OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF

REPORT AND OPINION OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF DISTRICT LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2014

REPORT AND OPINION OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2014

THE RT. HON. SPEAKER OF PARLIAMENT

Introduction I have audited the accompanying financial statements of Bulambuli District for the year ended 30th June 2014. These financial Statements comprise of the statement of financial position as at 30th June 2014, statement of financial performance, statement of changes in equity, cash flow statement together with other accompanying statements, notes and accounting policies. Management Responsibility for the Financial Statements

Under Article 164 of the Constitution of the Republic of Uganda and Section 8 of the Public Finance and Accountability Act, 2003 and section 64 and 86 of the Local Governments’ Act 1997 as amended, the Accounting Officer is accountable to Parliament for the funds and resources of the Local Government. The Accounting Officer is responsible for the preparation of financial statements, in accordance with regulation 68 of the Local Governments Financial and Accounting Regulation, 2007 and for such internal controls as management determines necessary to enable the preparation of financial statements that are free from material misstatements whether due to fraud or error. Auditor’s Responsibility

My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, Section 86 of the Local Government Act and Sections 13, 16 and 19 of the National Audit Act, 2008 is to express an opinion on these statements based on my audit. I conducted my audit in accordance with the International Standards on Auditing(ISA)/ International Standards of Supreme Audit Institutions (ISSAIs). Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due

1 to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Part “A” of my report sets out my qualified opinion on the financial statements. Part “B” which forms an integral part of this report presents in detail, all the significant audit findings made during the audit which have been brought to the attention of management.

PART “A” Basis for Qualified Opinion

Funds not accounted for

A sum of UGX.111, 319,388 remained unaccounted for at the time of audit, contrary to the Financial Regulations. Consequently, I could not confirm that the funds were utilized for the intended purpose.

Qualified Opinion In my opinion, except for the possible effect of matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly in all material respects the financial position of Bulambuli District as at 30th June 2014 and the results of its operations and cash flows for the year then ended, and comply in all material respects with the Generally Accepted Accounting Practice, the Local Governments’ Act cap 243 of the Laws of Uganda (as amended) and the Local Government Financial and Accounting Regulations, 2007.

John F.S. Muwanga AUDITOR GENERAL 20th February, 2015

2

PART "B"

BULAMBULI DISTRICT DETAILED REPORT OF THE AUDITOR GENERAL FOR THE

FINANCIAL YEAR ENDED 30TH JUNE 2014

1.0 Introduction In accordance with Article 163(3), of the Constitution of the Republic of Uganda, I am required to audit and report on the public accounts of Uganda and of all public offices, including the courts, the central and the local government administrations, universities and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the Bulambuli District to enable me report to Parliament.

2.0 AUDIT OBJECTIVES

The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. The audit was carried out with regard to the following objectives:- a. To verify whether the financial statements have been prepared in accordance with the requirements of the Local Governments Financial and Accounting Manual 2007; and the Local Governments Financial and Accounting Regulations 2007; and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b. To verify whether all the funds of the entity were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. To verify whether goods and services financed have been procured in accordance with the PPDA Act. d. To evaluate and obtain sufficient understanding of the internal control structure of the entity, assess control risk and identify reportable conditions, including material internal control weaknesses e. To verify whether the management of the funds of the entity was in compliance with the Government of Uganda financial regulations.

3

f. To verify whether all the necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented.

3.0 Audit Methodology

The following audit procedures were undertaken:-

a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements of the entity.

b. Expenditure The payment vouchers of the entity were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation.

c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period

d. Procurement Reviewed the procurement of goods and services under the various departments during the period under review and reconciled with the approved procurement plan.

e. Fixed Assets Management Reviewed the use and management of the assets of the entity during the period under review.

f. Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluated the overall financial statement presentation.

4.0 Entity Financing

Bulambuli District is financed by grants (Conditional and Unconditional) from the Central Government, development partners and locally generated revenues from taxes, fees,

4

licenses and charges. During the year, the district received grants totaling to UGX12,485,835,886 from the Central Government; UGX.111,798,670 from locally generated revenues and UGX.208,209,300 from Development Partners. The total revenue of UGX12,805,843,856 constituted 93% of its approved budget estimates of UGX.13,703,829,807.

5.0 Detailed Audit Findings

This section outlines the detailed audit findings and my recommendations in respect thereof.

5.1 Funds not accounted for

Regulation 42 and 43 (2) of the Local Governments Financial and Accounting Regulations 2007, require funds to be properly vouched and accounted for within a period of one month. It was observed that a sum of UGX.111,319,388 remained unaccounted for by the time of audit contrary to the Regulations as shown in Appendix 1. Consequently, I could not confirm that the funds were utilised for the intended activities. Accounting Officer attributed it to laxity of staff to properly account for the funds.

I advised the Accounting Officer to ensure that funds are properly accounted for or recoveries from the concerned officers be made.

5.2 Local Revenue shortfall

Regulation 32 of the Local Governments Financial and Accounting Regulations, 2007 requires councils to ensure collection of all budgeted revenue in an approved manner and the revenue banked intact in Council accounts. It was observed that council set out to collect local revenue of UGX.205, 890,242 but only realised UGX.112,483,270 resulting in a shortfall UGX 93,406,972 representing 45% under performance as shown below; Code Local Revenue Budgeted Actuals Variance 2013/2014 2013/14 113101 Land Fees 22,765,000 23,461,500 (696,500) 114504 Application Fees/Local 27,361,950 10,954,000 16,407,950 Service Tax

5

142205 Advertisements/Bill - 0 - Boards/Non - Refundable Fee 142206 Animal & crop Husbandry 548,000 498,000 50,000 related Levies/Forestry Registration of CBO's - 0 - 142207 Registration (e.g. Births, 0 - Deaths, Marriages etc.) fees 142208 Registration of 43,380,310 24,917,081 18,463,229 Businesses/Development fees 142212 Agency Fees 20,229,810 14,923,000 5,306,810 Entry fees/Park fees 20,005,403 0 20,005,403 142214 Market/Gate charges 11,669,493 (11,669,493) 142219 Other Fees & charges/ 71,599,769 26,060,196 45,539,573 Recovery/Interest from Bank Total 112,483,270 93,406,972 205,890,242

The Accounting Officer attributed the short fall to non-remittance of Local Service Tax of UGX.16,407,950 from the Centre, reverting of Muyembe Tax Park to Bulambuli Town Council and transfer of District accounts from Crane Bank to DFCU Bank which had promised 4% interest but never honoured.

I advised the Accounting Officer to ensure that all budgeted revenue is collected.

5.3 Irregular levy of 2% development tax

Section 13(0) of the fifth schedule of the Local Governments Act requires any Council to seek authority from the Minister of Local Government to levy taxes. A sum of UGX.15,714,385 was collected from contractors’ payments as 2% development tax, without approval by the Minister of Local Government. Details are in Appendix 2. The deductions may compromise quality of work and may attract legal battles between council and contractors. The Accounting Officer explained that the tax was approved by Council in the financial year and a request had been sent to the Ministry of Local Government to sanction the tax.

I advised the Accounting Officer to follow up the matter with Ministry of Local Government to have the tax regularised otherwise its collection be halted.

6

5.4 Lack of Land Title

Regulation 58 (4) of the Local Governments Financial and Accounting Regulations, 2007 states that the properties and assets of local governments shall be properly registered and titles issued. It was however observed that the district council did not have land titles for its property as the titles were in the names of Muyembe Sub County. This creates a risk of encroachment and disputes. The Accounting Officer explained that the district Council is in the process of securing the title in the district names after resettling Muyembe Sub-county on their own land.

I advised the Accounting Officer to follow up the matter and ensure that land titles are transferred in the District names.

5.5 Understaffing

The District has an approved structure of 1,449 positions. However, out of the 1,449 approved positions only 1,034 are filled, leaving 415 vacant positions, representing 29% of the establishment as shown below: Table showing understaffing

Established Position Vacant Percentage %age Staff Category position filled post filled vacant District Local Gov’t 353 134 219 37.90% 62.1% Health 300 221 79 73% 27% Secondary Teachers 177 76 101 42% 58% Primary teachers 619 603 16 97.40% 2.6% TOTAL 1449 1034 415 71.30% 28.7

Understaffing adversely affects service delivery. Management attributed understaffing to the ban on staff recruitment by the Ministry of Public Service.

I advised the Accounting Officer to engage the Ministry of Public Service so that the vacant positions are filled.

7

APPENDICES

Appendix 1-Funds not accounted for

Voucher Date Payee Amount Description remarks Finance

No receipts, Purchase of printing invoices, LPO, PV20820 23/05/2014 Nandutu Phyllis 600,000 stationary for payroll GRN, Delivery notes No field activity Program & Wamayeye Facilitation for PAF report, receipts PV 21487 7/3/2014 700,000 Ronald field activities for stationary, fuel receipts and payment sheets No fuel receipts, Facilitation for PAF PAF monitoring PV 21475 21/2/2014 Maziina Michael 1,000,000 monitoring By DEC program members for 3rd Qtr &Report, payment sheets Facilitation for No monitoring Nagudi supervision, PV 21443 18/12/2013 484,000 program & Catherine monitoring reports &mentoring LLGs No supporting Facilitation for documents were V33/11/201 28/11/2013 Wanade John 700,000 verification of PAF attached i.e. fuel 3 projects 2nd quarter receipts, payment sheets Admin 0 No fuel receipts of 68,000, stationary Facilitation for a receipts of Shs 11674 22/11/2013 Tabali Moses 408,000 sensitization meeting 50,000, other supporting receipts Shs 290,000 No 4th Quarter audit work program/work Payment in respect plan, report, fuel PV 11625 13//08/2013 Wanade John 2,000,000 of 4th Quarter receipts Shs Routine Audit 870,000, stationary receipts No fuel receipt of Payment in respect Shs 399,000, pre PV 5/6/2014 Muduku Charles 399,000 of support & post inspection 0002369 supervision of LLGs report, payment sheets No audit work Payment in respect Wamayeye plan, report, fuel PV 002360 21/05/2014 900,000 of audit of sub Ronald receipts and counties 3rd Quarter payment sheets

8

Payment in respect No pre & post PV 002359 16/05/2014 Wanade John 600,000 of repair and service inspection of UG-3030R reports, receipts Education 0 Payment in respect Shs 450,000 lacks PV 23519 19/11/2013 Gimei Charles 450,000 of school inspection accountabilities and monitoring Stat. 0 Bodies Facilitation to No PV 21660 5/12/2013 Mayeku Tom 740,000 Entebbe Dept. of accountabilities survey and mapping attached No BututoJenepher Rent for the house PV 22444 16/05/2014 1,000,000 accountabilities & family used by DSC attached Facilitation for No procurement unit PV 22435 16/05/2014 NangaiZemulani 1,300,000 accountabilities activities in the 4th attached Quarter Fuel for support 270 Litres diesel M/s Shell Elgon Health 752,000 supervision too hard no M/Veh. Services to reach areas Numbers No activity for Allowances for parish shs.5, 566,000. Dr.Mulongo M. 5,994,000 mobilisers and No names, dates vaccinators , signs Fuel supervision and Issue vouchers M/s Shell Elgon 4,725,000 vaccine delivery to have no M/Veh. Services lower Health Centres Nos. 0

Delivery of 15 trips No receipt from 1/4 chq055 Mafabi Martin 750,000 gravel supplier, no GRN Fuel for back Shell Elgon No issue and 10/11 chq 600,000 stopping sensitization Service Station demand receipts of Sub Counties

Direct purchase of The 5 receipts for aggregates (10-14 fuel not dated MM) from Rec. 0628 Shs. `Build world` 60 4.2M from Build 13/12 chq086 Zesani Gerald 6,655,000 Tones 5 trips total world not dated 4.2M and fuel paid cash. Fuel 2,080,000, 130 Litres already paid for diesel @ day vide vr8/12

Issue vouchers and credit statement do not Fuel for DHO for the M/s Shell Elgon show Motor 2/11 chq043 750,000 months of Oct., Nov., Services Vehicle Reg. and Dec. 2013 Numbers for consumption of fuel Construction of 2/5 chq 0195 Zesani Gerald 2,690,000 foundation of district No documents H/quarters 2/6 chq0220 Globest 2,000,669 Retention fee for No defects

9

Agencies Ltd extension of liability certificate Buluganya Sub County office, construction of staff extension House, Kitchen and 4 stance pit latrine at Buluganya S/C 20/6 Chq J &M Elgon Co. No GRN, Not 1,691,185 Office furniture 0235 Ltd taken on charge Certificate not signed by IOW (preparer) -Cert. issued on 30/12/2013 but payment made Construction of Zema Savings on 18/11/2013 Chiefs House, 22/11 chq062 and Credit Co- 9,212,000 (payment before Kitchen 2 stance pit Ltd cert. is issued). latrine at Bulaago S/c Payment made to `Ideal Merchant Property Holdings (U) Ltd` rec.214- 18/11/2013 i.e. wrong payee No defects liability Nasize Retention for certificate, Paid 25/11 chq065 Construction 2,303,000 completion of to Buluganya Firm Bukhalu Sub County International Ltd (rec.052- 28/11/2013 No defects liability Completion and certificate, The Buluganya retention House/ project 28/11 chq068 International (U) 5,000,000 (shs.5,000,000) for was handed over Ltd Bulegeni S/c Office on 20/11/2013 and staff House and retention paid on 28/11/2013 Emptying 5 stance 2 Oceans Screen 3/9 Chq017 1,040,956 Latrine and putting No requisition Printers burglar proof No documents- Preparation of BFP as Receipts, signs , 3A/1/ chq090 Madete Richard 455,000 girded by MOFPED programmes, dates, No documents- Submission of BFB Receipts, signs , 3B/1 chq090 Madete Richard 650,000 and re- submission of programmes, OBT to MOFPED. dates, Sector review 5/11 chq Tsekeli Alfred 610,000 No minutes meeting Kongasis Fuel deposit used for No demand and 6/4 Chq060 Petroleum 1,600,000 beautification of issue voucher Dealers district compound.

10

No documents ( Reports, receipts, Facilitate follow-up of no dates for 17 LLGs in preparation 8/3 chq048 Madete Richard 2,410,000 days indicated, for NAT on no names and 18/3/2014 signs of 5 staff mentioned ) Fencing District offices 10 Rolls of 9/3 chq049 Madoyi Michael 5,000,000 barbed wires and DN, GRN availed. 20,000 Apple seedlings Payment in respect Lacks fuel Shell Elgon of fuel for PV 002347 500,000 consumption Service coordinating schedule departmental Lacks fuel Shell Elgon Payment of fuel for PV 002356 1,500,000 consumption Service DCAO for April - June schedule lacks fuel consumption Kongasis PV 10907 1,600,000 Fuel for coordination schedule, Petroleum Coordination program No PAF Fuel supply to LLG s Shell Elgon monitoring PV 11090 1,734,000 supervision & Back Service program & up Support reports No pre & post Repair of motor PV 11616 Nanoga Richard 2,000,000 inspection vehicle LG-0009-54 reports, Payment in respect No requisition, Simaki PV 11617 576,671 of works done in LPO, GRN, Enterprises Ltd procurement office Delivery note Lacks fuel Shell Elgon CAO's fuel for August PV 11623 2,000,000 consumption Service and September 2013 schedule Monitoring of PAF PV 21430 Chelimo Alex 750,000 PRDP projects in six No invoice sub counties Supply of fuel to Lacks fuel Shell Elgon PV 21488 500,000 CFO's office for consumption Service March 2014 schedule Facilitation of C/man No meeting V to travel to PV 21612 Maziina Michael 780,000 invitation and Entebbe for ULGA agenda attached annual meeting Payment for fuel for Lacks fuel Shell Elgon PV 21614 1,000,000 chairman LCV for consumption Service October 2013 schedule facilitation of c/man No meeting V to Kampala, PV 21615 Maziina Michael 780,000 invitation and Munyonyo Hotel for agenda JILOS Meeting Facilitation for No meeting PV 21623 Maziina Michael 910,000 UDIWSA meeting in invitation and

11

Entebbe agenda attached Facilitation of No invitation, fuel speaker to Mbarara receipts, PV 21627 Maziina Michael 790,000 Annual General subscription meeting (ULGA) receipt No report Facilitation for generated and training area land swearing PV 21646 Mayeku Tom 1,235,000 committee & ceremony swearing in program not ceremony attached Facilitation for LCV No Meeting PV 21648 Maziina Michael 780,000 Chairman to travel to minutes Kampala(OPM) Payment in respect No board of field visit for all meeting minutes, PV 21673 Mayeku Tom 1,607,500 public Lands and visit program and clarification report Facilitation for C/man LCV travels to No meeting PV 21695 Maziina Michael 780,000 Kampala to attend invitation ULGA meeting. No school Payment of fuel for Shell Elgon inspection and PV 23520 1,200,000 school inspection and Service monitoring monitoring report, program Construction of 2 No GRN, LPO, ZemaSavings & classroom block, 5 PV 23528 2,645,547 Delivery note, Credit stance pit latrine & invoice, for desks supply 36 desks No GRN, LPO, Construction of 4 Delivery note, Khaukha Fred classrooms, 5 stance invoice, PV 23531 4,110,556 and Sons line pit latrine & acceptance letter, supply 72 desks contract agreement No Contract agreement, Construction of 2 award letter, Betimu Hot classroom block PV 23546 9,483,266 acceptance letter, services without office & GRN, LPO, supply of 36 desks Delivery note , Invoice for desks No letter of ward, Construction of 2 acceptance letter, Zema Savings & classrooms, supply of invoice, contract PV 23556 7,887,038 Credit 36 desks at agreement, GRN, Bumusamali P/S LPO, Delivery notes TOTAL 111,319,388

12

Appendix 2-Irregular levy of 2% development tax

Receipt No. Particulars Amount 10062 Azom Construction Co 141,571 10063 Nabomarks (U) Ltd 126,796 10066 Zema Savings & Credit Co Ltd 411,780 10067 Globest Agencies Ltd 199,656 10068 KLR (U) Ltd 736,285 10069 Absolom& Brother Ltd 161,097 10070 Absolom& Brother Ltd 168,777 10071 KLR (U) Ltd 333,926 10084 2 Ocean screen printers 70,964 10085 Digital World 4,418 10088 Ideal Merchant property holdings 129,913 10091 Digital sounds & Sights 7,520 10097 2 Ocean screen printers 21,244 10099 Link Burg (U) Ltd 148,539 10204 Masijapo 52,181 10205 2 Ocean screen printers 39,292 10225 2 Ocean screen printers 37,600 10250 Ideal Merchant property holdings 188,000 10269 Buluganya International Ltd 13,160 10271 Buluganya International Ltd 8,629 10274 Buluganya International Ltd 11,938 10281 Buluganya International Ltd 29,422 10282 Buluganya International Ltd 30,012 10308 American Tower company Kampala 1,100,000 10323 Aswaki Construction Co 209,319 10324 Absolom& Brother Ltd 82,513 10325 L.H.M ground water exportation 40,000 10328 Health Dept 505,964 10335 Buluganya International Ltd 47,000 10336 Buluganya International Ltd 287,050 10346 LGMSD 123,991 10349 Link Burg (U) Ltd 54,802 10351 Nabuti technical services Ltd 20,304 10352 Nabuti technical services Ltd 19,082 10361 2 Ocean screen printers 36,952 10365 Gundu Construction & Builders 122,674 10366 Super Elgon Contraction Ltd 5,325 10367 Zimondo Multipurpose 11,143 10368 PIA Building & Construction 7,155 10369 Shelter Hitech 5,329 10370 Shelter Hitech 8,379 10371 G & W 7,424

13

10372 Kasande Agency 75,200 10373 Shelter Hitech 17,851 10374 M/S Infrastructure 7,266 10375 Reina savings & Credit co Ltd 3,666 10376 G & W 12,101 10377 Musamani& Sons 12,861 10378 Buluganya International Ltd 12,408 10379 Education Dept 53,991 10380 Education Dept 83,889 10386 Techo Design Engineering 198,850 10387 2 Ocean screen printers 80,088 10388 174,483 10391 Buluganya International Ltd 5,659 10392 Buluganya International Ltd 4,700 10398 Kawama General Ent 8,911 10399 Sibita Contractors 4,540 10402 Nalwali General enterprises 48,524 10413 Digital World sounds & Sights 4,700 10423 Buluganya International Ltd 6,110 10441 Nabomax 173,873 10468 Buluganya International Ltd 232,001 10469 Agolo General Enterprises 357,914 10498 Gundu Construction & Builders 3,746 10499 Nabaya General enterprises 5,463 10500 Gundu Construction & Builders 3,670 10551 Buluganya International Ltd 30,174 10555 Betimu Hot services Ltd 193,536 10556 Zema Savings & Credit Co Ltd 100,149 10557 Zema Savings & Credit Co Ltd 160,960 10558 Buluganya International Ltd 75,680 10559 Zimondo Multipurpose 175,460 10569 Nambasi International Ug Ltd 168,695 10576 Sibita Contractors 5,640 10577 Sibita Contractors 4,512 10578 Ideal Merchant property holdings 12,614 10584 Globest Agencies Ltd 212,848 10585 Azom Construction Co 107,009 10586 2 Ocean screen printers 16,168 10591 LGMSD 216,200 10592 Nabmax International Ltd 188,996 10598 Bulambuli DLG Works 230,751 10599 Bulambuli DLG Works 97,141 10600 Bulambuli DLG Works 235,000 10601 Works & Technical services 93,943 10614 Bunagani Young farmers 701,090

14

10615 Kasande Agency 270,720 10616 Education Dept 448,030 10617 LGMSD 58,938 10619 Health Dept 165,000 10621 Buluganya International Ltd 16,759 10622 Education Dept 262,209 10623 Education Dept 31,979 10624 Education Dept 208,206 10625 Works & Technical services 334,479 10626 Works & Technical services 139,292 10627 Health Dept 288,730 10628 Production & marketing 238,985 10633 Works & Technical services 323,360 10634 Works & Technical services 218,832 10635 Health Dept 329,052 10651 Works & Technical services 192,634 10657 Education Dept 202,938 10658 Health Dept 180,499 10659 Education Dept 344,882 10660 Education Dept 94,600 10661 Buluganya International Ltd 66,529 10662 Production & marketing 228,465 10663 Production & marketing 103,820 10675 Works & Technical services 81,810 10676 Works & Technical services 37,103 10677 Works & Technical services 170,920 10685 Education Dept 289,457 TOTAL 15,714,385

15