Office of the Auditor General

OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF UGANDA

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF NANSANA MUNICIPAL COUNCIL FOR THE YEAR ENDED 30TH JUNE 2017

OFFICE OF THE AUDITOR GENRAL UGANDA TABLE OF CONTENTS

LIST OF ACRONYMS ...... 2 Key Audit Matters ...... 4 Other Matter ...... 4  Failure to Implement Budget as approved by Parliament ...... 4  Low Recovery of Youth Livelihood program funds ...... 5  Understaffing ...... 5  Lack of Land Titles ...... 6 Management’s Responsibility for the Financial Statements ...... 6 Auditor’s Responsibilities for the Audit of the Financial Statements ...... 7 Appendices...... 9 Appendix 1 ...... 9 Budget Performance (Financial) ...... 9 Appendix 2: Low Recovery of Youth Livelihood program funds ...... 12 Appendix 3 under Staffing...... 14 Appendix 4 health centers without land titles ...... 16

LIST OF ACRONYMS

DLG District Local Government GOU Government of Uganda ISSAI International Standards of Supreme Audit Institution LGFAM Local Governments Financial and Accounting Manual 2007 LGFAR Local Governments Financial and Accounting Regulations 2007 LGMSD Local Government Management and Service Delivery MC Municipal Council MMHS Management of medicines and Health Supplies MoFPED Ministry of Finance Planning and Economic Development NEMA National Environment Management Authority NMS National Medical Stores PFMA Public Finance Management Act 2015 PPDA Public Procurement and Disposal of Public Assets UGX Uganda Shillings

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NANSANA MUNICIPAL COUNCIL FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2017

THE RT. HON. SPEAKER OF PARLIAMENT

Opinion I have audited the financial statements of Nansana Municipal Council which comprise the Statement of Financial Position as at 30thJune 2017, and the Statement of Financial Performance, Statement of Changes in Equity and statement of Cash flows together with other accompanying statements for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In my opinion, the financial statements of Nansana Municipal Council for the year ended 30th June 2017 are prepared, in all material respects in accordance with section 51 of the Public Finance Management Act, 2015 and the Local Governments Financial and Accounting Manual, 2007.

Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and the National Audit Act 2008. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the municipal Council in accordance with the Constitution of the Republic of Uganda (1995) as amended, the National Audit Act 2008, the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Uganda. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. I have determined that there are no key audit matters to communicate in my report.

Other Matter I consider it necessary to communicate the following matters other than those presented or disclosed in the financial statements:

 Failure to Implement Budget as approved by Council Section 45 (3) of the Public Finance Management Act, 2015 states that “ An Accounting Officer shall enter into an annual budget performance contract with the Secretary to the Treasury which shall bind the Accounting Officer to deliver on the activities in the work plan of the vote for a Financial year, submitted under section 13 (15)” of the said Act.

Based on the procedures performed, I observed that out of the budgeted revenue of UGX.14,002,596,787; the Municipal Council received UGX.12,405,907,664 (89%) leading to a shortfall of UGX.1,596,689,120 (11%). Consequently, a number of planned outputs were not implemented. The most greatly affected outputs included the procurement of land and the Roads Maintenance among others as shown in Appendix 1. Failure to implement activities denies service to the beneficiary communities and defeats the purpose for which budgeting and budgetary controls are instituted. The failure to implement all the planned activities may have been a result of inadequate releases or may be an indication of inefficiency.

According to the Accounting Officer the shortfall was due to budget cut for the Non- wage recurrent and challenges with collection of taxi park fees.

The Accounting Officer is advised to engage the relevant authorities and ensure that budget deficiencies are addressed and that all the allocated funds are released and all activities are implemented according to the budget as approved by parliament.

 Low Recovery of Youth Livelihood program funds

Section 6(1) of the Youth Livelihood Programme (YLP) document 2013 requires all Project Funds disbursed to each Youth Interest Group to be treated as a Revolving Fund to be repaid in accordance with the Project Financing Agreement between the Municipality and the beneficiary Youth Interest Group witnessed by the Area Resident State Attorney. However, an analysis of recovery of the programme funds by the Municipal Council revealed low recovery of funds. Out of UGX.237,893,000 due for recovery as at 30thJune 2017, only UGX.17,215,000 (7%) was recovered leaving a balance of UGX.220,678,000 (93%) outstanding as shown in Appendix 2.

Low recovery adversely impacts on Government objectives of setting up a revolving fund to empower the Youth in Uganda to harness their socio-economic potential and increase self-employment opportunities and income levels

The Accounting Officer explained that recoveries started with groups that signed commitments and payment plans.

The Accounting Officer is advised to ensure that outstanding amount is recovered.

 Understaffing The Municipal Council has an approved staff structure of 898 positions. Out of the approved staff structure of 898 only 631 (70%) are filled leaving a staffing gap of 267 (30%) positions as shown in Appendix 3.

Understaffing overstretches the available staff beyond their capacity, creates job- related stress to the fewer staff and negatively affects the level of public service delivery to the community.

The Accounting Officer attributed the under staffing to the wage bill limitations. He further stated that recruitment in a number of positions had been prioritized and a recruitment plan set up.

The Accounting Officers is advised to continue engaging the Ministry of Public Service, the Ministry of Local Government and the Ministry of Finance Planning and Economic Development to address the challenge.

 Lack of Land Titles Regulation 58(4) of Local Governments Financial and Accounting Regulations 2007 (LGFARs) requires that in order to comply with the required accounting systems, the properties, and assets of a Local Government, shall be properly registered, titles issued, and valued and that requirement shall apply to both movable and immovable properties and assets and it shall constitute a fixed assets register.

However I observed that the Municipality did not have titles for the land where its Health Centres are located as shown in Appendix 4. This creates a risk that the Council Land is exposed to encroachment and Land disputes. The Accounting Officer explained that the Municipal Council was in the process of collecting information about the schools and Health Centres.

The matter requires urgent attention.

Management’s Responsibility for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Nansana Municipal Council

The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Governments Financial and Accounting Manual, 2007 and the Public Finance Management Act 2015 and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

In preparing the financial statements, the Accounting Officer is responsible for assessing the municipality’s ability to continue delivering its mandate, disclosing, as applicable, matters related to affecting the delivery of the mandate of the municipal Council, and using the Local Governments Financial and Accounting Manual, 2007 and Public Finance

Management Act 2015 unless the Accounting Officer has a realistic alternative to the contrary. - The Accounting Officer is responsible for overseeing the Municipal Council’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISSAIs, I exercise professional judgment and maintain professional scepticism throughout the audit. I also:

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Municipal Council’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.  Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material

uncertainty exists related to events or conditions that may cast significant doubt on the municipality’s ability to deliver its mandate. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the Municipal Council to fail to deliver its mandate.  Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicate with the Accounting Officer regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

I also provide the Accounting Officer with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with him/her all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards.

From the matters communicated with the Accounting Officer, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

John F.S. Muwanga AUDITOR GENERAL 8th December, 2017 8

Appendices

Appendix 1

Budget Performance (Financial) Revised %age Audit Management Response Approved varianc comments Items Budget Actual realized Variance e Under Non remittance of collections from lorries & performed by tippers by skype. The case is in courts of law 8% Boycott of payment by taxi drivers following Local Revenue 3,055,058,787 2,807,116,440 (247,942,347 ) 8% introduction of monthly sticker No follow up of The releases are published and budget cuts Central Gov't unreleased communicated Grants 10,947,538,000 8,603,497,592 (2,344,040,408) 21% funds

Donor funds - - - Funds not The funds included Uganda Road Fund worth budgeted for UGX.1,051,576,990, UWEP worth UGX.172,108,316, Youth Livelihood 264,601,034, Uganda Road Fund was budgeted for earlier. Transfers During the course of the year, the released funds received from under and UWEP, YLP were passed as other Gov’t units - 1,488,286,340 1,488,286,340 100% supplementary budget Min. 16/Cm/NMC/16/17. 8% of funds Total receipts 14,002,596,787 12,898,900,371 1,103,696,416 8% not realized.

Budget Performance (Physical) Depart Item Description Planned Output/Quantity Actual Output/Quantity Amount Amount Variance Audit Management ment Budgeted Released (UGX) Remarks response (UGX) (UGX) Educat Classrooms 2 classroom block constructed 2 classroom block constructed 152,647,000 63,752,812 (40,056,650) Output The project at lugo ion constructed at Lugo Church of Uganda P/s at not c/u was taken over by under UPE in Busukuma Division St. Jude Kiryagonja P/S and achieved min of Educ Classroom blocks constructed at Buwambo P/S St. Jude Kiryagonja P/S and Buwambo P/S Classrooms Renovation of 5 Classes at Renovation of 5 Classes at Not The work plan only rehabilitated Nansana C/U in Nansana Nansana C/U in Nansana 128,950,838 budgeted reflected renovation under UPE Renovation of 2 Classes at Kazo Renovation of 2 Classes at Kazo for of Kazo mixed .This Mixed P/S in Nabweru Division Mixed P/S in Nabweru Division was adequately Renovation of classroom blocks Renovation of classroom blocks budgeted for and at Kazo Mixed P/S at Kazo Mixed P/S implemented Latrine stances 5 Stances VIP Latrine in each of 5 Stances VIP Latrine in each of 192,000,000 125,239,000 (66,761,000) The pit latrine at constructed the UPE schools of Maganjo the UPE schools of Maganjo kitanda p/s and UMEA and Sam Iga in Nabweru UMEA and Sam Iga in Nabweru Nabutiti were not Division Division constructed due to 5 Stances VIP Latrine in each of inadequacy of funds the UPE schools of Kitanda C/U 5 Stances VIP Latrine in each of in Gombe Division the UPE schools of Kitanda C/U 5 Stances VIP Latrine in each of in Gombe Division the UPE schools Nabutiti P/S in Busukuma Division. 5 Stances VIP Latrine in each of And Nabinaka in Gombe the UPE schools of Nabutiti P/S Division. in Busukuma Division 5 stances at Migadde CS P/S, Sam Iga Memorial P/S, and Maganjo UMEA P/S Inspections- 80 Primary schools in Nansana 80 Primary schools in Nansana 51,699,000 16,237,000 (35,462,000) Primary, Municipality inspected and 12 Municipality inspected and 12 Secondary and Secondary schools in Nansana Secondary schools in Nansana Tertiary Municipality inspected. Municipality inspected. Health OPD Constructed Replacement of asbestos roof Replacement of asbestos roof 40,000,000 (3,000,000) The actual cover with iron sheets at cover with iron sheets at 43,000,000 expenditure was Buwambo H/C IV OPD block Buwambo H/C IV OPD block 46,849,688 .It rose due to un fore seen

collapsed floor of opd which caused variation Works Routine Labour Based Road Labour Based Road 135,165,000 264,285,000 129,120,000 Under At the time of maintenance- maintenance of Sitabaale - maintenance of Sitabaale - budgeted implementation urban (kms) Kikoko Road (2km) in Kikoko Road (2km) in for Lukadde-Mayanja Busukuma Division , Kitanda - Busukuma Division , Kitanda - Swamp-Kamanya- Tikalu Mile Road (2.8km), in Tikalu Mile Road (2.8km), in Kawempe Rd had Gombe Division and Kaboza - Gombe Division and Kaboza - worsened and the Kamanya Road (3km) Kamanya Road (3km) in cost of Mechanized Road Maintenance Nabweru Division implementation of Gombe - Kungu - Buwambo - required extra funds Namulonge Raod (13.5km), and Kamanya road (1.5km road) for the execution. many others & Repair of - Repair of Lukadde-Mayanja Therefore the matter Lukadde-Mayanja Swamp- Swamp-Kamanya-Kawempe Rd was brought to Kamanya-Kawempe Rd council and the Suppy & Installation of culverts budget was approved to various roads in Nabweru under Division & stone pitching Min.16/CM/NMC/16/1 7 Municipal Road Upgraded to Bitumen Road Upgraded to Bitumen 767,740,000 335,524,499 (432,215,501) The true budgeted periodic standard 1.2 km, Side drain standard 1.2 km, Side drain amount was maintenance constructed to critical area for constructed to critical area for 762,240,000 Kabumbi Road (1.2km), Kabumbi Road (1.2km), meant for entire Nansana Division Nansana Division periodic maintainance for the f/y 2016/17.This included various activities on 3 roads Purchase of one 1 0 50,000,000 0 (50,000,000) acre of land for division offices(Nansana Division) Construction of 5 1 0 20,000,000 0 (20,000,000) stances of pit latrines at Buwambo HC IV Purchase of 15 15 0 7,000,000 0 (7,000,000)

council chairs Purchase of 1 0 10,000,000 0 (10,000,000) Generator Purchase of 1 0 35,000,000 0 (35,000,000) land/Lease of land for Division offices Renovation of 5 1 0 7,632,000 0 (7,632,000) classes at Nansana C.O.U in Nansana Division Procurement of 2 0 4,000,000 0 (4,000,000) 2 sideboards

Appendix 2: Low Recovery of Youth Livelihood program funds

NO DIVISI VILLAGE NAME OF YLP GROUP NO OF AMOUNT TOTAL BALANCE DATE OF ON YOUTHS LUGX] AMOUNT SIGNING IN THE APPROVED RECOVERED FINANCING

GROUP BY- TSU- AT THIS AGREEMENT

AMOUNT AMOUNT AMOUNT

%AGEOF %AGEOF

REMAINING MGLSD DATE RECOVERED (FA) 1 Nansa Nansana West 10 6/30/2017 Nansana West Youth Poultry 7,000,000 na 250,000 6,750,000 4% 96% 2 Nansa Nabweru South Nabweru South Youth Poultry 10 6/29/2017 7,800,000 na - 7,800,000 0% 100% 3 Nansa Ochieng Ochieng Youth Arts & Crafts 12 6/29/2017 6,500,000 na Africa - 6,500,000 0% 100% 4 Nabweru South Youth Metal 13 6/30/2017 Nansa Nabweru South 6,450,000 na Fabrications 635,000 5,815,000 10% 90% 5 Ochieng 10 6/29/2017 Nansa Ochieng Youth Metal Welders 7,000,000 na 200,000 6,800,000 3% 97% 6 Nansa Nansana West Nansana West Youth Paper Bag 10 6/29/2017 7,000,000 na Makers 100,000 6,900,000 1% 99%

7 Nansa Nansana East Nansana East Youth Metal 10 6/29/2017 7,830,000 na Fabrication 150,000 7,680,000 2% 98% 8 Nansa 10 6/28/2017 Lugoba Lugoba Youth Tents & Chairs 7,000,000 na 600,000 6,400,000 9% 91% 9 Kazo Kazo Muganzilwaaza Youth 10 7/2/2017 Nansa Muganzilwazza Catering Services 6,000,000 na 460,000 5,540,000 8% 92% 10 Nabweru North Nabweru North Disabled Youth 11 6/29/2017 Nansa Ceremonial Services 7,000,000 na 370,000 6,630,000 5% 95% 11 Nabwe 2/28/2017 Katooke B Katooke B Youth Catering 7,800,000 ru 10 600,000 7,200,000 8% 92% 12 Maganjo A Maganjo A BIVA Youth Catering 4/18/2017 Nabwe 8,200,000 ru 10 130,000 8,070,000 0% 0% 13 Nabwe Maganjo B Maganjo B Youth His Will 3/17/2017 8,000,000 ru Events Management 12 1,500,000 6,500,000 19% 81% 14 Ttaba Wamala Ttaba Youth Blessed 3/28/2017 Nabwe Rabbits Project 5,000,000 ru 10 - 5,000,000 0% 100% 15 Nabwe Kisumu Kisumu Youth Tailoring 3/1/2017 8,000,000 ru 10 820,000 7,180,000 10% 90% 16 Maganjo B Maganjo B Youth Peasant 4/28/2017 Nabwe Welding & Metal Works 7,500,000 ru 10 200,000 7,300,000 3% 97% 17 Ttula Ttula Youth Welding & Metal Nabwe Fabrication 7,773,000 ru 10 300,000 7,473,000 4% 96% 18 Busuk Wamirongo Wamirongo Youth Passion Fruit 15 7/1/2017 7,000,000 uma Growing 7,000,000 0% 100% 19 Busuk Busukuma Busukuma Youth Poultry 7/11/2017 7,500,000 uma 10 800,000 6,700,000 11% 89% 20 Busuk Lugo Lugo Youth Poultry 14 7/11/2017 8,000,000 uma 8,000,000 0% 100% 21 Busuk Nabutiti Nabutiti Youth Poultry 10 8,000,000 uma 8,000,000 - 100% 0%

22 Busuk Namulonge Namulonge Youth Ndokwa 10 7/11/2017 7,100,000 uma Nursery - 7,100,000 0% 100% 23 Busuk 10 7/11/2017 Lugo Lugo Youth Carpentry & Joinery 7,640,000 uma 350,000 7,290,000 5% 95% 24 Busuk Guluddene Guluddene Youth Metal 10 7/11/2017 7,800,000 uma Fabrication 400,000 7,400,000 5% 95% 25 Kikoko Kikoko Kamukamu Youth Metal 10 7/10/2017 Busuk Fabrication 7,000,000 uma - 7,000,000 0% 100% 26 Busuk 10 7/11/2017 Magigye Magigye Youth Tents & Chairs 8,000,000 uma - 8,000,000 0% 100% 27 Buwambo Buwambo Youth God is Able 10 7/6/2017 Gombe Passion Fruit Growers 6,500,000 900,000 5,600,000 14% 86% 28 Kiteredde Kiteredde Youth Mukama 10 3/9/2017 Gombe Afaayo Piggery 8,000,000 - 8,000,000 0% 100% 29 Kito Matugga Kito Youth Piggery 10 4/8/2017 Gombe Development 8,000,000 8,000,000 0% 100% 30 Ssayi Ssayi Youth Tusuubira Piggery 3/9/2017 10 Gombe 8,000,000 - 8,000,000 0% 100% 31 Migadde Migadde Youth United Piggery 3/9/2017 10 Gombe 8,000,000 800,000 7,200,000 10% 90% 32 Lwadda B Lwadda B Youth Extra Empire 3/9/2017 Gombe Entertainment 10 9,500,000 100,000 9,400,000 1% 99%

TOTAL 337 237,893,000 17,665,000 220,228,000 7% 93%

Appendix 3 under Staffing NO DEPARTMENT APPROVED NO. OF FILLED NO OF STAFF VACANT REMARKS STAFF 1. ADMINISTRATION 31 9 22 2. HUMAN RESOURCE MGT. 2 I 1 3. WORKS DEPARTMENT 11 4 7 4. FINANCE AND PLANNING 12 5 7

5. PHYSICAL PLANNING 4 1 3 6. COMMUNITY BASED SERVICES 4 1 3 7. EDUCATION 6 0 6 4 STAFF ASSIGNED 8. PRODUCTION 2 2 0 9. TRADE AND INDUSTRY 3 0 3 10. NATURAL RESOURCES MGT 2 0 2 11. PROCUREMENT 2 1 1 12. INTERNAL AUDIT 2 1 1 13. PUBLIC HEALTH 5 2 3 86 27 59 DIVISIONS 14. SENIOR ASSISTANT TOWN 4 4 0 But they are SAS CLERKS needs to be regularized 15. TREASURERS 4 4 0 Needs to be regularized 16. COMMUNITY DEVELOPMENT 4 4 0 OFFICERS 17. ASST. TOWN CLERKS 4 1 3 18. ASST TREASURERS/SAA 4 4 0 19. ASST. AGRIC. OFFICER 4 1 3 20. ASST VET. OFFICER 4 0 4 21. PRINCIPAL TOWN AGENTS 29 15 14 22. HEALTH INSPECTOR 4 0 4 23. LAW ENFORCEMENT 4 0 4 OFFICERS 24. POOL STENOGRAPHER 4 1 3 SECRETARY 25. LAW ENFORCEMENT 29 0 29 ASSISTANTS 26. OFFICE ATTENDANTS 4 1 3 27. DRIVERS 4 0 4 28. ASKARIS 8 0 8 114 35 79

Appendix 4 health centers without land titles

Size of land in Clients per year Health Centre acres Estimated Value Land ownership Buwambo HC IV 4 250,000,000 Private not fully titled 27,413 Kawanda HC III 0.25 60,000,000 Institutional land 13,394 Kasozi HC III 11 330,000,000 Public and fully titled 14,257 Ttikalu HC III 4 80,000,000 Private not fully titled 11,352 Nabutiti HC III 3 90,000,000 Private and fully titled 7,596 Nabweru HC III 1 150,000,000 Kabaka’s land not leased 17,203 Namulonge HC III 1.5 90,000,000 Kabaka’s land not leased 10,785 Gombe HC II 1 50,000,000 Kabaka’s land not leased 7,562 Nansana HC II 1.5 250,000,000 Kabaka’s land not leased 10,390 Matugga HC II 0.5 80,000,000 Private not fully titled 7,885 Migadde HC II 5 200,000,000 Private not fully titled 6,185 Wamala HC II 1 100,000,000 Private not fully titled 5,435 Maganjo HC II 0.25 80,000,000 Kabaka’s land not leased 6,998