Office of the Auditor General

THE REPUBLIC OF UGANDA

OFFICE OF THE AUDITOR GENERAL

ANNUAL REPORT OF THE AUDITOR GENERAL FOR THE YEAR ENDED 30TH JUNE 2014

VOLUME 2(B) CENTRAL GOVERNMENT AND STATUTORY CORPORATIONS

TABLE OF CONTENTS

LIST OF ACRONYMS AND ABREVIATIONS...... iii

SECTION 1: INTRODUCTION ...... 1

1.1 MANDATE ...... 1

1.2 AUDITED ENTITIES ...... 1

SECTION 2: DETAILED AUDIT FINDINGS...... 3

2.1 SOCIAL DEVELOPMENT SECTOR ...... 3

2.1.1 EQUAL OPPORTUNITIES COMMISSION ...... 3

2.2 WORKS SECTOR ...... 6

2.2.1 UGANDA NATIONAL ROADS AUTHORITY ...... 6

2.2.2 TRANSPORT SECTOR DEVELOPMENT PROJECT (TSDP) ...... 51

2.2.3 ROAD SECTOR SUPPORT PROJECT 3 (RSSP 3)– NYAKAHITA-KAZO-KAMWENGE FY 2012/2013 ...... 56

2.2.4 THE UGANDA ROAD FUND ...... 59

2.3 JUSTICE LAW AND ORDER SECTOR ...... 64

2.3.1 JUDICIAL SERVICE COMMISSION ...... 64

2.3.2 UGANDA LAW REFORM COMMISSION ...... 70

2.3.3 UGANDA HUMAN RIGHTS COMMISSION ...... 72

2.3.4 UGANDA REGISTRATION SERVICES BUREAU OPERATIONS ...... 75

2.3.5 UGANDA REGISTRATION SERVICES BUREAU – LIQUIDATION ACCOUNT...... 76

2.3.6 UGANDA LAND COMMISSION ...... 77

2.4 PUBLIC SECTOR MANAGEMENT ...... 82

2.4.1 PUBLIC SERVICE COMMISSION ...... 82

2.4.2 LOCAL GOVERNMENT FINANCE COMMISSION ...... 85

2.4.3 KAMPALA CAPITAL CITY AUTHORITY ...... 91

2.4.4 KAMPALA INSTITUTIONAL AND INFRASTRUCTURE DEVELOPMENT PROJECT (KIIDP) (TEN MONTHS PERIOD ENDED APRIL 2014) ...... 116

2.4.5 BILL AND MELINDA GATES FOUNDATION – KCCA ...... 119

2.4.6 ELECTORAL COMMISSION ...... 119

2.5 LEGISLATIVE SECTOR ...... 124

2.5.1 PARLIAMENTARY COMMISSION ...... 124

2.6 HEALTH SECTOR...... 132

2.6.1 UGANDA AIDS COMMISSION ...... 132

2.6.2 HEALTH SERVICE COMMISSION ...... 134

2.6.3 EDUCATION SERVICE COMMISSON ...... 136

2.7 ENERGY SECTOR ...... 138

2.7.1 ATOMIC ENERGY COUNCIL...... 138

LIST OF ACRONYMS AND ABREVIATIONS

AIDS Acquired Immunodeficiency Syndrome

ART Anti-Retroviral Therapy

BFP Budget Framework Paper BOU Bank of Uganda BTC Belgium Technical Cooperation

CAES College of Agriculture and Environment Sciences

CAO Chief Administrative Officer

CDC Center for Disease Control

CEDAT College of Engineering Design Art and Technology

CEES College of Education and External Studies

CEMAS Computerized Education Management and Accounting System CHOGM Commonwealth Heads of Governments Meeting CHS College of Health Sciences

CHUSS College of Humanities and Social Sciences

CIID Criminal Intelligence and Investigations Department

COBAMS College of Business and Management Sciences

COCIS College of Computing and Information Sciences

COMESA Common Market for Eastern & Southern Africa CONAS College of Natural Sciences

COVAB College of Veterinary Medicine and BioSecurity

CUFH China Uganda Friendship Hospital

DHO District Health Officer

DSCs District Service Commissions EAC East African Community ED Executive Director

EFT Electronic Funds Transfer

iii

ESAAG East and Southern African Association of Accountant Generals ESC Education Service Commission FAR Fixed Asset Register

FIEFOC Farm Income Enhancement and Forest Conservation

FOC Faculty of Commerce FY Financial Year GoU Government of Uganda

HC Health Centre

HIV Human Immunodeficiency Virus

HSC Health Service Commission HSC Health Service Commission

IAS International Accounting Standards

ICGR International Conference for Great Lakes Region ICT Information and Communications Technology ICT Information Communication Technology IFMS Integrated Financial Management System

ITFC Institute of Tropical Forest Conservation

JCRC Joint Clinical Research Center

JLOS Justice, Law and Order Sector JMS Joint Medical stores

KCCA Kampala Capital City Authority KYU Kyambogo University L.T.C Lymphoma Treatment Centre

LANs Local Area Networks LC Letter of Credit LCs Letters Of Credit

M&E/MIS Monitoring & Evaluation/Management Information System

MDAs Ministries, Departments and Agencies iv

MEACA Ministry of East African Affairs MICT Ministry of Information and Communications Technology MNRH Mulago National Referral Hospital

MoES Ministry of Education and Sports MoFPED Ministry of Finance Planning And Economic Development

MoFPED Ministry of Finance, Planning and Economic Development MoH Ministry of Health

MoLHUD Ministry of Lands, Housing and Urban Development

MoTIC Ministry of Trade, Industry and Cooperatives

MoTWA Ministry of Tourism Wildlife and Antiquities MOU Memorandum of Understanding MUBS Makerere University Business School MUECCA (A) Makerere University Establishment of Constituent College Order Amended

MUK Makerere University MUST Mbarara University of Science and Technology

MWE Water and Environment

NBI National Backbone Infrastructure NCBS National College of Business Studies

NDA National Drug Authority

NHIS National Health Insurance Scheme

NMS National Medical Stores NTC National Teachers College NTR Non Tax Revenue NWSC National Water and Sewerage Corporation

OAG Office of the Auditor General OPD Out Patients Departments

PAC Public Accounts Committee PAYE Pay As You Earn PFAA Public Finance and Accountability Act

PFAR Public Finance and Accountability Regulation PIC Planning Investment Committee PPDA Public Procurement & Disposal of Public Assets PPS Private Patients Services

PS Permanent Secretary

PS/ST Permanent Secretary/Secretary to the treasury

PSC Public Service Commission PSU Pharmaceutical Society of Uganda

S.T.C ward Solid Tumor Centre ward

TAI Treasury Accounting Instruction UAC Uganda AIDS Commission

UBTS Uganda Blood Transfusion Services

UCI Uganda Cancer Institute

UGX. Uganda Shillings UHI Uganda Heart Institute ULC Uganda Land Commission ULC Uganda Land Commission UNHRO Uganda National Health Research Organisation UNICEF United Nations International Children's Emergency Fund

URA Uganda Revenue Authority

USD United States Dollar

WAN Wide Area Network WRS Warehouse Receipt System

SECTION 1

INTRODUCTION

1.1 MANDATE

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 on 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 (B) of my annual report to Parliament and it covers financial audits carried out on public entities1 which are self-accounting and funded through the central Government budget. The analysis of cross cutting and key issues and status of completion of audits for these entities are covered under volume two (A).

1.2 AUDITED ENTITIES

Under this volume, 20 entities have been included. The list of entities and their respective opinions is below. No Entity Category Sector Opinion 1 Equal Opportunities Commission SA/SE Accountability Unqualified 2 Electoral Commission Commission Administration Qualified 3 Education Service Commission Commission Education Unqualified 4 Atomic Energy Council Council Energy Unqualified 5 Uganda Aids Commission Commission Health Unqualified 6 Health Service Commission Commission Health Unqualified 7 Uganda Human Rights Commission Commission JLOS Unqualified 8 Judicial Service Commission Commission JLOS Unqualified

1 Please note that this is not an exclusive list of all the entities. 1

No Entity Category Sector Opinion 9 Uganda Law Reform Commission Commission JLOS Unqualified Uganda Registration Services 10 Bureau - Operations SA /SE JLOS Unqualified Uganda Registration Services 11 Bureau – Liquidation Account SA /SE JLOS Unqualified Lands & 12 Uganda Land Commission Commission Housing Unqualified 13 Parliamentary Commission Commission Legislature Unqualified 14 16 Public Service Commission Commission PSM Qualified Local Government Finance 17 Commission Commission PSM Qualified 18 Kampala Capital City Authority SA / SE PSM Unqualified 19 Uganda National Roads Authority SA / SE Works Qualified 20 The Uganda Road Fund SA /SE Works Unqualified

The detailed audit findings are presented under Section 2 that follows.

SECTION 2

DETAILED AUDIT FINDINGS

2.1 SOCIAL DEVELOPMENT SECTOR

2.1.1 EQUAL OPPORTUNITIES COMMISSION

2.1.1.1 Budget shortfall Whereas the approved budget of the Commission during the year under review was UGX..2,003,018,309, the entity realized only UGX..1,703,928,658 resulting into a short fall of UGX..299,089,651 (15%). Consequently the following activities were not implemented;

 Tribunal hearings at the headquarters.  Tribunal hearings at regional centres.  Inspections of work places.  Production of reports on government compliance to international conventions  Monitoring and evaluation.  Advocacy and networking in districts.  Study and review customs and cultures of different tribes in Uganda on issues of equal opportunities.

Management stated that despite writing to Treasury for release of the funds, there was no response.

I advised management to continue liaising with the Treasury to ensure that the appropriated resources are realized.

2.1.1.2 Understaffing According to Section 12 of the Equal Opportunities Act 2007, for the Commission to perform its functions better, it will establish offices at

appropriate administrative levels. These offices will be filled by officers to enable the Commission achieve its objectives. However, out of the approved establishment of 49 posts, only 28 are filled leaving 21 vacancies. Among the vacancies are; Vice Chairperson, Undersecretary and Commissioner, Legal Services and Investighations. The understaffing constrained the execution of its mandate. Management attributed the staff shortage to inadequate funding and indicated that recruitments would be phased with effect from financial year 2014/15. I advised management to liaise with the ministries of Public Service, Finance, Planning and Economic Development and Gender, Labour and Social Development to obtain the necessary resources for staffing.

2.1.1.3 Arrears of Gratuity A review of the employment terms of the Commission indicated that staff are employed on three year renewable contract with the exception of the Commission members whose renewable contract is five years. Clause seven (7) of the contract of employment stipulates that “the employee shall be entitled to gratuity at the end of each year‟s period of service”. However, there was no evidence that employees were paid their gratuity at the end of the year as stated in the contract agreement. Besides, it appears there was no budget provision for the gratuity. Breach of employment terms may result into litigation and associated costs to the Commission. Management explained that it was the responsibility of Ministry of Public Service to budget for gratuity for the period and that a list of beneficiaries was submitted for the purpose of determining gratuity due. I advised management to follow up the matter so as to avoid accumulation of gratuity arrears.

2.1.1.4 Irregular gratuity rate paid to employees Clause seven of the employment contract for technical staff states that the rate of gratuity shall be 30% of the consolidated salary paid to the employee during the contract period. Contrary to this clause, a category of technical staff were paid gratuity for financial year 2012/13 at the rate of 25% resulting into underpayment of UGX..2,569,419. Management explained that the 25% rate was effected by Ministry of Public Service without explanation. Management further wrote to the Permanent Secretary, Ministry of Public Service to rectify the anomaly but no response had been received. I advised management to liaise with Ministry of Public Service and harmonize the gratuity rate to avoid legal conflict in future.

2.1.1.5 Property not transferred into the Commission’s names. According to section 3 of the Equal Opportunities Commission Act 2007, the Equal Opportunities Commission shall, in exercise of its functions be independent and shall not be subject to the direction or control of any person or authority. However, it was noted that the Commission is occupying the premises and using six vehicles registered in the names of the Ministry of Gender, Labour and Social Development without a Memorandum of Understanding between the two entities and this impairs its independence. This also makes it difficult to pay utility bills, property tax as well as ground rent using the IFMS system when the property is still registered in the names of the original owner. I advised management to liaise with the Ministry and have the items transferred into its names for ease of management.

2.2 WORKS SECTOR

2.2.1 UGANDA NATIONAL ROADS AUTHORITY

2.2.1.1 Mischarge of Expenditure – UGX.3,501,412,816 Parliament appropriates funds annually in accordance with the needs of each MDA. This appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account and MTEF codes. Contrary to the above; expenditure totalling to UGX.3,501,412,812 was inappropriately charged on budget lines to fund activities that were not planned without authority.

I explained to management that mischarge of expenditure translates into misrepresentation of expenditure balances in the financial statements and it is also contrary to the intentions for which the funds were appropriated by Parliament.

In response management acknowledged the anomaly and committed that prior approval for reallocation and virement shall be sought before any such expenditure is incurred.

The outcome of management‟s commitment is awaited.

2.2.1.2 Upgrading of Mukono- Kyetume -Katosi/Kisoga –Nyenge Road (74 Km) On 15th November 2013, UNRA entered into an agreement with Eutaw Construction Company Inc. of 622 Beach land Bivd Suite 201 Vero Beach Florida USA for upgrading of Mukono- Kyetume -Katosi/Kisoga –Nyenge Road (74 Km) from gravel to paved (Bitumen) for a contract price of UGX.165,272,156,814 including all local taxes. Examination of expenditure vouchers showed that only UGX.24,790,823,522 (15% of the contract price) was paid to the construction company as advance payment. A review of the transaction details revealed the following anomalies;

2.2.1.3 Limited Advertisement Condition 4 of the Fourth Schedule of PPDA Act 2003 requires that open international bidding shall be open to all bidders following public advertisement of a Bid Notice in a publication of wide international circulation. Section 80 (2) of the PPDA Act 2003 provides that open international bidding is used to obtain the maximum possible 6

competition and value for money where national providers may not necessarily make this achievable. However a review of the procurement showed that the procurement advertisement was run in Daily Monitor News Paper of Monday, April 2010. There was no evidence that the procurement advertisement was put in the foreign/international newspaper/media.

In the circumstances, there was non-compliance with the provisions of the PPDA law.

I advised management to always comply with the procurement law.

2.2.1.4 Performance guarantee On 18th November 2013; UNRA received the contractor`s performance guarantee from a local bank dated 13th November 2013. On the 19th November 2013, UNRA management wrote to the contractor rejecting the performance guarantee on condition that it was not consistent with the provisions of the contract data. A second performance guarantee from the same bank dated 21st November 2013 was tendered in by the contractor. On receipt of the performance guarantee, the Acting Director Procurement wrote a memorandum dated 26th November 2013 to the Director Finance and Administration (DFA) requesting him to verify the authenticity of the performance guarantee and requested the DFA to inform them of the results of the verification. The verification results were not presented for verification. It is likely that the verification was not done. Paying out Government funds without checking the authenticity and validity of the performance guarantee was risky and could cause financial loss to Government.

In response, management explained that the Performance Guarantee was verified by the DFA before payment was effected to the contractor and details regarding the verification are under investigation by the IGG and Police.

I await IGGs and Police investigations on the matter.

2.2.1.5 Limitation in the Scope of Work - Due Diligence A review of the correspondences on file showed that a due- diligence team was appointed on the 31st October, 2013 to carry out legal establishment of the company and examine the powers of attorney of the company managers. A review of the correspondences seen showed that the due- diligence team highlighted that the

findings were based on limitations of time and geographical location. I noted that the team was given ten (10) days to carry out the due-diligence assignment and were limited to information on the company`s website and other locally available documents.

It was further noted that the team did not travel to Aberdeen Mississippi, United States of America where the company was allegedly registered and hence did not satisfy themselves as to whether the company existed and in operation. In the circumstances, the due- diligence team was limited in scope. I could not rule out the likelihood that the team did not carry out its assignment as expected.

Management responded that it was their expectation that the due-diligence report would generate enough information for a decision to be taken. However, due to the limitation of the assignment in terms of time and geographical location, only preliminary findings could be obtained. It is now a requirement to carry out due diligence on all major procurements and UNRA is currently implementing this directive as directed by the Ministry of Finance, Planning and Economic Development.

I advised management to implement the recommendation of the Ministry of Finance, Planning and Economic Development and all major projects to avoid such incidences.

2.2.1.6 Due Diligence Findings and Recommendations The due diligence team submitted their report on 8th November 2013 to the Acting Executive Director. However, during examination of the transaction details I noted that some of the due-diligence team‟s findings and recommendations were ignored by management. The due- diligence team noted some inconsistences with the documentations of Eutaw Construction Company Inc, where it was highlighted that the findings were preliminary and thus recommended for further investigations and confirmation to be made before a final position could be reached.

The team further recommended that a physical verification should be undertaken on the bidder‟s home country where the company was legally constituted through direct contact with the relevant Government/State Agencies. The due diligence report was dated 8th November 2013 and the agreement was signed on 15th November 2013. It was evident that management ignored the findings and recommendations of the due-diligence team by going ahead to conclude the contract.

Further examination of correspondences on file showed that the Acting Executive Director was directed to immediately sign the contract by the Hon. Minister of Works in his letter dated 14th November 2014 while due- diligence was still being carried out. I explained to management that signing the agreement while due-diligence was still ongoing was irregular. Without a complete due-diligence; the competence, existence and location of the company (contractor) could not be established. The contract was therefore concluded and awarded without the physical verification of the location of the company managers, and establishment of its competence which was risky to Government.

Management stated that the issue is one of those under investigation by the IGG and Police.

Results of the IGG and Police investigations are awaited.

2.2.1.7 Contract Manoeuvre by Eutaw Construction Company Inc. Florida –USA Examination of transaction details, showed that on 6th August 2013, Eutaw Construction Company Inc. management (the “best evaluated bidder”) wrote to the Minister of Works and Transport informing him of an offer of a discount of 15% of the bid price of UGX.183,285,341,234. This price was however rejected and in his letter dated 23rd August 2013, the Minister of Works and Transport informed the company that the procurement law does not allow for counter offers after a bidding process.

Further review of the agreement details revealed that management later entered into an agreement at a contract price of UGX.165,272,156,814 far less than the bid price of UGX.183,285,341,234 translating into a reduction in price of UGX.18,013,184,420 (183,285,341,234 – 165,272,156,814) which was 9.9% of the bid price. I could not establish the cause of the reduction.

In response, management explained that the change in price was necessitated by a change in the wearing course of the road project. At the time of bidding, it was designed that the road would be of Asphalt Concrete (AC). However, overtime, UNRA was informed by the Ministry of Works that there was a change of policy that all roads out of the main corridor must receive a Double Surface Dressing Treatment

(DSDT). A re-negotiation and re-computation of costs was undertaken and a reduction of UGX.18,013,184,420 was achieved out of these changes.

I could not confirm the above position as the explanation was not supported.

2.2.1.8 Inconsistencies in the company that bidded and one that was awarded the Contract A review of the bid documents, the agreement and other transaction documents such as the bid security and performance guarantee revealed the following inconsistencies;

 Bidding While the company that bidded for the job was M/s Eutaw Construction Co. Inc. of Aberdeen Mississippi; in his bid acceptance letter dated 7th November 2013 the Acting Executive Director wrote to the M/S Eutaw Construction Co. Inc. of 622 Beach land Bivd. Suite 201 Vero Beach Florida 32,963 United States of America, a company that did not participate in the bidding process.

 Contracting While M/s Eutaw Construction Co. Inc. of Aberdeen Mississippi participated in the bid process covering the whole procurement process, the contract was awarded to M/s Eutaw Construction Co. Inc. of 622 Beach land Bivd. Suite 201 Vero Beach Florida which did not participate in the bidding process. This was irregular.

 Performance guarantee While the Bid Security was issued in favour of M/s Eutaw Construction Co. Inc. of Commerce St 109 W, Aberdeen Mississippi United States of America the company that participated in the bidding process; the Bank Performance Guarantee was issued in favour of Eutaw Construction Company. Inc. located on 622 Beach land Bivd. Suite 201 Vero Beach Florida 32963, United States of America the company that did not participate in the bidding process.

It is evident that UNRA management dealt with two (2) companies at different stages. Besides, there was no due-diligence carried out to confirm the legal existence

and physical location of the company of both companies. Management responded that this issue is under investigation by the IGG and Police. UNRA Board and indeed the Police and IGG are in charge of these investigations and they shall take action based on the findings.

I await IGG and Police investigations on the matter. 2.2.1.9 Unrecovered advance payment Examination of expenditure vouchers showed that UGX.24,790,823,522 (15% of the contract price) was paid to Eutaw Construction Company Inc. of 622 Beach land Bivd. Suite 201 Vero Beach Florida USA on the 24th of January, 2014. However, I noted that management had not made any effort to recover the money advanced after the failed contract.

In response, management explained that the issue is under investigation by the IGG and Police. UNRA Board and indeed the Police and IGG are in charge of these investigations and they shall take action based on the findings.

I await the IGG and Police investigation on the matter.

2.2.1.10 Retendered works awarded to another company During the review, I noted that on 12th January 2015, the same construction work of Upgrading of Mukono- Kyetume -Katosi/Kisoga –Nyenge Road (74 Km) was contracted to another company for a contract price of UGX.253,940,121,150. This was far higher than the original contract price of UGX.165,272,156,814 in a failed contract earlier awarded to Eutaw Construction Company Inc. of Suite 201 Vero Beach Florida 32963 United States of America. This reflected additional spending.

Further a review showed that there was no valuation of the works done by the former contractor to assess how much work had been executed and how much was remaining to establish the basis for the negotiations of the contract price with the new contractor.

In the circumstances, GOU/UNRA is likely to lose again on the works that were already completed by the failed contractor Eutaw Construction Co. on top of the unrecovered advance payment.

In response, management explained that this was an admeasured contract and the contractor will only be paid for the work they will have executed through proper certification. Regarding recovery, the matter is before the Constitutional Court.

I advised management to ensure valuation of works executed by the failed contractor (Eutaw) is carried out to aid the Board and other stakeholders to make informed decisions.

2.2.1.11 Receivables held in ABC Capital Bank The schedule of other receivables includes a figure reflected as Prepayments in ABC Capital Bank of UGX.173,701,010. This amount has been held in ABC Capital Bank for over a year under unclear circumstances. During the review, I noted that there were been no significant steps taken to recover the money held since the previous audit.

In response, management explained that this amount was fraudulently transferred to ABC Capital Bank with the assistance of some UNRA Staff members and officers working with ABC Capital Bank. Police instituted investigations where suspects were arrested. The investigations have not been concluded yet. UNRA management engaged Bank of Uganda to recover these funds from ABC Capital Bank though no progress has been made. This case is now being handled by the UNRA Legal Department who are engaging police and the office of the Director of Public Prosecution to conclude the matter.

The outcome of management‟s effort is awaited.

2.2.1.12 Budget Performance Funds not Utilized A review of the budgeted revenue and expenditure against the actual expenditure for the year showed that management had budgeted to receive UGX.2,198,606,856,359. However UGX.2,025,250,018,096 (92%) was spent, leaving UGX.173,356,838,263 (8%) of the funds available unutilized. I noted that the gap was an operational issue caused by delays in procurement leading to failure to consume all the allocated funds translating into underperformance.

Failure to utilize the available funds affects implementation of the planned activities which could lead to failure to fulfil the Authority‟s mandate in the long run. 12

In response, management explained that this was mainly due to procurement delays in progress on the Gulu Atiak Road and Fort-portal Kamwenge road that are financed by TSDP. Management further explained that out of the gross tax of UGX.10bn that was budgeted, only UGX.1bn was utilized resulting in a shortfall of UGX.9 billion (unspent).

I advised management to always plan adequately and ensure full utilization of the available funds.

Uncompleted Activities/Programs Review of the Authority‟s quarter four performance (cumulative progress report for projects and programs) revealed that a number of Activities/Programs were not completed during the year translating into underperformance as summarised below;

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response 1 Project 1033: Design Hoima - Kaiso -Tonya (85km) Acquisition of Land Since the project start There was a delay in Management should The valuation report by Government UGX.10.8bn has been approval of valuation explain the causes of the commenced after a paid out of the valued report for extra land delay that could lead to design review and the UGX.11.8bn which is take. paying more and or face valuation and approval 95% of the amount litigation challenges. depends on the office of approved. the Chief Government Valuer who has a national task of advising on value. UNRA‟s programs sometimes delay because the entity has to seek approval before any land acquisition can be carried out. National Road This project was The Project is behind Poor planning could lead

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response Construction/Rehab expected to be schedule because rock to payment of project ilitation (Bitumen completed by excavation Km 57-59 extension costs. No management Standard) December 2014. long has taken longer Response than was anticipated. No management given Response given. 2 Project 1035: Design Mpigi- Kabulasoka - Maddu (135 km) 1035 Acquisition of Land The verification of There was a delay to Management should Procurement of the by Government; PAPs (Project affected finalize the procurement explain the causes of the Consultant was initiated persons) along the of works contractor for delay and what measures in 2011 but the process project road and cash Kanoni-Sembabule have been put in place to was halted due to compensation section. avoid such occurrences. insufficient funds for FYR Commenced. 2012/13. When the project was revived, the contract had to go to the SG for approval. Meanwhile the Valuation

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response had expired because it was done in 2012 so it had to be updated before paying to reduce on the rejections by the Project affected persons (PAPs). 4 Output 04 5105 Axle Load Control Procure 2 mobile Not delivered yet Procurement delays Management should Analysis of the dates weigh bridges- two explain the cause of marking the major multi-deck platform procurement delays yet milestones in the process weighbridge scales there is a directorate of does not indicate major for Mbarara and procurement in place. delays except getting Luwero SG‟s approval which took two months. Foundations built at Luwero and Mbarara, installation of equipment to be completed by end of March 2015.

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response Procure design and Not delivered yet Procurement delays Management should Technical and Financial build contracts of explain the cause of evaluation report parking yards for procurement delays and submitted to PDU. four OSBPs of plans underway to Busia, Malaba, complete the activity. Elegu and Mutukula. 5 Output 4 5172 Terms of reference for The procurement Management should UNRA is using the design Government the design delayed to commence explain the progress of and build approach to Buildings and Services were because MoWT received the delayed activity. procure a designer and Administrative finalized. un solicited offer from a contractor at once to Infrastructure- developer to construct 3 save on the time of Draft Design of Towers including a implementation of the UNRA Headquarters UNRA tower. works (save approximately one year).

6 Project 0295 Upgrade Kampala - Gayaza- Zirobwe (44.3km)

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response Acquisition of Land 5.93 hectares of land Delayed approval of Management should The original contract did by Government were acquired out of contract for extra land explain the poor not cover the additional the annual target of take and injurious performance and avail land requirement and so 17 hectares and spent affection, absentee land the current progress a new contract needed to UGX.18.1 billion out of owners. status for review. be prepared. Since it was UGX.21.7 billion beyond the allowable budgeted. 25%, the method of procurement changed and a direct procurement instead was sought. The procurement is in advanced stages and the additional land will be acquired. However the absentee landlords are still a challenge and the Consultant under the new Contract will make an effort to trace the land owners. If they fail, the

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response land will be subdivided to create the title for the road reserve. In the meantime UNRA has applied to the MoLHUD for gazettement of this road reserve to ease the process of gazetting. National Road The consultant The target was not met Management should avail Construction/Rehab submitted the because the scope of evidence of the progress ilitation (Bitumen Inception services changed and so far registered and No evidence of progress Standard) Report. He the contract had to be plans underway to speed so far made availed for recommended a new amended which took up the process. verification. design because the time. No evidence of progress existing one was out- so far made availed for of date after more verification. than 10 years. 7 Project 0955 Upgrade Nyakahita- Ibanda-Fort Portal

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response (208km) Acquisition of Land 9.78 hectares of land Targets were not met Management should The target was set high, by Government were acquired and due to the delayed explain the poor but compensation by the properties therein contract for injurious performance and avail time of the Audit review, compensated out of affection and extra land the current plans for most of the land had the annual target of take. review. already been acquired. 45. However there was need for additional land acquisition arising out of extensive redesign of the road for which a contract is under procurement. National Road Kamwenge - Fort The target for Management should Construction/Rehab Portal 22.8% of the Kamwenge - Fort Portal explain the penalties No evidence of penalties ilitation (Bitumen works was completed road was not met charged against the charged against the Standard) out of the annual because of under contractor. contractor availed for target of 25%. performance of the No evidence of penalties verification. contractor. charged against the contractor availed for verification.

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response

8 Project 0957 Contractor is The target was not met Management should The key areas of delay Design the New mobilizing. Expected because procurement explain the cause of were because of the Nile Bridge at Jinja to end in August 2014 delayed to be finalized. Procurement need to seek approval and actual works to inadequacies. from the funding agency. commence then. Secondly due to the complex nature of the procurement, the bid submission deadline had to be extended twice to accommodate the addendums and requests for clarifications that UNRA had to handle. 9 Project 1032 Upgrade Vurra - Arua - Koboko - Oraba (92km)

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response Acquisition of Land 63.08 hectares of land Land compensation was The audit noted lack of The valuation report by Government were acquired and affected by the delayed follow up on this matter commenced after a properties therein approval of valuation to have accelerated the design review and the were compensated out report for Municipality delays. Management valuation and approval of the annual target of section. should explain the depends on the office of 200. anomaly. the Chief Government Valuer who has a national task of advising on value. UNRA‟s programs sometimes delay because the entity has to seek approval before any land acquisition can be carried out which was the reason for the delay in acquiring land. National Road The cumulative Cumulative Management should Construction/Rehab progress since the achievement was lower explain the plans No plans availed for ilitation (Bitumen start of the project than the programmed underway to complete review during Standard) was 72.25% of the largely because of the delayed activity. 22

Projects/ Status of Variance in Audit Remarks Management Activities performance performance. Response works completed out encumbrances caused verification. of the programmed by delayed payment of 75.85%. compensation. 10 Project 1034 Design of Mukono- Katosi-Nyenga (72km) Acquisition of Land There was no land Payment was affected Management should avail Payment has since been by Government acquisition because by MoFPED requirement evidence that the effected after MoFPED of the requirement of that all PAPs should be payment was effected. relaxed the need for a TIN (Tax Identification paid through IFMS and TIN before compensation Number) must have TIN. National Road Contractor The target was not met Management should Construction/Rehab commenced because of delayed land explain why this was not No evidence availed for ilitation (Bitumen mobilization of and property planned for adequately to review during Standard) equipment and compensation. avoid the many claims verification. personnel; and setting and ensure effective up a camp to service delivery. commence works in July 2014.

I noted that most of the delays as summarized above were not due to budget shortfalls but other reasons revolving around delays in procurement, inadequate planning and lack of follow up on compensations and valuations.

I advised management to always plan adequately, ensure effective collaborations with other stakeholders early enough and enforce project monitoring and supervision for effective service delivery.

2.2.1.13 Un-refunded borrowings from Kampala Station by UNRA Head Quarter- UGX.232,022,599 Examination of records at Kampala UNRA Station revealed that UNRA Headquarters borrowed station funds totaling to UGX.1,017,612,528 for various activities from both cash drawings and Land Compensation Funds during the year. As at the close of the financial year, UGX.785,612,528 had been refunded leaving a balance of UGX.232,022,599 outstanding. I noted that out of UGX.1,017,612,528 borrowed, UGX.557,983,140 was cash drawings for headquarter official use. I explained to management that cash drawings of huge sums are risky and irregular and could lead to misappropriation of Government funds. Besides; borrowings translate into diversion of funds that are meant to clear other planned activities for the year.

In their response, management explained that expenses worth UGX.1,017,612,528 were incurred by UNRA Kampala Station on behalf of UNRA Headquarters. These borrowings were short term interventions undertaken for urgent critical activities where UNRA Headquarters was unable to process immediate payments, but were approved by the Accounting Officer or Director Finance and Administration. All borrowings were refunded to the Station. The outstanding balance of UGX.232 million at the time of audit will be refunded during the Financial Year 2014/15.

I advised management to refund the remaining balance to Kampala station and also to reduce on cash transactions.

2.2.1.14 AUDIT INSPECTION OF STATIONS As part of the audit; inspection of the UNRA stations was carried out and below is a summary of the findings; Mpigi Station 24 a) Tractor tyres due for disposal Inspection of station stores revealed that there were new tyres of size 9.5 -24 (15 tyres and 7.5 – 18 (16 tyres) that have been kept in store for more than 10 years. According to management and review of stores ledgers, the tyres were for the tractors which were used by the Ministry of Works and Transport and were left in stores when the station was handed over to UNRA.

Given the size of the tractor tyres, they were occupying almost half of the stores space and thereby limiting the storage capacity of the station store. There is a risk that the tyres could get stolen and or expire leading to loss of value that would accrue to UNRA arising from an early disposal. Management responded that the supplies officer was notified about the tyres and arrangements for their disposal are being finalized at head office.

I await the outcome of management action.

Kasese Station a) Missing confiscated bitumen – 24 drums A review of stores ledger and physical count done on the 03/12/2014 revealed that Bitumen had a ledger balance of 58 drums. However, physical count revealed that there were only 35 drums of bitumen at the station goods yard, an indication that 24 drums were missing.

According to management, the 24 missing bitumen drums were confiscated by the Chinese who were escorted by Uganda Police to the station premises. Further review showed the following observations:

 The Police or the Chinese Nationals did not leave behind any documentary evidence that they had confiscated the 24 drums of bitumen;

 It was not clear why the two correspondences from UNRA to the Regional CIID Fort-portal were signed by UNRA station store keeper on behalf of the Station Engineer but not the Station Engineer himself as the station Accounting Officer;

The first communication from UNRA Kasese station to Regional CIID Fort-portal was made on 10/09/2014 meanwhile, correspondences on file showed that the 25

drums of bitumen were confiscated in September 2012 implying that the station management spent two years without following the matter.

 Although the two correspondences available were from UNRA Kasese station to the Regional CIID Fort-portal through the District Police Commander Ntoroko District, there was no evidence that the communications actually reached the Regional CIID Fort-portal.

The station lost 24 drums of bitumen reportedly confiscated by the police/Chinese firm. I noted that there was laxity on the part of management in following up the matter that led to loss of station materials and besides the loss was not captured in the financial statements.

In response, management explained that a warrant of search document was produced and the confiscated bitumen was witnessed and signed off by Police. Management indicated that they are following up the matter with Regional CIID Fort Portal to cause recovery of the bitumen.

I advised management to follow up the issue with police and ensure recovery of the bitumen.

Moyo Station a) Lack of pre-inspection report on the former ferry and related issues UNRA procured and installed a new ferry at Laropi Ferry Landing site replacing the old ferry that was in use before. During the review; it was established that the older ferry was dismantled and the following anomalies were noted;

 The Moyo Station management did not have documentary evidence concerning the dismantled ferry. I could not therefore establish who authorized dismantling of the former ferry. Besides; there was no documentary evidence in form of a report on the list of the parts of the ferry that were removed as they dismantled it.

 I established that the ferry parts were left in different locations. Some box parts of the ferry were at Laropi Landing site and others put apart were at UNRA Arua station parking yard as shown in the photographs below; 26

Below: Parts of the old Ferry that were left at Laropi Landing site.

Below: Some of the parts of the old ferry that were transferred to UNRA Arua station parking yard.

 There were no documentary evidence of delivery and receiving of the ferry parts at the Arua station hence parts were not taken on charge.

 During the review, I could not trace the engine of the former ferry. According to the Manager Ferries at UNRA headquarters, the ferry engine was at Luwero UNRA station for repair however; there was no documentary evidence of the engine movement. In the circumstances, it is possible that some portable parts of the ferry could have gotten lost through theft as the ferry was being dismantled.

 The ferry parts left at the Laropi Landing Site unattended to could easily get picked by scrap dealers and or sold off without authority.

I explained to management that the ferry engine is highly susceptible to misappropriation. In response, management explained that the schedule of all the parts is available and that the overall report is being compiled for verification.

I await for the final report for verification.

b) Hiring of Road equipment by the stations - UGX..5.2bn During the review, it was noted that the Stations hire privately owned equipment like motor graders, Bull dozers and Water Bowsers for carrying out road maintenance work. I noted that the hiring of the privately owned equipment is a result of the stations running and operating old and inadequate road equipment which is always breaking down.

During the year under review, the stations spent UGX..5,264,577,411 on hire of road equipment units. I explained to management that hiring of privately owned equipment is expensive and does not seem to be sustainable at the current rate. There is a possibility that this may result into the UNRA failing to maintain its own equipment.

In response, management explained that hiring of equipment has steadily reduced with increased equipment availability and receipt of new equipment. Management was optimistic that by the beginning of the financial year 2015/16, UNRA will have 72 new earth moving equipment and 88 new trucks. It is anticipated that this equipment fleet would be adequate for UNRA‟s maintenance needs. Management further indicated that the procurement of equipment is in advanced stages and some consignment has been received.

Management action on the matter is awaited.

2.2.1.15 Delayed delivery of 5 Motor Graders A contract for the supply of Earth Moving Equipment – (16 Motor Graders) at a Contract Price of JPY 288,000,000 (Japanese Yen Two hundred eighty eight million only) was entered into on 18th June 2014 and the delivery period was stated to be within 5 months after contract signing (end of November 2014).

Inspection of the UNRA Mpigi station yard on 10th February 2015 confirmed delivery of eleven (11) Motor Graders while five (5) of them had not been delivered. A Letter of Credit (LC) of JPY 192,960,000 in favour of the supplier was opened on 9th

December 2014. There was no follow up on the delays besides, no reminders were seen on file. I explained to management that delayed supply of the Motor Graders affects the operations of UNRA programs.

Management explained that 13 graders out of 16 have so far been delivered at Mpigi UNRA Stores while the balance of 3 graders is awaiting tax clearance.

I advised management to follow up the undelivered graders and have them delivered.

2.2.1.16 Staff Establishment Gaps The Authority‟s approved staff structure shows 1,109 approved posts. However, during the review, I noted that only 1,011 (91%) were filled leaving 98 posts (9%) vacant as summarized below;

Directorate Approved Filled Vacant Directorate of Internal Audit 16 6 10 Directorate of Finance and Administration 309 291 18 Directorate of Operations 704 645 59 Directorate of Planning 29 28 1 Directorate of Projects 23 21 2 Directorate of Procurement and Disposal 18 15 3 Total 1,109 1,011 98

The unfilled posts impact negatively on the Authority‟s service delivery.

Management responded that they have liaised with the Ministry of Finance and the UNRA Board to address the existing staffing gaps. The Board has initiated the restructuring process to establish the critical numbers required for proper functioning of UNRA and once the process is concluded, further consultations and approvals shall be sought from Ministry of Public Service and Ministry of Finance and the gaps shall be filled.

Results of management‟s commitment are awaited.

2.2.1.17 Payment without a valid contract - Supervision of works along Atiak-Moyo-Afoji Road On the 13th December 2010, UNRA signed an agreement with a consultant for the provision of Consultancy Services for Supervision of Construction of Bridge Structures, Box Culverts and Ferry Landing Sites along Atiak-Moyo-Afoji Road for a contract price of UGX.826,800,000 or such other sum as may become payable under the provision of the contract, at the times and in the manner prescribed by the contract for a contract duration of 26 months that commenced after 30 days from the date the contract was signed i.e. 13th January 2011 (the contract started).

During the review; I noted that the contract lapsed on the 13th March 2013 and UNRA wrote to PPDA on 10th of June 2013 in addendum No.1 requesting for approval of the additional costs and the PPDA in their letters dated 16thJuly 2013 and 1st October 2013 rejected the approval on the following grounds among others;

 The contract variation of UGX.1,059,200,000 for 18 months an equivalent of 128% increment of the original contract price was higher than the initial contract value of UGX.826,800,000 for 24 months,

 In light of the fact that the civil works contract expired, the entity‟s request for extension of the consultancy services for 18 months to supervise works during the liquidation period does not amount to value for money;

 The consultancy services contract expired on 13th March 2013 and UNRA submitted its request to PPDA to extend the contract three (3) months after the expiry.

 Although PPDA rejected the extension of the consultancy contract agreement; UNRA continued paying the consultancy firm long after the expiry date of the contract. I noted that though the contract price was UGX.826,800,000, the consultant was paid a total sum of UGX.1,687,819,070 implying that UGX.861,019,070 was paid over and above the agreeable contract price as the contract had not been renewed.

In response, management explained that the Consultant was contracted to supervise construction of bridges and box culverts works along the Atiak-Moyo-Afogi road

under a time based Contract and while works were expected to be completed in a period of 18 months, actual completion took a period of 32 months and the consultant continued to supervise these works. The supervision contract provided for such circumstances since it was a time based contract.

I advised management to always observe the PPDA law.

2.2.1.18 Engineering Audit Findings Engineering audits were carried out on roads constructed by the Authority during the year. Below are the key audit findings of the audits:

a) Inadequate planning In the estimation of the total contract price for the Kampala – Entebbe Expressway, the capping layer was costed at $32,240,000 almost the same amount as for the sub base ($33,320,000). This assumes that wherever there is a sub base there will be a capping layer underneath yet some sections may not need the capping layer that is; where the sub grade meets the strength requirements to support the sub base. It is important to note that besides strengthening weak sub grades, capping layers also saves the cost of the sub-base. This makes the cost of the capping layer unrealistically high (exaggerated). As the contract progresses UNRA should take keen interest in the application of the capping layer given its potential for cost savings.

There are cases of heavy investments being incurred on maintenance of some roads which are earmarked for full rehabilitation in the near future for example Kawempe – Kafu is undergoing an Asphalt Overlay even when it was advised in the FY 2008/09 audit report that this intervention should not be undertaken since the resealing works including some rehabilitation was just being implemented then. The works had then been estimated to give the road 4-5 years and audit tests conducted had confirmed that the base was weak in some sections thus not warranting an overlay to be placed but to wait and plan for a full rehabilitation after the design life (4-5 years). This weakness in planning is costing Government not less than UGX.140.5 billion for the works as well as UGX.13 billion for variation of Price, US$ 2,937,714.2 plus UGX.1,538,702,752 for the supervising Consultant. With better planning this amount would have been utilized to kick start the full rehabilitation of the road which in the

31 long run would have saved government a substantial part of the rehabilitation cost currently estimated at UGX.380 billion for the 160kms.

Inadequate planning in the procurement process and poor keeping of contract management records was observed. The procurement process has continued to lag sometimes to as long as 2 years from the time of bidding to the time of award of contract. This has an effect on the parameters (Current /Base indices) used in the computation of VoP (Variance on price) and in the case of periodic maintenance, the delay results in further deterioration of the roads which in turn increases the scope of works. The procurement of the supervising consultants after the contractor had been identified was observed in a number of contracts. For example for design and built of Mbarara – Kikagati road, initiation of procurement of the supervising consultant was done one year and two months after securing the Design and Build contractor. In the case of Kawempe-Kafu, the consultant was engaged 4 months after the contractor had mobilized and this resulted in payment of a claim worth US$ 3.2 million for idle plant and equipment.

UNRA should improve on the planning and procurement mechanisms to ensure that activities are implemented timely to avoid loss of funds.

b) Costs of road construction It was noted that there was inadequate cost control of projects characterised by UNRA‟s inability to verify contractors‟ bids because of absence of unit rate breakdown. Due to lack of cost control during tendering and award of contracts, the costs of construction for a number of projects have continued to be high. For design and built contracts there was no basic data for conducting preliminary designs and hence no breakdown of the cost estimates is given. Contractors‟ resources to match the volume of work were not usually provided and this led to unrealistic work programmes that caused delays in completion of works.

The Accounting Officer explained that in a bid to improve on cost control, UNRA had developed a contract management system which among others provides adequate information on unit breakdown. Regarding bid submission all bidders are required to avail the breakdown of their unit rates.

I expressed to the Accounting Officer the need to;

 Exercise more cost control in road constructions by ensuring that unit rate break downs in contractor‟s bids are clearly detailed and available to enable objective and fair evaluation of contractor‟s bids.  Ensure that detailed and accurate work programs and resource inputs are available for all contracts including the design and build.  Assess the performance and adequacy of the newly implemented Contract management system in addressing cost control.

c) Delayed completion of works Whereas UNRA had greatly improved in completing a number of projects within expected durations, there were still some projects which were lagging behind programme. By the time of audit inspection, the Kampala-Entebbe Expressway had lost 9.54% of the project time, Vurra – Arua – Koboko project, Gulu – Atiak, Ishaka – Kagamba and the Kawempe – Kafu overlay were all lagging behind completion targets.

The Accounting Officer explained that delays in completion of works were mostly caused by land acquisition challenges where UNRA has no direct control. However, discussions with relevant authorities such as Ministry of Lands and Housing, Ministry of Finance, Planning and Economic Development and Ministry of Justice were underway to explore lasting solutions for land acquisition.

I advised the Accounting Officer to institute a comprehensive investigation into the causes of delays of completion of works and set up the appropriate remedial measures.

d) Delayed compensations for the Right of Way (RoW) on a number of Projects It has continued to be observed that there are a number of cases where contractors have been asked to commence works when full compensation for the RoW has not been completed. Disputes had emerged and the delayed compensations had caused the works to be equally delayed with additional costs being incurred on the projects in form of prolongation costs, costs on Variation of Prices (VoP) and maintenance of Consultants on site. UNRA was not exerting enough effort in ensuring the compensations disputes that exist are timely resolved and the RoW given to the 33

Contractor. Projects which have suffered such delays included Vurra – Arua – Koboko, Kawempe – Kafu and Ntungamo – Kabale – Katuna.

The Accounting Officer explained that compensation delays were mostly caused by land acquisition challenges where UNRA has no direct control.

I advised the Accounting Officer to ensure that;  Commencement of works by contractors on road projects is undertaken when all compensation of persons on ROW has been carried out where possible.  For future projects, more control should be exercised in the compensation process by early engagement and follow up with relevant authorities such as Ministry of Finance, Planning and Economic Development, Ministry of Lands, Housing and Urban Development and Ministry of Local Government.

e) Substandard works leading to defects A number of defects were observed on projects which were a result of poor workmanship by the contractors; these include asphalt failures, scouring of the stone base and broken culverts. Specifically for asphalt failures noted on Lot 3 Rwentobo – Kabale–Katuna road, and the Kawempe – Kafu Overlay, contractors were still on site and repairs were being done.

Tests conducted on asphalt cores on the above roads as well as Mbarara-Kikagati road, and Ishaka-Kagamba road failed the Indirect Tensile Strength test (ITS) i.e. results showed values lower than the specification of 800kPa. This implies that the pavements are susceptible to: longitudinal cracking, moisture related deterioration, stripping and rutting. Low ITS also leads to micro cracks resulting from early cooling of materials during field placing and compaction.

It was not clear whether the asphalt being used for the on-going repairs of failed sections met the specifications and whether there was no need to replace the entire stretch of which the same asphalt material was used in the first place.

The Accounting Officer explained that all asphalt constructed fully complied with the specifications required. However of late, some distress was experienced along the constructed asphalt sections and the possible causes were under investigations with the view of determining the appropriate remedial measures. Regarding the failed tests, he promised to follow them up with a view to taking the necessary corrective measures. 34

I advised the Accounting Officer to;

 Investigate the causes of Asphalt failures on the specified roads and carry out necessary measures to rectify the defects and ensure the desired quality based on the road design specifications is achieved.  Hold the contractors liable for rectification of defects pursuant to the requirements of the Defects Liability Period clauses.

f) Irregular Payments –(Loss, Likely Loss and Nugatory Expenditure) A review of payment certificates revealed irregularities related to payments for works not executed, payments for defective works and payments that could have been avoided with better procurement planning and contract management. The likely losses will crystallise into losses unless management takes measures to have them recovered. The table below shows the irregular payments noted for the projects with the “likely losses” (UGX.45,315,967,993, USD.1,848,205 and Euro.68,558) losses amount to (UGX.300,279,163 and Euro.66,698) and “nugatory expenditures” amount to (UGX.2,464,934,174 and USD.3,663,761).

Road Contract Irregularity Likely Loss Loss Nugatory

Design and Build of Kampala – Improper application of the VoP formula. $68,558 Entebbe Expressway at USD.479,172,021

Design and Build of Mbarara- Changes in preliminary design vs actual UGX. 25,830,786,648 Kikagati – Murongo Bridge Road constructed pavement yet the costing was based Works from Gravel to Paved on the preliminary design. UNRA disregarded (Bitumen Standard) at PPDA condition for unentitled benefit of this UGX.178,227,299,491 amount to the contractor.

Failure to apply currency correction factor in the UGX.16,999,819,835 computation of VoP.

Upgrading of Vurra – Arua – Poor planning and delay by NEMA in assessing the UGX.1,840,314,546 Koboko – Oraba Rd to Paved impacts on the Rokoze stone quarry leading to (Bitumen) Standard – 92Km by M/s contractor‟s claim. CICO at UGX.138,861,458,345

Asphalt Overlay of Kawempe - Prolongation costs- $3,213,876 Kafu2 at UGX.140,556,490,385 Claim for contractor‟s idle plant and equipment for 4 months following a change of name of the Consultant.

2 The entire project costs worth Shs.140,556,490,385 for the works, 13bn for VoP, US$ 2,937,714.2 plus UGX. 1,538,702,752 for the Consultant is a waste of the taxpayers’ funds since this intervention was not called for. 36

Road Contract Irregularity Likely Loss Loss Nugatory

Interest on delayed payments UGX.624,619,628 & $449,885

Asphalt defects UGX.16,771,245

Reconstruction of the Mbarara – The price of materials, Po used in RoP calculation €154,955 Ntungamo – Kabale – Katuna was not justified. Section of the Northern Corridor Lack of Right of Way-Claim by contractor for lack €66,698 Route Lot No.3 (Km 95+000 – Km of access to site. 150+000) at Euro 65,808,558.09 Defective Asphalt €1,693,250

Civil Works for Upgrading of Ishaka Extra Road width overpaid UGX.214,652,426 – Kagamba road to bituminous standard (35.4Km) at UGX. 112,718,570,492 VoP overpaid due to errors. UGX.161,276,564

Upgrading of Gulu-Atiak Road to Liquidated damages-Contractor not charged UGX.1,928,828,025 Paved Bitumen Standard (74Km) at liquidated damages UGX.89,667,759,288

Periodic Maintenance of Muhanga – Mitres, culvert end structures, stone pitching and UGX.195,93 Kisiizi – Kebisoni Rd (61Km) at gravel not executed 2,1 UGX.2,775,586,000 75

Periodic Maintenance Rukungiri- Overpayment in pipe culverts and gravelling UGX.9,502,

Road Contract Irregularity Likely Loss Loss Nugatory

Mitaano-Kanungu (44Km) at UGX. works. 250 1,965,727,500

Periodic Maintenance of Kazo – Liquidated damages not charged to contractor UGX.163,833,250 Buremba – Nyakaliro (33Km) and Nyakaliro – Kyegegwa (53Km) at UGX.3,276,665,000

Emergency Repair of Karamoja Uncharged claim for non-completion of works UGX.63,935 Flood Damaged Roads: - Package ,25 3; Moroto (Ariamoi) – Lopei – 0 Kotido Road (102Km) at Gravel thickness UGX.12,909 UGX.2,031,200,000 ,48 8

No evidence that the drift works were performed UGX.18,000 by the contractor. ,00 0

Totals $68,558 €66,698 $3,663,761

€1,848,205 UGX.300,279,16 UGX.2,464,934,174 3 UGX.45,315,967,993

I advised the Accounting Officer to:

 Review the IPCs and investigate the irregular payments for works not executed and payments for defective works; in addition enhanced monitoring and supervision of works being executed be undertaken;  Ensure that for the defective works already identified remedial measures should be undertaken by the contractor before works are handed over to ensure the desired quality of works is maintained.  Ensure the likely losses are investigated and appropriate action taken.  Nugatory expenditures should be avoided by improved planning of road activities; UNRA should liaise with all other Government Departments that are partners in the road works like NEMA, MoFPED, MoLH, MoJ etc. to come up with remedial measures for the challenges prevalent in their supporting role to UNRA. g) Variation of prices / revision of prices It has been observed that although UNRA has streamlined VoP clauses in the current contracts, more still needs to be done. Contractors state in their appendix to the tender documents the sources of their inputs and thus indices but during execution of works these sources have changed without changing the source of the indices which should not be allowed. This leads to unrealistic VoPs being assessed.

It was also observed that most Chinese Contractors use CEMAC indices for inputs presumed to be purchased from China. These indices are not easily accessible by the public and thus cannot be relied upon. The process of obtaining these indices is difficult, not transparent and they involve re-basing for each contract which is not an internationally adopted method.

Also noted was the mis-application of the VoP formulae where currency conversion factors should apply to elements whose currency is different from the currency of the formulae of payment. This non-compliance was observed in respect of the Mbarara-Kikagati road where UGX.16,999,819,835 and Kampala-Entebbe Expressway Projects where $68,558 had been over-certified respectively. For

Kagamba-Ishaka road, UGX.161,276,564 was over-certified as a result of errors involving wrong euro exchange rate and only IPC No.10 was reviewed implying the errors could be spread in earlier IPCs. For Mbarara-Ntungamo-Kabale-Katuna Lot 3, €154,955 was over-certified as a result of use of unjustified factor for price of materials at base.

The Accounting Officer explained that a lot of improvements had been made in the VoP provisions and applications under the contracts. Furthermore whereas it is possible to dictate the sources of indices for contracts fully financed by Government of Uganda, for those funded by other stakeholders as World Bank, European Union, ADB, JICA and Islamic Bank, the institutions prefer to leave the sources open to the bidder. As an improvement, UNRA had proposed imposing a cap on VoP under contracts to a maximum of 20% of the contract value. Regarding CEMAC indices, he explained that UNRA was increasingly rejecting sources of indices that cannot easily be accessed and verified.

I advised the Accounting Officer to;

 Exercise more due diligence when evaluating bids and ensure that sources for materials for intended works are accurately detailed and documented as this will be a source of reference by the contractor when acquiring materials.  Task the contractors to detail the sources of indices used in the works contract and ensure they are transparent and readily available to facilitate fair and realistic computation of VoP; CEMAC indices be made readily available and accessible for realistic VoP compensations if they are to be consistently used by the Authority indices from National Bureau of Statistics of the source countries be applied.  Ensure that for contracts where misapplication of the VoP/RoP formulae has been done, corrections be made in upcoming IPCs and recoveries made.

h) Variation of price reconciliations on previously audited Contracts - UGX. 34,575,679,456 Variation of Price was reviewed for 9 previously audited contracts on recommendation by the Parliamentary Public Accounts Committee following disagreements by UNRA. Out of a review of certified IPCs with errors and subsequent joint re-computations with UNRA a total of UGX.34,575,679,456 in VoP errors was established. The table below shows a summary of the reconciled position:

S/No Project Title IPC Value of Work VOP Jointly VoP % Recoverable R Recomputed Amount e (OAG/UNRA) f

1 Fort Portal 45 UGX.217,648,455,701 UGX.77,798,990,19 35.75 UGX.21,577,696,52 Bundibugyo – Lamia 9 2 Road 2 Bugiri – Busia/Malaba 2 UGX.109,388,732,415 UGX.73,370,228,86 67.07 Nil 4 3 Nyakahita – Kazo 31 UGX.133,137,332,394 UGX.25,560,471,58 19.20 UGX.8,106,545,320 Road upgrading 6 project 4 Kazo – Kamwenge 35 UGX.168,337,116,650 UGX.39,628,443,93 23.54 UGX.2,731,287,220 Road upgrading 1 project 5 Soroto – Dokolo road 29 UGX.76,235,532,471 UGX.21,710,252,84 28.48 UGX.(291,296,627) upgrading project 4 6 Dokolo – Lira road 26 UGX.94,749,247,587 UGX.24,601,676,80 25.97 UGX.1,276,255,648 upgrading project 7 7 Reconstruction of 34 €59,164,061.84 €19,194,248.38 32.44 Nil Kampala – Mbarara Northern Corridor; Package C: Nsangi- Kamengo; Lukaya- Masaka & Katonga Bridge. 8 Kabale – Kisoro – 68 UGX.184,572,534,677 UGX.68,925,843,79 37.34 UGX.883,894,746 Bunagana – Kyanika 7

S/No Project Title IPC Value of Work VOP Jointly VoP % Recoverable R Recomputed Amount e (OAG/UNRA) f

road upgrading project 9 Package 1, BRMP Lira 12 UGX.22,018,002,428 UGX.12,882,513,42 58.51 Nil – Karuma – Kamdini 5 Road Total Recoverable VoP UGX.34,575,679,45 6

i) Environmental and social safeguards, and occupation health and safety It was observed that safety gear was in place on most of the project sites but enforcement of their use by workers was lacking. Road safety warning signs during and after constructions were found inadequate and the reason given by UNRA has always been vandalism.

Also noted was grassing of slopes not being taken account of in some contracts like Mbarara-Kikagati-Murongo which will lead to severe erosion of the slopes and thus increases maintenance costs of clearing drains.

For Vurra – Arua – Koboko road, at all bridge locations, walkways were constructed and encroached on the carriageway width which is very likely to cause accidents because of a constriction created at these points despite the carriageway width of 6.5m being maintained. On the same project, costs were incurred due to delays in NEMA approving the use of a stone quarry for project works.

The Accounting officer explained that, social safeguards matters along the roads under review shall continue to be vigorously monitored.

I advised the Accounting Officer to

 Sensitise the communities living alongside the roads on road safety measures to avert vandalism of temporary and permanent road safety and informative signs; UNRA project sociologists during constructions should spear head the sensitisations and work hand-in-hand with Road Committees instituted and governed under the Uganda Road Fund Act.  Ensure that Social Safeguards are taken seriously on road works and for the case of bridge constrictions along Vurra-Arua-Koboko road, speed humps be placed to minimise the chances of accidents. j) Contracts management Weaknesses still exist in the supervision and monitoring of works contracts by UNRA. It was observed that there is frequent change of key consultant‟s staff on some projects for example; Gulu-Atiak and Entebbe Expressway, on some periodic maintenance contracts for example; Muhanga – Kisizi – Kebisoni and Rukungiri – Mitaano – Kanungu, the consultant changed staff without notice but when UNRA learnt about it, the staff were approved retrospectively without penalizing the consultant. This affects project outputs both in terms of quality and time.

Irregular use of PPDA guidance on Jinja- Kamuli road for introduction of Price adjustment Clause on the contract for Kafu- Kawempe road also shows weakness in contract management. The project managers/supervisors lack adequate skills for effective management of contracts.

I have advised the Accounting Officer to effectively implement the skills training programme instituted for project managers/supervisors for proper management of contracts to foster Value for Money in the undertakings. The merit of introduction of VoP on Kawempe – Kafu road contract should be assessed by PPDA and general advice sought for future contracts.

k) Summaries of key findings per project The table below shows the summary of key findings for each of the projects audited for FY 2013/14. The details of corresponding management responses and audit comments are presented in the detailed engineering audit report: 43

S/n Road Contract / Key findings Contractor / Amount 1. Design and Build of  The Capping layer was costed at $32,240,000 almost the same amount as for the sub Kampala – Entebbe base ($33,320,000) yet some sections with strong enough subgrade may not need the Expressway (51.4Km) by capping layer. M/s China Communication  Works running behind schedule with 9.54% of the time lost as of August 2014. Construction Company  Delayed settlement of disputes for RoW compensations hence delaying the contractor Limited (CCCC) at with possible costs in claims. USD.479,172,020.74  Three cracks were observed on the abutment wall for the underpass at Km 5+810.  There was a crack on the wing wall for the underpass at Km 18+345  Enforcement of use of safety gear by workers was lacking.  CEMAC indices from China used cannot be easily accessed and were found to vary widely across projects.  In the Price adjustment foreign currency formula, no currency conversion factor is applied for Reinforcing steel which is purchased locally in Uganda resulting in an over- certification of $68,558.08 2. Design and Build of  Inadequate cost control of the project because of absence of unit rate breakdown and Mbarara-Kikagati – resources to monitor performance. Murongo Bridge Road  Procurement and Contract Management records not poorly kept and some missing. Works from Gravel to  Poor planning in the procurement process characterised by: Paved (Bitumen Standard) i. Placing of the notice for prequalification of D&B contractor before approval of both the procurement method and the prequalification document. by M/s China ii. Absence of key background data in the bid documents issued later, prolonging Communications the procurement period. Construction Company Ltd iii. Initiation of procurement of the supervising consultant one year and two months at UGX.178,227,299,491 after securing the D&B contractor; iv. Direct procurement of the consultant to carry out feasibility studies for collecting the background information hence eliminating competition.  Potential savings of UGX.25,830,786,648 not claimed by UNRA from the contract in line

S/n Road Contract / Key findings Contractor / Amount with PPDA advice, following changes in the preliminary design as compared to actual implemented design.  Un necessary inclusion of UGX.1,926,705,095 in the contract for construction of houses, laboratory and offices for the supervisor‟s representative.  At some locations where stone pitching was done, it was not laid up to the shoulder.  The surface dressing works on access roads was not properly done.  Culvert end wall structures on most access culverts were found to be poorly done with headwalls lower than that of the road surface.  Localised under-scouring of the bases of the side drains.  Some concrete access culverts were found broken.  Premature termination of lined drains in several locations.  No adequate provision for access culverts to private premises especially in Urban areas.  Grassing of slopes was not included in the detailed design and not done.  Overpayment of UGX.16,999,819,835 in VoP due to failure to apply the currency conversion factor. 3 Upgrading of Vurra – Arua  Environmental and social safeguards not properly addressed prior to commencement of – Koboko – Oraba Rd to works causing claims for extension of time with costs of UGX.1,840,314,546. Paved (Bitumen) Standard  Bleeding observed on the Vurra junction and on approaches to speed humps.  Crushed stone base was scouring around headwalls of access culverts. – 92Km by M/s Chongqing  Poor Workmanship of at Km 89+050 for the first seal without repairing damaged primed International Construction base course. Corporation (CICO), China  Extensive cracking of the polymer modified concrete surfacing at Vurra. at UGX.138,861,458,345  The parking lots in Arua town considered for DBST instead of concrete;  Inferior quality mortar was being used for some lined drains.  Some access culverts laid without sealing the joints and not properly aligned.  At Ch.29+691 cross culvert, the pitching stone work protection had failed.  Concrete spalling and honey combs on abutments for bridge at Ch.26+850.  At Km 79+937, the horizontal alignment for the curve was twisted and is likely to cause accidents.  Walkways on bridges were constructed and encroached on the carriageway width and 45

S/n Road Contract / Key findings Contractor / Amount likely to cause accidents unless speed on approaches is checked.  Inadequate warning signs where works were on-going and /or stalled.  The workers crushing stones for pitching works had no safety gear.  Delayed works at Ch.26+850 and Ch.17+500 due to compensation related disputes. This will lead to increased project costs in claims.

4 Asphalt Overlay of  Nugatory expenditure of USD 3,213,876 for idle equipment & plant. Kawempe – Kafu Road  Delayed completion of works by the contractor for over 10 weeks without the employer‟s (166Km) by M/s intention to charge for delayed damages.  Nugatory expenditure of UGX.624,619,628 & USD 449,885 as Interest on delayed EnergoprojektNiskogradnja payment of Interim Certificates. at UGX. 140,556,490,385  Lack of Clearance of addenda no. 1 for service Contract by the Solicitor General.  Irregular use of PPDA guidance on Jinja- Kamuli road for Introduction of Price adjustment Clause resulting in payment of UGX.13,210,451,347 so far.  There was bleeding, hairline cracks & longitudinal cracks in asphalt, and heaving.  Siltation and vegetation growth along the lined drainage channel at Ch.52+820.  Transverse and longitudinal construction joints without warning signs.  At Ch.135+300, the thickness of asphalt was 55mm instead of 65mm specified.  UGX.16,771,245 at stake to be lost due to defective asphalt sections.  Unreliable indices for bitumen in computation of VoP.  Notwithstanding to the above findings, disregarded a recommendation in the FY 2008/09 audit report to defer application of the overlay since underlying layers were weak; more than UGX.140,556,490,385 is to be spent yet the works have shown signs of distress.

S/n Road Contract / Key findings Contractor / Amount 5 Reconstruction of the  Poor record keeping by PDU. Mbarara – Ntungamo –  Deficient detailed breakdown of prices submitted by RCC. Kabale – Katuna Section of  Unjustified inclusion of transport costs, losses, taxes and duties in Po in the application the Northern Corridor of RoP resulting in Euro.154,955 over-certified. Route Lot No.3 (Km  Financial loss of EUR 66,698 cost claim for lack of access to site by the contractor. 95+000 – Km 150+000)  Numerous cracks on the AC on the road section between Km 95+000 and Km 137.5 valued at Euro 1,693,250. The Asphalt failed the ITS tests. by /s Reynolds  Continuous longitudinal joint crack between the RHS & LHS sections of the road. Construction Company (Nig) Ltd at Euro 65,808,558.09 6. Civil Works for Upgrading  Performance security and workmen‟s compensation policy expired, were renewed but no of Ishaka – Kagamba road due diligence was conducted on the documents. to bituminous standard  Non-participation of the Lead partners M/s General Nile Company.  Delayed completion of works due to inadequate equipment, delayed compensation and (35.4Km) by M/s General lack of final designs. Additional supervision cost of USD 1,096,121 and UGX. 36,330,000 Nile Company for Roads is to be incurred. and Bridges / Dott  Inadequate Traffic management/ safety signs. Services Ltd JV at UGX.  UGX.214,652,426 overpaid to the contractor in extra road width.UGX. 112,718,570,492  UGX.161,276,564 overpaid due to errors in VoP computation in IPC No.10 7. Upgrading of Gulu-Atiak  Quantities of some work items like road bed preparation increased by 1,628%, Armco Road to Paved Bitumen culverts by 2,075% raising doubts on the authenticity of the design. Standard (74Km) by M/s  Delayed completion of works and uncharged Liquidated damages of UGX.1,928,828,025 as only provisional extension of time was granted. China Henan International  Several sections along the road between Ch.43+625 and Ch. 64+925 were identified to Cooperation Group Co. Ltd 3 have suffered loss of second seal . (CHICO) at  Stripping and Raveling was observed on sections around Ch 67+345.

3BS/GA/PH/694/2014 of 30th July 2014 47

S/n Road Contract / Key findings Contractor / Amount UGX.89,667,759,288  Bleeding was observed on sections Ch 15+548, Ch 64+055,Ch 67+200 an indication of high bitumen content.  Edge failure was observed at several locations.  No warning signs at active site locations.  No dust pollution control mechanisms were observed at the quarry.  Some access culverts installed were deformed e.g at Ch. 34+614 RHS.  Pavement layer thickness (base and sub-base) revealed that specifications were not being followed and the thicknesses laid were lower than specified in the contract. 8. Periodic Maintenance of  Long procurement period of 11 months delay in award from the scheduled date. Muhanga – Kisiizi –  Change of consultant staff without approval by the client and no penalty given. Kebisoni Rd (61Km) by  The road had developed potholes, corrugations and gullies at various locations.  A number of culvert lines were installed without end structures. M/s Pearl Engineering Co.  There was poor jointing of the culverts e.g. at Ch.2+250 Ltd at UGX.2,775,586,000  The minimum pipe cover for most of the culvert lines was not achieved.  The culvert line at Ch.16+500, had headwalls built with protruding pipes.  Gravel used was of course type with 5% of size greater than 50mm.  Overpayment of UGX.195,932,175 was made for inexistent mitres, culverts and their end structures, stone-pitching and gravelling.

S/n Road Contract / Key findings Contractor / Amount 9. Periodic maintenance  Long procurement period of 5 months delay in award from the scheduled date. Rukungiri-Mitaano-  Lack of invocation of Clause 38.1 of the contract for rate change on item 2.2 which Kanungu (44Km) by M/s increased by over 13,000% and could have led to cost savings in the rate. NICONTRA Limited at  Change of consultant staff without approval by the client and no penalty given. UGX. 1,965,727,500  Excess quantities for grading and gravel provided in the contract causing overpricing by UGX.326,379,405.  The gravel used from Ch 0+000 to Ch 17+200 had course particles.  Road surface defects like potholes, gullies and corrugations were observed.  Siltation in some culverts was observed at Ch 7+300, 7+400, Ch 8+160.  Vegetation overgrowth was observed in the side and mitre drains.  Overpayment of UGX.9,502,250 was made in respect of culverts, and gravelling.

10. Periodic Maintenance of  Long procurement period of 5 months delay in award from the scheduled date. Kazo – Buremba –  Expired Performance Security. Nyakaliro (33Km) and  The delayed completion of works attracting liquidated damages of UGX.163,833,250.  Rutting, water ponding, gullies and localised potholes were observed. Nyakaliro – Kyegegwa  A number of culverts had no end structures & others had cracked. (53Km) by M/s Lexman  At Ch.29+850 of Link 1, the culvert line inlet was completely silted/blocked. Ltd at UGX.3,276,665,000  The side drains were mostly eroded and there was no provision of scour checks.  The gravel wearing course contained more of coarse particles  Item 3.8.2 for culverts increased in quantities by 189% attracting a rate change as per Clause 38.1 and no variation order to the effect was seen.  IPC backup computations could not easily be matched to assess whether items of work paid represented value for money.

S/n Road Contract / Key findings Contractor / Amount 11. Periodic Maintenance of  Delayed procurement process. Ngetta- Apala- Adwari  The road at Ch.1+700 and Ch.11+100 had been narrowed due to erosion of the road, Lot 10 (46Km) by shoulders.  Potholes, gullies and corrugations were observed at several locations. M/s Mostom Company Ltd  The headwalls did not meet the specified 0.6m height above the road surface. at UGX.1,487,119,350  Water ponding was observed at various locations along the road.  Some of the culverts had cracks on the invert e.g.Ch.13+800 and 17+000, some were out of alignment making them susceptible to displacement; Broken culverts are worth UGX.2,104,960.  Many culverts were silted and had vegetation overgrowth at the end structures.  There was a general lack of off-shoots in low lying areas that resulted in ponding. 12. Emergency Repair of  Poor record keeping by PDU Karamoja Flood Damaged  Unjustified estimated cost of UGX. 2,210,858,560 without build-up unit rates. Roads: - Package 3;  Inadequate Control of Cost of the project, bidders are not asked to submit the unit Moroto (Ariamoi) – Lopei – break down/build-up of unit rates for the tender amounts Kotido Road (102Km) by  Noted potholes, depressions, rutting, gulleys, loss of camber and deformations. M/s Omega Construction  Uncharged Shs 63,935,250 for non-completion of works as per SCC 60.1 Limited at  Overpayment of UGX.12,909,488 due to variance between thickness of gravel certified in UGX.2,031,200,000 IPC, and verified thickness by the laboratory staff.  Payment to the contractor for works done by Kotido station on a drift amounting to UGX.18,000,000.

2.2.2 TRANSPORT SECTOR DEVELOPMENT PROJECT (TSDP)

2.2.1 Compliance with the Financing Agreement & GoU Financial Regulations It was observed that management had complied in all material aspects with the financing agreement and GoU financial regulations except for the following matters;

2.2.2 Delayed overall Contract Implementation process It was noted that the contractors of Gulu-Atiak Road, Vurra‐Arua‐Koboko‐Oraba Road and Fort Portal – Kamwenge Road delayed to comply with the following: i) Environmental, health and safety provisions. ii) The supervisors‟ laboratories were not fully equipped. iii) Handing over of sites to contractors. iv) PAP valuations and compensation. v) Approvals from the regulatory authorities (NEMA, UWA). vi) Submission of work plans.

As a result, the projects have been delayed as noted below; Roads Overall delay days 181 Gulu-Atiak months 6.02 days 159 Vurra - Arua – Koboko – Oraba months 5.31 days 317 Fort Portal – Kamwenge months 10.56

Management explained that for all areas where land acquisition was an issue, supplementary valuation reports were prepared working with the office of the Chief Government Valuer. All outstanding compensation cases have been verified and are ready to be paid. They further explained that for the future, the Consultancy Services contract periods have been increased to allow them sufficient time to

address all social and compensation matters during the project implementation period.

Management also explained that with strict adherence to the contractual expectations of all parties, the contractors had been compelled to abide by their safeguards obligations; and with the increased supervision by UNRA and other oversight agencies, there had been noticeable improvement in compliance on all TSDP projects.

I advised management to strengthen the monitoring process throughout the contract implementation to reduce the delay in implementation of projects.

2.2.3 Unrealistic budget allocations During the year under review, TSDP was allocated UGX.6.7 billion for implementation of project activities. However, only UGX.886 million was utilized. The balance of UGX.4.5 billion was spent on other projects without approval from the Ministry of Finance, Planning and Economic Development (MoFPED). Discussions with management revealed a mismatch in funding between budgetary allocation and project activities as a result of uncoordinated planning between UNRA management and MoFPED.

I advised management to always seek prior approval of inter project transfers. UNRA and Ministry of Finance should also critically review the budgetary process and match the project implementation progress before funds allocation and approval.

2.2.4 General Standard of Accounting and Internal Control A review was carried out on the system of accounting and internal control. It was noted that management had instituted adequate controls to manage project resources except for the following matters;

(i) IT general controls Management did not have formalized user access matrix for accounting software. The Chief Accountant instead had IT administrative access rights in Pastel accounting software. This is an indicator of IT system control weakness and as such 52 there is a possibility that the controls would fail to prevent or detect misstatements in the financial statements.

Management promised to revisit the pastel access rights and allocate the super user access rights to the Director, Finance and Accounts.

Management action on the matter is awaited.

(i) Inactive pastel report writer module It was noted that the Pastel report writer module was not being used by management. It was further noted that accounts extracted from the Pastel accounting software did not correspond to budget components and sub components.

It is likely that it would be difficult to correlate expenditures to budget for each components and sub components and also in the preparation, review and understanding of the financial statements by stakeholders.

Management explained that the UNRA Chart of Accounts was based on specific reporting requirements of each project, not on the GoU chart that was too general. The TSDP Chart of Accounts was designed so as to enable UNRA report on individual project components based on the TSDP structure as documented in the Credit and Financing Agreements. They further explained that payments in TSDP were based on Contracts. Financial progress on each contract was reported on through the quarterly Interim Financial Reports (IFRs), where expenditure for each project component was compared with the respective budget/signed contract value.

I advised management to upgrade the current PASTEL Version that will align specific budget heads, to accumulate expenditure incurred and compare the same with the budget of each component and sub components.

(ii) Un-reconciled IFMS allocations/Borrowings UNRA was allocated funds on IFMS system towards land and property (LAP) compensations on TSDP. However, during the review, I noted that part of the funds received from government towards TSDP project LAP compensations as 53 accumulated in the IFMS statement was used to fund other projects as indicated in the table below;

Project Details Outstanding Lending to Borrowings Outstanding Balance at other projects from other Balance at July1, 2014 projects June 30, 2014

(UUGX. ‘000) (UUGX. ‘000) (UUGX. (UUGX. ‘000) ‘000) Outstanding 8,905,228 - - 8,905,228 Balance Kampala-Entebbe - 1,794,807 - 1,794,807 Express Highway CCCC IPC 5 - 2,248,41 - 2,248,418 LPC to other GoU - 529,575 - 529,575 projects Total 8,905,228 4,572,800 - 13,478,028

Follow up of the borrowings was difficult.

It was also noted that management did not have a cumulative position of funds received and could not provide a reconciliation between balances reflected in IFMS statement and receipts recognized in TSDP financial statements. This could lead to misstatement of the project financial statements balances resulting into inaccurate disclosures.

I advised management to periodically reconcile the account to obtain an accurate picture of funds borrowed for different projects and that spent on TSDP.

(iii) Lack of control accounts for advance payment, recoveries and IPC retention from contractors It was noted that UNRA did not maintain control accounts for advance payments, recoveries and IPC retentions from the contractor‟s payment. Lack of control accounts causes reconciliation problems especially the contractors accounts.

Management explained that according to their structure, each road contracts are managed by a technical team which comprised of a Project Engineer, Project Manager and a Director, responsible for all aspects of contract supervision and management, both technical and financial, on behalf of the client and in accordance with the conditions of the contracts. The technical Contract management team is responsible for monitoring physical and financial progress of contracts. Management intends to go full accrual so that the financial management system will be realigned to track advances and recoveries.

I advised management to maintain a control account for all contractors to track advance payments recovery and retentions for proper monitoring and recording in the financial statements.

(iv) Inappropriate supporting documents in respect of payments A sample of invoices verified revealed that some of the accountabilities worth UGX.23,632,667 were found missing. It was also noted that advances paid for activities were debited to expenditure and as a result no track was maintained for pending accountabilities. In the absence of accountabilities, verification of expenditure became difficult.

Management stated that the missing documents had been observed and would ensure that this was not repeated.

I advised management to ensure that copies of accountabilities are kept together with payment vouchers for easy access and review, and also advance paid should be debited to asset and should be expensed only on receipt of accountability. In the meantime, accountability documents should be provided or recoveries effected.

(v) Contra confirmation At the time of writing this report, contra confirmation from UNRA and GoU for IFMS account was not availed for scrutiny. In case of any reconciliation issues, the account balances in the financial statements are likely to be misstated.

Management explained that they had written to the Office of the Accountant General to confirm IFMS payments, however no response has been received from the Accountant General‟s office.

I advised management to continue following up with the Accountant General with a view of obtaining the contra confirmations.

2.2.3 ROAD SECTOR SUPPORT PROJECT 3 (RSSP 3)– NYAKAHITA-KAZO- KAMWENGE FY 2012/2013

2.2.3.1 Compliance with The Financing Agreement And GoU Financial Regulations A review was carried out on the project compliance with the credit agreement provisions and GoU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GoU regulations except in the following matters:

i) Kazo – Kamwenge performance rating below average I noted that the contractor of lot-2 (Kazo – Kamwenge) section did not perform to the expectations by the reporting period and on agreed upon rating. The contractor performed at 47.25% which was below average as indicated in the table below: Activity Expectation Total Score Work progress 40 24.26 Environmental Management 20 8.10 Accommodation of traffic 10 2.70 Engineer‟s facilities 5 3.30 Camp-site/ contractor‟s establishment 10 3.60 Contractor‟s workers‟ welfare 10 4.09 Public Relations 5 1.20 Total 100 47.25

There is a risk that the contractor may not complete the work on the agreed time and undesired quality of work could be delivered.

Management responded that the Contractor later increased his resources and works were substantially completed. They also explained that the quality of the constructed works was good.

I advised Management that explicit intervention and remedial actions should be taken by the technical team at both UNRA and the consultants (project supervisor) to minimize deficiencies in performance on future undertakings. ii) Project Funding The following were observed regarding the RSSP-3 funding:  The Government of Uganda share on the project was agreed at 27.45% and the Bank at 72.55%. However, during the audit, I noted that the Government made payments of UUGX.27,018,723,587 on Lot 1 which was 17% and UUGX.14,743,421,917 which was 18% on Lot 2, out of the agreed 27.45%.  It was also noted that by the reporting period of 30th June 2013, the overall progress of work was at 98% and 67% completed for Lot 1 and Lot 2 respectively. However, payments for the work done for lot 1 totalled to UUGX.28,433,861,682 above completion percentage, and payments for lot 2 amounted to UUGX.28,664,511,351 below the completion percentage. The table below refers.

Lot 1 Lot 2 Nature of contract: Admeasured contract Nature of contract: Admeasured contract Contract amount: 134,385,576,794.65 Contract amount: 167,458,031,180 ADF share: 72.55% ADF share: UGX. 72.55% GoU share: 27.45% GoU share: UGX. 27.45% China China Railway Name of firm: Communications Name of firm: Seventh Group Co. Construction Co. Ltd Ltd Nationality: China Nationality: China Headquarter: Beijing, China Headquarter: Henan, China

Overall estimated Overall estimated progress 98% progress 67% Payments: Payments: 57

Lot 1 Lot 2 Donor 133,113,003,354 83% Donor 68,788,947,622 82% GoU 27,018,723,587 17% Gou 14,743,421,917 18% 160,131,726,941 83,532,369,539

Expected payment 131,697,8 112,196,8 as of 30 June 2013 65,259 80,891 Computed difference 28,433,861,682 (28,664,511,351)

Funding inconsistencies may negatively impact on contract performance.

Management explained that Government‟s failure to fully meet its contribution to the project was due to an inadequate budget. However, all the outstanding payments are now being settled.

Management further explained that the observed increases were a result of cost for variation of price (VoP) that due to inflation, increased beyond the amount that was originally estimated in the contract. At contract signature, VoP costs were estimated at 10% of the value of the works but at the time of audit, the proportion had increased to 26% of value of the works arising out of increases in values due to price indices that are applied to the price adjustment formula. Management also indicated that an addendum that is subject to the Bank‟s approval has been prepared to revise the amount for variation of price and increase the contract price accordingly.

I await the results of management action on the variation of price. iii) Inter-Project transfers At the start of the year under review, the project had a net payables position of UGX.14,444,650,464. During the year, the project borrowed additional UGX.24,391,784,285 from other Projects and also transferred UGX.5,524,288,068 to other projects creating an overall payables position of UGX.33,312,146,681 at the end of the financial year.

The inter project borrowings may negatively affect implementation arrangement of the project.

I advised management to minimize the inter project transfers as these could disrupt the implementation of project activities.

2.2.3.2 General Standard Of Accounting And Internal Control A review was carried out on the financial management system of the project and it was noted that management had put in place adequate controls to manage project resources.

2.2.4 THE UGANDA ROAD FUND

2.2.4.1 Outstanding funds recoverable from implementing agencies

During the year under review, a number of implementing agencies had outstanding amounts totalling to UGX.1,860,291,838 whose activities had not been undertaken as planned and the funds that were to be recovered and refunded back to the Uganda Road Fund. The unutilised amounts were a result of funds garnished by court orders, garnished by Uganda Revenue Authority, inaccurate measurements and/or overpayments to contractors, ineligible expenditure and unaccounted for funds among others. The table below provides the details of unutilised amounts that were outstanding as at 30th June 2014:

Details Amount (UGX.) Road maintenance funds garnished by court orders 696,876,622 Funds garnished by URA 134,336,390 Inaccurate measurement of works/overpayments to 243,052,170 contractors Ineligible expenditure 8,000,000 Unremitted to Town Council by District 18,000,000 Funds not remitted to Road Sector Account by Agencies 31,076,554 Unaccounted funds 728,950,102 Total 1,860,291,838

Some of these funds have been outstanding for more than one year. The summary table below shows the period for which the funds have been outstanding. Recovery of the funds has been delayed.

No Amount (UGX.) Outstanding since Number of Years 1 57,065,478 30th June 2010 5 2 84,093,597 30th June 2011 4 3 991,393,422 30th June 2012 3 4 727,739,341 30th June 2014 1 Total 1,860,291,838

Management explained that they have pursued recovery of the funds from the affected implementing agencies with limited success. They have however referred the matter to Ministry of Local Government being the supervising authority over the defaulting Local Governments. Management further indicated that the matter will be pursued to ensure quick recovery of the funds by the agencies during the financial year 2014/15.

I await the outcome of the management efforts.

2.2.4.2 Sources of funding

The Road Fund Act provides for various sources of funding to the fund including donations, Road user-charges and others. However during the review, I noted that appropriations by Parliament was the only source of funding to the fund during the year. I explained to management that failure to mobilize funding for the URF poses a big challenge for the successful maintenance of roads, the objective for which the fund was established.

In response, the Accounting Officer explained that the URF did not realize funds from its various sources as listed in Section 21 of the URF Act because an amendment to the Uganda Revenue Authority (URA) Act to enable the fund collect its revenues has not been done.

I advised management to liaise with the relevant authority with a view of fulfilling the URF mandate of having a fund and collecting its revenue.

2.2.4.3 Lack of Enabling Regulations

URF was created in 2008 by an Act of Parliament. However six years later; I noted that the fund secretariat does not have enabling policies. These include the Fund Regulations, Risk Management and the Training Policy.

During the year, UGX.216,733,443 was spent on staff training without a training Policy to guide its management on staff selection and trainings. I explained to management that there is a risk that irrelevant training courses could be undertaken that may not add value to the entity resulting into wasteful expenditure and or misuse of funds.

In his response, the Accounting Officer explained that the above mentioned policies are in a draft form awaiting the Minister to gazette. Once the approval is done, management will assign a dedicated officer to manage the functions.

I advised management to have the manuals approved and operational.

2.2.4.4 Delayed Release of Funds to Designated Agencies

During the review, it was noted that the first quarter release of funds from Ministry of Finance, Planning and Economic Development (MoFPED) was received on the 12th August 2013 however; URF took over three months to release these funds to the affected 7 designated agencies as listed below. As a result, the agencies closed the quarter with these balances.

Funds Funds No of Agency EFT No Amount received by when months UGX. URF on. released to delayed the DAs 1 12/08/2013 07/11/2013 over 3 months Moroto District 6579 60,375,000

Funds Funds No of Agency EFT No Amount received by when months UGX. URF on. released to delayed the DAs 2 12/08/2013 07/11/2013 over 3 Ntungamo months District 6587 169,090,635 3 12/08/2013 07/11/2013 over 3 Sembabule months District. 6592 108,350,606 4 12/08/2013 07/11/2013 over 3 months Kole District 6648 79,105,355 5 12/08/2013 27/11/2013 over 3 months Lamwo District 6626 59,935,750 6 12/08/2013 27/11/2013 over 3 months Zombo District 6628 41,544,431 7 12/08/2013 27/11/2013 over 3 months Agago District 6652 165,098,501 TOTAL 683,500,278

I explained to management that delayed release of funds to designated agencies affects implementation of the Annual Road Maintenance Programmes.

In response, the Accounting Officer explained that the funds could not be released in time as the affected designated agencies had not updated their bank accounts despite management‟s effort to inform the agencies to confirm their bank accounts.

I advised management to always endeavour to release road maintenance funds on a timely basis.

2.2.4.5 Human Resource Issues

(a) Vacant positions

A review of the approved staff establishment of 31 posts showed that only 22 posts representing 71% had been filled by the year-end leaving nine (9) vacant posts as indicated in the table below. It was noted that at the time of this report, six (6) posts had been advertised, however the recruitment process had stalled.

S/N Position Established No. Filled Vacant 1. Internal Auditor 1 0 1 2. Head PDU 1 0 1 3. PDU Assistant 1 0 1 4. Manager corporate services 1 0 1 5. Manager policy & strategy 1 0 1 6. Human Resource Officer 1 0 1 7. System Administrator 1 0 1 8. Policy & Strategy officer 1 1 0 1 9. Policy & Strategy officer 2 1 0 1 Total 9

I explained to management that lack of such essential staff may negatively impact on the Fund's performance and service delivery.

In response, the Accounting Officer explained that the delay in filling vacant positions arose because the selection process for the positions of Head PDU, PDU Assistant, and System Administrator flopped when the selected staff turned down the offers due to low pay and the on-going selection process for Manager Policy and Strategy; Manager Corporate Services, Head PDU, and Internal Auditor was delayed because the recruitment process was to be outsourced to a consultant who was not in place at the time of advertising for these positions. However, the consultant was selected and has commenced on the recruitment process.

I advised management to expedite the recruitment process and have the vacant posts filled.

(b) Staff turnover It was observed that 5 members of staff resigned their positions or offered not to have their contracts renewed

I explained to management that the high rate of staff turnover impacts negatively on service delivery and the image of the entity. 63

In response, the Accounting Officer explained that staff have previously raised concern about remuneration and welfare in the annual staff retreat held in December 2011. Staff retention has become a challenge because URF„s remuneration is no longer competitive on the market. The Board is addressing the issue by reviewing the structure and remuneration of staff with effect from next financial year.

I advised management to address the above challenge.

2.3 JUSTICE LAW AND ORDER SECTOR

2.3.1 JUDICIAL SERVICE COMMISSION

2.3.1 Mischarge of Expenditure

The Parliament of Uganda appropriates funds annually in accordance with the needs of each MDA. This appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account and MTEF codes.

A review of the Commission‟s payments revealed that there were mischarges under various codes worth UGX.86,527,567 during the year under review. These payments were made without requisite authority. Although there was a tremendous reduction in the mischarged expenditure over the previous two financial years, the practice undermines the budgeting process and the intentions of the appropriating authority. The practice also leads to financial misreporting.

I advised management to streamline the budgeting process and ensure that funds are allocated to budget lines in accordance with priorities. Any reallocations should be undertaken in accordance with the regulations.

2.3.2 Fuel Payments/deposits unaccounted for

UGX.95,350,296 was deposited with a fuel company to supply fuel to the Commission. However, the funds remained unaccounted for as the monthly fuel 64

consumption statements were not maintained and reconciliations not undertaken. In absence of the fuel reconciliation and consumption statements, it was not possible to ascertain how the fuel was consumed and utilised. Activity reports linking to the fuel usage were not also availed for audit review. This poses a risk of misuse of Government fuel.

I advised the Accounting Officer to ensure that fuel accountabilities are obtained and kept for future reference.

2.3.3 Case Backlogs

The Judicial Service Commission (JSC) is mandated under Article 147(a) to receive people‟s complaints and recommendations concerning the Judiciary and the administration of justice and generally to act as a link between the people and the judiciary. Upon receipt of public complaints, the Disciplinary Committee for judges is expected to immediately hear such cases for administrative action.

However, as noted in the previous audit report, the Commission has been slow in handling cases brought against judicial officers. At the closure of the previous year, the figure for case backlog stood at 788.

The Commission registered 187 cases, bringing the total number of cases to 975 but only 226 cases were handled and cleared. The un-cleared number of cases at the close of the financial year stood at 749. Table below refers:

Cases carried forward Cases registered Cases concluded in Cases carried from 2012/2013 in 2013/2014 2013/2014 forward to 2014/2015 788 187 226 749

Delays in clearing case backlog impair the timely administration of justice.

The Accounting Officer explained that the Chairperson of the Commission is the only full time member while the other members are part time. The part time status of the Commission members undermines its ability to address day to day demands connected to the Commission‟s mandate. This has restrained the Commission from 65

sitting frequently and deal with the disciplinary matters. The Accounting Officer also explained that funding allocated to the Disciplinary Committee activities is grossly inadequate and this greatly impacts on its ability to investigate, hear and conclude cases in time.

I advised the Accounting Officer to engage the relevant stakeholders to consider changing the Commission status to full time. Funding of the Commission should be improved to enable the Commission deliver its mandate.

2.3.4 Inability to distribute civic education materials

The Judicial Service Commission is mandated by the Constitution of the Republic of Uganda to carry out civic education on law and administration of Justice to the public. To implement the mandate, the Commission printed 3,384 courts hierarchy charts and citizens‟ hand books on law and administration of justice in Uganda in Luganda, English and Swahili worth UGX.29,816,159. These civic education materials were intended to benefit all citizens regardless of their legal background.

A visit at the stores in November 2014 revealed that 1502 books were still lying in the stores thereby defeating the intended objective. Details are shown on table below:

Item Cost Quantity Quantity Balance (UGX.) Procured issued out in stores Citizens‟ Hand Book in 24,677,968 2000 944 1056 Luganda Citizens‟ Hand Book in 4,738,191 384 88 296 Swahili Courts Hierarchy charts 400,000 1000 850 150 Total 29,816,159 3384 1882 1502

The Accounting Officer responded that the Commission budgeted for dissemination of civic education materials under JLOS Secretariate but no funds were provided by

the Secretariat to undertake the activity. As management, they came up with a decision to distribute whenever the JSC staff are carrying out other field activities.

I advised the Accounting Officer to speed up the distribution of the procured learning materials to the intended beneficiaries with a view of fulfilling the Commission‟s mandate.

2.3.5 Staffing Gaps

A review of the staff list against the organizational structure revealed that 10 posts were still vacant. These included the position of the Under Secretary; Registrar; Deputy Registrar (PRI); Principal Legal Officer; Senior Assistant Records Officer; three legal clerks; and two Personal Secretaries.

Lack of staff in vital positions of the organization affects the performance and overall achievement of organization‟s goals and objectives due to work overload.

Management explained that the posts of Registrar and Deputy Registrar have been re-advertised by the Public Service Commission. As for the common six (6) cadre staff, the Commission has been in constant touch with the Ministry of Public Service to ensure that these posts are filled.

I await the results of management efforts on the matter.

2.3.6 Understaffed Internal Audit Unit

It was noted that the organization structure provides for only one Internal Auditor to carry out all internal roles and responsibilities for the entire Commission. Inadequate staffing in the Internal Audit unit may result into lack of capacity by the existing internal auditor to carry out the significant monitoring role. Consequently, the efficiency and effectiveness of operations may decline due to inadequate evaluation of control systems.

The Accounting Officer responded that the Commission‟s Internal Audit Unit is under-staffed, however, management is in the process of restructuring the Internal Audit department with a view of getting additional staff in consultation with the

Ministry of Public Service as well as that of Finance, Planning and Economic Development.

I advised the Accounting Officer to seek support from relevant authorities with a view of restructuring the existing organization structure to provide for an adequate Internal Audit staff.

2.3.7 Absence of Risk Management Policy

Best practice requires that entity management has a structured process for managing risks. By applying a structured process, key risks can be identified and ways of mitigating them sought to avoid negative impact on the organization operations. Furthermore, the Internal Audit Charter, November 2008, section 3.4 requires the Internal Audit to conduct risk management audits to ascertain whether or not management has set procedures for risk identification and management including fraud and money laundering.

However, it was noted that despite my highlight of this issue in the previous year audit, the Commission has not yet put in place a well-documented policy for managing risk.

The Accounting Officer explained that they have been working closely with the Internal Audit Unit to collectively identify likely risks based on audits conducted and the findings reported to management for necessary action to ensure minimum occurrence of the likely risks.

I advised the Accounting Officer to develop a risk management strategy to monitor and investigate the risks and their likelihood of occurrence.

2.3.8 Budget Performance

Review of the Commission‟s budget performance for the year revealed that the approved budget for the financial year 2013/2014 stood at UGX.2,293,207,000. It was however noted that, only UGX.1,989,847,545 was received (representing about 86.8% of the total budget), this resulted into a shortfall of UGX.303,359,455. The shortfall in the releases partly affected implementation of planned activities. It was

68 noted that some planned key activities were not fully executed, such activities included; printing and dissemination of citizens‟ hand books as indicated in 7.4 above, handling of disciplinary cases as indicated in 7.3 above and finalizing with the court investigations as indicated in the table below.

Activities Details of activities not undertaken Court investigations Out of the 24 planned investigation trips, 16 trips were carried out in various districts. The institution still faces human resource and transport challenges which affect its planned performance targets. Printing of Citizen‟s Handbooks Out of planned 4000 copies of the Citizen‟s handbooks, the Commission printed 2000 copies of the Citizen‟s handbooks in Luganda, 1000 copies in English and 384 copies in Kiswahili. This represents 84.6% performance. The remaining 15.4% is attributed to inflation.

Failure to implement activities as planned impacted on the Commission‟s achievement of its objectives.

The Accounting Officer explained that the Commission did not have control over funds disbursements.

I advised the Accounting Officer to liaise with the relevant authorities with a view of seeking for adequate funding to ensure that activities not implemented are undertaken in accordance with work plans.

2.3.2 UGANDA LAW REFORM COMMISSION

2.3.2.1 Outstanding Payables

A review of the Statement of Financial Position revealed outstanding payables of UGX.488,767,967 broken down into: trade creditors UGX.314,507,781; sundry creditors UGX.172,391,288; and Withholding tax UGX.1,868,898. Outstanding arrears are manifestation of non-compliance with the requirement of the Commitment Control System. During the year under review, only UGX.711,001 worth of arrears were cleared from the outstanding arrears brought forward from the previous year.

Accumulation of creditors may lead to loss of reputation, litigation and/or payment of extra costs above the credit amounts.

The Accounting Officer explained that UGX.314,507,781 relates to staff contributions to NSSF not remitted for the period 1996 to February 2008. The payable arose out of a suit filed by NSSF against GoU. A consent judgment was entered into between the Attorney General and NSSF. Management is however in the process of engaging the Solicitor General on when the arrears will be paid. The Accounting Officer further explained that UGX.172,391,288 arose out of office rent arrears for the financial year 2011/12, because the landlord increased the rent late in the course of the year after the budget process had been concluded. The rent arrears will be cleared in the financial year 2014/15.

I advised the Accounting Officer to follow up with the relevant authorities to have the arrears cleared.

2.3.2.2 Mischarge of Expenditure - UGX.77,415,412

It was however noted that during the year under review, there were mischarges on various codes worth UGX.77,415,412 without the requisite authority. The practice not only undermines the budgeting process and the intentions of the appropriating authority but also leads to financial misreporting.

The Accounting Officer explained that mischarges usually arise due to constraints within the budget. Some expenditure pressures arise within the quarter when funds have already been realized. The Accounting Officer further indicated that they are committed to working towards eradicating the practice altogether as they strengthen their budgeting and monitoring processes.

I advised that the Accounting Officer to streamline the budgeting process and ensure that funds are allocated to budget lines in accordance with priorities. Any reallocations should be undertaken in accordance with the regulations.

2.3.2.3 Unaccounted for fuel - UGX.63,000,000:

The Commission operated the Advantage Card System with Standard Chartered bank where the funds for fuel were disbursed to the Commission fuel account for loading onto individual beneficiary officers‟ advantage cards.

However, no fuel register was maintained to record the use of the fuel. Besides, no accountability in form of general receipts, monthly fuel reconciliations and fuel consumption statements were provided for my review.

I advised that the Accounting Officer to put in place a fuel register and obtain fuel statements for future use and reference.

2.3.2.4 Budget Performance:

Review of the Commission‟s budget performance for the year revealed that the approved budget for the financial year 2013/2014 stood at UGX.7,420,535,812. Out of the amount, UGX.6,456,051,515 was received (representing about 87% of the total budget) resulting into a shortfall of UGX.964,484,297. It was noted that some key planned for activities were not fully executed by the Commission. These included reform and simplification of laws such as; the Employment Act, and 71

Witness Protection Act, and revision of laws such as; the Civil Procedure laws, Evidence Act, Medical Practitioners Act, Proceeds of Crime Act, Succession laws. Furthermore the Commission did not quantify what they expected to achieve and how much performance was realized. In absence of performance milestones, I was not able to assess with certainty the actual output out of the appropriation funds.

The Accounting Officer explained that as far as the review of subsidiary laws, preparation and submission of the final revision report (Principal laws) to the Attorney General are concerned, a delay in submission was encountered because at the time of submission, a series of unforeseen circumstances arose which required a fresh round of editorial work on the draft revised Principal laws of Uganda.

I advised the Accounting Officer to ensure that planning figures are pegged to particular items and to report on the actual outcomes in future. I also advised the Accounting Officer to ensure that planned for activities are completed to enable the Commission deliver its mandate.

2.3.3 UGANDA HUMAN RIGHTS COMMISSION

2.3.3.1 Case Backlogs

The Uganda Human Rights Commission (UHRC) is mandated under Article 52 (1) and 53 of the Constitution of the Republic of Uganda to manage complaints related to human rights abuse as one of its core activities. The Commission fulfils this function through complaints receipt, registration, investigation, mediation, counselling and the tribunal process.

A review of the Commission‟s performance reports revealed that some cases registered before and during the period were not handled, thereby resulting into case backlogs. At the closure of the previous year, the outstanding case backlog stood at 1067. Registered cases during the year were 788 bringing the total number of complaints to 1855, out of which only 770 (41.5%) cases were fully investigated and ready for further action, including tribunal proceedings. The un- cleared complaints at the year-end were 1085 representing an under performance of 58.5%. The Table below refers: 72

Cases brought Cases Cases Cases carried forward from registered in concluded in forward to 2012/2013 2013/2014 2013/2014 2014/2015 1067 788 770 1085

According to the annual reports, the delays in handling complaints conclusively were attributed to the following factors:  Failure by the respondents to locate some of their witnesses thereby slowing down the tribunal process.  Bureaucratic procedures at the Ministry of Justice and Constitutional Affairs which delays the process of settling complaints amicably.  Absence of some regional Offices for Ministry of Justice and Constitutional Affairs (MoJCA) in certain regions like Moroto, Fort portal, Masaka and Jinja to expeditiously handle complaints.  Failure to attend tribunal hearings by Attorney General‟s representatives yet the Attorney General is the respondent in most of the matters before the tribunal.  Inadequate finances to conduct frequent investigations  Hardships in locating witnesses who change the registered addresses  Files pending conclusion as a result of lack of information from some implicated respondents and other stakeholders (experts).  One of the Members of the Commission resigned to take up another assignment in another government organization and it took long for the position to be filled. This affected the tribunal process.

Delays in clearing case backlog impair the timely administration of justice.

I advised the Accounting Officer to consider ways of addressing the challenges in collaboration with other stakeholders like the JLOS Programme under MOJCA with a view of reducing the registered complaints.

2.3.3.2 Budget Performance

During the year, the approved budget for the Commission amounted to UGX.9,800,407,297. However, by the close of the financial year, UGX.9,664,910,526 had been received (representing 98.7% of the budget). A review of the Commission‟s performance as per the 2013/14 Ministerial policy Statement and semi-annual reports revealed that some planned activities had not been done, while others were not undertaken at all. The table below refers:

Planned Key Activity Expected Output Actual output Variance Human Rights Education Production and 3,000 copies of the Nil 100% under distribution of 3,000 quarterly „Your absorption. copies of the quarterly Rights Magazine‟ „Your Rights Magazine‟. produced and distributed. Develop, translate and 5,000 Brochures 1,000 Brochures 80% under print 5,000 brochures. developed, developed, absorption. translated and translated and printed. printed.

Enhanced focus on economic, social and cultural rights Visiting Health units. 495 health units 225 health units (59%) under inspected. inspected. absorption.

The Accounting Officer explained that the activities were not implemented due to lack of sufficient funds.

I advised the Accounting Officer to always come up with realistic plans with a view of delivering its mandate.

2.3.4 UGANDA REGISTRATION SERVICES BUREAU OPERATIONS

2.3.4.1 Mischarged expenditure

A review of the Bureau‟s payments revealed that there were mischarges under various codes worth UGX. 239,197,478 during the year. The payments were made without requisite authority. The practice undermines the budgeting process and the intentions of the appropriating authority. The practice also leads to financial misreporting.

The Accounting Officer explained that the funds were utilized on a day to day operational activities like staff facilitation allowances, assorted stationery and advertising, and this was due to financial constraints faced because of low MTEFs. Management however promised to improve the budgeting process.

I await the results of management commitment.

2.3.4.2 Absence of Capital Development Budget

It was observed that the Bureau has operated without a capital development budget allocation since inception. Because of lack of a budget, the activities earmarked as priorities were not funded during the year. These activities had been budgeted at UGX.12,180,000,000 as indicated in the table below:

Activity Amount Budgeted (UGX.) Automation of Business Registry 10,372,000,000 Operationalization of four regional offices 710,000,000 Digitization of Civil Registry 320,000,000 Securitization of Certificates 244,000,000

Activity Amount Budgeted (UGX.) Printing and distribution of registration materials 534,000,000 Total 12,180,000,000

This gap has affected the entity‟s capacity to fund its capital development initiatives and will in turn affect the implementation of its strategic plan.

The Accounting Officer responded that they have and will continue to engage the Ministry of Finance, Planning and Economic Development for increased MTEF in order to address this problem and other funding gaps.

I await the results of the management efforts.

2.3.5 UGANDA REGISTRATION SERVICES BUREAU – LIQUIDATION ACCOUNT

2.3.5.1 Outstanding receivables

The receivables towards the liquidation funds as at 30th June 2014 stood at UGX.8,177,490,354. This comprised of funds payable to the office of the official receiver by companies in liquidation and funds borrowed by other agencies from the liquidation funds as shown in the table below:

Debtor Amount (UGX.) Ministry of Justice and Constitutional affairs 3,353,802,640 UEB to PMB 58,125,725 Ministry of Defence 1,866,600,000 UEGCL 1,134,989,464 MOJCA debt on behalf of Mwesigwa (deed of 124,432,500 assignment) Kenya Railways debt 1,582,215,752 Tashobya debt 57,324,273 Total 8,177,490,354

The continued holding of these funds by the debtors increases the risk of the debts turning into bad debts.

The Accounting Officer responded that management has endeavoured to make all efforts including engaging the Ministry of Finance – Privatization Unit to enable recovery of the debts. Management is also engaging the Solicitor General to recover/demand the debt from Kenya Railways. Further, management explained that they had also held several meetings with UEGCL management to have the outstanding debt recovered. All efforts are geared toward the recovery of the receivables.

I await the results of management‟s effort.

2.3.6 UGANDA LAND COMMISSION

2.3.6.1 Outstanding property rates Payables worth UGX.7,163,296,958 remained outstanding in property rates as at the end of the financial year. I noted that the creditors have tremendously increased by UGX.4,320,436,341 (60%) from UGX.2,842,860,617 of the previous financial year. There is a possibility that the payables will soon become unmanageable and the Commission could face litigation challenges for non- payment.

Management explained that the payables pertain to the property rate bills which accrue every year for which ULC is committed to pay by Statute. Unfortunately, the budget provision cannot cater for these bills and thus they accumulate every year. The Commission has on several occasions written to MoFPED on this matter but to no avail.

I urged management to continue pursuing this matter with MoFPED for adequate funding to settle the obligation.

2.3.6.2 Budget performance

a) Revenue performance

I noted that the Commission budgeted to receive UGX.15,994,657,000 however, UGX.15,304,293,189 (95.7%) was received leaving UGX.690,363,811(4.3%) unrealized. Failure to realise the set targets translates into underperformance which in turn affects service delivery.

Management indicated that the revenue under performance was mainly attributed to a reduction in the Leasehold applications because NTR is collected after applications are approved and considered for offer. However, due to the suspension of ULC Board by the Minister, there was a reduction in Commission meetings in which these Leasehold applications are considered.

I advised management to liaise with the responsible authorities and ensure that the suspension of the Uganda Land Commission (ULC) Board is resolved.

b) Un-completed planned activities for year

A review of the Commission quarterly performance reports revealed that the following activities were not fully implemented during the financial year despite the availability of funds;

Details of Performance Audit Management activity Qty Qty Varia- Remarks. Responses eAchieved nce d Lease 600 309 291 Managemen The commission applications t should processed 726 leases on that were explain the Government land for being cause of investments, housing processed variance. development and farming but issued out only 309. 417 leases were caught up by the Hon. Minister of lands directive to the Commission to stay 78

Details of Performance Audit Management activity Qty Qty Varia- Remarks. Responses eAchieved nce d transactions on Government land. Government 60 10 50 Managemen The Commission land titles t should approved processing of that were to explain the 48 requests for titling be cause of Government land. 10 processed. underperfor were fully processed and mance. the rest are at different stages of completion. This is attributed to delays in survey works which are a responsibility of the respective Government land user MDAs Bonafide 1,750 0 1,750 Managemen Consideration and occupants to t should approval of the Land be registered explain the Fund Regulations which failure to were to guide the perform as process of registering planned. bonafide occupants delayed in cabinet and the funds were reallocated and used to acquire more hectares of land. Hectares of 4,000 3835 165 Managemen 4000 ha were targeted land to be t should and 3834.764 Ha were acquired to explain the achieved due to secure cause of variation between the bonafide underperfor planned and actual occupants mance. compensation value as per the Chief Government valuer‟s. Uganda Land The first draft of Uganda Managemen Consultations on the bill Commission Land Commission Bill was t should are still on going. Bill to be developed and consultations explain the drafted and are still on going failure to stakeholders complete to be the consulted on consultation the draft Bill. exercise. To develop Procured a consultancy firm Managemen Consultations still on electronic to develop the electronic data t should going. data base base management system explain the 79

Details of Performance Audit Management activity Qty Qty Varia- Remarks. Responses eAchieved nce d management cause of system for delays. Government land inventory Certificate of Draft of ULC Bill was Managemen financial developed and consultations t should The ULC Bill was drafted implication are still going on explain the and consultations are for ULC Bill to cause of still on going. be secured failure to from MoFPED complete the activity as planned.

Failure to complete the planned activities in the scheduled period may impact negatively on the general performance of the Commission and could lead to failure to fulfil the entity‟s mandate.

I urged management to always ensure that all funded activities are undertaken.

2.3.6.3 Un-updated government land register

Management of the Commission failed to update a register of all land titles which were processed and acquired for Government institutions contrary to Section 49 of the Land (Amended) Act, 2004. I further noted that management has not come up with a Register of Government Institutions with Land that is not surveyed and therefore not titled. Cases of un-surveyed and untitled land were noted in NARO, Uganda Police, Universities and Ministry of Lands among others. This exposes government land to risk of loss through land encroachment.

Management explained that they have a fully compiled Inventory of Government Land though not fully updated. Management has requested for funding from MoFPED to complete this exercise.

I advised management to expedite the process of establishing a well updated inventory of Government Land.

2.3.6.4 Dormant bank accounts

The Commission has five (5) bank accounts all held in Bank of Uganda however, these accounts remained open yet they were dormant for the whole financial year under review. Details in the table below: I explained to management that failure to close dormant bank accounts is an avenue for irregular transactions.

Account No Account Title 1 003560068000001 Uganda Land Commission Salary Account 2 003560078000001 Uganda Land Commission Cash 3 003560168000001 Uganda Land Commission –NTR 4 003560308000001 Uganda Land Commission Forex Transfer A/C 5 003560318000001 Uganda Land Commission LC A/C

Management explained that they have written to MoFPED to have the accounts closed however no action has been taken yet.

I advised management to follow up the matter with the Accountant General and have the dormant accounts closed.

2.3.6.5 Failure to maintain a land fund bank account

Management of Uganda Land Commission did not keep a separate bank account i.e. “the land fund account” contrary to the requirements of the Land (Amendment) Act. Failure to maintain the account implied that the activities planned under the land fund especially compensations and land acquisitions may not be achieved.

Management explained that Government has not fully operationalized the Land Fund as per the requirements of the Land Act but indicated that the land fund regulations, 2014 - Statutory Instrument Supplement No.6. will be used by Cabinet to direct MoFPED to open a separate account for the Land Fund and allocate it Funds.

I advised management to follow up the matter with the relevant authorities to ensure that the account is opened and operationalized.

2.4 PUBLIC SECTOR MANAGEMENT

2.4.1 PUBLIC SERVICE COMMISSION

2.4.1.1 Mischarge of expenditure

The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Commission‟s expenditures revealed that the entity charged wrong expenditure codes to a tune of UGX.512,592,443. This constituted 13% of total expenditure of the Commission. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to misreporting.

Management explained that they have been rationalizing the use of funds released since the funds are not sufficient. They further explained that they have always found it difficult to effect payments based on items given that most activities are process activities hence ending up charging various items according to Commission priorities.

I advised the Accounting Officer to streamline the budget process to ensure that sufficient funds are allocated to each account. Authority should be sought for any reallocations. 2.4.1.2 Stationery not taken on charge –UGX.21,760,585

Treasury Accounting Instructions (TAI) Part 2 Chap.2 Section 203 Stores requires that all store receipts should be posted in the ledger as soon as they have been examined in accordance with the receiving procedure.

It was observed that stationery amounting to UGX.21,760,585 procured by the Commission was not supported by delivery notes, goods received notes, invoices 82

and acknowledgement receipts and there were no alternative procedures to verify delivery of the stationery. As a result I could not confirm that the stationery items were procured and taken on charge as required by the regulations.

Management explained that the Commission does not have substantively appointed stores staff but has stepped up close supervision in this area to streamline and enforce stores control measures. The office supervisor has been assigned this responsibility in the meantime.

I advised management to ensure compliance with the Treasury Accounting Instructions.

2.4.1.3 Outstanding domestic arrears

UGX.73,540,596 due to various suppliers remained outstanding for the fourth year running, i.e. since 2009/2010. The bigger portion of the arrears amounting to UGX.66,955,379 relate to UMEME being unpaid electricity bills. The Commission risks litigation from the suppliers which may lead to losses in form of damages and interest awards by courts.

Management explained that they have followed up the matter with Ministry of Finance, Planning and Economic Development and as a result, a provision of UGX.13,628,000 for the arrears in the budget for financial year 2014/2015 was made. Management further explained that the balance is progressively being reduced through deductions made by UMEME on the prepaid accounts at the rate of 30% per payment.

I advised management to continue liaising with Ministry of Finance, Planning and Economic Development and have the arrears cleared.

2.4.1.4 Budget performance

Public Finance and Accountability Regulations 2.10(b) entrusts the Accounting Officer with ensuring that all controls such as those contained in the approved estimates and warrants are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort 83

should be made to achieve the agreed objectives or targets of the entity within the availed resources.

A review of the budget performance for the year revealed that some targets were not achieved despite release of funds for the vote functions. Details are as below. The inadequate performance may hamper service delivery and the appropriating authority‟s objectives may not have been met.

Vote Item Quantity Amount Amount Quantity Remarks function description budgeted released output (UGX.’00 (UGX.’00 0) 0)

135206 Guidance Adverts to 166,000 166,000 Released Despite funding, and be one advert only Monitoring- conducted “PSC Internal UGX.17,200,000 Advertiseme by PSC Advert was spent which nts is 10% of actual release. 135275 Purchase of One 250,000 170,792 One vehicle The commission motor vehicle purchased – over budgeted for vehicles and procured double cabin the purchase of other one car because it transport spent only equipment UGX.82,186,936 therefore diverting the balance of UGX.88,605,939 as indicated in 7.1 above.

Management explained that the Commission decided to intensify performance audits during the period when there were no Members of PSC and also concentrated on induction of new members of the District Service Commissions (DSC). Where field visits were not done to provide technical guidance, technical staff of DSC were brought to PSC offices for coaching in specific areas.

I advised management to ensure adequate implementation and supervision of planned and budgeted for activities.

2.4.1.5 Absence of IT strategic plan

As noted in my previous report that Public Service Commission has an IT resource Centre responsible for maintaining data of the Public Service Commission. However, the Commission does not have a strategic IT plan that ensures adequate security and protection over computers and of data held on computers or information systems operated by the Commission.

There is a risk of wastage in the absence of the IT strategic plan given the considerable investments in terms of computers, accessories and data security.

Management explained that the Commission has embarked on the development of the IT Strategic Plan and that the delay was caused by the on-going merger of the PSC System with IFMS and IPPS. Management further explained that the Commission in the meantime ensures security and protection over computers and data by operating an external back – up System by a Senior Officer at the rank of Commissioner who also keeps a close password to all sensitive information.

I advised management to expeditiously formulate and have the plan approved to help provide proper procedures to guide in the use of IT resources.

2.4.2 LOCAL GOVERNMENT FINANCE COMMISSION

2.4.2.1 Mischarge of expenditure

The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Commission‟s expenditures revealed that the entity charged wrong expenditure codes to a tune of UGX.241,919,355 which constituted 6.8% of total expenditure. This practice undermines the budgeting process as well as the intentions of the appropriating authority and leads to misreporting.

Management in their response acknowledged the mischarges and attributed it to the inadequate budget allocation for gratuity and allowances both of which are statutory obligations.

I advised the Accounting Officer to streamline the budget process to ensure that sufficient funds are allocated to each account. Authority should be sought for any reallocations.

2.4.2.2 Outstanding commitments

It was noted that UGX.17,525,048 (payables) due to URA in taxes remained outstanding for the third year running contrary to section 124(1) that requires remittance within fifteen days after end of month in which the payment subject to the withholding was made. No effort has been undertaken to have it cleared. The Commission risks fines and penalties from the tax body for the unremitted taxes.

Management attributed this to non-allocation of funds for domestic arrears in the appropriation despite several requests from the Accountant General for the item inclusion. Management further explained that the outstanding dues will be settled in the financial year 2014/2015 once the funds have been sought.

I await the outcome of management efforts.

2.4.2.3 Outstanding advances

Receivables amounting to UGX.52,575,575 were not collected by the close of the financial year. UGX.49,138,063 relates to the period 2011/12 and UGX.3,437,512 relates to the period 2012/2013. It should be noted that the amount accrued in the financial year 2012/2013 was not included in the statement of financial position as at 30th June 2014 therefore understating the receivables by UGX.3,437,512.

Management explained that consultations are underway with the Accountant General‟s office over UGX.49,138,063 advanced to an official who suffered a stroke and is unable to carry out any official activity. Management further stated that necessary adjustments for UGX.3,437,512 will be made to cater for the outstanding position. 86

I advised management to adjust the financial statements of the commission accordingly. The outcome of consultations with Accountant General is also awaited.

2.4.2.4 Non deduction of PAYE from Gratuity Payments

It was noted that the Commission paid UGX. 241,809,552 being gratuity to all staff. However, contrary to the tax law, UGX.72,542,866 was not deducted from gratuity payment. Failure to deduct taxes exposes the Commission to a risk of penalties and fines, and it culminates into loss of Government revenue.

Management explained that payments without offsetting tax was based on a letter from URA dated 21st September 2001 exempting gratuities and pensions being paid from the consolidated fund from tax. I explained to management that according to the letter, exemption was applicable to only pension gratuity in accordance with the Pensions Act and not contract gratuity.

I advised the Accounting Officer to institute recovery measures for the un-deducted amounts for onward remittance to URA.

2.4.2.5 Advances to individual personal accounts

Sections 227, 228 and 229 of the Treasury Accounting Instructions (TAIs), require that all payments should be made by the Accounting Officer directly to the beneficiaries. Where this is not convenient, an imprest holder is required to be appointed by the Accounting Officer with the approval of the Accountant General. However, it was noted that UGX.241,922,320 was advanced to Commission staff through their personal bank accounts to undertake direct procurements and other activities of the Commission.

Such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the commission does not have any control over such funds deposited on individual personal accounts. Management explained that it was resolved to minimize these advances where practicable by using the cashier as the agent to manage cash and make payments

where necessary. Management further explained that requests will be made for program officers to be appointed as temporary imprest holders for up-country activities.

I advised management to ensure strict adherence with the requirements of the Treasury Accounting Instructions.

2.4.2.6 Doubtful payments on spares and repairs

UGX. 140,273,112 was paid to several pre-qualified garages for repairs of Commission vehicles for the financial year 2013/14. A review of the transactions revealed the following which were contrary to Section 816 of the Treasury Accounting Instructions, 2003, Part 11 Public Stores Chapter 8 outlining modalities for maintenance of vehicle inventories: • There were no vehicle repair assessments done by a competent mechanical engineer prior to commitment of vehicles to garages for repair. The garages could thus take advantage in assessing repair needs and consequently inflating repair costs. • No competent mechanical engineer from the Commission was at hand to inspect and certify repairs undertaken by the garages. • The spare items replaced (used spare parts) were not returned to stores for independent verification by audit.

I informed management that there was a risk that garages could have taken advantage in assessing repair needs and consequently inflating /falsifying repair costs. In absence of checks, the genuineness of the repairs could not be ascertained.

Management explained that consultations with Ministry of works were undertaken and guidance on the appropriate process to follow was provided and the involvement of the Chief Engineer‟s office reviews on all servicing and repairs has now been instituted.

I await the effectiveness of the instituted system.

2.4.2.7 Dormant account

The Commission had a dormant account “Local Government Sector Investment Plan-LGFC” (Account number 110088000020) with a balance of UGX.124,888,417. This was contrary to guidance from the Accountant General which provides that all Government accounts held with Bank of Uganda are automatically blocked if they are inactive for a period of six months. It was noted that this account has been non-operational with the same balance both in the previous financial year and the year under review. Dormant accounts are risky as they provide an avenue for perpetuating fraud through concealment.

Management explained that they had written to the Permanent Secretary/Secretary to the Treasury on the same issue and had been advised to wait for communication from the donors before any action is taken.

I advised management to liaise with the donors immediately and have the account closed.

2.4.2.8 Pre-qualified framework contracts

It was noted that 80% of procurements undertaken by the entity were under frame work contracts. However several procurement regulations were flouted as stated below;

 Section 237 (2) of the PPDA regulations requires a bidder to indicate the unit rate for each item. Further, section 237 (7) provides for a price adjustment in accordance with section 244 and 245. It was noted that all frame work contracts neither had fixed prices nor price adjustment clauses to be used during the agreed period.

 Section 126 (4) of the PPDA regulations requires a PDU to rotate pre-qualified providers on successive shortlists where pre-qualification is used for a group of contracts. It was noted that one provider was single sourced to supply assorted stationary, tonners, printing and photocopying services almost the entire year

of frame work contract among the updated 20 pre-qualified suppliers of the similar items.

The Commission risks being exposed to non-competitive prices and optimal budgeting for supplies may be hampered due to fluctuating prices for projected procurement requirements.

I advised Management to ensure that all requirements under the framework contracts are complied with.

2.4.2.9 Budget performance

Public Finance and Accountability regulations, 2003 section 2.10(b) entrusts the Accounting Officer with ensuring that controls such as those contained in the approved estimates and warrants are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation. Effort should be made to achieve the agreed objectives or targets of the entity within the availed resources.

Review of the budget performance for the year under review revealed that the activity in the table below was not achieved despite Government releasing funds. The table below refers:

Vote/ Item Quantity Amount Released Quantity Remarks Program descript Budgeted me ion Vote Output-  Purch 99,700,000 93,593,26  No Despite function 135375- ase of 2 vehicle 93% 1353 purchase one purchased funding of motor station no vehicle vehicles wagon was and  Purchase procured. other of tyres equipme and spare nt parts

The authority‟s objectives may not have been met. 90

Management explained that the amount released from Treasury under the Development Budget was not adequate to purchase the station wagon as had been planned and therefore used the funds to purchase other Capital items.

I advised management to always undertake planned activities as approved.

2.4.3 KAMPALA CAPITAL CITY AUTHORITY

2.4.4.1 Outstanding receivables

The trade and other receivables increased from UGX.58,950,497,967 to UGX.63,232,221,289 (representing 7% increase from the previous year‟s balance). The change in receivables was partly due to change in accounting policy on provision for doubtful debts from 30% to 10% of outstanding receivables. Out of the receivables amount of UGX.70,258,023,654(excluding 10% provisions), UGX.59,905,664,404 relates to arrears of property rates UGX.49,000,673,808 and Ground rent UGX.10,904,990,596 that have remained outstanding for over 5yrs. Failure on the part of management to recover outstanding receivables may lead to further accumulation of receivables to unrecoverable levels which may require writing off hence financial loss to the Authority.

Management explained that a special team was appointed to handle revenue arrears which have been segmented with focus on clients with bigger arrears bearing in mind the 80/20 parity rule. Management further explained that the Permanent Secretary/Secretary to Treasury was requested to withhold at source arrears to the tune of UGX.10billion owed by various Government departments. The KCCA litigation department has also been directed to pursue arrears cases worth UGX.8 billion through the courts as sensitization activities to clients to enhance voluntary compliance are going on.

I advised management to streamline its debt management policy with a view of recovering outstanding arrears.

2.4.4.2 Shortfall in Government Grant

The Authority estimated to receive UGX.118,409,594,604 as grants from the Central Government. However, only UGX.116,836,314,649 was released creating a short fall of UGX.1,873,051,171. Failure by Government to release all budgeted funds to the Authority stalled implementation of some programs thereby denying services to the beneficiary communities.

Management stated that it appealed to Government to release all budgeted funds in order to fully implement the approved work plan.

I advised management to continually engage the Ministry of Finance, Planning and Economic Development to ensure that budgeted funds are actually released.

2.4.4.3 Incomplete asset register

A review of the asset register and reports from real estate management unit revealed the following;  A number of plots of land were not stated in the fixed asset register  Plots of land stated in the asset register were not backed with land titles  Some Plots of land in the fixed asset register lacked plot numbers, and location.

Refer to the table below: Land details Amount (UGX.) Remarks Bukasa primary school 556,000,000 Land title not yet acquired Block 18 Plot 234 , Nateete 900,000,000 Land title not yet acquired Bukoto Health centre No land title, no valuation and asset not in the asset register FRV 402 Folio 21 Plot A-16A Not yet valued and thus Naguru link not in the asset register Block 208, Plot 1035, 3883 & Not yet valued and thus 3884 at Kawempe Kyadondo not in the asset register

Land details Amount (UGX.) Remarks LRV 1485 Folio 1 Plot 4A-12A Not yet valued and not Namugera Road Mbuya (99 in the asset register. years-Lease from KDLB) LRV 374 Folio 1 Plot 22 Plot Not yet valued and not in 1A Kitante the asset register. Plot 20-22 and Plot 24 Not yet valued and not in Nakivubo the asset register. LRV 2833 Folio 5 Plot 2 Not yet valued and not in Kenneth Close the asset register.

There is a risk of loss of assets because of the incomplete asset register.

Management explained that some plots of land were not stated in the asset register pending conclusion of valuation by the Chief Government Valuer. Management further explained that the process of securing land titles is underway for Bukasa primary school and Block 18 Plot 234, Nateete.

I advised management to expedite the process of property verification and valuation to avoid any future encumbrances.

2.4.4.4 Absence of Public Accounts Committee

Section 58 of the Kampala Capital City Authority (KCCA) Act, 2010 stipulates that there shall be established for the Capital City, a Public Accounts Committee (PAC) consisting of a Chairperson and four other members appointed by the Lord Mayor and with the approval of the Minister. This Committee is responsible for examining the reports of the Auditor General, Chief Internal Auditor and any reports of Commission of Inquiry and submits its reports to the Authority and to the Minister and the Minister lays the report before Parliament.

As reflected in my previous year report, the Capital City Public Accounts Committee is yet to be instituted. Absence of Authority Public Accounts Committee implies that the corporate governance structures are inadequate and the recommendations of Internal Audit department, Auditor General and other investigation agencies may not be reviewed and implemented as required.

Management explained that the Authority has a standing committee in place overseeing the function of internal audit in accordance with section 16 of KCCA Act 2010. Management further explained that section 58 of the same Act also requires the authority to form a Public Accounts Committee which performs almost similar function as the standing committee in charge of the audit function of the Authority.

I advised management to liaise with the line Ministry in consultation with Parliament in order to harmonize the contradictions within the law.

2.4.4.5 Organizational structure - Staffing gaps

The Authority does not have adequate staff numbers to achieve the desired performance as out of an approved organization structure of 1,332 posts, only 395 positions are filled by contract staff representing only 29.7% of the required workforce. 641 positions including key positions of Administration officers, Treasury officers have been filled by staff recruited on Temporary basis representing 48% of the required workforce.

Lack of adequate staff coupled with the workload on the existing staff may impact negatively on service delivery and achievement of the targeted output/results. Segregation of duties may not be adequately done as required.

Management explained that the challenge of the current inadequate staffing is due to budget constraints other than the speed of the relevant recruitment authorities. Management further explained that KCCA appoints staff in line with the budget allocation and that the budget provision for the financial year 2014/15 has so far allowed the Authority to increase the staffing number by 3% that is from 395 to 421, accounting for 32% of the approved structure compared to 29% as at end of the financial year 2013/14 while the permanent staff members are still being complemented by staff on 4 months‟ contracts.

I advised management to liaise with Ministry of Finance, Economic Planning and development with a view of increasing budget provisions for staff costs so as to address the problem of staffing gaps.

2.4.4.6 Court and out of court settlements

A review of quarterly reports from the legal department revealed that the entity incurred lost legal cases or engaged into out of court settlements worth UGX.2,463,978,558 which arose from management‟s conduct of operations like alienating of land during construction, breach of contract agreements and delayed signing of contracts. A number of costs also arose from duplicate allocation of land titles and leases by Kampala District Land Board (KDLB), thus causing a liability to KCCA. There is a risk that amount incurred in Court claims, could affect service delivery as planned activities may be hindered or not funded.

Management explained that these cases were due to poor contract management during the tenure of the defunct KCC, however contract management has since improved. Management further explained that other activities arose from acts or omissions of KDLB and by virtue of section 63 of the Land Act which requires that all expenses of KDLB are charged on KCCA funds.

I advised management to act diligently in executing its mandate to avoid expenditure arising from litigation.

2.4.4.7 Unaccounted for Festival funds

Section 181 requires all vouchers to contain full particulars of each service or good and be accompanied by such supporting documents as may be required so as to enable them to be checked without reference to any other documents.

It was noted that UGX.74,547,100 advanced to a Supervisor, Revenue Reconciliation on 4th October 2013 a day to the event to cater for festival emergencies was not accounted for before the staff absconded from duty. In absence of the relevant accountabilities, I was unable to confirm whether the funds were put to the intended purposes for which they were requisitioned.

Management explained that the affected staff left KCCA before handing over and submitting full accountability. Management further explained that the staff‟s gratuity has not yet been paid and Police is pursuing the case.

I advised management to ensure that all Authority funds are properly requisitioned and accounted for within the statutory period. Meanwhile, I await police action on the matter.

2.4.4.8 Procurement of Public Transport Management system

The Authority signed contract with an International Company to provide a system to manage public transport at cost of USD.2,753,932. A review of the contract document revealed that the contractor included withholding tax (6%) amounting to USD.133,255 on the costing schedule. This implied that the withholding tax cost was to be incurred by KCCA contrary to the Income tax Act. There is a risk that management may incur illegible costs arising from the contract hence resulting into a loss of government funds.

Management explained that a letter was written to the contractor seeking an addendum to the contract by removing the withholding tax from the costing schedule.

I advised management to pursue the matter and recover the funds from the outstanding balance of 37% of contract price. Further, management should ensure there is strict adherence to Income tax laws in future for procurement of goods and services.

2.4.4.9 Budget performance

Public Finance and Accountability Regulations 2.10(b) entrusts the Accounting Officer with ensuring that all total controls such as those contained in the approved estimates, warrants and others are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort

is required to be made to achieve the agreed objectives or targets of the entity within the availed resources.

Review of the budget performance for the year under review revealed that some targets were partially or not achieved by the end of the financial year. Service delivery is hampered and the appropriating authority‟s objectives are not met. Refer to the table below:

Vote Item Planned Amount Amount Actual out Audit function descripti outputs budgeted released/ Put as at remarks output on /quantity (UGX.) collected 30th June (UGX.) 2014 Roads Constructi Building of 1,000,000,000 1,000,000, procurement The and on of retaining wall 000 constructi drainage Prince so that road on work works Charles is opened to had drive traffic commenc retaining ed wall – including road reconstruct ion Reconstruc Construction 2,521,131,800 2,356,736, Still Construct tion of of 1.9km 000 struggling ion is not Mbogo Mbogo road- with yet Road upgrade to contractor to complete (PAVED) paved road complete d. Reconstruc Mutundwe 13,122,000,00 15,167,589 Works Works tion / 4.5km 0 ,100 started on are upgrade Weraga Mutundwe ongoing Lot-2 2.45km road. Wansaso Expected to 0.18km be completed by March 2015 Drainage Replaceme Manhole 450,000,000 71,647,600 The single Manholes improvem nt of cover sourced have not Manhole replacement company yet been ent and Covers within the ALTIUS fully 97

Vote Item Planned Amount Amount Actual out Audit function descripti outputs budgeted released/ Put as at remarks output on /quantity (UGX.) collected 30th June (UGX.) 2014 maintena city ENGINNERIN installed nce works G (U) LTD in the did not city. deliver the manholes LGMSD Health  Kitebi 1,729,892,000 1,729,892,  Works on Procurem infrastruct health 000 kitebi still at ent for ure centre about 20% the renovated  Renovation constructi  Renovation at Kawaala on of of kawaala still at Kawala H/C design Health  Kisenyi stage centre health has centre commenc remodeled ed.

Delay in implementation of planned activities affects the Authority in the achievement of its mandate.

I advised management to expedite the process of Programmes implementation to ensure that all planned activities are implemented within the target period in order to the achieve Programmes objectives.

2.4.4.10 KCCA Football Club (KCCA FC)

A review of KCCA Football Club activities during the year under review revealed the following;

a) KCCA FC Governance Structures (i) Failure to hold Annual General Meeting (AGM) Section 131 (1) of the companies Act (Cap 110) states that” Every company shall in each year hold a general meeting as its Annual General Meeting (AGM) in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date

98 of one annual general meeting of a company and that of the next; except that so long as a company holds its first Annual General meeting within eighteen months of its incorporation, it need not hold it in the year of its incorporation or in the following year.”

On the contrary, KCCA Football Club Limited, a private company incorporated on 13th December 2006 did not hold an Annual General Meeting during the year and there was also no evidence of AGMs held in the recent past.

Failure to hold AGMs denies shareholders the right to monitor the Company and also casts doubt on the stewardship role of management.

(ii) Non-functional structures Other non-functional organs of the company are:  The Executive Committee  Finance Committee  Audit Committee  Legal Committee  Women Football Committee  Marketing, Communications and Fans Committee  Estates, Security and Safety Committee Management explained that the AGM is attended by members of the club who presently are the institution (KCCA) and the Board (which is appointed by the institution). Management further explained that as overseers of the operational activities, the Board reports to the Authority on a quarterly basis through the Executive Director and therefore the essence of an AGM might be superfluous.

I advised management as a shareholder with controlling interest in the club to liaise with the relevant stakeholders to ensure that AGMs are held in accordance with the law and also ensure that all corporate governance structures of the club are existent and functional.

99 b) Inadequate Record Keeping

It was noted during the audit that KCCA FC did not maintain a Cashbook in which to record all receipts and payments for KCCA Football club funds. The Club had a budget of UGX.1,979,908,000 for 2013/2014. However, all the receipts and payments were not recorded in a cash-book which include 85% of the gate collections at every match, grants from KCCA, annual membership fees, grants from FUFA, CAF and FIFA, Donations. Other records indicated in the Kampala Football club constitution under Article 35 that were not updated/ maintained include:

 Members Register- Although this is in place, it was last updated in 2003 thus it is not reliable.  Accounting Ledgers -These are not kept and maintained.  Register of Shareholders- This is not in place.  The Club does not produce annual financial statements.

This was caused by laxity on the part of the Executive Committee of the club to enforce the requirements of the Club Constitution. As a result of non-maintenance of records, I could not confirm that all revenue due was collected, receipted, recorded and properly accounted for; and that all expenditure incurred were duly authorized, paid to the right persons and recorded in the accounting books.

Management explained that a review process on club‟s operations to improve its administration and management was underway.

I advised the KCCA FC Board members to ensure that complete records for the club activities are maintained to facilitate financial reporting. c) Non-Compliance with PPDA Act, regulations and guidelines

Section 55 of the Public Procurement and Disposal of Public Assets Act and Regulations, 2003 required all public procurements and disposals to follow the procedures prescribed therein.

100

Examination of payment vouchers for the KCCA Football club for 2013/2014 revealed that the club made payments and purchases for services and goods which were above the tenderable threshold. However, it was noted that supplies and services were procured by staff using cash advances to the tune of UGX.122,850,000 without following the procurement process. In all cases, Local Purchase orders were not issued. I was therefore not able to obtain assurance that the procurement process yielded value for money. KCCA FC is therefore exposed to a risk of loss of funds through procurement by cash.

Management explained that a review process on club‟s operations to improve its administration and management was underway.

I advised KCCA as a major shareholder with Board representation to ensure that club management avoids the use of cash procurements and follow proper procurement procedures as prescribed by the PPDA law.

2.4.4.11 Inspection of schools

Inspection of a number schools in all five divisions of Kampala revealed that the schools faced several challenges that impacted on service delivery namely:

a) Land ownership

During inspection, it was noted that a number of schools funded by the Authority had land disputes which meant that the Authority risked losing its investment in the schools in case the land was sold. For example in the case of Nabagereka primary school where the bonafide owner of the land sold off the land, the school was demolished yet KCCA had invested over UGX.50million on the renovation of the school in the prior year and capitalized the investment in the fixed asset register for the year under review. The Authority risks losing its investment in the schools on the disputed land.

Management explained that apart from 4 schools (Kisaasi Primary school , Bukasa Primary school, Mirembe primary school and Kamokya primary school), that are owned by KCCA. Other schools‟ land is owned by other authorities such as Uganda 101

Land Commission, Kampala District Land Board, Faith Based Organizations like churches and Muslim organizations and Buganda Land Board. Management further explained that KCCA has been negotiating with the aforementioned stakeholders to obtain lease or Memorandum of Understanding that can allow the Authority to make long term investments on the land and sustain service delivery in the city.

I advised management to continue liaising with the relevant stakeholders like Uganda Land Commission and Ministry of Education to ensure that school land and buildings are safeguarded. b) Other observations

The following are the observations made in the schools inspected;  Kiteebi primary school lacked furniture in its school libraries  Namungona Kigube‟s land had been encroached on by neighbours.  Nakesero, Buganda road and Murchison bay primary schools had a high number of classroom per pupil ratio and there is need for more classrooms.  Naguru Katale primary school lacked a school fence to safeguard school property.  Kawempe Muslim primary school was experiencing water shortages that affected school sanitation.

The above challenges hamper effective service delivery.

Management explained that Kitebi primary school will be supplied with desks in the financial year 2015/16. Management further explained that the water shortages in Kawempe Muslim Primary school are being addressed through a partnership between African Evangelistic Enterprise/Water Aid which has just completed a 10,000 litre harvesting tank in the school to address the water shortage.

I advised management to continue taking the necessary steps to solve the bottlenecks for effective service delivery in the schools.

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2.4.4.12 ENGINEERING AUDIT FINDINGS

Engineering audit was carried out in KCCA for the year under review. The findings are below: a) Contract Management

It was noted that supervising consultants were engaged after the contractors had commenced works leading to delays in issuance of design drawings and hence delaying actual completion of the projects. This was noted for the Rehabilitation of Jinja Road project, construction of Mbogo Road Project, Reconstruction / Upgrading and Periodic Maintenance of several roads in Nakawa Division and Upgrading of Drainage Black Spots Contract Phase 1 (Sixth Street, Ben Kiwanuka Road, Jinja Road Access, Luthuli-Bandali – Rise, Salaama Road, Kawempe – Ttula Road).

The Accounting Officer explained that to address the problem, framework contracts will be applied for consultancy supervision in future contracts.

I advised the Accounting Officer to always procure supervision consultants prior to commencement of works to enable timely review of designs and thereby avoid delays in contract implementation.

b) Delayed completion and abandonment of works

It was t noted that two projects including Mbogo road and Drainage of black spots were abandoned resulting into delayed completion of the works. Liquidated damages amounting to UGX.56,725,464 were not charged against the contractor for Construction of Mbogo road for the delays in the completion of the works.

I advised the Accounting Officer to have the amounts recovered and to ensure that liquidated damages are charged for the delayed works as required by the contract.

The Accounting officer explained that liquidated damages would be charged in the final account.

103 c) Quality of works

Generally, the overall quality of the works on the projects audited was good. However, there were instances where defects such as alligator cracks drainage defects, ponding, uncovered manholes, segregation were identified which needed rectification. These were noted on all the road projects selected. Furthermore, test results on AC sample cores showed that some sections did not have the binder content or the air voids as per the specifications. The Accounting Officer explained that for projects under defects liability period, the defects had been identified under the snag list and were being worked upon whereas for the Nakawa and Luzira roads, correction of defects was an on-going process since the contract was still under execution. There was an exception for the black spots and Mbogo road projects where the contracts had been terminated and the defects would be rectified under force account.

I advised the Accounting Officer to exercise more control over the quality of works being executed and ensure that the defective works identified on the specific projects are rectified by the contractor and the desired quality achieved. d) Summary of key findings per project

Below is a summary of key audit findings as a result of the engineering audit per project:

S/No Key findings Management Audit remarks response /recommendations 1. Rehabilitation of Jinja Road section from Yusuf Lule Junction to Nakawa (Katalima Road Junction) by M/S EnergoProjektNiscogradnja Ltd at UGX. 10,126,298,101

 Un updated bill of The bill of quantities Updated BoQs were quantities (BoQs) to (BoQs) for the project not used for reflect changes after was updated after the certification of works. design review. design review and it was I advised the

the basis for the Accounting Officer to

104

S/No Key findings Management Audit remarks response /recommendations Variation. ensure that the revised BoQs are used whenever there is a review.  The Consultant was KCCA has now put in Consultants should be engaged after 48% of place framework engaged before the works were contracts for consultancy commencement of the completed. The consultant‟s scope supervision to contracts. included a design minimize/control such review and hence delays. The Authority should required the Consultant‟s assess the adequacy of engagement before framework contracts contracting the works for consultancy out. supervision of civil works in ensuring that they actually minimize and control works delays and achieve value for money in implementation of civil works.

 At the time of field The observed defects The Contractor should inspections road were identified as part of be tasked to rectify the sections had ponding, the snag list issued to defects to achieve the alligator cracks, uncovered manholes the contractor. These desired quality. and segregation. failed areas are mostly around sewer manholes The Authority should which frequently monitor and ensure all

105

S/No Key findings Management Audit remarks response /recommendations overflow with sewage defects are actually weakening the asphalt. corrected during the The contractor has been defects liability period. instructed to use C25 concrete to surround the manholes to avoid sewage penetrating under the asphalt and thus weakening it. The Contractor is gradually attending to the defects during the defects liability period. 2. Reconstruction of Mbogo Road (Paved) by M/s Omega Construction Limited at UGX. 2,521,131,767

 Liquidated damages Liquidated damages Contractors should amounting to UGX. could not be charged for always be charged 56,725,464 were not liquidated damages for charged to the works that were done contractor as per within the performance the delays as per GCC49.1 of the period of the contract contract. contract. which ended on February 4, 2014. The works that were approved for payment in interim payment certificate no. 1 were executed during the performance period of the contract and tests were conducted by

106

S/No Key findings Management Audit remarks response /recommendations MoWT laboratory on 8th January 2014. Liquidated damages however, will be charged for any works that were executed after February 4, 2014 in the final accounts.

 Delayed issuance of The initial The document design drawings and commencement date of submitted does not report at relate to the commencement of the contract was 29th works. Detailed design May 2013. However the commencement order. drawings were issued contractor wrote vide to the contractor 56 The Accounting officer days after issuing the letter ref Commencement order. OME/MPM/KCCA/TRMRM should always abide by D/2013/011 dated 5th best practice by July 2013 notifying that ensuring detailed he would be starting design drawings and works on 26th July 2013, report are available effectively changing the and issued to the start date. The first set contractor at of design drawings was commencement of issued to the contractor works to avoid delays on the 24th July 2013 to in contract avoid any delay in the implementation implementation of the contract. (See attachment 1.2e)

 The supervision The commencement date The commencement consultant for the was effectively changed date did not change works was because the commissioned 49 days by acceptance of the 107

S/No Key findings Management Audit remarks response /recommendations after the contractor‟s letter dated contractor‟s letter did commencement of 06th July 2013 to 26th not refer to a works, making it July 2013. So the commencement order. unclear who supervised the works before. consultant was engaged in time. The Accounting Officer should ensure that supervision consultants are procured before commencement of works.

 Quality related defects The contract was The Accounting officer were observed on terminated by the is advised to ensure several sections of the that; Road, including Employer due to segregation signs, fundamental breach of  Final account is cracks, poorly prepared and all contract by the constructed overlays contractual and drainage contractor specifically by; obligations with the contractor are defects.(Silted culverts, (i) Failure to rectify collapsed ,manholes, concluded. unprotected slopes and defective works  Enhanced supervision scoured channels) (ii) Failure to is carried out on the maintain a valid advance new contractor payment guarantee tasked to rectify defective works to (iii) Failure to perform ensure the desired the contract within the quality of works is achieved. maximum liquidated time of 100 days.

The contract is under arbitration awaiting a final ruling. The Employer intends to

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S/No Key findings Management Audit remarks response /recommendations rectify the defects using another contractor.

3. Upgrading of Gomotoka Road by Kiru General Services Ltd at UGX. 1,400,006,282

 Quality related defects The manholes were were observed on broken by heavy trucks The Accounting officer some sections of the should road revealing 2 which are not supposed broken manholes, to use the road. There Ensure; some road edges were are road signs clearly  Defective works not flashing with the on the road edges and indicating the tonnage drains and lack of road drains are screens for debris from allowed on the road. rectified to the desired access road drains. Police has been advised quality of works.

to enforce this  Sensitization of public regulation. The and road users about safeguard and contractor was however destruction of instructed to make good manhole covers and has replaced the  Use of superior covers. materials in manhole Screens for debris were construction deterring theft of manhole not included in the BOQ covers and the drains are self-

cleaning because of the slopes.

In the sections where the road edges do not flash with the drains, the asphalt had been laid after stone pitching works. This was evened up with a concrete 109

S/No Key findings Management Audit remarks response /recommendations coping and trimming of edges.

4. Reconstruction/Upgrading and Periodic Maintenance of Kintu/Kitintale(1.0km), Kamuli Link/Ndagire(0.65km), Cannon(0.8km), Circular Drive(0.4km), Valley Drive(0.8km), Corporation(0.27km) Martyrs access(0.35km), Wanaichi(0.4km),Access2(0.1km), UNEB Access(0.35km), Lakeside(1.0km), Radio Maria(0.55km), Mutungo-1(0.75km), Mutungo Ring Road-2(0.75km), Kabalega Crescent(0.9km), Buvuma(0.27km) Roads in Nakawa Division

Contractor: M/S Abubaker Technical Services and General Supplies Ltd

Contract value : UGX. 14,602,410,905

 The Consultant was KCCA has now put in engaged three (3) The Accounting Officer months after contract place framework commencement contracts for consultancy should ensure that supervision to supervision consultants minimize/control such are procured before delays. commencement of works.  Quality related defects The roads were The Accounting officer were observed on inspected while the should ensure that some road sections such as edge failures, works were in progress. defective works alligator cracks, The mentioned failures associated with edge ponding, damaged side drains , stone pitching were identified and the failures, alligator and vegetation consultant issued cracks, ponding, side overgrowth instructions for their drains, stone pitching , correction. Currently they vegetation overgrowth are largely rectified and are rectified by the

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S/No Key findings Management Audit remarks response /recommendations the remaining few are contractor before being rectified on a case handover of the works. by case basis by the contractor during work progress 5. Upgrading of drainage Black Spots Contact Phase 1 (Sixth street, Ben Kiwanuka road, Jinja Access, Luthuli-Bandali – Rise, Salaama Road, Kawempe – Ttula road)

by M/S Omega Construction Ltd at UGX. 4,181,073,515

 Final designs were This claim is still being submitted 8 months reviewed by the Final design drawings after signing of and report should be contract, leading to a consultant as evidence claim for idle time for provided was not made available and plant and personnel of satisfactorily, hence issued to the contractor UGX. 1,700,000,000 being disputed by the at commencement of Employer. The figure works to avoid recommended by the associated delays in consultant was not contract justifiable and has not implementation and been accepted by the associated claims. Employer. The Employer recommended to consultant to close off this matter in accordance to provisions of GCC clause 44.4 which states that, “the contractor shall not be entitled to compensation to the

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S/No Key findings Management Audit remarks response /recommendations extent that the Employer‟s interests are adversely affected by the contractor‟s not has given early warning or not having cooperated with the Project Manager”.

 The Consultant was The time extension was appointed 3 months granted to the contractor The Accounting Officer after commencement, should ensure that; with a scope that at no extra cost to the included design review, Employer (see  Supervision which was submitted consultants are attachment 1.5c). The late into the contract procured before implementation. The claim for idle time made commencement of result was a claim for by the Contractor was works to enable idle time and time designs of works is disputed by the extension by the reviewed for quality Contractor. Employer. and avoid delays in contract implementation.

 The adequacy of framework contracts for consultancy supervision proposed by the accounting officer be assessed to ensure quality works is achieved and delays in completion of work minimized and controlled

 There was inadequate It is the contractors Response not coordination with 112

S/No Key findings Management Audit remarks response /recommendations third parties such as responsibility to liaise satisfactory. National Water and with third parties like The Accounting Officer Sewerage Corporation UMEME, NWSC etc as has an obligation of (NWSC) in relocation of infrastructure within per technical ensuring that there is the works of KCCA specification A14 coordination with third

That notwithstanding, parties other than the KCCA made Efforts to contractors if they are coordinate several third Gov‟t agencies such as parties such as NWSC, UMEME and NWSC in UMEME, etc. This was implementation of civil through letters and works especially meetings and there were where; contact persons to  Water and sewerage infrastructure consult interferes with road works

 Power lines interfere with road works

This will facilitate smooth implementation of works by the contractor and avoid unnecessary delays associated with accommodating works of these utility service providers

 Contractor was not KCCA can only penalize The Accounting officer penalised for the contractor at is advised to ensure abandoning works on payment, and no that a final account is Salama Road, Ttula certificate had been prepared and all 113

S/No Key findings Management Audit remarks response /recommendations and Bugolobi as presented during that contractual obligations required by GCC59.2 period of site with the contractor are but later terminated abandonment. concluded.

the contract before the KCCA started on the client did over payment process of termination delay of IPC4. (request was at SG) but due to required approvals, delays are eminent. The contractor went ahead to terminate before KCCA got approvals from SG. Nevertheless, KCCA rejected the grounds for contractor‟s action and later terminated after SG approval.

The Employer did not approve payment of IPC no.4 on grounds of failure by the contractor to fulfil contractual obligations of renewing performance guarantee and lack of quality assurance reports. The contract was finally approved for termination by Solicitor General and a letter forwarded to the

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S/No Key findings Management Audit remarks response /recommendations contractor in January 2015. A final account is under preparation by the consultant. (see attachment 1.5f)

Filed Observations along The contract was road sections on the terminated and the The Accounting officer black spots revealed the contractor shall be should ensure that; following; penalized for uncorrected  Defective works identified on the  Salama Road – varying defects on compilation of diameter weep holes, black spots on a final account. lack of relief points to Salama road, Bandhali rise, flood areas at back All uncompleted and slope to the drain, Entebbe road are defective works noted on rectified by the  Bandhali rise/Bugolobi the respective project contractor and the – overburden left in the sites have not yet been desired quality island between drains, achieved. overgrown bush, lack paid.  Close and continuous of weep holes, lack of All Uncompleted works manhole covers, poorly monitoring and and defects noted are restored road. supervision of planned to be addressed implementation of  Entebbe Road – un- civil works is carried in-house. restored areas at out to enable early manholes near capital detection and shoppers, settlement/ corrections of defects

depression of restored identified to ensure wearing course, Defects on Entebbe road quality works are alligator cracks on achieved. are already being restored asphalt, un- even paving blocks, addressed in-house. choked and silted

manhole covers. Works which were  Ttula Road – lack of abandoned like on Tula weep holes, abandoned stone road will be done after 115

S/No Key findings Management Audit remarks response /recommendations pitching works, gulley sourcing for another and pit formation with contractor to complete mudslides on drain the works. sides expanding to nearby houses(cracked), vegetation overgrowth, The sewage flow is as a garbage dumping and result of illegal sewage/ filth flow. connections of sewage to  Electoral commission / storm water lines. At the Jinja Road – vegetation same time, the National overgrowth, cracked Water and Sewerage headwall, and sewage flow. Corporation project which is laying sewer lines close to this section will be a permanent solution in that it will help illegal sewage systems to be properly connected.

2.4.4 KAMPALA INSTITUTIONAL AND INFRASTRUCTURE DEVELOPMENT PROJECT (KIIDP) (TEN MONTHS PERIOD ENDED APRIL 2014)

(a) Compliance with Financing Agreement and GOU Financial Regulations It was noted that project management had complied with the credit agreement provisions and GoU financial regulations except for the matter noted below;

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(b) General Standards of Accounting and Internal Control Systems A review was carried out of the project system of financial management and it was noted that management had instituted adequate controls to manage project resources.

(c) Status of Project Implementation A review and inspection of project activities was undertaken and the following were noted; i) Construction of Lubigi channel drainage system I noted the following during inspection when I visited the completed construction of Lubigi channel drainage system:- • Some parts of the channel mostly the downstream had encroachers (Flower gardens). • At Hoima road, the culvert constructed was fully covered with swampy vegetation. • The downstream of the channel had a lot of depositions and silt.

In the circumstances, the smooth water run-off in the area was hindered.

Management explained that they have taken note of the flower gardens established along the channel banks and they are making arrangements to evict the persons and convert those spaces into public parks. They further explained that the cleaning and maintenance of the channel is still a responsibility of the contractor (M/s Spencon) whose contract is still under defects liability period. Management has continued to supervise the contractor and will ensure regular cleaning and maintenance of the channel.

Management effort to the effect is awaited. ii) Kitezi Land Fill Extension I noted the following when I visited the completed construction of Kitezi Land fill extension:-

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• Some fencing poles had broken down. • Re shaping of the cells was not complete. • Filling of the cells with hard core stones was not fully done as some bottom areas did not contain any stones. • The chain link concrete poles were not of good quality.

The defects mentioned above affected the attainment of initial objectives.

Management explained that the identified anomalies were being addressed. Management had commenced on works to restore cell bottoms for the steep embankment in cell 3. With regard to filling of the cells with hardcore stores, silt had been deposited and the landfill management had commenced works to deliver waste into the cells as a drainage blanket to prevent clogging of the aggregate. The damaged poles had been replaced while the defective ones will be addressed under the defects liability period.

I advised management to follow up the contractor and ensure that the remaining works are concluded. iii) Kimera Road Inspection of the completed construction works of Kimera road revealed that the street lights constructed were not functioning properly. In addition, the road was not cleaned by the contractor as agreed and it was full of dirty materials. The contractor therefore breached the contractual obligation of installing functioning lights, cleaning the road, and removing all construction materials from the site. The intended objectives of the project may not have been fully achieved.

Management responded that they are yet to carry out investigations and address the short comings with the contractor since the contract was still under the defects liability period.

I advised Management to ensure that works are done and completed according to the contract.

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2.4.5 BILL AND MELINDA GATES FOUNDATION – KCCA

Budgeting and Budget controls - over expenditure on International Travel

Contrary to the donor conditionality that required any expenditure variance on a budget line above 10% to be approved by the donor, it was noted that there was over expenditure on international travel of more than 10% without approval. Over expenditure without donor approval is ineligible and may necessitate a refund.

Management explained that total Project travel costs were within the total budget except the line item on international travel that was paid in excess of 10%.

I advised management to always seek the required authority prior to re-allocation of funds from one budget line to another.

2.4.6 ELECTORAL COMMISSION

2.4.6.1 Rent Expenses

Section (H-b) (1) of the Public Service Standing Orders states that “Occupancy of any Government Housing shall be governed by a Tenancy Agreements detailing the terms and conditions of the tenancy. The tenancy agreement shall be drawn in consultation with the Government Valuer”.

Payments amounting to UGX..305,700,000 to various Land Lords for properties rented for district offices lacked tenancy agreements. In the absence of the agreements, I could not confirm the correctness of the payments. Meanwhile UGX..463,070,327 that was paid in advance by the Commission as rent was not reflected in the Financial Statements as a prepayment (receivable). In the circumstances, the networth is misrepresented in this regard.

Although the Accounting Officer indicated that the tenancy agreements were available, they were not availed for verification.

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I advised the Accounting Officer to ensure that all rental payments for district offices are supported with tenancy agreements. In addition the prepaid rent should be reflected as a receivable in the financial statements.

2.4.6.2 Payables

The Commission, in its Statement of Financial Position as at 30th June, 2014 disclosed a payables balance of UGX..8,139,451,273 which relate to expenses incurred on Data entrants during the preparations for Lower Local Councils in the financial year 2009/10 (UGX..472,324,176) and Gross Tax incurred during the procurement of ballot papers for the 2011 General Elections (UGX..7,748,161,249). Delayed settlement of payables may result into litigation and their attendant costs.

The Accounting Officer indicated that whereas a request to settle the arrears was made to MoFPED, there was no provision in the Commissions MTEF ceiling. He also explained that the Commission was working with MoFPED to clear tax obligations.

I advised the Accounting Officer to follow up with MoFPED and obtain an adjustment on the MTEF ceilings to enable him settle the obligations.

2.4.6.3 Officers in Acting Capacities beyond the recommended Periods

It was noted that five officers of the Commission had been occupying their positions in acting capacities for more than the maiximum six (6) months stated in paragraph 4.7.7 of the Electoral Commission Personnel Manual. There was no evidence on file to show that there had been attempts to fill the positions with substantive appointments. The practice has the effect of demotivating staff.

The Accounting Officer acknowledged the anomaly and indicated that the staff had been appraised and the process of confirmation was underway. I advised the Accounting Officer to fill the positions substantively.

2.4.6.4 Understaffing

The Electoral Commission Act 1997 Section 20(1) states that there shall be as many Electoral Districts as there are Administrative Districts. 120

According to the Commission organogram, each electoral district should be headed by a District Registrar who is deputised by an Assistant Registrar. Review of the Commission staffing levels revealed a shortage of 26 staff country wide with the majority shortages being among Election Officers (Assistant District Registrars). The shortage of technical staff may negatively affect the conduct of elections in the country.

In response, the Accounting Officer explained that the posts had been advertised and the process of filling the positions was ongoing. I await the outcome of this undertaking.

2.4.6.5 Failure to engrave Assets

Inspection of the assets revealed that all printers and scanners in the printery, the laptops and desktop computers of the commission had not been engraved with unique identification numbers contrary to regulation 101 of the Public Finance and Accountability Regulations 2003. The practice could lead to misappropriation and loss of Commission assets with no possibility of recovery.

The Accounting Officer indicated that the process of engraving the assets was ongoing. I await the outcome of this undertaking by the Accounting Officer.

2.4.6.6 Irregular payment of Medical expenses

UGX..233,195,850 was refunded to staff of the Commission in respect of medical expenses contrary to Paragraph 7.4.2.4 of the Electoral Commission Personnel Manual which requires the staff to obtain medical services from Government or Traditional hospitals. There is a risk of false claims being paid resulting into loss of public funds.

The Accounting Officer explained that some districts were remote which made it difficult to access the government hospitals and where they were available some of them did not offer the required services.

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I advised the Accounting Officer to streamline the provision of medical care to staff to avoid settlement of possible false claims.

2.4.6.7 Under-absorption of funds for National Consultative Forum (NCF)

Out of the total funds budgeted and received of UGX. 500,000,000 for NCF activities, only UGX..431,167,902 (86%) of the total buget was actually spent leaving a balance of UGX.. 68,832,098. Under-absorption of the funds may imply failure to implement planned activites of the forum. It was further noted that the budget line of fuel, lubricants and oils was overspent by UGX..40,655,453 without request for reallocations.

The Accounting Officer explained that that implementation of NCF activities started late and by the closure of the financial year, some of the planned activites had not been implemented.

I advised the Accounting Officer to ensure adequate and appropriate planning for NCF activities.

2.4.6.8 Expenditure on NCF Meetings

The NCF Performance Report and Summary of planned activities for 2013/14 financial year indicated that each of the three (3) committees of the NCF had planned to hold four (4) meetings (one meeting per Quarter) during the financial year under review.

However it was noted that all the Committees sat more times than was expected resulting into unauthorized expenditure of UGX..39,150,000 as per details in the table below;

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Committee No. of Number Variance Number Rate Expenditure meetings of of per for extra budgeted meetings members person meetings for held who (UGX.) (UGX.) attended Business 4 7 3 9 290,000 7,830,000 Committee Legal and 4 8 4 15 290,000 17,400,000 Electoral Affairs Committee Finance and 4 8 4 12 290,000 13,920,000 Budget Committee Total 39,150,000

Management explained that before Government started funding NCF, UNDP used to engage consultants who would carry out preliminaries on all documentation before committees would begin on their deliberations. However with Government funding, the respective NCF Committees would generate both the plenary as well as the draft documentation for discussion. This therefore necessitated the committees to ask for more meetings from the business committee so as to finalize the required documentation.

I advised management to cause revision of the required meetings to enable proper planning and budgeting.

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2.5 LEGISLATIVE SECTOR

2.5.1 PARLIAMENTARY COMMISSION

2.5.1.1 Advances to Individual Personal bank accounts

a) Non-compliance with Treasury Accounting Instructions Sections 227, 228 and 229 of the Treasury Accounting Instructions (TAIs), require that all payments should be made by the Accounting Officer directly to the beneficiaries. Where this is not convenient, an imprest holder should be appointed by the Accounting Officer with the approval of the Accountant General. However, it was noted that UGX.3,429,105,022 was advanced to Commission staff through their personal bank accounts to undertake direct procurements and other activities of the Commission. Such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the Commission does not have any control over such funds deposited on personal accounts.

Management explained that this was due to some of the Commissions‟ activities that are field based across the country, such as committee field trips. However, steps will be taken to pay these funds directly to concerned staff and Members of Parliament, except advances to Committee Clerks specifically to cater for refreshments and other sundry expenses while on field trips.

I advised management to ensure strict adherence with the requirements of the Treasury Accounting Instructions.

b) Advances to personal accounts not accounted for A review of advances to personal accounts was carried out and it was noted that accountability to the tune of UGX.27,401,000 had no supporting documentation. Further, vouchers for payments amounting to UGX.421,200,400 advanced to a Director could not be accessed as they had been taken by the IGG for further investigation. As such I was unable to confirm whether the funds were applied to the intended purposes.

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Management explained that effective July 2014 enforcement of strict compliance to pay beneficiaries directly through their bank accounts was undertaken and this is likely to reduce on unaccounted for funds.

I advised management to ensure funds are accounted for or enforce recovery measures from the affected staff.

c) Travel Abroad trips not undertaken UGX.20,592,000 was paid to three members of the Commission for purposes of facilitating travel to various destinations outside Uganda. However the travels were not undertaken and as such funds ought to have been refunded.

Management explained that the funds will be recovered from the member‟s subsequent emoluments. I await management‟s effort on the matter.

2.5.1.2 Official Attire Standardisation and frequency of Payments for Official

Attire

Section 54 of the Parliamentary Service (staff) regulations 2001 provides for provision of at least two pairs of the prescribed attire each year to enable Commission staff maintain the dignity of Parliament. Staff entitlements are set in accordance with salary scales from UGX.480,000 to UGX.1,520,000.

It was noted that the Parliamentary Commission paid UGX.1,257,880,000 in cash to staff to enable them acquire at least two pairs of the official attire during the year under review. However the following issues were noted;

(i) Standard official attire: Cash advances were made to staff and accountabilities were submitted after procurement. However, this method was lacking as there was no standard attire procurement since it was evident that officers bought from different suppliers without any verification of quality procured. I noted UGX.10,260,000 as unaccounted for in respect of official attire by staff.

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(ii) Frequency of payment: It was noted that some officers were getting more payments during the year than others ranging from two to six times a year depending on the individual directorates budgets.

All the above were due to lack of standardization defining quality desired and where to procure with an aim of acquiring and maintaining uniformity and quality. The regulation was open ended with little guidance.

Management explained that the rates were payable “at least twice” in a financial year and the policy did not require staff to purchase standard or uniform attire, but rather buy and wear attire that was decent and commensurate with the status of Parliament. Management further explained that with effect from 1st July, 2014, official attire was regularized as clothing allowance which is paid twice a year for all staff among the approved allowances and is taxable.

I advised management to provide guidance in respect of the required attire to staff. In the meantime, I await outcome of Management efforts in regularization of the clothing allowance.

2.5.1.3 Staffing Gaps

Good strategic planning and management requires an entity to carry out human resource planning to ensure that an adequate number of qualified staff is in place to carry out the operational activities of an entity so as to enable it achieve strategic objectives. A review of the Commission‟s organizational structure revealed that out of the available 485 posts, 403 posts were filled leaving 82 posts vacant (representing a 17% vacancy level). The key vacancies among others are as detailed below:

Post Vacant Directors 2 Asst. Directors 2 Chief internal Auditor 1 Deputy Editor 1

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Post Vacant Deputy SAA ( Sergeant At Arms) 1 Senior Principal Administrative Assistant 1 Principal Legal/ Administrative Counsel 2 Principals 18 Seniors 16 Clerk Assistant 7 Economist 5

Service delivery is highly hampered by the delays in filling the vacancies especially at senior management level and staff fatigue may not be ruled out given the fact that some staff may be performing functions of two or more officers.

Management explained that the Parliamentary Commission approved the Report on the Review of the Parliamentary Structure-2011 and decided that recruitment of personnel to fill positions would be carried out in phased approach over a period of five (5) years with a projection of thirty four (34) new staff per year. The recruitment process for some of the posts is ongoing while others have been planned for the next financial year.

I advised management to continue with the recruitment to ensure that all gaps are filled.

2.5.1.4 Internal Audit

A review of the Internal Audit function of Parliamentary Commission revealed the following issues:  The Commission has only one internal auditor who also acts as Head of Internal Audit and yet the structure provides for three staff. This has created huge workload which cannot be handled by one officer. This number is considered inadequate in view of the increased activities (increased budget) for the Commission.  The current functional structure of the Commission places Internal Audit as a department under Administrative Services headed by the Director Finance and

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Administration (DFA). However, with the changing roles of Internal Audit function and the principles of good governance, the current placement of the department under the ambit of the DFA means that the internal audit actually reports to the Director Finance and Administration which is not in line with good corporate governance practices.

Absence of an efficient Internal Audit function leads to lack of appraisal on the adequacy and effectiveness of internal control systems and non-detection of fraud in time which could lead to loss of assets and misstatements in books of accounts.

Management explained that the Parliamentary Commission was concerned about the lack of manpower and accordingly, in April, 2014 two posts were advertised and in the end, no suitable candidate was identified for the post of Chief Internal Auditor though a successful candidate was identified for the position of Internal Auditor and has already reported for duty. The post of Chief Internal Auditor was re-advertised and shortlisting of the applications was taking place by the time of writing this report. I await the outcome of management‟s effort in recruitment of a suitable Chief Internal Auditor.

2.5.1.5 Absence of Audit Committee

Regulation 29 and 30 of the Public Finance and Accountability regulations, 2003 and section 8 of the Public Finance and Accountability Act, 2003 require the Minister in charge of Finance to establish and appoint Audit Committees whose functions are advisory to the Accounting Officer.

During the year ended 30th June 2014 the Parliamentary Commission had no Audit Committee and as such the following functions were not undertaken by the committee:

 The Commission‟s Internal Audit annual and operational plans were not reviewed and approved.  The Commission‟s Internal Audit functions were not periodically reviewed and its overall quality reported on. 128

 There was no review of the adequacy of the Internal Audit function, its adherence to professional standards, independence, standing, scope, resources and reporting arrangements.  There was no consideration of objectives and scope of any additional work to be undertaken by internal auditors so as to ensure that there was no conflict of interest and compromise.  There was no discussion with the Accounting Officer on the Internal Audit findings and their recommendations and review or monitor their implementation.  There was no representation of Internal Audit concerns about under facilitation/funding to the relevant Accounting Officer, the Accountant General and the Secretary to the Treasury or the Minister.  There was also no review of the Commission financial statements prepared by the Accounting Officer to ensure adequate disclosure and fair presentation. Management explained that the establishment of the Audit Committee had delayed because of consultations where the Commission was advised to choose between setting up its own Committee and using one of the already established Sectoral Audit Committees on which the Commission was due to make a decision in its next meeting.

I await the decision of the Commission in establishing an audit committee.

2.5.1.6 Budget performance

Public Finance and Accountability Regulations, 2003, section 2.10(b) entrusts the Accounting Officer with ensuring that all controls such as those contained in the approved estimates and warrants are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort is required to be made to achieve the agreed objectives or targets of the entity within the availed resources.

Review of the budget performance for the year 2013/2014 revealed that some targets were not fully achieved. It was noted that renovation of Development house and plumbing of the Parliamentary building were incomplete by the end of the

129 financial year despite full release of the budgeted amount. Details are as in the table below.

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Vote/ Item Budgeted Quantity/ Amount Released Actual Quantity/ Remarks Progra description outputs Budgeted (UGX.) out puts mme (UGX.) Project Rehabilitation  Carry out emergency 8,966,232,226 8,966,115,876  Repair of roof of  Development 0355 of Parliament repair of the roof of the Parliamentary house Parliamentary building building renovation not  Complete renovation of  Partial renovation completed the Development house of development  Plumbing of the  State of the art house and parliamentary plumbing completed plumbing building not undertaken completed

Management explained that renovation on Development House has been completed as per contract and the building will be handed over to the Parliamentary Commission on 3rd February, 2015. Further, the contractor which carried out the repairs on the plumbing system experienced many challenges which resulted in delays in completion of works.

I advised management to always ensure that activities are undertaken as planned.

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2.6 HEALTH SECTOR

2.6.1 UGANDA AIDS COMMISSION

2.6.1.1 Nugatory Expenditure

The Commission incurred fees and legal charges of UGX..12,766,000 arising out of a court settlement of a case in which the entity had failed to pay M/s Maka Motors Ltd for repair services rendered. The costs are considered nugatory as they would have been avoided had the Commission settled its obligations timely. Besides, compliance with the Government commitment control system would have enabled the entity avoid accumulation of liabilities.

In response, the Accounting Officer attributed delayed settlement of the debts to detailed verification procedures since the documents submitted by the Company dated as far back as 2008.

I advised management to ensure proper record keeping and timely settlement of genuine claims when they are submitted.

2.6.1.2 Staffing levels

Out of 84 approved positions, 56 positions had been filled leaving 28 vacancies. Among the unfilled posts were key positions such as Chief Accountant, Grants Officer, Communication Officers, Head of ICT, Zonal Coordinators, Programme Officers and Assistants. Absence of key staff may hinder efficient operation of the Commission.

The Accounting Officer stated that filing the vacancies was constrained by inadequate funding and plans were under way to fill the gap in a phased manner.

I advised management to ensure the key positions are filled accordingly.

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2.6.1.3 Un explained Fluctuation of Non-tax revenue

Analysis of non-tax revenue (NTR) collections over the last three years revealed wide fluctuations. It was noted that NTR largely comprised rental income which is considered relatively predictable .The table below refers:

F/Y 2010/11 2011/12 2012/13 2013/14 NTR (UGX..) 6,200,000 28,670,000 9,950,000 30,650,000

Unexplained fluctuations cast doubt on the reliability of NTR collections. In response, the Accounting Officer attributed the fluctuations to the tenant‟s inability to pay on time.

I advised the Accounting Officer to report the outstanding NTR as revenue in arrears and ensure that the amount is recovered.

2.6.1.4 Failure to finalize a strategic plan

Best practice requires an entity to prepare a strategic Plan that spells out its long term direction. The plan also outlines the strategic objectives and milestones upon which an entity can measure its performance. It was however noted that the Commission has not put in place a strategic plan since its establishment in 1992. Lack of a strategic plan impairs coordination and evaluation of the Commission‟s activities.

In response, the Accounting Officer stated that a draft strategic plan covering the period 2015/2016-2019/2020 had been developed and would be approved by June 2015.

I advised the Accounting Officer to ensure a strategic plan is put in place and implemented accordingly.

2.6.1.5 Delayed Formulation of the Board Charter

The institutional review report of 2011, section 3.2.2, advised that a board charter be put in place to spell out the definite terms of service for the board members, performance management and evaluation mechanisms, composition of committees,

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and the appointment of board members to enhance the accountability of board members. However, it was noted during the audit that the charter had not been put in place which may affect the effective operation of the Board.

In response, the Accounting Officer explained that a draft charter had been developed and is due for submission to the board for approval.

I advised the Accounting Officer to ensure finalization of the charter to streamline the relationship between the Management and the Board.

2.6.1.6 Failure to report asset losses

Part 217 Part (b) of the Treasury Accounting Instructions, 2003 requires that in case of loss of assets/inventory, a report of the loss or deficiency must be made to the Accountant General and copied to the Secretary to the Treasury immediately it is discovered. Contrary to the above instructions, a loss of a generator valued at UGX..2,000,000 was not reported to the relevant authorities.

Besides, the loss was not reported in the Statement of losses of public moneys, stores and other assets in the financial statements, making them misrepresented. The loss was attributed to lack of proper security measures in the stores. In response, the Accounting Officer stated that the loss was reported to the Police and an update is awaited.

I advised the Accounting Officer to institute proper security measures in the store premises and ensure that the loss is reported to the Treasury without further delay.

2.6.2 HEALTH SERVICE COMMISSION

2.6.2.1 Payables

The payables increased from UGX..2,920,555 in the previous year to UGX..75,489,633 in the current year. Included in the payables was a tax liability in respect of PAYE (UGX..15,024,998) and WHT (UGX..2,920,555) which may attract penalties. 134

The Accounting Officer attributed the payables to the bouncing of electronic funds transfer (EFT) instructions resulting from wrong entries of details in the accounting system, as shown below.

Company Item Amount (UGX.) URA PAYE 15,024,998 Victoria Motors Payment for Motor Vehicle 57,544,080 Balances B/F WHT 2,920,555 Total 75,489,633

I advised the Accounting Officer to settle the tax liabilities without further delay and to always ensure correct entry of information into the EFT system.

2.6.2.2 Shortfall in Revenue performance

Out of the UGX..3,885,301,949 approved for the year under review, only UGX..3,469,500,474 was realized resulting in a shortfall of UGX..415,801,475 (11%). As a result, planned activities such as; holding of two (2) regional workshops for DSCs, DHOs, CAOs and Hospital Managers, developing a costed plan for construction of HSC office premises, and drafting Recruitment Guidelines for the Health Workers were not undertaken. It was also noted that a number of unfunded priorities such as purchase of land for office accommodation, validation of Health Workers in Central Government Health Institutions, reviewing Terms and Conditions of Service-Training and Qualifications remained outstanding. The shortfall was attributed to failure to release appropriated funds by Ministry of Finance, Planning and Economic Development (MoFPED). I advised the Accounting Officer to continue liaising with the MoFPED, to ensure that all appropriated funds are released to enable implementation of planned activities.

2.6.2.3 Staffing Gaps

Out of the approved staff establishment of 63, only 51 positions were filled leaving 12 vacancies. Among the vacant key positions were: Principal Personal Secretary, Senior Human Resource Officer, Systems Administrator, Personnel Secretary, Records Officer and Senior Office Supervisor. The absence of key staff mentioned 135

above affects office management, human resource management and supervision of Information and Communications Technology equipment.

In response, the Accounting Officer explained that the posts of the Principal Personal Secretary, Senior Office Supervisor, Systems Administrator, Personnel Secretary, Records officer, Assistant records Officer and Receptionist had been presented to Public Service Commission for filling, while the positions of Senior Human Resource Officer were to be filled by the Ministry of Public Service through deployment.

I advised management to follow up the recruitment and development of staff without further delay.

2.6.3 EDUCATION SERVICE COMMISSON

2.6.3.1 Revenue shortfall Examination of the statement of appropriation revealed that out of the budgeted revenue of UGX..6,034,344,000 for the year under review, the Commission received UGX..5,412,724,499 resulting into a shortfall of UGX..621,619,501 (10%). Revenue shortfall hinders implementation of planned activities.

The Accounting Officer attributed the shortfall to non-release of funds on the Gross tax Account, freezing of salaries of two members whose contracts had ended and vacant posts which were not filled. It appears the Commission did not adequately plan for procurement and staff recruitment activities to enable timely requisition for the funds.

I advised management to always ensure proper procurement planning and timely recruitment of staff to be able to requisition and absorb budgeted funds in a timely manner.

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2.6.3.2 Budget Performance Review A Review of the performance of the Commission in regard to the expected outputs revealed that in a number of areas, actual outputs fell short of planned outputs as shown below;

Planned Expected Actual outputs Remarks Activities Outputs Output Appointment of -Appointed 82 Did not appoint 075201. 2,000 teaching and Teaching and Non 1,918 Teaching and Management of non teaching teaching staff in Non teaching Education Personnel. NTCs. personnel. Personnel. Confirmation of Confirmed and Did not confirm 2,000 teaching and Regularized 277 1,723 teaching and non-teaching teaching and non non- teaching personnel. teaching staff. personnel

Promote 4,000 Did not promote Primary Teachers 4,000 primary under Scheme of Teachers. Service Supervising and Did not supervise guiding 112 and guide the 112 Districts on districts on Recruitment. recruitment.

Failure to recruit and/or confirm teachers and non-teaching staff as planned may adversely affect staff motivation and ultimately result into poor performance of students/pupils.

In response, the accounting officer explained that recruitment of teachers was not undertaken because there was a temporary freeze on recruitment by the Ministry of Public Service. It was also stated that inadequate funding constrained supervision activities in the districts.

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I advised management to liaise with the relevant stakeholders and source necessary resources for implementation of planned activities.

2.7 ENERGY SECTOR

2.7.1 ATOMIC ENERGY COUNCIL

2.7.1.1 Budget Performance Review of the budget performance revealed that whereas the Council budget was UGX..3,547,113,510, it realised UGX..1,277,354,799, resulting into a shortfall of UGX..2,319,758,711 (65%).

As a result of the shortfall, various planned activities such as setting up the Radiological Emergency Preparedness and Response Plan (EPRP) committee, development of a national action plan for EPRP, procurement of calibration and inspection equipment, and fencing of the waste management facility were not undertaken.

In response, management indicated that the subvention received from the Ministry of Energy and Mineral Development (MEMD) was inadequate for execution of the planned activities.

I advised management to liaise with MEMD so that a budget line for the Council is created in the Ministry budget. In addition the Ministry is urged to source adequate funds for the Council.

2.7.1.2 Inadequate Staffing Out of the Council‟s staff establishment of 51 positions, only 30 (58%) positions were filled leaving 21 (42%) vacancies. Some of the key vacant posts were; Chief Radiation Protection Officer (RPO) - Inspectorate, Principal

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RPO (Environmental and Nuclear Waste), Senior Human Resource Manager and Store keeper. In the circumstances, the Council is constrained from achieving its mandate.

In response management stated that, staff recruitment is planned for the next financial year. I have advised management to carryout recruitment in a phased manner starting with the most critical positions.

2.7.1.3 Signatories to the Bank Account In my previous year‟s report to parliament, I indicated that the Council‟s Secretary was not a signatory to the Bank of Uganda Account contrary to Section 17 of the Atomic Energy Act. During the year under review, it was noted that the Council resolution for the Secretary to become signatory to the Account remained outstanding.

In the circumstances, there is a risk of mismanagement of the financial affairs of the Council without the knowledge of the Chief Executive Officer.

In response management indicated that it was working closely with the Ministry of Energy and Mineral Development to implement the resolution.

I await the outcome of management‟s action in this regard.

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