REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DAIRY DEVELOPMENT AUTHORITY FOR THE FINANCIAL YEAR ENDED 31 ST DECEMBER, 2015

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DAIRY DEVELOPMENT AUTHORITY FOR THE FINANCIAL YEAR ENDED 31 ST DECEMBER, 2015 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST OF ACRONYMS... iii 1.0 INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING MANDATE AND OBJECTIVES OF THE DDA AUDIT PROCEDURES PROCEDURES PERFORMED CATEGORIZATION AND SUMMARY OF FINDINGS Categorization of Findings Summary of Findings DETAILED FINDINGS Audit of Financial Statements Delayed Submission of Financial Statements Nonfunctional Revolving Fund Failure to receive compensation for lost CESS revenue Budget Shortfall Land Matters Lack of Board of Directors Staffing Gaps Inspection of Entebbe Dairy Training School Mischarge of expenditure Corporate Governance Matters Rehabilitation of Entebbe Dairy Training School Inspection of Masindi Milk Collection Centre Inspection of Mbarara Regional Office ii

3 LIST OF ACRONYMS Acronym Meaning DDA ICT MCC MoFPED. MoU MTEF NAADs PS/ST TSSA Dairy Development Authority Information and Communication Technology Milk Collection Centres Ministry of Finance, Planning and Economic Development Memorandum of Understanding Medium Term Expenditure Framework National Agricultural Advisory Services Permanent Secretary/Secretary to the Treasury Treasury Single Sub Account iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DAIRY DEVELOPMENT AUTHORITY FOR THE YEAR ENDED 31 ST DECEMBER, 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of the Dairy Development Authority (DDA) for the year ended 31 st December These financial statements comprise of the statement of financial position, statement of financial performance, statement of changes in equity, 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, 1995 (Amended) and Section 45 of the Public Finance Management Act, 2015 the Accounting Officer is accountable to Parliament for the funds and resources of the Dairy Development Authority. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance Management Act, 2015, the Financial Reporting Guide, 2008 and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. Auditor s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (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, 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 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

5 accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Part A of this report sets out my 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 will form part of my Annual Report to Parliament. PART A Opinion In my opinion the financial statements present fairly in all material respects, the financial position of the Diary Development Authority for the year ended 31 st December 2015 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Dairy Industry Act (Cap 85). Other matters Without qualifying my opinion, I consider it necessary to communicate the following matter other than those presented or disclosed in the financial statements: Land matters The Authority lacked land titles for 40 milk collection centres across the country. Besides, land titles in the names of defunct Diary Corporation could not be traced to the fixed assets register. Some pieces of the land have been sold illegally and are pending courts of law decision. The uncertainty of ownership of land may result into loss of Government property. Lack of Board of Directors After the expiry of tenure of the previous Board in July 2014, the Authority has continued to operate without the Board of Directors hence, affecting the policy and strategic director of the Authority. John F.S. Muwanga AUDITOR GENERAL 25 th August, 2016 v

6 PART "B" DETAILED REPORT OF REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DAIRY DEVELOPMENT AUTHORITY FOR THE YEAR ENDED 31 st DECEMBER, 2015 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 Dairy Development Authority to enable me report to Parliament. 2.0 BACKGROUND INFORMATION The Dairy Development Authority head office is located on Plot 1 Kafu Road, Kampala. The Authority is a statutory body that was created under the Dairy Industry Act Cap. 85. DDA came into existence as a result of government adoption of liberalization policy of the dairy industry, following the split of the Dairy Corporation into DDA and Dairy Corporation Ltd. The objective of DDA is to provide proper coordination and efficient implementation of all government policies which are designed to achieve and maintain self-sufficiency in production of milk in Uganda by promoting production and competition in the dairy industry and monitoring the market for milk and dairy products. 3.0 ENTITY FINANCING The Dairy Development Authority was financed by Government subventions of UGX.4,139,211,333 and revenue generated from operations of UGX.469,404,050, making a total operating revenue for the year of UGX.4,608,615,383 which constituted 90.4% of its total approved budget estimates for year of UGX.5,100,305, MANDATE AND OBJECTIVES OF THE DDA The Dairy Development Authority was established by an Act of parliament in the year 2000 with the objective of providing proper coordination and efficient implementation of 1

7 all government policies which are designed to achieve and maintain self-sufficiency in production of milk in Uganda by promoting production and competition in the dairy industry and monitoring the market for milk and dairy products. The key functions of the DDA include:- Provision of dairy development and regulatory services Coordination and efficient implementation of all government policies in the milk industry Promote production, consumption of milk and competition in the dairy industry Monitor the market for milk and dairy products. 5.0 AUDIT PROCEDURES The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. The audit was carried out with regard to the following objectives:- a. The financial statements have been prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures for the period and of the financial position as at the end of the period. b. All DDA funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Goods and services financed have been procured in accordance with the Government of Uganda procurement regulations. d. To evaluate and obtain a sufficient understanding of the internal control structure of the DDA, assess control risk and identify reportable conditions, including material internal control weaknesses e. The DDA Management was in compliance with the Government of Uganda financial regulations. f. All necessary supporting documents, records and accounts have been kept in respect of all DDA activities, and are in agreement with the financial statements presented. 6.0 PROCEDURES PERFORMED The following audit procedures were undertaken:- 2

8 a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the DDA cashbooks on the IFMS and bank statements. b. Expenditure The DDA 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. d. Procurement Reviewed the procurement of goods and services under the DDA during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the assets of the DDA during the period. 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 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of Findings The following system of profiling of the audit findings has been adopted to better prioritise the implementation of audit recommendations: No Category Description 1 High significance Has a significant/material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. 2 Moderate significance Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. 3 Low significance Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. 3

9 It is a matter of low risk or low stakeholder interest. 7.2 Summary of Findings No Finding Significance Delayed Submission of Financial Statements High Nonfunctional Revolving Fund High 8.2 Failure to receive compensation for lost CESS Revenue High 8.3 Budget shortfall - UGX.891,262,769 High Lack of land titles for Milk Collection Centers High Pending court cases relating to DDA land High 8.5 Lack of Board of Directors Medium 8.6 Staffing Gaps Medium 8.7 Inspection of Masindi Milk Collection Centre Medium 8.8 Mischarge of expenditure UGX 17,079,124 Low Lack of Approved IT Strategic Plan Low Lack of a Training Policy Low Failure to Prepare Budget Variance Reports Low 8.10 Rehabilitation of Entebbe Dairy Training School - UGX.183,316,854 Low 8.11 Inspection of Entebbe Dairy Training School Low 8.12 Inspection of Mbarara Regional Office Low 8.0 DETAILED FINDINGS 8.1 Audit of Financial Statements Delayed Submission of Financial Statements Section 19 (3) (b) of the Dairy Industry Act 1998 requires the Board of Directors to prepare Financial Statements within three months after the end of each financial year and submit to the Auditor General for auditing. However, the Authority did not submit financial statements for the financial year ended 31 st December, 2015 for audit within the statutory period. The financial statements were submitted on 3 rd month after the statutory deadline. May 2016, one The Accounting Officer attributed the delayed submission of the financial statements to the absence of Board of Directors to approve recruitment of the Principal Accountant to prepare accounts. I advised management to follow up the appointment of the Board with the Minister responsible for Agriculture to ensure that the authority executes its mandate. 4

10 8.1.2 Nonfunctional Revolving Fund The National Agricultural Advisory Services (NAADs) purchased and supplied milk cooling equipment to DDA Stakeholders who run Milk Collection Centers. A Memorandum of Understanding (MOU) was signed between DDA and the vendors requiring the vendors to pay back 30% of the cost of the milk cooling equipment into a revolving fund. A total of UGX.91,765,600 was collected during the year following the MOU. However, I was not availed with the schedule of vendors that received the milk cooling equipment to determine how much was outstanding at the beginning and close of the financial year. Besides, the financial statements do not include what was expected from the Milk Vendors (receivables) into the Revolving Fund. I was therefore unable to ascertain the collections for the year and outstanding amount as at end of the financial year. In response, the Accounting Officer explained that the Permanent Secretary and Secretary to the Treasury (PS/ST) directed that this money be collected and banked on the consolidated fund intact, hence the revolving fund became non-operational. I advised management to explain to the PS/ST the need to plough back these funds to support the operations of DDA. 8.2 Failure to receive compensation for lost CESS revenue Regulation 18 (1-4) of the Dairy Regulations, 2003 requires the Authority to levy, charge and collect a CESS on processed milk and milk products at a rate of one percent of the ex-factory price per litre or kilogram of the milk or milk products. I noted that the levy of CESS on milk or milk products was suspended by H.E The President in 2007 and a directive was issued for DDA to receive compensation from Ministry of Finance, Planning and Economic Development (MoFPED). However, I observed that DDA postponed levying CESS but has not received compensation from MoFPED as directed. This has adversely affected the operations of the Authority. My assessment indicates that UGX.1.2 bn is meant to be paid by Government to DDA annually as compensation. In response, management explained that efforts to demand compensation from MoFPED yielded no results. 5

11 I advised management to continue following up the compensation with the MoFPED to ensure implementation of the presidential directive. 8.3 Budget Shortfall Chapter 7 of the Financial and Accounting Manual states that the budget is prepared among other things to assist management in working out whether DDA has all resources to accomplish all the intended activities and project implementation for control of actual implementation costs against budgeted expenditure. It was noted that the Authority budgeted for UGX.5,100,305,000 as Government of Uganda funding but received only UGX.4,209,042,231, leading to a shortfall of UGX.891,262,769. The shortfall affected implementation of planned activities as shown in the table below; Budget Performance of Planned against Actual INDICATORS FY 2014/15 & 2015/16 Total target Q1 & Q2-2015/16 Total Achieved % Achieved Number of stake holders trained along the dairy value chain % Number of milk collection centres rehabilitated % Number of dairy premises/ equipment inspected % Number of dairy premises/ equipment registered % Number of milk and milk product samples analyzed % No. assorted milk handling equipment procured % Number of Quality Assurance exercises undertaken % Management attributed the under-performance to budget cuts by the Ministry of Finance, Planning and Economic Development (MOFPED) and was unable to implement some of the planned activities. 6

12 I advised management to present the critical needs of DDA to MoFPED to minimize budget cuts. 8.4 Land Matters Lack of land titles for Milk Collection Centers Chapter 13 of the Authority accounting manual requires that all assets are safeguarded by recording their details and monitoring their location, condition and usage and proper maintenance of a fixed assets register. It was observed that the Authority owns 42 Milk Collection Centers (MCCS) throughout the country out of which 40 do not have land titles. The entity is exposed to risk of wrangles, litigation or encroachment as evidenced in Amuria District Local Government. In response, management explained that applications for processing of titles for DDA properties were submitted to the various District Local Governments, however, the process is slow because the Area Land Committees and District Land Boards that are not functioning well. I advised management to continue with the effort of acquiring land titles to avoid loss Pending court cases relating to DDA land It was observed that DDA holds land titles to a number of its property but these land titles could not be traced in the fixed asset register. Refer to table A below. Interview with management revealed that the land in question was sold. However evidence of the board decision to sell or documentation in form of sale agreements were not availed for audit verification. It was also observed that DDA remained with the original land titles in the names of Dairy Corporation after the sale, making the ownership questionable. Furthermore, management revealed that the authority had pending cases regarding the sale of land at Kyeitabya-Bukasa by DDA in Refer to table B below. The uncertainty of ownership and questionable sale of DDA assets may result into loss of Government property. 7

13 Table A: Details of Land Titles not traced to the Assets Register Block Number Plot No Area Audit Remarks ,318,341, H Transferred from Dairy Corporation to Dairy Development Authority on 28/07/2003 through Instrument number KLA , & Transferred from Dairy Corporation to Dairy Development Authority on 28/07/2003 through Instrument number KLA Transferred from Dairy Corporation to Dairy Development Authority on 28/07/2003 through Instrument number KLA Transferred from Dairy Corporation to Dairy Development Authority on 28/07/2002 through Instrument number KLA Transferred from Dairy Corporation to Dairy Development Authority on 28/07/2003 through Instrument number KLA Table B: Pending Court Cases Relating To DDA Land S/N CASE No COMPLAINANT 1 JOSEPH BUKENYA Vs DDA Civil suit No.12 of JOYCE KIGUNDU Vs DDA Civil suit No.13 of SALONGO STANLEY KALYANGO & NALONGO SARAH KALYANGO Vs DDA Civil suit No.218 of GWAYAMBADDE M.S - NOTICE OF INTENSION TO SUE Plaintiff seeking for compensation as a kibanja holder. Plaintiff seeking for compensation as a kibanja holder. Plaintiff seeking for specific performance and general damages for breach of contract. The plaintiff is demanding certificate of title and transfer forms for plot 796. The Accounting Officer explained that there were gaps in the documentation of the sale transaction. Management will seek guidance from the Board on the way forward. I advised management to follow up the matter and ascertain the status of all the land under dispute to ensure that the issues are resolved. 8

14 8.5 Lack of Board of Directors Section 8 of the Dairy Industry Act 1998, requires the Authority to have a Board of Directors consisting of eleven members who should hold office for a term of four years and may be eligible for reappointment not exceeding two consecutive terms. It was noted that since the expiry of the term of the previous board in July 2014, the Minister responsible for Agriculture had not constituted a new board. As a result, Board functions such as review of the policy and strategic plans, guidance to the Executive Director, approval of appointments of technical and professional staff, monitoring and evaluating performance of the authority against the budget and work plans among others were not undertaken. This adversely affected operations of the authority and hence service delivery. In response, the Accounting Officer explained that the Board had been appointed but was awaiting inauguration to enable them start work. I advised management to follow up the matter and have the appointment process concluded. 8.6 Staffing Gaps Paragraph 2.2 of the Dairy Development Authority's Terms and Conditions of Service 2009, requires all approved vacant positions to be filled by internal promotions or open to the public for fresh applications. It was observed that out of the Authority s approved structure of 78 positions, only 62 posts were filled leaving 16 posts vacant. Most of the vacant posts were at senior management level. Staffing gaps affect achievement of the Authority mandate. Management attributed the staffing gaps to absence of Board of Directors and the wage ceiling set by MoFPED. However, these positions had been advertised and would soon be filled once the Board is established. I advised management to expedite the recruitment process and have the positions filled. 8.7 Inspection of Entebbe Dairy Training School The Dairy Training School in Entebbe is a Centre of Excellency for training DDA stakeholders in the areas of Milk Quality Control and Quality Assurance, Small Scale 9

15 Dairy Processing, Farm Production and Management and Dairy Business. The school thus trains participants among other study areas on how milk should be received in good condition, tested for quality, pasteurized, cooled and made into cheese and other milk products. Inspection of the school revealed the following; N o. (i) Audit finding Accounting Officer s response Non functional Milk Product The Accounting Officer Processing Factory The machines were non-functional since inheritance from Dairy Corporation in There was no power as the machines were not wired to the electricity grid. The machines had not been tested since delivery to confirm functionality. explained that the milk processing equipment was inherited after privatization. It was found old and obsolete and not in tandem with modern technology. The Authority had secured additional funding for equipping the factory for demonstration purpose and the only yoghurt packing machine was test-run and functioning well. Recommendation Management action is awaited. (ii) (iii ) Encroachment on the School Land School land (title FRV 464, Foil 13) measuring approximately hectares, had been encroached on by a private investor (fish factory). Fencing was partially done leaving out part of the lower area open. Failure to complete the fencing of the entire land could lead to grabbing of the land or costly disputes in the event of eviction. Sub standard roof works A local firm was contracted to renovate offices at a cost of UGX.333,091,462 and the works included replacement of old asbestos sheets with new iron sheets. It was observed that all the offices ceiling were being destroyed as a result of leaking roof. This may lead 10 Management explained that the case of encroachment was being handled by lawyers while fencing was being done in phases according to funding availability. Management explained that they had invoked the contractual provisions on defects liability and damages; meanwhile a new contractor had been hired to rectify the I advised the Accounting Officer to prioritize the issue of securing land titles to avoid the risk of loss of property. I advised the Accounting Officer to rectify the leakages to avoid further deterioration of the ceiling.

16 to caving in of the ceiling. Photos are as below; defects. Destroyed ceiling in one of the offices of the Institute 8.8 Mischarge of expenditure The Parliament of Uganda appropriates funds through the national budget in which funds are tagged to particular activities and outputs using account codes. A review of the DDA s treasury single sub account (TSSA) payment file revealed that the entity charged wrong expenditure codes to a tune of UGX.17,079,124. Mischarges undermine the importance of the budgeting process as well as the intentions of the appropriating authority and hence misleading to users on the reported financial statements balances. The Accounting Officer explained that whereas planning was properly done and funds allocated to priority areas, budget cuts affected activities that required emergency action such as cases of milk adulteration and officers had to travel immediately to act on the emergency. The Accounting Officer further indicated that the procedure to seek approval of reallocations of funds is too long and becomes prohibitive. I advised management to always plan in advance in cases where emergencies may arise and address such challenges, given the nature of DDA operations. 8.9 Corporate Governance Matters Lack of Approved IT Strategic Plan The Authority has a high dependence on IT systems for maintaining and processing of data of the Authority, however there is no approved IT strategic Plan. It was also observed that the authority did not have an IT strategic committee to ensure that investments in IT are well aligned with other business processes and objectives of the Authority and also ensure adequate security and protection over computers and of data held on computers or information systems operated by the Authority. There is a 11

17 risk that IT may not be used as a strategic resource and a possible wastage of Authority resources given the considerable investments in IT resources. Management explained that a draft Information and Communication Technology (ICT) policy was in place. Management was also considering having an ICT Steering Committee, all of which were awaiting Board approval. I advised management to prioritize approval of the IT strategic plan and the IT strategic committee to enable strategic use of IT resources Lack of a Training Policy Section 1.1 of the DDA terms and conditions of service provides for enabling staff to achieve the overall goals of the Authority, to serve better, if the operation of the Authority is conducted in an open and participatory manner that encourages all personnel to work harmoniously by establishing a manpower development system. It was observed that the Authority carried out staff and stakeholder training without a training policy as well as a manpower development plan. This may result into misuse of Authority funds through undertaking of inappropriate programmes, duplication of trainings and biased selection of staff to undertake training. Management explained that the policy is part of the revised Human Resource Manual whose implementation is awaiting Board approval. I advised management to follow up the Board approval and have the training policy approved Failure to Prepare Budget Variance Reports Section of the Authority Financial and Accounting Manual requires the finance department to prepare regular and timely financial information involving comparison of actual performance with plans, evaluating the effectiveness of plans, identifying weaknesses early and taking corrective actions. However, the Authority did not prepare budget variance analysis reports as required. In the absence of budget variance analysis reports, management may fail to achieve the planned outputs and monitor progress. 12

18 The Accounting Officer explained that the Authority lacked the Principal Accountant to prepare the reports. I advised the management to address the manpower gaps to ensure all operations of the authority are carried out effectively Rehabilitation of Entebbe Dairy Training School Regulation 5 (3) of the PPDA 2014 requires the Accounting Officer to re-assess the market price and ascertain that it is still valid where the prices of the best evaluated bidder is higher than the market price established at the commencement of the procurement. A review of the procurement file revealed that the established market price as per PP Form 20 was UGX.159,000,000 and yet the contract sum awarded to a supplier was UGX.183,316,854, leading to an increase of UGX.24,316,854 representing 15% increase. However, there was no evidence to confirm that management re-assessed the market prices at the time of award to confirm change in estimated prices. This may lead to inflated awards or unnecessary variations resulting into delayed completion of the project. The Accounting Officer explained that carrying out market survey on contracts involving works was not easy because it involves spending more money on carrying research. Besides, market dynamics change every day. I advised management to undertake realistic market surveys and to factor in a margin to cater for any fluctuations in market prices as required by the regulation Inspection of Masindi Milk Collection Centre DDA signed a contract for rehabilitation of Masindi Milk Collection Centre with a local contractor on 30/04/2015 at contract price of UGX.166,725,198. Works were scheduled to start seven (7) days after signing of the contract. At the time of audit in May 2016, only UGX.90,556,172 had been paid and much of the contracted work had not been carried out. The chain link fence had not been installed on both sides. 13

19 It was further noted that the after the original Contract, other three addenda s were signed on 12/08/2015, 30/10/2015 and 15/01/2016 extending the completion dates from 7/8/2015 to 30/10/2015, 30/01/2016 and 30/04/2016 respectively. An inspection carried out by this office on 09/05/2016 revealed that works were still ongoing although the contract period had expired way back on 30/04/2016. Inspection further revealed that the following works were still outstanding; Gutters to collect rain water from iron sheets were not yet installed and connected to the installed two 5000 litre tanks. An elevated steel tower was constructed but the 3,000 litre tank was not yet installed and the tank was not yet on site. Water pump and associated accessories for pumping water from the two 5,000 litre rain water collection tanks into the 3,000 litre water tank on the elevated Steel tower was not yet installed. Painting of the milk collection centre walls was still on going. Soak pit was still under construction. Management explained that unfinished works were due to budget cuts that resulted into a decision to change from using a private supervision consultant to using Ministry of Works engineers. Procedural processes involved therefore caused a delay in implementation, forcing management to extend the contract end date to 30 th June, I advised the management to ensure that the works are completed in line with the contracts Inspection of Mbarara Regional Office Inspection of the office revealed that staff was inadequate to cover 22 districts of South Western Uganda. The regional office had only five staff, one Manager, two Diary inspectors and two Diary officers. The work load may not allow staff to appropriately respond to any emergencies like outbreaks of diseases as well serving the farmers needs in terms of diary information dissemination. This may affect quality, quantity and standards of milk in the region. 14

20 The Accounting Officer explained that the regional offices were opened to take services nearer to the clients, however strengthening of these offices was being done in a phased manner depending on the availability of funds. I advised management to seek additional support to improve on the facility to serve the region better. 15

21 FINANCIAL STATEMENTS 16