REPORT OF THE CONTROLLER AND AUDITOR GENERAL · 2015. 8. 13. · The audit was conducted in accordance with International Standards on Auditing (ISA), INTOSAI standards and such other

THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE PRIME MINISTER’S OFFICE

REGIONAL ADMINISTRATION AND LOCAL GOVERNMENT (PMO-RALG) VOTE 56 FOR THE FINANCIALYEAR

ENDED 30TH JUNE, 2007

The Controller and Auditor General, National Audit Office, Samora Avenue/Ohio Street, P.O. Box 9080, Tel: 255 (022) 2115157/8 Fax: 255 (022) 2117527 E-mail [email protected] Website: www.nao.go.tz DAR ES SALAAM. March, 2008 AR/VT.56/2007

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____________________________________________________________________________ Office of the Controller and Auditor General AR/VT.56/2007

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Office of the Controller and Auditor General, National Audit Office, The United Republic of Tanzania. (Established under Article 143 of the Constitution of the URT). The statutory duties and responsibilities of the Controller and Auditor General are given in the Public Finance Act No. 6 of 2001 (revised 2004).

Our Vision

To be a centre of excellence in public sector auditing

Our Mission To provide efficient audit services in order to enhance accountability and value for money in the collection and use of public resources. In providing quality services, NAO is guided by the following Core Values:

Objectivity: We are an impartial organization, offering services to our Clients in an objective, and unbiased manner.

Excellence: We are professionals providing high quality audit services based on best practices.

Integrity: We observe and maintain high standards of ethical behaviour and the rule of law.

People’s focus: We focus on stakeholders’ needs by building a culture of good customer care and having competent and motivated work force

Innovation: We are a creative organization that constantly promotes a culture of developing and accepting new ideas from inside and outside the organization

Best resource utilisation: We are an organisation that values and uses public resources entrusted to it in efficient, economic and effective manner

We do this by:- • Contributing to better stewardship of public funds by ensuring that our

clients are accountable for the resources entrusted to them: • Helping to improve the quality of public services by supporting innovation

on the use of public resources; • Providing technical advice to our clients on operational gaps in their

operating systems; • Systematically involve our clients in the audit process and audit cycles; and • Providing audit staff with adequate working tools and facilities that

promote independence. © This report is intended to be used by Government authorities. However, upon

tabling of the General Report of the CAG in Parliament, this report becomes a matter of public record and its distribution may not be limited.


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TABLE OF CONTENTS Page Preliminary page ii-iv 1.0 Audit report on the financial statements 1

2.0 Background information 4

2.1 Introduction 4

2.2 Establishment of the Name of PMO RALG and Affiliated Bodies 4

2.3 Operational objectives 4

2.4 Financing 4

2.5 Management structure 5

2.6 Brief description of internal control system 6

2.7 Audit mandate 7

2.8 Audit Objectives 7

2.9 Audit scope 8

2.10 Audit methodology 9

3.0 Audit findings and recommendations 11

3.1 Follow up on the Implementation of previous year’s audit

recommendations

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3.2 Current year’s Audit findings and recommendations 11

4.0 Evaluation of Agencies under the MDAs 17

5.0 Evaluation of Donor funded projects and summary of opinion

issued

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6.0 Conclusion 30

7.0 Annexures

I. Financial Statements

II. Organization structure.

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Definition of terms and Abbreviations Financial statements mean the following statements, notes and supporting schedules of the Prime Minister’s Office, Regional Administration and Local Government for the year ended 30th June, 2007. • Responsibility for Financial Statements • Statement of Vote Account - Recurrent • Cash flows -Statement for Recurrent • Cash flow Statement for Development • Cash flow Statement for Deposit • Statement of Revenue • Summary statement of losses • Statement of arrears of revenue • Statements of composition of funds • Statement of commitments outstanding • Summary Appropriation Account-Recurrent • Notes to the Financial Statements Regulations means the Regulations of the Public Finance Act issued under G.N. Number 259 of 2003 and the Public Procurement Regulations, 2005 issued under G.N. No 98 published on 15/4/2005 These Financial Statements are attached as annexure No.1 to this report. ACGEN Accountant General AIDS Acquired Immune Deficiency Syndrome AQ Audit Query AR Audit Report BOT Bank of Tanzania CAG Controller and Auditor General G.N. Government Notice GAAP General Accounting Principles HIV Human Immune Deficiency Virus HOST Head of Sub-Treasury IFMS Integrated Financial Management System INTOSAI International Organization of Supreme Audit Institutions ISA International Standards on Auditing IPSAS International Public Sector Accounting Standards MDAs Ministries, Departments and Agencies

MoID Ministry of Infrastructure Development PAC Public Accounts Committee PMO-RALG Prime Minister’s Office, Regional Administration and Local

Government


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PFA Public Finance Act PFR Public Finance Regulations, 2001 (Revised 2004) PMU Procurement Management Unit PPA Public Procurement Act No. 21 of 2004 PPR Public Procurement Regulation of 2005 Reg. Regulations TANROADS Tanzania National Road Agency URT United Republic of Tanzania USD United States Dollar


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PRESENTATION OF THE AUDIT REPORT This report is being submitted in accordance with Section 35 (1) of the Public Finance Act No.2001 (revised 2004). For presentation purposes, the report is divided into five (5) main parts, namely:- Part 1: Audit opinion and Financial Statements This part comprises the Controller and Auditor General’s (C&AG) opinion on the critical examination of the financial statements submitted for audit and the circumstances surrounding their preparation and presentation. Part 2: Background information This part gives explanation on the history of the client establishment; its operational objectives, financing, management structure, description of internal control system and the audit mandate vested to the Controller and Auditor General, the audit objectives and audit methodology applied during the audit. Part 3: Audit findings and recommendations This part comprises the detailed findings on the gaps and shortfalls in the Internal Control system which, if rectified on time, will greatly improve its effectiveness when applied by the audited entity. Part 4: Appraisal of Agencies under the vote This part concludes the audit by citing requirements and action to be taken by management for future improvement and clearance of audit findings. Part 5: Appraisal of the Primary Education Development Programme (PEDP) This part covers independent appraisal of PEDP which is implemented under PMO-RALG Part 6: Conclusion The relationship with the auditee staff during the course of the audit and words of appreciation form part of this section


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To: Ms Tarishi M. K, Permanent Secretary and Accounting Officer, Prime Minister’s Office, Regional Administration and Local Government – Vote 56, P.O. Box 1923, DODOMA REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE PRIME MINISTER’S OFFICE, REGIONAL ADMINISTRATION AND LOCAL GOVERNMENT FOR THE YEAR ENDED 30TH JUNE, 2007. I have audited the financial statements of the Prime Minister’s Office, Regional Administration and Local Government shown as Annexure I of this report for the financial year ended on 30th June, 2007.

Responsibilities of the Accounting Officer Sect. 25(4) of the Public Finance Act (PFA) No. 6 of 2001 (revised 2004) places responsibility to the Accounting Officer to prepare the financial statements based on the generally accepted accounting principles (GAAP).

In addition, Reg. 28-35 of the Public Finance Regulations (PFR) 2001 (revised 2004) requires the Accounting Officer and the organization management to establish an effective internal control system, internal audit unit and audit committee appropriate to the circumstances of the Prime Minister’s Office, Regional Administration and Local Government. Responsibilities of the Controller and Auditor General My responsibility is to express a professional opinion based on the audit. I am also, required to satisfy myself whether the funds appropriated to the Prime Minister’s Office, Regional Administration and Local Government were used exclusively and judiciously to meet eligible expenditures with due regard to economy and efficiency, whether the accounts have been kept in accordance with generally accepted accounting principles (GAAP), and on the procurement procedures adopted by the Prime Minister’s Office, Regional Administration and Local Government based on the audit. According to Sect.30 of the PFA, my specific responsibilities are to examine, enquire into, audit and report on the accounts of the Prime Minister’s Office, Regional Administration and Local Government Vote 56. In addition, Sect. 31 of the PFA requires me to satisfy myself that the accounts have been kept in accordance with generally accepted accounting principles; reasonable precautions have been taken to safeguard the collection of revenue, the receipt, custody, disposal, issue and proper use of public property, and that the law, directions and instructions applicable thereto have


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been duly observed, expenditures of public monies have been properly authorized; and to satisfy myself whether the funds appropriated to the Prime Minister’s Office, Regional Administration and Local Government were used exclusively and judiciously to meet eligible expenditure with due regard to economy and efficiency.

Further more, Section 44(2) of the Public Procurement Act No.21 of 2004 and Regulation No. 31 of the Public Procurement (Goods, Works, Non-consultant services and Disposal of Public Assets by Tender) Regulations G.N 97 of 2005 requires me to state in my annual audit report whether or not the auditee has complied with the provisions of the law and its regulations. Basis of opinion The audit was conducted in accordance with International Standards on Auditing (ISA), INTOSAI standards and such other audit procedures I considered necessary in the circumstances. These standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit also, includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also, includes assessing the significant estimates and judgments made in the preparation of the financial statements, assessing whether the internal control system and the accounting policies are appropriate to the circumstances of the Prime Minister’s Office, Regional Administration and Local Government, and that they have been consistently applied and adequately disclosed. It also involves evaluating the overall financial statements presentation, and assessing the extent of compliance with the statutory requirements. I believe, the audit provides a reasonable basis for my opinion.

The financial statements have been prepared and presented based on the cash basis of accounting pursuant to Reg. 53 of the PFR 2001. Under the cash basis of accounting, cash receipts are recognized when they are received and cash payments are recognized when they are paid. Unqualified opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of the Prime Minister’s Office, Regional Administration and Local Government as of 30th June, 2007 and of the results of its operations and its cash flows for the year then ended, in accordance with generally accepted accounting principles.


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Emphasis of matter Without qualifying my opinion, I draw attention to the following matters: • Procurement made without showing price quotations and not accounted for

in the stores ledger Shs.178, 450,630 • Fixed assets shown in the annual accounts but not reflected in the fixed

asset register worth Shs.91, 887,720. • Books ordered while the same type/kind of books were dormant in store

Shs.53, 957,567. Report on Compliance with Procurement Legislation In view of my responsibility on the procurement legislation, and taking into consideration the procurement transactions and processes I reviewed as part of this audit, I state that the Prime Minister’s Office – Regional Administration and Local Government (PMO-RALG) has generally not complied with the requirements of the PPA No.21 of 2004 together with its related Regulations of 2005.

Ludovick S. L. Utouh

CONTROLLER AND AUDITOR GENERAL

Office of the Controller and Auditor General,

The National Audit Office,

Dar es Salaam.

31st March, 2008


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2.0 BACKGROUND INFORMATION TO THE AUDIT 2.1 Introduction

I have completed the audit of the Accounts and related records of the Prime Minister’s Office, Regional Administration and Local Government for the year ended 30th June, 2007. Audit findings arising from the examination of the accounting records, appraisal of activities as well as evaluation of the internal control system which require management attention and action are set out under Part 3 of this report.

2.2 Establishment of the Prime Minister’s Office, Regional Administration

and Local Government. The Prime Minister’s Office, Regional Administration and Local Government was established by the President of the United Republic of Tanzania in Government Notice No. 1 of on 4th January, 2006.

2.3 Operational objectives

The operational objectives of the Prime Minister’s Office, Regional Administration and Local Government are as follows:-

• To improve performance of the PMO-RALG and of the Regional

Secretariats to carry out their mandatory functions.

• To provide a clear policy framework and capacity building for local authorities.

• To monitor information flows between the authorities for the benefit

of the stakeholders.

• To improve management and coordination of reform processes for civil service sectors and local government reforms.

• To make policies approaches methodologies and implementing

various obligations to their local people.

To enhance and internalize good governance (democracy equity and rule of law in Local Authorities).

2.4 Financing During the financial year 2006/2007 the Office of Prime Minister’s Office, Regional Administration and Local Government received a sum of Shs.163, 305,496,801.77 in the form of Exchequer Issues from the Ministry of Finance as shown in the table and pie chart below:


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Table: Sources of Funds of the PMO-RALG

Vote Amount received as per exchequer issues

Supply Shs. 44,918,343,375.77 Development Shs.118,387,153,426.00 Total Shs.163,305,496,801.77

2.5 Management Structure The office is headed by the Minister of State, Prime Minister’s Office who is assisted by the Deputy Minister. For the day to day administration are managed by the Permanent Secretary assisted by deputy Permanent Secretary. The Permanent Secretary is also the PMO-RALG accounting Officer for Vote 56. The organization structure of the PMO-RALG is made up of the following:

• Regional Administration Division • Local Government division • Sector Coordination division • Management Information Systems Division • Legal Services Division • Finance and Accounts Unit • Internal Audit Unit • Information Education and Communication Unit • Procurement Management Unit.

PIE CHART SOURCES OF FUNDS OF PMO RALG - DODOMA

28%

72%

Supply

Development


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Vision The overall vision of the Prime Minister’s Office, Regional Administration and Local Government is to improve people’s quality of life and eradicate poverty through effective, efficient, accountable and autonomous Local Government Authorities. Mission The Prime Minister’s Office, Regional Administration and Local Government will: • Administer Regional Administration, Urban and Rural Development

Management Policy • Champion decentralization by devolution and create the requisite

condition for autonomous Local Government Authorities to improve systems and deliver quality services effectively, efficiently and equitably, in order to eradicate poverty

• Effectively co-ordinate the critical interfaces between Ministries, Departments, and Agencies (MDAS), Development partners, Regional Administrations, Local Government Authorities and other stakeholders, in compliance with decentralization by devolutions (D by D).

• Demonstrate commitment to continuous performance improvement and empower employees to fulfill their maximum potential.

• Promote cross cutting issues of diversity, good governance, combating HIV/AIDS, and the protection of the environment.

2.6 Brief description of internal control system 2.6.1 Accounting System

The PMO-RALG operates within the usual government accounting system using the Integrated Financial Management System (IFMS) based on EPICOR accounting software package. Accounting procedures revolve around the Public Finance Act No. 6 of 2001; the Public Procurement Act No.21 of 2004 together with their accompanying Regulations.

2.6.2 Internal Audit The Public Finance Regulations, 28-35 requires Accounting Officers to establish an effective Internal Audit Unit. The Internal Audit Unit is required to appraise the soundness and application of accounting, financial and operational controls within the Prime Minister’s Office, Regional Administration and Local Government. The Prime Minister’s Office, Regional Administration and Local Government have established the Internal Audit Unit to oversee the controls instituted.


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2.6.3 Audit Committee Regulation 28 of the PFR requires the Accounting Officer to establish an effective Audit Committee. The Prime Minister’s Office, Regional Administration and Local Government has established an Audit Committee since 14thOctober, 2004

2.6.4 Procurement Tender Board

The Public Procurement Act No.21 of 2004 Section 33 and 34 requires the Office to form Tender Boards, and establish a Procurement Management Unit (PMU).Prime Minister’s Office, Regional Administration and Local Government has established a Tender Board and a Procurement Management Unit.

2.7 Audit Mandate

By Virtue of the provisions of Articles 143 of the Constitution of the United Republic of Tanzania and Sect.30 (i) and 37 (i) of the Public Finance Act No. 6 of 2001, the Controller and Auditor General is the statutory auditor of all Government revenues and expenditures including the revenues and expenditure of the Prime Minister’s Office, Regional Administration and Local Government.

2.8 Audit Objectives The main objective of conducting the audit is to enable the Controller and Auditor General to express a professional opinion on the financial statements of the Prime Minister’s Office, Regional Administration and Local Government, for the year ended 30th June, 2007 and in particular:- • To determine whether all funds as approved by the Parliament have

been received and appropriated in accordance with the approved budget.

• To determine whether funds have been collected properly and used exclusively and judiciously for eligible expenses as per approved budget and regulations governing government expenditure with due attention to economy and efficiency.

• To determine whether the Appropriation Accounts and other financial

statements are prepared in accordance with Instructions/Guidelines and International Public Sector Accounting Standards (IPSAS).

• To ascertain whether all necessary documents, books, register, accounts and information have been kept in respect of all transactions.

• To ensure adequate disclosure of assets and liabilities in the appropriation accounts/statements of Assets and Liabilities.

• To verify whether goods and services bought for the Prime Minister’s


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Office, Regional Administration and Local Government were acquired through laid down procurement procedures and the Public Procurement Act No. 21 of 2004.

• To determine whether the Internal Audit Section properly performs its duties with absolute independence and whether the Audit Committee effectively performs its duties to ensure that the system of internal control is adequate and reliable.

• To determine whether the internal control structure provides management with a reasonable assurance in regard to the procurement of goods and services, to ensure that it is being done in accordance with prescribed procedures and that quality, right quantity and economy, efficiency and effectiveness are being considered in the procurement process.

• To verify whether the Tender Board effectively performs its prescribed duties and that proper procurement procedures are being followed in the execution of its duties.

• To determine whether the Office is managing or utilizing its resources in an economical and efficient manner and that the causes of any inefficiencies or uneconomical practices are promptly identified, reported and corrected.

• To determine whether the desired results or benefits are being achieved, whether the objectives established by Parliament or other authorizing bodies are being met, and whether the Office has considered alternative ways to ensure the desired results are attained at lower costs.

• To closely follow-up on the previous year audit findings and recommendations and instructions/directives issued by the Public Accounts Committee (PAC) and to ensure that proper actions have been taken in respect of all matters being raised.

• To ensure that good governance has been enforced in the day-to-day operations of the Office and in carrying out the overall strategy of the Office.

• To determine whether the Office has properly addressed key social problem areas such as HIV/AIDS, gender balance, environmental issues etc.

• To determine whether the management of the Office has taken reasonable corrective actions on all matters raised in previous year’s audit reports.

2.9 Audit Scope

The audit was carried out in accordance with the International Standards on Auditing (ISA), INTOSAI Standards and other audit procedures which were deemed appropriate under the circumstances. The audit covered the evaluation of the effectiveness of the financial accounting system and internal control over the activities of the Prime Minister’s Office,


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Regional Administration and Local Government examination and verification of the accompanying financial statements to the appropriation account, and other procedures as was considered necessary in the circumstances. Therefore the audit findings are confined to the extent that records, documents and information requested for the purpose of the audit were made available to audit. As auditors, we are not required to specifically search for fraud; therefore our audit cannot be relied upon to disclose all such matters. However, my audit was planned in such a way that I would have reasonable but not absolute expectation of detecting material misstatements in financial statements, including those resulting from fraud or irregularities. The responsibility for detection and prevention of fraud and irregularities rests with the management of the office who are responsible for setting up and maintaining an adequate system of internal control.

2.10 Audit Methodology

In auditing the financial statements together with the related records and schedules of the Prime Minister’s Office, Regional Administration and Local Government, the following steps were followed:- • Planning the audit to obtain an adequate understanding of the Prime

Minister’s Office, Regional Administration and Local Government its activities and operations and assessment of the risk areas.

• Carrying out substantive test of the balances reported by the Prime

Minister’s Office, Regional Administration and Local Government in order to obtain reasonable assurance regarding the amounts and disclosures included in the financial statements.

• Review the adequacy of the internal control system in place, testing

whether it is in compliance with laid down rules, policies, procedures and regulations.

• Examination of payments vouchers to check for eligibility and

propriety of payments made and determines whether they were properly accounted for in the books of accounts.

• Review Prime Minister’s Office, Regional Administration and Local

Government Medium Term Expenditure Framework (MTEF).

• Interview and discussion with some of the staff and other key stakeholders in the implementation of various activities.


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• Conduct site visits to verify physical implementation of planned activities as well as assessing the progress made.

• Hold entrance and exit meetings with the auditee to discuss the audit

objectives and results of the audit, respectively.

• Appraise the previous audit recommendations to determine whether Management of the Prime Minister’s Office, Regional Administration and Local Government has taken adequate corrective action.


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3.0 AUDIT FINDINGS AND RECOMMENDATIONS 3.1 Follow up on the implementation of previous years’ auditors

recommendations

During the previous year’s audit, several recommendations were made in some of the key issues which required management’s necessary action for improvement. Issues raised were implemented except for the following: Para Period Audit recommendation Current Status 3.2(iv) 2005/06 Funds to be refunded back to

Treasury Shs. 923,000 Shs. 923,000 not refunded

3.2.6 2005/06 The PMO – RALG to account for 115,900 books purchased

Shs.28,205,890

Total Value of outstanding matters in year 2005/06

Shs.29,128,890

Recommendation

The management of the Prime Minister’s Office, Regional Administration and Local Government should make a close follow-up on the clearance of these outstanding issues.

3.2. Submission of Financial Statements The financial statements for the year under review were received on 28th September, 2007.

3.3 Financial Performance Issues 3.3.1 Supply Vote

The financial performance of the Ministry on the supply vote

A B C A-B B-C Approved Budget (Shs)

Exchequer Release (Shs)

Net Expenditure

(Shs)

Under Release

(Shs)

Unspent Fund (Shs)

45,254,348,219 44,918,343,375 44,906,953,384 336,004,844 11,389,991


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(ii) Development Vote During the year under review, financial performance of the Ministry on the Development Vote was as follows:

A B C A-B B-C

Approved Budget (Shs)

Exchequer Release (Shs)

Net Expenditure (Shs)

Under Release (Shs)

Unspent Fund (Shs)

158,176,767,425 118,387,153,426 118,386,013,426 39,789,613,999 1,140,000

3.3.2 Statement of Revenue

The statement of revenue as at 30th June 2007 reflected total revenue collection of Shs.31, 078,166 against the approved estimates of Shs. Nil.

The trend analysis of revenue collection for three consecutive years is as shown in the table and histogram below: Table: Revenue Trend Analysis for Prime Minister’s Office – RALG

Year 2004/2005 2005/2006 2006/2007

Estimates Nil Nil Nil Actual collection 18,057,514 22,304,000 31,078,166

The above information can be shown in a pictorial form as

follows:

05,000,000

10,000,00015,000,00020,000,00025,000,00030,000,00035,000,000

SHILLINGS

Nil Nil Nil

2004/2005 2005/2006 2006/2007

YEARS

HISTOGRAM: REVENUE TREND ANALYSIS FOR THREE YEARS FOR PMO-RALG

Actual collection


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Implication PMO-RALG has inadequate mechanism of preparing realistic budgets.

Recommendation

Management of the PMO RALG should improve the budget preparation processes.

3.4 Management of assets 3.4.1 Fixed assets shown in annual accounts but not reflected in fixed asset

register worth Shs.91,887,720.29. Audit test check of asset records in the assets schedule attached to the financial statements and those in the assets register disclosed assets with a total cost of Shs.91,887,720 which were not recorded in the fixed assets register as detailed below:

Fixed Asset Serial Number as

Per schedule Quantity Amount

(Shs) Executive chair 1, 44 and 54 151 51,893,929.90 Executive table 2, 45 and 55 153 30,812,104.40 Public addressing system

25 2 2,230,222.00

Electric cooker 29 4 733,038.00 Radio Sony 777 34 33 5,570,650.00 Paper shredder rexes

74 1 647,775.19

Total 91,887,720.29 Implication

Improper record keeping may leads to misappropriation of public assets. Recommendation

Management is urged to record the omitted assets in the fixed assets register and to ensure that proper procedures are followed in managing assets as clearly stated in the Procurement legislations.

3.4.2 Quantities of fixed assets as per accounts differ with fixed assets

register records

Fixed asset Qty as per Accounts Qty as per Register

Difference

Office table 173 (Serial no. 9) 233 60 Office chair 132 (Serial no. 8) 387 255 Sofa 9 (Serial no. 18) 65 58 Bookshelf 34 (Serial no. 33) 37 3 Cup board 24 (Serial no. 11) 12 12 Binding machine 7(Serial no. 5 & 75) 4 3


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Fire extinguisher - 30 30

Photocopier machine 19 (Serial no. 26, 31, 69 & 70) 21 2 Radio Call - 23 23 Refrigerator 16 (Serial no. 21) 13 3 Computer (Lap top) 94 (serial no. 38 & 65) 7 87 Scanner 16 (Serial no. 39) 7 9

Implication

Improper record keeping may leads to misappropriation of public assets. Recommendation

Management is required to reconcile the records and to provide to audit the correct information.

3.2.5 Expenditure Management

Audit test check of payments during the year revealed the following irregularities:

3.5.1 Irregular repair cost of motor vehicles Shs.14,837,761.

Two motor vehicles STJ 2943 and STK 2046 were repaired by M/S Toyota (T) Ltd for a total sum of Shs.14, 837,761 as shown bellow:

Motor Vehicle Reason for repair Amount (Shs) STJ 2943 Involved in a road

accident 10,343,977

STK 2046 Involved in a road accident

4,493,784

Total 14,837,761 However the following details were not made available to audit on request: • Police traffic accident reports. • Court proceedings and rulings • MTB and Accounting Officers approval for the repairs Implication Non adherence to proper procedures may lead to loss or misappropriation of public fund.

Recommendations Management should regularize the transactions by submitting appropriate evidences to support the expenditure incurred.


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3.5.2 Books ordered while the same are dormant in store Shs.53,957,567. During the year under review, the Ministry ordered 268,642 books of different articles vide LPO NO. 600625 through deposit account vide cheque no. 515182. The books were ordered from M/S Central Printing Works which supplied the same books in the financial year 2005/06. The books details are as follows:

Qty of

books Description Unit Price(Shs) Total amount

(Shs). 1. 29,798 Utawala Bora 153.15 4,563,563.70 2. 29,798 Mpango wa Uboreshaji 166..30 4,955,407..40 3. 29,798 Uendeshaji wa Shughuli 187.80 5,596,044.40 4. 29,798 Kuondoa Umaskini 166.30 4,955,407.40 5. 29,798 Udhibiti wa Ukimwi 159.75 4,760,230.50 6. 29,798 Uchambuzi wa Kijinsia 166.30 4,955,407.40 7. 29,798 Hifadhi Endelevu 187.80 5,596,044.40 8. 29,798 Mpango Shirikishi 159.75 4,760,230.50 9. 29,798 Mkakati wa Kupambana na

Rushwa 159.75 4,760,230.50

10. 460 Mwongozo wa Kufundishia 526.16 242,033.60 Total 268,642 53,937,567.60

Verification of the payment disclosed that the same kind of books were purchased in 2005/06 for Shs.48,635,040 from the same supplier. During the PAC meeting held on 23rd October, 2007, it was disclosed that 115,990 books acquired in 2005/2006 were still in stock. Audit is of the view that there was no necessity of purchasing other books while the same were in stock.

Implication

Value for money would appear to have not been achieved. Recommendations

Management should confirm how the need of the books was established and should confirm distribution of these books to intended users.

3.6 Procurement Management 3.6.1 Procurement made without showing price quotations and store

ledger references Shs.178,450,630

Audit test on procurement of various office goods procured during the year under review noted goods worth Shs.178,450,630 not supported by price quotations and were also not accounted for in the store ledgers.


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Implication Procurement were made contrary to the public procurement regulations and this may leads to misappropriation of public funds.

Recommendation

Management should strictly adhere to the existing procurement laws and regulations. Also, management should confirm accountability of purchases worth Shs.178,450,630.

4.0 INDEPENDENT APPRAISAL OF DONOR FUNDED PROJECTS

According to Section 37 (ii) of the Public Finance Act, 2001 (revised 2004) all Donor Funded Projects are required to be audited by the Controller and Auditor General.

During the financial year 2006/2007; projects falling under the Prime Minister’s Offcie - RALG were audited and finalized. The summarized outcomes of the audits and opinions issued thereon are as follows:

PROJECT DESCRIPTION OPINION NOTED ISSUES

1. Local Government Support Project – IDA Credit No. 4003-TA for financial year ended 30th June, 2007

The Government of the United Republic of Tanzania entered into agreement with the International Development Association whereby the latter agreed to extend credit in various currencies equivalent to USD 22,478,322 to finance a programme designed to strengthen fiscal decentralization, improve accountability in the use of Government resources, and improve management of inter-governmental transfer systems; increase access to infrastructure in services in unplanned and under –served areas of Dar es Salaam and to improve revenue performance for sustainable operations and maintenance through the Local Government Support Project (LGSP)

Unqualified Opinion

Matters for the attention of the management: 1. Questionable expenditure on project funds Shs.55,649514.00

2. Unconfirmed delivery and accountability of goods worth USD 26,785.42 3.Delays in releasing the approved project funds amounting to USD.12,494,742.10 4. Ineligible expenditure of Shs.307,882,538 5.Overpayment to a Contractor for Shs.27,997,219 6.Receipts understated by Shs.42,500,199


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2. Danish Road Sector Programme Support-Phase 3 for the year ended 30th June 2007

As per Article 6 of the agreement, the total grant budget is DKK 500 million (Danish Kroner Five hundred Million) as an obligation of the Government of the Kingdom of Denmark. The programme obligations of the government of the United Republic of Tanzania are as stated in article 5 of the Agreement.

Unqualified Opinion

-

3. Norway Support to the Development for the Road Sector Programme Prime Minister’s Office Regional administration and Local Government (PMO-RALG) for the Financial year Ended 30th June 2006

Source of Funds Total funds committed for the Programme amounted to Shs.4,700,451,856 out of which TShs.4,073,479,885 is committed specifically for the Prime Ministers office – Regional Administration and Local Government to finance roads construction in the Local Authorities analysis of the funding is as follows: PMO- RALG Shs. 4,073,479,885 MoID 626,971,971 4,700,451,856

Unqualified Opinion

-

4. Local Government Loans Board for the year ended 30th June 2006

Funds and Resources of the Board: Under section 59 of the Local Government Finances Act No. 9 of 1982 (revised 2000) the funds and resources of the Board consist of:- (a) Grants as may be provided by the Parliament for that purpose (b) Funds deposited with the Board by Local authorities (c ) Interests from investment of the Board (d) Donations, grants and loans

received from any person or body of persons.

However, funds received by the Board for the financial year 2005/2006 were from the following sources:-

Item (Shs) Amount interest Income from dividends

85,176,134.19

House rent 810,000 Government grant

7,200,000

Total Shs. 644,027,334.19

Unqualified Opinion

Matters for the attention of the management:

• Unrecovered investment from then Tanzania Elimu Supplies Shs.400,000

• Receipt in cash book not in bank statement amounting to Shs.2,000,000


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5.

Local Government Support Project – IDA Credit No. 4003-TA for financial year ended 30th June, 2007

The Government of the United Republic of Tanzania entered into agreement with the International Development Association whereby the latter agreed to extend credit in various currencies equivalent to USD 22,478,322 to finance a programme designed to strengthen fiscal decentralization, improve accountability in the use of Government resources, and improve management of inter-governmental transfer systems; increase access to infrastructure in services in unplanned and under –served areas of Dar es Salaam and to improve revenue performance for sustainable operations and maintenance through the Local Government Support Project (LGSP)

Unqualified Opinion

Matters of Emphasis: 1. Questionable expenditure on project funds Shs.55,649514.00

2.Unconfirmed delivery and accountability of goods worth USD 26,785.42 3.Delays in releasing the approved project funds amounting to USD.12,494,742.10 4.Ineligible expenditure of Shs.307,882,538 5.Overpayment to a Contractor for Shs.27,997,219 6. Receipts understated by Shs.42,500,199

6.

Danish Road Sector Programme Support-Phase 3 for the year ended 30th June 2007 TANROADS PMO-RALG

As per Article 6 of the agreement, the total grant budget is DKK 500 million(Danish Kroner Five hundred Million) as an obligation of the Government of the Kingdom of Denmark. The programme obligations of the government of the United Republic of Tanzania are as stated in article 5 of the Agreement.

Unqualified Opinion

No more audit comments

7.

Norway Support to the Development for the Road Sector Programme Prime Minister’s Office Regional administration and Local Government (PMO-RALG) for the Financial year Ended 30th June 2006

Source of Funds Total funds committed for the Programme amounted to Shs.4,700,451,856 out of which TShs.4,073,479,885 is committed specifically for the Prime Ministers office – Regional Administration and Local Government to finance roads construction in the Local Authorities analysis of the funding is as follows: Amount (Shs.) 30/11/2005 PMO-RALG23 Million 4,073,479,885 14/12/2005 MOID3.6 Million 626,971,971 Total Shs.4,700,451,856

Unqualified Opinion

No more Audit Comment


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8.

Local Government Loans Board for the year ended 30th June 2006

Funds and Resources of the Board: Under section 59 of the Local Government Finances Act No. 9 of 1982 as revised 2000 the funds and resources of the Board shall consist of:- (a)Grants as may be provided by the Parliament for that purpose (b)Funds deposited with the Board by Local authorities (c )Interests from investment of the Board (d)Donations, grants and loans received from any person or body of persons. However, funds received by the Board for the financial year 2005/2006 were from the following sources:- Item Amount (Shs.) Interests 85,176,134.19 Income from Dividends 810,000.00 House rent 7,200,000.00 Government grants 550,841,200.00 Total 644,027,334.19

Unqualified Opinion

Matters of Emphasis: Unrecovered investment from then Tanzania Elimu Supplies Shs.400,000 Receipt in cash book not in bank statement amounting to Shs. 2,000,000

Detailed reports of these projects are available in the individual reports sent to the Accounting Officers of the respective projects.

5.0 Independent Appraisal of Primary Education Development Programme (PEDP)

5.1 Programme Background

The United Republic of Tanzania, in collaboration with its Development Partners (DPs) in the Education Sector, established a Primary Education Development Programme (PEDP) which was implemented from 1 July 2001. The programme was developed under the Education Sector Development Programme (ESDP) under the Ministry of Education and Vocational Training (MoEVT).

The implementing agents for the programme include the Ministry of Education and Vocational Training (MoEVT), Prime Minister’s Office - Regional Administration and Local Government (PMO-RALG), Local Government Authorities (LGAs) - district councils, town councils, municipal councils and city councils and School Committees at each government primary school.


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MoEVT and PMO-RALG Permanent Secretaries and the Council Directors are the accounting officers of their respective central ministries and councils. They are therefore responsible for planning, budgeting, financial management, procurement and reporting for funds channeled through their organizations.

A large proportion of the funds made available are passed through local government authorities to school committees for disbursement against school Plans of Action. The PMO-RALG is responsible for the implementation of activities at the council level and within PMO-RALG. The Permanent Secretary PMO-RALG is the accounting officer for funds released to finance such activities.

5.2 Programme Financing.

During the year under review, PEDP was financed under the Ministry of Finance PEDP Pooled Fund Account. The total fund available was USD 36,170,447 (equivalent to Tshs 46,211,363,087) as follows:

Receipts USD Balance brought forward 29,980,053 Received during the year 6,190,394

Total funds available 36,170,447


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5.3 Summary of audit opinions on the LGAs visited

5.3.1 The table indicates that only 2 of the 30 Local Government Authorities audited in 2006/07 have been given unqualified opinions (about 7%) and the rest 28 (97%) have been issued with qualified opinion as follows:

LGA Type of

opinion Remarks Reference

to individual reports

1. Monduli DC Qualified Un-audited opening fund balance Volume 1 2. Babati DC Qualified Un-audited opening fund balance Volume 1 3. Hanang DC Qualified Un-audited opening fund balance

Unexplained adjustments Volume 1

4. Kinondoni MC Qualified Opening fund balance difference to audited accounts Expenditure analysis by budget codes not provided.

Volume 1

5. Mpwapwa DC Qualified Un-audited opening fund balance Payments mad for non-PEDP activities

Volume 1

6. Iringa MC Qualified Un-audited opening fund balance Difference in opening fund balance between cash book and statement of receipts and payments Unsupported cash book adjustments Expenditure allocation not done

Volume 1

7. Njombe DC Unqualified

None. Volume 2

8. Bukoba DC Qualified Accuracy of opening and closing fund balance

Volume 2

9. Ngara DC Un-qualified

None. Volume 2

10. Kigoma TC Qualified Unsupported opening fund balance Funds misused – did not reach recipients

Volume 2

11. Moshi MC Qualified Un-audited opening fund balance Opening and closing fund balance not agreed to cash book

Volume 2

12. Same DC Qualified Un-audited opening fund balance Volume 2 13. Lindi DC Qualified Un-audited opening fund balance Volume 3


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14. Tarime DC Qualified Un-audited opening fund balance Closing fund balance no agreed to cash book Unsupported payments

Volume 3

15. Musoma DC Qualified Opening fund balance not agreed to audited accounts Unsupported payments

Volume 3

16. Mbeya CC Qualified Un-audited opening fund balance Volume 3 17. Morogoro DC Qualified Un-audited opening fund balance

Unsupported payments and cash book adjustments

Volume 3

18. Mtwara MC Qualified Un-audited opening fund balance Volume 3 19. Masasi DC Qualified Unsupported payments

Incorrect basis for expenditure allocation

Volume 4

20. Mwanza CC Qualified Opening fund balance not agreed to audited accounts

Volume 4

21. Misungwi DC Qualified Un-audited opening fund balance Unexplained receipts Imbalanced trial balance

Volume 4

22 Mkuranga DC Qualified Un-audited opening fund balance Volume 4 23. Sumbawanga MC Qualified Un-audited opening fund balance Volume 4 24. Sumbawanga DC Qualified Un-audited opening fund balance Volume 4 25. Songea DC Qualified Un-audited opening fund balance Volume 5 26. Bukombe DC Qualified Un-audited opening fund balance Volume 5 27. Singida MC Qualified Un-audited opening fund balance

Inclusion of accrued expenses under payments

Volume 5

28. Tabora DC Qualified Un-audited opening fund balance Unexplained difference in statement of receipts and payments Incompleteness of accounting records Unsupported payments

Volume 5

29. Urambo DC Qualified Un-reconciled receipts Unsupported payments

Volume 5

30. Tanga MC Qualified Un-audited opening fund balance Unexplained difference in closing fund balance

Volume 5


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5.3.2 Audit of 30 Local Government Authorities.

Issues arising to qualified opinions that came from various categories are summarised below:

(i) Lack of supporting documents

(ii) Unsupported adjustments in cash book

(iii) Inadequate supervision of classroom construction

(iv) Non disbursement of funds to schools

(v) Poor control over imprests

(vi) Payments made out deposit accounts

(vii) Accrued expenses reported as payments

(viii) Misallocation of expenditure

(ix) Items not booked in stores ledger

(x) Budget overrun on expenditure

(xi) Lack of Council’s Education Plan of Action

(xii) Lack of evidence of competitive bidding

(xiii) Payments made on profoma invoice

(xiv) Long outstanding cheques

(xv) Opening and closing fund balance not agreed to cash book

(xvi) Use of funds for non planned activities

(xvii) Delay in disbursement of funds and materials

(xviii) Incorrect bank reconciliation statement

(xix) Inaccurate PEDP financial reports

(xx) Lack of expertise in EPICOR software

5.3.3 Recommendations We recommend the following to the key ministries:

(i) Implement audit recommendations as agreed.

(ii) Ensure that funds are spent on programme activities and as per approved budgets

(iii) Improve accounting record keeping

(iv) Follow up implementation audit issues at the LGAs during inspections/review missions


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5.4 Audit of the PEDP at the Prime Ministers’ Office – Regional Administration and Local Government (PMO-RALG)

During 2006/07 the audit also covered operations which are directly under the PMO-RALG. The outcome of the audit is as follows:

5.4.1 Implementation of prior audit recommendations

Prior year recommendation Status as at 30 June 2007

1 Delay in preparing bank reconciliation statements Observation During the time under audit, bank reconciliation statement for deposit account as at 30 June 2006 was not prepared. Recommendation Bank reconciliation statement should be prepared timely.

Implemented - Bank reconciliation statement at the sub treasury level for deposit and development account were prepared.

2 Misposting of transactions Observation There was no control mechanism in place to ensure that all expenditure in the statement of receipts and payments relates to PEDP activities, for instance included in the last year sample there was a total of Tzs 24,637,000 included in the PEDP financial report that did not relate to PEDP activities Recommendation Management should ensure that only payments related to PEDP activities are included in the statement of receipt and expenditure

3 Non separation of PEDP funds from other transactions Observation It was noted that PEDP funds were combined with non PEDP funds in a single deposit account maintained at the sub treasury Dodoma, as the practice make difficult to trace separately the PEDP transactions and ultimately the year end balance reported in the statement of receipts and payments. Recommendations Management should make a separate account for the PEDP funds.

Not implemented


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5.4.2 Current year’s audit Findings S/N Observation Implication Recommendation Management

Response 1 During audit, based on

sample selected, we noted that some of the supporting documents of the reported expenditure of Shs. 741,844,401 were missing

Without supporting documents authenticity, occurrence and completeness of the transactions can not be verified

All payments made must be supported by appropriate supporting documents such as invoices, receipts, delivery notes, advance requests, etc to enable verification of the payments authenticity and occurrence. Such supporting documents should be kept by the management for verification whenever required

-

2 Inconsistence of balances: The cash book provided to us in a spread sheet showed an account balance of Tzs 208,645,712.69 as at 30 August 2006 of which the transactions were captured at the PMO-RALG, while that from the accounting system showed a balance of Tzs 318,143,000 on the same date. Also as at 30 June 2007 there was a difference of Tzs 115,122,287.11 between the two sources of information

.Reliability of the bank balance as at 30 June 2007 can not be ascertained.

.Reported receipts and expenditure may not be accurate and complete

Management should ensure that all transactions have been processed properly in the accounting system and that the reports produced (and submitted for verification) are complete and reliable. The two sources of information need to be reconciled to each other as they purport to present the same transactions and balances

-

3 Missing Payment Vouchers Our scope of expenditure verification was limited as we were unable to verify several expenses incurred. There were no payment vouchers and respective supporting documents for the various payments made to support activities conducted during the year. The total amount was Shs. 100,246,892

.We can not verify the authenticity of these payments

.The objectives of the mentioned above activities may not have been met

.Management should keep all original documents

supporting payments for the reported expenditure.


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4 Payments not related to PEDP activities During review, we noted some instances where payments are made to some activities which do not relate to PEDP, but the expenses were charged in PEDP account shs. 78,633,000

PEDP intended activities may not be completed as they were planned if funds allocated to them are re-allocated to other non-programme activities

Management should ensure that PEDP funds are allocated as they were planned in order to achieve the intended objectives

5

Non completion of plan of action During our audit, we observed that a total amount of Tzs 1,246,221,700 was allocated in PEDP various activities under development account of which Tzs 1,246,047,568 was reported as payments made in the statement of receipt and payments, remaining with the balance of Tzs 174,132. However, three activities as per Plan of Action (i.e. D10C01 - to prepare capacity building strategy with the allocation of Tzs 50,000,000, D10C03 - to carry out monitoring of PEDP by LGAs and Regions with the allocation of Tzs 42,000,000 and activity D10C04 - to carry out capacity building for regions and LGAs with the allocation of Tzs 8,000,000) seem not to have been implemented, as there are no payments nor reports/documentary evidence that these activities were implemented.

The three activities mentioned above and as per Plan of Action can not be implemented since the total allocated to them amounts to Tzs 100,000,000 while only Tzs 174,132 remain as the balance in the statement of receipt and payments.

.PEDP funds may be allocated to some other activities which were not in the Plan of Action

.Management should track down where did the PEDP funds were spent and reallocate accordingly to the PEDP intended activities.

.At any point in time management should ensure that, funds are spent for the intended purposes only and if activities for which funds were received is outstanding, then there should be available funds to cover such activities.


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5.5 Audit Opinion

The Audit Opinion issued to the Prime Ministers’ Office – Regional Administration and Local Government (PMO-RALG) on PEDP accounts is Qualified Opinion.

The qualification is based on: uncertainty on the accuracy of fund balances, unsupported payments and missing payment vouchers and payment not related to PEDP activities

Detailed reports of the PEDP are available in the individual reports sent to the Accounting Officers where the programme is being implemented

6.0 CONCLUSION

The detailed audit findings presented above were communicated to the management of the Prime Minister’s Office, Regional Administration and Local Government during an exit meeting held on 19th December, 2007 in which all issues raised were discussed and agreed upon. The Management of the Prime Minister’s Office, Regional Administration and Local Government has promised to take appropriate action with a view to rectify the situation. We shall appreciate to formally receive within a period of 21 days from the date of this report the action taken on the observations and recommendations contained therein. Lastly, I would like to express my appreciation to the Management of the Prime Minister Office, Regional Administration and Local Government for the assistance and co-operation given to the audit team during the course of the audit. It is my hope that such good working relationship will be extended to us during our future audits.

Ludovick S. L. Utouh

CONTROLLER AND AUDITOR GENERAL Copy to: The Chief Secretary, The State House, P.O. Box 9120, DAR ES SALAAM.

Permanent Secretary and Paymaster General, Ministry of Finance, P.O. Box 9111, DAR ES SALAAM.


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Documents

REPORT OF THE CONTROLLER AND AUDITOR GENERAL · 2015. 8. 13. · The audit was conducted in accordance with International Standards on Auditing (ISA), INTOSAI standards and such other