OFFICE OF THE AUDITOR · PDF fileTHE REPUBLIC OF UGANDA OFFICE OF THE AUDITOR GENERAL ......

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THE REPUBLIC OF UGANDA

OFFICE OF THE AUDITOR GENERAL

ANNUAL REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF STATUTORY

AUTHORITIES AND STATE ENTERPRISES FOR THE YEAR

ENDED 30TH JUNE 2009

VOLUME 4

STATUTORY CORPORATIONS

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LIST OF ACRONYMS AND ABBREVIATIONS

AHP Allied Health Professionals

AHL Amber House Limited

LI Live stock Industries

AC Amnesty Commission

BOU Bank of Uganda

CCL Cable Corporation Limited

CMA Capital Markets Authority

CAA Civil Aviation Authority

COCTU Coordinating Office for Control of Trypanosomiasis in Uganda

CDO Cotton Development Organization

HTTI Crested Crane Hotel & Tourism Training Institute

CAA Civil Aviation Authority

DDA Dairy Development Authority

PU Privatization Unit

EAC East African Community

ERA Electricity Regulatory Authority

UICT Institute of Communication & Information Technology

KCCL Kasese Cobalt Company Limited

KML Kilembe Mines Limited

KSW Kinyara Sugar Works

LVFO Lake Victoria Fisheries Organization

LDC Law Development Centre

MTAC Management Training and Advisory Centre

MNS Mandela National Stadium

MEMD Ministry of Energy and Mineral Development

NAGRIC National Animal Genetic Resources Centre and Data Bank

NWMS Nakivubo War Memorial Stadium

NCC National Council for Children

NCHE National Council for Higher Education

NCS National Council of Sports

NCDC National Curriculum Development Centre

NDA National Drug Authority

NEC National Enterprises Corporation & Subsidiaries

NFA National Forestry Authority

NHCCL National Housing & Construction Company Limited

NMS National Medical Stores

NPA National Planning Authority

NWSC National Water & Sewerage Corporation

NWC National Women‟s Council

NYC National Youth Council

NHI Nile Hotel International

NSSF National Social Security Fund

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PLB Public Libraries Board

PPDA Public Procurement & Disposal of Public Assets Authority

REA Rural Electrification Agency

UACC Uganda Air Cargo Corporation

UBC Uganda Broadcasting Corporation

BC Broadcasting Council

UBOS Uganda Bureau of Statistics

UCDA Uganda Coffee Development Authority

UCC Uganda Communications Commission

UDB Uganda Development Bank

UDC Uganda Development Corporation

UEB Uganda Electricity Board

UEDCL Uganda Electricity Distribution Company Limited

UEGCL Uganda Electricity Generation Company Limited

UEGCL-TA Uganda Electricity Transmission Corporation (Twinning Arrangement)

UETCL Uganda Electricity Transmission Company Limited

UEPB Uganda Export Promotion Board

UIC Uganda Insurance Commission

UIA Uganda Investment Authority

UMDPC Uganda Medical and Dental Practitioners Council

UNBS Uganda National Bureau of Standards

UNCST Uganda National Council of Science & Technology

UNCC Uganda National Cultural Centre

UNEB Uganda National Examinations Board

UNMC Uganda Nurses & Midwives Council

CASSOA Civil Aviation Safety and Security Oversight Agency

MERECP Mount Elgon Regional Ecosystem Conservation Programme

KCCL Kasese Cobalt Company Limited

PSA Production Sharing Agreement

PPP Public Private Partnership

SCOUL Sugar Corporation of Uganda Ltd.

NIC National Insurance Corporation Ltd.

UTL Uganda Telecom Ltd.

QCIL Quality Chemical Industries Ltd.

UGCEA Uganda Ginners and Cotton Exporters Association

CSDP Cotton Subsector Development Credit

NHL Nsimbe Holdings Ltd.

MEL Mugoya Estates Ltd.

JV Joint Venture

MCELU Mugoya Construction and Engineering Limited Uganda.

MIC Management Investment Committee

VPDL Victoria Property Development Ltd.

BOD Board of Directors

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UPPC Uganda Printing & Publishing Corporation

UPHL Uganda Property Holding Limited

URC Uganda Railways Corporation

USL Uganda Seeds Limited

UTB Uganda Tourism Board

UWA Uganda Wildlife Authority

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TABLE OF CONTENTS

CHAPTER ONE ................................................................................................................................................................ 9

1.1 Mandate and Legal framework ........................................................................................... 9 1.1.1 The Auditor General’s Responsibilities............................................................................... 9 1.1.2 Responsibilities of Public Organisations on the financial statements ........................... 10 1.1.3 Representations by management..................................................................................... 10 1.2 VISION ............................................................................................................................... 11 1. 3 STATUS OF ACCOUNTS AUDITED DURING THE YEAR ..................................................... 11 1.4 SUMMARY OF MAJOR AUDIT FINDINGS OF THE REPORT .............................................. 12 1.4.1 Unremitted statutory deductions ..................................................................................... 12 1.4.2 Corporate Governance ...................................................................................................... 13 1.4.3 Asset Management ............................................................................................................ 14 1.4.4 Performance Review of Public Organizations.................................................................. 15 1.5 REGIONAL AUDITS ............................................................................................................ 16

CHAPTER TWO ............................................................................................................................................................. 18

2.1 AUDIT OPINION (CERTIFICATION OF ACCOUNTS) ........................................................ 18 2.1.1 Unqualified Opinion ........................................................................................................... 19 2.1.2 Unqualified opinion with Emphasis of Matter (EOM) ...................................................... 20 2.1.3 Qualified Opinion ............................................................................................................... 20 2.1.4 Disclaimer of Opinion ........................................................................................................ 22 2.1.5 Adverse Opinion ................................................................................................................. 23 2.2 ACCOUNTS WHERE EXAMINATION OF BOOKS OF ACCOUNTS HAVE BEEN CONCLUDED

BUT THE ACCOUNTS HAVE NOT BEEN CERTIFIED .......................................................... 23 2.2.1 COORDINATING OFFICE FOR THE CONTROL OF TRYPANOSOMIASIS IN ..................... 24 2.2.2 LAW DEVELOPMENT CENTRE: Year ended 30th June 2006 ............................................ 26 2.2.3 UGANDA NATIONAL CULTURE CENTRE: Years ended 30th June ................................... 26 2.2.4 UGANDA LIVESTOCK INDUSTRIES LTD ........................................................................... 27 2.2.5 NATIONAL COUNCIL FOR HIGHER EDUCATION .............................................................. 29 2.2.6 NATIONAL COUNCIL FOR HIGHER EDUCATION: ............................................................. 30 2.2.7 JOINT CLINICAL RESEARCH CENTRE: .............................................................................. 31 2.2.8 NAKIVUBO WAR MEMORIAL STADIUM (NWMS) ............................................................. 34 2.3 AUDITS IN PROGRESS ...................................................................................................... 36

CHAPTER THREE .......................................................................................................................................................... 37

3.1 UNQUALIFIED AUDIT OPINION WITH EMPHASIS OF MATTER PARAGRAPHS.............. 37 3.1.1 NILE HOTEL INTERNATIONAL LIMITED (31st DECEMBER 2008) ................................... 37 3.1.2 UGANDA COFFEE DEVELOPMENT AUTHORITY (30TH SEPTEMBER 2008) ...................... 37 3.1.3 NATIONAL DRUG AUTHORITY (30TH JUNE 2009) ............................................................ 38 3.1.4 CABLE CORPORATION LIMITED (31ST DECEMBER 2008) ............................................... 38 3.1.5 UGANDA NATIONAL COUNCIL OF SCIENCE AND TECHNOLOGY (30TH JUNE 2008) ...... 38 3.1.6 UGANDA NATIONAL COUNCIL OF SCIENCE AND TECHNOLOGY (30TH JUNE 2009) ...... 38 3.1.7 AMBER HOUSE LIMITED (31ST DECEMBER 2008) .......................................................... 39 3.1.8 UGANDA PRINTING AND PUBLISHING CORPORATION (30TH JUNE 2009) ................... 39 3.1.9 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2007) ................................................ 40 3.2 QUALIFIED OPINIONS ...................................................................................................... 40 3.2.1 NATIONAL WATER AND SEWERAGE CORPORATION (30th JUNE 2009) ....................... 40

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3.2.2 UGANDA AIR CARGO CORPORATION (30TH JUNE 2008) ................................................ 40 3.2.3 NATIONAL CURRICULUM DEVELOPMENT CENTRE (31ST DECEMBER 2004) ................. 41 3.2.4 NATIONAL CURRICULUM DEVELOPMENT CENTRE (31ST DECEMBER 2005) ................. 41 3.2.5 UGANDA DEVELOPMENT BANK (31ST DECEMBER 2008) ................................................. 41 3.2.17 UGANDA PROPERTY HOLDINGS LIMITED (30TH JUNE 2009) ...................................... 50 3.2.18 UGANDA SEEDS LTD (30TH JUNE 2007) ......................................................................... 50 3.2.24 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2005) .............................................. 54 3.2.25 NATIONAL CURRICULUM DEVELOPMENT CENTRE ....................................................... 55 3.3 QUALIFIED OPINIONS WITH EMPHASIS OF MATTER ..................................................... 55 3.3.1 NATIONAL YOUTH COUNCIL (30TH JUNE 2005) .............................................................. 55 3.3.4 UGANDA AIR CARGO CORPORATION (30THJUNE1999) .................................................. 57 3.3.5 UGMA ENGINEERING CORPORATION LIMITED (31ST DECEMBER 2008) ...................... 57 3.3.6 CIVIL AVIATION AUTHORITY (30TH JUNE 2008) ............................................................. 58 3.3.7 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2008) ............................................. 59 3.3.8 NATIONAL ENTERPRISE CORPORATION (30TH JUNE 2006) ........................................... 59 3.3.10 CIVIL AVIATION AUTHORITY (30TH JUNE 2008) ........................................................... 61 3.3.11 UGANDA REVENUE AUTHORITY (30TH JUNE 2009)....................................................... 62 3.4 DISCLAIMER OPINIONS.................................................................................................... 62 3.4.1 LAW DEVELOPMENT CENTRE (31ST DECEMBER 2002) .................................................... 62 3.4.4 THE HOTEL AND TOURISM TRAINING INSTITUTE (30TH JUNE 2005). ......................... 66 3.4.6 UGANDA RAILWAYS CORPORATION (31st DECEMBER 2007) ........................................ 68 3.5 ADVERSE OPINION ............................................................................................................ 70 3.5.1 POSTA UGANDA LIMITED (30TH JUNE 2007) .................................................................. 70

CHAPTER FOUR ............................................................................................................................................................ 72

4.0 ENERGY SECTOR AUDITS .................................................................................................. 72 4.1 STATUTORY CORPORATIONS ........................................................................................... 72 4.1.1 UGANDA ELECTRICTY TRANSMISSION COMPANY LIMITED .......................................... 72 4.1.2 UGANDA ELECTRICTY DISTRIBUTION COMPANY LIMITED ........................................... 73 4.1.3 KILEMBE MINES LTD. (30TH JUNE 2009) ......................................................................... 74 4.1.4 UGANDA ELECTRICTY GENERATION COMPANY LIMITED .............................................. 75 4.1.5 ELECTRICITY REGULATORY AUTHORITY (30TH June 2008) ........................................... 76 4.1.6 RURAL ELECTRIFICATION AGENCY (30TH JUNE 2009) ................................................... 77

CHAPTER FIVE .............................................................................................................................................................. 78

5.0 AUDIT OF INVESTMENTS BY GOVERNMENT IN PRIVATE COMPANIES ......................... 78 5.1 Section18. Audit of public monies in private organizations and bodies. ....................... 78 5.2 The third Schedule of the Public Finance and Accountability Act 2003 Accounts ......... 78

CHAPTER SIX ................................................................................................................................................................ 80

6.0 SPECIAL AUDITS AND INVESTIGATIONS ........................................................................ 80 6.1 COTTON DEVELOPMENT ORGANIZATION (CDO) ............................................................ 80 6.1.1 Compliance with the Loan Agreement ............................................................................. 81 6.1.2 Utilization of the Loan Funds ............................................................................................ 82 6.1.3 Impact ................................................................................................................................ 82 6.1.4 Recovery of Loans ............................................................................................................. 83 6.1.5 Non Compliance with Agreements ................................................................................... 83 6.1.6 Repayments ....................................................................................................................... 84 6.1.7 Revolving Fund .................................................................................................................. 84 6.1.8 Accrued Interest ................................................................................................................ 84

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6.1.9 Capacity to Pay .................................................................................................................. 85 6.2 NATIONAL SOCIAL SECURITY FUND (NSSF) ................................................................... 87 6.2.1 Procurement findings ........................................................................................................ 87 6.2.1.1 IMIS ................................................................................................................................. 87 6.2.1.2 Motor vehicle purchase .................................................................................................. 88 6.2.1.3 Legal services providers’ files ........................................................................................ 89 6.2.1.4 Private investigations file .............................................................................................. 89 6.2.2 Payment of salary advances, allowances and loans........................................................ 89 6.2.2.1 Managing Director NSSF ................................................................................................ 89 6.2.2.2 Deputy Managing Director NSSF ................................................................................... 89 6.2.3 Credit card usage by management ................................................................................... 90 6.2.4 Issues regarding JVs ......................................................................................................... 90 6.2.4.1 Nsimbe Holdings Limited (NHL) .................................................................................... 90 6.2.4.2 Victoria Property Development Limited (VPDL) ........................................................... 91 6.2.5 Listed securities ................................................................................................................. 93 6.2.5.1 Procurement of stockbrokers ........................................................................................ 93 6.2.5.2 British American Tobacco (Uganda) .............................................................................. 93 6.2.5.3 Bank of Baroda (Uganda) ............................................................................................... 93 6.2.5.4 Development Finance Company of Uganda .................................................................. 93 6.2.5.5 Stanbic Bank (Uganda) .................................................................................................. 94 6.2.6 Investments in fixed deposit ............................................................................................ 94 6.2.7 Sale of government bonds before their maturity date .................................................... 95 6.2.8 Purchase of land ................................................................................................................ 95 6.2.8.1 Temangalo ...................................................................................................................... 95 6.2.8.2 Branch offices ................................................................................................................. 96 6.2.8.3 Law firm single sourced ................................................................................................. 96 6.2.8.4 Investment Policy not followed ..................................................................................... 96 6.2.8.5 Arua Project .................................................................................................................... 96 6.2.8.6 Gayaza and forest land................................................................................................... 96 6.2.8.7 Lumumba ........................................................................................................................ 96

CHAPTER SEVEN .......................................................................................................................................................... 97 7.0 STATUS OF BUSINESS OF THE STANDING COMMITTEE ON COMMISSIONS, STATUTORY

AUTHORITIES & STATE ENTERPRISES ............................................................................. 98 7.1 Reports presented to the House ....................................................................................... 98 7.2 Reports concluded but not yet presented to the House ................................................. 98 7.3 Reports still under consideration ..................................................................................... 99

CHAPTER EIGHT ......................................................................................................................................................... 100

8.0 DIVESTITURE ACCOUNTS ............................................................................................... 100 8.1. Status of Divested Enterprises ....................................................................................... 100 8.2 Contingent Liabilities ...................................................................................................... 101 8.3 DIVESTITURE AUDIT OF UGANDA ELECTRICITY BOARD (UEB) ................................... 101 8.3.1 Introduction ..................................................................................................................... 101 8.3.2 Legal Status .................................................................................................................... 102 8.3.3 Ownership ........................................................................................................................ 102 8.3.4 Divestiture Process .......................................................................................................... 102 8.3.5 UEB Core Assets ............................................................................................................... 103 8.3.6 Asset valuation ................................................................................................................ 103

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8.3.7 Unbundling UEB Assets and Liabilities ........................................................................... 103 8.3.8 Findings on Divestiture of Uganda Electricity Board ..................................................... 104 8.3.5 Conclusion ........................................................................................................................ 105 Appendix 1 ................................................................................................................................. 106 Appendix A ................................................................................................................................. 108 Appendix B ................................................................................................................................. 110 Appendix C ................................................................................................................................. 112 Appendix D ................................................................................................................................ 114 Appendix E ................................................................................................................................. 118 Appendix F ................................................................................................................................. 120 Appendix G ................................................................................................................................ 122

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CHAPTER ONE

RESPONSIBILITY OF THE AUDITOR GENERAL AND LEGAL FRAMEWORK

This is volume 4 of the Auditor General‟s annual report to Parliament. The report presents

a summary of audit reports issued for Statutory Corporations / entities audited during the

period from 1st April 2009 to 31st March 2010.

1.1 Mandate and Legal framework

The 1995 Constitution of the Republic of Uganda under Article 163 (3) as amplified by the

National Audit Act 2008 Section 17, and other various Acts of Parliament establishing

Statutory Corporations and State Enterprises require the Auditor General to examine and

audit the accounts of these entities and submit annually a report to Parliament on the

financial as well as value for money audits. In addition, the Auditor General is mandated

to carry out special audits on any matter and report to Parliament. The National Audit Act

under Section 18 also states that the Auditor General may inquire into, examine,

investigate and report, as he or she considers necessary, on the expenditure of public

monies disbursed, advanced, or guaranteed to a private organization or body in which

government has no controlling interest.

1.1.1 The Auditor General’s Responsibilities

The scope of the Auditor General‟s work when conducting financial audits is to audit and

report to parliament by expressing an independent opinion as to whether or not the

financial statements, in all material respects, fairly state the results of operations of the

entities in accordance with International Financial Reporting Standards and in the manner

consistent with the respective Acts and Statutes establishing these entities as well as

complying with the relevant laws and regulations applicable to financial matters. These

standards require that ethical requirements are complied with and the audit is planned

and performed to obtain reasonable assurance as to whether the financial statements are

free from material error or misstatement.

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The audit also includes obtaining sufficient and appropriate evidence supporting the

amounts and disclosures in the financial statements to provide a basis for making an

opinion. The audit procedures selected depend on the auditor‟s judgment, including the

assessment of risks of material misstatements of the financial statements, whether due to

fraud or error. In making risk assessments, the auditor considers internal controls relevant

to the entity‟s preparation and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circumstances.

An opinion will also be expressed as to whether or not any matters came to the Auditors‟

attention that causes him/her to believe that material errors and non-compliance with

laws and regulations, applicable to financial matters, had occurred.

1.1.2 Responsibilities of Public Organisations on the financial statements

It is the responsibility of The Directors of the audited entities to prepare financial

statements which give a true and fair view of the state of affairs and operating results of

their entities in accordance with International Financial Reporting Standards and the

various Acts and Statutes establishing them. This responsibility also includes designing,

implementing and maintaining internal controls relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether

due to fraud or error, selecting and applying appropriate accounting policies and making

accounting estimates that are reasonable in their circumstances. The audit of financial

statements does not relieve management, or those charged with governance of their

responsibility.

1.1.3 Representations by management

As part of normal audit procedures, the auditor will where necessary request management

of audited entities to provide written confirmations or oral representations that have been

received from management during the course of the audit

After conducting audits based on the scope of the auditor‟s responsibility stated above,

the auditor shall report to management in writing, any significant weaknesses based on

observations on the internal control system and other areas that come to his /her notice

which he / she considers necessary to be brought to management‟s attention by way of a

Management letter.

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1.2 VISION

The vision of the office of the Auditor General is “To be an Effective and Efficient Supreme

Audit Institution (SAI) in promoting public Accountability in the use of Resources in the

enhancement of good governance”.

Mission The mission of the office of the Auditor General is “To audit and report to the Public and

thereby make an effective contribution in improving public accountability”.

Core Values

The office of the Auditor General is run on three (3) specific core values which motivate

and guide staff in their endeavours to achieve the vision and mission of the office. These

core values are:-

Integrity

Objectivity and

Professional Competence

1. 3 STATUS OF ACCOUNTS AUDITED DURING THE YEAR

The Office of The Auditor General is responsible for the audit of Seventy six (76)

entities comprising of state enterprises, statutory authorities and commissions as listed in

appendix 1. The nature of the entities is such that their accounting dates are not co-

terminus (do not all end on the same date). Four different accounting dates feature in the

accounts of the entities as follows:-

Year ending 30th June,

Year ending 30th September,

Year ending 31st October and

Year ending 31st December.

A total of 198 audits were conducted during the year under review. Out of these audits,

111 audit certificates were issued to 65 entities. Forty four (44) other audits were

concluded but audit certificates could not be issued to these entities due to their failure to

prepare financial statements. The remaining forty three (43) audits in respect of 21

entities were still under progress.

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1.4 SUMMARY OF MAJOR AUDIT FINDINGS OF THE REPORT

1.4.1 Unremitted statutory deductions

During the period under review, seven public organizations failed to remit statutory

deductions amounting to Shs.3,436,170,469 to the relevant statutory authorities. Of these

amounts, un remitted taxes to Uganda Revenue Authority in respect of Pay As You Earn,

Value Added Tax and Withholding Tax amounted to Shs.2,278,405,227 while deductions

for Employee benefits relating to National Social Security Fund amounted to

Shs.1,157,765,242. Details are shown in the table below:

No Entity NSSF

Shs

Taxes

Shs

Amount

Shs

1 Hotel Training and Tourism

Institute

68,960,986 71,174,387 140,135,373

2 Uganda Broadcasting

Corporation

304,209,915 1,497,662,635 1,801,872,550

3 Nakivubo War Memorial Stadium

29,376,861 163,818,328 193,195,189

4 Mandela National Stadium 638,830,396 11,177,671 650,008,067

5 COCTU - 16,357,500 16,357,500

6 Management Training and Advisory Centre

116,387,084 114,188,183 230,575,267

7 Uganda National Bureau of

Standards

146,612,166 146,612,166

8 Uganda Export Promotion

Board

- 257,414,357 257,414,357

TOTAL 1,157,765,242 2,278,405,227 3,436,170,469

Pictorially, the above information can be shown in a pie chart as follows

This is a critical situation of non compliance with the law and remedial measures should

be sought to avoid penalties which may be charged by the respective statutory bodies.

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1.4.2 Corporate Governance

The framework for accountability in government specified in Section 15 and 19 of the

Public Finance and Divestiture Act (Cap 98) requires Accounting officers and their Boards

to be accountable for their entity‟s activities. It is mandatory for management of public

entities to put in place effective internal control systems to safe guard assets and

resources from mismanagement and fraud. The following commonly recurring corporate

governance issues were;

Public enterprises operating for long periods of over 2 years without Boards of directors.

Late renewal and appointment of new Boards by the respective line Ministers responsible

for the Public Enterprises and Organizations.

Board members of public enterprises involved in day to day management functions

instead of providing policy decisions and supervising management.

Public enterprises operating without approved budget estimates.

Board members remunerating themselves without approval from the line Ministers.

Irregular Board meetings below or exceeding the required minimum.

During the year under review a total of Fourteen (14) Public organizations had

governance issues as summarized in the table below;

No Entity Governance issues

1 Uganda National Council of Science & Technology Absence of Board of Directors

2 Uganda Air Cargo Corporation (UACC) Absence of Board of Directors

3 Uganda Broad Casting Corporation(UBC) Non approval of Board remunerations

4 National Enterprise Corporation(NEC) Absence of Board of Directors

5 National Council for Children(NCC) Absence of Board of Directors

6 Uganda Export Promotion Board(UEPB) Lack of approved budgets

7 Nakivubo War Memorial Stadium(NWMS) Board indebted to stadium without settling debts

8 COCTU Irregular Board meetings

9 Mandela National Stadium (MNS) Unsigned Board minutes.

10 National Council for Higher Education(NCHE) Board of Directors involved in

management functions

11 Uganda Livestock Industries Lack of approved budgets

12 National Planning Authority Absence of Board of Directors

13 Kilembe Mines Limited(KML) Absence of Board of Directors

14 Civil Aviation Authority Absence of Board of Directors

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Recommendations

Ministers responsible for these entities should ensure that appointment of new boards is

timely.

In order to avoid conflict of interest, in as far as the oversight function is concerned Board

members should avoid performing management functions.

Accounting officers of public enterprises should ensure that their budgets are approved by

the Board and line Ministers.

1.4.3 Asset Management

A review of public organizations revealed that many were noted to have poor or improper

management of non current assets. There was apparent lack of ownership to properties

as evidenced by absence of title deeds to many of the properties, absence of fixed assets

registers or incomplete and outdated fixed assets registers, non revaluation of assets for a

long period of time and impairment not tested periodically as required by the accounting

standards. During the year under review a total of Nineteen (19) Public organizations had

asset management weaknesses as shown below;

No Entity Asset management issues

1 National Water and Sewerage

Corporation (NWSC)

Lease hold land without titles

2 Uganda Coffee Development Authority Uninstalled Wet coffee processing machines

3 Cotton Development Organization (CDO) Absence of title to seed dressing stations

4 Uganda Electricity Generation Company

Ltd (UEGCL)

Impairment of assets (Dams)

5 Dairy Development Authority (DDA) Valuation of Property, plant and equipment

6 National Enterprise Corporation(NEC) Non Valuation of Property, plant and equipment

7 Law Development Centre(LDC) Outdated fixed assets register

Non Valuation of Property ,plant and equipment

Absence of title to properties

Encroachment on LDC land

8 Uganda Nurses and Midwives

Council(UNMC)

No fixed assets register



9 Hotel Training and Tourism

Institute(HTTI)


Impairment of Property plant and equipment.

10 Management Training and Advisory

Centre(MTAC)


Non revaluation of Property plant and Equipment

11 National Council for Children (NCC) Encroachment on NCC land

12 Uganda Seeds Limited(USL) Non Valuation of land and Buildings

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Impairment of Buildings

13 Uganda Property Holding Limited (UPHL) Non Valuation of land and buildings

14 NAGRIC Absence of title to properties

Lack of livestock census register

No valuation of biological assets

15 Nakivubo War Memorial Stadium(NWMS) No fixed assets register


No valuation of property plant and equipment

16 Uganda Broad Casting Corporation (UBC) No values to property and assets vested to UBC


17 Uganda Livestock Industries No fixed assets register


No valuation of property plant and equipment

18 National Curriculum Development

Centre(NCDC)

No depreciation of Motor vehicles

19 Uganda institute of Information and

Communication Technology

No values to assets vested to UICT from UCC

Recommendations

Legal ownership of properties should be secured and land titles/deeds obtained from

relevant authorities.

Revaluation of assets should be conducted and impairment testing carried out at periodic

intervals.

Maintenance and update of fixed assets registers should be carried out.

Land encroached upon should be secured.

1.4.4 Performance Review of Public Organizations

Audit of financial statements of public organizations revealed that some entities have been

operating profitably while others have been operating at a loss. Financial standing of

these entities has been evaluated basing on the accumulated surplus or deficit as at 30th

June, 2009, 31st December, 2008, 31st October 2008 and 30th September, 2008 depending

on the year end of the financial years of these entities.

An analysis of financial statements of fifty eight (58) entities whose accounts were

certified revealed that twenty six (26) made losses while thirty two (32) made profit. This

is summarized in the table below;

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Public organization Number of loss

making

Number of

profit making

Total

Regulatory Authorities 7 13 20

Government Institutions 9 6 15

State Enterprises 10 13 23

Total 26 32 58

It was further noted that eleven (11) organisations had continued accumulating losses,

the following five (5) entities were singled out for making huge losses

No Entity Losses made in

Shs

Financial

year

reviewed

1 Uganda Electricity Generation Company Ltd (25,786,766,000) Dec 2008

2 Uganda Electricity Transmission Company Ltd (57,021,601,000) Dec 2008

3 Uganda Electricity Distribution Company Ltd (42,582,952,000) Dec 2008

4 National Social Security Fund(NSSF) (50,198,093,000) June 2008

5 Civil Aviation Authority (CAA) (11,291,238,000) June 2008

The earlier efforts are made, to reverse this trend the better for the economy of the

country.

Full details of the performance are shown in appendix A, B and C.

1.5 REGIONAL AUDITS

Uganda is a member of the following Regional Intergovernmental Organizations namely;

Intergovernmental Standing Committee on Shipping (ISCOS)

Northern Corridor Transit Transport Coordinating Authority (NCTTCA);

Common Market for Eastern and Southern Africa (COMESA)

East African Community (EAC).

The East African Audit Commission consisting of the five Auditors‟ General of East Africa is

mandated to audit the East African Community. During the year, the Auditor General of

Uganda chaired the audit of the East African Community and its organs, namely the East

African Secretariat, Lake Victoria Basin Commission (LVBC), Lake Victoria Basin

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Commission Partnership Fund (LVBCPF); Lake Victoria Environmental Management Project

II (LVEMP II) , the Civil Aviation Safety and Security Oversight Agency (CASSOA) and

Mount Elgon Regional Ecosystem Conservation Programme (MEPECP). The Auditor

General conducted the audits together with Auditors General of Rwanda and Tanzania.

The audit was completed and accounts presented to the East African Legislative Assembly

where it was reported to the Committee on Accounts for scrutiny on 23rd September,

2009.

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CHAPTER TWO

BASIS AND TYPES OF AUDIT OPINIONS ISSUED TO PUBLIC ORGANIZATIONS

This chapter deals with the basis and types of audit opinions issued to public organizations

during the Period 1st April 2009 to 31st March 2009.

2.1 AUDIT OPINION (CERTIFICATION OF ACCOUNTS)

During the period under review, a total of one hundred fifth six (155) audits were

undertaken and of these; forty two (42) opinions issued were unqualified, eleven (11)

opinions issued were unqualified with emphasis of matter (EOM) thirty (30) opinions

issued were qualified, twenty (20) opinions issued were qualified with emphasis of matter

(EOM), seven (7) opinions were issued with disclaimers, one (1) opinion issued was

adverse, while examination of books of accounts were concluded for forty four (44)

accounts but no certification was done.

Chart showing the proportion of audit opinions

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2.1.1 Unqualified Opinion

An unqualified audit opinion is issued when the Auditor is able to express an opinion and

concludes that the financial statements of an audited entity give a true and fair view or

are presented fairly, in all material respects, in accordance with the International Financial

Reporting Standards of the various Acts and Statutes establishing the state enterprises,

statutory authorities and commissions.

In the year under review Forty two (42) unqualified opinions without emphasis of matter

were issued to (23) public organizations compared to thirty eight (38) reported previously

showing an increase level of 10.5%, this is shown in the table below;

No Entity No of

reports certified

Financial year audited

1 Amnesty Commission 1 30th June 2008

2 Bank of Uganda 1 30th June 2009

3 Capital Markets Authority 1 30th June 2009

4 Management Training & Advisory Centre 4 31st Dec 2004- 31st Dec 2007

5 National Housing & Construction Co. Ltd 1 31st December 2008

6 New Vision Printing & Publishing Corporation 1 30th June 2009

7 Post Bank Uganda Limited 1 31st December 2008

8 Public Procurement & Disposal of Public Assets 1 30th June 2008

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Uganda Institute of Information &

Communications Technology. 3 30thJune2006- 30th June 2008

10 Uganda Insurance Commission 1 30th June 2008

11 Uganda Investment Authority 1 30th June 2008

12 Uganda National Council for Higher Education 1 30th June 2006

13 Lake Victoria Fisheries Organization 1 30th June 2008

14 Uganda National Bureau of Standards 1 30th June 2008

15 Uganda National Examinations Board 4 30thJune 2005.-30thJune 2008

16 Broadcasting Council. 3 30thJune 2006-30th June 2008

17 Uganda Tourism Board. 1 30th June 2009

18 Uganda Communications Commission. 1 30th June 2009

19 Uganda Air Cargo Corporation. 1 30th June 2009

20 National Women‟s Council. 7 30th June 2002-30th June 2008

21 National Council for Children 3 30th June 2003,2004 and 2006

22 National Planning Authority 2 30thJune2007 to 30th June 2008

23 Uganda Bureau of Statistics 1 30th June 2009.

TOTAL 42

20

2.1.2 Unqualified opinion with Emphasis of Matter (EOM)

An emphasis of matter paragraph may be included in the Auditor‟s opinion to highlight

material matters and significant uncertainty which in the auditor‟s judgment do not affect

the financial statements of the entity, but may be of such importance that it is

fundamental to the users‟ understanding of the financial statements.

In the year under review Eleven (11) unqualified opinions with emphasis of matter were

issued to ten (10) public organizations shown in the table below

No Entity No of reports

certified

Financial year

Audited

1 Nile Hotel International Limited(NHI) 1 30th December 2008

2 Uganda Coffee Development Authority(UCDA) 1 30th September 2008

3 National Drug Authority(NDA) 1 30th June 2009

4 Cable Corporation Limited(CCL) 1 31st December 2008

5 Uganda National Council of Science & Technology 2 31st June 2008-2009

6 Uganda Electricity Distribution Company Ltd 1 30th September 200

7 Amber House Limited(AHL) 1 31st December 2008

8 Uganda Printing and Publishing Corporation 1 30th June 2009

9 National Council for Children(NCC) 1 30th June 2007

10 Rural Electrification Agency(REA) 1 30th June 2009

TOTAL 11

2.1.3 Qualified Opinion

An auditor expresses a qualified opinion when:

(a) The auditor, having obtained sufficient appropriate audit evidence, concludes that

misstatements, individually or in aggregate, are material, but not pervasive, to the

financial statements; or

(b) The auditor is unable to obtain sufficient appropriate audit evidence on which to

base the opinion, but the auditor concludes that the possible effects on the

21

financial statements of undetected misstatements, if any, could be material but not

pervasive.

In the year under review Thirty (30) qualified opinions were issued to Nineteen

(19) public organizations listed below;

No Entity No of

reports certified

Financial year Audited

1 Dairy Development Authority 4 31st Dec 2005- 31st Dec 2008

2 Uganda Wildlife Authority 1 30th June 2009

3 Kilembe Mines Limited 1 30th June 2009

4 National Water and Sewerage

Corporation

1 30th June 2009

5 Uganda Electricity Generation Co. Ltd 1 31st December 2008

6 Uganda Air Cargo Corporation 1 30th June 2008

7 National Curriculum Development Centre. 3 31st Dec 2004-31st Dec 2006

8 Uganda Broadcasting Corporation 1 30th June 2006

9 Uganda Development Bank 1 31st December 2008

10 National Social Security Fund 2 30th June 2007-30th June 2008

11 Uganda Property Holdings Ltd 1 30th June 2008-30th June

2009

12 Management Training and Advisory Centre

1 31st December 2008

13 Uganda Seeds Limited 5 30th June 2004-30th June

2008

14 Uganda Broadcasting Corporation 2 30th June 2007-30th June

2008

15 Uganda Electricity Transmission Co. Ltd 1 31st December 2008

16 Electricity Regulatory Authority 1 30th June 2008

17 National Council for Children 1 30th June 2005

18 Uganda Export Promotion Board 1 31st December 2006

19 Law Development Centre 1 30th June 2005

TOTAL 30

22

In addition Nineteen (20) Qualified opinions with Emphasis of matter (EOM) were issued

to Nine (9) public organizations listed below;

No Entity No of

reports certified

Financial year Audited

1 National Council for Children 1 30th June 2008

2 Uganda Export Promotion Board 2 31st Dec 2004-31st Dec 2005

3 Cotton Development Organization 1 31st October 2008

4 Uganda Air Cargo Corporation 10 30th June 1998-30thJune 2007

5 UGMA Engineering Corporation Ltd 1 30st December 2008

6 National Youth Council 1 30th June 2005

7 National Enterprise Corporation 2 30th June 2006-30th June

2007

8 Uganda Revenue Authority 1 30th June 2009

9 Civil Aviation Authority 1 30th June 2008

TOTAL 20

2.1.4 Disclaimer of Opinion

The Auditor shall disclaim an opinion when the auditor is unable to obtain sufficient

appropriate audit evidence on which to base the opinion, and the auditor concludes that

the possible effects on the financial statements of undetected misstatements, if any, could

be both material and pervasive.

The auditor shall disclaim an opinion when, in extremely rare circumstances involving

multiple uncertainties, the auditor concludes that, notwithstanding having obtained

sufficient appropriate audit evidence regarding each of the individual uncertainties, it is

not possible to form an opinion on the financial statements due to the potential

interaction of the uncertainties and their possible cumulative effect on the financial

statements.

During the year under review; I was not able to issue an opinion on the financial

statements of five (5) public organizations listed below;

23

No Entity No of reports

certified

Financial year

Audited

1 Law Development Centre 2 31stDec 2002-31st Dec 2003

2 Uganda Nurses & Midwives Council 2 30th June2004-30thJune

2005

3 Hotel Training and Tourism Institute 1 30th June 2005

4 Posta Uganda Limited 1 30th June 2008

5 Uganda Railways Corporation 1 30th June 2009

TOTAL 7

2.1.5 Adverse Opinion

The auditor shall express an adverse opinion when the auditor, having obtained sufficient

appropriate audit evidence, concludes that misstatements, individually or in the

aggregate, are both material and pervasive to the financial statements.

Public Organization issued with Adverse audit opinions during the year.

No Entity Type of audit opinion

issued

Financial year

Audited

1 Posta Uganda Limited Disclaimer 30th June 2007

2.2 ACCOUNTS WHERE EXAMINATION OF BOOKS OF ACCOUNTS HAVE BEEN

CONCLUDED BUT THE ACCOUNTS HAVE NOT BEEN CERTIFIED

A total of Forty four (44) audits were concluded for Thirteen (13) public organizations.

However, I was unable to certify these audits because signed financial statements were

not presented to my office due to the following reasons,

Some entities had no Boards to approve the financial statements.

Others had their financial statements rejected by my office because of non compliance

with reporting requirement and errors in the financial statements.

24

The following is a listing of these public organizations;

No Entity No of

years

Financial year under

review

1 Joint Clinical Research Centre 4 2005/2006-2008/2009

2 Nakivubo War Memorial Stadium 5 2004/2005-2008/2009

3 Livestock Industries 5 1998/1999-2000/2001

4 COCTU 4 2005/2006-2008/2009

5 Allied Health Professionals 1 2004/2005-2005/2006

6 National Council for higher Education 3 2006/2007-2008/2009

7 National Animal Genetic Resource Centre and

Data Bank (NAGRIC)

2 2004/2005-2006/2007

8 National Forestry Authority 2 2007/2008-2008/2009

9 Uganda Nurses and Midwives

Council

4 2005/2006-2008/2009

10 Uganda National Cultural Centre 7 Dec 2002-Dec2008

11 Uganda Institute of information and

Communication Technology

1 2008/2009

12 Law Development Centre 3 2005/2006-2007/2008

13 Mandela National Stadium 3 Dec 2006-Dec2008

TOTAL 44

The following are audit issues for public organizations whose audits were completed but

did not submit financial statements.

2.2.1 COORDINATING OFFICE FOR THE CONTROL OF TRYPANOSOMIASIS IN

UGANDA (COCTU)

Outstanding issues for the year ended June 30th 2008

Late submission of accounts

Management of the Council did not prepare and submit Final Accounts to the

respective authorities within 3 months after the end of the Financial Year as required

by the Public Finance and Accountability Act 2003, Sec 31(b) and the Uganda

Trypanosomiasis Control Statute 1992 sec 26(2). In addition, the accounts for the

financial year ended June 2008 were submitted in August 2009 (i.e. 11 months

later).

25

Non remittances of taxes

Deductions totaling Shs.8, 514,000 in respect of PAYE from gratuity payment to staff

was not remitted to URA.

Outstanding issues for the year ended June 30th 2009

Non remittances of taxes

Deductions totaling Shs.7, 843,500 in respect of PAYE from salaries to employees was

not remitted to URA.

Procurement of goods and services

We noted that procurement of some goods and services of Shs.13,250,600 was done

without following the Public Procurement and Disposal of Assets Regulations, 2003.

Procurement plans based on the approved budget were not made and submitted to

the Procurement and Disposal Authority. Instead, procurement was done in an adhoc

manner and without requisition from the user department. Besides, there were no

contracts committee minutes approving the transactions.

Internal control system

We noted that the internal control system of the Organization was weak in the

following areas:-

o Council did not operationalise the internal audit function as provided for in the

Council‟s organization structure.

o The entity did not have Accounting and Human Resource Manuals to guide the

operations of the Council.

o All payment vouchers and their supporting documents were not cancelled with

“paid” stamp during the financial years under review. The possibility of

duplication of payments could not be ruled out.

o The assets register was not updated on regular basis to ensure that all asset

acquisitions, disposals, their condition is documented.

o Uganda Trypanosomiasis Control Council had only one Board meeting for the

whole financial year instead of 4 as stipulated in their Statute of 1992, sec

10(1).

o Expenditure totaling Shs.10,635,700 did not have supporting documents such

as activity reports and receipts, rendering the expenditure doubtful

26

2.2.2 LAW DEVELOPMENT CENTRE: Year ended 30th June 2006

Lack of an approved budget

Sec 21 (Cap 132) of the centre‟s Act requires Management to submit to the Minister

responsible for finance, for his/ her approval, estimates of its income and expenditure

for the next ensuing year before the beginning of each financial year. Contrary to this

requirement, the Centre operated without an approved budget during the year under

review

Un accounted for funds

A total of shs.82,660,000 which was paid to Legal Aid Clinic as students contribution

for various activities, remained unaccounted for at the year end.

2.2.3 UGANDA NATIONAL CULTURE CENTRE: Years ended 30th June

2002,2003,2004,2005,2006 and 2007

Comprehensive fixed assets register

The Centre does not maintain a fixed asset register. Consequently all information and

explanations which was considered necessary to ascertain the completeness,

existence, ownership and valuation of property, plant and equipment could not be

obtained. Property, plant and equipment balances therefore may not be fairly stated.

Lack of bank reconciliation statements

There were no bank reconciliation statements for the bank Accounts maintained

contrary to best practice and the Financial Regulations and Accounting Manual of the

centre. Besides, certificates of bank balances were not availed for audit. I could not

therefore ascertain the correctness of the cash balances at the close of the year.

Revaluation of fixed assets

It was noted that a number of assets have unrealistic values while others have no

values attached to them at all. This is contrary to IAS 16 which requires assets of the

same class to be regularly revalued to reflect their fair values.

Depreciation policy

The non current assets were depreciated using the straight line method according to

the accounting policies. This is however, contrary to Section 10.7 of the Centre‟s

Financial Regulations and Accounting manual which requires non current assets to be

27

depreciated using the reducing balance method. This inconsistency needs to be

addressed.

Bad Debts Provision

Management did not make a provision for all doubtful debts as a result of the figures

for debtors reflected in the financial statements are not fairly stated.

Reserves

The reserves figure reflected in the Statement of Changes in Equity for the year ended

31st December 2002 of Shs.135, 855, 077 differs significantly with that reflected in the

balance sheet of the same year of Shs.130,069,946 by Shs.5,785,131. This difference

was not explained.

Un-receipted income

The total collection from plays staged by different groups in the Centre was

Shs.139,676,500 for 2004 and Shs.97,706,000 for 2005. These funds were neither

receipted nor banked. It was therefore not possible to ascertain and establish the

completeness of the total revenue collected and banked. Besides, utilization was not

availed.

Bankings not captured in the bank statements

A review of transactions on Account number 2060205 Allied Bank, to confirm the

authenticity of the bankings reported in the cash books for the periods ended 31st

December, 2006 and 30th June, 2007 revealed that although Shs.492,874,589 and

Shs.257,391,232 respectively is reported to have been banked, only Shs.387,551,807

and Shs.257,762,151 respectively was credited on the bank statements. This created

unexplained difference of Shs.105,322,782 and Shs.370,919 respectively. Bank

reconciliations reconciling bank balances at the end of these periods were not availed

to audit.

2.2.4 UGANDA LIVESTOCK INDUSTRIES LTD: Five years ended 31st December

1997,1998,1999,2000 and 2001.

Lack of company /Ranch annual Budgets

For the five year period under review, audit was not availed with approved budgets of

income and expenditure.

28

Rental payments

During the period under review, the company paid Shs 9,813,609 to M/S Francisco

Opoka estates as rental fees for the period ended December 1999. However, audit

noted that these payment lacked supporting documents including rental Agreements.

Un-supported payments

During the period under review, the company paid a total of Shs. 49,600,000 to M/S

Etatas Ltd to rehabilitate Kiryana and Kyempisi ranches. However audit noted that all

these payments were made without any supporting documents.

Trade creditors and other payables

Trade creditors and other payables were reported in the financial statements under

current liabilities as shown below.

1997- 5,129,502,975

1998- 5,603,699,938

1999- 6,198,252,672

2000- 6,302,862,829

2001- 7,655,853,642

The completeness, existence and accuracy of these liabilities could not be ascertained

because detailed creditors schedules confirming the valid amounts and creditors

ledgers to confirm their accuracy were not availed for audit.

Property, Plant and Equipment

A review of the Company‟s fixed asset values and records for the five year period

established the following;

i) The Company did not maintain a fixed assets register for the entire five

year period under review; as a result audit could not confirm the cost,

location, conditions, existence and values of assets maintained.

ii) Registration log books for the Company‟s motor cycles and motor vehicles

were not availed for audit, as a result audit could not confirm the

ownership of these motor vehicles, including the values in the financial

statements.

iii) Uganda Livestock Industries Ltd does not have title deeds to Ranches at

Kilak Kitgum; Lale Soroti and Land at Port Bell Kampala; in this respect

audit could not confirm the Company‟s ownership to these properties.

29

iv) The Company‟s Ranch Land at Aswa, Kiryana, Kyempisi, Lale, Maruzi and

Pader is not valued. Besides the other assets have never been revalued

since 1997. Consequently the entire value attached to property, plant and

equipment cannot be confirmed for accuracy and completeness.

v) Work in progress was not reflected in the accounts in 2001 yet capital

works amounting to Shs.2,730,634,545 were shown in 2000, no

corresponding increase in fixed assets to this amount was reflected in the

assets schedule.

2.2.5 NATIONAL COUNCIL FOR HIGHER EDUCATION: Year ended 30th June 2007

Non-compliance with PPDA and Regulation

It was noted that the Council did not follow laid down procedures required by PPDA in

the procurement of goods and services and the council did not have a contract

committee and procurements disposal unit in place. As a result payments totaling to

shs 10,281,800 for goods and services were made through cash advances.

Maintenance Expenditure

A sum of Shs.6,521,700 was paid to Goshem Uganda Limited for painting an office.

However, an independent verification of the work done was not carried out. It was

therefore not clear whether work done was according to specification.

Irregular payment of per diem

A sum of Shs.32,931,100 was paid to participants for residential workshops organized

by the council in respect of per diem, out of pocket allowance and transport refund.

We however, noted that the payment for these workshops was full board, meaning

that participants would be catered for fully. This payment was therefore irregular.

Payment of Gratuity

We noted that staff appointment letters indicate a gratuity rate of 15% while the

personnel manual stipulated a rate of 25%. Therefore, the correct gratuity balance

could not be confirmed in the financial statements.

30

2.2.6 NATIONAL COUNCIL FOR HIGHER EDUCATION:

Outstanding issues for the year ended 30th June 2008

Irregularities in the procurement process/activities

We noted the following irregularities from the examination and review of procurement

documents and activities of the Council for the period under review.

User departments did not prepare work plan for procurement based on the

approved budget for Submission to the Procurement and Disposal unit to

facilitate orderly execution of annually, procurement activities as prescribed in

the PPDA Regulations 96(1-3).

Although the nominated members of the contracts committee were approved by

the Secretary to the Treasury in the Ministry of Finance, Planning, and Economic,

there was no formal appointment by the Executive Secretary as required by the

PPDA Regulations 2003.

An extra member (an accounts assistant) to the Committee was added on the

list without following proper procedures.

The membership of the procurement and disposal unit did not sign the code of

ethical conduct in business using PP form 211 as prescribed by the PPDA

regulations.

Under Staffing

The council has a provision of 39 technical staff. However, a review of the pay roll and

personal files revealed that 15 of these positions had not been filled constituting about

39.5% of the approved structure. Specialized positions in procurement, transport,

public relations and human resources had not yet been filled by time of this report.

Lack of internal audit function

During the period under review, it was observed that the Council did not have in place

an internal Audit Department as prescribed by the NCHE Accounting Manual 2005 Sec

12.0 and The public Finance and Accountability Regulations 2003, 27 and 28.

Nugatory expenditure

The council engaged services of solicitors to defend the entity in the court of law in a

suit that arose when individuals who were dissatisfied with the grading of their

academic qualifications obtained from various academic institutions sued the council. A

31

sum of Shs 194,391,636 and Shs 45,000,000 were paid to the solicitor and individuals

as legal fees and fines respectively.

It was further noted that the process through which the legal firm was procured was

not transparent while management of the cases were affected by conflict of interest.

While the entity won some cases, the amounts that were awarded were not vouched

and disclosed in the accounts.

Outstanding issues for the year ended 30th June 2009

Understatement of non current assets in accounts

We noted that a donation of freehold land on plot no M834 measuring 1.216

hectares to the council was only disclosed in the notes to the accounts but was not

valued and disclosed in the financial statements.

2.2.7 JOINT CLINICAL RESEARCH CENTRE:

Outstanding issues for the two years ended 30th June 2009

Lack of procurement plans

We noted that JCRC procured goods and services from various suppliers without a

Procurement Work plan for the period under review. This is contrary to Sec.60 of

PPDA Act which requires user departments to prepare work plans and submit them to

PDU for implementation and consolidation into a procurement plan.

Contracts Committee

Sec 27 (2) of the PPDA Act (2003) requires members of the Contract‟s Committee to

be nominated by the Accounting officer and approved by the Secretary to the

Treasury. In absence of approval letters from the Secretary to the Treasury; audit

could not confirm whether the Contract‟s Committee of the Centre was legally

constituted.

Lubowa Construction Contract

In 2007, JCRC undertook to construct a modern hospital at Lubowa at a contract price

of Shs.6,111,600,964. The Project was to be completed on 20th March 2008. The

contract price was revised to Shs.8,185,518,570 resulting into a variation of

Shs.2,073,917,606 which is 34% of the original contract sum. The variations of the

32

Lubowa Constructions Contract did not get the approval of the contracts committee

and PPDA contrary to regulations.

Outstanding issue for the year ended June 30th 2007

Depreciation Policy

The Research Centre‟s accounting manual stipulates that depreciation of assets should

be based on the straight line method and that the following rates per year shall be

used: buildings 5%, computers 25%. It was however noted that all assets were

depreciated at a uniform rate of 20% without regard to the rates for the different

classes of assets. As a result of these, the book values of these assets are not fairly

stated.

Debtors

Review of the financial statements revealed that Shs.337,281,702 remained

unrecovered from debtors at the close of the year as compared to shs.364,388,822 at

previous year end. Poor recovery of debts from debtors increases the likelihood of

some debts becoming bad and doubtful.

Salary advances

We noted that received salary advances totaling shs.21,320,312 remained outstanding

and un-recovered at year end. Out of this sum Shs.15,392,640 was advanced to staff

for six months contrary to the research Centre‟s policy while Ushs.5,927,672 was not

reflected in the final accounts.

Repair of vehicles

During the audit we noted that repair of vehicles is done without requisition from the

users and a verification report by the transport officer. This is a weakness which could

result in irregular repair bills being paid.

Valuation of land at Mengo

It was noted that JCRC acquired land on plot 616 block 12 comprising of 0.5 acres.

However, this property is not recorded in the fixed asset register. Furthermore, the

reported amount at Shs.550,815,730 in the financial statements is only in respect of

the cost of building on which the Centre‟s head office is located excluding land.

33

Construction work at Kakira

A certificate of completion in respect of construction work by M/s Associated

Enterprises Construction (U) Ltd in respect of the Centre‟s Kakira branch built at a cost

of Shs.188,611,205 was submitted on 14th February 2008 by the supervising engineer.

A review of the inspection reports and a physical inspection of the site revealed that

the work had several defects as noted below:-

i) The floor was poorly done and in some places it has already developed

cracks.

ii) The roofing timber was rotting.

iii) The painting on the outside wall was peeling.

iv) Quality of the doors frames is not satisfactory.

v) The ceiling of the conference room is sagging.

This was an indicator of poor quality work and weaknesses in supervision by the

Engineers/Estates department.

Internal control structure/operation

o Fixed asset register: Best practice requires that an asset register be maintained

and updated frequently for proper management, custody and maintenance of fixed

assets. During the audit we noted that an asset register was still not in place.

o Movement of drugs: The drug stores system at JCRC requires that drugs delivered

to JCRC are received in the stores while distribution is effected by first issuing out

to the pharmacy before dispatch to the respective centres. The stores and

pharmacy department each keep separate registers and we noted that a

reconciliation of the drugs issued from stores and received/issued by the pharmacy

was not carried out.

o Exchange rate for forex accounts: The Centre‟s Accounting manual stipulates that

conversions of currency shall be authorized by the financial controller and shall be

based on the bank rate for transactions with the same bank, otherwise the best

ruling rates of the day from the mass media would be used. A review of the

internal audit reports of the Centre revealed that the cashier and accountant in

charge of TREAT Project were dealing in foreign currency transactions and

determining rates being used without seeking approval from the financial controller

as required by the Centre‟s regulations.

34

2.2.8 NAKIVUBO WAR MEMORIAL STADIUM (NWMS)

Outstanding issues for three years ended 31st December 2007

Lack of an assets register

It was noted that management did not maintain a fixed assets register, to record asset

cost /value location and condition. Most assets were not engraved. Besides different

depreciation rates were used for loose tools at 61.25% in December 2004 and 50% in

December 2005 respectively contrary to IAS 16.

Revenue

i) Gate Collections

We noted that Turn style, the stadium revenue recording machine at entrances

was out of order. As a result ticket tabs could only be reconciled with tickets sold

against cash collected by management to ascertain gate collections. This method

is prone to errors and makes collusion possible with gate officials who can print

their own tickets sell them and not declare the tabs.

ii) Concession fees in respect of Nakivubo Park Yard

The trustees of Nakivubo Stadium (NWMS) entered into an agreement with

Kampala city council (KCC) under which KCC was to pay 30% of collections from

users of the Market stalls at Nakivubo park yard, however, KCC did not honor this

agreement upon which it was sued by the trustee of NWMS. On 26th May 1998, a

consent judgment was entered into by KCC and NWMS in which KCC agreed to pay

the rebate of 30% of the monthly collections but to date KCC has not remitted any

funds.

It was also noted that on 20th July 2000 KCC awarded the tender to M/S equator

Towing services to manage the Nakivubo Park yard at a contract fee of

Shs.16,500,000 per month for two years. It was noted that payment was only

made in 2005 and partially in 2006 and by time of this report a total of

Shs.86,927,060 remained unremitted by KCC.

Water Consumption Facilities

It was noted that the Stadium was using a water hydrant line for industrial

consumption usage contrary to National Water and Sewerage Corporation which

35

requires hydrants to be used for emergency fire fighting. Consequently NWSC billed

the Organization Shs.21,916,854 on the hydrant line and Shs.2,508,467 on the

commercial line. A sum of shs.24,425,321 had not been paid by the time of audit.

Non-compliance with PPDA rules and regulations

It was observed that management did not follow laid down procedures required by

PPDA in the procurement of goods and services during the year. The contracts

committee and procurement and disposal units are not in existence; as a result value

for money may not have been obtained from hiring out its properties as parking

space, Billboards, toilets.

Personnel files

A review of personnel records revealed that files for the 16 staff were not up to date.

Some files were found to be lacking in several major aspects like not having

application, promotional or even appointments letters. We could therefore not

ascertain whether the affected employees were transparently recruited.

Doubtful payments to clubs

During the financial year 2006 management made payments out of gate collections to

Football clubs, but acknowledgement receipts by the following clubs were not availed

for audit see table below;

Voucher Number Amount Club

3925/3/06 299,889 Express foot ball club

3924/3/06 299,889 Kampala United

3941/03/6 360,281 FUFA

3920/02/06 369,970 Victor FC

4161/06/06 407,846 FUFA

4020/04/06 262,702 KCC

Total 2,000,577

36

2.3 AUDITS IN PROGRESS

Forty three (43) audits were under progress at the time of issue of this report these are

listed below;

No Entity No of

years

Financial year under

review

1 Uganda Broadcasting Corporation 1 2008/2009

2 Uganda National Examinations Board 1 2008/2009

3 Uganda National Bureau of Standards 1 2008/2009

4 Uganda Coffee Development Authority 1 2008/2009

5 Cotton Development Organization 1 2008/2009

6 Amnesty Commission 1 2008/2009

7 National Enterprise Corporation and

Subsidiaries

2 2007/2008-2008/2009

8 Electricity Regulatory Authority 1 2008/2009

9 Public Procurement and Disposal of Assets

Authority

1 2008/2009

10 National Council for Children 1 2008/2009

11 National Women‟s Council 1 2008/2009

12 Broadcasting Council 1 2008/2009


Data Bank (NAGRIC)

2 2007/2008-2008/2009

14 Allied Health Professionals 3 2006/2007-2008/2009

15 Uganda Livestock Industries 8 2001/2002-2008/2009

16 Public Libraries Board 9 2000/2001-2008/2009

17 Uganda Insurance Commission 1 2008/2009

18 National Planning Authority 1 2008/2009

19 Uganda Investment Authority 1 2008/2009

20 Uganda Export Promotion Board 2 Dec 2007-Dec 2008

21 National Youth Council 3 Dec 2006-Dec 2008

TOTAL 43

37

CHAPTER THREE

DETAILED PARAGRAPHS OF AUDIT OPINIONS

3.1 UNQUALIFIED AUDIT OPINION WITH EMPHASIS OF MATTER

PARAGRAPHS

The following is a detailed listing of the audit issues arising from the audit of the 11 public

organizations certified with unqualified opinions with emphasis of matter

3.1.1 NILE HOTEL INTERNATIONAL LIMITED (31st DECEMBER 2008)

Unqualified audit opinion with emphasis of matter

Common Heads of Government Meeting (CHOGM) advances from Government

Shs.1,898,972,476

Government advanced Shs.1,898,972,476 to a local firm on account of Nile Hotel

International Limited (NHIL) which was used to carry out refurbishment works at Serena

Conference Centre. Of this amount, Shs.1,021,839,175 was considered to be a loan in the

financing agreement but the repayment terms were not clearly stated while

Shs.877,133,301 was advanced by government but without indicating in the financing

agreement whether it was a loan or an increase in government‟s share holding value in

NHIL.

3.1.2 UGANDA COFFEE DEVELOPMENT AUTHORITY (30TH SEPTEMBER 2008)


Investments in Wet Coffee processing machines

The Authority invested Shs.834,815,878 in Wet Coffee processing machines financed by

government under the Strategic Export Program. These machines were offered to the

beneficiaries at a discounted price by 50%, to Shs.417,407,939 under a Finance lease

Arrangement managed by DFCU leasing. However, not all these machines have been

installed. As a result, the original objective of value addition was negatively affected and

repayment of the finance lease to UCDA delayed.

38

3.1.3 NATIONAL DRUG AUTHORITY (30TH JUNE 2009)


Lack of Authority and commission.

There was lack of a duly constituted Authority and attendant Commission. The

Commission had expired prior to signing of these financial statements.

3.1.4 CABLE CORPORATION LIMITED (31ST DECEMBER 2008)


Going Concern Matters

The company has accumulated revenue reserves deficit of Ushs7.9 billion as at 31st

December 2007 (2006: Ushs9.1 billion) and as of that date its total liabilities exceeded

total assets by Ushs5.4 billion (2006: Ushs6.5 billion). These conditions together with

other matters as set forth in the note to the financial statements indicate the existence of

a material uncertainty which may cast significant doubt on the company‟s ability to

continue as a going concern.

3.1.5 UGANDA NATIONAL COUNCIL OF SCIENCE AND TECHNOLOGY (30TH JUNE

2008)


Absence of Board of directors

During the financial year as noted in the previous year council operated without a Board

of Directors, as a result policy decisions were initiated, approved and implemented by

management.

3.1.6 UGANDA NATIONAL COUNCIL OF SCIENCE AND TECHNOLOGY (30TH JUNE

2009)


Absence of Board of directors

Same as in 3.1.5 above

39

3.1.7 AMBER HOUSE LIMITED (31ST DECEMBER 2008)


Trade and Other Receivables

Note 7 in the Balance sheet of the financial statements indicates that there is weakness in

Debt collection with the overall debtors increasing from shs 2,534,157,146 in 2007 to shs

3,093,442,135 in 2008.

These conditions indicate the existence of a material uncertainty over trade receivables.

3.1.8 UGANDA PRINTING AND PUBLISHING CORPORATION (30TH JUNE 2009)


Statutory Contributions

The financial statements indicate (Under note (6) that PAYE, VAT and WHT payable

increased from Shs.307,090,367 in 2007/08 financial year to Shs.479,409,013 in

2008/09 implying that these taxes are not paid regularly and/or on time thus exposing

the Corporation to unnecessary penalties.

Unremitted NSSF Contributions also increased from Shs.112,055,340 in 2007/2008

financial year to Shs.175,159,701 in 2008/09 indicating possible liquidity problem.

Trade debtors

Note 4 of the financial statements indicates that there are weaknesses in debt

collection with the overall Corporation‟s debtors increasing from Shs.427,703,964 in

2008 to Shs.865,748,794 in 2009.

These conditions indicate the existence of a material uncertainty over trade debtors

and the ability of the corporation to continue as a going concern. However, the

financial statements have been prepared on a going concern basis on the assumption

that continued financial support will be made available to the corporation by

Government.

40

3.1.9 NATIONAL COUNCIL FOR CHILDREN (30TH JUNE 2007)


Governance

During the financial year, the term of the council expired and had not been renewed. As a

result the Council operated without a governing council resulting in policy decisions being

initiated, approved and implemented by management.

3.2 QUALIFIED OPINIONS

3.2.1 NATIONAL WATER AND SEWERAGE CORPORATION (30th JUNE 2009)

Qualified Opinion

Lease hold land without Title Deeds

As indicated in note 19(c) to the financial statements. The corporation has some

leasehold land for which it does not have title deeds. The leasehold land prepayment

is therefore not amortized to the income statement. The Corporation is in advanced

stages of obtaining the relevant title deeds but this process had not been finalized by

the date of this report. Consequently, adequate assurance over the ownership of those

properties and completeness of leasehold amortization reported in the financial

statements could not be obtained.

Unaccounted for water

Due to technical and non- technical losses in the supply system, the Corporation is not

able to bill all the water produced from the pumping stations. As at 30 June 2009, the

non revenue water was estimated at 35.8% (2008:33.5%). Because of this limitation,

reliance could not be placed on the system for the purposes of testing the accuracy

and completeness of the Corporation‟s water revenue. There were no practical

procedures that could be adopted for this purpose. However, income from water

supplied and billed is subjected to adequate accounting and control procedures.

3.2.2 UGANDA AIR CARGO CORPORATION (30TH JUNE 2008)

Qualified Opinion

Debtors

Included under debtors in the financial statements is a figure of shs 4,193,864,273 which

has been long outstanding; the total amount of shs 4,193,864,273 is yet to be recovered.

41

The recoverability of this amount appears doubtful and in the absence of a specific

provision for bad debts, the debtors are not fairly stated.

3.2.3 NATIONAL CURRICULUM DEVELOPMENT CENTRE (31ST DECEMBER 2004)

Qualified Opinion

Debtors

Included under debtors in the financial statements is Shs.281,751,397

(US$120,903.35) in respect of royalties which were remitted by M/s Pearson Education

and M/S Macmillan Publishers of UK between September 1998 and June 2002 but was

instead erroneously banked on a former Director‟s personal account No. 8670587 of

Barclays Bank Queensway Kenya. In addition, Shs.54,075,000 (£25,020) was banked

on the same account in the period ended 31st December 2004). The total amount of

Shs.335,826,397 is yet to be recovered. The recoverability of the debt appears

doubtful and in the absence of a specific provision for bad debts, the debtors balance

may not be fairly stated.

Valuation of UNESCO Coupons

The Centre obtained UNESCO coupons valued at Shs.1,892,431 dating way back in

1970. However, the value of these coupons has not been discounted. Therefore the

value of these coupons may not be fairly stated in the financial statements.

3.2.4 NATIONAL CURRICULUM DEVELOPMENT CENTRE (31ST DECEMBER 2005)

Qualified Opinion

Debtors

Valuation of UNESCO Coupons

The issues above are the same as in 3.2.3.

3.2.5 UGANDA DEVELOPMENT BANK (31ST DECEMBER 2008)

Qualified Opinion

Investments in Associates IAS 28

The bank holds a 28% shareholding in Kajjansi Roses Limited, stated at Ushs.762

million in the balance sheet. IAS 28, Investments in Associates requires that such an

investment where the entity has significant influence be recorded using the equity

method of accounting. The bank has not recognized its share in the associate‟s profit

or loss for the year ended 31 December 2008. Further, the audited financial

42

statements of the associate as at 31 December 2008 were not available. Therefore,

the correctness of the investments could not be determined.

Investment property (‘IAS 40’)

The bank has recognized a fair value gain on investment property of Shs.9,670 million

based on an independent valuation done in 2008. Hither-to, the last fair valuation of

investment property was done in 2005 and since then no fair value gains or losses had

been recognized in the financial statements. IAS 40 requires the fair value of

investment property to reflect market conditions at the balance sheet date and the

gain or loss arising from the change in fair value of investment property recognized in

profit or loss for the period in which it arises. Had the bank been carrying out annual

fair value assessments as required by IAS 40, the fair value gain of Shs.9,670 million

included in 2008 income statement, would have been progressively recognized in the

respective accounting periods. As a result of the above, the profit for the year is

overstated and the opening balance of retained earnings is understated. However the

misstatement could not be qualified.

Financial instruments, Recognized and Measurement (‘IAS 39’)

IAS 39 requires that an entity shall assess at each balance sheet date whether there is

any objective evidence that a financial asset or group of financial assets is impaired. If

any such evidence exists, the entity shall determine the amount of the loss as the

difference between the asset‟s carrying amount and the present value of estimated

future cash flows (excluding future credit losses that have not been incurred)

discounted at the financial asset‟s original effective interest rate. This was done as at

31st December 2008. However as at 31st December 2007, the company‟s loan

impairment was based on number of days in arrears and fixed percentages, and not

estimated future cash flows as required by IAS 39. Management did not make an

impairment assessment and thus the impact on the financial statements of the

deviation in prior years from the requirements of IAS 39 pertaining to the above issue

could not be assessed.

43

3.2.6 NATIONAL SOCIAL SECURITY FUND (30TH JUNE 2007)


Members Fund

Included in the members‟ fund account as at 30 June 2007 is an amount of

Ushs.360,592 million which has not been allocated to specific members. Management

has been unable to provide an analysis of this balance or confirm the completeness

and accuracy of balances credited to individual members accounts. Accordingly, it was

not possible to obtain sufficient appropriate audit evidence that the members‟ fund

account balance is not materially misstated.

Other Payables

A credit balance of Ushs.2,371 million is included in other payables as at 30 June

2007. Management was unable to provide an analysis of this amount and could also

not explain the nature of the credit balance. Accordingly it was not possible to obtain

sufficient appropriate audit evidence that other payables are not materially misstated.

3.2.7 NATIONAL SOCIAL SECURITY FUND (30TH JUNE 2008)

Qualified Opinion

Members Fund

Included in the members‟ fund account as at 30 June 2008 is an amount of

Ushs.206,405 million which has not been allocated to specific members. Management

has been unable to provide an analysis of this balance or confirm the completeness

and accuracy of balances credited to individual members accounts. Accordingly, it was

not possible to obtain sufficient appropriate audit evidence that the members‟ fund

account balance is not materially misstated.

Trade and Other receivables

A debit balance of Shs.10,829 million is included in other receivables as at 30 June

2008. Management was unable to provide an analysis of this amount and could also

not explain the nature of the debit balance. Accordingly it was not possible to obtain

sufficient appropriate audit evidence that trade and other receivables are not

materially misstated.

44

3.2.8 UGANDA BROADCASTING CORPORATION (30TH JUNE 2006)

Qualified Opinion

Vesting amounts from merged departments

Following the merger of the departments of Radio Uganda and Uganda Television to

form Uganda Broadcasting Corporation, an instrument vesting Property, assets and

liabilities of these departments to the Corporation was issued in May 2006. However

no values were attached to this instrument. There were no alternative procedures that

could be carried out to independently ascertain the value of the vested assets.

In light of the above, a material uncertainty exists over the accuracy and

completeness of the Corporations Property plant and equipment.

Title to Properties

The Corporation has not secured title to all its Land, except for Titles to Land at Kibira

road, Broadcasting house and Naguru hill included under its properties. Consequently I

am unable to confirm and quantify the value of Corporation‟s properties without titles.

Director’s Remuneration

The UBC Act provides for directors remuneration and allowances to be determined by

the line Minister. During the year under review, the line Minister did not approve any

rates for director‟s remuneration. Consequently I am unable to confirm the validity of

payments relating to directors remuneration during the year.

3.2.9 DAIRY DEVELOPMENT AUTHORITY (31ST DECEMBER 2005)

Qualified Opinion

There were three difference types of reports issued for each of the years 2005, 2006 and

2007. The issues raised were however, the same as in all the reports as detailed below:

Non Disclosure of uncollected Rent and electricity bills

The Authority leased its Dairy plant at Entebbe to a local firm in 2003.However by the

time of termination of the contract in 2004, the local firm had defaulted on rental dues

totaling Ushs.54,000,000 and had accumulated electricity bills of Shs.16,229,284.

Although management is pursuing the recovery of this debt at the time of audit, the

uncollected rent income is not disclosed in the Authority‟s books of account.

45

Property, plant and equipment

The Authority‟s assets were last valued in 1996 and, besides, most of the properties do

not have land titles.

IAS 16 requires that items of property, plant and equipment which are carried at

revalued amounts be revalued with sufficient regularity to ensure that the carrying

amount does not differ materially from that which would be determined using fair

value at the balance sheet date. The Authority has not carried out any subsequent

revaluation of the assets.

IAS 16 also requires the subsequent increase in the revaluation to be carried under

equity as revaluation surplus; this has not been done in the financial statements.

Due to the above limitations I am therefore unable to confirm the accuracy,

completeness and valuation of property, plant and equipment shown in the

balance sheet.

Government grants

The authority received grants relating to assets. IAS 20 requires that asset related grants

including non-monetary grants at fair value should be presented in the balance sheet

either by setting up the grant as deferred income or by deducting the grant in arriving at

the carrying amount of the asset.

The authority has not appropriately disclosed government grants in accordance with IAS

3.2.10 DAIRY DEVELOPMENT AUTHORITY (ENDED 31ST DECEMBER 2008)

Qualified Opinion

Non Disclosure of uncollected Rent and electricity bills

Property, plant and equipment

The above two issues are the same as in 3.2.9

Nugatory Expenditure

The Authority paid URA a penalty of Ushs.83,445,373 as a 2% interest charge per

month for delaying to remit PAYE deductions totaling 105,627,054 on time.

Although management stated that this resulted from inadequate funding to the

authority, this payment did not derive any extra value to the Authority and is deemed

nugatory expenditure.

46

3.2.11 UGANDA WILDLIFE AUTHORITY (30TH JUNE 2009)

Qualified Opinion

Non Compliance with IAS 12 Income Taxes

The financial statements do not comply with the requirements of IAS 12 on „Income

Taxes‟ as no income tax and deferred tax have been provided for. Management has

not quantified the effect of this non-compliance on the operating results of the

authority.

Concessions Income

There was an inadequate system of control of recording concessions income-franchise

fees on which we could rely on for the purpose of the audit. We were therefore unable

to verify the completeness of concessions income-franchise fees as stated in the

financial statements amounting to Shs.936.4 million. There were no satisfactory

alternative audit procedures that could be adopted to confirm that concessions

income-franchise fees are fairly stated.

3.2.12 UGANDA PROPERTY HOLDINGS LIMITED (30TH JUNE 2008)

Qualified Opinion

Recoverability of receivables from an Apparel Company

Included in the financial statements is an amount of Shs 4,741,740,000 relating to

unpaid rent from Apparel Tri Star Ltd. It was noted that Uganda Property Holdings has

not signed a tenancy agreement with Apparel Tri Star at inception in January 2003.

Furthermore a new company LAP Textiles ltd took over the Assets and liabilities of

Apparel Tri-Star limited. There is therefore uncertainty surrounding the recoverability

of this debt.

Valuation of Property, Plant and Equipment

Some of the Uganda Property Holdings properties in Uganda were last revalued in

2005 at the time of transfer. IAS 16 requires that when items of Property, Plant and

Equipment are revalued, the entire class of Property, Plant and Equipment to which

the Asset belongs should be Valued.

IAS 16 also states that items of Property, Plant and Equipment carried at revalued

amount be revalued with sufficient regularity to ensure that the carrying amount does

47

not defer materially from that which would be determined as the fair value at the

Balance sheet date. Due to the above limitations, the accuracy, completeness and

valuation of Property, Plant and Equipment shown in the Balance sheet cannot be

confirmed.

3.2.13 MANAGEMENT TRAINING AND ADVISORY CENTRE (31ST DECEMBER 2008)

Qualified Opinion

Title to Properties

The Centre has not yet secured title deeds to four properties at Plots M290 and M255

Ntinda Industrial Area and Plots 175 – 183 and PM 119 Nakawa. Consequently, I am

unable to confirm the Centre‟s ownership of these properties.

Land and Buildings

The value of the Centre‟s Land and Buildings is reflected as Shs.3,114.865,634 in the

financial statements against which depreciation of shs 49,397,933 has been provided.

IAS 16 requires land and buildings to be dealt with separately for accounting purposes

even when they were acquired together. Management has not yet been able to

identify separately the cost of land and buildings. It was therefore not possible for

audit to determine the actual value of the Company‟s land and buildings separately

and to confirm the depreciation charged.

Revaluation of Property Plant and Equipment

IAS 16 requires property plant and equipment carried at revalued amounts to be

revalued with sufficient regularity to ensure that the carrying amounts do not differ

materially from that which would be determined using fair values at the balance sheet

date. The centre has not carried out any subsequent revaluation of the assets.

Consequently the centre‟s assets may not be fairly stated.

3.2.14 UGANDA SEEDS LTD (30TH JUNE 2004)

Qualified Opinion

Attendance at the Stock take

The counting of physical inventories as of June 2004 was not observed by audit. There

were no other alternative procedures that could have been carried out to verify the

physical existence of inventories amounting to Shs 296,788,326. In this circumstance

48

a material uncertainty exists over the existence, accuracy and completeness of

inventory balances in the financial statements.

Trade receivables

Indicated under note 2(g) in the financial statements are trade receivables of

Shs179,704,680. These include shs160,871,000 of trade receivables which have been

outstanding for over two years. The recoverability of these debts appears doubtful;

and in the absence of a specific provision for bad and doubtful debts, the receivables

are not fairly stated.


Qualified Opinion

Attendance at the Stock take

The counting of physical inventories as of June 2005 was not observed by audit. There

were no other alternative procedures that could have been carried out to verify the

physical existence of inventories amounting to shs 218,459,171. In this circumstance a

material uncertainty exists over the existence, accuracy and completeness of inventory

balances in the financial statements.

Trade receivables

Indicated under note 2(h) in the financial statements are trade receivables of

shs164,471,000. These include shs160,871,000 of trade receivables which have been

outstanding for over two years. The recoverability of these debts appears doubtful;

and in the absence of a specific provision for bad and doubtful debts, the receivables

are not fairly stated.

49


Qualified Opinion

Valuation of property plant and equipment: Land and Buildings

The net book value of the company‟s property plant and equipment is indicated as

shs5,048,131,665 in the financial statements, this figure includes land and buildings of

shs3,065,000,000. Under IAS 16 land and buildings are separable assets and are dealt

with separately for accounting purposes even if they are acquired together. The

Company is therefore not able to effectively:

Identify separately the cost of land and buildings.

Allocate the depreciable amount of buildings.

Due to the above limitations, it was therefore not possible to confirm the accuracy and

valuation of the property, plant and equipment shown in the balance sheet.


The company‟s buildings at Kisindi Farm are dilapidated and require major repairs.

Due to the unavailability of cost /valuation relating to these buildings, it was not

possible to determine the impairment loss of the company‟s assets as required under

IAS 36 in order to reduce the carrying amount of buildings to the recoverable

amount and recognize the impairment loss in the financial statements.

Concession Income Uganda Seeds Limited (USL) entered into a leasing agreement with M/s Nyakatonzi

Cooperative Union Limited on 24th November 2005 for a 30 year lease of USL assets.

The lessee was to pay USD$150,000 as lease fee in respect of lease and concession of

the assets. In addition an annual concession fee amounting to 1% of the annual

gross sales generated from use of the leased assets was to be paid to USL. It was

noted that the Union has since defaulted on her obligation of remitting concession fees

and to date, no amount has been paid to USL. There was an inadequate system of

control of recording concessions income fees on which could be relied on for the

purpose of the audit. It was therefore not possible to verify the completeness of

concessions income fees as stated in the financial statements.

50

3.2.17 UGANDA PROPERTY HOLDINGS LIMITED (30TH JUNE 2009)

Qualified Opinion

Land and Buildings

The value of the Company‟s Land and Buildings is reflected together at a net book

value of Shs.64,406,292,451 in the financial statements contrary to IAS 16 which

requires land and buildings are dealt with separately for accounting purposes even

when they were acquired together. It was noted that management has not yet been

able to identify separately the cost of land and buildings. It was therefore not possible

for audit to confirm the actual value of the Company‟s land and buildings separately

for purposes of determining the depreciation charged. As a result the value of land

and buildings and the depreciation charged may not be fairly stated.


Qualified Opinion

Valuation of property plant and equipment; Land and Buildings



shs3,065,000,000. Under IAS 16, land and buildings are separable assets and are dealt

with separately for accounting purposes even if they are acquired together. The


o Identify separately the cost of land and buildings.

o Allocate the depreciable amount of buildings

Due to the above limitations, it was therefore not possible to confirm the accuracy

and valuation of the property, plant and equipment shown in the balance sheet.


The company‟s buildings at Kisindi Farm are dilapidated and require major repairs.

Due to the unavailability of cost /valuation relating to these buildings, it was not

possible to determine the impairment loss of the company‟s assets as required under

IAS 36 in order to reduce the carrying amount of buildings to the recoverable

amount and recognize the impairment loss in the financial statements.

Concession Income

Uganda Seeds Limited (USL) entered into a leasing agreement with M/s Nyakatonzi

Cooperative Union Limited on 24th November 2005 for a 30 year lease of USL assets.

51

The lessee was to pay USD$150,000 as lease fee in respect of lease and concession of

the assets. In addition an annual concession fee amounting to 1% of the annual

gross sales generated from use of the leased assets was to be paid to USL. It was

noted that the Union has since defaulted on her obligation of remitting concession fees

and to date, no amount has been paid to USL. There was an inadequate system of

control of recording concessions income fees on which could be relied on for the

purpose of the audit. It was therefore not possible to verify the completeness of

concessions income fees as stated in the financial statements.


Qualified Opinion

Valuation of property plant and equipment: Land and Buildings



shs3,065,000,000. Under IAS 16, land and buildings are separable assets and are

dealt with separately for accounting purposes even if they are acquired together. The


Identify separately the cost of land and buildings.

Allocate the depreciable amount of buildings

Due to the above limitations, it was therefore not possible to confirm the accuracy and

valuation of the property ,plant and equipment shown in the balance sheet.


Concession Income

The above two issues are the same as in 3.2.18.


Qualified Opinion

Vesting Assets from merged departments

Following the merger of the departments of Radio Uganda and Uganda Television to

form Uganda Broadcasting Corporation, an instrument vesting property, assets and

liabilities of these departments to the Corporation was issued in May 2006. However,

values in respect of these properties were not attached to the instrument and included

52

in the financial statements. In light of the above, a material uncertainty exists over

the accuracy and completeness of the Corporations Property plant and equipment

Title to Properties

The Corporation has not secured title to all its Land, except for Land at Kibira road,

Broadcasting house and Naguru hill included under its properties. Consequently I am

unable to confirm the ownership and accuracy of the value of these properties without

titles.

Gratuity

Included in the creditors schedule is Shs.230, 675,000 in respect to gratuity. This

benefit to staff is not provided for by the Human Resource Manual of the Corporation.

3.2.21 UGANDA EXPORT PROMOTION BOARD (31ST DECEMBER 2006.)

Qualified Opinion

Statutory Deductions

The Board did not remit Income taxes in respect of PAYE amounting to shs 324,197,838

during the year to Uganda Revenue Authority.

Non Compliance with laws and regulations is an offence which may result in fines,

penalties and litigation.


Qualified Opinion

Vesting amounts from merged departments

Title to Properties

The above two issues are the same as in 3.2.20

Gratuity

Included in the creditors schedule is Shs.550,924,235 in respect to gratuity which is

not provided for in the Human Resource Manual.

Non Compliance with laws and regulations

The Corporation did not remit taxes in respect of PAYE of shs742,397,537 and VAT of

shs 755,265,098 during the year to Uganda Revenue Authority, In addition

53

shs304,209,915 in respect of Social Security Fund contributions was not remitted to

NSSF.

Non compliance with laws and regulations is an offence which may result in penalties

and litigation.

Trade debtors and other receivables

As indicated in note 12 to the financial statements, the Corporations debtors increased

from shs559,913,919 to shs 1,766,625,528 during the year. Over 75% of these

debtors have been outstanding for more than 4 months. In the absence of a provision

for bad and doubtful debts , I am unable to confirm that all the debtors and other

receivables are fairly stated in the financial statements.

3.2.23 LAW DEVELOPMENT CENTRE (18 MONTHS ENDING 30TH JUNE 2005)

Qualified Opinion

Fixed Assets Register

The Centre maintains a fixed assets register which has not been updated for a long

time. As .a result the net book value of property, plant and equipment as indicated in

the fixed assets register did not agree to that as reported in the balance sheet. Due to

the above limitations, it was not possible to confirm the accuracy, existence,

completeness and validity of property plant and equipment reflected in the financial

statement.

The Centre is therefore not able to effectively;

o Allocate depreciable amounts of this property, plant and equipment over their

useful life as required under IAS 16.

o Facilitate the fair presentation of fixed assets in the Centre‟s financial

statements.

Land and Buildings

The net book value of the Centre‟s Land and Buildings is indicated as shs.474,295,995

in the financial statements. Under IAS 16, land and buildings are separable assets and

are dealt with separately for accounting purposes even when they are acquired

together. It was noted that management has not been able to identify separately the

cost of land and buildings. It was, therefore, not possible to confirm the actual value

of the Centre‟s land and buildings separately.

54

Valuation of fixed assets

Although the Centre valued its land and building, the revalued amounts were not

reflected in the financial statements. Motor vehicles, furniture fittings and other assets

were not revalued.

o IAS16 requires that items of property, plant and equipment which are carried at

revalued amount be revalued with sufficient regularity to ensure that the carrying


value at the balance sheet date. The Centre has not carried out any subsequent

revaluation of the revalued assets. This constitutes non-compliance with the

revaluation requirements of IAS 16.

o IAS 16 also requires the subsequent increase in revaluation to be carried under

equity under Revaluation surplus, this was not done in the financial statements.

Due to the above limitations I am unable to confirm the accuracy, completeness and

Valuation of the property, plant and equipment shown in the balance sheet.

Title to Properties

The Centre does not have title deeds to plots 1,34,69,508,509,510,614 and 615

included under its properties. Consequently I am unable to confirm the Centre‟s

ownership to these properties, and due to lack of a comprehensive fixed assets

register I am further unable to quantify the value of these properties without titles.

Encroachment on Land

The Centre has properties on plot 339 and 169 on blocks 9 and plot 69 Block 1 and on

Block 11882 in Bukoto. However, it was noted that these properties have been

encroached upon with permanent structures built on them. The Centre has not taken

action to remove the encroachers. Due to this limitation I am unable to confirm the

value and ownership to these properties.


Qualified Opinion

Nugatory Expenditure

The council was sued by a staff for wrongful dismissal and awarded Ushs 12,146,580 in a

case in which the council did not defend.

55

It was further noted that the same officer while still serving the council was paid Ushs

4,100,000 for consultancy work, in addition to his salary.

3.2.25 NATIONAL CURRICULUM DEVELOPMENT CENTRE ( 31ST DECEMBER 2006)

Qualified Opinion

Depreciation Policy

The Centre depreciates its assets using a straight line method and applies a fixed rate of

depreciation on the cost of each asset category. However, depreciation was not charged

to motor vehicles as required by the centre‟s depreciation policy. In addition there was no

depreciation charged to library books valued at shs 8,806,906 contrary to IAS 16 which

requires depreciable amounts of an asset to be allocated on a systematic basis over its

useful life. As a result, the net book value of Fixed Assets of shs 558,927,859 in the

financial statements may not be fairly stated.

3.3 QUALIFIED OPINIONS WITH EMPHASIS OF MATTER

3.3.1 NATIONAL YOUTH COUNCIL (30TH JUNE 2005)

Qualified with Emphasis of matter

Procurement Procedures

Contrary to the PPDA Act, the Council did not have a contracts committee during the

period under review. Procurements were made in an adhoc manner in disregard to the

provisions of the PPDA Act. Furthermore, stationary and tyres procured at a total cost

of Shs.19,971,600 were not recorded in the council‟s books. Therefore, I could not

confirm that the actual deliveries were made and that the amount spent on

procurement of these goods was put to good use.

Unauthorized Borrowing of Funds

Contrary to Section 18 of the National Youth Council Act (Cap 319), the council

borrowed Shs.6,380,000 at a rate of interest of 17% per month without the approval

of the Minister. In this respect I could not confirm that the loan was legally obtained

and put to the proper use.

56

Internal Control

As mentioned in my previous report, the internal control structure of the council

remained weak. There was lack of segregation of duties as demonstrated by a single

individual performing the tasks of initiating payments, preparing vouchers, drawing

and paying out cash as well as writing up the prime books of entry of the council.

3.3.2 COTTON DEVELOPMENT ORGANIZATION (31ST OCTOBER 2008)


Titles to Seed Dressing Stations

The Organization has seed dressing properties (seed stores, seed dressing halls and

delinters) at Kasese, Ngetta, Nakivumbi and Kachumbala worth Ushs2.051billion for

which it has not secured Land titles for over four years. The security of these

investments is therefore not guaranteed.

Loan from UGCEA

Attention is drawn to outstanding amounts due to Uganda Ginners and Exporters

Association (UGCEA) of Shs7.8 billion stated in note 7 to the financial statements. The

Organization raised a loan from Uganda Ginners & Exporters Association UGCEA in

2003 to finance cotton seed activities which were implemented under the Strategic

Intervention Program (SIP) which is still outstanding. In the event that UGCEA recalls

the loan, the organization may not have sufficient resources to meet the payment.

3.3.3 UGANDA AIR CARGO CORPORATION (30THJUNE1998)


Ten separate audit reports were issued for the ten years 1998, 1999, 2000, 2001, 2002,

2003, 2004, 2005, 2006 and 2007. The issues therein were however the same as

detailed below;

Valuation of Property Plant and Equipment

The Corporation has an Aircraft, a Hercules Model L100-30 reflected at a cost of

Shs.8,382,954,749 in the financial statements. There has been no revaluation to this

aircraft for a long time. Consequently the carrying value of the Aircraft may differ

materially from its fair value at the balance sheet date.

57

Depreciation policy on aircraft

It was noted that the Aircraft was depreciated using the reducing balance method at a

uniform rate of 5% contrary to IAS16 which requires depreciation of Aircrafts to be

done on specific parts at different rates and not generally because of the different

lifespan of these parts and components. As a result, the value of the aircraft may not

be fairly stated in the financial statements

Repair of the Air Craft

The Corporation‟s Aircraft Hercules C130 was impounded in Congo in 1995 and later

got involved in an accident in Cairo, Egypt in the same year. The repair bill estimated

at US$10.5m was financed by the Privatization Unit under the Ministry of Finance,

Planning and Economic Development. In the event the Privatization Unit recalls this

loan, the Corporation may not have sufficient resources to meet the payment.

3.3.4 UGANDA AIR CARGO CORPORATION (30THJUNE1999)


Contingent liability $10.5m (this affected the years 1999 to 2004 only)

The Corporation‟s Aircraft Hercules C130 was impounded in Congo in 1995 and later

got involved in an accident in Cairo, Egypt in the same year. The repair bill estimated

at US$10.5m was financed by the Privatization Unit under the Ministry of Finance,

Planning and Economic Development. In the event the Privatization Unit recalls this

loan, the Corporation may not have sufficient resources to meet the payment.

3.3.5 UGMA ENGINEERING CORPORATION LIMITED (31ST DECEMBER 2008)


Government of Uganda Loans

As disclosed in note 15 to the financial statements, the company has term loans from

the Government of Uganda amounting to Ushs.24.8 billion (2007: Ushs.24.3 billion)

for which no independent confirmation has been received. No formal agreements exist

in respect of Ushs.18.267 billion (2007: Ushs17.982 billion). I was not able to satisfy

myself as to the completeness and accuracy of the balance due to Government of

Uganda. In addition, I was unable to satisfy myself with the completeness and

accuracy of the interest charge for the year ended 31 December 2008 and prior years.

58

Losses

The Company incurred a net loss of Ushs3.631 billion during the year ended 31

December 2008 (2007: Ushs.41,293 billion). These conditions along with other

matters as set forth in the note 2 to the financial statements indicate the existence of

a material uncertainty which cast significant doubt on the company‟s ability to

continue as going concern.

3.3.6 CIVIL AVIATION AUTHORITY (30TH JUNE 2008)


Receivables

At the end of the financial year, the carrying value of receivables stood at

Ushs.62,494,262,000; I am unable to confirm whether the balance reflected as

receivables in the financial statements is fairly stated due to incomplete reconciliation

of receivables. The amount of trade receivables in the financial statements is Ushs.91,

521,818,102 before deduction of provisions for doubtful debtors. The gross amount of

debtors includes government debtors of Ushs.63, 176,773,099. The amount of

government debtors balances verified is only Ushs.62, 100,094,483, leaving an un

reconciled difference of Ushs.1,076,678,616.

Inventory

As a result of incomplete reconciliation of the value of closing physical inventory to the

balance of inventory in the general ledger, it was not possible to confirm whether the

amount attributable to inventory in the balance sheet is fairly stated. While the

closing physical inventory as at 30th June 2008 was valued at Ushs.1,206,029,518 ,the

general ledger balance was stated at Ushs.1.105,927,521 and this was the value

adopted in the balance sheet.

Payables

It was also not possible to confirm the correctness of the carrying amount of Ushs.25,

689,227, 000 stated as the balance of payables in the financial statements due to an

adjustment totaling Ushs.180,504,373 in respect of debit balances.

Recoverability of Receivables

As stated in note 4 to these financial statements, the carrying value of receivables as

at 30th June 2008 increased from Ushs.51,435.065,000 (2006/2007) to Ushs.62,

59

494,262,000 (2007/2008) representing an increase of 21.5%. The major categories of

the debt are owed by Government of Uganda. The majority of these debts have been

outstanding for over 6 years and their recoverability is not certain.



Encroachment on land.

The council acquired Land and a building from the Uganda Land commission at

Mukabya road, Nakawa in 2004. However, this property which is not secured has

been encroached upon by a Motor repair Garage. The Council has not taken any steps

to evict the encroachers. Furthermore the property has not been included in the

financial statements.

Due to the above limitation I am unable to confirm the ownership to this property and

the accuracy, completeness, valuation of property and equipment shown at shs

18,246,118 in the balance sheet.

Governance

During the financial year, the term of the council expired and had not been renewed. As

a result the Council operated without a governing council resulting in policy decisions

being initiated, approved and implemented by management.

3.3.8 NATIONAL ENTERPRISE CORPORATION (30TH JUNE 2006)


Two accounts were certified for the years 2006 and 2007. And they had similar issues as

raised below:

Valuation of property and plant at plot 38-40 Kibira road Bugolobi

Although the Corporation carried out a valuation of this property in 1998, a

subsequent revaluation was not carried out until 8 years later in 2005 when it was

sub-leased to NEC Health World Pharmaceuticals contrary to IAS 16. IAS 16 requires

that items of property, plant and equipment which are carried at revalued amounts be

revalued with sufficient regularity to ensure that carrying amounts do not differ

materially from that which would be determined using fair value at the Balance Sheet

date. Due to the above limitation , I am unable to confirm whether the sub-lease was

60

carried at fair value and whether the figure of the leased property in the financial

statements is fairly stated.

Trade and Other Debtors

There are over 40 debtor accounts with account balances which have remained

dormant for over five years in respect of Luwero Industries Subsidiary. The

recoverability of these debts appears doubtful. In the absence of a specific provision

for bad debts, these debtors are not fairly stated.

Absence of board of directors

During the period under review, the National Enterprise Corporation and the

subsidiaries namely; NEC Farm, NEC Construction Works and Engineering Ltd and NEC

Luwero Industries operated without a Board of Directors. As a result policy decisions

were initiated, approved and implemented by management.

3.3.9 UGANDA EXPORT PROMOTION BOARD (31st DECEMBER 2004.)



raised below:

Non Compliance with laws and regulations

The Board did not remit Income taxes in respect of PAYE amounting to shs

227,414,357 during the year to Uganda Revenue Authority.

Non Compliance with laws and regulations is an offence which may result in fines,

penalties and litigation.

Unapproved Budget

During the year the Board did not submit estimates of Income and expenditure for

approval. Absence of an approved budget contravenes section 13 of the Uganda

Export Promotion Board Act (Cap 102). Therefore expenditure incurred stands

unauthorized in the accounts.

Absence of Board of Directors

During the period under review there was no Board of Directors in place as a result

policy decisions were initiated, approved and implemented by management.

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3.3.10 CIVIL AVIATION AUTHORITY (30TH JUNE 2008)

Qualified opinion with emphasis on matter

Receivables At the end of the financial year, the carrying value of receivables stood at

Ushs.62,494,262,000; I am unable to confirm whether the balance reflected as

receivables in the financial statements is fairly stated due to incomplete reconciliation

of receivables.

The amount of trade receivables in the financial statements is Ushs.91,521,818,102

before deduction of provisions for doubtful debtors. The gross amount of debtors

includes government debtors of Ushs.63,176,773,099. The amount of government

debtors balances verified is only Ushs.62,100,094,483, leaving an un reconciled

difference of Ushs.1,076,678,616.

Inventory

As a result of incomplete reconciliation of the value of closing physical inventory to the

balance of inventory in the general ledger; it was not possible to confirm whether the

amount attributable to inventory in the balance sheet is fairly stated. While the

closing physical inventory as at 30th June 2008 was valued at Ushs1,206,029,518, the

general ledger balance was stated at Ushs1,105,927,521 and this was the value

adopted in the balance sheet.

Payables

It was also not possible to confirm the correctness of the carrying amount of

Ushs.25,689,227,000 stated as the balance of payables in the financial statements due

to an adjustment totaling Ushs.180,504,373 in respect of debit balances.

Recoverability of Receivables

As stated in note 4 to these financial statements, the carrying value of receivables as

at 30th June 2008 increased from Ushs.51,435,065,000 (2006/2007) to

Ushs.62,494,262,000 (2007/2008) representing an increase of 21.5%. The major

categories of the debt are owed by Government of Uganda. The majority of these

debts have been outstanding for over 6 years and their recoverability is not certain.

62

3.3.11 UGANDA REVENUE AUTHORITY (30TH JUNE 2009)


Outstanding Reconciling Items

A review of the bank reconciliation statements revealed outstanding reconciling

differences representing bank credits not traceable to the collection cash books

(shs.1,800,120,481) and cash book collections not traceable to the bank accounts

(Shs.1,938,289,152). These differences have not yet been resolved and have an

effect on the reported collections and closing cash balances.

VAT Deferment

According to the information obtained from the ASYCUDA++ system, customs entries

with a BIF value of Shs.152,276,897,266 granted VAT deferment of

Shs.27,409,841,508 (being 18% thereof) remained un-validated beyond the thirty

days, with some dating as far back as July, 2007. Evidence for extension of this

facility was not provided hence rendering the recoverability of the amount uncertain.

Outstanding government taxes

Information obtained from the ASYCUDA++ system revealed that a total of

shs.3,337,763,547 remained outstanding during the year under review,

shs.2,356,598,147 representing 66% relates to the prior year.

Outstanding Transit Bonds

Transit bonds totaling shs.1,431,804,139 at various Customs stations to which they

were destined remained outstanding beyond the statutory period. Included were

outstanding transit bonds that go beyond July, 2008 (a year ago), a period too long

for any consignment to remain in transit. This is a potential revenue loss which

requires investigation.

3.4 DISCLAIMER OPINIONS

3.4.1 LAW DEVELOPMENT CENTRE (31ST DECEMBER 2002)

Disclaimer


raised below:

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The Centre maintains a fixed assets register which has not been updated. The net

book value of property, plant and equipment as indicated in the fixed assets register

did not agree to that as reported in the balance sheet. The Centre is therefore not

able to effectively; allocate depreciable amount of this property, plant and equipment

over their useful life as required under IAS 16, and facilitate the fair presentation of

fixed assets in the Centre‟s financial statements. Due to the above limitations, it was

not possible to confirm the accuracy, existence, completeness and validity of property,

plant and equipment reflected in the financial statements.

Land and Buildings

The net book value of the Centre‟s Land and Buildings is indicated as shs.28,568,443

in the financial statements, under IAS 16 land and buildings are separable assets and

are dealt with separately for accounting purposes even when they are acquired

together. It was noted that management has not been able to identify separately the

cost of land and buildings. It was, not possible to confirm the actual value of the

Centre‟s land and buildings separately.

Valuation of Land, buildings and fixed assets

Although the Centre valued its land and building, the revised amounts were not

reflected in the financial statements, while Motor vehicles, furniture fittings and other

assets were not revalued. IAS16 requires that items of property, plant and equipment

which are carried at revalued amount be revalued with sufficient regularity to ensure

that the carrying amount does not differ materially from that which would be

determined using fair value at the balance sheet date. The Centre has not carried out

any subsequent revaluation of the revalued assets. This constitutes non-compliance

with the revaluation requirements of IAS 16. IAS 16 also requires the subsequent

increase in revaluation to be carried under equity under Revaluation surplus; this was

not done in the financial statements. Due to the above limitations I was unable to

confirm the accuracy, completeness and Valuation of the property, plant and

equipment shown in the balance sheet.

Title to Properties

The Centre does not have title to plots 1, 34, 69, 508, 509, 510, 614 and 615 included

under its properties. Consequently I am unable to confirm the Centre‟s ownership of

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these properties, and due to lack of a comprehensive fixed assets register, I am

further unable to quantify the value of these properties without titles.

Encroachment on Land

The Centre has properties on plot 339 and 169 on blocks 9 and plot 69 Block 1 and on

Block 11882 in Bukoto. However, it was noted that these properties have been

encroached upon with permanent structures built on them. The Centre has not taken

action to remove the encroachers. Due to this limitation, I am unable to confirm the

value and ownership to these properties.

Motor Vehicles

For values given to motor vehicles shown in the financial statements, we were unable

to obtain the documents confirming their purchase and values. Consequently we have

been unable to confirm the accuracy, completeness recording and accounting for this

property, plant and equipment.

Revenue balances

There were differences in GOU subventions from the Centre as shown in the

statement of income and expenditure of (Shs.1,080,525,886) and (Shs.1,010,004,001)

and that verified by audit of (Shs.946,321,335) and (Shs.966,004,001) for the years

2002 and 2003 respectively. Management attributed the differences to salaries for

staff and tuition for Bar course for Government sponsored students. However,

evidence to this effect was not availed. In this circumstance I was not able to confirm

the accuracy and completeness of income reflected in the income statement.

Cash and Bank Balances

The cash and bank balances of Shs.270,433,302 and Shs.227,060,924 for the years

2002 and 2003 respectively included in the accounts could not be confirmed because

bank statements and certificates of bank and cash balances were not availed for audit.

There were no alternative audit procedures that could be performed to confirm the

cash and bank balances.

65

3.4.2 UGANDA NURSES AND MIDWIVES COUNCIL (30TH JUNE 2004)

Disclaimer


The Council does not maintain a fixed assets register indicating the break down of

property, plant and equipment and details of fixed asset particulars such as, location,

condition values, cost and date of purchase. The Council is therefore not able to

effectively;

Allocate depreciable amounts of these property, plant and equipment over their

useful life as required by IAS 16.

Facilitate fair presentation of fixed assets in the Council‟s financial statements.

In the circumstances therefore; it was not possible to confirm the accuracy, existence,

completeness and validity of property, plant and equipment of the Council.

Title to Property

The Council purchased a building in 2005 for shs.207 million which it expensed in the

year of purchase. The title to this building was not availed for verification.

Consequently it was not possible to confirm the ownership of this property.

Non disclosure of Property, Plant and Equipment

An inspection of the Council‟s assets to establish existence revealed that the Council

has assets such as motor vehicles, computers, furniture and fittings. However, these

Assets have not been disclosed at fair values in the financial statements contrary to

IAS 16.

Financial Statement Balances

Management did not keep proper books of account. There are no complete ledgers

and the trial balance was not prepared. As a result the accuracy of account balances in

the financial statements cannot be confirmed.

Cash and cash equivalents

Cash and cash equivalent amounts was reflected in the balance sheet, as

Shs.419,667,041 while the corresponding notes to the accounts had a figure of

Shs.382,110,997;

Management was not able to explain the difference of Shs.37,556,044. Furthermore

proper cash books were not maintained. There were no alternative procedures that

could be conducted to ascertain the accuracy of this figure. Therefore, a material

66

uncertainty over the existence, accuracy and completeness of the Councils cash

balances exists.

3.4.3 UGANDA NURSES AND MIDWIVES COUNCIL (30TH JUNE 2005)

Disclaimer

Fixed Assets Register.

Title to Property

Non disclosure of Property, Plant and Equipment

Financial Statement Balances

The above four issues are the same as those raised in 3.4.2 above.

Cash and cash equivalents

Cash and cash equivalent amounts is reflected in the balance sheet, as

Shs.289,133,114 while the corresponding notes to the accounts has a figure of

Shs.264,324,115.

Management has not been able to explain the difference of Shs.24,808,999.

Furthermore proper cash books were not maintained. There were no alternative

procedures that could be conducted to ascertain the accuracy of this figure. Therefore,

a material uncertainty over the existence, accuracy and completeness of the Councils

cash balances exists.

3.4.4 THE HOTEL AND TOURISM TRAINING INSTITUTE (30TH JUNE 2005).

Disclaimer

Land and Buildings

The Value of the Institute‟s Land and Building is indicated as Shs.1,556,547,952 in the

financial statements, against which depreciation of Shs.30,730,959 has been charged.

Under IAS 16, Land and Building are separate assets and are dealt with separately for

accounting purposes even when they are acquired together. It was noted that

management has not been able to identify separately the cost of Land and Buildings.

It was therefore not possible to confirm the actual value of the Institute‟s Land and

Buildings separately.

Valuation of Land and Buildings

The Institutes acquired Land (register Vol. 496 folio 17) on 1st September 1960

comprising 5,672 acres on which the hotel is located. The Buildings on this Land were

67

revalued by the government valuer in 1996 at Shs.800,000,000 while the Land has

never been valued.

IAS 16 requires that items of Property, Plant and Equipment which are carried at

revalued amount be revalued with sufficient regularity to ensure that the carrying


value at the Balance Sheet date. The Institute has not carried out any subsequent

revaluation of the revalued assets since 1996. This constitutes non compliance with

the revaluation requirements of IAS 16. Due to this limitation I am therefore unable

to confirm the accuracy, completeness and valuation of the property, Plant and

Equipment shown in the balance sheet.

Property Plant and Equipment (PPE)

It was noted that The Institute‟s Property, plant and equipment namely, Machinery

and Equipment, Motor vehicles, Crockery and Cutlery, Linen and Uniform have been

fully depreciated yet these assets are still in use. IAS 16 requires the residual value

and useful life of PPE to be reviewed at least at each financial year end and if

expectations differ from previous estimates the change be accounted for as a change

in accounting estimate in accordance with IAS 8. Management has not carried out a

review of the useful life of these assets nor a valuation to ascertain their values and

useful life.

Due to these limitations I am therefore unable to confirm the accuracy and valuation

of Property Plant and Equipment (PPE) stated in the financial statements at

Ushs1,337,024,518.

Government Grants

IAS 20 requires that the nature and extent of the government grants received be

appropriately disclosed in the financial statements. The standard also requires that

asset related grants including non monetary grants at fair value should be presented

in the balance sheet either by setting up the grant as deferred income or by deducting

the grant in arriving at the carrying amount of the asset. The Institute received a

grant of Shs.350 million at year end ear marked for construction of classroom blocks.

This transaction has not been treated in accordance with IAS 20 in the financial

statements.

Due to this limitation, I cannot confirm the accuracy of grants disclosed in the financial

statements.

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3.4.6 UGANDA RAILWAYS CORPORATION (31st DECEMBER 2007)

Disclaimer

Comprehensive Fixed Assets Register

The Corporation maintains fixed assets registers whose asset values are prepared in-

house by the management. The registers were revised and the results incorporated in

these financial statements. All asset carrying amounts were corrected except for

buildings and as a result I am unable to allocate their depreciable amount over their

useful lives.

Asset Revaluation The Corporation‟s assets were last revalued in 1988. The revaluation model under IAS

16, property, plant and equipment requires that, items of property, plant and

equipment which are carried at the revalued amount, be revalued with sufficient

regularity to ensure that the carrying amount does not differ materially from that

which would be determined using fair value at the balance sheet date. The

Corporation has not carried out any subsequent revaluation of the revalued assets.

This constitutes non-compliance with the revaluation requirements of IAS 16.

Although a revaluation of some assets was carried out for purposes of the concession

in April 2005, the results of the same cannot be relied upon for accounting purposes

because of the valuation models adopted.

Due to the above limitation, I was unable to establish as to whether the property,

plant and equipment in the financial statements are stated at fair value or not.

Revaluation Reserve The Directors undertook an in-house valuation of all property, plan and equipment in

1988 to take into account the currency reform of 1987. The results were incorporated

in 1989 financial statements as a surplus in the capital revaluation reserve amounting

to Shs.168.235 billion (2006: U.Shs.168.237 billion). This balance has been carried

forward over the years while the assets in question were being depreciated. This

accounting treatment contravenes the provisions of IAS 16, property, plant and

equipment.

Impairment of Assets

The following factor suggests that some of the Corporation‟s assets may be impaired:-

Included in plant and equipment are two passenger boats namely MV Barbus and MV

Mvule with a value of U.Shs.1.6 billion. Due to the lack of insurance for the boats and

69

the declining marine passenger services, the Corporation suspended these services on

Lake Victoria several years ago and the boats are anchored at the Port Bell Pier.

Whereas MV Mvule was conceded, MV Barbus is still anchored at Port Bell with no

economic benefits flowing to the Corporation from it. Due to the matter relating to

the assets stated above, I was unable to determine the impairment loss of the boats

as required under IAS 36, Impairment of assets.

Investment in Subsidiary

The Corporation holds a controlling (98%) stake in Nalukolongo Railway Workshop

Limited (NRWL). The Corporation is still accounting for this investment in its books at

cost. Pursuant to the concession agreement, NRWL‟s assets were revalued and taken

over by the concessionaire and as such the Corporation has no right to cash flows in

form of dividends from NRWL. The Corporation has neither consolidated the effect of

this investment in its financial statements previously nor has it been derecognized in

light of the effects of the concession. In light of the above, the investment in the joint

venture has neither been accounted for in accordance with the requirements of IAS 27

Consolidated and Separate financial Statements, IAS 31 Interests in Joint Ventures,

nor IAS 39 Financial Instruments; Recognition and Measurement.

Valuation and Existence of Inventory

The Corporation has inventory held at its Nalukolongo warehouse that was neither

used in the Corporation‟s joint venture operations nor included in its books. They

include parts for locomotive engines (class 72 and Class 82), which are considered

obsolete, as the Corporation is no longer using them. These assets are not recognized

in the financial statements of the Corporation.

Long-Term Loans

The Corporation recorded several long-term loans in its books. These comprise of

funds borrowed or mobilized by the Government of Uganda from various multi lateral

and bilateral funding agencies for onward lending to the Corporation. I was not

provided with copies of the loan agreements with the exception of the Spanish Loan

Agreement. Furthermore, I did not obtain confirmation from the Government of

Uganda on the balances outstanding for the principal and accrued interest as at 31

December, 2007.

I was therefore unable to verify:-

Whether the terms and conditions of the loans had been complied with.

70

Whether the principal loan balance and the accrued interest was fairly stated.

Whether the long and short term portions of the loans are appropriately

disclosed in the financial statements.

Uganda Government Contribution

As at 31st December, 2007, the Government of Uganda‟s contribution to the

Corporation amounted to UShs.39.99 billion. These contributions comprise both of

non-monetary/capitalization grants and revenue grant which were used for asset

acquisition. These Government grants have not been accounted for in accordance with

the requirements of IAS 20 Government grants which states that Government grants

related to assets, including non-monetary grants at fair value, shall be presented in

the balance sheet either as deferred income or by deducting the grant in arriving at

the carrying amount of the asset of which the deferred grant income should be

amortized over the useful life of the asset.

3.5 ADVERSE OPINION

3.5.1 POSTA UGANDA LIMITED (30TH JUNE 2007)

Balances due to international creditors

Included in the creditors and accruals figure of Ushs.13,317,407,000 is a balance of

Ushs.1,565,910,000 described as international payables in note 7 to the financial

statements. Posta Uganda Limited maintains ledgers for the international creditors

combined with international debtors. The ledgers could not be agreed to the balances

in the final accounts. Therefore, the existence of these creditors could neither be

confirmed nor the movement of the year verified.

Debit Balance under creditors

Included under creditors is a debit balance for money orders amounting to

Ushs.218,162,000. Normally, the balance on this account is supposed to be a credit,

representing cash received from customers due to be paid out. There was no

schedule available to support this balance; consequently we could not verify the

existence of this balance.

Prior Year Adjustment

During the year, unspecified entries amounting to a net debt of Ushs.3.063 billion

were posted on this account leading to a closing debit balance of Ushs. 414,714,000.

71

These entries include a debit amount of Ushs.2 billion for liquid assets which should

have been applied to the Profit and Loss Account of the current year.

System Generated Entries

It was observed that a number of accounts had entries with a description of ‘system

generated entries’. explanations for these entries which included an entry to the Prior

Adjustment Account which had a material debit entry of Ushs.1.655,000,000 billion

were not obtained.

Inaccurate Debtors balances and completeness of Debtors’ balances

The general ledger does not have a provision for control accounts and subsidiary

ledgers. In addition, no reconciliation statements are prepared for debtors. There

were some variations between the debtors‟ amounts included in the accounts and the

confirmation received from the debtors. The completeness and accuracy of Debtor

balances totaling Ushs.621,000,000 due from Other Organizations could not be

confirmed.

Inaccuracies in computation of Pay as You Earn (PAYE)

Posta Uganda Limited does not properly operate the PAYE system. There were

various amounts paid to staff for which PAYE was not deducted and remitted to the

tax authority. The outstanding PAYE figure included in the financial statements is

understated by at least Ushs.93,205,513.

Opening balances

The previous year balances were qualified by the external auditor. Management has

not carried out a comprehensive exercise to reconcile the opening balances. There are

material variations between some of the opening balances in the accounts and the

financial statements of the previous year. The variations could not be reconciled.

Emphasis of matter

I further draw attention to note 17 in the financial statements which indicates that the

Company incurred a net loss of Shs.1,525,407,000 during the year ended 30th June

2007 and, as of that date, the Company‟s current liabilities exceeded its current assets

by Ushs.7,108,331,000. In addition, there is decreasing liquidity at the company

resulting in the inability to meet current liabilities as they fall due. These matters

indicate the existence of a material uncertain which may cast significant doubt about

the Company‟s ability to continue as a going concern.

72

CHAPTER FOUR

4.0 ENERGY SECTOR AUDITS

During the year the directorate undertook a pilot audit under a sector wide approach. The

Energy sector was identified for this pilot Audit. The audit entities and projects reviewed

using this approach comprised the Ministry of Energy and Mineral Development and

Energy projects whose report is in volume 2, audits of Statutory Corporations and oil

exploration companies. Audits of oil exploration activities were done for licenses issued to

Blocks 1, 2,3A, 4B and 5. Reports on Oil exploration activities are available on request.

4.1 STATUTORY CORPORATIONS

STATUTORY AUTHORITIES Type of opinion

issued

Financial year

audited

1 Electricity Regulatory Authority Qualified with EOM 30th June 2008

2 Uganda Electricity Transmission Company Ltd Qualified 31st December 2008

3 Uganda Electricity Distribution Company Ltd Unqualified with EOM 31st December 2008

4 Uganda Electricity Generation Company Ltd Qualified with EOM 31st December 2008

5 Rural electrification Agency Unqualified with EOM 30th June 2009

6 Kilembe Mines Ltd Qualified with EOM 30th June 2009

4.1.1 UGANDA ELECTRICTY TRANSMISSION COMPANY LIMITED (31ST December

2008)

Qualified Opinion

Depreciation of property plant and Equipment

Included in Property, plant and equipment are asset additions worth

Ushs.32,856,279,827 that were not depreciated during the year due to the Company‟s

policy of not depreciating assets in the year of acquisition. The depreciation on these

assets would have been Ushs.1,253,927,757. This is in contravention of IAS 16

Property, Plant and Equipment that requires assets to be depreciated from the date

they are available for use.

73

Valuation of Inventory

Included in the financial statements is inventory valued at Ushs.6,625,646,000 whose

valuation could not be independently tested due to unavailability of purchase invoices

or any other supporting documents. Further, despite indications of slow

moving/obsolete stock, no provision was made to reduce the realizable value of the

company‟s stocks. As a result, the valuation of the company‟s inventories could not be

confirmed since no alternative procedures could be performed in this regard.

Related Party Transactions

Included in the amount due to related parties is a balance of Ushs.30,987,371,102 due

to UEGCL which dates as far back as 2001. This amount has been long-outstanding

and its fair value could not be determined as well as its validity. The valuation and

validity of this amount could not be ascertained since no alternative procedures could

be performed.

4.1.2 UGANDA ELECTRICTY DISTRIBUTION COMPANY LIMITED (31ST DECEMBER

2008)

Unqualified with Emphasis of Matter

Current liabilities in excess of current assets

Note 2.1 in the financial statements indicates that the Company‟s current liabilities

exceeded its current assets by Ushs.31,291 million and its total liabilities exceeded its

total assets by Ushs68,489 million as at 31 December 2008 and the Company made a

net loss of Ushs42,582 million for the year then ended. These conditions indicate the

existence of uncertainty which may cast doubt about the Company‟s ability to continue

as a going concern. However the Company is a holding entity with its services fully

paid for from the tariff or by other agencies it provides services to.

The loans in the balance sheet were vested to the company form UEB by the

Government while it still managed and operated the distribution and supply of

electricity. The principal and interest repayments for loans are fully paid from the tariff

as part of the lease payments by the concessionaire. The operations of the off-grid

stations are subsidized from the tariff. Construction of rural electrification schemes is

fully funded by Government of Uganda through the Ministry of Energy and Mineral

Development. The Company has also got substantial liquid investments which will

74

continue to generate income in the foreseeable future. These financial statements

have therefore been prepared on a going concern basis.

4.1.3 KILEMBE MINES LTD. (30TH JUNE 2009)


Sub-Lease Agreement between KML & Tronder Power ltd

Kilembe Mines Ltd entered into a sub-lease agreement with Tronder Power Ltd to

sublease 7.554 Acres of land for the period of 27 years upon payment of a premium of

shs.250m on the date of signing of the Agreement, and an annual rent of

shs.1,000,000. The agreement further states that if the rates are not paid as

stipulated for more than 6 months, the agreement will be terminated. Contrary to this

requirement, Tronder Power Limited had not paid the premium of shs.250m by the

time of audit.

In addition, the structures valued at shs14,000,000 formerly belonging to KML and

taken over by Tronder Limited have not yet been compensated for as per agreement.

These amounts have not been reflected in the financial statements of Kilembe Mines

Limited. We noted further that Tronder Power Limited has already erected permanent

structures on the land.

Board of Directors’ Responsibilities

For six months during the financial year, the company did not have a Board of

Directors having been directed by the Minister of Energy and Mineral Development to

step aside on 30th December 2008

Lack of a substantive Board deprived the entity of strategic direction. It is not clear

how key decisions affecting the company were taken in the absence of the Board of

Directors.

Investment in KCCL shs.17,426,428,620

Kilembe Mines Limited acquired 25% shareholding in Kasese Cobalt Company Ltd in

2001 at shs.17,426,428,620 (ref: note 10 to the accounts). This investment has

remained constant since 2001 and no dividend has ever been received by Kilembe

Mines Ltd.

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4.1.4 UGANDA ELECTRICTY GENERATION COMPANY LIMITED (31ST December 2008)

Qualified Opinion

Government of Uganda Loans

As disclosed in note 18 to the financial statements, the Company has long term loans

from the Government of Uganda amounting to Shs.102.9 billion (2007: Ushs.96.3

billion) for which no independent confirmation had been received. In addition no

formal agreement exists in respect of Government of Uganda-UEB refinancing loan of

Shs.33.3 billion (2007: Ushs.31.8billion). Accordingly, it was not possible to establish

the completeness and accuracy of the loans due to Government of Uganda.

Related Party balance

Included in note 20 in the financial statements are balances due from related parties

as at 31st December 2008 amounting to Shs.31 billion and amounts payable of Shs.1.4

billion. These balances have been outstanding for long periods and there was no

independent confirmation from these companies. Besides, management could not

confirm their recoverability. Accordingly, it was not possible to obtain sufficient

appropriate audit evidence that these balances are not materially misstated.

Due to Government of Uganda

An amount of Shs.32.8 billion (2007: Shs.32.5) as at 31st December 2008 is due to

Government of Uganda and has been outstanding since 2001. This amount was

transferred from Uganda Electricity Board (UEB) to UEGCL, who were supposed to

collect UEB debtors and use the proceeds to pay the Government. There was no

independent confirmation from Government regarding the existence and accuracy of

this amount. Accordingly, it was not possible to confirm completeness, existence and

accuracy of this balance and to obtain sufficient appropriate audit evidence that the

amount is not materially misstated.

Impairment of assets

The installed capacity of the power complex (Nalubale and Kiira) was 380MW and

during the year the average capacity generated was about 170MW. Management

attributed the low level generating capacity to low water levels, which resulted to

restricted amount of water released to the complex. However Management has not

carried out an impairment testing for the assets as required by the company‟s

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accounting policy No. 2(1) and International Accounting Standards No.36. Accordingly,

it was not possible to obtain sufficient appropriate audit evidence that the carrying

amount of the assets as at 31st December 2008 was not materially misstated.

4.1.5 ELECTRICITY REGULATORY AUTHORITY (30TH June 2008)

Qualified Opinion

Property, Plant and Equipment; Land and Buildings

The value of the Authority‟s Land and Building is reflected as shs1,970,000,000 in the

financial statements. This value is based on a revaluation done during December

2008, two months after the preparation and submission of the financial statements.

This condition did not exist within the reporting period as required by IAS 10, and

therefore the revaluation does not affect these financial statements. Further more the

Buildings have not depreciated. Due to inappropriate treatment to Land and Buildings

in the financial statements, I cannot confirm that the value of land and buildings is

fairly stated.

General Reserves

Following a revaluation carried out during December 2008, the Authority has reflected

a general reserve of shs687,538,018 in the financial statements. However the

revaluation was done after the reporting date and therefore the reserves do not

qualify to be an adjusting event as at the balance sheet date.

Depreciation of Books and Journals

During the financial year under review the Authority depreciated it‟s Books and

Journals at a rate of 20 % p.a resulting in a charge of shs1,900,194. The depreciation

rate has not been approved by the Board.

Office Equipments and Computers

Management still derives economic benefits from Office Equipments and Computers

which have been fully depreciated. The Authority has not carried out a revaluation of

these assets in accordance with IAS 16 which requires that the residual value and

useful life of an asset be reviewed at least each financial year to ensure that

expectations in usage and useful life do not differ materially.

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4.1.6 RURAL ELECTRIFICATION AGENCY (30TH JUNE 2009)

Unqualified with Emphasis of matter

Conflict of interest

The chair person to the Rural Electrification board is also the Accounting Officer and

the Principal signatory to the of Rural Electrification Agency Accounts. This is a conflict

of interest and violates the principles of a good corporate governance structure since

the board chairman participates in setting the organization‟s policy which (s)he then

implements.

Rural electrification Mini grids.

The board sourced and licensed two (2) local firms to run rural electrification Mini-

grids at Kalangala and Ngoma. It appears, however, that the Rural electrification

model and implementation framework applied did not evaluate their viability. At the

time of audit the two operators had abandoned the mini-grids citing failure to make

profits due to the high cost of diesel.

Un-implemented Rural electrification schemes.

The Agency has a backlog of 154 unimplemented rural electrification projects including

Presidential pledge projects. There is however no prioritization criteria in respect of all

these projects.

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CHAPTER FIVE

5.0 AUDIT OF INVESTMENTS BY GOVERNMENT IN PRIVATE COMPANIES

The audit of investments by Government in private companies under the public private

partnership arrangement (PPP) is governed by the following legal frameworks.

5.1 Section18. Audit of public monies in private organizations and bodies.

The Auditor General may inquire into, examine, investigate and report, as he or she

considers necessary, on the expenditure of public monies disbursed, advanced, or

guaranteed to a private organization or body in which government has no controlling

interest. In addition the Public Finance and Accountability Act 2003 also requires the

Accountant General to submit to the Auditor General details of these investments as

follows;

5.2 The third Schedule of the Public Finance and Accountability Act 2003 Accounts

to be submitted by the Accountant General states that;

The following accounts shall be submitted to the Auditor General and the Minister by the

Accountant General-

(i) A statement of investments held by the Government at the end of the year showing

the original cost and current value;

(j) A statement of the net worth of all state enterprises as at the end of the financial year;

During the year the Accountant General was required to avail a list of all

beneficiaries/investments in Private companies in which Government made investments

but did not have a controlling interest.

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He submitted the list of beneficiaries listed below:

No. Entity Subscribed Share

Capital

%of

Government

Share Holding

1 Housing Finance Bank 30,000,000,000 49.2

2 Sugar Corporation of Uganda Ltd. 9,181,500 23.8

3 National Insurance Corporation Ltd. 807,760,000 40

4 Uganda Telecom Ltd. 22,638,001,410 31

5 Kinyara Sugar Works Ltd. 3,000,456,160 49

6 Phoenix Logistics (31/July/2008) 5,097,599,190 49

7 Quality Chemicals Industries Ltd 23/July/2008 10,000,000,000 22

8 Commonwealth Resort Munyonyo 10,000,000,000 25

9 J&M International Hotel 2,000,000

10 Good Africa Coffee (20/June/2008)

Financial statements of the above PPP were not submitted to the Auditor General including a

statement of investments held at original cost and current value other than the shareholding

position above.

Due to these limitations it was not possible for me to carry out audits in the PPP arrangement.

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CHAPTER SIX

6.0 SPECIAL AUDITS AND INVESTIGATIONS

This chapter deals with special audits and investigations carried out during the Audit

reporting period 1st April, 2009 to 31st March, 2010. Under Section 22 of the National

Audit Act (NAA) 2008 the Auditor General may carry out special audits, investigations or

any other audit considered necessary by him or her. Special audits and investigations are

audits which do not follow normal statutory audit procedures. These are audits that may

cover more than one accounting period. During the year under review, the Auditor

General conducted five (5) special audits on Statutory Organisations as summarized

below;

Cotton Development Organization (CDO)

National Social Security Fund (NSSF)

African Trade Development Fund (ATDF)

National Housing and Construction Company Limited (NHCCL)

Quality Chemical Industries Limited (QCIL)

The special audits of African Trade Development Fund (ATDF), National Housing and

Construction Company Limited (NHCCL) and Quality Chemical Industries Limited

(QCIL) are still in progress.

Special audits of Cotton Development Organization (CDO) and National Social Security

Fund (NSSF) were completed and the outcomes of these special audits and

investigations are analyzed below;

6.1 COTTON DEVELOPMENT ORGANIZATION (CDO)

A special audit exercise was conducted to determine review loans to Cotton Development

Organization (CDO) and Uganda Ginners and Cotton Exporters Association (UGCEA) under

the Cotton Development Sub sector development credit (CSDP) disbursed by Bank of

Uganda. The objective of the audit was to:

Ensure CDO and UGCEA have complied with provisions of the Loan Agreement relating

to disbursement of funds from Bank of Uganda.

Review and assess the liquidity position and financial performance of CDO and UGCEA

in order to establish their ability to repay the loan.

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Ascertain accuracy and completeness of principal amounts lent, outstanding balances,

interest payable accruing from CDO and UGCEA and guaranteed by government of

Uganda in respect of the disbursed loans.

Ascertain actual balances and the status of the revolving account in Standard

Chartered Bank relating to UGCEA under the CSDP credit.

Obtain and analyze lists of beneficiaries from UGCEA and CDO.

Assess the impact of the credit facility on cotton production since 1998 to date.

A summary of loans received by UGCEA and CDO from the Bank of Uganda amounting to

Shs.9,865,054,080 is as follows:-

Agreements date Beneficiary and Amount Ug. Shs. Equivalent

2nd April 1998 CDO $1,250,000 1,427,500,000

14th July 1998 UGCEA $3,290,050 4,267,554,080

10th June 99 UGCEA 750,000,000

13th Sept 99 UGCEA 3,300,000,000

14th December 99 UGCEA 120,000,000

TOTAL 9,865,054,080

Findings

6.1.1 Compliance with the Loan Agreement

It was noted that management of both CDO and UGCEA complied in all material respects

with the loan agreement provisions except for the following:

UGCEA

UGCEA did not invite Bank of Uganda to witness the procurement, storage, distribution

and utilization of the pesticides. After restructuring of the Loan, did not give standing

instructions to the Participating bank to transfer into Bank of Uganda Seed Emergency

Response Programme Account all funds recovered under advice to Bank of Uganda-

Development Finance Department.

CDO

CDO did not enter into contract with designated ginners for the collection of the loans

advanced to farmers in form of seeds.

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Bank of Uganda

BOU did not maintain true and complete records and accounts of the programme and

arrange for the preparation of the accounts of the programme and the audit by an

independent qualified auditor acceptable to Government annually.

6.1.2 Utilization of the Loan Funds

According to the loan agreements between BOU, UGCEA & CDO, the money was meant

for purchasing pesticides and spray pumps which were to be distributed to the farmers.

These items were periodically purchased both locally and internationally and distributed to

farmers in the cotton growing areas. It was observed that the purchases of items started

in 1998 and ended in 2001, with the total value of the purchases totaling to $

8,949,455.5. Audit was generally satisfied with the utilization of the loan except for the

case of theft mentioned below.

An analysis of the records availed for audit revealed that out of the above procured items

10,032 units of pesticides and 20 units of spray pumps were stolen. Information received

from management was that those pumps were stolen by the entity‟s store‟s assistants

who were later dismissed and reported to Police.

6.1.3 Impact

The distribution and use of the pesticides plus the spray pumps by the farmers resulted in

a general increase in cotton production, farmer‟s income and foreign exchange earnings

from the inception of the intervention till 2004/05 and started declining again.

See the graphs 1 & 2.below

Graph 1

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Graph 2

Besides the government facilitation in form pesticides, seed dressing and spray pumps,

there were other factors which also affected the production and these were:-

Un-favorable weather conditions resulting in El-nino which caused rotting of cotton

balls thereby affecting the quality and quantity of cotton produced.

Poor soils and inadequate extension services.

Drought or late rains in some parts of the country.

Level of cotton prices during the year prior to the season ie if prices are poor,

farmers get discouraged and if good, farmers are encouraged to grow more

cotton.

6.1.4 Recovery of Loans

CDO received a loan of $1,250,000 under SERP while UGCEA received a combined total

amount of Shs.4.170bn and US$3,290,050 for both the pesticide programme and the

SERP the following was noted on recovery of these loans.

6.1.5 Non Compliance with Agreements

Both CDO and UGCEA were expected to give standing instructions to participating Banks

to transfer to the Bank of Uganda SERP and PP accounts all funds recovered. We noted

that only UGCEA complied and gave standing instructions to this effect. We were not

provided with any evidence by CDO that standing instructions were given. Instead CDO

appears to have left the responsibility to UGCEA to recover the money from ginners and to

directly repay BOU.

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CDO management response was that, it reached an understanding with UGCEA

management, for the ginners to own and manage the CDO Loan of shs 1,427,500,000 and

the accrued interest. This money was even reflected in the UGCEA accounts for the year

end 30th June 1999 as a liability.

6.1.6 Repayments

Out of this principal sum, a total of Shs.2.84 billion was remitted by UGCEA to BOU by

standing order instruction and Shs.500 million by cheque, bringing the total amount

remitted to Shs.3,340,609,301, leaving an outstanding balance of Shs.6,524,444,779.

6.1.7 Revolving Fund

We noted that on 28th February, 2000, the outstanding loan to UGECEA under CSDP was

restructured into a revolving fund to settle outstanding balances due to companies that

had supplied pesticide and spray pumps to finance the seed planting activities for

2000/2001 season. The revolving fund was to be recalled after 3 years i.e 6th Feb 2003.

Bank of Uganda was to have constant access to the revolving account records at all times.

After the expiry of the revolving fund period, BOU and UGCEA did not issue fresh standing

instructions to Standard Chartered Bank to resume transferring all funds recovered .This

resulted in the default of the loan repayment.

By the time of this audit, the revolving account (Standard Chartered Collection Account

No. 01040-108463 -01) was still operational. However, the last time money was deposited

on the account was 18th May 2007 when a cheque totaling Shs22,510,000 was deposited.

6.1.8 Accrued Interest

We noted from the review of BOU internal audit quarterly reports that accrued interest

due from CDO/UGCEA by September 2004 amounted to Shs.2,596,091,000. By January

2005 when BOU suspended accruing interest, the total amount due had risen to

Shs.3,193,377,841.

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6.1.9 Capacity to Pay

During our review of the cash flow statements and Bank statements for CDO and UGCEA

for the period between June 1999 and April 2009, it was noted that the liquidity position

of the two organizations kept on declining a persistent trend resulting into minimal cash

balances. A further review of the bank statements for UGCEA and CDO for the period

ending 30th march 2009 and 30th April 2009 respectively revealed the cash position as

indicated below.

UGCEA

Account no Bank Type of Account Amount Ugshs

01040108463-01 Standard Chart Bank Collection

account/revolving

841,047

01040108463-00 -do- operation 73,315

01400075426-01 Stanbic Bank operation 212,866,971

Total 213,781,333

CDO

Account no Bank Type of

Account

Amount Ugshs

01L2540582900 Dfcu K‟la operation 881,306,463

210211076-1 BOU 1,007,922,899

02L2540582900 Dfcu K‟la Capital account 66,117,108

01400904349-01 StanbicBank Lira operation 110,112,245

01400842616-01 Masindi -do- 21,402,350

01400444110-01 Mbale -do- 220,409,178

01400369124-01 Iganga -do- 164,234,783

Total 2,564,885,624

Less Outstanding

commitments

3,425,236,542

We noted that the current liquidity position of both CDO and UGCEA is poor. The total

indebtedness of CDO at the time of audit was Shs7.78billion, of which Shs.4.75 billion was

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borrowed from the revolving fund and Shs 3.02 billion from the Government Cotton Price

Subsidy given to the Ginners. The total indebtedness at the time of audit stood at

Shs.7.78billion, of which Shs.4.75 billion was borrowed from the revolving fund and

Shs.3.02 billion from the Government Cotton Price Subsidy given to the Ginners. Details

are as shown below.

A CDO Borrowing from UGCEA Recoveries

B (Borrowings from the Government Cotton Price Subsidy to Ginners)

CDO is 95% funded by Government and lack of Government‟s intervention raises going

concern issues. The CDO‟s inability to pay the UGCEA loans has been a subject of

previous audit reports.

6.1.10 Conclusion

Cotton Development Organization and Uganda Ginners and Cotton Associations may not

be in a position to repay the loans.

Non compliance with some provisions of the agreements affected the performance

of the loans.

Out of the Principal total amount of Shs.9,865,054,080 in loans to UGCEA and

CDO, Shs.3,340,609,301 was remitted to BOU leaving a balance of

Shs.6,524,444,779.

Loan advances from the revolving fund totaling Shs.4,75b to CDO remain unpaid.

The balance due from UGECEA is Shs.4,967,822,620 in respect of Principal amount

(Shs.1,774,444,779) and accrued interest (Shs.3,193,377,841) to February 20

Period Amount borrowed(Shs) Amount repaid(Shs) Outstanding

bal(Shs)

02/03 1,700,000,000 Nil 1,700,000,000

03/04 2,500,000,000 Nil 4,200,000,000

04/05 550,000,000 Nil 4,750,000,000

04/05 4,007,001,170 Nil 4,007,001,170

05/06 Nil 978,855,822 3,028,145,348

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6.2 NATIONAL SOCIAL SECURITY FUND (NSSF)

This summary provides a brief synopsis of the forensic investigation of NSSF and the key

findings. The full report which had earlier been submitted to Parliament forms an integral

part of this report. A copy of the report is available on the website.

6.2.1 Procurement findings

The Public Procurement and Disposal of Public Assets Act came into force on 21 February

2003 provides that it shall apply to all procurement using public funds. It was noted that

NSSF did not adhere to various rules and regulations of the Public Procurement and

Disposal of Public Assets Act (PPDA) Act during procurement of the following:

• IMIS.

• Motor vehicle lease.

• Legal service procurement.

• Private investigation services.

6.2.1.1 IMIS

The procurement process for the support component of the NSSF IMIS project was

reviewed. It was noted that the support component was divided into three phases; the

first to conduct a diagnostic study, the second to rectify IMIS and the third to provide

future technical support on an annual basis.

It was noted that there was no procurement requisition (PP Form 20) for phase 1 from

the user department–ISD.

It was noted further that the bid notice period was 12 days instead of the minimum 22

days required by the PPDA Act and Regulations.

NSSF wrote to the PPDA Authority for a waiver of the notice period vide a letter dated

10 April that was received by the Authority the following day, which was the day the

bids were opened.

NSSF did not receive a response to their letter requesting for a waiver.

The bid for phase 1 was awarded to CIAL at a bid price of USD 430,000 on 11 April

2007.

It was noted that a written response prepared by the user department-ISD to the MD-

NSSF concerning CIAL‟s report on phase 1. ISD stated among others, that the CIAL

report contained many inaccuracies, that the technical team was changed after the

contract award, that for future work the technical staff of CIAL are largely based

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abroad, and suggested a phased approach in fixing IMIS and that the bidding process

be open.

It was noted that there was no advertisement for the second phase or any open

bidding process and that the contract was awarded to CIAL at USD 4.9 million on 28

August 2007. The PPDA also detected this breach during its compliance check and

stated that “it was irregular for NSSF to have contracted the same firm (CIAL) to

identify problems (diagnostic study) and then award them to fix the IMIS problems

since they would have a conflict of interest”. The PPDA letter further states that “The

findings of the Authority under the Compliance Check report were communicated to

the entity which was requested to respond but the then Accounting Officer (MD-NSSF)

did not respond despite several reminders. The queries of the Authority are still

outstanding and a formal response is required…”

It was also noted that the contract for phase 2 states that CIAL has completed phase

1 to the satisfaction of NSSF. However, the report by the ISD at the end of phase 1

seemed to suggest otherwise.

It was noted that on 30 November 2007, three months after the award of phase 2, the

Contracts Committee approved a variation to the contract price from USD 4.9 million

to USD 5,472,845.

On 18 March 2009, NSSF applied for a waiver from PPDA for USD 900,000 to contract

CIAL for maintenance services for one year and additional training under phase 2. On

8 May 2009, the PPDA gave this waiver.

6.2.1.2 Motor vehicle purchase

On 5 June 2007, the NSSF Transport Department raised a requisition to procure 67

vehicles under an operating lease. It was noted that the bid notice days were 28

instead of 33 working days as provided in section 145 (1) (b) of the PPDA Act. It was

also noted that NSSF changed the contract from operating lease to hire purchase after

the contract was awarded, and the agreement included an option for NSSF to purchase

the vehicles within six months. The above change could have resulted in a breach of

regulation 219(3) (b) which states that “negotiations under competitive procurement

method shall not be conducted to materially alter the terms and conditions of contract

stated in the solicitation documents”.

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6.2.1.3 Legal services providers’ files

Ten legal files from service providers were examined and it was noted that Sections 79

and 84 of the PPDA Act were not adhered to as none of the service providers‟ submitted

proposals to the NSSF. NSSF did not adhere to sections 126 and 142 of the PPDA

Regulations which requires the preparation of a shortlist of service providers. It was also

noted that the suppliers did not submit all mandatory documentation as required by the

PPDA Act and Regulations.

6.2.1.4 Private investigations file

NSSF hired the services of a private company on 4 December 2007 to provide

investigation services. The company did not send a quotation to NSSF as required by

Section 84(3) of the PPDA Act. NSSF did not comply with Section 126 and 142(1) of the

PPDA Regulations, since it did not prepare a short-list of available providers of

investigation services. We also noted that the supplier‟s file did not contain most of the

mandatory documentation as required by the PPDA Act and Regulations.

6.2.2 Payment of salary advances, allowances and loans

6.2.2.1 Managing Director NSSF

The MD received housing advances exceeding the limit of his gratuity. Furthermore he

was paid gratuity without recovery of housing advances. He received a total of

Shs.259.2million in housing advances over 22 months. He received salary advances

exceeding his monthly salary on three different occasions; 02 August 2007, 14 April 2008

and 18 September 2008. Paragraph 25.1 of the Loan Policy3 allows for only one salary

advance per year. In 2007 and 2008, a total of six salary advances were authorised for

the MD. In total, Shs.148.6 million of salary advances was paid to him. As at 31

January,2009, the MD‟s ledger account indicated that he owed the fund Shs 244.2 million.

To recover this money from him, NSSF would have to deduct Shs.20.3 million per month

for the remaining duration of his contract. This is more than his monthly salary of

Shs.18million.

6.2.2.2 Deputy Managing Director NSSF

In year 2007, four salary advances were authorised for the DMD. Paragraph 25.1 of the

Loan Policy, only allows for one salary advance per year. As at 31 January 2009,the

DMD‟s ledger account indicated that he owed the NSSF Shs.111.5 million. To recover this

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money, the NSSF would have to deduct Shs.9.3 million per month from the DMD‟s

monthly salary of Shs.16 million, for the remaining period of his contract.

6.2.2.3 Others

Some members of staff received very low net salaries after deduction of advances, which

did not comply with paragraph 25.9 of the staff handbook.

6.2.3 Credit card usage by management

The MD-NSSF instructed Orient Bank to hold an NSSF investment account as lien for credit

cards issued to senior management. It was noted that US$. 37,141.71 and cash advance

of Kshs.29,075.50 relating to personal expenses and appearing on MD-NSSF‟s credit card

statement were debited to his ledger account at NSSF. At the date of audit, he had not

reimbursed NSSF for these charges.

6.2.4 Issues regarding JVs

6.2.4.1 Nsimbe Holdings Limited (NHL)

Despite repeated requests for the relevant financial and supporting documentation, these

were not provided to us and therefore we were unable to examine all supporting

documentation relating to the activities of this JV. However, the following issues were

noted.

Mugoya Estates Limited (MEL) was selected as a partner in this JV.

Other than Mugoya Construction and Engineering Limited Kenya (MCELK), we

found no recorded applications being received from other parties.

No record at NSSF of any minutes of the MIC was found, or the Board of Directors

(BOD) with regard to the consideration of the applications received from other

parties other than from MCELK.

The first application by MCELK was made on 16 June 2003 on behalf of Mugoya

Construction and Engineering Limited Uganda (MCELU). MCELU did not have an

Investment Licence, which should have constituted sufficient grounds for

disqualification.

The second application was made on 21 January 20047 by, the Managing Director

of MCELK, personally.

A local law firm was appointed to act for NSSF in the underlying transactions. Also,

we did not find any appointing documentation formalising the relationship between

NSSF and KAA.

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There was also a case of potential conflict of interest on the part of KAA, as they

acted for, not only the sellers of the land in question, but the buyer (NSSF) and

the JV Company as well.

Messrs. Byokusheka were appointed to undertake valuations on the property.

There was no competitive bidding. The surveyors met with the NSSF Investment

Manager on 3 March 2004 and discussed the valuation of some pieces of land,

including that owned by MEL and on which the project was to be developed. On

the same day, the firm were appointed by the MD to undertake the valuations.

Evidence of adherence to the required procurement process was not availed.

On 18 June 2004 and 6 July 2004, NHL requested NSSF for funding “in order to

undertake part of infrastructural development for Nsimbe Estates”. This was

authorised by the BOD of NHL in a meeting on 16 June 2004. There was no

provision in the Joint Venture Agreement (JVA) for funding of the project by PDL

or NSSF. This should have been subjected to an entirely new investment

approval/procurement process by NSSF.

NSSF held 49% shareholding in NHL and half of the Board Members of NHL were

NSSF representatives. As NSSF was an interested party, issues of conflict of

interest arose with regard to NSSF/PDL negotiating with NHL for provision of the

financing “on terms and conditions to be agreed” as stated in the letter dated 18

June 2004 fromNHL to NSSF.

PDL seconded their Project and Development Manager, a local to NHL and offered

to pay for their services. The BOD of NSSF belatedly approved the appointment of

this firm for a period of 55 months on 20 August 2004 after management had

already formalized the appointment. MBW was to receive a 15% advance

payment and quarterly payments for the balance.

6.2.4.2 Victoria Property Development Limited (VPDL)

Despite repeated requests for the relevant financial and supporting documentation, these

were not provided to us and therefore we were unable to examine all supporting

documentation relating to the activities of this JV. However, the following issues were

noted.

1. The USD 1 million loan advanced by NSSF to VPDL was not authorised by the

Minister or by the BOD of NSSF.

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2. The loan was advanced to VPDL through PDL. However, there was no legal

agreement between NSSF and PDL regarding the loan. It appears that the loan

was given without due process and it is also unsecured.

3. The MD-NSSF sought to re-classify this loan as an advance payment to VPDL, with

consequential loss to NSSF.

4. Management has not acted on the recommendations by Internal Audit for the

recovery of these funds.

5. There were numerous instances of potential conflicts of interest involving NSSF

staff, management and board members who served in staff, management and

boards of other third party entities with which NSSF maintained business

relationships. The following are examples of possible conflicts of interest:

(i.) Corporation Secretary of NSSF and Company Secretary of PDL.

(ii.) Director of NSSF, Chairman of PDL and Chairman of VPDL.

(ii.) MD of NSSF, Deputy MD of VPDL, Ag. MD of PDL, BOD Member of VPDL

and BOD Member of PDL.

(iv.) CIO of NSSF, BOD Member of VPDL and BOD Member of PDL.

(v.) BOD Member of NSSF and Chairman of VPDL.

(vi.) BOD Member of VPDL and Investment Manager of NSSF.

(vii.) BOD Member of NSSF and BOD Member of VPDL.

(viii.) CS of VPDL and Investment Manager of NSSF.

(ix.) In an Internal Memo dated 10 May 2004, the CFO of NSSF stated that “the

CFO of NSSF should directly control the finance functions of VPDL”.

(x) Appointment of a Legal Advisor for the Lubowa Project: The Company

Secretary of PDL recommended to VPDL the appointment of a lawyer as

the Company Secretary of VPDL. Later, this lawyer was appointed by NSSF

as the Legal Advisor for the Lubowa Project and received professional fees

for the same. Note that the Lubowa Project was being undertaken by

VPDL, where this same lawyer was also the Company Secretary. The CS-

NSSF and the lawyer were in partnership in the same law firm as at the

time of our review.

93

6.2.5 Listed securities

6.2.5.1 Procurement of stockbrokers

Section 84(3) of the PPDA Act requires a proposal to be received from, in this case, the

stock brokers before their appointment to transact for NSSF. However, procurement

documentation for the stockbrokers used by NSSF for the period under review were not

provided.

6.2.5.2 British American Tobacco (Uganda)

The following in respect of transactions by Crane Financial Services (CFS) on behalf of

NSSF were noted:

CFS Sales Contract Note No. SC/354/Aug/07 has a price of Ushs 300 per share (value

Ushs 705,407,000) which is at variance with the price of Ushs 370 per share on USE

trading slips (value 869,722,830).

A CFS Statement of Account for the above transactions shows a deduction for CMA

charges of Ushs 14,964,888. It is not clear what this relates to.

The communication of sale from CFS to NSSF was two months after the sale, implying a

similar delay to NSSF receiving the funds.

6.2.5.3 Bank of Baroda (Uganda)

The following in respect of transactions by Crane Financial Services on behalf of NSSF

were noted:

CFS appears to have understated the funds owing to NSSF on Sale Contract Note No.

SC/51/Mar/08 by Ushs 519,350,000 by stating a price of Ushs 2,745 per share whereas

the price on the USE trading slips was Ushs 2,995 per share.

The former Chief Investment Officer of NSSF raised a complaint to the USE. On 1 April

2008, CFS paid NSSF an amount of Ushs 508,963,000. However, this amount is Ushs

10,387,000 less than Ushs 519,350,000.

6.2.5.4 Development Finance Company of Uganda


NSSF were noted:

CFS Sale Contract Note No. SC/23/Feb/08 for the sale of 2,389,463 DFCU shares has a

price of Ushs 650 per share (value Ushs 1,553,150,950 before commission and

94

statutory charges). This is at variance with USE trading slips which show prices

between Ushs 700 with a total value of Ushs 1,664,204,400.

CFS Sale Contract Note No. SC/38/Feb/08 for the sale of 3,825,560 DFCU shares has a

price of Ushs 675 per share (value Ushs 2,582,253,000 before commission and

statutory charges). This is at variance with USE trading slips which show a price of

Ushs 665700 with a total value of Ushs 2,677,892,000.

After a complaint was raised by the Chief Investment Officer, the USE intervened and

imposed a fine on CFS of Ushs 107,264,131.

6.2.5.5 Stanbic Bank (Uganda)


NSSF were noted:

• On 29 October 2007, CFS stated that it had purchased 3,185,800 shares whereas USE

trading slips show that it had purchased 4,477,500 shares.

• On 12 November 2007, CFS stated that it had purchased 1,000,000 shares whereas

USE trading slips show that it had purchased 978,000 shares.

• On 11 December 2007, CFS stated that it had purchased 2,071,657 shares whereas

USE trading slips show that it had purchased 2,076,657 shares.

• On 14 December 2007, CFS appears to have over-stated the cost of 20,411,996

shares that it had purchased for NSSF by Ushs 7,885,000.

• On 19 February 2008, CFS appears to have over-stated the purchase price of

2,410,000 Stanbic shares with a value of Ushs 12,050,000 as having been purchased

at Ushs 240 whilst trading slips showed that the same were purchased at Ushs 235

per share.

• On 25 February 2008, CFS stated that it had purchased 633,307 shares whereas USE

trading slips show that it had purchased 624,782 shares.

6.2.6 Investments in fixed deposit

A letter from NSSF to Citibank Uganda dated 3 May 2007 States that the signing mandate

should be operated by two authorized signatories. It was noted that the CS-NSSF alone

signed a letter dated 16 August 2007 authorizing the investment of Ushs.17 billion in

foreign currency fixed deposits and the transaction was effected on 17 August 2007.

A general payment voucher for this transaction was not provided during the audit. An

internal memo dated 17 August 2007 from the Acting Treasurer to the MD-NSSF

95

requesting authorization for this transaction and another one of Ushs.22.9 billion to be

entered into NSSF‟s books was noted. The memo indicated that the transaction of

Ushs.22.9 billion occurred on 8 August 2007. An undated journal voucher for the two

amounts which was prepared and posted by the Acting Treasurer was availed.

6.2.7 Sale of government bonds before their maturity date

NSSF sold several government bonds during the period September 2007 to November

2007. These bonds were sold before their maturity date. The decision to sell the bonds

was made by the MD-NSSF and was not deliberated by the MIC. Most of the bonds that

were sold to one of the companies were at a price below their discounted present value

(computed market worth) at the time. Even though gains were realised from the sale of

the bonds, these were below the market worth of the bond – a fact that could have been

revealed (by the MIC) through proper analysis of the bond prices.

An evaluation of the prices of the bonds and the prices at which NSSF sold the various

bonds revealed a total unfavorable variance of Ushs.5,790,785,765. A further evaluation

revealed an unfavorable variance of Ushs.2,757,616,821 between the market prices

prevailing at the time of sale and the price at which NSSF sold the bonds.

6.2.8 Purchase of land

Generally, NSSF‟s procurement and investment in land was not in accordance with the

PPDA Act. Nonetheless it was noted that PP Forms 20 that were used in the process for

the purchase of land were dated after NSSF had negotiated with the vendors. Under the

procurement act, a PPF 20 is used in the initial stages of the procurement process and

acts as a confirmation that money for the procurement envisaged is available from the

annual budget.

6.2.8.1 Temangalo

In the Temangalo land purchase, the MD-NSSF informed the team that he started the

procurement process by requesting for sale offers of land in Wakiso district in January

2008. It was noted that he had already started negotiations in December 2007 with one of

the Vendors for the purchase of his and another Vendors land in Wakiso. Thier land had

been surveyed and valued by December 2007, about a month before the alleged Request

for Proposals (RFP). No documented details of offers received arising from the RFP

process were availed for audit.

96

6.2.8.2 Branch offices

It was noted that the board approved the development of four branches for the financial

year 2007/2008 but NSSF purchased a total of eight branches. There were no valuations

for two of the branches - Gulu and Hoima.

On the Kabale purchase, the Investment Officer negotiated with the vendor for an agreed

price of Shs.112,000,000, which was above the valuation returned by the three valuers

and then submitted to the Contracts Committee for approval of the two plots in Kabale.

6.2.8.3 Law firm single sourced

NSSF pre-qualified several law firms to assist in the purchase of land for the branch

offices. However, the procurement process for these firms was not carried out properly. A

law firm that was engaged to purchase land for the Hoima Branch Office, was single

sourced contrary to the requirements of the PPDA Act.

6.2.8.4 Investment Policy not followed

The NSSF Investment Policy was not followed. There were no details relating to the

expected returns and the anticipated risk exposures for the land purchases made.

6.2.8.5 Arua Project

NSSF paid a local firm of surveyors before a contract was signed. They then continued to

pay this firm USD.5,537.24 per month when the contract period expired, though there

was no written agreement on the extension of contract or approval from the CC. It was

noted that the firm issued two Interim Payment Certificates No.10 and 11 without due

consideration of the Valuation Certificates issued by the quantity surveyors and approved

by, the project managers.

6.2.8.6 Gayaza and forest land

We noted that NSSF‟s BOD had approved the purchase of land for forest development and

the purchase of swampy land in Gayaza at values higher than those recommended by the

valuers.

6.2.8.7 Lumumba

The project at Lumumba started in the year 2000 with the appointment of as project

architects. Though there was no contract between the two parties, there were Terms of

97

Reference (TOR) which set out the duties of both parties and amount of payments due. It

was noted that Architects did not follow the TOR‟s and sent invoices for work that was

either not completed or partially completed.

In 2000, the project was initially estimated to cost USD.6,000,000, but this rose to

USD.21,991,896 in 2007 and USD.75 million in 2008, after changes to the initial design by

MD NSSF.

On 25 May 2008, MD-NSSF, ostensibly on instructions from the Board FIC, directed the

architects to revise the approved design to increase the number of floors from four to

sixteen and the number of basement parking levels from two to four. On 29 May 2008, he

instructed the Project Managers, to begin excavations for the increased number of floors

and parking levels. The revised design was approved by the NSSF‟s BOD in June 2008.

CHAPTER SEVEN

98

7.0 STATUS OF BUSINESS OF THE STANDING COMMITTEE ON

COMMISSIONS, STATUTORY AUTHORITIES & STATE ENTERPRISES

The Parliamentary oversight Committee on Statutory Authorities and State Enterprises

(COSASE) is responsible for reviewing and making recommendations on audit reports and

subsequently reporting to Parliament on their resolutions.

During the period the COSASE committee considered and discussed Eighteen (18)

reports as follows;

7.1 Reports presented to the House

A report on the performance of National Drug Authority was presented to the House

covering the financial year 1999 to 2007

7.2 Reports concluded but not yet presented to the House

Nine (9) reports were discussed which are ready to be presented to the House these are

reports on the performance of the following;

Four (4) reports on the performance of, Amber House, Uganda Communications

Commission, Uganda Property Holdings and National Forestry Authority were discussed

but are yet to be presented to the House as follows.

No Audit Entity Financial years covered

1 Amber House Limited Dec 2004 to Dec 2006

2 Uganda Communications commission 1999/2000 to 2006/2007

3 Uganda Property Holdings Limited 2000/2001 to 2006/2007

4 National Forestry Authority 2003/2004 to 2006/2007

Five (5) reports on the performance of; Uganda Revenue Authority, National Housing and

Construction Company Limited, Amnesty Commission, Electricity Regulatory Authority,

Cotton Development Organization were discussed and these are under compilation for

presentation to the House.

No Audit Entity Financial years covered

1 Cotton development Organization 1999/2000 to 2007/2008

2 Amnesty Commission 2000/2001 to 2007/2008

3 Electricity Regulatory Authority 2004/2005 to 2006/2007

4 National Housing and Construction Company Limited 1999/2000 to 2004/2005

99

7.3 Reports still under consideration

Eight (9) reports were under consideration during the period; these are reports on the

performance of the following;

No Audit Entity Financial years under

consideration.

1 Uganda Electricity Transmission Company 2005/2006 to 2007/2008

2 Uganda Coffee Development Authority 2000/2001 to 2007/2008

3 Uganda Investment Authority 2000/2001 to 2007/2008

4 Uganda National Bureau of Standards 2002/2003 to 2007/2008

5 Uganda Bureau of Statistics 2000/2001 to 2007/2008

6 Civil Aviation Authority 2004/2005 to 2007/2008

7 National Water Sewerage Corporation 2002/2003 to 2007/2008

8 Public Procurement and Disposal of Public Assets

Authority

2003/2004 t0 2007/2008

9 Posta Uganda 1998/1999 to 2006/2007

100

CHAPTER EIGHT

8.0 DIVESTITURE ACCOUNTS

This chapter deals with privatization of public enterprises during the year ended 30th June

2009.

8.1. Status of Divested Enterprises

A total of 132 enterprises were divested by government of which 93 were privatized, 11

were concessioned, 5 were repossessed by the former owners and 39 were struck off the

register of companies/liquidated, 2 dissolved. 40 other enterprises had been listed for

divestiture as at 30th June 2009. Below is a summary of method s of divestiture of these

public enterprises covering the period 1992 to 30th June 2009.

Method of Divestiture No of divestitures transactions

1 Auction 6

2 Concession 11

3 Debt Equity Swap 2

4 Initial Public Offering 4

5 Joint Venture 2

6 Liquidation / Struck off the Co register. 39

7 Management Buy Out 4

8 Pre-emptive rights 9

9 Repossession 5

10 Sale of Assets 22

11 Share Sale 28

Total 132

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Pie Chart presentation of Methods of Divestiture transactions

Details of the status of divested enterprises are attached to this report under appendices

D,E and F. By the time of this report, a total of 85 divestiture transactions had fetched a

cumulative total of shs 432,632,462,206 with 75 of them fully paid for. There were 7

others with a total outstanding balance of shs 18.318 bn while 3 transactions of pre-

emptive rights had not yet been exercised. Details of these are attached to this report

under appendices G.

8.2 Contingent Liabilities

Contingent liabilities from divested enterprises in respect of litigations against government

dating as back as 2003 remain unresolved. These post-divesture issues require urgent

(Government) intervention to prevent further build up of the burden. Appendix G provides

a summary of these litigations and court cases).

8.3 DIVESTITURE AUDIT OF UGANDA ELECTRICITY BOARD (UEB)

8.3.1 Introduction

The Uganda Electricity Board (UEB) was classified under Class II of the PERD Statute 1993

as an enterprise in which the State is supposed to retain the majority shareholding and

102

the Electricity Act 1999, provided for the formation of successor companies to assume all

responsibilities and obligations duties, objectives and functions including property, rights

and liabilities of UEB with the exception of the regulatory functions.

8.3.2 Legal Status

Uganda Electricity Board (UEB) was established by the Electricity Ordinance of 1948 which

was replaced by the Electricity Ordinance of 1961 and eventually re-enacted by the

Electricity Act Chapter 135 of the Laws of Uganda 1964.

The Board was established with the main functions relating to generation, transmission,

distribution and supply of electricity, inspection and testing of electrical plant and the safe

use of electricity, and for purposes incidental to and connected with matters aforesaid.

8.3.3 Ownership

UEB was 100% owned by Government of Uganda with a paid up capital of

Shs.92, 362,811,000 .

8.3.4 Divestiture Process

All the functions of UEB were unbundled for purposes of divestiture, and vested into

holding companies responsible for;

Generation: forming the Uganda Electricity Generation Company (UEGCL) to own

and operate the Kiira and Nalubale hydro-electric power stations to generated and sell

electricity to the Transmission Company.

Transmission: forming Uganda Electricity Transmission Company (UETCL) to own

the electricity transmission infrastructure above 33KV and responsible for buying

power in bulk from generators and selling it to distribution companies and for export.

Distribution: forming Uganda Electricity Distribution Company (UEDCL) to own and

operate the grid connected to supply infrastructure operating at 33KV and below;

inherit the responsibility for retail of electricity, metering, billing customers of UEB

including all outstanding balances.

Electricity Regulatory Authority (ERA) was created to regulate the activities of the

successor companies.

UEB the parent Company to administer Residual matters pending liquidation on

completion.

103

8.3.5 UEB Core Assets

A hydropower Dam and a Power station of 180 MW (Owen Fall Power Station) and

Extension Kiira Dam 200 MW

1400 Kilometers of Transmission lines

900 kilometers of distribution lines

Diesel generation (1-9MW) plus Seven small thermal power stations in remote regions (

Arua, Kapchorwa, Kitgum, Maziba (Kabul), Moroto, Moyo, Nebbi, Rukungiri)

Mini-hydro 1MW (Kabale)

150,000 customers

Other potential assets;

Hydro power sites at Budhagali, Busowoko, Kalagala, Kamdini, Karuma, Ayago North and

Ayago South

Nyagak Mini-hydro station (4.5MW)

8.3.6 Asset valuation

UEB asset values as at 31st December 1995 as per financial statements

Land and Buildings 34,994,064,433

Furniture and Fittings 278,893,099

Motor Vehicles 3,084,985,297

Transmission and Distribution 293,739,334,416

Generation 215,196,447,645

Computer and office Equipment 87,383,092

Tools and Equipment 2,049,524,279

Total 549,680,632,261

We were not availed with the evidence of any other asset valuation after 1995.

8.3.7 Unbundling UEB Assets and Liabilities

Assets of UEB were unbundled as follows;

Non Core assets (Amber House, Kimaka Estate)

Amber House: Amber House valued at shs 5 billion was transferred to Ministry of

Finance by signing a Transfer Share Certificate effective from 15th September

2005.

104

Kimaka Estate: At its 301st meeting of 22nd August 2003, DRIC noted and

approved the estimated revenue of shs 4.53 billion foregone in implementing the

Presidential directive of transferring the estate constructed at a loan of

US$8,222,185.50 to Ministry of Defence to function as a Military Academy in Jinja.

UEB Houses/Estate: The properties were valued at shs 12,733,650,000 out of

which houses worth shs 10,061,950,000 were sold to the sitting tenants and who

paid for them using their terminal benefits (either topping up) and others sold to

the public amounted to shs 2,671,700,000.

Core Assets: On 30th March 2001, the assets were vested among the holding

companies of Uganda Electricity Distribution Company Limited (UEDCL), Uganda

Electricity Generation Company Limited (UEGCL) and Uganda Electricity

Transmission Company Limited (UETCL).

To date the liquidation of UEB is still going on and a report is awaited.

8.3.8 Findings on Divestiture of Uganda Electricity Board

Two concessions were accomplished (Distribution and Generation), however, no records

are available to assess the values of the “concessioned” assets in both cases and without

an independent value attached to the assets, it‟s difficult to determine the basis on which

the concession fee was charged by GOU.

However, PU management believes that concession fees which were a result of a bidding

process had no relevance to the values of the Assets leased especially when the

Concessionaire was required to invest in the power sector.

Contrary to the cabinet decision under minute 401 (CT 2001) which recommended that all

real estate properties owned by Government including those to be acquired in the future

be vested with Uganda Property Holdings Ltd (UPHL) for proper management, audit noted

that the property was instead transferred to the Ministry of Finance.

The available records indicate that Amber House was registered under Amber House Ltd

with 100% government share holding and was managed by an agent M/s Bageine and

Company Ltd until March 2008 when the company employed its own Estate manager.

105

M/s Bageine agency cost government a cumulative management fee of shs124,487,041

(between 15th September 2005 when the property was transferred to Ministry of Finance

and march 2008 when M/s Bageine‟s contracted was terminated). This cost would have

been avoided if the Cabinet recommendation was adhered to.

iii) UEDCL and UEGCL have concessioned all their main activities for 20 years, leaving the

two companies with only the supervisory role of Umeme and Eskom respectively.

8.3.5 Conclusion

i. Shs 124,487,041 is a nugatory expenditure.

ii. The concession fees for both generation and distribution may not have been fair.

106

Appendix 1

List of seventy Six (76) public organizations audited by the Auditor General

1 Allied Health Professionals

2 Amber House Limited

3 Amnesty Commission

4 Bank of Uganda

5 Cable Corporation Ltd

6 Capital Markets Authority

7 Civil Aviation Authority

8 Coordinating Office for Control of Trypanosomiasis in Uganda

9 Cotton Development Organization

10 Crested Crane Hotel & Tourism Training Institute

11 Dairy Development Authority

12 Divestiture & Redundancy Accounts

13 East African Community

14 Institute of Communication & Information Technology

15 Kilembe Mines Ltd

16 Kinyara Sugar Works

17 Lake Victoria Fisheries Organization

18 Law Development Centre

19 Management Training & Advisory Centre

20 Nakivubo War Memorial Stadium

21 Nambole Stadium

22 National Animal Genetic Resources Centre and Data Bank

23 National Council of Sports

24 National Council for Children

25 National Council for Higher Education

26 National Curriculum Development Centre

27 National Drug Authority

28 National Enterprises Corporation & Subsidiaries

29 National Forestry Authority

30 National Housing & Construction Co. Ltd

31 National Medical Stores

32 National Planning Authority

33 National Social Security Fund

34 National Water & Sewerage Corporation

35 National Women‟s Council

36 National Youth Council

37 New Vision Printing and Publishing Corporation

38 Nile Hotel International

39 Post Bank Uganda Limited

40 Posta Uganda

41 Public Libraries Board

107

42 Public Procurement & Disposal of Public Assets

43 Rural Electrification Agency

44 Uganda Air Cargo Corporation

45 Uganda Broadcasting Corporation

46 Uganda Broadcasting Council

47 Uganda Bureau of Statistics

48 Uganda Coffee Development Authority

49 Uganda Communications Commission

50 Uganda Development Bank

51 Uganda Development Corp.

52 Uganda Electricity Board

53 Uganda Electricity Distribution Co.

54 Uganda Electricity Generation Co.

55 Uganda Electricity Regulatory Authority

56 Uganda Electricity Transmission Co.

57 Uganda Export Promotion Board

58 Uganda Insurance Commission

59 Uganda Investment Authority

60 Uganda Livestock Industries

61 Uganda Medical and Dental Practitioners Council

62 Uganda National Bureau of Standards

63 Uganda National Council for Higher Education

64 Uganda National Council of Science & Technology

65 Uganda National Council of Sports

66 Uganda National Cultural Centre

67 Uganda National Examinations Board

68 Uganda Nurses & Midwives Council

69 Uganda Printing & Publishing Corp.

70 Uganda Property Holding Limited

71 Uganda Railways Corp.

72 Uganda Seeds Company Limited

73 Uganda Tourism Board

74 Uganda Wildlife Authority

75 Uganda Women Council

76 UGMA Engineering Corporation Limited

108

Appendix A

Summary of operational and financial standing of Public organizations audited during the period 1st April 2009 to 31st March 2010 No Statutory Authority/State Enterprise Surplus/Deficit

for the year

Accumulated

Surplus/Deficit

for the year

A (i) Public organizations audited for financial years ended 30th June 2009

1 Bank of Uganda (BOU) 2,885,000,000 1,012,129,000,000

2 Capital Markets Authority (CMA) (738,718,000) 1,087,930,000

3 Kilembe Mines Ltd (KML) (5,842,063,772) (26,264,603,508)

4 National Drug Authority (NDA) 2,423,597,822 11,219,059,934

5 National Water and Sewerage Corporation

(NWSC)

12,350,645,000 36,696,814,000

6 National Women‟s Council (NWC) (7,986,870) (1,392,321)

7 New Vision Printing and Publishing Corporation 2,182,847,000 17,885,149 000

8 Uganda Bureau of Statistics (UBOS) (1,462,255,236) 2,881,327,764

9 Uganda Air Cargo Corporation (UACC) 4,893,701,067 (20,631,002,268)

10 Uganda Communication Commission (UCC) 18,270,350,534 38,327,394,491

11 Uganda National Council For Science and

Technology (UNCST)

(1,888,012,981) 1,042,700,627

12 Uganda Printing and Publishing Corporation

(UPPC)

17,732,000 2,004,043,000)

13 Uganda Property Holdings Ltd (UPHL) 465,885,824 425,135,340

14 Uganda Tourism Board (UTB) 35,631,168 8,032,101

15 Uganda Wildlife Authority (UWA) (1,216,197,000) (10,652,253,000)

16 Uganda Revenue Authority (URA) 8,676,103,233 5,282,539,508

17 Civil Aviation Authority (CAA) (11,291,238,000) (134,031,291,000)

A (ii)

Public organizations audited for financial

years ended 30th June 2008

18 Broadcasting Council (BC) 58,817,461 233,134,384

19 Electricity Regulatory Authority (ERA) 179,702,929 2,603,897,429

20 Lake Victoria Fisheries Organization (LVFO) (US $643,922) US $1,271,842

21 National Council For Children (NCC) (73,052,814) (58,825,601)

22 National Council For Disability (NCD) (9,105,681) 2,268,667

23 National Medical Stores (NMS) 3,019,501,000 9,224,522,000

24 National Planning Authority (NPA) 927,664,734 1,259,548,385

25 National Social Security Fund (NSSF) (50,198,093,000) 7,465,951,000


Authority (PPDA)

1,588,646,765 4,830,751,521

27 Uganda Broadcasting Corporation (UBC) 68,090,923 (1,051,573,209)

28 Uganda Institute of Information and

Communications Technology (UICT)

451,183,721 1,110,701,191

29 Uganda Insurance Commission (UIC) 767,404,936 1,228,009,826

30 Uganda Investment Authority (UIA) (1,239,048,054) 971,726,392

31 Uganda Medical and Dental Practitioners Counci

(UMDPC)

40,196,477 88,978,420

109

32 Uganda National Bureau of Standards (UNBS) (729,812,299) (1,169,961,881)

33 Uganda National Examination Board (UNEB) (251,480,601) (52,159,750)

34 Uganda Post Ltd (83,693,000) (5,538,764,000)

35 Uganda Seeds Ltd (USL) (225,348,303) (3,115,277,306)

A (iii) Public organizations audited for financial years ended 30th June 2007

36 Crested Crane Hotel & Tourism Training Institute

(HTTI)

(146,729,523) (1,112,212,890)


Data Bank (NAGRIC)

(12,032,000) 19,307,000

38 National Council of Sports (NCS) 18,424,083 327,332,858

39 National Enterprise Corporation (NEC) (2,822,712,655) (14,460,218,032)

A (iv) Public organizations audited for financial years ended 30th June 2005 & 2004

40 Law Development Centre (LDC) 947,084,321 1,508,543,565

41 National Youth Council (NYC) 114,305 (60,657,825)

42 Uganda Nurses and Midwives Council (UNMC) (130,533,927) 289,133,114

43 Uganda Export Promotion Board (UEPB) (219,992,002) (360,714,658)

B Public organizations audited for financial years ended 31st October 2008

44 Cotton Development Organization (CDO) 2,116,679,810 761,922,682

C Public organizations audited for financial years ended 30th September 2008

45 Uganda Coffee Development Authority (UCDA) 1,059,701,974 940,131,106

D

Public organizations audited for financial

years ended 31st December 2008

46 Amber House Ltd (AHL) 822,969,846 3,960,213,059

47 Cable Corporation Ltd (CCL) 388,053,000 (7,491,545,000)

48 Dairy Development Authority (DDA) 801,076,684 669,528,684

49 Management Training & Advisor Centre (MTAC) 159,524,369 (399,215,498)

50 National Housing and Construction Co Ltd

(NHCCL)

4,720,310,000 28,167,013,000

51 Nile Hotel International Ltd (NHI) 841,235,000 145,775,000

52 Post Bank Uganda Ltd 1,048,588,078 3,485,822,139

53 Uganda Development Bank Ltd (UDB) 11,583,878,000 18,054,208,000

54 Uganda Development Corporation (UDC) (122,276,000) (1,285,595,000)

55 Uganda Electricity Distribution Co Ltd (UEDCL) (42,582,952,000) (104,070,603,000)

56 Uganda Electricity Generation Co Ltd (UEGCL) (25,786,766,000) (65,582,798,000)

57 Uganda Electricity Transmission Co Ltd (UETCL) (57,021,601,000) (25,529,601,000)

58 UGMA Engineering Corporation Ltd (3,631,799,000) (47,587,726,000)

110

Appendix B Summary of operational and financial standing of Public organizations audited during the period 1st April 2009 to 31st March 2010 categorized under Regulatory Authority’s, Government institutions and State Enterprises from appendix A No Statutory Authority/State Enterprise Surplus/Deficit

for the year

Accumulated

Surplus/Defici

t for the year

A (i) Public organizations audited during the period 1st April 2009 to 31st March 2010

Government Institutions

1 National Women‟s Council (7,986,870) (1,392,321)

2 Uganda Bureau of Statistics (1,462,255,236) 2,881,327,764

3 Uganda National Council For Science and Technology (1,888,012,981) 1,042,700,627

4 Lake Victoria Fisheries Organisation (US $643,922) US.1,271,842

5 National Council For Children (73,052,814) (58,825,601)

6 National Council For Disability (9,105,681) 2,268,667

7 Uganda Institute of Information and Communications

Technology

451,183,721 1,110,701,191

8 Uganda Medical and Dental Practitioners 40,196,477 88,978,420

9 Crested Crane Hotel & Tourism Training Institute (146,729,523) (1,112,212,890)

10 National Animal Genetic Resource Centre and Data Bank (12,032,000) 19,307,000

11 National Council of Sports 18,424,083 327,332,858

12 Law Development Centre 947,084,321 1,508,543,565

13 National Youth Council 114,305 (60,657,825)

14 Uganda Nurses and Midwives Council (130,533,927) 289,133,114

15 Management Training & Advisor Centre 159,524,369 (399,215,498)

Regulatory Authorities

1 Bank of Uganda 2,885,000,000 1,012,129,000,000

2 Capital Markets Authority (738,718,000) 1,087,930,000

3 National Drug Authority 2,423,597,822 11,219,059,934

4 Uganda Communication Commission 18,270,350,534 38,327,394,491

5 Uganda Tourist Board 35,631,168 8,032,101

7 Uganda Wildlife Authority (1,216,197,000) (10,652,253,000)

8 Broadcasting Council 58,817,461 233,134,384

9 Electricity Regulatory Authority 179,702,929 2,603,897,429

10 National Planning Authority 927,664,734 1,259,548,385


Authority

1,588,646,765 4,830,751,521

12 Uganda Insurance Commission 767,404,936 1,228,009,826

13 Uganda Investment Authority (1,239,048,054) 971,726,392

14 Uganda National Bureau of Standards (729,812,299) (1,169,961,881)

15 Uganda National Examination Board (251,480,601) (52,159,750)

16 Uganda Export Promotion Board (219,992,002) (360,714,658)

17 Cotton Development Organisation 2,116,679,810 761,922,682

18 Uganda Coffee Development Authority 1,059,701,974 940,131,106

111

19 Dairy Development Authority 801,076,684 669,528,684

20 Uganda Revenue Authority 8,676,103,233 5,282,539,508

21 Civil Aviation Authority (11,291,238,000) (134,031,291,000)

State Enterprises

1 Amber House Ltd 822,969,846 3,960,213,059

2 Cable Corporation Ltd 388,053,000 (7,491,545,000)

3 Kilembe Mines Ltd (5,842,063,772) (26,264,603,508)

4 National Enterprise Corporation (2,822,712,655) (14,460,218,032)

5 National Housing and Construction Co Ltd 4,720,310,000 28,167,013,000

6 National Medical Stores 3,019,501,000 9,224,522,000

7 National Social Security Fund (50,198,093,000) 7,465,951,000

8 National Water and Sewerage Corporation 12,350,645,000 36,696,814,000

9 New Vision Printing and Publishing Corporation 2,182,847,000 17,885,149 000

10 Nile Hotel International Ltd 841,235,000 145,775,000

11 Post Bank Uganda Ltd 1,048,588,078 3,485,822,139

12 Uganda Air Cargo 4,893,701,067 (20,631,002,268)

13 Uganda Broadcasting Corporation 68,090,923 (1,051,573,209)

14 Uganda Development Bank Ltd 11,583,878,000 18,054,208,000

15 Uganda Development Corporation (122,276,000) (1,285,595,000)

16 Uganda Electricity Distribution Co Ltd (42,582,952,000) (104,070,603,000)

17 Uganda Electricity Generation Co Ltd (25,786,766,000) (65,582,798,000)

18 Uganda Electricity Transmission Co Ltd (57,021,601,000) (25,529,601,000)

19 Uganda Post Ltd (83,693,000) (5,538,764,000)

20 Uganda Printing and Publishing Corporation 17,732,000 (2,004,043,000)

21 Uganda Property Holdings Ltd 465,885,824 425,135,340

22 Uganda Seeds Ltd (225,348,303) (3,115,277,306)

23 UGMA Engineering Corporation Ltd (3,631,799,000) (47,587,726,000)

112

Appendix C

Financial standing of public organizations with up to date financial statements submitted for audit for the years ended 30th June 2009 and 31st Dec 2008 No Statutory Authority/State

Enterprise

Accumulated Surplus/Deficit for the past three years

Public organizations audited with financial years ended 30th June

NAME OF ENTITY 2008/09 2007/08 2006/07

shs shs shs

1. Uganda Air Cargo Corporation (UACC) (20,631,002,268) (25,524,703,335) (26,241,946,520)

2. Uganda Wild Life Authority (UWA) (10,652,253,000) (9,436,056,000) (6,140,516,000)

3. New Vision Printing and Publishing

Corporation

17,665,149,000 16,660,953,000 13,444,426,000

4. Bank of Uganda (BOU) 1,012,129,000,000 241,018,000,000 100,428,000,000

5. Uganda Tourism Board (UTB) 8,032,101 (27,598,967) (31,616,203)

6. Kilembe Mines Ltd (KML) (26,264,603,508) (20,171,252,442) (19,331,260,322)

7. National Women Council (NWC) (1,392,321) 6,594,549 3,547,759

8. Uganda Bureau of Statistics (UBOS) 2,881,327,764 4,343,583,000 3,328,955,377

9. National Drug Authority(NDA) 11,219,059,934 8,795,462,112 4,662,305,779

10. Uganda Property Holdings (UPHL) 425,135,340 (40,750,484) (129,330,512)

11. National Water and Sewerage Corporation (NWSC)

36,696,814,000 20,574,775,000 9,419,424,000

12. Uganda Communications commission

(UCC)

38,327,394,491 20,057,043,957 10,884,169,530

13. Uganda National Council for Science and Technology (UNCST)

1,042,700,627

3,851,833,549

5,224,867,770

14. Uganda Printing and Publishing Corporation (UPPC)

(2,004,043,000)

(2,008,978,000)

(1,569,224,000

)

Public organizations audited with financial years ended 31st December

NAME OF ENTITY DEC. 2008 DEC.2007 DEC.2006

15. Dairy Development Authority(DDA) 669,528,780 (131,548,904) (107,148,000)

16. Management Training and Advisory Centre(MTAC)

(399,215,198) (558,739,866) (579,003,461)

17. Amber House Ltd (AHL) 3,960,213,059 3,148,253,309 2,450,592,899

18. Nile Hotel International Ltd (NHI) 145,775,000 (695,460,000) (1,356,340,000)

19. Post Bank Ltd 3,485,822,139 2,542,195,834 1,763,683,238

20. Uganda Electricity Transmission

Company limited (UETCL)

(25,529,601,000) 31,491,984,000 30,968,410,000

21. National Housing and Construction Company Limited (NHCC)

28,167,013,000 21,366,545,000 14,842,297,000

22. Uganda Development Corporation Ltd

(UDC)

(1,163,319,000) (1,163,319,000) (1,035,625,000)

23. Uganda Electricity Generation

Company (UCDL)

(65,582,798,000) (39,796,032,000) (31,853,239,000)

24. Cable Corporation Limited (CCL) (7,491,545,000) (7,879,600,000) (9,113,602,000)

25. UGMA Engineering Corporation Ltd (47,587,726,000) (43,955,927,000) (39,659,207,000)

26. Uganda Development Bank Ltd (UDB) 18,054,208,000 6,635,207,000 6,048,148,000

27. Uganda Electricity Transmission Company (UETCL)

(25,529,601,000) 31,491,984,000 30,968,410,000

113

28. Nambole National Stadium (2,687,622,918) (2,770,496,076) (2,199,780,757)

29. Civil Aviation Authority (CAA) (134,031,291,000) (124,301,271,000) (102,668,098,000)

30. Uganda Revenue Authority (URA) 5,283,539,508 (2,856,169,106) (10,882,374,921,)

Public organizations audited with financial years ended 31st October

NAME OF ENTITY OCTOBER 2008 OCTOBER 2007 OCTOBER

2006

31 Cotton Development Organization (CDO)

761,922,682 (1,411,487,556) (991,548,245)

Public organizations audited with financial years ended 31st October

NAME OF ENTITY SEPTEMBER

2008

SEPTEMBER

2007

SEPTEMBER

2006

32 Uganda Coffee Development Authority (UCDA)

1,670,741,895 (2,539,598,232) (2,539,598,232)

114

Appendix D

DIVESTITURES AND OUTSTANDING TRANSACTIONS AS AT 30th JUNE 2009

Public Enterprise Buyer

Date Method of sale

Price Money collected

Balance (m)

1 Acholi Inn Ms Laoo Ltd

May-95 Sale of Assets

Shs 235 m 108,000,000

122

2 African Ceramics Co.

Muhindo Enterprises Ltd May-96

Sale of Assets Shs.0.270 bn

270,000,000

-

3 African Textile Mills P.S.Patel

Mar-96 Share Sale

Shs.1.4 bn 100,000,000

679

4 Agip (U) Ltd Agip Petrol International May-96

Share Sale Shs.1.675 bn

1,664,141,892

-

5

Agricultural Enterprises Ltd

Commonwealth Development Corp

Oct-93 Joint Venture US$ 12.7 m 3,835,414,534

-

6 Apollo Hotel Corporation Ltd.

MIDROC Ethiopia plc Mar-01

Share Sale US$ 18m

32,040,000,000

-

7 Associated Match company Ltd

Madhvani Group Jun-01

Shares/Preempitve rights Sh. 46,164

46,164

-

8 Bank of Baroda Bank of Baroda (India) Jun-99

Shares/Preempitve rights Shs 2.5bn

2,500,000,000

-

9 Barclays Bank of Uganda Ltd

Barclays Plc Oct-98

Shares/Preempitve rights Shs 5bn

5,000,000,000

-

10

BAT Uganda (PHASE 1, 20% of shares)

BAT Investments Ltd.

Sep-99

Shares/Preemptive rights

US$ 7m 10,290,000,000

-

11 BAT Uganda (PHASE 2)

Various Jun-00

Initial Public Offering - USE Ushs 4.6 bn

4,608,794,753

-

12 Blenders (U) Ltd Uniliver Overseas Holding BVC Aug-94

Share Sale US$ 531,586

38,109,750

-

13 Uganda Telecom Detecom

Jun-00 Share Sale

US$ 33.5m 50,975,088,162

-

14 Dairy Corp Sameer

Concession

US$0.5 m 892,000,000

-

15

Development Fiance Company of Uganda

Various Jul-04

Initial Public Offering - USE

Shs 10.1 billion

18,369,374,559

-

16 East African Distilleries ltd

International Distillers & Vintners Nov-92

Share Sale US$ 600,000

731,063,195

-

17 ENHAS

Efforte Corp, Global Airlinks & Sabena

Apr-98 Shares/Preemptive rights

US$ 3.75m 1,226,193,448

-

18 Foods & Beverages Ltd

James Mbabazi May-96

Auction Shs.0.670 bn

670,000,000

-

19 Fresh Foods Ltd Eddie & Sophie Enterprises May-96


900,000

-

20

Government Central Purchasing Corp.

Management and Employees

Jul-00

Management Buy Out

Shs 1.09 bn 1,091,276,000

-

21 Hilltop Hotel Three Links Ltd

May-95 Sale of Assets

Shs 35 m 10,000,000

25

22 Hotel Margherita Reco Industries Ltd Aug-94

Sale of Assets US$ 400,000

365,184,210

-

23 International television sales

ROKO Construction Dec-96

Sale of Assets Shs 0.32bn

320,000,000

-

24 Kakira Sugar Works

East African Holdings Ltd. Jul-00

Shares/Preemptive rights Shs 3.5 bn

3,500,000,000

-

25

Kampala Auto Centre (Gomba Motors Ltd)

Management Nov-95


8,200,000

-

115

26 Kibimba Rice Co. Ltd.

Tilda Holdings Sep-96

Share Sale Shs 1.607 bn

1,523,515,000

-

27 Kinyara Sugar Works Ltd

Rai Holdings Oct-06

Share Sale US$33.5 million

61,546,870,000

-

28 Lake Victoria Bottling Co. Ltd

Crown Bottlers (U) Ltd Feb-93


3,621,000,000

-

29 Lake Victoria Hotel (PHASE 1)

Windsor Ltd Aug-95

Share Sale Shs. 3.06 bn

2,962,387,928

-

30

Lake Victoria Hotel Ltd (Phase 2) - Windsor Lake Victoria

The Windsor Ltd.

Aug-00

Shares/Preemptive rights

US$ 1.75m 2,962,387,928

-

31 Lango Dev. Co. Sunset International Ltd. May-98

Share Sale Shs 0.1bn

100,000,000

-

32 Lira Hotel Showa Trade Company Ltd Jan-95

Sale of Assets Shs 250 m

50,000,000

200

33 Masindi Hotel Ottoman Engineering Feb-00

Sale of Assets US$ 500,000

198,500,000

-

34 Motorcraft and Sales Ltd.

Andami Works Ltd. Sep-96


200,000,000

-

35 Mt. Elgon Hotel

Bugisu Cooperative Union May-95


650,000,000

-

36 Mt. Moroto Hotel Kodet International Nov-94


40,000,000

-

37 Mweya Safari Lodge

Madhvani Group Aug-95

Concession Shs.1.821 bn

1,821,112,067

-

38

National Housing & Construction Corporation

Libyan Arab Foreign Investment Co. Jun-05

Debt/Equity Swap US$20.3 m

35,789,600,000

-

39

National Insurance Corporation Ltd (60%)

IGI Jun-05

Share sale US$3.625m

6,307,822,446

-

40

NEC Pharmaceuticals Ltd.

Haupt Groupe Dec-99

Joint Venture US$ 1.5m

-

-

41

New Vision Printing and Publishing Co Ltd (20%)

Various Sep-04

IPO and Rights Issue

Ushs 9.2 billion

2,040,000,000

-

42 Nile Breweries Madhvani Group

Apr-92 Repossession

shs 500m -

-

43 Nile Hotel International Ltd

Serena Tourism Promotion Services Jan-04

Concession US$1.2m

2,340,000,000

-

44 NYTIL Textile Industries Ltd

Picfare Ltd Mar-96

Sale of Assets Shs 7.0 bn

2,132,000,000

-

45 PAPCO Industries Ltd.

Praful C. Patel Feb-99

Share Sale Shs 100m

100,000,000

-

46 Uganda Railways Corp

Concession US$ 2m

3,479,200,000

-

47 Republic Motors Rafiki Trading Company Dec-95


148,000,000

-

48 Rock Hotel Swisa Industries Ltd Nov-94


300,000,000

-

49 Rwenzori Highland Tea Company Ltd

Finlays Groups May-02

Share sale/ Preemptive rights Ushs 1.45 bn

-

-

50 SAIMMCO Steel Rolling Mills Ltd. Sep-99

Share Sale Shs 202m

199,333,633

-

51 Second National Operator

MTN Mar-98

Concession US$ 5m

6,664,000,000

-

52 Shell (U) Ltd Shell Petroleum Co. Ltd Dec-92

Debt/Equity Swap Shs 12.79 bn

12,790,000,000

-

53 Soroti Hotel

Speedbird Aviation Services Ltd Jan-95


150,000,000

-

116

54 Stanbic Bank (U) Ltd.

IPO Dec-96

Share Sale Ushs 6.9 Bn

35,812,000,000

-

55 Stanbic Bank (U) Ltd.

SBIC Africa Holdings Ltd. Nov-96

Share Sale ushs 6939m

6,938,819,178

-

56

Steel Corporation of East Africa Ltd (SCEA).

Muljibhai Madhvani & Co. Ltd Jul-00

Shares/Preempitve rights

Shs 0.32bn 362,912,000

-

57 Total (U) Ltd Total Outre Mer

Mar-96 Share Sale

Shs.5.7 bn 5,645,992,433

-

58 Transocen 1998 (U) Ltd

Coin Ltd. Jul-01

Share Sale Shs 361m

361,000,000

-

59 TUMPECO GM Company Ltd

Aug-94 Share Sale

US$ 700,000 +Shs 429 m

693,350,000

-

60 Uganda Hire Purchase Co.

Tadeo Kisekka Nov-95


240,000

-

61 Uganda Cement Industry - Hima

Rawals Group of Industries Dec-94

Sale of Assets US$ 20.5 m

17,948,945,000

-

62 Uganda Cement Industry - Tororo

Corrugated Sheets Ltd Oct-95


5,864,857,750

-

63 Uganda Clays Ltd. Various

Oct-99

Initial Public Offering - USE Shs 1.46 bn

1,182,415,300

-

64 Uganda Commercial Bank

Westmont Asia ltd Oct-97

Share sale ushs 12610m 12,610,000,000

-

65 Uganda Commercial Bank

Stanbic Bank Feb-02

Share Sale by BoU Net Ushs 21.9 billion

21,900,000,000

-

66

Uganda Consolidated Properties (PHASE 1)

GoU

Apr-99

Sale of Assets

US$ 9m 11,250,000,000

16,174

67 Uganda Motors Ltd Management

Nov-95 Management Buy Out Shs.0.803 bn

300,000,000

-

68 Uganda Electricity Distribution Co Ltd

Umeme May-05

Concession US$1.4 m

10,765,000,000

-

69 Uganda Electricity Generation Co Ltd

Eskom Enterprises Nov-02 Concession US$0.5 m

993,000,000

-

70 Uganda Fisheries Enterprises

Nordic-African Fisheries Co. Ltd

May-95 Share Sale US$ 1.1 m 105,600,000

994

71 Uganda Garment Industries Ltd.

Phoenix Logistics Uganda Ltd. Aug-00

Sale of Assets US$ 0.5 m

850,000,000

-

72

Uganda Grain Milling Co.(PHASE 1)

Calebs International

Dec-96 Share Sale

Shs 5.3bn 5,336,000,000

-

73 Uganda Hardwares Ltd

Management Oct-95

Management Buy Out Shs.0.298 bn

18,200,000

-

74

Uganda Pharmaceuticals Ltd.

Vivi Holdings Jul-96


1,524,620,000

-

75 Uganda Industrial Machinery Ltd.

F.B. Lukoma May-97

Share Sale Shs 7 m

7,000,000

-

76

Uganda Leather and Tanning Industry (ULATI)

IPS (U) Ltd Jul-95


1,594,150,000

-

77

Uganda Libyan Arab Holding Co Ltd

Preemptive Apr-08

Preemptive Ushs 2 M

-

78

Uganda Livestock Industries Ltd _Kiryana Ranch

Ziwwa Ranchers May-02

Concession U Sh.0.800 bn

850,000,000

-

79

Uganda Livestock Industries Ltd _Kyempisi Ranch

Royal Ranchers Ltd

May-05 Lease of Assets

Ushs 391 m 391,000,000

-

80

Uganda Meat Packers Ltd (Kampala Plant)

Uganda Meat Industries Ltd

Aug-95 Sale of Assets

Shs.0.7 bn 588,094,172

-

81 Uganda Meat Teso Agric Nov-97 Sale of Assets Shs 0.3bn

117

Packers-Soroti Industrial Co Ltd. 185,755,445 124

82 Uganda Seeds (Kasese)

Lease/concession Sep-05

Lease/concession Shs 326 m

273,000,000

-

83

Uganda Seeds (Masindi and Kisindi)

Lease/concession Sep-05

Lease/concession US$350,000

648,495,259

-

84 White Rhino Hotel Dolma Associates Ltd May-95


200,000,000

-

85 White Horse Inn

Kabale Development Company Ltd. Aug-94


600,000,000

-

86 Winits (U) Ltd EMCO Works Ltd

Oct-95 Auction

Shs. 0.274 bn 102,500,000

-

87 Printpak (U) Ltd

Cancelled-Assets belonged to Lonhro

MBO n/a

-

-

88

Uganda American Insurance Company

American Life Insurance Company Nov-92

Repossession n/a

-

-

89 Uganda Crane Estates Ltd.

Buganda Kingdom Jun-97

Repossession n/a

-

-

90 Uganda Securiko Ltd

Securiko (U) Ltd Aug-93

Repossession n/a

-

-

91 Comrade Cycles (U) Ltd.

Uganda Motors Ltd. Jan-97

Share Sale n/a

-

-

92 Uganda Spinning Mills, Lira

Guostar Enterprises (U) Limited 1999

Sale of Assets by Court Order

n/a -

-

93 Uganda Tea Corporation

Mehta Group May-94

Repossession n/a

-

-

Total

432,632,462,206

18,318

Total Divestiture transactions

93

Liquidations 39

Total 132

118

Appendix E

PEs STRUCK OFF THE COMPANIES REGISTER /LIQUIDATED AS AT 30 JUNE 2009

Name Date of sale Nature of divestiture

1 Associated Paper Industries Ltd Apr-98 Liquidation

2 Gobbot (U) Ltd. Jul-96 Voluntary Liquidation

3 Intra africa Traders Jun-87 Liquidated

4 Ugadev Properties Ltd. Mar-98 Struck off Register

5 Agro-Chemicals Nov-93

Voluntary Liquidation & Struck Off Co

Register

6 Chillington Tools Co. Ltd. Jun-98 Liquidation

7 Coffee Marketing Board Ltd Apr-03 Voluntary Liquidation

8 Domestic Appliances Nov-93 Struck Off Company Register

9 Farm Marchinery Ltd, Namalere. Jan-97 Struck off

10 International Television Sales Nov-93 Struck Off Company Register

11 Itama Mines Nov-93 Struck Off Company Register

12 Johnas Brothers Ltd Apr-03 Voluntary Liquidation

13 Lebel (EA) Ltd. Nov-93 Struck Off Company Register

14 Lint Marketing Board Jul-94 Recievership

15 Paramount Manufacturers Ltd.(residual) Oct-93 Struck Off Company Register

16 Peoples Transport Co. Ltd. Jun-94 Recievership

17 Produce Marketing Board Liquidation on going

18 R. O. Hamiliton (U) Ltd Nov-93 Struck Off Company Register

19 SINO (U) Ltd. Oct-98 Voluntary Liquidation

20 Sukulu Mines Nov-93 Struck Off Company Register

21 The Uganda Fish Marketing Corp (1969) Ltd TUFMAC) Nov-93

Voluntary Liquidation & Struck Off Co Register

22 Toro Development Corporation Jul-91 Struck off Register

23 Tororo Industrial Chemicals and Fertlizers (TICAF)

Voluntary Liquidation

24 Ugadev Bank Ltd. Liquidation

25 Ugadev Holdings Ltd. Mar-98 Struck off Register

26 Ugadev Investments Ltd. Jul-91 Struck off Register

27 Uganda Air Ltd. 1976

Dissolved by Decree 15, 1976 (Airline decree)

28 Uganda Airlines Holdings Ltd. Apr-01 Liquidation

29 Uganda Aviation Services 1976

Dissolved by Decree 15, 1976 (Airline decree)

30 Uganda Bags & Hessian Mills Mar-97 Voluntary liquidation

31 Uganda Consolidated Properties Ltd (residual) Jan-01

Liquidation

32 Uganda Crane industries limited 2003 Liquidation

33 Uganda General Merchandise Ltd. Jul-94 Liquidation

34 Uganda Grain Milling (PHASE 2) Jan-04 Creditor Liquidation

119

35 Uganda Toni Services Not registered in Company Registry

36 Uganda Tourist Development Corporation 1994

Dissolved by Uganda Tourist Board

Act

37 Uganda Transport Co. Ltd. Jun-94 Struck off Register

38 Uganda Wild Life Development Co. Nov-96 Struck off Register

39 Wolfram Investments Ltd. Voluntary Liquidation

120

Appendix F

THE REMAINING ENTERPRISES LISTED FOR DIVESTITURE AS AT JUNE 2009

No. Parastatal Comment PERD Class GOU share %

1 Amber House Ltd Fomerly subsidiary of UEB I 100%

2 Cable Corporation Ltd. divestiture completed III 51%

3 Dairy Corporation Ltd. Concessioned to Sameer Group III

100%

4

Housing Finance Company of Uganda

Ltd. To be divested II 50%

5 Industrial Promotion Services Ltd Pre-emptive rights III 30%

6 Kasese Cobalt Company Ltd (KCCL) To be divested III 25%

7 Kilembe Mines Ltd. PPP / Concessioning III 99.996%

8

Kinyara Sugar Works Ltd. Divested & remainder to be divested through IPO III 49%

9

Mandela National Stadium

Pending concessioning II 100%

10 Munyonyo Resort To be determined and divested

11 National Enterprise Corporation To be divested II 100%

12

National Housing and Construction

Co. Ltd. Partial divestiture II 51%

13

National Insurance Corporation To be divested through IPO III 40%

14 National Medical Stores To be divested I 100%

15

National Water & Sewerage

Corporation PPP / Concessioning II 100%

16

New Vision Printing & Publishing Ltd. Partial divestiture through IPO II 53%

17

Nile Hotel International Ltd.

Concessioned to TPS Uganda II 100%

18 Post Bank (U) Ltd PPP / Concessioning II 100%

19 Pride Uganda Ltd. To be divested

20 Sugar Corporation of Uganda Ltd. divestiture completed III 30%

21

Tropical Africa Bank Ltd. (Libyan Arab

Holding) To be divested III 51%

22 Uganda Air Cargo To be divested II 100%

23 Uganda Commercial Bank/Stanbic IPO II 10%

24

Uganda Consolidated properties Ltd / Kulubya properties To be divested 93%

25 Uganda Crane Industries Ltd To be divested 100%

26 Uganda Development Bank N/A II 100%

27 Uganda Development Corporation To be revived I 100%

28

Uganda Electricity Distribution Co.

Ltd Concessioned to UMEME II 100%

29 Uganda Electricity Generation Co. Ltd Concessioned to ESKOM II 100%

30 Uganda Hotels Ltd (residual) To be wound up 100%

121

31 Uganda Libyan Arab Holdings Ltd To be divested 51%

32

Uganda Livestock Industries Ltd. Kiryana & Kyempisis ranches

concessione out III 100%

33 Uganda Posts Ltd PPP / Concessioning II 100%

34

Uganda Printing and Publishing

Corporation

I

35 Uganda Prison Industries Ltd. PPP / Concessioning II 100%

36 Uganda Property Holdings Ltd Asset Holding comapmy I 100%

37 Uganda Railways Corporation Concessioned to RVR II 100%

38 Uganda Seed Ltd Concessioned out II 100%

39 Uganda Telecoms Ltd To be divested through IPO III 31%

40

UGMA Engineering Company Ltd. divestiture completed

III 51%

Residual

PrintPak

Uganda Spinning Mills, Lira

122

Appendix G

PENDING CLAIMS (LITIGATIONS) AGAINST GOVERNMENT AS AT JANUARY 5, 2010 Public

Enterprise

Case/Parties/PE Particulars of Claim

1 Nyanza Textile Industries Limited

(NYTIL)

IGG vs. Gordon Ssentiba & Ors & AG HCCS No. 431 of 2006)

Compensation by the minority shareholders in NYTIL for their interest in

the company which according to a

Consent Judgment would amount to approx. US $ 9 Million. The Consent

Judgment which was entered against Government was successfully challenged

by IGG in the High Court and Court of

Appeal and was set aside. The minority shareholders appealed to the Supreme

Court

2 Uganda Electricity

Board (UEB) and

successor Companies

Bagamuhunda vs. UEB HCCS

No 1044 of 2001.

Kalibbala Vincent & Others vs AG

HCCS 107/2008

Edison Mavunwa & Another (on behalf of 194 Others) Vs

UEGCL & Attorney General – High Court Civil Suit No.

353/2003;

John Walugo & 175 Ors Vs UEB, UEDCL & UETCL – High

Court Civil Suit No. 967/2006;

and

Josephine Nakafeero & 844 Others Vs UEB, UETCL &

UEDCL - High Court Civil Suit No. 760/2006; and

Kyambadde Henry, Paul Nyamarere & 636 Others Vs

UEDCL & UETCL – High Court Civil Suit No. 138/2008.

Claim for terminal benefits computed

based upon their consolidated salary.

Judgment was entered in favour of the Plaintiffs

The Plaintiffs have sought declaration

from court that some UEB former

employees are entitled to pension arrears for the period 2006 – 2008.

Claim by 203 former employees of UEB

now working with UEGCL for terminal benefits not paid when UEB was

unbundled.

Claim of 1,500 former employees of UEB

now working with UEGCL for terminal

benefits not paid when UEB was unbundled.

The plaintiffs challenged the basis of the

payment of gratuity to them as terminal benefits for their period of service with

the successor companies. They contend

that they ought to have been paid pension in terms of the UEB Standing

Instructions

3 Uganda General

Merchandise

Uganda Transport

Company (1975)

a) UNIDRO vs AG HCCS No. 4/

2007;

b) George Zziwa & Others Vs

AG & DRIC - HCCS No.

Creditors of Uganda General Merchandise

supplied merchandise which was never

paid and instituted the suits for recovery of the monies due at the time of

liquidation.

123

Ltd

People‟s Transport

Company,

Uganda

Grain Milling Co Ltd

3/2007

c) Mugenyi & Co. Advocates Vs

AG HCCS No. 663 of 1994

d) Specioza Kalungi & 61

Others Vs AG & DRIC – HCCS No 63 of 2008

4 Uganda Transport Co. Ltd.

Ayoub Ibrahim Vs. AG HCCS No. 192/ 2003

Claim former employees for advances arbitrarily deducted from their terminal

benefits

5 Apollo Hotel Corporation

a) Kazooya & Others Vs Apollo Hotel Corporation, Sheraton

Hotel Limited & AG HCCS No. 64 of 2003

b) Clement Othieno vs. AG

c) David Lubega vs. AG HCCS No. 601/07

Claim for terminal benefits not paid after divestiture.

Claim for “Association fees” i.e. 25% of

the terminal benefits

6 Kilembe Mines

Limited (KML)

Kaija Mugenyi and 137 others

vs. Attorney General HCCS No. 755 of 2003

Claim for under payment of terminal

benefits based on approved terms and conditions of service retrospectively.

7 East African Steel Corporation

Mugalula & Others vs. MMCL & SCEAL

HCCS No. 640/1994

Claim arose out of a suit by former workers against MMCL & SCEAL. MMCL

was indemnified by Government

8 Uganda Railways Corporation (URC)

a) NSSF vs URC & AG HCCS No. 277/2008

b) Victor Byemaro vs URC HCCS No. 249/2009

c) Nkote Charles, Sabani

Magemeso vs. URC & URA H.C.C.SNo.107/2009

Claim for un-remitted workers contributory benefits under the NSSF Act

Claim for declarations that URC should

have remitted NSSF contributions for 200 URC workers

Claim arising from computation of the tax liability of the plaintiffs. The plaintiffs

allege that they were unlawfully taxed

9 Kibimba Rice Co. Ltd.

Notice of Intention to Sue – Peter Muwafu, Wandera

Basirita, Samanya Eriasa and

181 Others vs AG

Claim for compensation for land submerged after Tilda took over

operation of Kibimba

10 Diary Corporation

Limited (DCL)

a) Morris Ogwal Vs DCL, HCCS

No. 614/2003

b) Otai Samuel Vs DCL HCCS

No. 800/2003

c) Agono Charles Vs DCL, HCCS No. 814/2003

Behangana Richard Vs DCL - HCCS No. 883/2003

Claims are for payment of terminal

benefits and other allowances.

124

11 Other Diary

Corporation Limited cases

a) Owor Alex vs. DCL

HCCS No. 320 of 2006 b) Wekhasa Fred & 6 others

vs. DCL HCCS No. 1152 of

1998

c) Gerald Muhumuza vs. DCL HCCS No. 108 of 2004

d) Otai Samuel vs. DCL

HCCS No.261 of 2003

e) Edward Keijuko vs.

DCL HCCS No. 813 of 2003

f) Ephraim Kizito vs. DCL &

Attorney General HCCS No. 71 of 1977 and Civil Appeal

No. 36/2003

g) Habib Kiggundu vs. DCL

HCCS No. 17/ 1995

h) Mwesigwa Samuel vs. DCL

HCCS No. 59 of 2002

i) Alonga John Charles vs. DCL HCCS No. 48 of 2004

j) Siraj Hassan Kajura Vs. DCL

& URA

Former Employee claiming special

damages for salary arrears, general damages, interests and costs of the suit.

Terminal benefits claim, damages for

unlawful termination of employment Claim for unlawful termination of

employment and general damages.

Claim for payment of forced leave salaries, compensation for earnings lost

while on forced leave and damages. Court

entered judgement for UGX 8,575,299 inclusive of costs. This money was

deposited in court as a condition to stay execution of the judgement pending

appeal to the high court and a review of

the judgement of the court. Claim for terminal benefits, salary arrears

and allowances amounting to UShs 57,834,954 with interest of 25% and

general damages plus costs. Supreme Court Appeal: Claim for recovery

of milk cooling plant and lost revenue

from the DCL‟s confiscation of the milk cooler.

Compensation for the loss of

developments, damages for trespass,

mesne profits and costs.

Claim for unpaid salary plus, and travel allowance on retirement, general

damages for mental stress and costs of

the suit.

Claim for wrongful dismissal, general damages, terminal benefits, pension and

Claim arising from computation of the tax liability of the plaintiffs. The plaintiffs

allege that they were unlawfully taxed

12 Coffee Marketing

Board Limited

(CMBL)

CMBL Vs. National Union of

Clerical Commercial

Professional & Technical Employees

Misc. Application No. 74 of 2006

Claim for under payment of Terminal

Benefits Claims

13 African Textile

Mills, Nytil, Ug. Garment, & Lira

Spinning Mills)

Uganda Textile Garment

Leather & Allied Workers Union Vs. AG - HCCS No. 58 of 2009

Claim for recovery of Union Fees arising

from a check-off system of 3%

14 Kinyara Sugar Works Ltd

Nyeko Smith and Others vs. Kinyara Sugars Works Limited

& AG – HCCS 009/2009

Claim for terminal benefits bythe former employees of National Sugar Works

Kinyara

125

(Masindi)

15 Trans Ocean U Ltd Foods & Beverages Ltd (FBL)

Vs. AG – HCCS No. -/2003

FBL claimed US$ 730,000 for haulage

expense. Transocean counter-claimed for US $ 230,000

16 Uganda Posts & Telecomm.

Corporation

(UPTC)

a) Several former UPTC employees

b) Bernard Mweteise, Asaph Ndawula & 8823 Others vs.

Uganda Telecom Limited, Post Bank (U) Limited, Uganda

Posts Limited, Ug

Communication Commission & AG - HCCS No. 135/2003

Claims for pension under Ug Communications Employee Pensions

Scheme (UCEPS)

Declaration that former 825 former UPTC workers are entitled to pension payments

arising before the unbundling of UPTC

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