office of the auditor general - oag.go.ug

i

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

i

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

ii

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

iii

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

iv

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

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

v

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

vi

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

1

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.

2

No Entity Category Sector Opinion

9 Uganda Law Reform Commission Commission JLOS Unqualified

10 Uganda Registration Services Bureau - Operations SA /SE JLOS Unqualified

11 Uganda Registration Services Bureau – Liquidation Account SA /SE JLOS Unqualified

12 Uganda Land Commission Commission Lands & Housing Unqualified

13 Parliamentary Commission Commission Legislature Unqualified

14

16 Public Service Commission Commission PSM Qualified

17 Local Government Finance 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.

3

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

4

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.

5

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.

6

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

7

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

8

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.

9

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

10

(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

11

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.

12

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.

13

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;

14

Projects/

Activities

Status of

performance

Variance in

performance.

Audit Remarks Management

Response

1 Project 1033:

Design Hoima -

Kaiso -Tonya

(85km)

Acquisition of Land

by Government

Since the project start

UGX.10.8bn has been

paid out of the valued

UGX.11.8bn which is

95% of the amount

approved.

There was a delay in

approval of valuation

report for extra land

take.

Management should

explain the causes of the

delay that could lead to

paying more and or face

litigation challenges.

The valuation report

commenced after a

design review and the

valuation and approval

depends on the office of

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

15

Projects/

Activities

Status of

performance

Variance in

performance.


Response

Construction/Rehab

ilitation (Bitumen

Standard)

expected to be

completed by

December 2014.

schedule because rock

excavation Km 57-59

long has taken longer

than was anticipated.

to payment of project

extension costs.

No management

Response given.

No management

Response

given

2 Project 1035:

Design Mpigi-

Kabulasoka -

Maddu (135 km)

1035

Acquisition of Land

by Government;

The verification of

PAPs (Project affected

persons) along the

project road and cash

compensation

Commenced.

There was a delay to

finalize the procurement

of works contractor for

Kanoni-Sembabule

section.

Management should

explain the causes of the

delay and what measures

have been put in place to

avoid such occurrences.

Procurement of the

Consultant was initiated

in 2011 but the process

was halted due to

insufficient funds for FYR

2012/13. When the

project was revived, the

contract had to go to the

SG for approval.

Meanwhile the Valuation

16

Projects/

Activities

Status of

performance

Variance in

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

weigh bridges- two

multi-deck platform

weighbridge scales

for Mbarara and

Luwero

Not delivered yet Procurement delays

Management should

explain the cause of

procurement delays yet

there is a directorate of

procurement in place.

Analysis of the dates

marking the major

milestones in the process

does not indicate major

delays except getting

SG‟s approval which took

two months. Foundations

built at Luwero and

Mbarara, installation of

equipment to be

completed by end of

March 2015.

17

Projects/

Activities

Status of

performance

Variance in

performance.


Response

Procure design and

build contracts of

parking yards for

four OSBPs of

Busia, Malaba,

Elegu and

Mutukula.

Not delivered yet Procurement delays

Management should


procurement delays and

plans underway to

complete the activity.

Technical and Financial

evaluation report

submitted to PDU.

5 Output 4 5172

Government

Buildings and

Administrative

Infrastructure-

Draft Design of

UNRA Headquarters

Terms of reference for

the design

Services were

finalized.

The procurement

delayed to commence

because MoWT received

un solicited offer from a

developer to construct 3

Towers including a

UNRA tower.

Management should

explain the progress of

the delayed activity.

UNRA is using the design

and build approach to

procure a designer and

contractor at once to

save on the time of

implementation of the

works (save

approximately one year).

6 Project 0295

Upgrade Kampala -

Gayaza- Zirobwe

(44.3km)

18

Projects/

Activities

Status of

performance

Variance in

performance.


Response

Acquisition of Land

by Government

5.93 hectares of land

were acquired out of

the annual target of

17 hectares and spent

UGX.18.1 billion out of

UGX.21.7 billion

budgeted.

Delayed approval of

contract for extra land

take and injurious

affection, absentee land

owners.

Management should

explain the poor

performance and avail

the current progress

status for review.

The original contract did

not cover the additional

land requirement and so

a new contract needed to

be prepared. Since it was

beyond the allowable

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

19

Projects/

Activities

Status of

performance

Variance in

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

Construction/Rehab

ilitation (Bitumen

Standard)

The consultant

submitted the

Inception

Report. He

recommended a new

design because the

existing one was out-

of date after more

than 10 years.

The target was not met

because the scope of

services changed and

the contract had to be

amended which took

time.

Management should avail

evidence of the progress

so far registered and

plans underway to speed

up the process.

No evidence of progress

so far made availed for

verification.

No evidence of progress

so far made availed for

verification.

7 Project 0955

Upgrade Nyakahita-

Ibanda-Fort Portal

20

Projects/

Activities

Status of

performance

Variance in

performance.


Response

(208km)

Acquisition of Land

by Government


were acquired and

properties therein

compensated out of

the annual target of

45.

Targets were not met

due to the delayed

contract for injurious

affection and extra land

take.

Management should

explain the poor

performance and avail

the current plans for

review.

The target was set high,

but compensation by the

time of the Audit review,

most of the land had

already been acquired.

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

Construction/Rehab

ilitation (Bitumen

Standard)

Kamwenge - Fort

Portal 22.8% of the

works was completed

out of the annual

target of 25%.

The target for

Kamwenge - Fort Portal

road was not met

because of under

performance of the

contractor.

Management should

explain the penalties

charged against the

contractor.

No evidence of penalties

charged against the

contractor availed for

verification.

No evidence of penalties

charged against the

contractor availed for

verification.

21

Projects/

Activities

Status of

performance

Variance in

performance.


Response

8 Project 0957

Design the New

Nile Bridge at Jinja

Contractor is

mobilizing. Expected

to end in August 2014

and actual works to

commence then.


because procurement

delayed to be finalized.

Management should


Procurement

inadequacies.

The key areas of delay

were because of the

need to seek approval

from the funding agency.

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)

22

Projects/

Activities

Status of

performance

Variance in

performance.


Response

Acquisition of Land

by Government


were acquired and

properties therein

were compensated out

of the annual target of

200.

Land compensation was

affected by the delayed

approval of valuation

report for Municipality

section.

The audit noted lack of

follow up on this matter

to have accelerated the

delays. Management

should explain the

anomaly.

The valuation report

commenced after a

design review and the

valuation and approval

depends on the office of

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

Construction/Rehab

ilitation (Bitumen

Standard)

The cumulative

progress since the

start of the project

was 72.25% of the

Cumulative

achievement was lower

than the programmed

largely because of

Management should

explain the plans

underway to complete

the delayed activity.

No plans availed for

review during

23

Projects/

Activities

Status of

performance

Variance in

performance.


Response

works completed out

of the programmed

75.85%.

encumbrances caused

by delayed payment of

compensation.

verification.

10 Project 1034

Design of Mukono-

Katosi-Nyenga

(72km)

Acquisition of Land

by Government

There was no land

acquisition because

of the requirement of

TIN (Tax Identification

Number)

Payment was affected

by MoFPED requirement

that all PAPs should be

paid through IFMS and

must have TIN.

Management should avail

evidence that the

payment was effected.

Payment has since been

effected after MoFPED

relaxed the need for a

TIN before compensation

National Road

Construction/Rehab

ilitation (Bitumen

Standard)

Contractor

commenced

mobilization of

equipment and

personnel; and setting

up a camp to

commence works in

July 2014.


because of delayed land

and property

compensation.

Management should

explain why this was not

planned for adequately to

avoid the many claims

and ensure effective

service delivery.

No evidence availed for

review during

verification.

24

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

25

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

26

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;

27

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.

28

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

29

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.

30

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

31

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

32

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;

33

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

34

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.

35

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).

36

Road Contract Irregularity Likely Loss Loss Nugatory

Design and Build of Kampala –

Entebbe Expressway at

USD.479,172,021

Improper application of the VoP formula. $68,558

Design and Build of Mbarara-

Kikagati – Murongo Bridge Road

Works from Gravel to Paved

(Bitumen Standard) at

UGX.178,227,299,491

Changes in preliminary design vs actual

constructed pavement yet the costing was based

on the preliminary design. UNRA disregarded

PPDA condition for unentitled benefit of this

amount to the contractor.

UGX. 25,830,786,648

Failure to apply currency correction factor in the

computation of VoP.

UGX.16,999,819,835

Upgrading of Vurra – Arua –

Koboko – Oraba Rd to Paved

(Bitumen) Standard – 92Km by M/s

CICO at UGX.138,861,458,345

Poor planning and delay by NEMA in assessing the

impacts on the Rokoze stone quarry leading to

contractor‟s claim.

UGX.1,840,314,546

Asphalt Overlay of Kawempe -

Kafu2 at UGX.140,556,490,385

Prolongation costs-

Claim for contractor‟s idle plant and equipment for

4 months following a change of name of the

Consultant.

$3,213,876

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.

37


Interest on delayed payments UGX.624,619,628 &

$449,885

Asphalt defects UGX.16,771,245

Reconstruction of the Mbarara –

Ntungamo – Kabale – Katuna

Section of the Northern Corridor

Route Lot No.3 (Km 95+000 – Km

150+000) at Euro 65,808,558.09

The price of materials, Po used in RoP calculation

was not justified.

€154,955

Lack of Right of Way-Claim by contractor for lack

of access to site.

€66,698

Defective Asphalt €1,693,250

Civil Works for Upgrading of Ishaka

– Kagamba road to bituminous

standard (35.4Km) at UGX.

112,718,570,492

Extra Road width overpaid UGX.214,652,426

VoP overpaid due to errors. UGX.161,276,564

Upgrading of Gulu-Atiak Road to

Paved Bitumen Standard (74Km) at

UGX.89,667,759,288

Liquidated damages-Contractor not charged

liquidated damages

UGX.1,928,828,025

Periodic Maintenance of Muhanga –

Kisiizi – Kebisoni Rd (61Km) at

UGX.2,775,586,000

Mitres, culvert end structures, stone pitching and

gravel not executed

UGX.195,93

2,1

75

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

38


Mitaano-Kanungu (44Km) at UGX.

1,965,727,500

works. 250

Periodic Maintenance of Kazo –

Buremba – Nyakaliro (33Km) and

Nyakaliro – Kyegegwa (53Km) at

UGX.3,276,665,000

Liquidated damages not charged to contractor UGX.163,833,250

Emergency Repair of Karamoja

Flood Damaged Roads: - Package

3; Moroto (Ariamoi) – Lopei –

Kotido Road (102Km) at

UGX.2,031,200,000

Uncharged claim for non-completion of works UGX.63,935

,25

0

Gravel thickness UGX.12,909

,48

8

No evidence that the drift works were performed

by the contractor.

UGX.18,000

,00

0

Totals $68,558

€1,848,205

UGX.45,315,967,993

€66,698

UGX.300,279,16

3

$3,663,761

UGX.2,464,934,174

39

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

40

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.

41

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

R

e

f

Value of Work VOP Jointly

Recomputed

(OAG/UNRA)

VoP % Recoverable

Amount

1 Fort Portal

Bundibugyo – Lamia

Road

45 UGX.217,648,455,701 UGX.77,798,990,19

9

35.75 UGX.21,577,696,52

2

2 Bugiri – Busia/Malaba 2 UGX.109,388,732,415 UGX.73,370,228,86

4

67.07 Nil

3 Nyakahita – Kazo

Road upgrading

project

31 UGX.133,137,332,394 UGX.25,560,471,58

6

19.20 UGX.8,106,545,320

4 Kazo – Kamwenge

Road upgrading

project

35 UGX.168,337,116,650 UGX.39,628,443,93

1

23.54 UGX.2,731,287,220

5 Soroto – Dokolo road

upgrading project

29 UGX.76,235,532,471 UGX.21,710,252,84

4

28.48 UGX.(291,296,627)

6 Dokolo – Lira road

upgrading project

26 UGX.94,749,247,587 UGX.24,601,676,80

7

25.97 UGX.1,276,255,648

7 Reconstruction of

Kampala – Mbarara

Northern Corridor;

Package C: Nsangi-

Kamengo; Lukaya-

Masaka & Katonga

Bridge.

34 €59,164,061.84 €19,194,248.38 32.44 Nil

8 Kabale – Kisoro –

Bunagana – Kyanika

68 UGX.184,572,534,677 UGX.68,925,843,79

7

37.34 UGX.883,894,746

42

S/No Project Title IPC

R

e

f

Value of Work VOP Jointly

Recomputed

(OAG/UNRA)

VoP % Recoverable

Amount

road upgrading

project

9 Package 1, BRMP Lira

– Karuma – Kamdini

Road

12 UGX.22,018,002,428 UGX.12,882,513,42

5

58.51 Nil

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

43

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:

44

S/n Road Contract /

Contractor / Amount

Key findings

1. Design and Build of

Kampala – Entebbe

Expressway (51.4Km) by

M/s China Communication

Construction Company

Limited (CCCC) at

USD.479,172,020.74

The Capping layer was costed at $32,240,000 almost the same amount as for the sub base ($33,320,000) yet some sections with strong enough subgrade may not need the capping layer.

Works running behind schedule with 9.54% of the time lost as of August 2014.

Delayed settlement of disputes for RoW compensations hence delaying the contractor with possible costs in claims.

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

Mbarara-Kikagati –

Murongo Bridge Road

Works from Gravel to

Paved (Bitumen Standard)

by M/s China

Communications

Construction Company Ltd

at UGX.178,227,299,491

Inadequate cost control of the project because of absence of unit rate breakdown and resources to monitor performance.

Procurement and Contract Management records not poorly kept and some missing.

Poor planning in the procurement process characterised by:

i. Placing of the notice for prequalification of D&B contractor before approval of both the procurement method and the prequalification document.

ii. Absence of key background data in the bid documents issued later, prolonging the procurement period.

iii. Initiation of procurement of the supervising consultant one year and two months 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

45

S/n Road Contract /

Contractor / Amount

Key findings

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

– Koboko – Oraba Rd to

Paved (Bitumen) Standard

– 92Km by M/s Chongqing

International Construction

Corporation (CICO), China

at UGX.138,861,458,345

Environmental and social safeguards not properly addressed prior to commencement of works causing claims for extension of time with costs of UGX.1,840,314,546.

Bleeding observed on the Vurra junction and on approaches to speed humps. Crushed stone base was scouring around headwalls of access culverts. Poor Workmanship of at Km 89+050 for the first seal without repairing damaged primed

base course. Extensive cracking of the polymer modified concrete surfacing at Vurra. 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

46

S/n Road Contract /

Contractor / Amount

Key findings

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

Kawempe – Kafu Road

(166Km) by M/s

EnergoprojektNiskogradnja

at UGX. 140,556,490,385

Nugatory expenditure of USD 3,213,876 for idle equipment & plant. Delayed completion of works by the contractor for over 10 weeks without the employer‟s

intention to charge for delayed damages.

Nugatory expenditure of UGX.624,619,628 & USD 449,885 as Interest on delayed payment of Interim Certificates.

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.

47

S/n Road Contract /

Contractor / Amount

Key findings

5 Reconstruction of the

Mbarara – Ntungamo –

Kabale – Katuna Section of

the Northern Corridor

Route Lot No.3 (Km

95+000 – Km 150+000)

by /s Reynolds

Construction Company

(Nig) Ltd at Euro

65,808,558.09

Poor record keeping by PDU. Deficient detailed breakdown of prices submitted by RCC.

Unjustified inclusion of transport costs, losses, taxes and duties in Po in the application of RoP resulting in Euro.154,955 over-certified.

Financial loss of EUR 66,698 cost claim for lack of access to site by the contractor.

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.

Continuous longitudinal joint crack between the RHS & LHS sections of the road.

6. Civil Works for Upgrading

of Ishaka – Kagamba road

to bituminous standard

(35.4Km) by M/s General

Nile Company for Roads

and Bridges / Dott

Services Ltd JV at UGX.

112,718,570,492

Performance security and workmen‟s compensation policy expired, were renewed but no due diligence was conducted on the documents.

Non-participation of the Lead partners M/s General Nile Company. Delayed completion of works due to inadequate equipment, delayed compensation and

lack of final designs. Additional supervision cost of USD 1,096,121 and UGX. 36,330,000 is to be incurred.

Inadequate Traffic management/ safety signs. UGX.214,652,426 overpaid to the contractor in extra road width.UGX. UGX.161,276,564 overpaid due to errors in VoP computation in IPC No.10

7. Upgrading of Gulu-Atiak

Road to Paved Bitumen

Standard (74Km) by M/s

China Henan International

Cooperation Group Co. Ltd

(CHICO) at

Quantities of some work items like road bed preparation increased by 1,628%, Armco culverts by 2,075% raising doubts on the authenticity of the design.

Delayed completion of works and uncharged Liquidated damages of UGX.1,928,828,025 as only provisional extension of time was granted.

Several sections along the road between Ch.43+625 and Ch. 64+925 were identified to have suffered loss of second seal3.

Stripping and Raveling was observed on sections around Ch 67+345.

3BS/GA/PH/694/2014 of 30

th July 2014

48

S/n Road Contract /

Contractor / Amount

Key findings

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

Muhanga – Kisiizi –

Kebisoni Rd (61Km) by

M/s Pearl Engineering Co.

Ltd at UGX.2,775,586,000

Long procurement period of 11 months delay in award from the scheduled date. Change of consultant staff without approval by the client and no penalty given. The road had developed potholes, corrugations and gullies at various locations.

A number of culvert lines were installed without end structures. There was poor jointing of the culverts e.g. at Ch.2+250 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.

49

S/n Road Contract /

Contractor / Amount

Key findings

9. Periodic maintenance

Rukungiri-Mitaano-

Kanungu (44Km) by M/s

NICONTRA Limited at

UGX. 1,965,727,500

Long procurement period of 5 months delay in award from the scheduled date.

Lack of invocation of Clause 38.1 of the contract for rate change on item 2.2 which increased by over 13,000% and could have led to cost savings in the rate.

Change of consultant staff without approval by the client and no penalty given. 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.


Kazo – Buremba –

Nyakaliro (33Km) and

Nyakaliro – Kyegegwa

(53Km) by M/s Lexman

Ltd at UGX.3,276,665,000

Long procurement period of 5 months delay in award from the scheduled date.

Expired Performance Security. The delayed completion of works attracting liquidated damages of UGX.163,833,250. Rutting, water ponding, gullies and localised potholes were observed. A number of culverts had no end structures & others had cracked. At Ch.29+850 of Link 1, the culvert line inlet was completely silted/blocked. 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.

50

S/n Road Contract /

Contractor / Amount

Key findings


Ngetta- Apala- Adwari

road, Lot 10 (46Km) by

M/s Mostom Company Ltd

at UGX.1,487,119,350

Delayed procurement process. The road at Ch.1+700 and Ch.11+100 had been narrowed due to erosion of the

shoulders.

Potholes, gullies and corrugations were observed at several locations. The headwalls did not meet the specified 0.6m height above the road surface.

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

Karamoja Flood Damaged

Roads: - Package 3;

Moroto (Ariamoi) – Lopei –

Kotido Road (102Km) by

M/s Omega Construction

Limited at

UGX.2,031,200,000

Poor record keeping by PDU

Unjustified estimated cost of UGX. 2,210,858,560 without build-up unit rates.

Inadequate Control of Cost of the project, bidders are not asked to submit the unit break down/build-up of unit rates for the tender amounts

Noted potholes, depressions, rutting, gulleys, loss of camber and deformations.

Uncharged Shs 63,935,250 for non-completion of works as per SCC 60.1

Overpayment of UGX.12,909,488 due to variance between thickness of gravel certified in 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.

51

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

Gulu-Atiak days 181

months 6.02

Vurra - Arua – Koboko – Oraba days 159

months 5.31

Fort Portal – Kamwenge days 317

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

52

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

53

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

54

accumulated in the IFMS statement was used to fund other projects as indicated in

the table below;

Project Details Outstanding

Balance at

July1, 2014

Lending to

other projects

Borrowings

from other

projects

Outstanding

Balance at

June 30, 2014

(UUGX. ‘000) (UUGX. ‘000) (UUGX.

‘000)

(UUGX. ‘000)

Outstanding

Balance

8,905,228 - - 8,905,228

Kampala-Entebbe

Express Highway

- 1,794,807 - 1,794,807

CCCC IPC 5 - 2,248,41 - 2,248,418

LPC to other GoU

projects

- 529,575 - 529,575

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.

55

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.

56

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

57

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%

Name of firm: China Communications Construction Co. Ltd

Name of firm: China Railway Seventh Group Co. Ltd

Nationality: China Nationality: China

Headquarter: Beijing, China Headquarter: Henan, China

Overall estimated progress 98%

Overall estimated progress 67%

Payments: Payments:

58

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 as of 30 June 2013

131,697,8

65,259

112,196,8

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.

59

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

contractors 243,052,170

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

60

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.

61

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

received by

URF on.

Funds

when

released to

the DAs

No of

months

delayed

Agency EFT No Amount

UGX.

1 12/08/2013 07/11/2013 over 3

months Moroto District 6579 60,375,000

62

Funds

received by

URF on.

Funds

when

released to

the DAs

No of

months

delayed

Agency EFT No Amount

UGX.

2 12/08/2013 07/11/2013 over 3

months

Ntungamo

District 6587 169,090,635

3 12/08/2013 07/11/2013 over 3

months

Sembabule

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.

63

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.

64

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

65

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

from 2012/2013

Cases registered

in 2013/2014

Cases concluded in

2013/2014

Cases carried

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

66

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

(UGX.)

Quantity

Procured

Quantity

issued out

Balance

in stores

Citizens‟ Hand Book in

Luganda

24,677,968 2000 944 1056

Citizens‟ Hand Book in

Swahili

4,738,191 384 88 296

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

67

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

68

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

69

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.

70

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




codes.

71

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

72

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:

73

Cases brought

forward from

2012/2013

Cases

registered in

2013/2014

Cases

concluded in

2013/2014

Cases carried

forward to

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.

74


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

distribution of 3,000

copies of the quarterly

„Your Rights Magazine‟.

3,000 copies of the

quarterly „Your

Rights Magazine‟

produced and

distributed.

Nil 100% under

absorption.

Develop, translate and

print 5,000 brochures.

5,000 Brochures

developed,

translated and

printed.

1,000 Brochures

developed,

translated and

printed.

80% under

absorption.

Enhanced focus on economic, social and cultural rights

Visiting Health units. 495 health units

inspected.

225 health units

inspected.

(59%) under

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.

75

2.3.4 UGANDA REGISTRATION SERVICES BUREAU OPERATIONS

2.3.4.1 Mischarged expenditure




codes.

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

76

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

assignment)

124,432,500

Kenya Railways debt 1,582,215,752

Tashobya debt 57,324,273

Total 8,177,490,354

77

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.

78

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 activity

Performance Audit Remarks.

Management

Responses Qty ed

Qty Achieved

Varia-nce

Lease applications that were being processed

600 309 291 Management should explain the cause of variance.

The commission processed 726 leases on Government land for investments, housing 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

79

Details of activity


Management

Responses Qty ed

Qty Achieved

Varia-nce

transactions on Government land.

Government land titles that were to be processed.

60 10 50 Management should explain the cause of underperformance.

The Commission approved processing of 48 requests for titling Government land. 10 were fully processed and 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 occupants to be registered

1,750 0 1,750 Management should explain the failure to perform as planned.

Consideration and approval of the Land Fund Regulations which were to guide the process of registering bonafide occupants delayed in cabinet and the funds were reallocated and used to acquire more hectares of land.

Hectares of land to be acquired to secure bonafide occupants

4,000 3835 165 Management should explain the cause of underperformance.

4000 ha were targeted and 3834.764 Ha were achieved due to variation between the planned and actual compensation value as per the Chief Government valuer‟s.

Uganda Land Commission Bill to be drafted and stakeholders to be consulted on the draft Bill.

The first draft of Uganda Land Commission Bill was developed and consultations are still on going

Management should explain the failure to complete the consultation exercise.

Consultations on the bill are still on going.

To develop electronic data base

Procured a consultancy firm to develop the electronic data base management system

Management should explain the

Consultations still on going.

80

Details of activity


Management

Responses Qty ed

Qty Achieved

Varia-nce

management system for Government land inventory

cause of delays.

Certificate of financial implication for ULC Bill to be secured from MoFPED

Draft of ULC Bill was developed and consultations are still going on

Management should explain the cause of failure to complete the activity as planned.

The ULC Bill was drafted and consultations are still on going.

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.

81

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.

82

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

83

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.


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

84

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

function

output

Item

description

Quantity Amount

budgeted

(UGX.’00

0)

Amount

released

(UGX.’00

0)

Quantity Remarks

135206 Guidance

and

Monitoring-

Advertiseme

nts

Adverts to

be

conducted

by PSC

166,000 166,000 Released

one advert

“PSC Internal

Advert

Despite funding,

only

UGX.17,200,000

was spent which

is 10% of actual

release.

135275 Purchase of

motor

vehicles and

other

transport

equipment

One

vehicle

procured

250,000 170,792 One vehicle

purchased –

double cabin

The commission

over budgeted for

the purchase of

one car because it

spent only

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.

85

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.

86

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.

87

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

88

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.

89

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

90

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.


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/

Program

me

Item

descript

ion

Quantity Amount

Budgeted

Released Quantity Remarks

Vote

function

1353

Output-

135375-

purchase

of motor

vehicles

and

other

equipme

nt

Purch

ase of

one

station

wagon

Purchase

of tyres

and spare

parts

99,700,000 93,593,26

2

No

vehicle

purchased

Despite

93%

funding

no vehicle

was

procured.

The authority‟s objectives may not have been met.

91

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.

92

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

Naguru link

Not yet valued and thus

not in the asset register

Block 208, Plot 1035, 3883 &

3884 at Kawempe Kyadondo

Not yet valued and thus

not in the asset register

93

Land details Amount (UGX.) Remarks

LRV 1485 Folio 1 Plot 4A-12A

Namugera Road Mbuya (99

years-Lease from KDLB)

Not yet valued and not

in the asset register.

LRV 374 Folio 1 Plot 22 Plot

1A Kitante

Not yet valued and not in

the asset register.

Plot 20-22 and Plot 24

Nakivubo


the asset register.

LRV 2833 Folio 5 Plot 2

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.

94

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.

95

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.

96

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.


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

97

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

function

output

Item

descripti

on

Planned

outputs

/quantity

Amount

budgeted

(UGX.)

Amount

released/

collected

(UGX.)

Actual out

Put as at

30th June

2014

Audit

remarks

Roads

and

drainage

works

Constructi

on of

Prince

Charles

drive

retaining

wall –

including

road

reconstruct

ion

Building of

retaining wall

so that road

is opened to

traffic

1,000,000,000 1,000,000,

000

procurement The

constructi

on work

had

commenc

ed

Reconstruc

tion of

Mbogo

Road

(PAVED)

Construction

of 1.9km

Mbogo road-

upgrade to

paved road

2,521,131,800 2,356,736,

000

Still

struggling

with

contractor to

complete

Construct

ion is not

yet

complete

d.

Reconstruc

tion /

upgrade

Lot-2

Mutundwe

4.5km

Weraga

2.45km

Wansaso

0.18km

13,122,000,00

0

15,167,589

,100

Works

started on

Mutundwe

road.

Expected to

be completed

by March

2015

Works

are

ongoing

Drainage

improvem

ent and

Replaceme

nt of

Manhole

Covers

Manhole

cover

replacement

within the

450,000,000 71,647,600 The single

sourced

company

ALTIUS

Manholes

have not

yet been

fully

98

Vote

function

output

Item

descripti

on

Planned

outputs

/quantity

Amount

budgeted

(UGX.)

Amount

released/

collected

(UGX.)

Actual out

Put as at

30th June

2014

Audit

remarks

maintena

nce works

city ENGINNERIN

G (U) LTD

did not

deliver the

manholes

installed

in the

city.

LGMSD Health

infrastruct

ure

Kitebi

health

centre

renovated

Renovation

of kawaala

H/C

Kisenyi

health

centre

remodeled

1,729,892,000 1,729,892,

000

Works on

kitebi still at

about 20%

Renovation

at Kawaala

still at

design

stage

Procurem

ent for

the

constructi

on of

Kawala

Health

centre

has

commenc

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

99

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.

100

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.

101

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

102

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.

103

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.

104

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

response

Audit remarks

/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

quantities (BoQs) to

reflect changes after

design review.

The bill of quantities

(BoQs) for the project

was updated after the

design review and it was

the basis for the

Updated BoQs were

not used for

certification of works.

I advised the

Accounting Officer to

105


response

Audit remarks

/recommendations

Variation. ensure that the revised

BoQs are used

whenever there is a

review.

The Consultant was

engaged after 48% of

the works were

completed. The

consultant‟s scope

included a design

review and hence

required the

Consultant‟s

engagement before

contracting the works

out.

KCCA has now put in

place framework

contracts for consultancy

supervision to

minimize/control such

delays.

Consultants should be

engaged before

commencement of the

contracts.

The Authority should

assess the adequacy of

framework contracts

for consultancy

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

inspections road

sections had ponding,

alligator cracks,

uncovered manholes

and segregation.

The observed defects

were identified as part of

the snag list issued to

the contractor. These

failed areas are mostly

around sewer manholes

which frequently

The Contractor should

be tasked to rectify the

defects to achieve the

desired quality.

The Authority should

monitor and ensure all

106


response

Audit remarks

/recommendations

overflow with sewage

weakening the asphalt.

The contractor has been

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.

defects are actually

corrected 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

amounting to UGX.

56,725,464 were not

charged to the

contractor as per

GCC49.1 of the

contract.

Liquidated damages

could not be charged for

works that were done

within the performance

period of the 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

Contractors should

always be charged

liquidated damages for

the delays as per

contract.

107


response

Audit remarks

/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

design drawings and

report at

commencement of

works. Detailed design

drawings were issued

to the contractor 56

days after issuing the

Commencement order.

The initial

commencement date of

the contract was 29th

May 2013. However the

contractor wrote vide

letter ref

OME/MPM/KCCA/TRMRM

D/2013/011 dated 5th

July 2013 notifying that

he would be starting

works on 26th July 2013,

effectively changing the

start date. The first set

of design drawings was

issued to the contractor

on the 24th July 2013 to

avoid any delay in the

implementation of the

contract. (See

attachment 1.2e)

The document

submitted does not

relate to the

commencement order.

The Accounting officer

should always abide by

best practice by

ensuring detailed

design drawings and

report are available

and issued to the

contractor at

commencement of

works to avoid delays

in contract

implementation

The supervision

consultant for the

works was

commissioned 49 days

The commencement date

was effectively changed

by acceptance of the

The commencement

date did not change

because the

108


response

Audit remarks

/recommendations

after the

commencement of

works, making it

unclear who supervised

the works before.

contractor‟s letter dated

06th July 2013 to 26th

July 2013. So the

consultant was engaged

in time.

contractor‟s letter did

not refer to a

commencement order.

The Accounting Officer

should ensure that

supervision consultants

are procured before

commencement of

works.

Quality related defects

were observed on

several sections of the

Road, including

segregation signs,

cracks, poorly

constructed overlays

and drainage

defects.(Silted culverts,

collapsed ,manholes,

unprotected slopes and

scoured channels)

The contract was

terminated by the

Employer due to

fundamental breach of

contract by the

contractor specifically by;

(i) Failure to rectify

defective works

(ii) Failure to

maintain a valid advance

payment guarantee

(iii) Failure to perform

the contract within the

maximum liquidated time

of 100 days.

The contract is under

arbitration awaiting a

final ruling. The

Employer intends to


is advised to ensure

that;

Final account is

prepared and all

contractual

obligations with the

contractor are

concluded.

Enhanced supervision

is carried out on the

new contractor

tasked to rectify

defective works to

ensure the desired

quality of works is

achieved.

109


response

Audit remarks

/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

were observed on

some sections of the

road revealing 2

broken manholes,

some road edges were

not flashing with the

drains and lack of

screens for debris from

access road drains.

The manholes were

broken by heavy trucks

which are not supposed

to use the road. There

are road signs clearly

indicating the tonnage

allowed on the road.

Police has been advised

to enforce this

regulation. The

contractor was however

instructed to make good

and has replaced the

covers.

Screens for debris were

not included in the BOQ

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


should

Ensure;

Defective works

on the road edges and

road drains are

rectified to the desired

quality of works.

Sensitization of public

and road users about

safeguard and

destruction of

manhole covers

Use of superior

materials in manhole

construction deterring

theft of manhole

covers

110


response

Audit remarks

/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 engaged three (3) months after contract commencement

KCCA has now put in

place framework

contracts for consultancy

supervision to

minimize/control such

delays.


should ensure that

supervision consultants

are procured before

commencement of

works.

Quality related defects were observed on some road sections such as edge failures, alligator cracks, ponding, damaged side drains , stone pitching and vegetation overgrowth

The roads were

inspected while the

works were in progress.

The mentioned failures

were identified and the

consultant issued

instructions for their

correction. Currently they

are largely rectified and


should ensure that

defective works

associated with edge

failures, alligator

cracks, ponding, side

drains, stone pitching ,

vegetation overgrowth

are rectified by the

111


response

Audit remarks

/recommendations

the remaining few are

being rectified on a case

by case basis by the

contractor during work

progress

contractor before

handover of the works.

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

submitted 8 months

after signing of

contract, leading to a

claim for idle time for

plant and personnel of

UGX. 1,700,000,000

This claim is still being

reviewed by the

consultant as evidence

provided was not

satisfactorily, hence

being disputed by the

Employer. The figure

recommended by the

consultant was not

justifiable and has not

been accepted by the

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

Final design drawings

and report should be

made available and

issued to the contractor

at commencement of

works to avoid

associated delays in

contract

implementation and

associated claims.

112


response

Audit remarks

/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

appointed 3 months

after commencement,

with a scope that

included design review,

which was submitted

late into the contract

implementation. The

result was a claim for

idle time and time

extension by the

Contractor.

The time extension was

granted to the contractor

at no extra cost to the

Employer (see

attachment 1.5c). The

claim for idle time made

by the Contractor was

disputed by the

Employer.


should ensure that;

Supervision

consultants are

procured before

commencement of

works to enable

designs of works is

reviewed for quality

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

coordination with It is the contractors Response not

113


response

Audit remarks

/recommendations

third parties such as

National Water and

Sewerage Corporation

(NWSC) in relocation of

infrastructure within

the works of KCCA

responsibility to liaise

with third parties like

UMEME, NWSC etc as

per technical

specification A14

That notwithstanding,

KCCA made Efforts to

coordinate several third

parties such as NWSC,

UMEME, etc. This was

through letters and

meetings and there were

contact persons to

consult

satisfactory.


has an obligation of

ensuring that there is

coordination with third

parties other than the

contractors if they are

Gov‟t agencies such as

UMEME and NWSC in

implementation of civil

works especially

where;

Water and sewerage

infrastructure

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

penalised for

abandoning works on

Salama Road, Ttula

KCCA can only penalize

the contractor at

payment, and no

certificate had been


is advised to ensure

that a final account is

prepared and all

114


response

Audit remarks

/recommendations

and Bugolobi as

required by GCC59.2

but later terminated

the contract before the

client did over payment

delay of IPC4.

presented during that

period of site

abandonment.

KCCA started on the

process of termination

(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

contractual obligations

with the contractor are

concluded.

115


response

Audit remarks

/recommendations

contractor in January

2015. A final account is

under preparation by the

consultant. (see

attachment 1.5f)

Filed Observations along

road sections on the

black spots revealed the

following;

Salama Road – varying

diameter weep holes,

lack of relief points to

flood areas at back

slope to the drain,

Bandhali rise/Bugolobi

– overburden left in the

island between drains,

overgrown bush, lack

of weep holes, lack of

manhole covers, poorly

restored road.

Entebbe Road – un-

restored areas at

manholes near capital

shoppers, settlement/

depression of restored

wearing course,

alligator cracks on

restored asphalt, un-

even paving blocks,

choked and silted

manhole covers.

Ttula Road – lack of

weep holes,

abandoned stone

The contract was

terminated and the

contractor shall be

penalized for uncorrected

defects on compilation of

a final account.

All uncompleted and

defective works noted on

the respective project

sites have not yet been

paid.

All Uncompleted works

and defects noted are

planned to be addressed

in-house.

Defects on Entebbe road

are already being

addressed in-house.

Works which were

abandoned like on Tula

road will be done after


should ensure that;

Defective works

identified on the

black spots on

Salama road,

Bandhali rise,

Entebbe road are

rectified by the

contractor and the

desired quality

achieved.

Close and continuous

monitoring and

supervision of

implementation of

civil works is carried

out to enable early

detection and

corrections of defects

identified to ensure

quality works are

achieved.

116


response

Audit remarks

/recommendations

pitching works, gulley

and pit formation with

mudslides on drain

sides expanding to

nearby

houses(cracked),

vegetation overgrowth,

garbage dumping and

sewage/ filth flow.

Electoral commission /

Jinja Road – vegetation

overgrowth, cracked

headwall, and sewage

flow.

sourcing for another

contractor to complete

the works.

The sewage flow is as a

result of illegal

connections of sewage to

storm water lines. At the

same time, the National

Water and Sewerage

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;

117

(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:-

118

• 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.

119

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.

120

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.

121

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.

122

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;

123

Committee No. of meetings budgeted

for

Number of

meetings held

Variance Number of

members who

attended

Rate per

person (UGX.)

Expenditure for extra meetings

(UGX.)

Business

Committee

4 7 3 9 290,000 7,830,000

Legal and

Electoral

Affairs

Committee

4 8 4 15 290,000 17,400,000

Finance and

Budget

Committee

4 8 4 12 290,000 13,920,000

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.

124

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.

125

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.

126

(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

127

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

128

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.

129

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.


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

130

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

table below.

131

Vote/

Progra

mme

Item

description

Budgeted Quantity/

outputs

Amount

Budgeted

(UGX.)

Released

(UGX.)

Actual Quantity/

out puts

Remarks

Project

0355

Rehabilitation

of Parliament

Carry out emergency

repair of the roof of the

Parliamentary building

Complete renovation of

the Development house

State of the art

plumbing completed

8,966,232,226 8,966,115,876 Repair of roof of

Parliamentary

building

Partial renovation

of development

house and

plumbing

undertaken

Development

house

renovation not

completed

Plumbing of the

parliamentary

building not

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.

132

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.

133

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,

134

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.

135

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

136

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.

137

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

Activities

Expected

Outputs

Actual outputs Remarks

Output

075201.

Management of

Education

Personnel.

Appointment of

2,000 teaching and

non teaching

Personnel.

-Appointed 82

Teaching and Non

teaching staff in

NTCs.

Did not appoint

1,918 Teaching and

Non teaching

personnel.

Confirmation of

2,000 teaching and

non-teaching

personnel.

Confirmed and

Regularized 277

teaching and non

teaching staff.

Did not confirm

1,723 teaching and

non- teaching

personnel

Promote 4,000

Primary Teachers

under Scheme of

Service

Did not promote

4,000 primary

Teachers.

Supervising and

guiding 112

Districts on

Recruitment.

Did not supervise

and guide the 112

districts on

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.

138

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


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

139

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.

office of the auditor general - oag.go.ug

Documents