunteer students were supplementing the effort of the store assistant while effort is being made with the Public Service to recruit the store keeper.

The Accounting Officer was advised to expedite efforts with the Public Service.

51.0 JINJA HOSPITAL

51.1 Inadequate funding The hospital receives all its major funding from Government. Funding has generally been inadequate especially the Capital Development allocation and as a result, hospital buildings, vehicles, staff house and other infrastructures generally are dilapidated. Most of the equipment is old and non functional. These factors may put the lives of patients in danger.

51.2 Lack of land title for Hospital Land The Hospital does not have a land title over its properties which include the main Hospital and the Children‟s wing which were donated by Madhvani. There is the risk of property loss in the absence of a valid land title.

51.3 Lack of Technical Staff The Hospital lacks both technical and support staff. Out of 400 approved posts, 53 are vacant yet this is against a static establishment approved ten years ago despite the need for better services due to an increased population. An appropriate staffing level is required in order to provide a suitable service. The Accounting Officer was urged to bring the matter to the relevant authorities.

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52.0 LIRA HOSPITAL 52.1 Drugs and Sundry Stores

It was noted that Drugs and Sundry supplies were in some cases, not posted in the ledgers as and when received. This rendered the reconciliation between the physical Stock and ledger balance difficult. Some entries in the ledgers date back to 2007 and yet drugs were being received.

This practice may lead to theft and loss of drugs going undetected.

I advised management to ensure that the Stores records are properly maintained and updated.

Management accepted the findings and promised to address the concerns raised.

52.2 Payable Water Bill

Verification of the outstanding water bills at the year end revealed a total of Shs.45,855,096 on five accounts. Unpaid water bills may attract penalty if not settled and/or lead to undesirable disconnections.

Management explained that the outstanding bill was due to inadequate funding. 53.0 MASAKA HOSPITAL

53.1 Hospital Infrastructure 53.1.1 Lack of a Mortuary As I reported in the previous year, the hospital was still operating without a mortuary of its own which is not good for a referral hospital of this status. The hospital uses a mortuary that belongs to Masaka Municipal Council which is too small. The Accounting Officer explained that there is a plan to construct a mortuary in the financial year 2009/2010.

53.1.2 Inadequate Theatre Facilities The hospital has one theatre facility which has been over used due to the increasing number of patients referred from other neighbouring districts.

407 Inadequate theatre facilities imply that patients are not attended to in time. The Accounting Officer stated that there are plans to construct a new operating theatre in the financial year 2009/10

I advised the Accounting Officer to ensure that a proper strategic plan is put in place for the utilization of capital development funds being received. Construction of a theatre and a mortuary should be prioritised.

53.2 Drugs procured without certificate of Non-availability of Drugs from National Medical Stores During the period under review, drugs to the tune of Shs.114,673,020 were procured from private drug dealers without certificate of non-availability of drugs from National Medical Stores, contrary to regulations which require any procurement of drugs from private drug dealers to be done against certificate of non availability of drugs from National Medical stores.

The Accounting Officer explained that National Medical Stores (NMS) delays to issue certificates of non availability and sometimes does not issue them at all and as a result management resorts to JMS and other pre-qualified suppliers.

Procurement of drugs from private drug dealers without a certificate of non- availability of drugs from National Medical Stores and should be discouraged.

53.3 Un-witnessed Deliveries of Supply of Goods and Services to the Hospital It was noted during the time of audit that all supplies of goods and services were not being witnessed by the Internal Auditor, contrary to Internal Control Procedures. The Accounting Officer explained that during the year the Hospital did not have an Internal Auditor and efforts to have one posted, have not yielded any positive results.

I advised the Accounting Officer to continue liaising with the Accountant General to ensure that the post of the Internal Auditor in the Hospital is filled.

408 54.0 FORT PORTAL HOSPITAL 54.1 Utility bills Analysis of the domestic arrears schedule revealed that uncleared electricity bills stood at Shs.35,685,761 while unpaid water bills stood at Shs 36,408,660. The hospital risks services being disconnected due to this indebtedness.

It was further noted that the electricity company, Umeme charges the Hospital Commercial tariffs instead of Industrial tariffs which are lower.

The Accounting Officer has explained that there is increased outpatient load yet the budget for utilities has stagnated for the last five years. The Hospital is also threatened with litigations and disconnections. It was also explained that the hospital sewerage system is not connected to the municipal sewerage system and therefore more funds are spent on emptying Septic Tanks.

The Hospital bills should be cleared as and when they fall due.

I have also advised management to liaise with the utility company for consideration of a power tariff that is lower than the commercial one since it is offering a social service. I further advised that the hospital be connected to the sewage system.

54.2 Revenue underperformance It was noted that there was a low performance in collection of Non-Tax revenue. Out of the budgeted amount of Non-Tax Revenue of Shs.16,174,120, only Shs.12,544,527 was collected, leading to a shortfall of Shs.3,629,593. Additionally, the documentation to support the collections like revenue receipts, bank slips and other records were not available for audit purposes. The Accounting Officer explained that the Hospital had got only 12 beds in the private ward and because of the threat of Ebola and the poor state of the unit, there was a low turn out of patients and hence the low revenue performance.

It was recommended that the revenue collection system be properly documented and streamlined with supporting records for proper accountability.

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54.3 Shortfall in transfers from the Treasury Out of a total of Shs.2,193,061,000 expected from the Treasury during the financial year, only Shs.1,992,707,535 was received, leading to a shortfall of Shs.200,353,465.

Failure to realize budgeted revenue negatively affects the implementation of the Hospital activities.

I advised management to liaise with Ministry of finance Planning and Economic Development to obtain an appropriate release of budgeted funds to enable the Hospital provide adequate Health services to the public.

54.4 Fuel Consumption It was noted that fuel amounting to Shs.44,170,620 consumed during the financial year was not fully accounted for. The following matters were also observed;

o No fuel statements were obtained from the suppliers indicating the consumption for the period. o No log books were availed to monitor vehicle movements. o No activity reports were availed for audit purposes.

The Accounting Officer promised to take remedial action to improve on the system of fuel accountability.

The Hospital should establish, implement and maintain adequate internal controls over fuel usage. A system requiring use of motor vehicle log books and fuel requisitions and orders should be put in place.

54.5 Engraving of Hospital Assets It was observed that most hospital assets like furniture, beds, cabins, and computers were not engraved. Engraving of such assets safeguards them against theft and mishandling. In addition, no assets‟ register was availed to ascertain the

410 recording, existence, condition and ownership of the hospital assets, although the Accountant General has introduced a software to be used for the purpose.

All fixed assets of the Hospital should be engraved, and recorded in the fixed assets‟ register as recommended by the Accountant General.

55.0 KABALE HOSPITAL 55.1 Asset Register

The hospital management did not maintain a proper asset register to record land and other fixed assets as required by the Treasury Accounting Instructions. Besides, movable assets were not engraved to allow their identification and security.

During discussions, the Accounting Officer agreed that the Accountant General‟s Office had provided the hospital with an assets management software. However, the data base requires information such as identification numbers, cost and current values of the assets, which they did not have. He promised to have all hospital assets engraved and assigned serial numbers for the purpose of updating the data base.

I advised the Accounting Officer to ensure that an update asset register is in place and all assets engraved.

55.2 Expired Drugs A visit to the drug store also revealed that there were donated expired drugs which were still being kept. It was noted that donations were received in large amounts and some of them were of short shelf life.

The Accounting Officer explained that drugs/Chemicals expire for various reasons some of which are beyond the hospital‟s control. However, the Ministry of Health has been informed of the expired drugs.

411 I advised the Accounting Officer to liaise with other stake holders and have drugs properly disposed off without further delay following the laid down procedures. Meanwhile large stocks should be shared with other health centers in good time to avoid unnecessary expiry.

55.3 Lack of a Procurement Officer The Hospital did not have a Procurement Officer during the period under review. The procurement function is apparently being conducted by the Hospital administrator who also handles administrative duties hence no segregation of duties. Without the Procurement Officer, compliance with the procurement laws and guidelines becomes difficult. The Accounting Officer explained that the Hospital Procurement Officer was transferred away in July 2007. To-date no replacement has been made. He has however, written to the Accountant General requesting for a Procurement Officer.

I advised the Accounting Officer to ensure the position of the Procurement Officer is filled as a matter urgency to ensure compliance with the Procurement Guidelines and the Laws.

55.4 Land Related Matters

55.4.1 Mast Erected Illegally on Hospital Land A Telecommunication Company erected a telecommunication mast on the hospital land without permission of the hospital authorities. The mast is located near the mental health ward and it is likely to cause fatal accidents. The Accounting Officer explained that a squatter connived with a private Telecom Company to construct a mast on the Hospital land. The Accounting Officer has written to the squatter regarding the issue. Several letters have also been written to the private Telecom firm but with no response.

I advised the Accounting Officer to effect eviction of the illegal occupant and initiate legal proceedings against the Telecommunication Company.

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55.4.2 Fraudulent Acquisition of Land Title

A land title for medical staff house on plot No. 4 Bunigo Road was fraudulently obtained by an individual. During discussion, the Accounting Officer explained that he had made a follow up of the matter and that the Senior Hospital Administrator, together with the hospital Accountant visited the Lands and Survey Office in Entebbe and established that Kabale Hospital Land was still intact. He further stated that a letter has been written to the illegal owner to vacate the plot.

I advised the Accounting Officer to ensure that the illegal land title is canceled and the claimant removed.

55.4.3 Unlawful Occupation of Medical Staff House on Plot M12 A medical staff house on plot M 12 which is part of Kabale Regional Referral Hospital land was being unlawfully occupied by a squatter. During the discussions, the Accounting Officer explained that a letter was written to the squatter advising him to vacate Plot M12 but he had not responded.

I advised the Accounting Officer to obtain full possession of its property.

55.4.4 Give away of Government Land to Private Developer In 1996 whilst the hospital was under Kabale District Administration, the hospital management and advisory committee gave away part of hospital land to a private developer who built a school.

In 2004, the Director of Health Service together with the Medical Superintendent of the Hospital entered into a memorandum of understanding (MOU) to offer 1.376 acres of land to Kigezi International School of Medicine for a lease period of 49 years. The Institution has since changed names to Kabale Institute of Health Sciences and ownership.

The Administrators of the private school requested for more land for expansion and their request was granted. This expansion has affected the already existing

413 hospital staff houses on the land adjoining the school. According to available documentation, the private school administrators were supposed to relocate hospital staff to another place prior to taking over this lad. On inspection I fund a grader clearing the this land and staff houses taken over before the reallocation of hospital staff.

In a written reply the Accounting Officer explained that Kabale Institute for Health Sciences, a private institution, is on Bunigo Road, next to the Hospital gate. This portion of land was originally occupied by Kigezi International School of Medicine. The school collapsed in 2003/2004 but re-incarnated as Kabale Institute of Health Sciences in 2006.

He further explained that the Institute is expanding beyond what was originally Kigezi International School of Medicine. The Memoranda of Understanding were signed by (former Senior Hospital Administrators) on behalf of Kabale Hospital.

I advised the Accounting Officer to investigate the Land give away and ensure that proper boundaries are defined and adhered to. Furthermore, there is need to ensure that all concerned stakeholders were originally consulted before action was taken.

55.5 Staffing A review of the Hospital structure revealed that, a number of positions were still vacant. Out of 322 posts on the staff structure, only 166 positions are occupied and 156 positions are vacant representing 49%.

The Accounting Officer explained that the Hospital‟s staffing position has remained between 40% and 52% over several years impacting negatively on service delivery. The Health Service Commission and Ministry of Health have twice recruited staff and posted them to the Hospital. Surprisingly, about 80% of the posted staff have since been re-deployed elsewhere by the Ministry Of Health including those still on probation. Others go for greener pastures in NGOs and private practice. At the moment the hospital does not have a single surgeon, Pediatrician, Procurement Officer, Personnel Officer and many other categories of

414 staff. Of the 10 established posts for medical Officers, only 3 are filled. He further stated that he had written to responsible ministries to deploy more staff to the hospital and a response is being awaited.

I advised the Accounting Officer to liaise with Health Service Commission responsible for recruitment and fill in all the critical vacancies and improve on service delivery as a matter of urgency.

56.0 HOIMA HOSPITAL 56.1 Outstanding utility bills

It was noted that Management has constantly failed to clear Hospital bills in time. By the end of the financial year, electricity bills had accumulated to Shs.15,095,224, while water bills had accumulated to Shs 41,851,070.

It was further noted that the electricity company, Umeme charges the Hospital at Commercial tariffs instead of Industrial tariffs which would be more effective and result in a lower overall charge.

Possibilities of disconnection from services and litigation if the situation continues unaddressed cannot be ruled out.

The Accounting Officer explained that the tariffs for electricity and water were very high and the hospital had expanded requiring more funds for water and electricity. He further clarified that unless the arrears of utility bills are cleared and the budget allocation for them increased, the situation would continue to get worse and that the Accountant General‟s office has been informed of this situation.

Management should ensure that the Hospital utility bills are cleared as and when they fall due to avoid disconnection and disruption in service delivery.

415 I advised management to liase with utility companies to ensure that the Hospital is considered for a tariff that is lower than the commercial one since most of them are not in the business of generating profits but rendering an essential health service. Meanwhile budget negotiations with Ministry of Finance needs to continue to have allocation on these utilities increased.

56.2 Revenue underperformance Observation: It was noted that there was a low performance in the collection of Non-Tax revenue. The budgeted amount of Non-Tax Revenue was Shs.10,260,000, however only Shs.2,854,400 was collected (27.8% performance), leading to a shortfall of Shs.7,405,600 (72%).

In a written reply the Accounting Officer explained that the hospital is constrained on revenue collection because there is no Grade A or paying wing. There are only 16 side rooms that could fetch some revenue, but the hospital was discouraged from charging for the rooms. Permission had been sought from the Parliamentary Public Accounts Committee to levy chares for those rooms and that this will be implemented in the third quarter of this financial year. The Accounting Officer reported that the hospital management had planned to construct a paying wing for the hospital. The Accounting Officer was urged to continue exploring areas of revenue collection in order to improve service delivery.

56.3 Doubtful expenditure A sum of Shs.4,309,200 was paid out in settlement of a claim for repair of a vehicle. Examination of the transaction however revealed that the supporting documentation was inadequate to support the payment.

The Accounting Officer explained that this is an old vehicle which had outlived its life span. It had an engine leak and an engine overhaul had been done. It was the only vehicle available for administrative purposes and had to be repaired to sustain transportation needs.

416 The Accounting Officer was requested to provide suitable supporting documentation for audit and also make arrangements to obtain a replacement and have this one boarded of.

56.4 Understaffing at the Hospital Hoima hospital was upgraded to serve as a Regional Referral Hospital for the districts of Hoima, Masindi, Kibale, Kiboga and Buliisa. As a result, the hospital‟s staffing levels had to increase and the approved structure now stands at 361 posts. However, only 161 (44.5%) posts are currently filled, leaving 200 (55.5%) posts vacant. Most affected are key technical areas as detailed below: -

Post Approved Filled Vacant Senior consultants 4 2 2

Consultants 10 2 8

Medical: Special Grade 10 3 7

Medical Officers 8 4 8

Nursing 106 99 7

Para-medicals 70 25 45

Administration 28 8 20

Understaffing undermines the effective service delivery of the Hospital.

The Accounting Officer explained that he had declared the vacant posts to the Ministry of Health and the Health Service Commission and that plans were under way to fill the vacant posts. He further indicated that it was difficult to retain newly Recruited staff due to lack of suitable accommodation.

The Accounting Officer was urged to continue following up the matter of understaffing with the relevant authorities for redress whilst the issue of accommodation is being considered through the requisition of additional capital development funds to enable the construction of staffing units.

417 57.0 SOROTI HOSPITAL

57.1 Inadequate Funding

The hospital is inadequately funded as total bills of Shs.771,707,300 remained outstanding at year end. Inadequate funding may result into inefficient service delivery.

It is recommended that management liaises with the Ministry of Health and that responsible for Finance to obtain additional funding.

57.2 Lack of Technical Staff Out of 400 approved posts, 317 have not been filled leaving 83 vacancies. Moreover the current establishment was approved ten years ago and may require revision in view of higher demand for services arising from increased population. The effect of this is increased workload for staff and decline in morale leading to inefficiency.

Management should continue to liaise with the Ministry of Public Service to address the matter.

57.3 Unaccounted for Funds Shs.24,837,907 advanced to various officers of the Hospital remained unaccounted for at the end of financial year contrary to financial regulations. In the absence of accountability, I was not able to confirm that funds were utilized for intended purposes.

58.0 MBARARA HOSPITAL

58.1 Segregation of Duties in Hospital Stores

There was no segregation of duties within the drugs and sundries stores. The senior supplies officer is responsible for sundries. The respective officer in charge, prepares annual drugs and sundries work plans, requisitions, verifies deliveries,

418 posts the ledgers, prepares issue vouchers, issues out drugs and verifies monthly stores balances. The cause of lack of segregation of duties was understaffing. Whereas the Hospital structure provides for 3 personnel, only two were employed at the time of audit.

There are no checks and balances in stores and there is a high risk of drugs, sundries and other procurements being misappropriated and the Hospital management may not detect the anomaly in time. The Accounting Officers explained that the matter of understaffing had been brought to the attention of both the Ministry of Public Service and Public Service Commission. Meanwhile deliveries are being verified by an accounts staff.

The Accounting Officer has been advised to endeavor to fill in the existing position as soon as possible and ensure that appropriate store staff structure is in place.

58.2 Staffing Gaps As reported in the previous financial year, the hospital still does not have its own staffing structure approved by the Ministry of Public Service but uses Lira Hospital staffing structure. According to the existing structure a total of 102 vacancies are not yet filled. This has impacted adversely on service delivery. The demand for health service has increased greatly for example, Out Patients increased from 96,629 in 2006/07 to 280,198 and Diagnostic services from 87,915 to 111,259 in 2007/08.

The Accounting Officer stated that action is being taken and 91 vacancies have been declared to the Health Service Commission for recruitment.

The hospital should continue following up the matter in order to recruit and fill all vacancies and work out an appropriate structure that will handle the increasing demand of health services.

The Hospital should continue following up the matter in order to recruit and fill in all vacancies and work out an appropriate structure that will handle the increasing demand of health service.

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58.3 Internal Audit Function There was lack of effective Internal audit function in the Referral Hospital for the year under review. According to the structure, Internal Audit is supposed to have two staff members; however, only one staff exists. This has impacted on internal audit function as only one quarterly report was produced during the entire financial year.

Lack of effective internal audit function may lead to deteriorating internal controls and eventual loss of public resources. The Accounting Officer explained that during the second half of the year, the internal auditor was transferred away without a replacement hence the lack of quarterly reports.

The Accounting Officer has been advised to fill in the vacant positions and periodically review the performance of the internal audit.

58.4 Cash Office and Imprest System There is no segregation of duties in the cash office as the same person controlling cash and imprest payments, receives money and does banking and withdraws. Lack of segregation of duties may lead to losses of cash which may not be detected in time. The Accounting Officer attributed this anomaly to lack of adequate number of staff. Measures should be put in place to properly separate imprest management from non tax revenue accounting. Meanwhile vacant positions should be filled.

58.5 Non Functional Equipment

Audit inspection of a sample of hospital medical equipment revealed that one x-ray machine, Fluoroscopy and General Radiography machine, 3 ultra sound machines and one viewing board were non-functional. Management explained that the estimated repair costs of £30,500 were unaffordable. Besides, the search for a competent technician to carry out repairs had not yielded positive results.

The Accounting Officer further stated that funds are being sourced through the budgeting process to ensure that the facility is operational. 420

It is recommended that funds are availed for repair and/or procurement of these essential equipment.

58.6 Land and Building of Hospital Most of the hospital buildings are very old and not properly maintained. Some hospital units like grade (A) are housed in containers. This greatly affects service delivery adversely. The Accounting Officer explained that lack of building maintenances was due to inadequate funding.

It was also observed that the hospital Land title for plots 8-18 also includes land belonging to Mbarara University since the two institutions were initially managed as one. Lack of proper demarcation of the boundaries of the two institutions may hinder physical developments by either institution.

The Accounting Officer explained that the matter of separate titles was brought to the attention of Uganda Land Commission which verbally advised that it was not possible to separate land titles as the two institutions were interdependent. Consultations regarding separate land titles should be made to enable the University and the hospital to foster proper physical planning and development of their infrastructure. Meanwhile, existing buildings should be properly maintained.

Because of lack of separate land titles, these separate institutions! Strategic development activities are not coordinated. The Accounting Officer explained that the matter of separate titles was brought to the attention of Uganda Land Commission which verbally advised that it was not possible to separate land titles as the two institutions were interdependent.

59.0 LONDON MISSION 59.1 Inadequate Accountability for CHOGM Funds

The Ministry of Foreign Affairs remitted funds to the mission amounting to £100,000 to assist with the renovation of the Chancery in preparation for CHOGM

421 2007. The funds remained unaccounted for by the end of financial year. The list of payments submitted by management as accountability lacked basic supporting evidence such as requisitions, approvals, invoices, contracts and acknowledgement receipts. Management is advised to submit supporting documentation for verification.

59.2 Non Tax Revenue

59.2.1 Disclosure

According to Non Tax Revenue returns submitted, the only sources of revenue declared were passport renewal and visas. Revenue collected from letting Uganda House was not recorded and disclosed. This understates the NTR reported in the financial statements. Management is advised to disclose all sources of revenue and account for it accordingly.

59.2.2 Unauthorised Utilisation

According to Non Tax Revenue (NTR) returns submitted for audit, the mission collected GBP 209,554 for the period under review. However, only GBP 183,167 was banked leaving GBP26,387 unaccounted for. In addition, GBP 164,110 was withdrawn and utilized at source without authority. There was also no evidence to show that all collections were remitted to the consolidated fund as required by financial regulations.

59.3 Irregular Payment for Gratuity

Foreign Service Standing Orders require that officers recruited at missions shall be employed on non pensionable and non gratuitable terms. Examination of accounting records revealed that GBP 101,920.47 was paid to staff (former and current) as gratuity contrary to the above requirement. In addition, Shs.168,758,776 is still disclosed as outstanding in the financial statements.

In my report of 2006/2007, it was recommended that officers recruited locally should be on non pensionable and non gratuitable terms but it appears no action was taken to implement the recommendation.

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59.4 Lack Of Imprest Cash Book

The High Commission did not maintain an imprest cashbook. In response management indicated that a cash register where recipients sign for the funds is maintained instead of an imprest cash book. It is recommended that a proper imprest system is put in place in accordance with treasury accounting regulations.

59.5 Installation of Plasma/ICD Screen at the Chancery

A Ugandan registered company delivered to the Embassy a flat television screen and a DVD player plus some DVDs for tourism promotion. Records show that the TV screen and DVD will remain the property of the private company for five years after which they will be officially donated to Embassy as per the provisions of the Memorandum of Understanding signed with the Ministry of Foreign Affairs. The intentions of the private company appear noble. It is however not clear how information production costs, equipment costs and other operational costs are to be covered. Besides, the Memorandum of Understanding signed with the Ministry of Foreign Affairs was not availed for audit.

Management explained that the matter had been referred to Ministry of Foreign Affairs for appropriate action. I await copy of memorandum of understanding and the strategy for meeting related costs.

59.6 Cleaning Contract During examination of accounts, it was observed that the contract between the Mission and a private firm ended in December 2007 however, the firm continued with the Chancery cleaning responsibility from January 2008. GBP 13,995 was paid out for the services in the period under review. In the absence of a formal agreement, I was unable to ascertain the terms of service. Management is advised to submit all the necessary documentation for verification.

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60.0 NEW YORK MISSION 60.1 Excess Expenditure It was noted that the Mission incurred excess expenditure of Shs.2,997,312,605 as indicated in the Statement of Appropriation Account based on services voted by Parliament. I was not provided with evidence for the authority to incur expenditure over and above the budgeted amounts.

Management explained that the excess expenditure arose as a result of underfunding of the Mission budget. Expenditures that are critical for the running of the Mission and Uganda House have to be incurred leading to what appears to be excess expenditure.

The Accounting Officer is advised to spend within appropriated amounts and if additional expenditure is required, authority from the Secretary to the Treasury should be sought.

60.2 Uganda House The Missions owns a 14 storey building located on 336 East, 46th Street. Part of the premise is occupied by the Embassy and the remainder is rented out for purposes of generating income.

However it was noted that there is no budget provided for maintenance of such properties. The revenue obtained from this property is NTR which is required by law to be remitted to the consolidated fund and not consumed at source.

The Accounting Officer also indicated that the building requires major renovations in the areas of:- - Replacement of the elevator system - Water proofing the sides of the building - Installation of new water treatment - Upgrade of fire alarm control.

424 There is a risk that the building may be closed because facilities do not meet the required local standards.

The Accounting Officer explained that several requests have been made to MoFPED but in vain and that for purposes of ensuring that the building is not condemned, the NTR is used to maintain the building.

60.3 Non-Tax-Revenue Collections Shs.2,491,353,532 was realised from Non-Tax revenue during the year under review. The collections were in respect of rent (Shs.2,061,734,786) visa fees (Shs.96,229,525), Insurance claim (Shs.327,463,211) and other miscellaneous revenue (Shs.5,926,011).

The Public Finance and Accountability Act requires that such monies should be remitted to the Consolidated Fund and not spent at source.

However, it was noted that only Shs.84,530,500 was remitted leaving a balance of Shs.2,406,823,032 that was utilized at source. I was not provided with the authority for the mission to spend at source.

Management has explained that this arose as a result of underfunding of the Mission. The Mission had to finance vital utilities such as heating cooling and property maintenance as referred to in 2.0 above.

60.4 Liabilities Included in the liabilities of Shs.817,906,521 is an amount of Shs.630,866,228 incurred during the year contrary to government commitment control system. This relates to an interest bearing loan incurred without authority from the Treasury.

60.5 Assets Register The Embassy maintains a list of assets procured by the Embassy. However, the list does not meet the requirements of an assets register. An assets register should contain the following details:-

425 - Cost - Condition - Location - Serial No - Date of purchase

The Accounting Officer is advised to establish an Assets Register that should contain all necessary details.

The Accounting Officer has indicated that action is already being taken to establish a proper register for Government assets in New York.

61.0 WASHINGTON MISSION 61.1 Unauthorised Expenditure It was noted that the Mission incurred excess expenditure of Shs.212,705,753 as indicated in the Statement of Appropriation Account based on services voted by Parliament. I was not provided of the evidence for the authority to incur over and above the approved budget.

The Accounting Officer is advised to spend within appropriated amounts and if additional expenditure is incurred, authority from the Secretary to the Treasury should be sought. 61.2 Non-Tax-Revenue Collections Shs.1,211,183,453 was realized from Non-Tax revenue during the year under review. The collections were in respect of administration fees and licences. The Public Finance and Accountability Act requires that such monies should be remitted to the Consolidated Fund and not spent at source.

However, it was noted that only Shs.93,924,500 was remitted leaving a balance of Shs.1,117,458,953. Of that amount, Shs.670,055,000 was utilised with authority and the balance of Shs.447,403,953 utilised at source without authority.

426 Management explained that the amounts were utilised at source due to underfunding of Embassy. In this regard, the Embassy was compelled to utilize part of the NTR for vital utilities such as cooling, heating, electricity and property maintenance.

61.3 Mission Properties The Mission owns the following properties:- - 5009 Loughboro for the official residence - 5909 16th Street N.W. D.C. - 5919 16th Street N.W. D.C.

The following observations were made:- The Embassy does not have original titles for the properties The property on Plot 5009, 16th Street NW did not have a diplomatic cover. Properties 5909 and 5919 require general repairs to the building.

In addition, I was informed by the Accounting Officer that the basement of the property at 5919 needs external water proofing so as to avoid the partial flooding which regularly occurs in the basement during the rainy season.

The Accounting Officer is advised to liaise with the Ministry of Foreign Affairs to establish the whereabouts of the original titles and also liaise with the Ministry of Finance, Planning and Economic Development regarding the repairs required on properties 5909 and 5919 Coughboro Road.

61.4 Insurance of Properties The above-mentioned properties have not been insured. This exposes Government to losses in the event of a disaster leading to loss of property.

The Accounting Officer should ensure that the properties are covered under insurance.

427

61.5 Budgeting It was noted that the budget figures approved at the Embassy for various items appear unrealistic given the amounts consumed at the end of the financial year under review. For instance the following table shows the amounts provided for and the actual amounts consumed:-

Activity Budget Actual Variance Expenditure

Allowances 180,000,000 237,864,346 (57,864,346) Medical Expenses 91,000,000 154,290,951 (63,290,951) Telecommunications 10,000,000 45,216,353 (35,216,353) Electricity 10,000,000 46,977,794 (36,977,794) Travel Abroad 30,000,000 70,279,108 (40,279,108)

As a result of inadequate amounts provided, the Embassy incurred excess expenditure of Shs.212,705,753.

The Accounting Officer explained that realistic expenditures are recommended to MOFPED. However, when the budgets are approved, the amounts approved are less.

The Accounting Officer is advised to contact MOFPED with a view to review the expenditures upwards to reflect the changing conditions.

61.6 Medical Treatment of Mission Staff Contrary to chapter to 3 section F-a of the foreign service standing orders on medical treatment that require officers serving with the mission together with their spouses and children to be registered with a doctor and dentist abroad, the mission paid individual bills and even made refunds to officers for expenses incurred on treatment without any prescriptions.

428 A total of US$ 9,532.52 was spent in this respect yet monthly deposits for health insurance to M/s optimum choice amounted to US $ 3,073.23. This apparent double payment was not properly explained.

The Accounting Officer explained that due to insufficient funds allocated for medical expenses, the mission has been compelled to take up health insurance schemes which do not provide full coverage of medical services. Such health insurance schemes are only contributory in nature in that the patient is required to meet some of the cost of treatment (co-pay) over and above the contribution being made by the insurance company.

62.0 NEW DELHI MISSION 62.1 Domestic Arrears A review of the statement of outstanding commitments on page 16 of the Accounts, revealed that the mission incurred new commitments totaling shs.43,382,719 during the year contrary to the commitment control system.

62.2 Over Expenditure The mission incurred expenditure of shs.95,989,572 against shs.35,100,000 provided for in the approved budget on consumption of property, plant and equipments leading to an over expenditure of shs.60,889,572. The over expenditure lacked proper authority.

In her commentary on the financial statements, the Accounting Officer stated that the High Commission retained NTR and used it to top up funds in the purchase of a representation car. However, the authority to retain NTR was not provided.

62.3 Incompletely Vouched Expenditure A sum of Shs.80,233,285 paid to various service providers was not supported with adequate supporting documentation. I was therefore unable to verify and confirm the validity of the expenditure.

429 63.0 CAIRO MISSION

63.1 Non Compliance with the Procurement Law The Mission has continued to operate without the Contracts Committee and Procurement unit contrary to the PPDA Act and as a result purchases are not subjected to competitive bidding. It was also noted that the mission only operates a US $ dollar account which implies repetitive translation of dollars into local currency to facilitate cash purchases. This exposes the mission to foreign exchange losses and the risks associated with cash transactions.

The Accounting Officer is advised to seek guidance from PPDA on the application of the regulations. The Accounting Officer should also consider opening up a local currency account.

63.2 Allowance Paid To Local Staff It was noted that support staff are paid a consolidated overtime allowance of USD 521 every month. Further scrutiny of expenditure indicates that the same staff are paid for working beyond official working hours and working on public holidays. This practice is irregular and is not provided for in the local staff terms of employment.

63.3 Expired Contracts All contracts for the local staff expired on 1st August 2008 and have not been renewed. It was also noted that contrary to the terms of employment, local staff were given contracts of only one year despite the fact that they are entitled to 5 years contract. Besides, the terms of their employment did not clearly specify the benefits and obligations.

I recommended that terms of employment should be reviewed to clearly stipulate the obligations and benefits of the parties involved.

430

63.4 Mobile Phone Bills

Foreign Services Standing Order H-b (16) give authority to the Accounting Officer to pay two–thirds of the cost of un-timed calls for foreign services officers who have official telephones.

However, it was noted that during the year a total of USD 2,725 was paid out for expenses incurred on personal mobile phones. Regulations specify „official telephone‟ for which call cards are paid for and not mobile phones.

I have advised the Accounting Officer to follow the regulations as the officers are covered under the call cards system for official calls.

63.5 Medical Expenses (Refunds)

Foreign Services Standing Order F-a (2) recommends that officers serving with a mission should register with the National Health Insurance Scheme.

It was however noted that such a scheme was not in place. Instead, during the year a total of USD 6882 was paid out in form of Medical Claims to various officers. These claims couldn‟t be independently verified. I recommended that the Accounting Officer seeks guidance on the implementation of the Standing Order from Public Service.

63.6 Domestic Arrears/Payables At the end of Financial Year the mission had domestic arrears amounting to Shs.48,000,000. This contravenes the commitment control system. The Mission should liaise with Ministry of Finance to have this bill verified and paid. I have also advised the Embassy to observe the commitment control system in order to avoid the occurrence of arrears.

431 64.0 ADDIS ABABA MISSION

64.1 Unreconciled Cash and Cash Equivalent A balance of shs.381,631,248 is reported in the Financial Statements as Cash and cash equivalents as at 30th June, 2008. However, the figure is not supported by a bank reconciliation statement and certificates of balance and a Board of Survey report. It was therefore not possible to confirm the existence and accuracy of this amount.

64.2 Statements of Appropriation Account The two Statements of Appropriation Account prepared and included in the Embassy‟s financial statements should ideally report the same results of expenditure. However, the two statements are not consistent, reporting different balances on expenditure. The inconsistency arose as a result of including shs.180,678,228 (transfers to other Organisations) in one statement and excluding it from the other. The expenditure should be treated consistently in the two statements.

64.3 Over Expenditure Expenditure on a number of budget items was over and above the amounts authorized in the budget by shs.71,018,206 as shown in the table below. Of this amount shs.3,803,538 relates to expenditure on capital goods, yet no provision was made for capital expenditure in the budget. The over expenditure was not supported with virements or reallocation warrants.

Item Budget Actual Variance General expenses 35,000,000 7,379,609 32,379,609 Communications 10,000,000 30,237,950 20237,950 Travel & Transport 55,000,000 68,577,349 13,577,349 Maintenance 9,000,000 10,019,760 1,019,760 Property - 3,803,538 3,803,538 Total 109,000,000 180,018,206 71,018,206

432 I have advised the Accounting Officer to always seek for authorisation for excess expenditure and reallocations.

64.4 Unaccounted for fuel Deposits worth shs.75,475,627.5 were made to a firm to cater for fuel for the embassy vehicles. However, no accountability documents were provided to show how the fuel was consumed. In the absence of the documentation, it was not possible to confirm that the fuel was utilised for the intended purposes.

64.5 Irregular Use of Receipts Examination revealed that fifteen (15) receipts were missing in the series and were not indicated as cancelled in the cash book, and could not be accounted for. It was further noted that the receipts were not being used in their serial order, various receipt books were used at the same time, making it difficult to trace receipts actually used. I advised the Accounting Officer to ensure proper usage and accountability of the receipts.

65.0 BEIJING MISSION

65.1 Incompletely vouched Expenditure A total of US $ 11,043.83 and Chinese Yuan 71,400 was spent by the mission on various activities. However, acknowledgement receipts, delivery notes and requisitions initiating payments were not attached to support the payments. I was therefore unable to confirm whether the funds were put to proper use.

65.2 Unaccounted for Counterfoils Review of returns of unused counterfoils filed during the period and the cash statements revealed that a number of receipts were not accounted for as required by regulations. Details are given below;

Reference No.0336395-7, 0336548-550, 0336619, 0336692. There is a risk of abuse of such missing receipts.

433 Management should ensure that all the missing/unaccounted for receipts are traced and any revenue collected accounted for.

65.3 Non Tax Revenue A total of Chinese Yuan 1,469,239.60 and US $ 30,999.67 was remitted to the Treasury during the period under review. However, no acknowledgement receipts from the Treasury were presented for audit.

It was also noted that Chinese Yuan 14,000 was spent at source to cater for salary arrears without authority from the Treasury. In the absence of the authority, the expenditure is rendered irregular.

Management is advised to ensure that NTR is always banked intact and any remittance is acknowledged.

66.4 Staff Recruited Locally Regulations require heads of mission to clear every offer of local appointment to a Ugandan national with the Permanent Secretary, Ministry of Foreign Affairs before such an offer is made.

Records submitted for audit indicated that two staff were locally recruited at the embassy without clearance from the Permanent Secretary.

I recommended that the Accounting Officer follows the regulations whilst making any local appointments.

66.0 OTTAWA MISSION

66.1 Non-Tax-Revenue Collections Shs.178,004,231 was realized from non tax revenue during the year under review in respect of visas.

434 The Public Finance and Accountability Act requires that such monies should be remitted to the Consolidated Fund and not spent at source.

However, it was noted that only Shs.99,249,716 was remitted leaving a balance of Shs.80,755,515 that was utilized at source. I was not provided with the authority granted to the mission to spend at source. In addition, there was evidence of remittance to Uganda consolidated fund of Shs.82,348,907 only. The balance of Shs.16,900,309 remitted was not evidenced by way of receipt showing that the money was received by Treasury.

The Accounting Officer explained that at times there are no funds on the main account necessitating the Mission to utilised this revenue on important items such as heating/cooling, hydro, civil repairs.

It was also explained that NTR of US $9,744 was borrowed to facilitate the High Commissioner to accompany a special envoy to deliver CHOGM messages on condition that Ministry of Foreign Affairs was to refund the mission. Unfortunately, Ministry of Foreign Affairs has not refunded todate.

The Accounting Officer is advised to spend within appropriate amounts and if additional expenditure is incurred, authority from the Secretary to the Treasury should be sought.

66.2 Unauthorised Expenditure It was noted that the Mission incurred expenditure of Shs.16,187,023 in excess of the approved budget as indicated in the Statement of Appropriation Account based on services voted by Parliament. Various items of expenditure were also overspent without virements or reallocation warrants.

I was not provided with evidence for the authority to incur over and above the approved budget.

435 The Accounting Officer acknowledged the omission and explained that the excess expenditure was a result of inadequate funding. There is no provision for maintenance and yet the Mission has two old buildings.

The Accounting Officer is advised to spend within the appropriated amounts and if additional expenditure is incurred, authority from the Secretary to the Treasury should be sought.

66.3 Budgeting It was noted that the budget figures approved at the Embassy for various items appear unrealistic given the amounts consumed at the end of the financial year under review. For instance, the following table shows the amounts provided for and the actual amounts consumed:-

Activity Budget Actual Variance Expenditure Allowances 280,484,000 368,767,773 (88,283,773) Water & 10,000,000 44,021,189 (34,021,189) Entertainment Telecommunications 20,000,000 73,619,180 (53,619,180) Maintenance of 0 135,020,299 (135,020,299) Buildings

There is a risk that other activities may not be implemented as planned.

The Accounting Officer is advised to liaise with Ministry of Finance, Planning and Economic Development with a view to revise the expenditures upwards to reflect the changing conditions.

The Accounting Officer explained that the mission had a funding gap to carry out the required operations. Several appeals have been made to the authorities in Kampala but with no success.

436 66.4 Maintenance of Properties The mission owns property as follows:- - Official Residence on 235 Mariposa Avenue - Office accommodation on 231 Cobourg Street

However, there is no provision for maintenance of such properties. As a result, Shs.135,020,299 was diverted from other activities for purposes of carrying out maintenance.

The Accounting Officer has explained that the Mission owns two very old buildings which require a lot of continuous repairs and maintenance for them to be habitable and also requires regular machine maintenance due to frequent breakdowns and yet there was no provision in the budget for this important item. According to him there is a possibility that the chancery will be condemned in the near future if the recommended repairs of the basement are not carried out.

The Accounting Officer should liaise with the Ministry of finance for purposes of providing funds to enable the Mission maintain its assets.

67.0 TOKYO MISSION

67.1 Non-submission of Returns The returns for the month of April 2008 were not submitted for audit. It was therefore not possible to confirm and verify the revenue and expenditures for the month. Although the Accounting Officer explained that he had sent the documents to Ministry of Foreign Affairs, they were not submitted for audit.

67.2 Statement of Appropriation The two Statements of Appropriation reflect differing amounts of total mission expenditure being shs.1,583,293,107 and Shs.1,694,913,671. The variance was not properly explained.

437 67.3 Excess Expenditure The Embassy incurred shs.108,453,107 in excess of the approved budget without authority. In the absence of Parliamentary authority this expenditure is considered irregular.

The Accounting Officer explained that the excess expenditure arose due to the TICAD Summit that was held in Tokohama Japan and attended by a delegation of Ugandan dignitaries and officials and the Embassy‟s preparatory and coordinating role. The summit activities had not been included in the budget for 2007/08.

67.4 Unreconciled Remittance to the Treasury Non tax revenue (NTR) collections for the year is reported in the accounts as shs.119,036,256. However, the amount reported as transferred to treasury was shs.111,620,564 in the Statements of Performance and Cash flow differs from the amount reported in the Statement of Arrears of Revenue of shs.112,369,246. The discrepancies have not been explained. It is also not clear whether the closing balances of shs.10,175,005 relating to the financial year 2006/07 were ever transferred to the Consolidated Fund Account as required by the law.

It is recommended that a reconciliation to explain the discrepancies be prepared.

68.0 TRIPOLI MISSION

68.1 Excess Expenditure The Mission incurred excess expenditure of Shs.50,232,766 over the appropriated amount of Shs.910,121,000 without the required approval. The Accounting officer explained that the excess expenditure arose due to capital gains derived from the exchange difference between the Uganda shilling against the Euro.

68.2 Re-Allocations Without The Required Approval During the financial year under review, the Mission spent a total of 13,939.39 Euros equivalent of Shs.33,775,117 to construct a wall fence and to face lift official buildings during the expansion and modernization of Tripoli Ben Ashur

438 Street. However, no reallocation warrant was availed to confirm that this expenditure was approved. It was further established that the contractor had not been paid the balance of Shs.7,709,544 for the works undertaken by the close of the financial year.

The Accounting Officer explained that the works had to be undertaken urgently as was required by the Libyan Government for security reasons. The Accounting Officer further clarified that attempts were made to obtain supplementary approvals but no response was received from the Ministry of Finance, Planning and Economic Development.

68.3 Wasteful Expenditures Euros 2,909.1 was spent to hire space to store old items of the Embassy which were no longer required in the offices. An audit inspection of the stores revealed that most of the items were old broken furniture, old mattress, air conditioners and other items which were no longer needed. Most of the items have no value but the Embassy continues to incur costs for their custody.

The Accounting Officer explained that a letter had earlier on been written to PPDA to seek guidance on how to dispose the items due to the size of the Embassy and its peculiarity. A response has now been received giving guidance on how the properties can be disposed. The process has commenced and is expected to be finalised by the end of this financial year.

68.4 Lack of Capital Budget During The Year The Mission was not allocated funds for capital development despite the fact that it is an old Mission which requires major repairs on the Chancery building.

An audit inspection revealed that, kitchen facilities, house hold items like beds, chairs and air conditioners all require urgent replacement.

The Accounting Officer explained that a request was submitted for the capital expenditure requirements to be included in the budget but no funds were allocated.

439

68.5 Mission Charter In order to effectively fulfill the Mission charter there is a need to provide materials about Uganda translated into Arabic language for the natives to clearly understand them.

A review of budget of the Mission did not have a provision for translating documents into Arabic.

The Accounting Officer explained that the embassy was heavily constrained by lack of sufficient funds to fulfill the mission charter.

I have advised the Accounting Officer to liaise with the Ministry of Finance, Planning and Economic Development for purpose of providing such funding in the budget.

68.6 Non Compliance with the Procurement Law

It was noted that the Mission has continued to operate without both the Contracts Committee and Procurement Unit as required by the PPDA Act. The Mission procured its goods and services without subjecting them to competitive bidding as required by the law. I was therefore not able to ascertain whether Government realised value for money from these expenditures in terms of better prices and quality of goods and services procured.

The Accounting Officer explained that the peculiarities of Libya limit the applicability of some provisions of PPDA guidance. For instance there is no private press and the government owned newspapers only carry government adverts. The Accounting Officer further clarified that due diligence was however observed to ensure that value for money was derived for all purchases. I have advised that the mission seeks guidance from the PPDPA Authority on the appropriate course of action.

440

68.7 Increase in Cost Of Living In Tripoli Since the international lifting of the economic Embargo on Libya, the cost of living has been increasing overtime mainly because of the increase in trade and opening of new facilities. This has led to increase in demand for goods and services of all items with accommodation being affected most.

A discussion with staff showed that all local staff could no longer afford to pay rent because salaries have not been revised for the last five years. Some of the trusted and experienced staff have started looking for better alternatives.

I advised the Accounting Officer to liaise with Ministry of Foreign Affairs to determine proper categorization of the embassy so as to improve on the funding of the embassy.

69.0 RIYADH MISSION 69.1 Acknowledgement of NTR Remittances It was noted that SR 32,940.00 was collected during the year and SR 32,588.49 was reportedly remitted to Bank of Uganda. However, by the time of writing this report, the Accountant General had not acknowledged receipt of the funds.

I advised the Accounting Officer to follow up the acknowledgement receipts from Treasury.

69.2 Payments for Electricity Foreign Service standing orders require 20% of electricity charges to be paid by the officer. However the mission paid full costs of SR 984.22 to Saudi electric company for electricity consumed by the respective officers and no recoveries were made from the officers.

The Accounting Officer has explained that the payment was an over sight and measures have been instituted to recover the money from the affected officers.

I await the outcome of this action.

441

70.0 COPENHAGEN MISSION 70.1 Over Expenditure Analysis of the expenditure in the statement of appropriation revealed that Ushs.86,034,589 was spent in excess of the approved amounts on various budget lines without the authority from Secretary to the Treasury. Regulations require that authority for any virements and re-allocations should be sought before expenditure is incurred.

The Accounting Officer explained that retrospective authority is being thought from the Secretary to the Treasury.

70.2 Irregular Payment Disturbance allowance of US $ 4,070.80 was paid to a local resident staff in contravention of regulations which permit only payments for transfers between missions and from Uganda to a mission or vice versa. Besides, the officer was paid US $150 above the authorized rate for warm clothing allowance.

The Accounting Officer explained that the overpayment will be recovered.

70.3 Nugatory Expenditure. Dkr 38,242.04, equivalent to shs.12,803,436 was spent as demurrage charges and legal fees regarding the shipment of personal effects for one of the mission staff. This arose because the shipping firm which had been paid Dkr Dkr 75,850 ($13,600) abandoned the personal effects at Mombasa which attracted demurrage. In total the mission spent an extra Dkr 76,569.9 to ship the personal effects. This was a result of not carrying out proper evaluation during the selection of the service provider.

The Accounting Officer explained that the company did not truck the personal effects up to Kampala and the Embassy had to pursue legal means which resulted into accumulation of demurrage charges. It was also explained that the company became insolvent and no recovery could be made.

442 I advise the Accounting Officer to adhere to the requirements of the PPDA Act in the selection of selecting Service Providers.

70.4 Un-Authorized Salary Advances Mission staff were advanced salaries amounting to Ushs.8,889,609. However, it was noted that the advances remained un-recovered by the year end.

70.5 Non Tax Revenues (a) Non-Maintenance Of NTR Cashbook The Treasury Accounting Instruction 2003, paragraph 320 requires all revenue collectors to maintain revenue cashbooks. Contrary to this, the mission kept a single cashbook combining both NTR and RBC releases and transactions despite having two separate bank accounts. The Accounting Officer has promised that the mission will acquire and maintain a separate cashbook for NTR.

(b) Un-Remitted NTR Collections A total of Ushs11,630,282 was not remitted to Treasury at the end of the financial year contrary to financial regulations. The Accounting Officer has promised to remit the amount and his action is awaited. The Accounting Officer is advised to always spend within the budget or seek relevant authority for spending beyond the budget.

70.6 Long Outstanding Receivables Ushs.1,679,791 Ushs1,679,791 has been outstanding since the previous financial year as an advance to the Ministry of Foreign Affairs. I did not receive explanation as to why this amount has been outstanding for such a long time.

The Accounting Officer is advised to recover the funds.

70.7 Absence of Multiple Entry Visas: The embassy uses visa sticker which are all single entry visa each costing US $50. However, some visa applicants especially the regular travelers require multiple stickers as is the practice in other embassies. The Accounting Officer explained that the embassy had written to Ministry of Internal Affairs (Immigration Office)

443 asking for multiple visa stickers, however, by the time of this audit, no response had been received.

I recommend that multiple visa stickers should be availed to all embassies and other border points to meet the needs of the clients.

70.8 Condition of Properties 70.8.1 The Chancery The Mission through some savings was able to renovate part of the cellar of the chancery, which was dilapidated. There is still an urgent need to fix the balcony, which has curved in rendering it dangerous to the officers at the embassy. The repair has been estimated at US $105,000 and was budgeted for in the financial year 2008/09.

70.8.2 The Official Residence: Since the building was acquired nearly 30 years ago, no renovation has been carried out on the building. The roof tiles are broken and lack mortar; the chimney is leaking and needs a new chimney pot. It is estimated that US $ 120,200 will be required to carry out the repairs. The figure was also included in the budget estimates for 2008/2009.

Ugandan embassies and missions abroad should be facilitated to carry out regular maintenance of the properties to avoid accelerated depreciation.

71.0 NAIROBI MISSION 71.1 Excess Expenditure The mission incurred Shs.55,233,922 in excess of the approved budget without authority of Parliament. In addition, included in the Payables figure of Shs.232,870,462 is Shs.53,579,396 in respect of outstanding commitments incurred during the year contrary to government commitment control system. This indicates weaknesses in the budgetary control procedures.

444 Management is advised to operate within the appropriated amounts as required by the law. Meanwhile the excess expenditure should be regularised in accordance with the Public Finance and Accountability Act.

71.2 Cash Survey A cash survey carried out on 18th December 2008 revealed US$4,050 of NTR (Visa) and KSh6,400 of funds collected from issue of Emergency Permits. The NTR funds agreed with the receipt books and cash books.

It was however noted that the funds collected in respect of Emergency Permits are not acknowledged on government receipts. Instead the Cashier was using locally improvised receipts. For the period between 17/11/08 and 17/12/08 an amount of KSH 49,750 had been collected. The printing and storage of those receipts could not be ascertained.

I could not therefore independently establish the actual amount collected. It was further noted that all the amounts collected are used at source contrary to government regulations which require that all Non Tax Revenues be banked and transferred to the consolidated fund at the end of each month.

Although the Accounting Officer explained that the monies raised were used to meet costs of repatriating stranded and distressed Ugandans, out of the one month‟s collection of KShs.49,750, only Ksh1,000 was used for that purpose. The balance was used for office teas, photocopy and other sundry expenses. These expenditures from revenue require appropriate authority. The Accounting Officer stated that he had subsequently sought permission for the use of such funds from the Permanent Secretary/Secretary to the Treasury.

71.3 Management of Uganda House

The Mission is mandated to manage the five floor Uganda House which is located on Kenyatta Avenue. The Mission contracted Regent Management Limited to manage the property from 1994 to 30th June 2006 when the management contract expired. In September 2006 an advertisement for engaging another property

445 manager was made and the Contracts Committee subsequently pre qualified five firms which submitted bids as follows;

Bidder Management Letting Reletting Commission Commission Commission

Villa Care 2.5% 1.5% 1.5% Crystal Valuers 2.5% 2.5% 2.5% Mwaka Musau 2.5% 2.5% 2.5% Regent Management 4.0% 3.5% 2.5% Lloyds Masika 2.5% 3.75% 3.75%

The process of appointing a Property manager for Uganda House was later temporarily suspended pending clarification from Kampala. As a result the original manager was instructed to continue his services, on temporary basis, pending appointment of a new manager for the property. It was however observed that in February 2008, the Uganda High Commissioner unilaterally wrote to (M/s Lloyds Masika Ltd.) appointing them the official property managers effective 1st March 2008.The following matters were further observed; a) Flouting of Procurement Regulations The basis and criteria used by the Head of Mission in the selection of the property manager without going through proper evaluation was not properly explained. The contract was signed by the Head of Mission contrary to procurement and financial regulations which entrust such responsibility to the Accounting Officer.

From the figures quoted by the bidders above, it would probably have been more economical if the contract had been awarded to Villa Care who had quoted the lowest rates. Instead it was awarded to Lloyds Masika who eventually even increased their rates above those they had originally quoted amounts as indicated below;

446 Rate Management Letting Re-letting Commission Commission Commission

Bidded rate 2.5% 3.75% 3.75%

Contract 4% 5% 3.5% rate

The evidence indicates that the mission would have made savings if the procurement had been carried out in a competitive manner through a proper evaluation process as required under the Public Procurement and Disposal Act and Regulations. b) Unremitted Collections The new contract was challenged by the outgoing managers (Regent Management Ltd). Consequently they refused to handover and withheld an unspecified amount of money in respect of rental collection for February 2008 as compensation for the termination of the contract. They are demanding for compensation of KShs.1,300,000 plus 16% VAT which management has declined. In April 2008, the matter was referred to the Mission lawyers for mediation. By the time of audit, almost nine (9) months later, the matter had not been resolved.

A further verification of the returns submitted by the new Manager (Lloyds Masika Ltd) revealed that although they took over on 1st March 2008, the returns for the month of March were not submitted. c) Service Charge

According to the contracts between the Management Company and the tenants, a service charge of 15% of the rental amount is payable by the tenants to cater for maintenance and utility bills. A comparison of the total amount of service charge collected against payments for the year ended June 2008 revealed that although Kshs.4,758,655 was collected as service charges, a total of Kshs.6,984,891 was eventually spent occasioning a deficit of Ksh.2,226,236. This deficit was irregularly made good from the rental amounts. The service rate appears too low to meet all the

447 maintenance and management costs and needs review since it was last reviewed in 2007. d) Rental Arrears

A further review of May 2008 returns revealed that tenants had outstanding rentals amounting to Kshs.16,362,275. In view of the fact that monthly collections were on average Ksh.2m, the unpaid rentals appear to be on the high side. I advised management to ensure that tenants prepay their rentals to minimise the risk of default. The Accounting Officer promised to address the matter. e) Controlled Tenants

According to Kenyan laws, once a tenancy agreement expires and is not renewed but the landlord continues to receive rentals from the tenant, the tenancy is deemed to be still valid on the same terms. The terms of tenancy can only be varied under the authority of the Rent Tribunal. It was observed during the audit that Uganda House had so many such self controlled tenants who have been renting the property for a long time. Efforts by the new property manager to revise their rental upward have not yielded any results. They have refused to sign the revised tenancy agreements. As a result, the mission is not earning realistic market rates from their tenancy.

The Accounting Officer explained that the number of self controlled tenants has now reduced to eight years (8) and these are being vigorously pursued with the help of the Mission lawyers. f) Lifts

At the time of inspection, one lift (Lift A) was out of use. I was informed that it had been out of use for over four months. This was causing a major inconvenience for the tenants and their clients. In the long run it may have a negative impact on the attractiveness of the property. It was also noted

448 that although a company had been contracted to install new lifts at a cost of Kshs.6,040,925 in November 2004 they have never completed the work.

The Accounting Officer explained that he has handed the matter to the Mission lawyers and that in the meantime the Mission has tendered out the work to rectify faults as he awaits the litigation process. g) Fire Fighting Equipment

Review of records/returns from the Manager revealed that the fire fighting equipment was last serviced in September 2007, more than one year ago. The risk of fire cannot be over emphasised. I advised management to ensure that there is regular servicing of such equipment. The Accounting Officer explained that the contract for the service provider had expired and the Mission was in the process of tendering out the works. h) Repairs Undertaken

In April 2007, the Mission was authorised by the Ministry of Finance Planning and Economic development to spend NTR worth KShs.2,500,000 on the redecoration of Uganda house and repairs of the residence. In July 2007 works valued at KShs.2,569,245 were contracted out on the Uganda House as shown below:- External painting/glass work KShs 1,450,700 Installation of toilet locks/door closure KShs 234,394 Repair of leaking roof(Western wing) KShs 374,880 Painting of Official residence KShs 509,271 Total KShs 2,569,245

Inspections revealed that the above works were all done except for the flat roof, which developed new cracks in places that had been resealed. It could not be established whether it was a result of poor workmanship or natural wear and tear. However a longer lasting solution should be considered.

449

71.4 Local Staff A review of 13 local staff files revealed that the majority of staff (11) had never been appraised at all. The other two were last appraised in the year 2004. This is contrary to government regulations. Failure to undertake performance appraisal denies staff associated benefits relating to their personal and professional development.

In addition, two new staff were recruited in May 2008 as secretary/ receptionist and Receptionist/typist/tea girl respectively. I was however not availed details on how they were recruited. Another staff was promoted from Secretary to Personal Secretary in August 2005 on condition that she undergoes a computer stenography course. There was no evidence on file to show that this was undertaken. The Accounting Officer explained that the local staff matters are being regularised and streamlined.

71.5 Review of Internal Audit Findings An internal audit inspection carried out in July 2008 revealed a number of weaknesses in the Mission which have not yet been addressed. Most importantly these include:-

Non recovery and approval of staff advances as evidenced by one recalled officer who left the Mission without paying off his outstanding balance. The Accounting Officer stated that he was following up the Officer.

Inadequate controls over vehicle usage, allocation and fuel accountability. The criteria for allocation of vehicles could not be ascertained. It was not clear as to who was entitled to a vehicle and who was not.

It was difficult to ascertain who was in charge of imprest. The Accounting Officer had not designated the imprest holder, in writing, as required by the PFAA 2003.

450 No vehicle movement logbooks were maintained by the Mission so as to monitor vehicle maintenance costs, fuel and movements, including claims for drivers‟ overtime charges.

Medical treatment of staff and authorised dependants is not properly controlled and therefore it is easy for an unauthorised person to be treated in a clinic or hospital in the names of an authorised person.

In her handover report, the Accounting Officer quoted a figure of KShs.9,300,000 outstanding for telephone and KShs.500,000 as outstanding bills. It has not been explained why bills dating back as far as FY 2004 and 2005 stamped “Paid” were included in the list of domestic arrears. The genuineness and authenticity of such claims could not be verified as the original bills and invoices were not available for verification. The Accounting Officer explained that some of the original bills were sent to Kampala for verification.

The Mission contracts out services like guarding, cleaning etc. without going through the proper PPDA guidelines.

The Mission planned to dispose of a motor vehicle (Benz) but up to now the car is still parked in its Chancery at Riverside. Five bids for the car with the highest bidder offering KShs.2,396,000 inclusive of the applicable taxes were received. The Deputy High Commissioner of the Zambian High Commission also made an offer of KShs.1,200,000 exclusive of taxes for the vehicle but no decision has been made regarding its disposal. Meanwhile, the car is losing value. The Accounting Officer should take a decision on its disposal as any further delays cause loss of its salvage value.

72.0 DAR ES SALAAM MISSION 72.1 Funds for Domestic Arrears According to records, a sum of Shs.153,466,668 equivalent to US $82,957.50 was released to the Mission as vote on account to cater for Mission expenditure

451 including domestic arrears of Shs.70,000,000. However, the final accounts show that the Mission payables balance amounted to only Shs.29,882,391.

The Accounting Officer explained that the release of Shs.70,000,000 was meant to settle domestic arrears accumulated by her predecessors in 2005 but by the time the funds were released, the High Commission had cleared most of the bills. She stated that the funds had since been used to settle house rent, travel costs, settlement allowance and other related costs for a new officer posted to the Mission.

However, further scrutiny of related documentation revealed that the expenditure relates to the current financial year 2008/09 and it is far below the funds released. Besides, these funds were not reflected as unspent balances in the financial statements for the year ending as at 30th June 2008. This renders the explanation doubtful.

72.2 Over Expenditure The Treasury Accounting Instruction, 2003, requires authority for any virements and re-allocations to be sought before such movement of funds from one vote item to another is done. In addition, paragraph 156 prohibits transfer of available funds from one item or sub-item of expenditure to others, save on the authority of a virement warrant. Analysis of the expenditure in the appropriation account revealed an over expenditure of Shs.44,839,632. However the authority for reallocations from some items to others was not submitted for audit. The omission renders the over expenditure un-authorized. Details are shown below:-

Expenditure items Budgeted Actual Variances Communications 15,000,000 16,094,869 1,094,869 Travel & Transport 70,000,000 109,281,498 39,281,498 Maintenance 9,000,000 9,478,150 478,150 Furniture & Fittings - 3,985,115 3,985,115 TOTAL 94,000,000 138,839,632 44,839,632

452 The Accounting Officer is advised to spend within the approved budget and where additional funds are required authority to spend should be sought.

72.3 Payments for Un-certified Technical Works The PPDA regulation number (250) sub-section (2) requires that, where an interim or stage payment is permitted, then it should be linked to specific and verifiable deliverables and shall not exceed the cost or value of the deliverable it is linked to. As such the value of the works paid for should be certified by a technical person in that field.

However, U.S Dollars ($) 34,027 and (TZ) shs2,950,000 was paid for renovation of the Chancery, official residence and the perimeter wall construction but no proof of valuation and certification of the interim works paid for was submitted for audit. Accordingly the basis on which the interim payments were made remains un-clear.

I advised the Accounting Officer to always comply with the procedures as laid out in the Public Procurement and Disposal of Assets Act and regulations.

72.4 Funds Refundable (US $ 2,460.0) US $ 2,460.0 was paid to an officer who accompanied the Hon. Minister to deliver CHOGM 2007 invitation to the Head of Government in Tanzania. However, a review of letter referenced MOT 72/212/09 of 27th July 2007 indicated that per diem and air ticket for the accompanying officer were to be paid from the CHOGM 2007 account at the Ministry of Foreign Affairs but Missions were advised to borrow the money to be refunded by the Ministry Headquarters.

However, by the time of audit there was no evidence to show that the money was refunded by the Ministry.

I advised the Accounting Officer to follow up the refund with the Ministry headquarters.

453 72.5 Circumvention of the Procurement Regulations TZ Shs.3,000,000 was paid to a company for supply of (3) computers. However, despite the amount involved being substantial, the mission did not follow the prescribed procurement procedures as provided in the PPDA Act and Regulations.

I could not confirm whether the prices charged were competitive and goods delivered were of good quality.

I advised the Accounting Officer to adhere to the procurement procedures as provided for in the Public Procurement and Disposal of Assets Regulations.

72.6 Doubtful Fuel Consumption (T.Z) SHS.1,333,300 Verification of the statement of fuel consumption from the supplier of fuel for the Mission revealed that fuel worth (T.Z) shs.1,333,300 consumed during the year was found to be doubtful based on the discrepancies outlined below;

(a) Motor vehicle fuel tank capacity compared to actual consumption (T.Z) Shs.1,182,800 Analysis of fuel consumption by motor vehicle number T119 CD – M1 revealed that on several occasions it was filled with 120 litres of diesel at a go. However, it was noted that the fuel tank capacity of the said motor vehicle cannot absorb such quantities. This renders the expenditure doubtful.

(b) Petrol consumption by a diesel motor vehicle (T.Z) Shs.150,500 The mission owns motor vehicle number T119 CD – M1, with a presumed diesel engine as per trend of fuel consumption established from the schedules. However, it was noted that on two occasions the motor vehicle was filled with petrol without any proof of change of the engine. This renders the expenditure doubtful.

It was recommended that management investigates the matter with a view of recovery of misappropriated funds.

454 72.7 Book Keeping for NTR The mission maintains a U.S Dollar account with Stanbic Bank Tanzania for accounting for NTR collections. However, some weaknesses were noted as explained below;

(a) Non-submission of Duplicate Receipts for the Year Paragraph 67 of the (TAI) requires copies of revenue receipts to be retained in the books for audit purposes. It was noted that the duplicates of original general receipts books were not submitted for review. Thus, collections reported in the cashbook could not be independently verified.

(b) Format of the Cashbook Paragraphs 321-323 spell out the details to be included in the cashbook and the format as in appendix –D to the regulations. However, it was noted that the cashbook was not balanced at the end of the month. The debit side had only bankings instead of actual collections as per receipts issued. Thus, the receipt numbers were not recorded in the collection cashbook.

Such omissions in book keeping render the transactions recorded in the cash books unreliable. I advised the Accounting Officer to follow the Treasury Accounting Instructions.

72.8 Mission Charter According to the Mission charter, the Head of Mission is charged with a responsibility to implement the Charter and achieve various set targets.

However, annual work plans and performance reports for the financial year 2007/08 to the date of inspection were not availed for audit to enable me establish the level of performance. The Accounting Officer explained that a lot of work was being done without a written work plan, but work plans had been prepared for the current financial year (2008/09).

I advised the Accounting Officer to prepare annual work plans and write performance reports because they form a basis for achieving the Mission charter

455 and serve as a tool of measuring performance. I further advised management to liaise with the Ministry of Foreign Affairs and the Ministry of Finance, Planning & Economic Development to ensure that sufficient funds are provided to facilitate implementation of the mission charter.

72.9 Development of Plot 10 Kaunda Road, Dar-es-Salaam The residential house at Plot 10 Kaunda Road is dilapidated and uninhabitable. The Mission intends to demolish it and develop the Plot into flats in Partnership with a private developer which will house Foreign Service Officers and save the Mission US $72,000 that is being incurred annually on rentable accommodation. The other flats erected could earn rent income payable to the consolidated fund.

I advised the Mission to involve all the key stakeholders in the negotiation and decision making process and ensure that the project takes off as the method of financing would not exert pressure on the consolidated fund.

72.10 Involvement of Head of Mission in Financial Management It was observed that the Head of Mission was a signatory to the Mission accounts and gets involved in passing of expenditure vouchers for payment which is actually the role of the Accounting Officer. Whereas this allows the Head of Mission to participate in the financial management, it has the disadvantage of making the Head of Mission engrossed in the detailed financial management of the Mission at the expense of his other critical roles.

I recommended that the Head of Mission relinquish entirely this responsibility to the Accounting Officer but develop a framework where he is kept informed regularly of the financial matters of the Mission.

72.11 Renovation of the Official Residence Situated at Plot 65/11 Hill Road Oysterbay, Dar-es-Salaam A sum of US $105,464.05 equivalent to Shs.171,906,401 has been incurred on the renovation of the official residence.

456 However, the following procurement irregularities were noted:- There was no evidence that proper procurement procedures were followed. Although such a contract would require the involvement of the Ministry of Works and Communication for the estimation of costs, preparation of technical drawings, tender documents and bills of quantities and also the approval of the Solicitor General, these procedures were not complied with. Whereas such a contract would require technical supervision by competent engineers who would issue and certify work done through interim and final certificates of work done, this was not done, instead the Head of Mission claimed to have supervised the work himself. The fate of the timber, windows etc removed during renovation was not established although the Head of Mission claimed to have sold them and applied the proceeds on compound making and design.

In the circumstances, I could not confirm that the contracts awarded were done transparently and competitively and that its execution was competently supervised with due regard to specifications and that the cost incurred is commensurate with the work done. For example, an attempt to re-measure floor space of 225m2 where floor tiles worth TShs.7,200,000 were allegedly fixed revealed floor space of only 180m2.

72.12 Education Account The Mission operates an education account through which the Ministry of Education remits money to cater for book faculty (US $ 178) top up (US $120) and transport allowance (US $60) for University Uganda students in Dar-es-Salaam. A review of the records identified 2 students whose courses were not indicated while 10 students did not append their signatures to acknowledge receipt of their allowances. The genuineness of this expenditure could not be reliably verified.

The Mission was asked to investigate this matter and communicate its findings to the Ministry responsible for release of these funds.

457 73.0 ABUJA MISSION 73.1 Cash in Transit A review of the Final accounts under note 20 Cash and Cash Equivalents revealed that an amount of shs.58,574,300 (equivalent to US$ 36,451) was disclosed as cash in transit. This was in anticipation of the June 2008 monthly release which later was not realised. Recognition of unrealized revenues/cash in the financial statements is contrary to the stated accounting policy for recognition of revenue which requires that revenues are recognized only when received. This has the effect of overstating the cash balances.

73.2 Unrefunded CHOGM expenditure The Mission was instructed by the Accounting Officer, Ministry of Foreign Affairs to borrow funds from their budget to facilitate a Presidential Special Envoy to deliver CHOGM 2007 invitations to the various heads of state in West African countries of accreditation. The facilitation was to cater for air tickets and per diem. Subsequently an amount of $5,823 ($3,300 for per diem and $2,523.45 for air ticket) was paid for that purpose.

It was however noted that only $3,579.91 was refunded by the Ministry leaving $2,234.54 outstanding as at the time of audit. Failure to recover borrowed funds affects the implementation of planned Mission activities and ultimately the fulfilment of Mission objectives.

Although the Mission made a follow up with the Ministry Accounting Officer no response had been received by the time of the report.

73.3 Domestic Arrears/Payables An amount of Shs.53,312,854 disclosed as payables in the financial statements relates to outstanding bills for Nigerian Telecommunications (NITEL). Further inquiry revealed that the company was privatized. The lawyers of the new company (Ajayi Hakeem & co) had requested for the recovery of the funds. It was noted that although an amount of shs.12m was approved as reallocation to partly pay the bill, only shs.2,879,031 was paid to the company. No explanation was provided for not utilizing all the reallocation for the intended purpose.

458

73.4 Mission Property 73.4.1 Undeveloped Plot In my previous year‟s report I pointed out that the Mission‟s owns an undeveloped plot on Plot no 311 Cadastral Zone Central district Abuja measuring 8,959 sqm (2.5 acres). The Federal authorities threatened to revoke their lease offer by December 2009 if no development is undertaken there on.

During the year the Mission undertook some steps towards the development and on 2nd June 2008 advertised for consultants for expression of interest for pre- qualifications. Six companies expressed interest and preliminary evaluation was undertaken. Three companies were eventually recommended for consideration by the Contracts Committee. These included; i) Deserect Nig Ltd ii) Dante Multipurpose Ltd iii) Sadel Consults

In August 2008, the Accounting Officer Ministry of Foreign Affairs proposed to send a four person team of technical officials to Abuja to finalize the process of procuring a consultant and work jointly with the consultant to develop the project drawings as well as prepare the bidding documents.

Because the proposed budget of US$ 15,320 to cover the per diem and air tickets could not be met by the Mission, the Permanent Secretary/Secretary to the Treasury authorised the mission to reallocate funds from Capital development to facilitate the exercise.

However, by the time of this report, the team had not yet set off. Meanwhile costs are rising and deadline given by the Federal authorities is approaching. I advised the Mission to expedite the process.

459 73.4.2 The Chancery The Mission is renting a Chancery situated at Plot 44 Ontario Crescent Maitama at a cost of ₦ 3.5m per annum. During the year the Mission paid an amount of $30,434 in respect of one year‟s rent effective 4th July 2008 to 3rd July 2009.

Information obtained however suggests that the Land lord has indicated that he intends to increase the annual rental fees to ₦ 4.5m (almost $40,000). There is need for the Mission to try to secure and develop its own plot for office use so as to save on the increasing rental costs. The chancery should also be properly furnished and funds provided for its regular maintenance.

73.4.3 Official residence This property is owned by the government of Uganda with a 99 years lease effective 1992. I carried out an inspection of the official residence and observed that the property was in good condition after some renovations had been carried out.

There are still other repairs needed to be undertaken as indicated below; Electrical Rewiring Perimeter wall construction Verandah construction Replacement of Electric Cookers Renovation of the Boys Quarters Replacement of old carpets in the room

I have advised the Accounting Officer to have these properly budgeted for.

73.4.4 Staff Residences All staff residences at Property No 6 GAO Close Plot 1142 Cadastral Zone WUSE II were inspected and it was observed that the furniture, mattresses and carpets were in very poor condition and need replacement.

460 73.4.5 Un engraved Property/inventory A stock taking carried out for the various inventory of the Mission revealed that all property in the Chancery and Residences are not engraved contrary to Treasury regulations. Similarly all property including buildings and Mission car, two generators are still not insured. The Accounting Officer explained that steps are being undertaken to engrave all property in the coming financial year.

73.4.6 Damaged and Obsolete property Included in the inventory are many items which are damaged and obsolete and require disposing off. These include; 2 Fax machines, kettles, computer (Compaq), Generating set, 3 Air conditioners, a lawn mower, chairs, desks, mattresses etc.

The Accounting Officer was advised to ensure that disposal process is initiated to avoid further deterioration.

73.5 Staffing 73.5.1 Administrative Attache The Mission has not had an Administrative Attache since November 2007 when the previous one was recalled to Kampala. This has greatly affected the operations of the Mission in terms of secretarial work and other administrative tasks which are being performed by the Accounting Officer who also already has a busy schedule. The Accounting Officer was advised to liaise with the Ministry of Foreign Affairs to expedite the posting of the attaché.

73.5.2 Local Staff The Mission has recruited 10 local staff to assist in the day to day running of the Mission. It was however noted that although the local staffs were being paid a bonus (equal to half their monthly salaries) every end of year, this was not provided for in their appointment letters. Moreover there were no performance appraisals being carried out for local staff.

The Accounting Officer explained that this was a norm in the Nigerian Public and Civil service. I however advised him to have this regularised by providing for it in their terms and conditions of service.

461 73.6 Mission Charter As reported in my report last year, the Mission Charter mandates the Mission to focus on; i) increase Nigeria investment to Uganda by 30% ii) Growth of exports to Nigeria by 20% iii) Increase Nigeria Tourists/Christian Pilgrims to Uganda by 25%

Although this is an enormous task, the Mission has made some progress in investment by encouraging various banks which have now opened offices in Uganda. In the field of Tourism the number of religious tourists increased this year compared to last year. The Challenge still lies in the trade and export sector where little progress has been made.

The High Commissioner attributed this to the competitive advantage that western countries and China have over Uganda and prohibitive freight costs between Uganda and Nigeria.

It was further explained that the targets set appear too ambitious for the Mission in view of the meagre resources remitted to the mission, whilst noting that there is no budget line on promotion of trade, tourism and investment.

I advised management to liaise with Ministry of Finance, Planning and Economic Development and Ministry of Foreign Affairs to enable him meet the challenges and the targets set.

74.0 BRUSSELS MISSION

74.1 Poor State of Government Property 74.1.1 Official Residence

The official residence, which was bought in 1978, has been condemned and is due for demolition. The Accounting officer explained that an application for demolition is yet to be approved by Belgian authorities. It was further stated that a capital budget of Euros 3,038,400 for construction of two houses in place of the

462 condemned property has been submitted to Ministry of Finance for inclusion in 2009/2010 estimates.

74.1.2 The Chancery

The Chancery was bought in 1977 and has never had any major repairs apart from the roof and part of the ceiling, which were repaired recently. The rest of the building remains in a dilapidated state. Many Chancery windows can no longer close or open and require replaced. The Accounting Officer stated that windows on the ground and first floor have been replaced but due to limited funds those on second floor remain in a bad state. It was further explained that a sum of Euros 951,570 has been included in the capital budget for renovation.

74.1.3 The Villa

The Villa was bought in 1978 and has significantly depreciated with visible cracks in the brickwork. The heating system needs to be urgently replaced to comply with the EU new environmental regulations. The Accounting officer stated that a sum of Euros 226,570 and Euros 10,000 in respect of renovation and converting the heating system respectively have been included in the next capital budget.

It is recommended that provision of suitable accommodation and renovation of office premises be prioritized to assure safety of staff and image of the country. Government procurement procedures should however be adhered to.

74.2 Unpaid Bills

Unpaid bills are reported as Shs.83,336,275 in the statement of financial position as at 30th June 2008. However original supporting documents such as invoices and delivery notes were not availed for verification. It was explained that the bills relate to periods up to 2004/05. Longstanding arrears may attract interest charges. It is recommended that original supporting documents be availed for verification.

463 74.3 Installation Of Plasma/Lcd Screen At The Chancery

A Ugandan registered company delivered to the embassy a flat television screen and a DVD player plus some DVDs for tourism promotion. According to documents seen, the TV screen and DVD will remain the property of the private company for five years after which they will be officially donated to embassy as per the provisions of the Memorandum of Understanding reportedly signed with the Ministry of Foreign Affairs.

The intentions of the private company appear noble. It is however unclear how information production costs, equipment costs and other operational costs are to be covered. Besides, the Memorandum of Understanding signed with the Ministry of Foreign Affairs was not availed for audit. Management explained that the matter had been referred to Ministry of Foreign Affairs for appropriate action. I await copy of memorandum of understanding and the strategy for meeting related costs.

74.4 Absence Of Multiple Entry Visas

The embassy uses visa stickers except that the visas are all single entry visa each costing US $50. Some visa applicants especially the regular travellers require multiple stickers as is the practice in other embassies. The Accounting Officer explained that the embassy had written to Ministry of Internal Affairs (Immigration Office) asking for multiple visa stickers, however, by the time of this audit, no response had been received.

75.0 ROME MISSION 75.1 Excess Expenditure The mission incurred excess expenditure amounting to shs.53,734,007 above the approved budget which was not approved by Parliament. Excess expenditure is an indication of weakness in the controls over budgeted expenditure.

The Accounting Officer is advised to spend within the approved budget and in case of extra funding required, authority should be sought from Parliament. The

464 expenditure should be regularized in accordance with the Public Finance and Accountability Act, 2003.

75.2 Domestic Arrears Included in the Payable balance of shs.1,412,610,685 reflected in the Statement of Financial Position, are outstanding commitments totaling to shs.163, 093,420 incurred during the year. This practice is a violation of the commitment control system. It also indicates weaknesses in controls over budgetary expenditure.

75.3 Non Tax Revenue Utilized at Source Non Tax Revenue (NTR) amounting to €22,698 was utilized at source contrary to guidelines governing NTR management. The use of NTR at source lacked relevant authority.

The Accounting Officer explained that the Embassy used NTR to supplement the insufficient funds received from Treasury to finance the Embassy operations.

The Accounting Officer is advised to bank NTR collections intact and make remittances to the Uganda Consolidated Fund promptly.

75.4 Imprest System It was noted that the Embassy uses a petty cash imprest system to meet its day today obligations. Various claims are settled in cash including payment of local staff salaries and settlement of utility bills among others. The Accounting Officer herself manages this imprest.

However, contrary to the TAI and the Public Finance and Accountability regulations, 2003, no authority was sought by the Embassy from the Accountant General who is responsible for issuing imprest warrants to appointed imprest holders.

In the absence of an imprest warrant indicating the appointed imprest holder, the cash holding limit and the procedure for its accountability, there is a risk of imprest system being abused. 465

The Accounting Officer is advised to expedite the process of obtaining an imprest holder appointed in accordance with the Treasury Accounting Instructions and Regulations.

75.5 Expenditure on recalled Home Based Staff It was noted that €26,046.57 was incurred by the Embassy to pay for disturbance allowances and transport costs for two home based staff, their families and their personal effects upon their end of tour of duty.

During the year, the Embassy had four (4) Home Based Staff on recall and whose relocation costs had to be met. The expenditure on relocation of staff appears to constrain the Embassy resources, hence impact on its operations.

It was observed that Embassies do not budget for Home Based relocation costs since staff deployments at the Embassies is a responsibility of the Ministry of Foreign Affairs. It was also not clear why the Embassy had to pay staff disturbance allowance yet the deployment of home based staff is a responsibility of the Ministry of Foreign Affairs.

I advised management to liaise with the Ministry to ensure that home based staff relocation costs are adequately budgeted for and funds are released for the purpose.

75.6 Embassy Property (i) Chancery Offices The Embassy does not own a Chancery building. It rents offices for the Chancery at a monthly rental of €2,175. H.E. the Ambassador is occupying one of the offices which is too small to befit the status of an Ambassador.

In addition, there is no Board room where H.E. the Ambassador can hold official meetings. Instead, there is another small room “a waiting room” for the purpose. This does not depict a good image for the Embassy and indeed the country.

466 There is need for government to consider relocating the Chancery offices to a better spacious place that befits the status of the Embassy.

I advised management to liaise with the Ministry of Foreign Affairs and Ministry of Finance, Planning and Economic Development for purposes of providing adequate funding to enable the mission relocate its Chancery to a better facility.

(ii) Official Residence for H.E. the Ambassador The mission is renting a two bed roomed flat as the official residence for H.E. the Ambassador at a monthly rental of €1,400 where he has lived for the last three (3) years. An Ambassador, under normal circumstances is entitled to a reasonable official residence to enable him/her conduct business at his/her residence.

The practice is that Ambassadors normally receive delegations and organize official functions at their residences during which important matters may be discussed. However, the flat being used as the official residence is too small to serve the purpose.

I recommend that the Ministry of Foreign Affairs and Ministry of Finance provide funds to enable the mission secure a reasonable accommodation for H.E. the Ambassador. (iii) Lack of a Utility Car It was observed that for many years, the Embassy has had only one official car. The car meant for the Ambassador is also used for other Embassy operations which at times is an inconvenience to H.E. the Ambassador. This also affects his movements to areas of operation/accreditation which include Italy, Greece, Turkey, Serbia and Montenegro.

(iv) Unpaid Rent to the Embassy of Zambia The embassy once rented Chancery offices from the Embassy of Zambia and defaulted in rent payment. According to records inspected it was noted that the Embassy last made a payment to Embassy of Zambia in November, 2006 of €100,000 reducing the accumulated arrears to €273,164.44.

467 However, for now two years (24 months) since the date of the last payment, no further payments have been made to reduce and/or clear this obligation. H.E. the Ambassador explained that he got assurance from the Accounting Officer that money had been provided in the current 2008/09 financial year budget to clear all the domestic arrears.

I advised management to clear the debt once funds are released.

75.7 Controls over Receipt and Banking of NTR It was noted that the Accounting Officer who manages the Embassy‟s imprest , also receives NTR collected by the receptionist. Banking of the collections is done either by herself or another person instructed by her. The Accounts office is not involved in the entire system of NTR management. It was observed that the person who receives applications, does the recording in the visa book and also receives cash. There is lack of proper segregation of duties and this can render the system prone to abuse.

Furthermore, daily NTR collections by the receptionist are received by the Accounting Officer who also manages imprest (cash) for the Embassy operations. The implication is that the Accounting Officer authorizes cash payment and at the same time effects them. This is not good practice as the Accounts Assistant cannot hold her boss (Accounting Officer) accountable for the imprest and NTR.

Management was advised to review the controls over imprest and NTR management to ensure that there is proper segregation of duties.

75.8 Medical Expenses Standing Orders Ch.3 F-a(2) require that officers serving missions together with their spouses and children register with a National Health Insurance Scheme.

However, it was observed that officers are refunded expenses incurred on medical treatment. Some of the officers are insured with a medical scheme while others are not. This practice may lead to double payments.

468 For the period July – December 07 Euros 4,051.45 was paid out as refunds to officers for medical expenses incurred. Such expenses would have been avoided if the officers subscribed to a health insurance scheme.

It is recommended that officers together with their spouses and children be registered with a medical/health insurance scheme in compliance with standing orders.

76.0 JUBA MISSION 76.1 Incomplete Submission of Returns Records for NTR and RBC returns for the period July 07- June 08 were not submitted for audit were not complete contrary to regulations. These returns lacked revenue cashbooks, counter folios of used visa stickers, bank reconciliation statements for the revenue and recurrent account and bank statements and abstracts. This limited the scope of my audit as I was unable to carry out all the required procedures as set out under the International Standards on Auditing.

The Accounting Officer is advised to submit the returns for audit and abide with the reporting requirements in the future. 76.2 Incompletely Vouched Payments Contrary to TAI chap 5 120 which requires all payment vouchers to be properly supported with appropriate documents before they are passed for payment, the mission‟s payment documents were made without requisitions. In addition payment vouchers for purchases were not supported with all the relevant documents including requisitions, purchase orders, supplier‟s invoice, delivery notes and inspection/goods received note. This system inhibits the audit trail and makes it impossible to ascertain the authenticity of the payments.

The Accounting Officer is advised to adhere to financial regulations and ensure that all payments are properly supported.

469 76.3 Excess Expenditure Analysis of the expenditure in the appropriation account revealed that an excess of Ushs39,296,664 was spent on various items without the authority from Parliament. Regulations require that authority for any expenditure beyond the budget should be authorised by Parliament.

The Accounting Officer is advised to always spend according to the budget and seek relevant authority whenever supplementary funding is required.

77.0 KINSHASA MISSION 77.1 Non Submission of Cashbook and Bank Statements

The embassy did not submit bank statements cash book, abstract and ledgers for the period under review. I was not able to confirm the cash book balance of US $ 163,783.09 and other balances stated in the financial statements.

77.2 Irregular Payment for Construction Works

US $ 102,048 was paid to a contractor for renovation of the Ambassador‟s residence without professional certification of works done. It was also noted that although the contract sum was US $ 43,457.00, the actual payment amounted to US $ 102,048 resulting into an overpayment of US$ 58,591. No approved addendum or revision of quotation for works was availed for verification. In addition, payments under the contract were made to an individual without written authority of the contractor.

It is recommended that professional and independent certification of works always be carried out before payment. The over payment should be investigated and appropriate action taken.

77.3 Undisclosed Prepayments and Advances

US $ 11,727.77 relating to salary advances to staff for the month of July 2008 and US $ 32,400 spent in respect of rent for periods after June 2008 was directly

470 charged to expenditure items. Adjustments should be made so as to recognise advances and prepayments in the financial statements.

77.4 Irregular Procurements

The embassy purchased two vehicles at US $ 93,700 during the year under review. Although authority for purchase of one vehicle valued at US $ 60,000 was submitted, there was no evidence of competitive bidding. The expenditure of US$ 33,700 on the second vehicle was neither authorized nor subject to competition. Another sum of US $ 51,574 was spent on an assortment of items including a generator, computers, and office furniture without competitive bidding or quotations. The Mission is advised to adhere to procurement regulations when procuring goods and services.

77.5 Over Payment of Per Diem

Foreign Service standing orders require officers posted to a foreign mission to be paid using local rates when traveling to Uganda on official duty.

Contrary to the regulations US $ 2,940.00 equivalent to shs.5,110,014 was paid to an officer on the basis of rates applicable outside Uganda. The applicable amount would have been Shs.1,260,000 based on the local rates. As a consequence an overpayment by of Shs.3,850,014 was made.

The overpayment is recoverable from the concerned officer.

78.0 GENEVA MISSION

78.1 Excess expenditure

A review of actual expenditure in the appropriation account on page 9 of the accounts revealed that the Mission incurred expenditure of shs.59,795,523 in excess of the appropriation by Parliament. This expenditure is therefore, unauthorised.

471 The Accounting Officer is advised to operate within the appropriated amount and where necessary virements, reallocations or supplementary be sought.

79.0 PRETORIA MISSION

79.1 Expenditure Control and Book Keeping

The Mission did not implement the commitment Control System. The vote books, expenditure ledgers and advance ledgers were not maintained. Besides, most of the expenditure vouchers did not indicate item codes. Therefore, aggregating monthly expenditure and posting them to ledgers was not done. Because of lack of advance registers, advances were not adequately managed. Monthly bank reconciliation statements were also not being prepared to confirm monthly cash/bank balances.

Further test checks made on postings for the month of June 2008 revealed posting errors of R14, 735.66 (Shs.2, 505,062). The Mission had identified the general problem of poor book keeping and therefore doubted the integrity of the resultant final accounts and was contemplating engaging a competent person to rewrite the books.

I advised the Accounting Officer to implement the commitment control systems, open vote books, ledgers and advance register which should be properly maintained while bank reconciliations statements should be prepared monthly. Expenditure codes should be allocated and shown on the expenditure vouchers to ease expenditure abstraction. In addition, the Accounting Officer should expedite the process of rewriting books of accounts; returns and reconstruct the final accounts.

79.2 Cash and Cash Equivalents The cash and cash equivalent balance of shs.55,745,320 was reported in the accounts. However, the Board of survey report on cash indicates a balance of shs.32,283,812. It was not possible to confirm the accuracy of the balance reflected in the financial statements

472

79.3 Stolen Visa Stickers A review of the stock of visa stickers revealed four (4) under listed visa sticker booklets of single entry worth US $ 10,000 missing. Details indicate that the visa stickers were stolen.

UA547901 - UA547950 UA547851 - UA547900 UA547651 - UA547700 UA553451 - UA553500

Although the matter was purportedly reported to the South Africa Police Service, no details were provided for verification. Besides, the matter was not reported to the Auditor General and to the Treasury and included in the financial statements as required by regulations.

In his response, the Accounting Officer stated that the Mission is following up the matter with Police to determine the extent of the investigation.

It is recommended that the security of visa stickers and other controlled stationery be strengthened. I also await the outcome of the Police investigations.

79.4 Potentially Fraudulent and Suspected Transactions

It was noted from the records reviewed that there were potential fraudulent transactions discovered by the Accounting Officer of R82, 702.28 on reconciliation of some months. Out of these, R26, 814.47 has been reported to Police and the services of the Accounts Assistant responsible terminated. Further reviews identified suspected transactions amounting to R320, 969.77 (shs.54,564,861). These losses have also not been reported as required.

I advised the Accounting Officer to investigate the matter further and take appropriate action.

473 79.5 Lack of Contracts Committee and Procurement and Disposal Unit

The Mission does not have a contracts committee appointed contrary to regulations and therefore procurements and disposals are not properly guided. For example, procurements of R477, 641.36 lacked contracts committee approval. The Accounting Officer attributed lack of the contracts committee to the small number of staff at the Mission.

Management is advised to ensure the contract committee is constituted in accordance with the PPDA.

79.6 Over Expenditure

Expenditure on goods and services consumed and on consumption of property, plant and equipment exceeded the expenditure provided for in the approved budget by shs.258,030,431. There was no evidence by way of either reallocation or virement warrants supporting the expenditure as required by law. Accordingly, the expenditure was rendered unauthorised.

79.7 Cash Survey A cash survey was carried out on 24th February 2009 and imprest of R2, 136 was found on hand. However, this could not be reconciled to the imprest cash book because it was not being maintained although the Accounts Assistant runs a reimbursable imprest system of R5, 000. Besides, the appointment letter appointing him an Imprest Holder was not availed for verification. The Accounting Officer has been advised to streamline the imprest system and expedite the process of appointing the imprest holder in accordance with the Treasury Accounting Instructions.

79.8 Mission Charter

The Heads of the Missions were issued with Mission charters in January 2006 which they were responsible to implement and achieve specific set targets. I was not availed with charter for the Mission as it was reportedly held by the Head of Mission himself who was not at the station then. Also, the strategic plan and annual work plans to operationalise the charter and regular performance reports

474 for the financial year 2007/08 to the date of inspection were not availed for review.

It was noted however that on the target of bilateral cooperation for example, the last report was made in October 2006 stating that Memorandum of Understanding (MOUs) between South Africa and Uganda on Oliver Tambo School of Leadership Kiweweta, Prison Cooperation, Migrant Workers, Economic Cooperation, etc were not yet signed. However, status of the Memorandum Of Understandings as at the time of inspection could not be established.

The Accounting Officer explained that implementing and monitoring the charter was hampered by inadequate budget funding. Besides, the budget provisions are not tied to the charter strategic objectives rendering matching budget funding to actual performance difficult.

The Mission management was advised to develop the strategic plan, and to prepare annual work plans and regular performance reports meanwhile, the Mission should liaise with Ministry of Foreign Affairs and Ministry of Finance to have the Mission budget enhanced to enable the Mission achieve its targeted activities.

79.9 Properties 79.9.1 Land Titles The Mission owns both the Chancery and the official residence. However, no land titles were availed for audit. The Accounting Officer explained that the Mission was scheduling a meeting with the department responsible for land titles with the view of getting a title and authenticated copies for retention at the Mission. I advised the Accounting Officer to obtain the land titles and keep copies at the Mission Headquarters.

79.9.2 Official Residence A physical inspection of the official residence revealed that some parts of the external wall, internal wall and ceiling had developed cracks and were peeling off. Leakages were seen in the bath room and balcony while the Jacuzzi was blocked

475 and the taps in the bath rooms were not functioning properly.. Some wall to wall carpets and curtain linings were also torn. The Accounting Officer verbally explained that the Mission does not have a capital development budget to undertake repairs.

I advised management to liaise with Ministry of Foreign Affairs and Ministry of Finance for additional funding to undertake major repairs of the official residence and meet other expenses of capital nature.

79.9.3 Old Furniture and Equipment Old furniture and equipment are stored at the official residence. The items are occupying a lot of space and are deteriorating in value.

I advised the Accounting Officer to have a Board of Survey constituted to report the condition of the items in question and initiate the disposal process accordingly.

79.9.4 Safe The Mission acquired a new safe that has never been put to use. No explanation was given as to why details were not provided by the vendor.

I advised the Accounting Officer to take up the matter with the supplier have the problem solved or have the safe replaced.

79.10 Mission Management Structure According to information available, the Mission is classified as (medium 1 + 3) i.e. one head of Mission, three foreign service officers and an administrative attaché However, it was noted that the Mission lacks one Foreign Service Officer thereby affecting negatively on the performance of the Mission.

I advised the Accounting Officer to liaise with the Permanent Secretary, Ministry of Foreign Affairs to have the vacant position filled.

476 79.11 Non-Tax Revenue Verification of Banking before Receipt of Visa Fees and Issue of Visa Stickers It was observed that visa fees are paid directly into the bank on a bank deposit slip. The deposit slip is used as proof of payment against which a receipt and subsequently a visa are issued. Sometimes one receipt is issued for a number of visa applicants.

There is no procedure of verifying the banking slips against the bank statements. There are possibilities of issuing visas when actually the money has not been deposited in the bank. Similarly, issuing one receipt for several visa applicants leads to errors in posting and extraction of information.

I recommended that the receipts and visas should only be issued on confirmation and verification of payment by an independent person. Similarly, each visa applicant should be issued with a separate receipt.

80.0 KHARTOUM MISSION

80.1 Over Expenditure

Shs.137,495,690 was incurred over and above the approved estimates on goods and services and consumption of property, plant and equipment as indicated below;

Item Budget Actual Variance Good and services 347,000,000 414,449,701 67,449,701 Consumption of 0 70,045,989 70,045,989 property and equipment TOTAL 137,495,690

The Accounting Officer explained that the Embassy‟s approved budget did not reflect the exact needs of the Embassy and a request for virements was sought form the Treasury which was not responded to. The Accounting Officer further

477 stated that due to failure to consider the Embassy‟s budget estimates, gross under funding of some expenditure items left the Accounting Officers with no option but to re-allocate funds.

The Accounting Officer is advised to spend within the approved budget and where there is need to re-allocate funds, proper procedures should be followed as provided by the regulations.

81.0 KIGALI MISSION

81.1 Excess expenditure The mission incurred an excess expenditure of shs.39,725,648. This expenditure was not appropriated by Parliament contrary to the Public Finance and Accountability Act, 2003.

The Accounting Officer is advised to spend within appropriated amounts and incase additional funds are required, authority should be sought from Parliament through Ministry of Finance, Planning and Economic Development.

81.2. Domestic arrears There was no schedule and related supporting documents to support the payables figure stated as shs.46,062,587. In addition, the mission incurred domestic arrears totaling Shs.3,986,969 during the year. This was a breach of the commitment control system which requires the Accounting Officers to spend within the allocated funds.

81.3 Non Tax Revenue (NTR) 81.3.1 Lack of Acknowledgement Receipts For NTR Remittances The Mission collects fees from visa and temporary travel documents. For the year under review, a total of $ 21, 823.67 which includes $5,736 brought forward from previous year (2006/07) was realized. Transfers to the Treasury (UCF) amounting

478 to US $ 20,500 were effected leaving a balance of $1,049.39. The remittance of $20,500 to UCF lacked acknowledgement receipts from the Treasury.

I advised the accounting officer to remit the balance to the treasury and obtain acknowledgement receipts for all the remittance made.

81.3.2 Issuance of Temporary Travel Document It was observed that the Mission issues temporary travel documents in lieu of the national passports to assist Ugandan residents return home.

Between July and October 23rd 2007, FRW 1,619,000 equivalent to $3,922 was collected. However the temporary travel documents were issued against letters instead of using serially pre-printed emergency certificate issued by the Ministry of Internal Affairs, which bear a fixed fee payable. Without using printed certificates, it became difficult to ascertain the accuracy and completeness of NTR reportedly realized.

The Accounting Officer was urged to obtain pre printed certificates for use.

81.3.3 Custody of Cash: It was observed that the accounts assistant makes cash transactions to cater for payment of utilities and imprest expenses. However there is no safe in place for the custody of the money that is drawn.

I advised management to procure a safe or a cash box for the safe custody of cash and other valuables.

81.4 Mission Charter According to the Mission charter, the head of Mission is charged with implementing among other things targeting a 20% annual growth rate of the net trade imbalance in favour of Uganda in the countries of accreditation namely Rwanda and Burundi. However, annual work plans to operationalize the charter and similarly regular performance reports for the year under review were not

479 availed for audit. It was also verbally explained that the implementation of the charter is hampered by insufficient funding from the Treasury.

I urged the Accounting Officer to prepare annual work plans and submit performance reports. These form a basis for implementing the Mission charter and act as a tool for monitoring and assessing performance.

81.5 Property Allocated to the Government of Uganda on Dissolution of Kagera Basin Organisanisation (KBO) When the Kagera Basin organization was dissolved in July 2004 by the heads of states of the member states (Uganda, Rwanda, Burundi and Tanzania) Uganda was allocated a residential house at plot 721 Kacyiru and a two storeyed building in Mbarara. The following observations were made:-

81.5.1 State of the Residential Building The residential building was found inhabitable and is now due for demolition. The Mission plans to construct a chancery whose cost has been estimated at shs.1.5 billion by Ministry of Works and Transport. I recommend that funds should be provided to have the plot developed. This will save the Mission the rent of US $102,000 that is being incurred annually on the office and residential accommodation.

81.5.2 Two Storeyed Buildings at Mbarara According to the information available on file UKC 61- referenced Kagera river basin organization, government of Uganda was also allocated two storeyed office buildings which were the former Regional Offices for KBO situated in Mbarara valued at an estimated cost of US $406,136. However, the land title was not availed for audit and the Mission could not explain the current occupants of these offices.

I advised the Mission to follow up the matter of the building at Mbarara with the Ministry of foreign affairs.

480 81.6 Lack of Contract Committee By the time of inspection, the contracts committee had not been appointed and therefore procurements undertaken during the financial year under review of $ 24,359 lacked contract committee approval.

The Accounting Officer explained that the PPDA had carried out a sensitization exercise in October 2008 at the Mission and issued guidelines to staff accordingly.

I urged the Accounting Officer to liaise with the Accountant General and have the contract committee appointed.

82.0 MOSCOW MISSION

82.1 Over Expenditure The Mission incurred expenditure of Shs.176,184,882 over and above the approved budgetary provision for goods and services and consumption of plant, property and equipment without relevant authority.

The Accounting Officer is advised to spend within allocated resources and where additional funding is required, authority should be sought from Parliament.

82.2 Accommodation

(a) Chancery Premises The Mission is located in apartment No. 3 at Konvy Val 7. This apartment has three offices, a conference hall, a small store and a kitchen and is rented from Ministry of Foreign Affairs. It was observed that the offices are very small and don‟t reflect appropriately the image of Ugandan Mission which covers; the Russian Federation, Belarus, Ukraine, Uzbekistan, Mongolia, Moldova and Georgia.

The Accounting Officer explained that he had written to the Permanent secretaries of the Ministry of Finance and that of Foreign Affairs singling out the need for bigger office space and was advised that this could be done as long as the Mission‟s resources could accommodate it.

481 (b) Residence The Mission rents two flats for the two home based staff i.e, the Head of Mission and the 1st Secretary/Accounting Officer. It was noted that both flats are small in size and do not offer the necessary convenience for the staff. . In his response the Accounting Officer explained that the Embassy had budgeted for a more presentable official residence and hoped that funds would be availed.

82.3 Documents Not Translated Into English It was observed that key documents like quotations and receipts are not translated from Russia into English.

In his reply, the Accounting Officer explained that the Embassy had not yet acquired sufficient funds to employ an official translator.

The Accounting Officer is advised to liaise with the Ministry of Finance, Planning and Economic Development for the necessary funding. 82.4 Documents Not Stamped ‘Paid’

It was noted that only the payment voucher was stamped „PAID‟ and all other supporting documents as not crossed after effecting payment. This is contrary to the Treasury Accounting Instructions. This practice creates a risk of double payments using the unstamped documents.

The Accounting Officer acknowledged the omission and promised to start stamping all documents „PAID‟.

82.4 Staffing Matters

As reported in the previous report, the Mission is understaffed. It has only two home based staff, the Assistant Ambassador and the First Secretary/Accounting Officer. The Mission is supposed to cover Russia, Ukraine, Belarus and common wealth countries of independent States. However, there is only one driver for the Ambassador. It was also noted that the Accounts Assistant doubles as a driver for the pool car.

482

In his response the Accounting Officer stated that the embassy was not able to employ other required staff Members because of budgetary constraints.

I advised the Accounting Officer to liaise with the Ministry of Foreign Affairs and Ministry of Finance, Planning and Economic Development for the necessary staffing and funding.

83.0 BERLIN MISSION

83.1 Double Payment of Clothing Allowance According to Circular Standing Instruction No.2 of 2005, climatic clothing allowance is paid to a Foreign Service Officer every 3 years and warm clothing is paid when an officer proceeds for training/duty overseas to temperate and cold climates. In circumstances where Foreign Service Officers are entitled to climatic clothing allowance they receive warm clothing only when they are proceeding from their duty station to another cold country for a short course or workshop.

However, the mission paid both warm clothing and climatic clothing allowance to Foreign Service Officers at the mission to the tune of Euros 2,833.91.

I informed the Accounting Officer that payment of both the climatic clothing allowances and warm clothing allowances to deployed Foreign Service Officers tantamount to a double payment.

Management is advised to recover warm clothing allowances paid to officers who also receive climatic clothing allowances.

83.2 Telephone Expenses Foreign Service Standing Orders Chapter 3 H-b (16) requires that when Foreign Service Officers have official telephones in their homes at missions, two thirds of the cost be paid by government and one third by the officer. However, the

483 mission paid all the telephone expenses of € 6305.41 in full without recovering the one-third share of the beneficiary officer.

The Accounting Officer is advised to make recoveries from the affected officers.

84.0 PARIS MISSION

84.1 Excess Expenditure The Embassy incurred expenditure in excess of the approved budget totaling Shs.338,533,377 on three expenditure items shown below:-

Expenditure Item Actual Budget Variance Employee Costs 1,010,945,746 901,023,000 109,922,746 Goods & Services 991,872,610 767,000,000 224,872,610 Consumption of Property, 103,738,021 100,000,000 3,738,021 Plant & Equipment TOTAL 2,106,556,377 1,768,023,000 338,533,377

The excess expenditure may indicate breakdown of controls over budgeted expenditure.

The Accounting Officer explained that the excess expenditure was a result of inadequate funding by the Ministry of Finance, Planning and Economic Development which forced her to utilize Non Tax Revenue to finance some critical mission activities.

Management was advised to spend within approved budgets and in case additional funding is required, authority should be sought from Parliament through Ministry of Finance, Planning and Economic Development.

84.2 Non-Tax Revenue (NTR) The existing NTR regulations require that all revenue collected in form of NTR should be remitted to the Consolidated Fund. It was noted that the Embassy collected €109,519.44 as NTR during the year under review. In addition, the

484 balance brought forward from the previous year amounted to €89,713.41 bringing NTR available to €199,232.85.

However, only €73,682.50 was remitted to Bank of Uganda leaving a balance of €125,550.35 which was utilized at source mainly on renovation of the Chancery building. The authority for this expenditure was not provided for verification.

In addition, the transfer to BOU of €73,682.50 was not supported by acknowledgement receipts from the Accountant General. It was therefore not possible to establish whether the funds were credited on the Consolidated Fund.

The Accounting Officer indicated that the mission has now stopped using NTR from the time they received instructions from the Permanent Secretary/Secretary to the Treasury.

It is recommended that development funds be released from Treasury to enable renovation works on the Chancery building to be completed.

84.3 Embassy Property (i) Chancery Building The Embassy owns a building located at 13th Avenue Raymond Poncaire in Paris used as the Chancery building. This building is currently undergoing major renovations since the Embassy was re-opened.

However, all the ongoing major renovations have been carried out using NTR resources without authority. Although commendable work has been carried out by management, more is still needed to be done on the building. For instance, work on the 4th Floor of the building was started but stalled due to lack of funds. It was observed that this Floor if fully renovated is capable of generating more revenue and may also enable the Embassy save money currently spent on hiring venues for hosting official functions.

485 (ii) Lift for Chancery Building The lift is too old and no longer working. Repairs to the lift became too expensive and it was advised by Engineers that a replacement was more economical. This has not been done. The matter should be addressed because the tenants (Embassy of the Republic of Tanzania) have expressed concern on several occasions over the non-functioning lift. Besides when the 4th Floor is renovated it will require an operational lift for its accessibility.

I advised management to liaise with the Ministries of Finance and Foreign Affairs to ensure that resources are mobilized to facilitate the chancery building and replace the lift which is urgently needed.

(iii) Tenancy for the Embassy of the Republic of Tanzania The Embassy entered into a tenancy agreement with the Embassy of the Republic of Tanzania for a period of three years which expired on 30th October, 2007 (i.e. September, 2004 to October 2007) at a monthly rental of €6,152. The agreement provided that the rental would be reviewed once renovations are completed. Although renovations were done on the Floor occupied by the Embassy of Tanzania, the review of the rental has not been done. It was observed that the Embassy is not earning economic rates as the rates charged are much lower than the current market rates.

Besides, it was noted that although the tenancy agreement expired on 30th October, 2007 the Tanzanian Embassy has continued to occupy the building without a valid tenancy agreement for now over a year.

I urged the Embassy management to initiate the process of renegotiations and renewal of the tenancy.

486 85.0 TEHRAN MISSION

85.1 Over Expenditure The law requires that Accounting Officers seek authority for any virements and reallocations before expenditure is incurred on budget items whose provisions have been exhausted. However, Shs.16,890,703 was spent on two items over and above the appropriated amounts without the requisite authority as indicated below.

Item Budget Actual Variance Employee costs 298,121,000 314,020,964 15,862,925 Consumption of Property, 0 1,027,778 1,027,778 plant and equipment Total 16,890,703

Overspending on the budget item may be a result of weaknesses in the budgetary control procedures.

The Accounting Officer is advised to always adhere to the budget limits and seek authority where there is need for re-allocations.

85.2 Non Tax Revenue The Statement of Arrears of Revenue indicates that a total of shs15,807,993 was not remitted to the Consolidated fund by the end of the financial year. However, Note 20 shows that shs.15,136,000 was still on the bank account awaiting remittance to Bank of Uganda. The inconsistency between the two balances was not explained.

The Accounting Officer is advised to always remit NTR collections to Bank of Uganda in time.

487

86.0 CANBERRA MISSION

86.1 Excess Expenditure During the financial year, Mission incurred excess expenditure of Shs.115,439,219 in excess of appropriated amount of Shs.791,804,000. The excess expenditure was incurred without relevant authority contrary to regulations.

86.2 Non Tax Revenue 86.2.1 Incomplete Submission of NTR Returns The mission did not submit any NTR receipt books for the period July 07 to June 08, contrary to regulations. Only bank statements for the period October 2007 to June 2008 were submitted which revealed that Australian Dollars $ 122,249 was banked on NTR account.

In the absence of receipt books and bank statements, I am not able to confirm the accuracy of the non tax revenue balance of Shs.248,568,647 reported in the financial statements.

86.2.2 Utilisation of NTR at Source Shs.248,568,647 was collected as non tax revenue by the mission and only Shs.142,277,665 was transferred to Bank of Uganda leaving a balance of Shs.106,290,982. In addition contrary to regulations, Shs.97,818,665 ($ 60,950) was transferred from NTR collection account to expenditure account and subsequently spent without authority. The balance of Shs.8,472,317 (106,290,982 – 97,818,665) is not accounted for.

The Accounting Officer is advised to adhere to the provisions of the law regarding non tax revenue.

86.3 Re-Allocation of Funds without Authority The mission incurred a total of Australian Dollars $ 8,492.76 towards acquisition of mission utility vehicle. However, the source of funding could not be established since the mission did not have any capital development budget. It is likely that

488 funds from the mission‟s recurrent budget were used to finance the transaction contrary to law.

The Accounting Officer was advised to seek the necessary authority for the reallocation.

86.4 Expenditure on Medical Treatment of Mission Staff Regulations on medical treatment of foreign mission staff require serving officers together with their spouses and children to be registered with a doctor and dentist abroad under a known Health Insurance Scheme. Contrary to this requirement, the mission paid for individual medial bills and made refunds to officers for expenses incurred on treatment without any prescription from qualified personnel to the tune of $4,762.16.

The adhoc settlement of medical bills is prone to abuse. No explanation was given as to why the mission did not join a medical insurance scheme as required.

86.5 Payment of rent Australian Dollars 68,418.25 was paid in respect of rent for the chancery, official residence and officers‟ accommodation. However, no copies of tenancy agreements were provided to confirm that the rental payments made were as per agreement. Further still, no acknowledgement receipts from the landlords were availed to confirm receipt of the funds. In the circumstances, it was not possible to confirm that the expenditure on rent of premises was properly stated in the financial statements.

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