REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KAMPALA CAPITAL CITY AUTHORITY FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2015

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KAMPALA CAPITAL CITY AUTHORITY FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2015 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST OF ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KAMPALA CAPITAL CITY AUTHORITY FOR THE YEAR ENDED 30 TH JUNE, iv 1.0 INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING MANDATE AND 0BJECTIVES OF KCCA AUDIT OBJECTIVES AUDIT PROCEDURES PERFORMED CATEGORIZATION AND SUMMARY OF FINDINGS DETAILED FINDINGS Outstanding Receivables Increasing provision for legal costs Constructions Non-remittance of 15% NSSF deductions Under-collection of revenue and Shortfall in Government Grant Youth Livelihood Programme (YLP) Job Stimulus Programme (JSP) Failure to create a Metropolitan Police Force Land board Operations Inadequacies in the Department of Physical planning Field Inspections of KCCA Schools and Road Works ii

3 LIST OF ACRONYMS Acronym Meaning BLB Buganda Land Board CDD Community Driven Development DLB District Land Board DPP Directorate Of Physical Planning EFT Electronic Funds Transfer IGG Inspectorate of Government KCC Kampala City Council KCCA Kampala Capital City Authority KDLB Kampala District Land Board MDA Ministries, Departments and Agencies MOU Memorandum of Understanding NSSF National Social Security Fund NTR Non-Tax Revenue PPDA Public Procurement and Disposal of Assets Authority YIG Youth Interest Group YLP Youth Livelihood Programme PFMA Public Finance Management Act, 2015 TAIs Treasury Accounting Instructions iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KAMPALA CAPITAL CITY AUTHORITY FOR THE YEAR ENDED 30 TH JUNE, 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the Financial Statements of Kampala Capital City Authority (KCCA) for the year ended 30 th June These financial statements comprise of the statement of financial position, the statement of financial performance, statement of changes in equity 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, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Kampala Capital City 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 KCCA Act 2010, and the International Public Sector Accounting Standards (IPSAS) on Accrual basis of accounting and for such internal controls 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, 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 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 iv

5 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 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 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 Kampala Capital City Authority as at 30 th June, 2015 and its financial performance and cash flows for the year then ended in accordance with the International Public Sector Accounting Standards (IPSAs) and the KCCA Act Emphasis of Matter Without qualifying my opinion, attention is drawn to the following matters that are described in Note 4 (trade and other receivables) and note 12 (provisions for legal costs) in the financial statements and also in paragraph and of my report: Outstanding receivables Receivables to the tune of UGX.77,007,788,342 were reported at the close of the financial year. This was attributed to substantial Government arrears on property rates across Government entities. Failure by management to recover outstanding receivables may lead to further accumulation of receivables to unrecoverable levels which may necessitate writing off, thus resulting into a financial loss to KCCA. v

6 Provision for legal costs Management provisions for legal liabilities increased from UGX 2,463,978,558 in the previous year to UGX.28,120,651,033 in the year under review. These relate to various civil cases filed against the Authority, and currently pending before the courts of law. Increase in legal provisions is an indication of likely future expenditure that may adversely affect the planned cash flows and service delivery. Report on other legal requirements As required by the Kampala Capital City Authority Act, 2010 and the National Audit Act, 2008: i. I have obtained all the information and explanations, which to the best of my knowledge and belief were necessary for the purpose of my audit. ii. In my opinion, proper books of account have been kept by the Authority, so far as appears from my examination of those books; and iii. The statement of financial position and statement of financial performance are in agreement with the books of account. John F.S. Muwanga AUDITOR GENERAL KAMPALA 7 th December, 2015 vi

7 REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION 0

8 PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KAMPALA CAPITAL CITY AUTHORITY FOR THE YEAR ENDED 30 TH JUNE, 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 Kampala Capital City Authority (KCCA) to enable me report to Parliament. 2.0 BACKGROUND INFORMATION Kampala Capital City Authority was enacted by Kampala Capital City Act The Authority is a body corporate with perpetual succession and may sue and be sued in its corporate name. It is located at city hall on Plot 1-3 Sir Apollo Kaggwa road, Kampala Capital City. The Authority s vision is to be a vibrant and sustainable City while the Mission is to deliver Quality service to the City 3.0 ENTITY FINANCING The Authority was financed by grants from Central Government and locally generated revenue. Grants totaling to UGX.140,267,456,872 from Central Government were received while, UGX.78,932,621,041 was received as funding from development partners. Cash collections from Non-tax revenue amounted to UGX.84,915,196,440 and UGX.76,734,694 was collected from Miscellaneous revenue. The total funding received of UGX.220,782,784,714 constituted 83% of its approved budget estimates of UGX.267,191,851, MANDATE AND 0BJECTIVES OF KCCA The core mandate is enshrined in section 7 (1-4) of the Kampala Capital City Authority Act, 2010 and are; (i) (ii) To provide for Administration of Kampala by the Central Government; To provide for the Territorial Boundary of Kampala; 1

9 (iii) To Provide for the Development of Kampala Capital City; (iv) To Establish a Kampala Capital City Authority as the Governing Body of the city; (v) To Provide for the composition and Election of Members of the Authority; (vi) To Provide for the removal of members from the Authority; (vii) To provide for the Functions and Powers of the Authority; (viii) To provide for the election and removal of the Lord Mayor and Deputy Lord Mayor; (ix) To Provide for the Appointment, Powers and Functions of an Executive Director and Deputy Executive Director of the Authority; (x) To provide for Lower urban councils under the Authority; (xi) To provide devolution by the Authority of Functions and Services; (xii) To provide for a metropolitan Physical Planning Authority for Kampala and adjacent Districts; (xii) To provide for the power of the Minister to veto decisions of the Authority in certain circumstances and for related matters. 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 whether:- 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 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 organization, assess control risk and identify reportable conditions, including material internal control weaknesses. e. The Management was in compliance with the Government of Uganda financial regulations. 2

10 f. 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 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:- (a) Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements. (b) Expenditure The Authority 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 audited. (d) Procurement Reviewed the procurement of goods and services by the Authority 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 Authority during the period audited. (f) Authority s 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. 3

11 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. It is a matter of low risk or low stakeholder interest. 7.2 Summary of Findings No Finding Significance 8.1 Outstanding receivables - 77,007,788,342 High 8.2 Increasing provision for legal cost - 28,120,651,033 High 8.3 Constructions High 8.4 Non-remittance of 15% NSSF deductions High UGX.1,047,092, Under-collections of revenue and Shortfall in Government High Grant UGX. 46,370,980, Youth Livelihood Programme (YLP) High 8.7 Job Stimulus Programme (JSP) High 8.8 Failure to create a Metropolitan Police Force High 8.9 Land board Operations High 8.10 Inadequacies in the Department of Physical planning Moderate 8.11 Field inspections of KCCA schools and road works Moderate 8.0 DETAILED FINDINGS 8.1 Outstanding Receivables Accumulation of Outstanding receivables The trade and other receivables presented in the statement of financial position increased from UGX.63,232,221,289 to UGX.77,007,788,342 (representing 22% increase from the previous year s balance). Included in the receivable balance is property rates and ground rent that rose from UGX.62,674,727,078 and UGX.13,970,034,025 in the previous year to UGX.66,396,029,910 and UGX.13,993,742,152 during the year under review respectively implying low revenue 4

12 recovery of the entity debts. The uncollected outstanding receivables may eventually necessitate writing off the debts thus causing financial loss to the Authority. The Accounting Officer explained that the accumulation was majorly due to property rates arrears due from MDA s as at June 2015 and wrong classification of properties as commercial. The properties in question are actually residential owner occupied. Going forward, management has put in place measures aimed at recovering the receivables such as enforcement of staff adherence to the arrears management guidelines, granting instalment payment option for tax payers, issuing reminders and engaging PS/ST to advise the Accounting Officers of affected MDAs to make budget allocation to settle KCCA taxes. I await the results of management s debt recovery initiatives Specific Provision on Outstanding Balances of Receivables KCCA accounting policy on provision for bad debts requires that specific provision is made on an entire amount on the ledger where there is certainty of non-recovery. Further, a general provision of 10% is made for all outstanding balances at year end. A review of the receivables ledger revealed that Management made specific provisions on several ledger balances where they were certain of non-recovery, such as; property rates, markets, parking fees, advertising, street parking, public convenience and local hotel tax. According to the financial statements, a sum of UGX.7,611,799,344 was off set 100% being provision during the year. I was not availed with evidence that necessary steps had been undertaken by Management in terms of necessary reminders, negotiations, legal redress etc, to be certain of entity s inability to recover. In absence of detailed debtors review report, the Authority risks writing off public moneys that are collectable. The Accounting Officer explained that all specific provisions made on outstanding receivables were arrived at after evaluation of the necessary actions that had been taken to recover the said sums. Management promised to review the existing policy in light of the audit observation and recommendation. I await results of the Accounting Officer s review report indicating action taken to enable me assess the policy provision. 5

13 8.2 Increasing provision for legal costs Management provided for legal costs of UGX.28,120,651,033 relating to projection of potential liability drawn from claims in various civil cases already filed against the Authority, and currently pending before the courts of law. It was noted that the provisions on legal costs for the current year increased from 2.4 billion in the previous year to 28.1 billion in the current year. In case these provisions crystalise, the Authority planned cash flows and service delivery will be affected. The Accounting Officer explained that no court judgments have been rendered to crystallize any liability to the stated amounts. At the inception of KCCA in April 2011, there were over 133 cases already pending against its predecessor Kampala City Council in various courts with some cases dating as far back as the late 1990 s and early 2000 s. Another 65 court cases are pending against the KDLB involving huge sums of money, some of which are likely to be decided against the Board. I advised the Accounting Officer to closely follow up on the proceedings of these cases with a view to ensuring the liability that may crystalise is minimized. In the meantime controls should be strengthened to ensure that the new cases are minimized. 8.3 Constructions Delay in completion of road works During the year under review, a sum of UGX.189,685,616 was paid to the contractor for certified works on Mbogo road and UGX.970,158,313 for upgrading of drainage black spots. I reviewed the documentation related to this payment and noted that KCCA entered into contractual obligations with a local construction firm to reconstruct Mbogo road (2.08 km) in Makindye division and upgrade of drainage black spots in Kampala at contract sums of UGX.2,521,131,767 and UGX.4,181,073,515 respectively. The contract start date for Mbogo road was 29/05/2013 and the expected completion date was 29/11/2013. The completion date was extended to 04/02/2014 but despite the extension, the contractor failed to rectify the defective works, and also failed to perform the works within the maximum liquidated time of 100 days. KCCA subsequently terminated the contract in July 2014 and declined to pay for the works done. The value of the uncompleted works was assessed as UGX.1,595,515,818. 6

14 Delayed works affect performance of the Authority. The Accounting Officer explained that despite the adequate supervision of the two projects, the contractor failed to deliver as expected thus the termination of the contracts. Further, subsequent review revealed that the adjudication process was undertaken but ended without agreement and the issue is before an arbiter. I await the outcome of the arbitration process Supply of Construction Materials A review of a sample of records for supply of construction materials worth UGX.1,405,999,005 was undertaken and it was noted that the providers of these materials were given framework contracts for the supply of these materials. These materials were either delivered at specific sites where they were to be utilized or at the respective division yards. Scrutiny of the documentation and interview with staff revealed that the Authority was not adhering to the TAIs as KCCA lacked the equipment like weighbridge services to measure the tonnage of the deliveries of materials. Management only relied on the tonnage of the trucks as provided for by the manufacturers which I could not place reliance to independently verify for accuracy. The Accounting Officer explained that although KCCA has no weighbridge, random checks on the trucks delivering materials were undertaken by utilizing the MCD weighbridge in Nakawa as there were no funds to procure the weigh bridges. Management will continue to utilize the URA weigh bridge as they plan to acquire one. Further, management indicated that in order to eliminate this problem, the new framework contracts for supply of materials have been structured to have cubic meters (m 3 ) as the unit of measure and contractors were required to provide registration and volume capacities for the vehicles they intended to use in the delivery of materials to the Authority. I advised the Accounting Officer to consider prioritizing funding of an internal weigh bridge in subsequent budgets and have the equipment procured. 7

15 8.3.3 Nugatory expenditure-compensation for lost business KCCA entered into Joint Venture (JV) contractual obligations with a local firm to construct the Aquaculture One-Stop Centre and Fry project at Komamboga and a letter of bid acceptance (which amounts to a contract) was signed. However, a review of procurements related to this JV revealed that KCCA eventually cancelled the contract due to lack of funds and as a result, the local company submitted a claim of UGX.204,040,000 as compensation for losses incurred as a result of KCCA s failure to conclude the procurement process. At the time of this report a sum of UGX.151,372,000 had been paid to the firm. Compensations for un-delivered goods or services is wasteful and affects service delivery. The Accounting Officer explained that mandatory approval of the contract from the office of the Solicitor General delayed leading to delay in the issuance of the letter of bid acceptance and by the time the bidder submitted performance security, and was ready to sign the contract, the new financial year had already began and the funds that had been earmarked to finance the project had been returned to the Consolidated Fund as required by law. I advised the Accounting Officer to ensure prudence in taking decisions with financial implications. 8.4 Non-remittance of 15% NSSF deductions The Authority had outstanding arrears of NSSF contributions to the tune of UGX.1,047,092,247 dating back from the period April 2011 to March 2015 majorly for the former staff of KCC. These arrears exclude the transitional team amounts because it is yet to be computed. Further, it was noted that the Authority had committed to pay the arrears inclusive of the 5% workers contribution that was never deducted from their wages which is irregular. Details as below; S/N Staff cadre Total gross salary 15% NSSF Contribution 1 Mayors and deputy mayors 1,032,983, ,947,551 2 Revenue officers 204,577,056 30,686,558 3 Enforcement officers 298,583,751 44,787,562 4 Casual workers 5,444,470, ,670,575 5 Transition team Not yet computed 0 Total 1,047,092,246 8

16 Failure to remit Employees NSSF contributions results into penalties and fines to KCCA and delayed remittance denies employees interest earnings on their savings. Furthermore, committment for payment of 5% deductions from KCCA funds is a loss of taxpayers money. The Accounting Officer explained that the delay in the remittance of NSSF contribution of the four categories of staff and the political leaders was due to the contention regarding the eligibility of the individuals in each of the categories to subscribe to NSSF. Management further explained that an agreement on the individuals eligiblility to subscribe to NSSF as per the Act was reached and a repayment plan has been agreed upon with the Management Team of NSSF and all staff have been registered and monthly deductions and remittances have been made to NSSF since April I advised the Accounting Officer to ensure that all NSSF deductions are remitted as required by the law and the 5% employee contributions previously not deducted should be recovered from the salaries of the staff and not KCCA funds. 8.5 Under-collection of revenue and Shortfall in Government Grant The Authority estimated to receive UGX.267,191,851,780 as taxes, grants from the Central Government and non-tax revenue for the year under review, however, only UGX.220,820,871,000 was received creating a short fall of UGX.46,370,980,780 as detailed below; S/N Budget (UGX) Actual (UGX) Variance (UGX) 1 Taxes 32,690,378,562 31,887,855, ,523,280 2 Government 172,718,959, ,267,456,872 32,451,502,600 transfers 3 Non-tax revenue 61,782,513,746 48,574,369,879 13,208,143,867 4 Miscellaneous 0 91,188,967-91,188,967 Total 46,370,980,780 Failure by Government to release all budgeted funds to the Authority and undercollection of Non-Tax Revenue by the Authority affected implementation of some programs. The Accounting Officer explained that they have continuously engaged the MoFPED to release all budgeted funds for full implementation of approved work plans but to no avail. NTR shortfall was due to non-operationalization of some revenue 9

17 intervention measures such as implementation of the Commercial Road user fees and proposed upward revision in some tax rates. I advised the Accounting Officer to engage further the MoFPED and ensure that budgeted funds are released. I also advised the Accounting Officer to follow up the intervention measures with a view of improving revenue collection. 8.6 Youth Livelihood Programme (YLP) The programme (YLP) aims at addressing the unemployment challenge in the country, which is more pronounced in the urban areas as a result of rural urban migration. YLP targets the poor and unemployed youth aged (18-30) in all districts country wide and it s implemented under the Ministry of Gender, Labor and Social Development (MoGLSD). The following were observed: Non-compliance with loan repayment agreement It was noted that a total of 103 Youth Interest Groups (YIG) have so far benefited from the funds totaling UGX 1,025,531,040 since inception of the programme. These funds are supposed to be recovered on monthly installments over a period of time as per the various MOUs ranging from months and the recovered funds are to re-finance the YIG s that did not benefit or were deferred. However, it was noted that monthly installments were not regularly paid contrary to the provisions of the MoUs. Out of the expected recoveries of UGX.384,743,425, only UGX.69,519,950 had been collected and transferred to MoGLSD leaving an outstanding arrears amount of UGX.315,223,475. This represents only 18% recovery rate which is low with Rubaga division as low as 9%. The anticipated benefits from the project may not be realised. The Accounting Officer explained that they had undertaken recovery strategies such as routine and joint monitoring visits during which reminders to pay the funds are issued, issued demand notes to all groups with arrears and are working with police and monitoring unit to apprehend the non-compliant groups. I advised the Accounting Officer to follow up on the recovery to ensure compliance with the MoUs. 10

18 8.6.2 Failed Projects It was observed that projects to the tune of UGX.223,526,600 were mismanaged and collapsed majorly due to diversion of funds. The objectives of the programme are not being achieved and this being a revolving fund, the deferred groups may lose out as no repayments are made. The Accounting Officer explained that the due process of community selection, desk appraisal, field appraisal and approval by MoGLSD as stipulated in the guidelines were followed. However, the guidelines provided for selection of groups that were loosely connected, with no legal binding and no strict sanctions to non-repayment were provided for which impacted on compliance by the groups. Despite the flaws in the guidelines, management identified and forwarded non-compliant groups to their internal Monitoring and Investigations unit for investigation and prosecution and as a result some of the project leaders were arrested and released on bond and investigations are still ongoing. I advised the Accounting Officer to liaise with the MoGLSD for purposes of improving the guidelines to enable proper implementation of the programme. 8.7 Job Stimulus Programme (JSP) Unrecovered loan funds This programme was a result of 2011/2012 budget intentions to address structural bottlenecks in the economy in order to accelerate socio-economic transformation for prosperity. To kick start the programme; UGX.3.3 billion was advanced as first tranche which benefited 2,777 youths. A sum of UGX.4,715,876,000 has been advanced as at 30 th June However, it was observed that many youths defaulted on the repayment and as such a sum of UGX.87,856,342 had not been recovered as at 30 th June 2015 which the bank has subsequently debited against the fund. Default was attributed to some beneficiaries who did not have adequate business skills, eviction of some youth operating in kiosks and containers and disappearance of some beneficiaries. Project objectives may not be attained. The Accounting Officer explained that efforts are being made to recover the funds from the guarantors. 11

19 I advised the Accounting Officer to ensure adequate verification of groups and guarantors prior disbursement of funds. In the meantime, I await the results of management s efforts on recovery. 8.8 Failure to create a Metropolitan Police Force Part V Section 26 of the KCCA ACT 2010, provides for the Authority to form a Metropolitan Police Force which shall comprise of persons appointed under the Police Act and trained by the Uganda Police Force. It further empowers The Minister to make regulations for regulating the Metropolitan Police Force by statutory instrument, on the recommendation of the Police Authority. Contrary to the above, the Authority has not formed a Metropolitan Police Force for the Capital City since its inception. The Authority has continued to rely on services of the Uganda Police Force who are not directly accountable to the Authority. Further, there is no Memorandum of Understanding (MoU) between KCCA and the Uganda Police Force indicating conditions under which the force is to perform its various roles. The Accounting Officer explained that KCCA in consultation with the Minister have recommended certain proposals to enable the amendment of provisions in the Kampala Capital City Act which pertain to the Metropolitan Police and Parliament is yet to consider the proposals for amendment. I await the Accounting Officer s effort in this regard. 8.9 Land board Operations The functions of a District Land Board (DLB) as prescribed in the Land Act, CAP 227 include holding and allocating land in the District which is not owned by any person, facilitation of the registration and transfer of interests in land and taking over the role and exercise the powers of the lesser in the case of a lease granted by a former controlling authority. In the performance of these functions the DLB is assisted with technical services provided by the District land office comprising the District offices of the Physical planner, land officer, valuer, surveyor and registrar of titles. Whereas KCCA is duly resourced with appropriate staff in the above offices, the DLB does not utilise the personnel in the discharge of its functions. This state of affairs has affected KCCA as highlighted in the meeting held on 9 th March 2015 between KCCA 12

20 and DLB: These matters raised in the meeting have been brought to attention of Parliament for appropriate guidance on the operations of the DLB (a) Allocation of the same parcel of land to more than one individual Plot 16 Luthuli Drive was allocated to a third party yet at the time of allocation there was a subsisting interest in favour of another individual. In all cases of this type the Authority is sued as a co-defendant since under section 90 of the Land Act, all rent, fees and other revenues from the Land Board form part of the KCCA revenues. (b) Retrospective Ground rent revisions For a long time the DLB did not exercise the right to revise the rents at the specific times stipulated in the various lease agreements. The board has purported to exercise this power recently and has sought to apply the revised rates retrospectively to the time when it was due and this has triggered volumes of complaints from land owners with one noted litigation proceeding against both the DLB and KCCA i.e. HCCS No.580 of (c) Creation of plots in existing roads and carriageways Many neighbourhoods in the city are traversed by planned but unconstructed roads to enable access to surrounding properties. It was noted that recently the DLB allocated one such existing road to a private developer who then processed a Title as Plot 9 Kololo crescent. This matter is being investigated by the IGG. (d) Conversion of lease into free hold Section 10 of the Land Act vests powers in the DLB to receive and consider applications for grants of land in freehold. Section 60 of the same Act however prescribes that in the exercise of its functions the DLB shall take into account the national and District council policies on land. It was noted that whereas the national land policy 2013 expressly prohibits conversion of former public land into freehold, the board has in the recent past entertained and granted applications for conversion to freehold which is against the existing national policy and also reduces the Authority s revenues in light of the provisions of section 90, Land Act. (e) Changes of user Government through the National physical planning board, approved and adopted the Kampala Development plan in the year 2013 as the principal planning and zoning 13

21 instrument to define which activities shall be permitted and authorised in which particular parts of the city as a mechanism to ensure planned developments. It was noted that the DLB approves applications for change user without reference to the Kampala Physical development plan thereby impeding the regulation of uncontrolled developments that shall likely conflict with the approved planning schemes for the particular areas. As a result of these transgressions, colossal sums are claimed for compensations and settlement of third parties which exceed the Authority s annual budgetary provisions. The Accounting Officer explained that KCCA has since created a fully-fledged Land Management Unit comprising an advocate of the Courts of Judicature, a registrar of titles, a physical planner, a valuer and a surveyor in line with the Land Act which compels the district (city) administration to designate their relevant and competent staff to render technical services to the Land Boards. Management further explained that the technical guidance has been appropriately provided which will eliminate the hitherto instances of bad decisions by the Board. I advised the Accounting Officer to develop a work flow (checklist) that ensures KCCA technical involvement before final decisions are made so as to harmonise the current state of affairs Inadequacies in the Department of Physical planning Non-compliance with provisions of Physical Planning Act 2010 Surveying is one of the sections in the Physical Planning Directorate (DPP) and its major functions are opening of boundaries and carrying out topographic surveys for KCCA properties and reviewing of survey files and also acting as a supportive centre for Ministry of Lands, Housing and Urban Development for processing deed plans through the Ministry Zonal Office (MZO). The Physical Planning Act 2010, under Section 36 (3) provides that an application for the sub division or consolidation of land shall be in Form P.P.A 2 in the Seventh Schedule. Details indicated in Form P.P.A 2 include name and address, applicant s name and address, nature of interest in land (registered owner, lessee, tenant by occupancy, sub lessee, customary tenant), block, plot number and acreage, registered number of the application, for which land or building is now used, brief description, proposed subdivision, details of any relevant easements affecting the 14

22 proposed sub-division, area affected, area covered by buildings and Percentage of site covered by existing buildings and that covered by proposed buildings. Out of a sample of 15 selected files reviewed, a total of 5 did not have attachments of copies of Form P.P.A.2. Legal provisions governing the subdivision or consolidation of land were not adhered to, which may limit decision making based on inadequate information and also lead to litigation from the aggrieved parties of the public. I advised the Accounting Officer to ensure that all relevant forms are duly appended to their respective files prior to the Physical Planning Committee approval of any deed plan for processing Illegal constructions (a) Illegal construction on Plot 2596, Block 215 Ntinda-Kulambiro An inspection of files revealed that a structure on plot 2596, Block 215 in Ntinda Kulambiro (District: Mengo; County; Kyaddondo) where records indicated that a new submission for alterations and additions to a residential apartment to four (4) levels was deferred pending approval of structural drawings, comprehensive audit on the foundation, submission of separate floor plans and provision of sufficient headroom under the staircase landing. However, it was observed that construction is on-going at the site as the owner had constructed all four levels of the building. The illegal structure is shown below: 15

23 The Accounting Officer explained that they are yet to review this case and take appropriate action. I advised the Accounting Officer to set up follow up mechanisms on enforcement notices by ensuring that those charged with execution provide reports to all stakeholders. (b) Non-enforcement of issued Enforcement Notices It was noted that cases where implementation of removal or demolition of illegal permanent structures upon non-compliance takes long or does not take place at all. Examples are in the table below: No. Particulars Date of Enforcement Notice 1. 3-level building off Hanlon Road in Lusaka Zone Makindye division. 2. Paradiso Inn Bukulungu village, Masanafu Lubaga division 3. Illegal development at Plot 328, Block 248, Kauku Bunga Makindye division. Remarks 11/02/2014 Much as the owner was served with demolition notice, he continued to build. Site visit done on 11 th June /06/2014 The developer continued with the constructions works and as of 28/04/2015, the building was at the 3 rd level. 23/10/2013 Initial Notice was for removal of a dock, there was no record on file to indicate that the dock was demolished. Site visit on 11 th June, 2015 indicated that the dock and other structures were completed. Failure to implement the necessary action at the appropriate time encourages other illegal developers to emerge. The Accounting Officer explained that the above sites are scheduled for enforcement. The main focus of enforcement/demolition has been towards decongestion of road reserves and clearance of temporary structures. Logistics are being mobilized for dealing with more complex structures where the safety risks are higher. I await the results of the Accounting Officer s efforts in this regard. 16

24 8.11 Field Inspections of KCCA Schools and Road Works Road works Physical inspection of the facilities revealed the following anomalies: Lack of drainage channels on some roads, Incomplete road works due to termination of contracts i.e. Mbogo road S/N Photos Remarks Management response The road was done in Constructing drainage house (KCCA). channels on Seriiso (i) During the inspections, it Road was delayed due was noted that some to the heavy workload sections of the Road did not on the Division have drainage channels Engineer. The drainage while sections with works are scheduled to channels needed clearing. be executed during This poses a serious financial year, 2015/16. problem to its maintenance. Seriso road in Makindye A Section of Mbogo Road whose contract was terminated due to failure to follow instructions. The contractor did not achieve the thickness of the stone base which was required in the bid. KCCA terminated the contract to reconstruct Mbogo Road after the Contractor executed defective works which he failed to correct. The issue raised is right now under arbitration. Mbogo road Schools facilities Inspection of a number schools revealed that the schools faced challenges that impacted on service delivery as outlined below: (i) Land Disputes During inspection, it was noted that a number of schools still had land disputes which meant that the Authority risked losing its earlier investment in the schools which constrains future investment. The land owners where the schools are based included Uganda Land Commission, Kampala District Land Board, Faith Based Organizations like churches and Muslim organizations and Buganda Land Board. It was noted that Management of KCCA has not negotiated with some of the aforementioned stakeholders to obtain lease or Memorandum of Understandings that can allow the Authority to make long term investments on the land and sustain 17

25 service delivery in the city i.e. the owners of the land on which Kalinaabiri P/S is located demanded for UGX 1.5billion for the land and KCCA could not afford that money which left the school at the mercy of the land owner. (ii) Sanitation A number of schools had shortage of latrines and faced water challenges, for example; Ntinda Primary School, Naguru Katali and Nakasero primary school. (iii) Dilapidated structures A number of schools had very old dilapidated structures which pose a serious risk to the pupils i.e. Bat valley and Naguru katali. The table below refers: Issue Land Kalinabiri P/S Kalinaabiri Primary School. The school is still a squatter on a private Land. During interactions with the School Administration, it was stated that the Land lord is requesting for 1.5Billion to sell the land to the school but KCCA does not have that money. However, as the land lord threatens to evict the school, the school administration continues to invest in the school. It has completed fencing the school and is in the final stages of completing the school latrine. The school bought a piece of land adjacent to the school and added to the current land they are using. However, no title or land agreement was made available during the audit inspection. Management response KCCA has engaged the various controlling authorities in a bid to secure government s interest in schools which sit on their land i.e. applied to Uganda Land Commission for leases for schools sitting on land controlled by ULC, lodging caveats on school land belonging to (ULC), applied to the BLB for leases with respect to schools on land controlled by them. With regard to schools on land belonging to religious institutions, KCCA has continued to implore the Foundation Bodies to enter into cooperation frameworks with KCCA which will ensure the safety of school land. With respect to school land held by other entities and private individuals, KCCA has approached such entities to enter into negotiations with the said entities and individuals to secure the schools. With specific reference to Kalinabiri P/S, KCCA management has taken 18

26 The Police Children School Ntinda. The land on which the school is situated is not secured. There were new infrastructures which the school is putting up like a water borne toilet. There is need to secure the land to guarantee such investments a decision to purchase the land on which the school sits as and when the funds are secured. Police children school Ntinda KCCA P/S Kamwokya This building adjacent to the school was bought by the school. The piece of Land it lies on is called Kamwokya Land. However, it has no title. Below: front of Building KCCA Kamwokya P/S sits on Kibuga Block 29 plots 938, 939, 940, 941 and 942 registered in the names of KCC/A. However the adjacent portion of land is comprised in a Kibanja which is not yet registered in the names of KCCA. Efforts are underway to trace the owner of the mailo title in order to mutate the portion which was purchased by the defunct KCC. Sanitat ion (i) Ntinda Primary School land remains unsecured with two churches (ST. Luke and Charles Lwanga) both claiming ownership (ii) The school faces a shortage of Latrines as the current Pit latrines are dilapidated and in urgent need of repair. Ntinda Primary School is one of those schools KCCA recognizes as a school sitting on ULC land. We have accordingly applied for a lease from ULC as earlier mentioned. Regarding the shortage of latrines, the school has been earmarked to benefit from a waterborne toilet in the 2016/17 FY. Ntinda primary school 19

27 Dilapid ated structu res Bat valley P/s Dilapidated latrine at Naguru Katali P/s Bat valley p/s Naguru Katali P/S is a school on ULC land for which KCCA has applied for a lease and is yet to receive a response from ULC. The school shall be considered for construction of a perimeter wall once a reply is received from the Uganda Land Commission. Regarding the state of latrines, KCCA has identified this school to be one of the 5 schools to benefit from construction of a 12 stance biogas toilet and a rainwater harvesting system to be funded as part of the Corporate Social Responsibility by MTN from the proceeds of the 2015 MTN Marathon. Bat Valley Primary School sits on land owned by the Shree Sanatan Dharma Mandal (SSDM) Asian Community. The SSDM has a free hold title on the land and they have recently been promoting the idea of turning Bat Valley P/S into a Private School. They recently threatened to take court action if KCCA does not relinquish the school. Under such circumstances, KCCA cannot guarantee the safety of any government investment. 20

28 Above: Bat Valley Primary School The school buildings were found in a very sorry state and pose a serious risk to the school children Left: One of the School Blocks which require urgent renovation Naguru Katali P/S I advised the Accounting Officer to follow up the above issues with a view to improving facilities in the schools. 21

29 APPENDIX 1 FINANCIAL STATEMENTS 22