REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF LOCAL GOVERNMENT FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF LOCAL GOVERNMENT FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST OF ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF LOCAL GOVERNMENT FOR THE FOR THE YEAR ENDED 30 TH JUNE, iv 1.0 INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING FUNCTIONS OF THE MINISTRY AUDIT OBJECTIVES PROCEDURES PERFORMED FINDINGS Local Government Sector Investment Plan (LGSIP) Account Payments for domestic arrears Vacant Posts in the Establishment Budget Performance Follow up of prior year audit reccommendations ii

3 LIST OF ACRONYMS CHOGM Common Wealth Heads of Government meeting DDP Duty Delivery Paid DDP III District Development Programme III ERT Energy for Rural Transformation LED Local Economic Development LGMSD Local Government Management and Service Delivery LGSIP Local Government Sector Investment Plan MOLG Ministry Of Local Government MOFPED Ministry of Finance Planning and Economic Development MoU Memorandum of Understanding MoW &T Ministry of Works and Transport MTEF Medium Term Expenditure Framework NSSF National Social Security Fund PAYE Pay As You Earn PPDA Public Procurement and Disposal of Assets PST Project Technical Team TAI Treasury Accounting Instructions TSSA Treasury Single Sub-Account UGX Uganda Shillings UNCDF United Nations Children s Development Fund UNDP United Nations Development Programme UPF Uganda Police Force URA Uganda Revenue Authority WHT Withholding Tax iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF LOCAL GOVERNMENT FOR THE FOR THE YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of the Ministry of Local Government for the year ended 30 th June These financial statements comprise of the Statement of Financial Position, the Statement of Financial Performance, and Cash flow Statement together with other accompanying statements, notes and accounting policies. Management Responsibility Under Article 164 of the Constitution of the Republic of Uganda (as amended) and Section 8 of the Public Finance and Accountability Act, 2003, the Accounting Officer is accountable to Parliament for the funds and resources of the Ministry. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance and Accountability Act 2003, and Financial Reporting Guide, 2008, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda (as amended) and Sections 13 and 19 of the National Audit Act, 2008 is to audit and express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor s judgment including the assessment of risks of material misstatement of financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity s preparation and fair presentation of financial iv

5 statements in order to design audit procedures that are appropriate in the circumstances but not for purposes of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Part A of this report sets out my qualified opinion on the financial statements. Part B which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management and form part of my Annual Report to Parliament. PART A Basis for Qualified Opinion Mischarge of Expenditure The Ministry of Local Government charged wrong expenditure codes to a tune of Shs.2,497,433,465. The practice undermines the intentions of the appropriating authority and leads to incorrect financial reporting. Qualified Opinion In my opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the financial statements of the Ministry of Local Government for the year ended 30 th June 2014 are prepared, in all material respects, in accordance with the Financial Reporting Guide, 2008 and section 31(6) of the Public Finance and Accountability Act, John F.S Muwanga AUDITOR GENERAL KAMPALA 17 th March, 2015 v

6 REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION

7 PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF LOCAL GOVERNMENT FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014 This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 1.0 INTRODUCTION Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended) requires me to audit and report on the public accounts of Uganda and all public offices including the courts, the central and local government administrations, universities, and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the Ministry of Local Government to enable me report to Parliament. 2.0 BACKGROUND INFORMATION The Ministry of Local Government (MOLG) headquarters is Located at Workers House Pilkington Road 2 nd -6 th Floor. The mandate of the Ministry is derived from the Constitution of the Republic of Uganda 1995, Chapter eleven and The Local Government Act 2002 as amended in 2007 being the legal instruments creating the entity. Its vision is To have democratic and accountable local Governments capable of delivering efficient and effective sustainable services to the people, thereby bringing about social-economic transformation in the country. 3.0 ENTITY FINANCING The Ministry was financed by grants from Central Government. Grants totaling to Shs.35,209,462,811 from Central Government were received. The Ministry also received Shs.61,197,000 as miscellaneous revenue, bringing the total revenue to Shs.35,270,659,811. The total grants revenue of Shs.35,209,462,811 constituted 72.8% of its approved budget estimates of Shs.48,411,342, FUNCTIONS OF THE MINISTRY The Ministry has the following objectives:- To guide, harmonize, mentor and advocate for all Local Government in Support of the vision of Government to bring about socio Economic Transformation in the country. 1

8 5.0 AUDIT OBJECTIVES The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish:- a. Whether the financial statements have been prepared in accordance with the requirements of the Public Finance and Accountability Act 2003 and the regulations, and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b) Whether all the Ministry s funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c) Whether goods and services financed have been procured in accordance with the PPDA Act. d) To evaluate and obtain a sufficient understanding of the internal control structure of the Ministry, assess control risk and identify reportable conditions, including material internal control weaknesses e) Whether management was in compliance with the Government of Uganda financial regulations. f) Whether all necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented. 6.0 PROCEDURES PERFORMED The following audit procedures were undertaken:- a) Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the Ministry s cashbooks and bank statements. b) Expenditure The Ministry payments vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. c) Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period. 2

9 d) Procurement Reviewed the procurement of goods and services under the Ministry during the period under review and reconciled with the approved procurement plan. e) Fixed Assets Management Reviewed the use and management of the Ministry s assets during the period under review. f) Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluating the overall financial statement presentation. 7.0 FINDINGS 7.1 Mischarge of Expenditure A review of the Ministry of Local Government s expenditures revealed that the entity charged wrong expenditure codes to a tune of Shs.2,497,433,465. This constituted 8% of total expenditure for the Ministry. Mischarges undermine the importance of the budgeting process as well as the intentions of the appropriating authority and lead to misreporting. Management explained that this was caused by quarterly release limitations which forced management to charge items with cash balances to fund urgent and critical activities. Management further explained that insufficient budget allocations and severe cuts in consumptive areas by MOFPED led to this situation. I advised management to liaise with the relevant authorities to streamline the budget process to ensure that sufficient funds are allocated to each account. Further, authority should be sought for any reallocations. 7.2 Unaccounted for remittance to Uganda Police Force Shs.137,542,000 It was observed that Shs.137,542,000 was remitted by the Ministry to UPF to cater for training of Police Fire and Rescue personnel on Fire fighting equipment but this payment was not supported with a Memorandum of Understanding between the two parties specifying the outputs, responsibilities and accountability framework. Furthermore, I could not confirm whether the activity was undertaken as no accountability documentation or report was availed for verification. 3

10 Management explained that UPF had been contacted to furnish them with the accountabilities. I advised management to ensure funds are accounted for in time and also have the MoU in place before any remittance of funds to third parties is effected in the future. 7.3 Advances to Individual Personal Accounts Shs.4,623,642,146 Non-Compliance with Treasury Accounting Instructions Shs.4,623,642,146 was advanced to Ministry staff through their personal bank accounts to undertake direct procurements and other activities of the Ministry contrary to Sections 227,228 and 229 of the Treasury Accounting Instructions. Such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the Ministry does not have any control over such funds deposited on personal accounts. Management explained that the advances mainly related to activities and workshops undertaken upcountry with staff from other Ministries/Local Governments. Management further explained that staff from the Ministry acted as Team leaders who were responsible for allowances and other facilitations for the team members. All activities were carried out and activity reports filed. I advised management to ensure strict adherence with the requirements of the Treasury Accounting Instructions. 7.4 Payments for beautification of Kampala A local Company entered into a contract with Ministry of Local Government for beautification of the Clock-Tower-Nsambya-Gaba/Munyonyo Road corridor in 2007 ahead of the CHOGM activities and final certification of works was issued in May A review of the payments to the contactor revealed several issues as follows; (i) Nugatory Expenditure: It was noted that Shs.107,989,414 has been outstanding since issuance of a completion certificate by the consultant in May Because of that, interest accrued on late payment rose to Shs.371,748,822 as at February 2012 (an increment of 344%) leading to a payable sum of Shs.479,738,236. At the time of reporting, the payable had been made good. The interest paid is considered nugatory. 4

11 (ii) Interest computation basis: Clause 43.1 and 43.2 of the contract provided for interest on late payment by the client to the Contractor from the date by which the payment should have been made up to the date when the late payment is made at the prevailing rate of interest for commercial borrowing. It was noted that the basis for the contractors interest rate was unknown since the clause did not specify the Bank for prevailing commercial interest purposes. The contractor seems to have exploited the loophole to compute interest using his own banks interest rate that might have been higher than Bank of Uganda rate. Without providing the schedule for interest computation, I could not confirm the accuracy of the amount and whether the right rate was used in the computation. Management explained that the transaction was incurred during the CHOGM and it was inevitable that the payment had to be settled although it was not included in the domestic arrears. The Ministry of Finance, obligated votes to settle outstanding claims under their votes the basis upon which the payment was later made. I advised management to avoid such losses in future by putting in place adequate risk management controls, and paying suppliers and contractors promptly. 7.5 Motor vehicles and office equipment Motor vehicle repairs and servicing Shs.560,453,690 was spent on repairs and servicing of the Ministry s motor vehicles during the year. However the following issues were noted which require management attention; Payment for grounded vehicles Shs.13,869,979 was spent on four vehicles that were confirmed as having been grounded throughout the year and were ineligible for any repairs. Cash payments Cash payments to the tune of Shs.5,000,000 was paid to a staff for onward remmittance to a pre-qualified supplier being funds to cater for repairs and servicing Ministry motor vehicles instead of using direct EFT payment. This is contrary to the financial regulations. 5

12 Management explained that the grounded vehicles were earmarked for disposal but the Ministry failed to acquire a new fleet and the same vehicles remained in use for the time the expenditure was incurred. Management also explained that there was an emergency activity and garages had refused to offer services without settlement of outstanding dues which led to the utilization of cash to undertake the repairs. I advised management to liaise with Ministry of Works and Transport and have uneconomical motor vehicles boarded off Non-serviceable motor vehicles An inspection of the Ministry s stores and motor vehicle yard revealed that there were a number of un-serviceable motor vehicles and office equipment which were occupying valuable space. There was no evidence of any initiated process for disposal. Some of the vehicles were found abandoned in privately owned service garages where they were exposed to risk of vandalism and further loss of value. Non-disposal of un-serviceable motor vehicles and office equipment may lead to loss in value through vandalization or theft and creates shortage of valuable storage space. Management explained that the Ministry through an Auctioneer carried out the process of disposing off all the old vehicles last year. Unfortunately the fleet continues to depreciate and more vehicles became unserviceable. The Ministry has again initiated the process to dispose them off. I await management s effort in the disposal process Nugatory payment of parking fees As noted in my previous year report, it was observed that during the year under review, Shs.33,040,000 was again paid to a parking space service provider as parking fees for 16 Ministry motor vehicles parked in the basement of Uganda House contrary to Chapter 7, paragraph 705 of the Treasury Accounting Instructions part 11-Stores that requires compilation of lists of unserviceable vehicles for onward submission to the Accountant General requesting for their disposal. The payments relate to the period January to June 2013 (Shs.15,292,800) and July to December 2013 (Shs.17,747,200). Inspection of the parked vehicles in the basement revealed that these vehicles were grounded and therefore expenses incurred on them are nugatory. There is risk of loss of the vehicles given the incomplete vehicle register and vandalism which will reduce the disposal value. 6

13 Management explained that the process of boarding off was in advanced stages. I advised management to expedite the boarding off of grounded motor vehicles so that wasteful funds paid for parking space is saved. 7.6 Non-deduction of Withholding tax Section 120(1) of the Income Tax Act requires all Ministries to withhold tax from supplies of any services of an amount or amounts in aggregate exceeding one million shillings to any person in Uganda at the rate of 6% of the aggregate sums. Further, section 124(1) of the Act requires a withholding tax agent to remit the tax within fifteen days after month end. Contrary to the above, I noted that withholding tax to the tune of Shs.93,970,920 from two payments was not deducted for onward remittance to URA. See the table below; S/N Description Gross amount (Shs.) 6% WHT 1 Rental payments to NSSF 1,354,050,785 81,243,047 2 Stationery purchases 245,453,819 12,727,873 93,970,920 The Ministry risks fines and penalties from URA that may be imposed for nonadherence to the laws. Management in response regretted the anomally and pledged to withhold tax from the suppliers subsequent payments. I advised management to ensure that due taxes are deducted and remitted to URA as required by the Income Tax law. 7.7 Anomalies in Procurement A sample of procurement files were selected to enable me audit the various stages of the procurement process from initiation to contract management and a number of observations ranging from undervaluation of taxes, bid and evaluation manipulation, non-compliance to specifications in bid documents, defiance of Public service authority, contract payments and limitation on bidders were noted. Details are as below; 7

14 a) Limitation on bidders on procurement of energy packages PPDA regulations 142(1), (2) and (3) requires a shortlist to include sufficient bidders to ensure effective and real competition. Further, it requires a PDU to use information from four sources i.e. PPDA register, entity prequalified list, any other PDU list and market knowledge. Three bidders were invited using market knowledge and two submitted bids for the above mentioned procurements worth Shs.123,679,500. However, it was noted that there was limitation as the PPDA register had at least four providers for the service who would have been invited to bid and widen competition. As such there was no adequate competition in this respect. b) Non-compliance to specification Review of the evaluation worksheets revealed that a company that bided for supply of vehicles and motor cycles was non-compliant on the 4WD station wagon of 3000cc with regard to minimum dimensions as the company was silent on ground clearance that was required of 0.22m and fell short on the required length of 4.9m by submitting a bid of 4780mm. The company should have been eliminated at this stage. The company however went on to win the contract. Further, Government procedure requires authority from the Minister of Public Service for procurement of vehicles. Authority on the procurement from the Minister of state dated 31/3/2014 specified two double cabin pick-ups not exceeding 2800cc; however the supplier was awarded to provide 3000cc vehicles. Management explained that PDU s knowledge of the market was one of the recognized databases under Rule 142(2) (d) for development of provider shortlist and that three providers on the shortlist were considered sufficient. Management further explained that registered providers will be accorded priority in future. With regard to non-compliance to specifications, the evaluation and review of specifications offered by providers involved expertise from MoWT and that certain non-conformity could be waived under R178 (4), (5). I advised management to ensure that the Procurement and Disposal Unit and Contracts Committee adhere to the PPDA Act and regulations are strictly adhered to. 8

15 7.8 Local Government Sector Investment Plan (LGSIP) Account The Ministry operates a Bank Account Local Government Sector Investment Plan with Bank of Uganda. At the end of the financial 2012/2013 the Ministry had a balance of Shs.852,593,754 and during the financial year 2013/2014 management made several transfers totalling to Shs.440,697,837 from Treasury Single Sub Account (TSSA) to this account for onward remittance to clearing firms. Audit review of receipts and expenditures on this account revealed the following; Rationale for maintenance of Bank account: It was noted that the account has no project funding but rather receives transfers from the Ministry Treasury Single Sub Account (TSSA) for onward remittance to suppliers and Ministry staff which activities should have been effected from the TSSA. It should also be noted that the Project closed some years back but Management did not close the account. This is contrary to Treasury Accounting Instructions (TAIs). Such accounts are easily susceptible to irregular activities. Financial reporting: The balance brought forward of Shs.852,593,754 and spent during the year was not reflected in any performance report for the year since it was neither project funding nor appropriated by Parliament. Management explained that Local Government Sector Investment Plan was a Project and as such its expenditure could not be reflected in the statement of financial performance but rather end of year balances are disclosed in the schedule of Project balances. I explained to management that projects have timelines, financing agreements, project appraisal documents and annual audit reports which was not the case. I advised management to consider closing the account in line with Accountant Generals guidelines. 7.9 Payments for domestic arrears Treasury Accounting Instructions 2003 Part 1 chapter IV section 188 specifies that an officer authorized to incur expenditure will ensure that no payments due in any financial year remain unpaid at the end of that year. Further, the established commitment control system requires management to commit the Ministry only when funding is appropriated and has been confirmed. 9

16 A review of the financial statements of the Ministry for the year ended June 2013 revealed that the Ministry had outstanding commitments of Shs.51,037,123. However I noted that Shs.799,619,907 was paid to several companies for settlement of arrears incurred in the previous financial years. This was a clear indication of nondisclosure of full arrears. Summary of payments is as below; S/N Description Amount (Shs) 1 Beautification M/s Omega construction 479,738,236 2 Vehicle repairs 186,545,356 3 Clearing and forwarding 133,336, ,619,907 The Ministry misrepresented their indebtedness in the previous financial statements. Furthermore, the Ministry did not budget and neither did it have a provision for item (domestic arrears) besides, supplementary funding was not requested instead management mischarged already budgeted items. Under the circumstances funds for planned activities appropriated by Parliament were diverted to settle domestic arrears. I advised management to adhere to the commitment control system and ensure that domestic are verified, budgeted for and paid using the appropriate expenditure account codes and are appropriately disclosed in the financial statements Vacant Posts in the Establishment Ministry of Local Government has an approved establishment structure of 165 staff. However a review of the established structure revealed that 16 posts were not yet filled representing ten (10%) vacancy gap. Service delivery is hampered by delays in filling the vacancies especially at senior management level and staff may be overworked which may adversely affect their morale. Management explained that some of the posts fell vacant because some staff were interdicted while others were promoted to higher posts. Management further explained that a submission had been made to Public Service Commission to have the vacant posts filled. I await management s effort in filling the vacant posts. 10

17 7.11 Budget Performance Public Finance and Accountability Regulations 2.10(b) entrusts the Accounting Officer with ensuring that all total controls such as those contained in the approved estimates, warrants and others are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort is required to be made to achieve the agreed objectives or targets of the entity within the availed resources. Review of the budget performance for the year under review revealed that some targets were partially or not achieved despite release of funds to the vote functions. Details are in the table below: Vote function output Project 1089a-LGSIP Support to District Development Project 1089b-LGSIP Support to local councils development Project 1089d-LGSIP Support to policy, planning and support Item description Planned outputs/ Quantity Construction of Subcounty headquarter s at Nabweru Wakiso district Construction of Local government offices supported pledges Procurement of Motor vehicle Government buildings and administrative infrastructure Purchase of Motor Equipment and other Transport Equipment government building and administrative infrastructure Amount (Shs) budgeted Amount released (Shs) Actual output/ Quantity 300,000, ,400,000 No construction has started Remarks 37% of the funds were received but construction has not started 200,000, ,400,000 None No construction has started 200,000, ,400,000 None -No vehicle was procured despite receiving 67% of the funds Service delivery is hampered and the appropriating authority s objectives are not met. Management explained that funds were transfered to Mubende Town Council and District for completion of a sanitation site and office block at district headquarters respectively. Management further explained that funds for procurement of a vehicle were used on vehicle maintenence. I advised management to ensure that all activities are undertaken as planned. 11

18 7.12 Follow up of prior year audit reccommendations A follow-up of the issues was undertaken and the status of implementation of the previous audit recommendations is presented below: Audit Findings Prior Recommendation Status on implementation of recommendations Mischarge of Expenditure Shs.4,178,737,274 The entity charged wrong expenditure codes to a tune of Shs.4,178,737,274. Advances to Individual Personal Accounts Non-Compliance with Treasury Accounting Instructions Shs.1,840,727,530 was advanced to Ministry staff through their personal bank accounts to undertake direct procurements and other activities of the Ministry. Advances to personal accounts not accounted for Personal advances to the tune of Shs.67,700,200 were not accounted for by the respective officials. Unaccounted for Cash Withdrawals It was noted that Shs.77,896,691 was unaccounted for at the time of audit. Payments for Hotel Services Expenditure worth Shs.636, 362,171 for retreats and workshops lacked attendance lists Irregular borrowing from Project Accounts Contrary to section 42 (c) of the TAIs the Ministry borrowed a sum of Management was advised to desist from such a practice and always request for reallocations or virements, as provided for under the TAI. Management was advised to stop the practice and ensure strict adherence with the requirements under the Treasury Accounting Instructions. Management was advised to ensure that funds are accounted for or recovery measures should be initiated. Management was advised to ensure that all funds are accounted for within the statutory period or recovery measures be enforced. Management was advised to ensure that all funds are accounted for within the statutory period or recovery measures be enforced. Management was advised to ensure strict adherence to the Commitment Control guidelines and avoid borrowing from the 12 Repeated Repeated Not repeated Not repeated Not repeated Not Repeated

19 Shs.916,601,532 from eight (8) project Accounts to fund Ministry s activities. At the time of the report, the borrowings had not been refunded. Unaccounted for borrowings Shs.70,931,400 advanced in form of fuel and allowances to staff to carry out various activities remained unaccounted for by the time of audit contrary to section 120 of the TAIs. Improperly vouched air tickets expenditure A sum of Shs.33,578,776 was spent on air tickets for staff travelling abroad. However the funds were not properly accounted for as they lacked supporting documents contrary to section 120 and 181 of the Treasury Accounting Instructions. Irregular Inter-Account Transfer A transfer of Shs.5,211,930,182 was made from the Treasury General Account in the last week of the financial year 2011/2012 (29 th June 2012). No authority from Treasury for the transfer to the off-budget account was availed for review. This transfer could have been made to circumvent the controls which require unspent balances to be returned to Treasury at the close of the financial year. Payment for Protocol and Presidential Pledges During the year a total of Shs.84,000,000, was paid to the Ministry of Foreign Affairs (Shs.59,000,000) and State House (Shs.25,000,000) to facilitate protocol activities and hosting of the State banquet. However there were no supporting documents project Accounts. I advised management to ensure that all funds are accounted for within the statutory period or recovery measures considered on the concerned officers. Management was advised to ensure that all funds are accounted for within the statutory period or consider recovery measures. I will await the outcome of the efforts to close the account Management was advised to provide accountability or initiate recovery measures. Not repeated Not Repeated Repeated Not repeated 13

20 Diversion of GOU Counterpart Funding Shs.143,102,809 was diverted to fund non-project related activities. Treatment abroad Shs.120,872,000 was remitted to Moroto Municipal Council for treatment of the mayor in India for a kidney transplant where he was to spend 38 days with the kidney donor and attendant. Included in Shs.120,872,000 is US$.17,900 to cater for hospital costs during observation, operation and after operation thus the officer was not entitled to any per-diem. However, contrary to the above requirement the patient was paid per diem of US$.13,680 (Shs.35,636,400) for all the 38 days which he spent in the hospital in India. Support to Town Councils Contrary to the above Government funding frame work, it was noted that the Ministry transferred Shs.60,000,000 to 5 Town Councils to open and grade urban roads without budgets and criteria for selecting the councils. Non-deduction of Withholding Tax from Local Suppliers It was noted that withholding tax to the tune of Shs.26,606,383 was not deducted from some payments for onward remittance to URA contrary to the regulations. Wasteful Expenditure- Parking fees for Grounded Vehicles It was noted that Shs.35,607,680 was paid to a company as parking fees for 16 Ministry motor vehicles parked in the basement of Uganda House for more than a year. Management in response stated that the omission had been noted and that refunds will be effected. Management was advised to always refer to the standing orders before such payments are affected. Management was advised to provide sufficient supervision to the town councils so as to ensure adequate absorption of funds transferred to them. The Accounting Officer was advised to adhere to the requirements under the Income Tax Act. The concerned suppliers should be traced and tax recovered. Management explained that the vehicles were in the process of being boarded off. I await the outcome of the boarding off process by management. Not Repeated Not repeated Not repeated Repeated Repeated 14

21 Staff Welfare-Irregular Allowances It was noted that Shs.624,920,000 was paid to Ministry staff as automatic monthly allowances. I observed that this allowance paid in form of night subsistence was paid irregularly because it was not supported with any administrative circulars/standing order instructions from Ministry of Public Service. Further, no taxes were deducted in form of PAYE. Management was advised to liaise with the Ministry of Public Service to have the allowance regularised. Keep in view 15

22 APPENDIX 1 FINANCIAL STATEMENTS 16