NaO - PublicFinInstns 0607

UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE
REPORT OF THE CONTROLLER AND AUDITOR GENERAL

On the Financial Statements of Public Authorities and Other Bodies for the Financial Year ended 30th June, 2007
THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

Telegram: Ukaguzi" Telephone: 255(022)115157/8 Fax: 255(022)117527/2133555 E-mail: ocag@nao.go.tz In reply please quote Ref. No.EAC.103/2006/2007 Office of the Controller and Auditor General Samora Avenue, P.O. Box 9080, DAR ES SALAAM. 26th March, 2008
Letter of Transmittal Your Excellency, Jakaya Mrisho Kikwete The President of the United Republic of Tanzania P.O. Box 9120 State House Dar es Salaam Re: Submission of Annual Audit Report of Public Authorities and Other Bodies 2006/07 Pursuant to Article 143 of the Constitution of the United Republic of Tanzania of 1977 (revised 2005), I hereby present to you my annual audit report for the audits carried out on the Public Authorities and other Bodies (PA&oBs) operations for the year ended 30th June 2007.
Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL
Office of the Controller and Auditor General
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Office of the Controller and Auditor General, National Audit Office
(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. Our Core Values are: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; Peoples 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; and Best resource We are an organization that values and uses utilisation: public resources entrusted to it in efficient, economic and effective manner. This report is intended to be used by Government Authorities.
However, upon tabling of this report in Parliament, the report becomes a matter of public record and its distribution may notbe limited.
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Table of Contents FOREWORD....................................................... AKNOWLEDGEMENT............................................. EXECUTIVE SUMMARY........................................... CHAPTER ONE.................................................... 1.0 RESPONSIBILITIES OF CAG AND LEGAL FRAME WORK...................................................... 1.1 The Responsibilities of CAG............................ 1.2 PA&oBs responsibilities................................. 1.3 Organisation of Audit work............................. 1.4 Legal Framework Governing Financial Reporting in PA&oBs................................................. 1.5 Responsibilities of the Accounting Officer........... 1.6 Reporting Procedures................................... CHAPTER TWO.................................................... 2.0 BASIS AND TYPES OF AUDIT OPINIONS ISSUED TO PA&oBs.................................................... 2.1 Introduction.............................................. 2.2 Audit Opinions............................................ CHAPTER THREE.................................................. 3.0 DETAILED AUDIT FINDINGS.............................. Part A:...................................................... Part B (i)................................................... 3.2.5 Assets Management........................................ Part B (ii)................................................... 3.3.0 Specific Audit Findings.................................. CHAPTER FOUR.................................................... 4.0 PUBLIC AUTHORITIES AND OTHER BODIES WITH GOING CONCERN PROBLEMS............................. 4.1 Tanzania Electrical Supply Co. Ltd (TANESCO)....... 4.2. Board of External Trade (BET)........................... 4.3. Dar es Salaam Water Supply and Sewerage Authority (DAWASCO)..................................... 4.4. National Insurance Corporation (NIC)................... ix xii xvi 1 1 2 3 5 6 8 9 10 10 10 11 31 31 31 47 51 61 61 85 85 86 87 87 88
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4.5. 4.6 4.7.
Mtwara Urban Water Supply and Sewerage Authority (MTUWASA)................................................. 88 Tanzania Posts Corporation (TPC)...................... 88 Tanzania Railways Corporation.......................... 89 90 90 90 91 92 93 94 94 95
PERFORMANCE REVIEW........................................... 4.8 Public Authorities and other Bodies operational performance and financial standing................... 4.9 Summary of the Operational Performance of the PA&oBs...................................................... 4.10 Cumulative surplus or loss............................... 4.11 Unremitted statutory deductions....................... 4.16 Outstanding Guarantees.................................. 4.17 Outstanding loans issued by the Government ........ 4.18 Questionable deletion of government Investments from records................................................ 4.19 Treasury Registrars Statement of Revenue as at 30th June 2007.............................................
CHAPTER FIVE...................................................... 99 5.0 PRIVATIZATION OF PUBLIC ENTITIES.................... 99 5.1 Privatized entities......................................... 99 5.2 Revenue earned from Privatisation..................... 102 5.3 Outstanding Revenue Proceeds......................... 102 5.4 Status of some of the Public Authorities and other Bodies........................................................ 102 5.5 Public Authorities and other Bodies under privatization process....................................... 103 5.6 Public Authorities and other Bodies not operating.... 104 5.7 Public Authorities and other Bodies under liquidation process....................................................... 107 5.8 Public Authorities and other Bodies under restructuring process...................................... 109 5.9 Public Authority undergoing winding up process...... 110 5.10 Public Authorities and other Bodies under Joint Venture Remarks on Information on Privatisastion... 110 CHAPTER SIX........................................................ 115 6.0 PUBLIC PROCUREMENT ISSUES........................... 115
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6.1 6.2 6.3 6.4 6.5
Report on Compliance with Procurement Legislation................................................... Lack of Procurement Planning........................... Absence of Management Procurement Units.......... Procurements made without approval of tender board......................................................... Specific Procurement Problems..........................
115 116 117 119 119 122 122 122 123 124 124 133 134 134 134 134 135 141 144 145 145 145 146 153 162 162 162 163 163
CHAPTER SEVEN................................................... 7.0 CORPORATE GOVERNANCE.............................. 7.1 Treasury Registrars Responsibilities................... 7.2 The CEOs Accountability Obligations Relating to Good Governance......................................... 7.3 Members of Parliaments vs. Board membership.... 7.4 Internal Audit Services.................................. 7.7 General Observation on Governance of PA&oBs...... CHAPTER EIGHT.................................................... 8.0 LEGAL ISSUES AND CONTRACTS MANAGEMENT........ 8.1 Introduction................................................ 8.2 Breach of Contract: the failure without legal excuse, to perform....................................... 8.3 Weak and vague contracts.............................. 8.4 Breach of contracts...................................... 8.5 Absence of contracts..................................... CHAPTER NINE..................................................... 9.0 SPECIAL AUDITS AND INVESTIGATIONS................. 9.1 Special Audit Investigation on BoT EPA Account..... 9.2 Special Audit of Tanzania Electric Supply Co Ltd (TANESCO).................................................. 9.3.0 Special Audit of the Air Tanzania Holding Corporation................................................ CHAPTER TEN...................................................... 10.0 CONCLUSION AND RECOMMENDATIONS................ 10.1 Introduction................................................ 10.2 Weak Information Technology Systems................ 10.3 Preparation of financial and operational manuals...
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10.4 Good Governance......................................... 10.5 Compliance with Public Procurement Law............ 10.6 Public Authorities with Going Concern Problems.... 10.7 Water Billing in Water Authorities...................... 10.8 Contracts Management................................... 10.9 Assets Management....................................... 10.10 Non recovery of Loans.................................... 10.11 Improvement in financial management and control...................................................... 10.12 Results of BOT Special audit on EPA account......... 10.13 Results of TANESCO Special audit...................... 10.14 Muhimbili National Hospital Assets verification...... Annexures.................................................. Glossary.................................................
164 165 166 166 167 167 168 168 169 169 170 172 224
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FOREWORD I have the pleasure of presenting my report on the audit of the financial statements of Public Authorities and other Bodies in the country as defined under Section 37 of the Public Finance Act th 2001 (revised 2004) for the period ended 30 June, 2007. This is my first general annual report on the audit of the accounts of Public Authorities and other Bodies of the United Republic of Tanzania; but also the first general report of its kind in the history of our country. Traditionally, I have been issuing annual general audit reports on the accounts of the Central and Local Government Administration. These reports have also been issued in this year as well. Before coming into effect of the PFA, 2001 (revised 2004) all accounts of the PA&oBs were being audited by the defunct Tanzania Audit Corporation. With the enactment of the Public Finance Act 2001 (revised 2004), my office is mandated to audit accounts of the PA&oBs by virtue of powers vested in me under Sections 30-37 of the same Act. However, it has taken some time for my office to start exercise. Therefore, considering the diversified nature of the PA&oBs my office has not been able to streamline information of all Public Authorities and other Bodies. However this will be realized in the coming years as I am continuously building capacity of and strengthening my staff alongside resource mobilization. This report aims at providing our stakeholders - the National Assembly, the Government, Development Partners, civil society, and the general public - with a summary of my findings arising from the audit of the accounts of Public Authorities and other Bodies in the country for the financial year ended 30th June 2007. The report gives a general assessment of the audit findings and observations on the state of the financial position, status of compliance with the laws and regulations; and on accountability ix
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and governance. It covers the audits of 158 PA&oBs that have been registered in my office. The Parliament looks to the Controller and Auditor General and the National Audit Office (NAO) for assurance in relation to financial reporting and public resources management in PA&oBs. We also contribute, through our recommendations, towards improvements in public sector performance. In this regard, both PA&oBs and NAO have a role in contributing towards building parliamentary and public confidence in public resources management. However, while the roles of public sector entities and NAO may differ, their drive towards efficient utilization of public resources remains a common ground. NAO continually reviews its audit approaches to ensure that the audit coverage provides an effective and independent review of the performance and accountability of public sector entities. Moreover, we seek to ensure that our audit coverage is well targeted and addresses priority areas so as to maximize our contribution. Since our work acts as a catalyst in improving financial management, we continually discuss contemporary issues and developments that impact on public sector management, particularly financial reporting and governance. It is my intention to put more emphasis on compliance with the countrys laws as part of our financial statement audits. The action taken by His Excellency the President of the United Republic of Tanzania when held discussions with all Accounting Officers regarding non compliance with rules and regulations reported in my last years audit reports is an important development to reinforce compliance which is highly appreciated. It is worth noting that while there is a key role for audit committees to play in overseeing legislative compliance across the public entities, ultimately, the responsibility for the maintenance of a compliant framework lies with each Accounting Officer.
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I would like to recognize with appreciation efforts being undertaken by the Government through the Treasury Registrars Office in overseeing operations of Public Authorities and other Bodies in the country. It has been said that the auditors role in auditing Government, amounts to looking at its activities in a rear-view mirror. This belief, however, ignores the value adding recommendations that we make. We dont end up recommending best practice but later, we follow up and report on the progress accomplished since our previous audits. In this way, we contribute towards maintaining healthy PA&oBs financial management and reporting systems. I hope that the National Assembly will find the information in this report useful in holding the PA&oBs to account for public funds entrusted to them for delivery of quality services to Tanzanians. In this regard, I will appreciate to receive feedback on how to further improve this report in the future. True, we have been through a demanding year but we have delivered on our set goals to timely inform the Parliament and the public on the issues arising from our audit coverage. I would like to acknowledge the professionalism and commitment of my staff in our ambitious audit programme goals, despite the fact that we have been working in very difficult conditions marked with insufficient funding, working tools, low salaries, and sometimes working in very remote and un-easily accessible locations.
Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL

______________________________________________________
Office of the Controller and Auditor General, National Audit Office, Dar es Salaam, 26th March, 2008
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AKNOWLEDGEMENT I am obliged to extend my regards to His Excellency Jakaya Mrisho Kikwete, the President of the United Republic of Tanzania, for always drawing attention to and laying emphasis on my general reports, particularly my last years reports. I wish to express my appreciation to the Chairpersons and Honorable members of various oversight Committees of Parliament for their commitment to deliberate on the contents of the report and the separate individual reports issued to the PA&oBs. I would like to express my gratitude to all those who created for me an enabling environment to discharge my constitutional obligations and timely completion of the report thereon. It is my belief that since this general report of PA&OBs is being issued for the first time and within the statutory due date, it will expedite the Committees hearing so that their oversight function is brought up to date. I wish to express my gratitude to the Executive Officers, and their Chief Finance Officers for the much needed support and information availed to me. I also would like to thank the Government Printer for expediting the printing of this report and therefore making it available for distribution to stakeholders on time. Further, I wish to express my deepest gratitude to the donors who have been supporting my office especially the Swedish National Audit Office (SNAO), the Government of Sweden and well wishers who have contributed immensely towards modernization of my office. I also wish to thank all the 44 private auditing firms that have been working hard with my office in the audits of the PA&oBs. They have done a commendable job which should be sustained in my future audit of the PA&oBs. Last but not least, I would like to thank staff members of my office who have worked tirelessly towards the timely release of this report. Their commitment and dedication has been very useful. I urge them to uphold the same team spirit they have demonstrated in all their future endeavors.
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Report Layout and Highlight Chapter 1 Deals with the responsibilities of the Controller and Auditor General and the Legal frame work governing financial reporting in PA&oBs and other key players in the audit process. Deals with the basis and types of audit opinions issued to the accounting officers by the auditor which are unqualified, unqualified opinion with emphasis of matter, qualified, adverse and disclaimer of opinion. Part A of this report deals with outstanding matters from previous audit findings and recommendations made by the CAG which have not been implemented by the PA&oBs management. Part B deals with current findings that have significant effect on the PA&oBs audited in the financial year ended June 30th 2007 Chapter 4 Deals with financial performance and going concern of PA&oBs for the period under review. It further analyses entities that have operated with profits or losses as well as those which failed to remit statutory deductions to relevant authorities. Deals with the privatization of Public Authorities and other Bodies. It further gives information on privatized entities, revenue earned from privatization, outstanding revenue proceeds. The chapter also deals with the results and gives brief analysis of privatization activities of public entities by the Government of Tanzania through the then Presidential Parastatal Sector Reform Commission. This function has now been vested to Consolidated Holdings Corporation. It further gives information
Chapter 2
Chapter 3
Chapter 5
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on the Public Authorities and other Bodies that are not operating, under liquidation, undergoing wind up process, under restructuring process and those operating jointly with private investors. Chapter 6 This chapter deals with compliance with the Public Procurement Legislation. It analyzes the compliance of Accounting Officers with requirements of the Public Procurement Act No. 21 of 2004 together with its related Regulations of 2005. Sect. 44 of the Public Procurement Act requires Accounting Officers to ensure that the procurement of goods, works, or services is done in accordance with procedures prescribed by the said laws or related regulations. This chapter deals with governance issues regarding operations of PA&oBs in line with the requirements of Regs. 28 -35 of the PFR 2001 which states that each Accounting Officer of PA&oBs is required to establish an effective internal audit service unit and audit committee. Deals with issues relating to management and administration of contracts and legal agreements within the public entities covered in this report. Deals with special audit investigations carried out by the Controller and Auditor General during the period of reporting. General concluding remarks and recommendations In accordance with Sect. 34 of PFA, the CAG is empowered to make recommendations to the Government on issues which he considers necessary to minimize loss of public resources or to maximize the collection of public revenues. After the analysis of audit results covered in this report I
Chapter 7
Chapter 8
Chapter 9
Chapter 10
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have come up with recommendations which are dealt with in this chapter. ANNEX 1 ANNEX 2 ANNEX 3 ANNEX 4 Show the trend of opinions issued for the past three years. Trend of profit/loss making (PA&oBs) for the past three years and accumulated surplus or deficit Shows the Treasury Registrars statement of Investment and Public Interest to the PA&oBs. Shows a list of pre qualified audit firms that have been authorized to audit accounts of Public Authorities and other Bodies on behalf of CAG. Sect 37(5) of Public Finance Act 2001 (revised 2004) empowers the CAG to appoint any authorized person(s) to carry out the audit on his behalf.
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EXECUTIVE SUMMARY (i) Responsibilities, Functions and Powers of the CAG General responsibilities, functions and powers of the Controller and Auditor General are stipulated under Article 143 of the Constitution of the United Republic of Tanzania and amplified in Sections 30 - 37 of the Public Finance Act 2001 (revised 2004). The responsibilities of the National Audit Office Section 26 (1) of the Public Finance Act 2001 (revised 2004) states that there shall continue in existence a Public National Audit Office which shall be headed by the Controller and Auditor General appointed by the President. The National Audit Office is the Supreme Audit Institution (SAI) in Tanzania which has a unique responsibility to ensure that there is proper accountability, financial discipline and transparency within the United Republic of Tanzania. Furthermore, NAO has a unique responsibility to issue timely and good quality audit reports on how best public resources have been put into use. (iii) Responsibilities of the Board of Directors and CEOs The Boards of Directors of public bodies are responsible for the preparation of financial statements that show a true and fair view of the state of affairs and the operating results of their respective entities as at the end of each financial year in accordance with the International Financial Reporting Standards and any other applicable standards/guidelines either enshrined in the laws of the Country or issued by the regulatory bodies like the National Board of Accountants and Auditors (NBAA) of Tanzania. The Board of Directors of the PA&oBs are also responsible for safeguarding the assets of their respective entities. The Board of Directors of PA&oBs are also responsible for developing suitable accounting policies
(ii)
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that are consistently applied in making reasonable judgments in preparing the entitys financial statements. (iv) Responsibilities of the Treasury Registrar The Treasury Registrar Ordinance Cap 418 and Sect. 6 of the Public Corporations Act No. 16 of 1983 in relation to functions of Public Corporations, state that the Treasury Registrar has the functions and responsibilities for oversight over PA&oBs and closely monitoring, controlling and managing them effectively in collaboration with the Governing Boards of the respective entities. Scope and the Legal Framework Article 143 (5) of the Constitution of the United Republic of Tanzania 1977 (revised 2005) amplified in Sect. 30 (1) (c) of the Public Finance Act No 6 of 2001 (revised 2004) requires the Controller and Auditor General to audit all Public Authorities and other Bodies at least once in every financial year. This report covers the audits of PA&oBs for the financial year ended 30th June 2007. Specifically, it covers audited accounts of the financial year ended, 30th September 2006, 31st December 2006 and 30th June 2007. It also covers outstanding and unimplemented audit recommendations made in previous years. (vi) Public Authorities and other Bodies data base I am responsible for the audit of the accounts of all Public Authorities and other Bodies as defined in Sect. 37 o PFA 2001. Since this is my first annual report of the PA&oBs, I was able to identify 158 authorities. Efforts are being made to ensure that the exact number of PA&oBs is obtained from the relevant authorities. Information from the Treasury Registrar and from the Ministries regarding Public Authorities and other Bodies somehow differs and therefore needs reconciliation. My office is working hard in establishing a Public Authorities and other Bodies data base. Therefore, the reported list of the Public
(v)
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Authorities and other Bodies is not exhaustive and should you be among the excluded ones please feel free to come forward with the information about your entity for inclusion in our data base and in any subsequent repots. (vii) Delay and non-submission of Draft Accounts to the CAG for audit It is a statutory requirement that draft accounts be submitted for audit within three months after the closure of the financial year as provided for under Section 25(4) of the Public Finance Act. However it was noted that the draft accounts of fifty one (50) PA&0Bs were submitted late. Moreover, seventeen (17) PA&oBs did not submit their accounts at all for audit. Private eligible audit firms Sub-Section 5 of Section 37 of the Public Finance Act, empowers me to authorise anybody eligible to be appointed as an auditor under the Auditors and Accountants (Registration) Act No. 33 of 1972 to conduct the audit of public authorities and other bodies on my behalf and make a report to me for the subsequent processing to Parliament. My office is currently working with forty four (43) private audit firms out of the 133 registered and authorized by the National Board of Accountants and Auditors (NBAA) to carry out accounting and audit functions in the United Republic of Tanzania. Types and basis of audit opinions Basis of opinions issued As a matter of statutory requirement, I am obliged to give assurance to stakeholders of the respective PA&oBs whether the information given in the financial statements prepared by them present fairly the results of the operations, cash flows and financial position of the PA&oBs for each financial year. This certification provides stakeholders the audit assurance as to the veracity of the financial operations of the PA&oBs including the PA&oBs compliance with prescribed requirements. Based on the International Standards on Auditing (ISA) and
(viii)
(ix)
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International Organisation of Supreme Audit Institutions (INTOSAI) standards, unqualified opinion, unqualified opinion with emphasis of matters, qualified (except for) opinion, and disclaimer of opinion have been issued as a measure of the assessment made on the financial information presented. (x) Status of the accounts of PA&oBs This report has covered 158 accounts of Public Authorities and other Bodies during the year ended 30th June 2007. Accounts submitted for the audit during the year under review were 141. Out of the 141 accounts submitted for audit, I was able to issue audit reports on 91 accounts by the date of issue of this report (31st March 2008). The 67 accounts on which I could not issue reports was due to failure by the 50 bodies to submit their financial statements for audit on the statutory due date and 17 bodies did not submit their accounts for audit up to the time of issuing this report. The ninety one (91) individual audit reports were also issued to the respective governing boards or board of trustees and their Ministries respectively. In short, the above information can be summarised in the table below as follows:
Category of the Entity Audited Accounts Audit in Progress Accounts not Submitted Total
S/No
1 2 3 4 5
Total
Water Authorities Regulatory Bodies Higher Learning Institutions Public Parastatals Government Institutions
20 14 12 33 9
91
12 9 15 11 6
50
4 9 4
17
32 27 27 53 19
158
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On the other hand, six (6) audits were in arrears as summarized in the following table: S/N Client Name 1 Muhimbili University of Health and Allied Science 2 Ardhi University 3 Institute of Social Work 4 Muhimbili University College of Health Science 5 Tanzania Fisheries Research Institute 6 Tanzania Wildlife Research Institute (xi) Last Audit 2005/2006 2005/2006 2005/2006 2005/2006 2005/2006 2005/2006
Audit opinions issued to PA&oBs During the year under review, various audit opinions were issued to the audited accounts of the Public Authorities and other Bodies audited. Out of the 91 accounts audited, 80 accounts representing 88% were issued with unqualified (clean) audit opinion, 10 accounts were issued with qualified (except for) opinion representing 11%; no account was issued with an adverse opinion and 1 account was issued with a disclaimer of opinion representing 1%. In short, these opinions are summarised in the following table:
Category of the Entity Water Authorities Regulatory Bodies Higher Learning Institution Public Parastatals Government Institutions Unqualified Qualified Opinion (Except for) Opinion 15 4 18 15 19 13 80 1 3 2 10 Adverse Opinion Disclaime r Opinion 1 1 Total
S/No
1 2 3 4 5 Total
19 19 15 23 15 91
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From the above analysis, it is evident that financial reporting within Public Authorities and other Bodies was generally satisfactory. The outcome of this periods audit exercise is considered satisfactory as regards to proper control and management of public resources. (xii) Summary of main audit findings The following are main audit the summary of main audit findings: Unremitted statutory deductions During the period under review, five PA&oBs failed to remit statutory deductions amounting to Shs.29,336,119,602 to relevant receiving agencies. Of the amount in question, unremmited statutory deductions (i.e. PAYE, PPF and NSSF PSPF) were Shs.23,643,858,878 while taxes were Shs. 2,210,703,119. Moreover, the Tanzania Posts Corporation failed to remit deductions of Shs.6,613,767 and Shs.196,741,985 relating to insurance premiums on staff life assurance policy and SACCOs loan repayment deductions respectively while the Board of External Trade failed to remit land rent amounting to Shs.142,859,539. Pictorially, the above information can be shown in a pie chart as follows:
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Non Remittance of Statutory Deductions

NRC 2% MNH STAMICO 11% 1% BET 2% STAMICO TPC BET MNH NRC TPC 84%
This indicates a critical situation of non compliance with related laws. Remedial measures should be sought to avoid penalties which may be charged by the respective receiving agencies for failure to remit statutory deductions on due dates. On the other hand, this situation may cause insurmountable problems in the payment of employees terminal benefits on retirement age. The National Social Security Fund (NSSF) has failed to recover loans extended to seven debtors amounting to Shs.4,881,818,964 as per loan agreements (chapter five) The National Insurance Corporations working capital for the current year and the preceding four years has been on a decline trend from a negative balance of Shs.31.1 billion (2002) to a negative balance of Shs.58.7 billion (2006). Over a period of five years to 31st December, 2006, the Corporations working capital had been negative. This indicates that it can not discharge in full all its maturing obligations. Over this period the current ratios indicate that on average the Corporation had only Shs.15 available to pay liabilities amounting to Shs.100. xxii
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Non payment of liquidated damages due from M/S Dowans Holdings Shs.2,683,800,000 as provided in terms of contract agreement (chapter three)
The NIC has uncollected long outstanding rent from its tenants amounting to Shs.933,137,060 (Chapter three). Dodoma Urban Water Supply and Sewerage Authority had expenditure in excess of the approved budget the tune of spent to Shs.136,061,758. Muhimbili National Hospital (MNH) had long outstanding receivable amounting to Sh.998, 543,766. The analysis of financial statements of 20 Public Entities shows long outstanding receivables and payables amounting to Shs.58,191,036,467 and Shs.11,154,027,688 respectively as shown in chapter 4. Several customers of the Tanzania Postal Bank had not paid their dues in compliance to their loan agreements amounting to Shs.196,973,814. Officials of Air Tanzania Holding Co. facilitated evasion of Capital Gain Tax amounting to Shs.25,225,000 as shown in chapter 9 Officials of Air Tanzania Holding Co converted an official imprest of USD.2,642.67 for personal use and no retirement was made after the return from safari as shown in chapter 9. There was extended unauthorized and personal use of the Corporation vehicles at the expense of the Corporation (chapter 9)
Uncertainty on the accounting treatment for the funds received from the Government of Tanzania amounting to Sh.5 billion revealed in the financial statement of DAWASCO as shown in Chapter 3.
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Delays in Billing New Customers & Non-Employees enjoying Discounted Electricity bills as shown in chapter 9. SIMU 2000 Ltd had no title deeds of the balance of properties for sale stated in the financial statements at Shs.1,956,800,000 as shown in chapter three. Tanzania National Park TANAPA deposited a tax payers moneys amounting to Shs.1.9 billion to a supplier contrary to public procurement procedure as shown in chapter 6. Tanzania Electrical Supply Co. Ltd (TANESCO), Dar es Salaam Water Supply and Sewerage Authority (DAWASCO), National Insurance Corporation (NIC),Tanzania Posts Corporation (TPC), Tanzania Railways Corporation, Board of External Trade (BET), Mtwara Urban Water Supply and Sewerage Authority (MTUWASA have been experiencing persistent negative working capital to the extent of facing difficulties in discharging their maturing obligations. A number of public entities operated during the period without Procurement Planning, Management Procurement Units and Tender Boards as shown in chapter six of this report. Tanzania Tobacco Board made Procurements of goods and services without competitive tendering amounting to Shs.223,695,649.00. The Chief Executive Officer of BOT, who incidentally happens to be the Chairman of the Board of Directors, is also the Chairman of the Audit Committee. This practice may impair the independence of the Audit Committee and hence make the Committee ineffective. This is contrary to the principles of good governance. Thirty (19) Public Authorities and Other Bodies did not comply with Reg. 30 of the Public Finance Regulations 2001of establishing and maintaining Audit Committees (chapter 7).
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Some of the Board of Directors or Board of Trustees has membership of Members of Parliament. Principles of good governance forbid Members of Parliament who have an oversight role to be members of Board of Directors or Board of Trustees of Public Authorities and other Bodies. Nineteen (11) Public Authorities and other Bodies failed to comply with Reg. 28 of the Public Finance Regulations of 2001, which requires the establishment of an effective Internal Audit Unit. Further to earlier payment of legal fees of Shs. 2,990,221,907 made by the Bank of Tanzania in the previous year to M/s Mkono and Company Advocates, the lawyers handling the Valambhia case, an additional amount of Shs.5,138,153,330 was paid during the year, almost twice as much as the amount paid in the previous year, making total payments of Shs.8,128,375,237 as at 30th June 2006 as shown in chapter 3 of this report. National Insurance Corporation is running on an old Informix computer system under UNIX platform developed and installed in 1993. Since development, the system has not undergone any major upgrade. This has resulted to poor performance, poor reliability, and lack of data integrity and availability of both services and data as shown in chapter three of this report.
The Government earned revenue amounting to Shs.120,133,616,259 and USD 291,396372 as revenue from privatization of public entities while Governments investments in the privatised entities was Shs.49,4006,730,416 and USD.3,035,898,250 respectively as shown in chapter five of this report.
Long outstanding revenue proceeds due to the Government amounting to Shs.7,942,247,030 from sale of Public Parastatals.
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The Government had Invested Shs.14,928,597,881 in Public Authorities and other Bodies that were under restructuring process as at 30thJune 2007. Government had invested Shs.10,691,261,115 in Public Authorities and other Bodies which were under liquidation process as at 30th June 2007. The Public Authority undergoing winding up process as at 30th June 2007 had a negative investment of Shs.12,506,598,308. During the year under review, 10 Public Authorities and other Bodies were noted to have weak information technology systems. Tanzania Ports Authority Container Terminal was leased to a private operator M/s Tanzania International Container Terminal Services (TICTS) since May, 2000. Initially, the lease agreement was to last for a period of ten years. However, the lease agreement was extended for another term of fifteen years vide Addendum No.2 to the lease agreement executed on 30.12.2005 to make the lease period to be twenty five years of which in my opinion there were irregularities as shown in chapter 8. Under the terms of the production sharing agreement between Pan African Energy Tanzania Ltd and Tanzania Petroleum Development Corporation (TPDC), where income tax is paid by the former (Pan Africa Energy Tz. Ltd), the same is recoverable from the profit available to the latter (TPDC). In this case the amount paid as corporation tax is deducted from the remittable proceeds to Government from the sale of additional gas. Audit examination of the financial statements during the year under review revealed that Shs. 1,887,186, 871 was deducted from proceeds which were supposed to be remitted to the government as shown in chapter eight of this report.
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DAWASCO has been consistently suffering a penalty equal to 0.5% of weekly revenue for each week for breach of contract with DAWASA relating to First Time New Domestic Water Supply Connection Fund as shown in chapter eight of this report. The special audit of the BoT EPA account concluded that Shs.133 billion was paid out of account of which Shs.90 billion was fraudulently paid, while the Shs.44 billion needs further investigation. A number of water authorities have been reporting deficits or decreasing profits due to wrong depreciation computations which do not base on realistic useful life of individual assets, in particularly the water and sewerage system. In the circumstances, the carrying amounts of property, plant and equipment reported does not reflect fair values to most of the water authorities. Overpayment of VAT amounting to Shs.375,144,226 paid to Commissioner of Domestic Revenue by Tanzania standard Newspaper (Shs. 268,610,275) and Tanzania Postal Bank (Shs. 106,533,951) due to wrong interpretation of VAT Act. (xiii) Summary of main Recommendations Chief Executive Officers of the PB&oBs should implement all recommendations issued in the respective individual management letters addressed to the chairman of the Board of Directors of these entities as well as highlights pointed below: (a) Billing Improvement in Water Authorities I recommend the following: Management of Water Authorities should identify all billable customers; Meter installation to customers should be hastened to ascertain accuracy of bills receivables;
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Management of Water Authorities should make sure that only genuine customers are billed; Management of Water Authorities should come up with improved accounting policies that will allow realistic depreciation rates of the assets; and The Ministry of Water and Irrigation should take the initiatives of identifying a water billing software package to be used by the Water Authorities in the country. (b) Operational performance In summary, I recommend the following: Efforts should be taken to increase revenue and reduce operating expenses; Lost public confidence in some public organisations should be regained by cutting down overheads and improve efficiency; Loss making units/branches should be identified and recommended for closure or restructuring; Obsolete assets should be sold, especially investments with poor returns; External financing should be secured to turn around the loss making PA&oBs to profitable organizations; Employees morale/motivation should be enhanced to improve performance; PA&oBs should ensure that statutory deductions are promptly remitted to the appropriate receiving agencies in order to avoid unnecessary heavy penalties and minimize the inconvenience that would be subjected to retiring officers. (c) Establishment of financial and operational manuals Operational and financial manuals together with sound accounting policies should be prepared in order to improve efficiency in implementation of PA&oBs objectives and reduce disparity in decision making whenever there is a change in key management personnel or operational parameters.
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(d) Internal audit and audit committees In order for the Internal Audit Units and Audit Committees to fulfill their intended objectives, I recommend the following:The Internal Audit Units must be manned by professionally competent staff with pre requisite resources and facilities to enable them to professionally execute their responsibilities; The head of Internal Audit Unit should report directly to the Chief Executive Officers and not to the Chief Accountant or Finance Manager as noted in some PA&oBs; The membership of the Audit Committees as stipulated in Reg.31 of the Public Finance Regulations 2001 should be reviewed to allow for more external membership of the Committee in order to be effective in giving the Chief Executive Officer appropriate and unbiased advice. (e) Compliance with Public Procurement Law In order to ensure compliance with PPA and its related Regulations, we also have the following recommendations:There is an urgent need for capacity building at all levels of the procurement process; The Public Procurement Regulatory Authority (PPRA) needs to be given adequate capacity and full mandate to regulate the procurement function in the Country; Effective Tender Boards and Procurement Management Units should be established. (f) Privatization of Public Parastatals The Government should: Institute sound debt collection policies for long overdue debts from defaulting investors; Take legal action against investors who fail to fulfill their contractual obligations on privatisation; Hasten resolution of cases relating to privatization;
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Either revive or liquidate Public entities that are not operating; Either claim the outstanding revenue proceeds due from privatisation of Public entities or otherwise repossess the assets from the defaulting investors; Instruct the Consolidated Holdings Corporation, the successor of PSRC and LART; to commission or carry out a Post Sale Audit of all divestitures to ascertain the conformance to the business objectives and any other developments as per sales agreements with the respective investors. (g) Assets Management I recommended that: Legal ownership of the properties like title deeds should also be sought. Revaluation of assets should be done and impairment tested in recommended interval of time pursuant to International Accounting Standard No 16 in order to ascertain the fair value of assets. Fixed assets registers should be maintained for proper management and safeguarding of the assets. (h) Specific Recommendations Disciplinary action should be taken against BOT officials involved in the actions of initiating, processing, authorising and approving payments for EPA debts in line with the established civil service and labour law procedures to avoid possible legal actions by the affected individuals.
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Further investigation should be performed on the other EPA payments made to the remaining 9 assignee companies amounting to Shs.42,656,107,416.61 for which the audit team could not conclude about their validity and authenticity at this stage. The Ministry of Finance/Treasury should consider establishing a debt oversight mechanism or function within the Ministry of Finance/Treasury and whose remit should include monitoring of EPA transactions and provide a central link between MOF/Treasury and BOT. The management of DUWASA should seek retrospective approval on the amount overspent Shs.136,061,758 The management of Tanzania Standard Newspaper and Tanzania Postal Bank should ensure recovery of Shs. 268,810,275 and Shs. 106,533,951 respectively overpaid to the Commissioner Domestic Revenue as VAT. Air Tanzania Holding Co Management should ensure that capital gain tax of Shs. 23,500,000 which have facilitated to evade has been recovered; Air Tanzania Holding Co Management should ensure that capital gain tax amounting to Shs.1,750,000 and the transfer fee which it has facilitated to evade have been recovered; Air Tanzania Holding Co Management should ensure that capital gain tax totaling Shs. 21,500,000 and the transfer fee which it has facilitated to evade have been recovered; Air Tanzania Holding Co Management should ensure that successful bidders were eligible to own the landed property or revert the transactions
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The management of TANESCO should ensure that liquidated damages amounted to Shs. 2,683,800,000 are paid by the defaulter (M/ Dowans Holdings) as per provision of the contract agreement and any delay in paying the amount in question attract interest charges. The Government to revoke un-procedural extension of the TICTs agreement and conduct a thorough evaluation of the 10 years agreement period before extension of the same is decided upon. Should there been need for an extension the Government is strongly advised to adhere to Public Procurement Regulations. I hope this section has provided a summary of the key audit findings and related recommendations that have been linked to chapters that extensively narrate the audit findings together with relevant authoritative information in chapter one to ten, together with annexure I to V. appended thereto.
Ludovick L. S. Utouh CONTROLLER AND AUDITOR GENERAL ____________________________________ Office of the Controller and Auditor General, National Audit Office, Dar es Salaam, 26th March, 2008.
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CHAPTER ONE
1.0
RESPONSIBILITIES OF CAG AND LEGAL FRAME WORK
Introduction
Article 143 sub section (5) of the Constitution of the United Republic of Tanzania 1977 (revised 2005) and amplified under sections 30 (1) (c) and 37 of the Public Finance Act No 6 of 2001 (revised 2004) requires the Controller and Auditor General to audit all Public Authorities and other Bodies at least once in every financial year. Moreover, Section 37 sub sect (5) of the Public Finance Act 2001 (revised 2004) allows the Controller and Auditor General to authorize any person eligible to be appointed as an auditor of a company or any officer to inspect, examine or audit on behalf of the Controller and Auditor General the books of accounts of any body that the CAG may be required to audit. This section read together with section 38 (1) and (2), gives the CAG the sole responsibility to certify accountability of all public funds to the Parliament. The office of the Controller and Auditor General is therefore keen to undertake this statutory obligation smoothly to ensure that all stakeholders and the public in general benefit from timely, high quality public auditing services and reports. As such, interim and annual audits of the accounts of any public body shall be undertaken in accordance with the International Standards of Auditing (ISA), International Organisation of Supreme Audit Institution (INTOSAI) standards and guidelines and any other procedures that the Controller and Auditor General shall find appropriate under the circumstances.
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The Responsibilities of CAG The Office of the Controller and Auditor General of the United Republic of Tanzania was established in accordance with Article 143 of the Constitution of the URT of 1977. The Office is mandated to conduct both financial and performance audits of public accounts (both Central and Local) including the audit of the financial statements of all Public Authorities and other Bodies as defined in Section 37 of the Public Finance Act No. 6 of 2001 (revised in 2004). The Office is also empowered to conduct special audits and audit investigations when required to do so. Sect. 34 of the Public Finance Act No.6 of 2001 further empowers the Controller and Auditor General to make recommendations for the purpose of: Preventing or minimizing the unproductive expenditure of public moneys. Maximizing the collection of public revenues; Averting loss by negligence, carelessness, theft, dishonesty, fraud and corruption relating to public moneys and resources. In fulfilling the above responsibilities, the CAG carry out annual audits of the submitted final accounts of the Ministries, Independent Departments of Government, Local Government Authorities, Public Authorities and other Bodies. Article 143 (4) of the Constitution of the URT of 1977 requires the Controller and Auditor General to submit the st CAGs annual reports to the President of the URT by 31 March. Upon receipt of such reports the President shall direct the persons concerned to submit those reports before the first sitting of the National Assembly which shall be held after the President has received the reports and it shall have to be submitted to such a sitting before the expiration of seven days from the day the sitting of the National Assembly began. If the President does not take steps of submitting such reports to the National
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Assembly, then the Controller and Auditor General shall in accordance with Section 36 (2) of the PFA 2001 submit such reports to the Speaker of the National Assembly (or the Deputy Speaker if the office of the Speaker is vacant then, or if for any reasons the Speaker is unable to perform the functions of his office) who shall submit the report to the National Assembly. Sect 25 (1) and (2) of the PFA 2001 stipulates that the Accounting Officers shall be responsible for the preparation of the financial statements of PA&oBs based on generally accepted accounting principles (GAAP) and submit them to the Controller and Auditor General for audit within 3 months after the end of the financial year. The National Audit Office is a Supreme Audit Institution (SAI) which has a unique responsibility to ensure that there is proper accountability, financial discipline and transparency in the use of public resources within the United Republic of Tanzania. Furthermore, NAO has a unique responsibility to provide timely audit reports of good quality. These reports give detailed results of revenue collections and expenditure analysis and governance issues of the PA&oBs. The audit findings in this report have been reported to the Chairmen of the Board of Directors and the Accounting Officers of the individual PA&oBs as well as the respective Parent Ministries. 1.2 PA&oBs responsibilities The responsibility for the preparation and presentation of the financial statements for audit purposes lies with individual Board of Directors and the Management of the PA&oBs. International Financial Reporting Standard one (IFRS I) and International Accounting Standards one (IAS 1) specifies the types of financial statements to be prepared. PA&oBs in Tanzania are required to prepare their financial statements in compliance with the
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International Financial Reporting Standards (IFRS) or the International Public Sector Accounting Standards (IPSAS) depending on the nature and objectives of the PA&oBs in question. This is in line with the decision taken by the National Board of Accountants and Auditors and endorsed by the Government that reporting entities in Tanzania shall embrace the International Accounting reporting standards. The preparation and submission of PA&oBs accounts is a legal requirement as per the requirements of the individual enabling Acts, the Companies Act of 2002 or Sect. 25 of the PFA 2001 as revised in 2004. PA&oBs annual reports provide information to assist citizens to assess the performance of these entities and hold them to account for their performance in the use of public resources. Timely information is necessary for this to occur. This is the whole essence of accountability in the use of public resources. As a matter of best practices and in accordance with the requirements of Reg. 8 (5) of the PFR 2001 every PA&oBs shall be responsible to ensure that information is available to the general public in respect of its activities and finances and for this purpose each PA&oBs shall prepare and make available to the general public an Annual Report stating the following:(a) the overall budget strategy; (b) the nature and objectives of each main programme; (c) assessments for output and performance against objective; (d) a summary of the financial results for the fiscal year; (e) the plans for the year ahead, as approved by the respective authorities; (f) the provisional plans for the two subsequent years. From the requirements of this regulation it is therefore a legal responsibility for Accounting Officers to ensure that
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information is available to the general public in respect of their activities and financial performance through the publication of the audited financial statements which will be incorporate in the PA&oBs annual reports. It is therefore illegal for any Accounting Officer to forbid any person access to information on the performance of the entity. PA&oBs in the country are expected to have in place effective financial reporting arrangements that underpin financial statements preparation procedures, including early recognition and resolution of issues that impact on the financial statements themselves. This involves having in place effective internal control systems which include the establishment of functional internal audit units and audit committees in line with the requirements of Regs. 28 35 of the Public Finance Regulations 2001 (revised 2004). The results of my audit in this financial year, have shown that PA&oBs that maximized the alignment of their year end financial reporting processes with effective internal control systems, segregation of duties, monthly bank reconciliations, proper custody of accountable documents, establishment of internal audit units together with audit committees were more successful in meeting the deadlines for submission of better quality accounts for audit purposes, than those which did not. 1.3 Organisation of Audit work The report provides a summary of the final results of the audit exercise, which was carried out on my behalf through outsourcing of this task to private audit firms registered with my Office for such purpose. In order for my Office to effectively handle this task of auditing all PA&oBs in the country, I decided to use the constitutional power vested in me and contracted out the audit of some of the Public Authorities and other Bodies. In executing this responsibility the office either singly or jointly did
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the audit of the PA&oBs while the majority of such audits were wholly outsourced. Such audits were subject to the quality review of my office. During the year under review my office worked hand in hand with 44 private audit firms registered with my office. 1.4 Legal Framework Governing Financial Reporting in PA&oBs This report is issued in accordance with the requirements of Article 143 (4) of the Constitution of the United Republic of Tanzania of 1977 (revised 2005). The report comprises the results of audits of financial statements of the PA&oBs for the financial years ended th 31st September 2006, 31st December 2006 and 30 June, 2007. According to the Constitution of the United Republic of Tanzania, Article 143 (2), I am required to: (i) Satisfy myself that any withdrawal of funds from the Consolidated Fund are authorized or are provided for under Article 136 of the Constitution, and if I am satisfied that these conditions were met, I approve such withdrawals. Satisfy myself that all funds which have been authorized as payments and charged from the Consolidated Fund or the funds which have been authorized by Parliament to be spent were applied solely for the purpose for which they were appropriated and that those expenditures were made in accordance with the rules of the requisite authority. Perform audit, at least once in every year, and submit reports on the financial statements of the Government of the United Republic of Tanzania, 6
(ii)
(iii)
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financial statements prepared by all officers of the government of the United Republic of Tanzania, financial statements of all Public Authorities and Bodies of the United Republic of Tanzania. On the other hand, Sect. 30 (1) of the Public Finance Act No. 6 of 2001 (revised 2004) specifies that, In addition to the functions assigned to the Controller and AuditorGeneral by the Constitution, the Controller and AuditorGeneral shall be responsible for examining, inquiring into, auditing and reporting on the accounts of:(a) All Ministries and departments of Government and their accounting officers; (b) All persons entrusted with the collection, receipt, custody and issue of payment of public monies or with the receipt, custody, issue, sale, transfer or delivery of any stamps, securities, stores or other public property; (c) All public authorities and other bodies; (d) Any authority or body which receives funds from the Consolidated Fund or from public moneys for a public purpose; (e) Any authority or body which is authorized by law to receive money for a public purpose; and (f) Any authority or body required by law to be audited by the Controller and Auditor-General In understanding of the legal framework governing the audit of PA&oBs, one has to take into consideration the fact that a number of PA&oBs are required to operate under the accrual accounting system which will necessitate these PA&oBs to be IFRS compliant. In such situation, the PA&oBs legal framework governing their financial reporting and auditing will either be the Companies Act No.12 of 2002 or the enabling Acts of Parliament of the respective PA&oBs.
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Responsibilities of the Accounting Officer Sect.25 (2) of the PFA 2001 states, Each Accounting Officer shall, within a period of three months after the end of each financial year, prepare and transmit to the Controller and Auditor General in respect of past financial year and in respect of the revenues and moneys for which he is responsible:(a) a balance sheet showing the assets and liabilities; (b) a statement of the source and application of funds showing the revenues, expenditures and financing of the fund for the year; (c) a summary statement of revenue and expenditure, being a summary of all the statements signed by accounting officers under subsection (2) (a) and (2) (c) of this section; (d) a statement of the amounts guaranteed by the Government at the end of the financial year in respect of bank overdrafts, loans, public loan issues and other contingent liabilities; (f) a statement of the amount outstanding at the end of the year in respect of loans issued by the Government; (g) a summary statement of arrears of revenue for each revenue head being a summary of the statements of arrears of revenue signed by accounting officers under subsection (2)(d) of this section. Sect.25 (4) states, All accounts submitted under this section shall: (a) Be prepared in accordance with generally accepted accounting practice; and (b) State the basis of accounting used in their preparation and identifies any significant departures therefrom and the reason for that departure. The audit results of the financial statements of the PA&oBs were submitted to the respective Accounting Officers.
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Furthermore, pursuant to Companies Act No. 12 of 2002 Section 152, the directors of every company shall prepare individual accounts for each accounting period and lay before the company general meeting in accordance with Section 166 of this Act, and such accounts shall indicate: (a) a profit or loss account or, in the case of a company not trading for profit, an income statement of account; (b) a balance sheet as at the last day of the accounting period; and (c) A cash flow statement. This report is the outcome of the summary of issues observed in the specific audit reports of each PA&oBs. 1.6 Reporting Procedures Being a member of the International Organisation of Supreme Audit Institutions (INTOSAI), NAO is required to comply with the requirements of carrying out audits of the financial statements of PA&oBs in conformity with the requirements of the INTOSAI standards and the International Standards on Auditing (ISA). During the audit, the auditors critically examined and verified the financial statements together with their supporting documents of the PA&oBs to establish their validity to be charged as PA&oBs expenditure. At the end of the audit, various audit opinions were expressed on the financial statements based on the audit findings.
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CHAPTER TWO 2.0 BASIS AND TYPES OF AUDIT OPINIONS ISSUED TO PA&oBs This chapter deals with the basis and types of audit opinions that were issued to PA&oBs during the financial year ended either on 30th September 2006, 31st December 2006 or 30th June, 2007 2.1 Introduction In this chapter, an endeavor is made to give a detailed analysis of the issues and matters which influenced the auditors in issuing the type of audit opinion issued i.e. unqualified opinion, unqualified opinion with emphasis of matter, adverse opinion, qualified and disclaimer of opinion to the PA&oBs in question. As explained in earlier chapter of this report, the basis of issuing a certain type of opinion is based on very clear criteria including the materiality tolerable error benchmark.
2.1.1 Basis of Opinions Issued As a matter of statutory requirement, auditors are obliged to give assurance to stakeholders of the respective PA&oBs whether the information given in the financial statements prepared by them present fairly the results of the operations, cash flows and financial position of the PA&oBs for the year under review. This certification provides to stakeholders the audit assurance as to the reality of the financial operations of the PA&oBs including the PA&oBs compliance with prescribed requirements. Based on the International Standards on Auditing (ISA) and INTOSAI standards, the following opinions are issued as a measure of the assessment given on the financial information presented. These are unqualified opinion, qualified (except for) opinion, adverse opinion and disclaimer of opinion.
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2.2
Audit Opinions
2.2.1 Definition of Audit Opinion The Oxford English dictionary of accounting defines an audit opinion as an opinion contained in an auditors report. It expresses a view as to whether or not the financial statements audited have been prepared consistently using appropriate accounting policies in accordance with relevant legislation, regulations, and applicable accounting standards/principles. According to International Standards on Auditing (ISA) the opinion should clearly indicate the financial reporting framework used to prepare the financial statements and state the auditors opinion as to whether the financial statements give a true and fair view and where appropriate, whether the financial statements comply with statutory requirements The opinion also has to state whether there is adequate disclosure of information relevant to the proper understanding of the financial statements or not. For the purpose of accountability and transparency to the National Assembly, regardless of the opinion given in the individual audit reports, audit findings are narrated alongside their implications, recommendations, clients responses, and auditors comments. I believe that this form of presentation of audit findings and reporting, promotes the obligations conferred to the Accounting Officer to prepare the financial statements and to the auditor to audit them. 2.2.2 Unqualified Opinion According to International Standards on Auditing an unqualified opinion should be expressed when the auditor concludes that the financial statements give a true and fair view (or presented fairly, in all material respects) in accordance with the applicable financial reporting framework. An unqualified opinion also indicates
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implicitly that any changes in accounting principles or in the method of their application, and the effects thereof, have been properly determined and disclosed in the financial statements An unqualified opinion is issued when I am satisfied that the PA&oBs financial statements are presented fairly in all material respects; in accordance with applicable financial reporting framework and applicable accounting principles. However, issuance of an unqualified opinion does not mean that the PA&oBs has a clean whole system of internal control. It only means that nothing has come to my attention to warrant a qualified opinion. Accordingly, each PA&oBs issued with an unqualified opinion has also been issued with a management letter giving details of the material issues that are equally potential to risks of financial and/or stores losses which, if not addressed could lead to qualified opinion in the future. In the year under review, seventy four (74) PA&oBs have been issued with unqualified opinion without emphasis of matter. The PA&oBs are as listed below:. S/N 1 2 3 4 5 6 7 8 9 PA&oBs issued with unqualified opinion Name of PA&oBs Tanzania Fertilizer Company Ltd Ngorongoro Conservation Areas Parastatal Pension Fund Tanzania Postal Bank Tanzania Petroleum Development Corporation. Arusha International Conference Centre.
Tanzania Industrial Research and Development Organisation (TIRDO). Tanzania Engineering and Manufacturing Design Organisation National Ranching Company(NARCO)
Type of Opinion Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
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10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
National Environment Management Council (NEMC) Consolidated Holding Corporation National Development Corporation State Mining Corporation National Health Insurance Fund
Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified 13
Muhimbili National Hospital Deposit Insurance Board The Mwalimu Nyerere Memorial Academy Unit Trust of Tanzania Ngorongoro Pastoralist Council(NPC) National Social Security Fund
Arusha Urban Water Supply and Sewerage Authority Moshi Urban Water Supply and Sewerage Authority Tanga Urban Water Supply and Sewerage Authority Musoma Urban Water Supply and Sewerage Authority Lindi Urban Water Supply and Sewerage Authority Songea Urban Water Supply and Sewerage Authority Mwanza Urban Water Supply and Sewerage Authority Dodoma Urban Water Supply and Sewerage Authority Bukoba Urban Water Supply and Sewerage Authority Mbeya Urban Water Supply and Sewerage Authority Tabora Urban Water Supply and Sewerage Authority Sumbawanga Urban Water Supply and Sewerage Authority Shinyanga Urban Water Supply and Sewerage Authority Morogoro Urban Water Supply and Sewerage Authority Architects and Quantity Surveyors Registration
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Board
36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66
Tanzania Tobacco Board Gaming Board of Tanzania Sugar Board of Tanzania Tanzania Cotton Board Presidential Parastatal Sector Reform Commission. Engineers Registration Board. (ERB) Energy and Water Utilities Regulatory Authority Tanzania Institute of Bankers Limited Tanzania National Parks(TANAPA) Tanzania Communication Regulatory Authority Dar es Salaam institute of Technology National Institute for Productivity Institute of Adult Education Institute of Finance Management Dar es Salaam Maritime Institute Tanzania Standard Newspaper Capital Market and Security Authority Tanzania Education Authority TCRA Consumer Consultative Council National Council for Technical Education Co-Operative Audit and Supervision Corporation College of African Wildlife Management(MWEKA) National Board of Accountant and Auditors Twiga Bancorp Limited Tanzania Commission for Universities Public Procurement Regulatory Authority National Economic Empowerment Council National Institute of Transport Contractors Registration Board Dar es Salaam University College of Education (DUCE) Tanzania Library Services Board(TLSB)
Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
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67 68 69 70 71 72 73 74 2.2.3
Moshi University College of Cooperative and Business Studies
Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
Institute of Accountancy Arusha Tanzania Coffee Board

Centre for Agricultural Mechanization and Rural Technology
National Sugar Institute National Housing Corporation National Board of Materials Management Mbinga Water Supply and Sewerage Authority
Unqualified opinion with Emphasis of Matter Sometimes an unqualified opinion is modified by adding an emphasis of matter paragraph to highlight a matter or matters affecting the financial statements but which are not materially significant to affect the opinion. The addition of such an emphasis of matter paragraph does not affect the audit opinion. The paragraph is normally included after the opinion paragraph and ordinarily refers to the fact that the opinion is not qualified in this respect. An emphasis of matter paragraph is appended in each situation, which draws the immediate attention of the management of the PA&oBs warning it about those matters requiring its urgent attention, failure of which may result in issuance of a qualified opinion in subsequent audits. However, the main objective of the emphasis of matter paragraph is to bring closer understanding of the situation obtained in the audited entity, despite the unqualified opinion issued. In the year under review, six (6) PA&oBs have been issued with unqualified opinion with emphasis of matter. The six PA&oBs and the matters in question are as listed below:.
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PA&oBs issued with unqualified opinion with emphasis of matters

S/N Name of PA&oBs Tanzania Port Authority Type of Opinion Unqualified opinion with emphasis of matters Basis for expressing unqualified opinion TPA assets in particular those taken over from the predecessors, namely, Tanzania Harbours Authority and Marine Services Company Limited, have not been revalued at any point in time in the last five years and the results incorporated in the books of account. International Accounting Standard No 16 recommends revaluation of assets to be done in an interval of between three and five years. In this regards, we could not ascertain and report on the fair value of assets as reflected in the financial statements at net carrying amount of Shs. 102,610,191,087. The Corporation has sustained deficits in the past four years which have accumulated from Shs. 18,219,202,000 as at 31st December, 2003 to Shs.54,489,166,000 as at 31st December 2006 resulting in a decline in the Corporations net worth. The Corporations current liabilities exceeded current assets by Shs. 9,990,291,000 as at 31st December, 2006 which indicates that the Corporation was unable to honour current obligations
1.
2.
Tanzania Railways Corporation
Unqualified opinion with emphasis of matters.
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3.
Kigoma Urban Water Supply and Sewerage Authority
4.
Board of External Trade
as they fall due Improperly vouched expenditure Shs14,621,593 Revenue lost due to water leakages Shs.127,826,100 Long outstanding receivables Shs.391,791,808 and payables Shs.41,775,376 Stores worth Shs. 4,004,110 queried during the previous year (2005/2006) is still not accounted for. The Board had negative working capital of Shs.152,924,130 and it has been: Unable to meet her maturing obligations. For the past five years, the Board had been unable to generate sufficient income to cover operating expenses. As at 30th June, 2007, the Board had accumulated deficits amounting to Shs.2,371,528,127. The current ratio is below normal. As at 30th June, 2007, the current ratio was 0.80:1 compared to standard ratio of 2:1. In this regard, the Board may in the future face a going concern problem if no additional working capital is injected from external sources, and review of its operating
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5.
Simu 2000 Limited
Unqualified opinion with emphasis of matters
6.
Tanzania Investment Bank Limited
Unqualified opinion with emphasis of matters
expenses to turn around the deficit trend is undertaken. - Going Concern problem - Post Balance Sheet Event - Pursuant to the amendment of the National Bank of Commerce (Reorganisation and Vesting of Assets and Liabilities) Act, Cap 404 dated 18th May, 2007 where it was decided that SIMU 2000 Ltds existence will come to an end on 31st December, 2007. All pending issues in favour or against SIMU 2000 Limited will thereafter be dealt with by Consolidated Holding Corporation. The Bank has not consolidated its accounts with its wholly owned subsidiary.
2.2.4.1 Qualified Opinion A qualified opinion is issued when the auditor conclude that an unqualified opinion cannot be issued but due to disagreement with management or limitation of scope is not so material and pervasive and except for the effect of the matter giving rise to the modification of audit opinion; the financial statements were prepared in accordance with the applicable financial reporting framework and not misleading thus they do not require an adverse opinion.
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2.2.4.2
Circumstances that may result other than an unqualified opinion (a) Limitation on Scope According to Sect. 32(5) of the Public Finance Act No. 6 of 2001 as revised in 2004; I am empowered to access all records, books, payment vouchers, documents, securities, stores or public property in the possession of any officer or any other person who has received any public money or property. When I am unable to obtain full information regarding the financial statements preparations or documents and the scope of audit is limited to full access of documents or such financial statements, and I am unable to issue an Opinion. In such case there may well exist the following Circumstances: Payments are made without payment vouchers; Goods or services procured were not supported by delivery notes; Various payments were not supported by proper documents; Revenue receipt books were not submitted for audit verification; Purchases were not supported by schedules, this may lead to doubtful existence of the asset; Unavailability of confirmation from the payees on the payments made;
(a) Disagreement in best practice on records keeping and non compliance with Laws and Regulations. In order to comply with the requirements of the Public Finance Regulations 2001 as revised in 2004, Regs 28-35 the Accounting Officers of each PA&oBs are required to establish sound system of internal
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controls including the establishment of effective internal audit units and audit committees. Disagreement with management The auditor may disagree with management about matters such as: the acceptability of accounting policies selected; the method of their application; the adequacy of disclosures in the financial statements
If such disagreements are material to the financial statements, the auditor should express a qualified or an adverse opinion. In this year under review, ten (10) PA&oBs have been issued with qualified opinion as listed below:. PA&oBs with Qualified Opinion S/N Name of Type of PA&oBs opinion issued 1 Tanzania Qualified Posts opinion Corporation Remarks The liability in respect of the employees defined benefits plan included in the accounts at a debit balance of Shs. 547,595,995 is not stated at fair value because actuarial computations to determine the employees benefits earned in return for their services in the current and prior period have not been done. The present value of the defined benefits could not be determined by discounting the estimated future cash flows, as the interest rates have not
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2.
Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO)
Qualified opinion
been determined by the actuary. In the circumstances the liability of pensions and provident funds included in the financial statements could not be reliably measured. Computation of NSSF and PPF deductions based on basic pay instead of gross pay. As a result amount remitted was understated Disconnection and connections not updated in the system Foreign currency cash book not maintained Delay in billing new customers Un authorized adjustments on customer bills Shs.497,740,043 Lack of the documented accounting policies for the corporation Loss of Shs. 324,000,000 (more clarification is needed) The use for First Time
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New Domestic Water Supply Connection Fund (FTNDWSCF) for unapproved purposes Shs.231,0000,000 The billing system not intergraded into the accounting system
3.
Dar es Salaam Water Supply and Sanitation Project International Development Association
Qualified opinion
Article III section 3.04 of the Development Credit Agreement between the United Republic of Tanzania and the International Development Association (IDA) and article II section 2.04 of the Project Agreement between DAWASA and IDA, require DAWASA to open and maintain a project bank account for deposit of counterpart fund/contribution to the project. This account must be replenished to Shs 750,000,000 at the end of each project quarter or when the balance falls below Shs 250,000,000. However, as at 30th June 2007 the balance in the project account was only Shs.93,575,267. This is a breach of a credit agreement covenant which could lead to suspension of financing by the financiers as provided for under Article V of the
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22
4.
Singida Urban Water Supply and Sewerage Authority
Qualified opinion
Development Credit Agreement with IDA and Article 1.07 of the Finance Agreement with EIB. Assets The Authority doesnt posses title deeds of its landed properties and motor vehicles are not registered under its name and balance per physical count. Fixed Assets at year end was not reconciled with that per accounts. I was therefore unable to ascertain the Authoritys legal ownership over building and motor vehicles disclosed in the accounts at Shs. 150,988,223 and Shs. 43,171,518 respectively and the correctness of movable fixed assets disclosed in accounts at Shs.70.5 million could not be ascertained. Debtors and Prepayments Debtors and prepayments include water bills debtors totaling Shs. 42.2 million that have been disconnected due to non payment. The amount has not been provided for as doubtful debts. Recoverability of these debts is therefore doubtful. Assets and liabilities of the defunct Tanzania Tea Authority (TTA) are yet to be formally transferred to the
5.
Tea Board of Tanzania
Qualified opinion
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23
Board and Tanzania Small Holders Tea Development Agency, which are its successors. Under the circumstances, all fixed assets which formerly belonged to the Authority and are currently utilized by the Board, are not incorporated in the accounts. Similarly, corresponding annual charges on the assets which are supposed to be made in the income and expenditure account in form of depreciation, arising in the course of their utilization for normal operational activities, are not recognized in the accounts. In this respect, the cost for the use of the assets to generate income has not been matched with income generated, contrary to sound accounting principles. Depreciation computations were not based on estimated useful life of individual assets as indicated on note 2 of the Authorities accounting policies. In the circumstances, the carrying amounts of property, plant and equipment reported at a net book amount of Shs. 2,694,078,399 are not stated at fair value Revenue from commercial advertisements
6.
Mtwara Urban Water Supply and Sewerage Authority
Qualified opinion
7.
Tanzania Broadca-
Qualified opinion
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24
sting Services
8.
National Insurance Corporation (T) Limited
Qualified opinion
The TBS receives commercial orders and raises broadcasting confirmation orders (BCOs), and programme certificates for programme and commercial advertisements aired. The invoices to customers are prepared on the basis of BCOs that are approved by the Director of Marketing. The TBS did not maintain lists of all commercial orders received and processed and BCOs raised during the year. Furthermore there was no list of all programme and commercial advertisements aired. Due to limitation with respect to the recording and accuracy of revenue transactions the completeness of the programme and commercial revenue could not be substantiated with appropriate audit evidence by using other audit procedures. We are therefore uncertain on the completeness of commercial revenue of Shs 2,672,924,063 included in the financial statements. Accounting for income There were no calculation details to support interest income on policy loans amounting to Shs. 54,959,092 and the same was not matched with relevant accounting
PA&oBs 2006/2007
25
periods as the interest income was recognized on loans which had reached maturity contrary to International Accounting Standards (IAS 18) which call for accrual over the relevant period. Lack of Subsidiary Records For Outstanding Claims Outstanding claims reported in the accounts Shs.26,103,256,042 (Non Life Insurance Business Shs.13,487,798,517 and Life and Pensions Assurance Business Shs.12,615,457,525) had no subsidiary ledger whose totals could be reconciled with their corresponding control accounts in the general ledger thereby rendering verification of their accuracy difficult. (a) Limitation of scope There were questionable procurement and use of fuel worth Shs.4,292,400 Records to supports stocks figure of Shs.28,088,704 were not available. (b) Disagreement with best practice on records keeping and non compliance with Laws and Regulations The Authority management has not established a sound
9.
Babati Urban Water Supply and Sewerage Authority
Qualified opinion
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26
10.
Tanzania Small Holder Tea Development Agency
Qualified opinion
internal control system since there is no proper segregation of duties and separation of responsibilities. Also there is no secured cash office room separate from other accounting duties. As a result, the Authority is prone to high risk of loses without management detection. The Authority has no internal audit unit and an audit committee. There were non competitive procurements worth Shs.51,835,500 - Assets and liabilities of the defunct Tanzania Tea Authority (TTA) are not incorporated in the accounts - Similarly, corresponding annual charges on the assets which are supposed to be made in the income statement in form of depreciation are not recognised
2.2.5
An Adverse Opinion An adverse opinion is issued when the effect of a disagreement with Management has a material and pervasive effect on the financial statement such that the financial statements are not prepared in accordance with the applicable financial reporting framework or are misleading as a whole. In this case, a qualified opinion is not adequate to disclose the misleading nature of the financial statements.
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27
However, for the period under review there was no PA&oBs that was issued with an adverse opinion. 2.2.6 Disclaimer of Opinion A disclaimer of opinion is expressed when the auditor is unable to obtain sufficient appropriate audit evidence in the financial statements so prepared and submitted. In this case, the situation has a material effect on the financial statements such that the auditor is unable to express an opinion on the financial statements. In the circumstances that a disclaimer of opinion is issued on the financial statements, disclosure is made of any unknown material misstatements or other reservations about the fair presentation of the financial statements in conformity with the applicable reporting framework. For the period under review only one public authority was issued with a disclaimer of opinion. The concerned PA&oBs and the reasons for the disclaimer are as indicated below: Tanzania Electric Supply Company Limited (TANESCO) Disclaimer of Opinion Inventories: The company has experienced problems in updating its inventory records since 2005 due to the introduction of new accounting software. Subsequently, prior year adjustment of Shs 18.5 billion has been made to correct the value of these inventories. In addition, some of the inventory transactions in respect of the year 2006 were recorded during the year 2007 and the resulting quantity balances as at 31st December 2006 could not be reconciled with physical quantities of stock at that date. Due to the foregoing, I was unable
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28
to determine whether inventories stated in the balance sheet at Shs 24.3 billion are fairly stated and whether no further adjustments are required in respect of prior year inventory problems. Adjustments to inventories would result in similar adjustments to property, plant and equipment and loss for the year. Trade and other payables The audit revealed that the Companys accounting and control systems in relation to trade and other payables had not operated effectively during the year under review, resulting in key accounts balance remaining unreconciled at the time of the commencement of the audit. In addition as a result of work undertaken during the course of the audit substantial adjustments were made to increase the level of trade and other payables. This included the work undertaken by the Companys staff to reconcile supplier statements and creditors audit confirmation of balances to the accounts payable records to certain key suppliers. Since the work undertaken did not cover all the key Companys suppliers of goods and services, I was unable to determine the extent to which further adjustment is required to the amount at which trade and other payables are stated.
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I have taken efforts of identifying the reasons for issuing the type of opinion issued so that the affected PA&oBs should be aware of the weaknesses and short comings of their financial reporting with the view of making improvements in the future.
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CHAPTER THREE 3.0 DETAILED AUDIT FINDINGS This chapter has two parts, A and B. Part A deals with outstanding audit recommendations of previous audit recommendations while part B deals with current year audit findings. Part B is further divided into two parts. Part one of part B deals with common issues and part two of part B deals with specific issues. Part A: 3.1.0 Outstanding previous audit recommendations These are various matters that arose from the previous audit which were either not yet implemented or were under the process of implementation at the time of issuing the specific/individual audit reports. The financial statements of the concerned bodies might be affected if purposive efforts will not be made by the respective authorities to clear the outstanding audit recommendations. Details of the outstanding audit recommendations which require attention of the management are as follows:
3.1.1 List of Outstanding Previous Audit Recommendations S/N PA&oB Previous Status Recommendation -Devising strategies geared Not 1. Tanzania at widening income Engineering Implemented
and Manufacturing Design Organisation generating activities. -Recovery of long outstanding debts. -Differences between VAT control account balance and monthly VAT. Claims should be investigated Title deeds Increase efforts to
2.
Institute of Adult
Not implemented 31
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Education
obtain the requisite title deeds for the institutes properties. Non control over cash at Regional centre.
3.
4.
State Mining Corporation (STAMICO)

Tanzania Ports Authority
Management should repossess equipment held in Burundi

-Non payment of rent by commercial tenants. -Amount due from Dunhill Motors. Close follow-up should be made to ensure that the case in court involving Dunhill Motors and the authority is concluded and the fate of the amount due from the latter is determined.
Not implemented
Not implemented
5.
Tanzania Postal Bank
-Depositors Account Balances. The suspected items on the depositors accounts Should be cleared -Reconciliation with Tanzania Posts Corporation should be done to establish whether the purported fraudulent withdrawn amounts by TPC staff on the Banks customers accounts are received. -Detailed age analysis of the suspected forgeries amounts by the Banks staff included under sundry receivables
Not implemented
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6.
Sugar Board of Tanzania
should be prepared. Assessment whether this amounts are to be recovered in full should be made. -To obtain title deed for the building on ; Plot No 45 at Agakhan Road. 6 houses on plot No 303 at Masaki. Residential houses at Makambako Iringa.
Not implemented
7.
SIMU 2000 LIMITED
-Review of present Not documents governing the implemented establishment of the company and appropriate changes effected to suit the working environment of the company. -Collection of rental charges /fees for the entire period during which the properties remained with TTCL pending compliance with the subscription and Shareholders agreement by TTCL. -Follow up with TTCL and National Housing Corporation with a view to sorting out the legal ownership of the block of residential flats situated in Tabora Municipality at Cheyo Area included in the Companys financial statements as available
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property for sale.
8.
Tanzania Railways Corporation
9.
Tanzania Tobacco Board
10.
Tanzania Library Services Board
Obtain Title Deeds/ Right of Occupancy Certificates. The legal documents of the following plots have not been obtained. Block No 228 Kurasini Dar es Salaam. 2 Blocks Dodoma (DCEs Office). Railway Club Uluguru Road Tabora. DTMs Mwanza North Port. Vigorous follow up efforts to ensure that TRA raises final tax assessments and therefore claim the tax credit on the Corporation tax paid in advance. 1. Requirement of financial assistance to tackle the problems facing the regional libraries. 2. Carry out practical counting of inventory items at the year end for inclusion in the financial statements. 3. Management should ensure that the books sent to regional
Not implemented
Not implemented
Not implemented
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libraries are processed and exposed to users in time. 4. Board of Directors should be appointed without further delay. -Inclusion of TTAS Under process assets and liabilities. of implementation -Management should liaise with responsible authorities to ensure that the assets of the defunct Tanzania Tea Authority are distributed to its successors (Tanzania Small Holders
Tea Development Agency) as appropriate.
11.
12.
13.
National Environment Management Council TCRA Consumer Consultative Council
-No insurance cover for the office furniture and equipment.
Not implemented
-Financing of the Not council; the implemented management of the council should liaise with the government through the Ministry of Infrastructure Development with the view of ensuring that funds to support the planned programme are provided and realized by the Council.
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35
14.
-Staff compliments. The council should consider recruiting an assistant accountant to handle bookkeeping matters of the Council. Presidential -Claim unpaid purchase Parastatal price Shs.184,266,641. Sector Reform -Missing expenditure Commission returns amounting to (PSRC) Shs.492,857,554.90 National Board of Accountants and Auditors -No internal audit was carried out during the year under review. -Control over consumable stocks -Institute disaster recovery and business continuity plan. -TSN to have lease agreements with all its tenants. -TSN to take appropriate action on long outstanding creditors of Shs.23,142,896 due to Kidaba Auto Works Ltd Shs.2,689,968 to Reuters Ltd settled. -Obtain new certificate of occupancy for two plots and two separate title deeds for plots 1408 and 1409. -Revalue TIRDOs land and buildings.
Partly implemented Shs.78,000,000 still outstanding
15.
16.
Tanzania Standard Newspapers
Not implemented
17.
Tanzania Industrial Research and Development Organisation (TIRDO)
Not implemented
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36
-A qualified competent internal auditor should be employed. -TIRDO to evolve strategies that will lead to recovery of substantial amount of outstanding accounts receivables. -TIRDO should plan its procurements in accordance with the Public Procurement Regulations, 2005. -Follow up of the scheme of service and incentive scheme with the Treasury and fill all key vacant posts. The management should make effort to employ more staff in the Internal audit unit. -Management should increase efforts of revamping the Companys operations focused at coming up with a practical consistent profit making trend. -Management should discharge the liability due to Treasury or negotiate its conversion
18.
Tanzania Broadcasting Service Tanzania Fertilizer Company Limited
Not implemented Not implemented
19.
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37
to Equity. -Outdated accounting manual, financial regulation and scheme of service -Management should tighten control over cost particularly the operating expenditure. -Have registered office in accordance with the Companies Act, 2002 where every company must keep at its registered office some important documents and register to facilitate inspection by creditors and other interested parties. Contrary to the requirement of the law all important documents are maintained at the Companys head office in Dar es Salaam. -The management should continue liaising with the Government on how to boost the Boards income. Also efforts should be made to cut down operating expenses to the minimum possible level. -Dormant Long outstanding Receivables
20.
Tanzania Coffee Board
Not fully implemented due to difficulty in changing policy
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38
21.
Dar es salaam Institute of Technology
22.
Unit Trust of Tanzania
Management Should intensify efforts in collecting long outstanding receivables with a view to strengthening liquidity position of the Board. Bad debts amounting to Shs.1,148,598,000 were written off during the year under review. -Updating the Unqualified Fixed register updated - Properly staffing the internal audit section. -Non review of financial regulation manual, -Absence of financial regulation and accounting manual -Formation of internal audit unit and audit committee
Under process of implementation
Partly implemented
3.1.2
Bank of Tanzania (i) Claims on Government External Payment Arrears NBC (EPA) Shs.131,725,294,000 The balance on NBC EPA Account represents losses on exchange rate differentials between the exchange rate ruling when the funds were initially deposited with the National Bank of Commence (NBC) and exchange rate prevailing when the beneficiaries are paid. The exchange losses are recoverable from the Government. However, as the Government could not in the short term raise the required levels of local currency (TZS) to
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39
compensate the Bank for the losses, it has converted the losses into EPA stock to be held by the Bank. The Bank maintains two ledger accounts; one is to source part of the required payment of the original deposits and the other (EPA Losses in Exchange NBC Account) is to source the difference of amounts which arose from the exchange rates differentials. We noted that the NBC External Payment Arrears Special Deposit (TZS) Account closed with a balance of Shs.2,288,418,663.41 as at 30th June 2006 and total payments of Shs.4,227,632,787.60 were made during the year. On the other hand, the total EPA Losses in Exchange NBC was Shs.131,725,294,000. Clause 4.2.1 of the BOT Debt Management Operations and Procedures Manual, 1997 require that, a beneficiary claimant (debt assignee) shall apply to the Bank of Tanzania, identifying a debt being claimed with all necessary particulars. An assignee claimant must also produce a legally binding Deed of Assignment from the respective creditor. We noted that, the claims were supported with application letters attached with Deeds of Assignments and other relevant particulars but were not supported with the suppliers original documents such as invoices, bills of lading and letters of credit. In addition the claims were not pre-audited by the Internal Audit Directorate before effecting payments. In the absence of the suppliers original documents in support of the debts, we are of the view that the debt assignment may not be complete and can raise problems in case of disputes that may arise. (ii) Excessive Legal fees Paid Further to earlier payment of legal fees of Shs.2,990,221,907 made in the previous year to M/s
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40
Mkono and Company Advocates, the lawyers handling the Valambhia case, an additional amount of Shs.5,138,153,330 was paid during the year, almost twice as much as the amount paid in the previous year, making total payments of Shs.8,128,375,237 as at 30th June 2006. The contingent liability to the Government regarding this case is about Shs.60 billion. Considering the fact that neither the outcome nor the time frame the case will take is known, there is a danger that the Bank may endup paying excessively high legal fees on the case. 3.1.3 Tanzania Post Corporation (i) Distribution of assets and liabilities The task of distributing the assets of the former Tanzania Posts and Telecommunications Corporation (TP&TC) between TTCL and TPC was in progress but yet to be completed by 31st December, 2006. (ii) Property, Plant and Equipment Title Deeds The corporation's properties stated at a total cost of Shs.77,400,000 as at 31.12.2006 had no title deeds. In the absence of title deeds, we could not ascertain the corporation's legal ownership of such properties. However, follow up is at an advanced stage to obtain the remaining title deeds.
3.1.4
Pension and similar obligations Ex-East African Community staff The liability of defined benefit plan created in the accounts is wholly unfunded by the Corporation. No contributions have been made by the Corporation into the defined benefit plan due to liquidity problems facing the Corporation. As a result the corporation has been forced to pay dues to retiring officers from sources not intended for that purpose. Furthermore, it was noted that the accounting for defined benefit plans was not compliant with accounting policies and IAS 19, in that: -
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41
(a) Actuarial techniques were not used to estimate employees benefits earned in return for their services in the current and prior period. (b) The present value of defined benefits could not be determined by discounting the estimated future cash flows, as the actuary has not determined applicable interest rates. (c) Actuarial gains and losses could not be determined and included in the accounts. As a result the liability in respect of pensions included in the accounts, which exceeded payments by Shs.547,595,995 could not be reliably measured in the absence of computation made by a qualified Actuarial Valuer. We are aware that the Ministry of Infrastructure Development has prepared a cabinet paper, recommending that the Government should take over the burden of settling the Ex-East African Community staff pension benefits. To date, nothing has come out from that proposal. 3.1.5 Tanzania Ports Authority (i) Dormant Capital Work In Progress Capital works in progress stated at Shs.11,830,974,758 as at 30.6.2007 includes Shs.391,174,929 related to the proposed HQ Investment Property on plot number 2459/35 along Shaban Robert Street and Garden Avenue which has remained dormant for over thirteen years. We learned that the Authority had acquired plot number 2459/35 with an area of 11,376 square meters together with 5 government houses constructed on it at a cost of Shs.362,692,440 in 1995 and a title deed number 53410 for a term of 99 years was granted. However the project could not take off as planned because the Authority was specified for divestiture and it was not allowed to invest in a project whose payback period exceeds two years. We
PA&oBs 2006/2007
42
noted however that in July, 2004 the Presidential Parastatal Sector Reform Commission vide a letter reference PSRC/1/13/48 allocated house number 15 Garden Avenue (one of the 5 houses in plot number 2459/35) to Capital Markets and Securities Authority for construction of offices. It was further noted that there has been a move to sub-divide the plot on which the project was to be erected in favour of CMSA. Of late, the management of the Authority confirmed that the project was no longer feasible because the Government had decided to reallocate the plot to the Ministry of Foreign Affairs and subsequently the Authority has surrendered the title to the Ministry of Lands. In this regard the cost pertaining to this project has no future economic benefits to the Authority and therefore should be provided for in the books of accounts. (ii) Non Payment of Rent by Commercial Tenants We noted that some of the commercial tenants maintained their status quo of not paying rent. As a result of that behavior, some tenants have accumulated substantial balances of unpaid rent. Efforts by the management to have the rent paid have not been successful. As at 30.6.2007, unpaid rent balance stood at Shs. 245,834,324 made up as follows:Long outstanding Rent Station TPA Headquarters TPA Tanga Port Total
Shs. 218,204,888 27,629,436 245,834,324
Some of the individual commercial tenants with outstanding rent balances (above 5 million) are listed below to support this query.
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43
Tenant Name
Balance at 06.2007
TAZARA Msasani Nursery School Infotech Investment Group Victoria Technology Vodacom Sokoine H.J.lmpex (1st&2nd Floor) Julius Chambers Polisi Wanamaji Amba Freight Jamex International Supplies Rose Mahendeka Computer Centre " Vodacom Kurasini Isle Freight Forwarder Inter Tourism Limited (iii) Amount due from Dunhill Motors
Shs 55,7 49,127 26,819,500 23,734,114 15,657,153 14,672,103 14,582,407 13,865,814 13,608,000 11,341,000 10,214,071 9,432,676 7,596,064 6,605,337 6,367,500 5,581,500
An amount of Shs.133,179,200 was paid to Dunhill motors for supply of motor vehicles seven years ago. However, Dunhill motors could not supply the motor vehicles and eventually the matter was referred to the court of law for determination. Up to the time of concluding the audit field work in October, 2007 the case had not yet been concluded. We noted, however, that full provision for impairment in value has been made in the financial statements (iv) Performance review Results from the audit performance review show that Tanzania Ports Authoritys management should take measures geared at promoting the ports of Tanga and Mtwara to boost revenue generation capacity and control expenditure to enable the ports to break even and or to generate surplus.
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44
3.1.6 National Insurance Corporation (i) IT Problem in Hardware and Software The Corporation is running an old infomix computer system under UNIX platform developed and installed in 1993. The system has not undergone any major upgrade since its installation. This has resulted in poor performance, unreliability of data. System failure is recorded at least once per month especially on database system.
Maintenance and recovery of data from the computer system especially main database once the failure has occurred takes a lot of time, even up to three days and causes other services to be placed on hold or being processed elsewhere. Lack of system automated features has also been causing many problems and delays including the following:(a) Manual verification of processed records and data; (b) Manual confirmation of tapes from branches during processing of records; (c) Loading of incorrect tapes into the computer system; Decentralization of data processing between branches and head office has also created several other problems, which include; - Data inconsistency between head office and branches; - Poor control on preparation of tapes to be transported to head office; - Poor control on transportation of media data tapes; - Poor control on handling of tapes at head office. (ii) Amount Due From Reinsurers Shs.4,578,501,546 Dues from Reinsures are stated in the accounts at Shs.4,578,501,546 (gross) as at 31st December, 2006. Our examination of the balance revealed that there were long
PA&oBs 2006/2007
45
outstanding receivables in respect of premium from reinsurance companies amounting to Shs.698,618,596 thus casting doubt on the accuracy and existence of receivables due to the possibility that they were received in the past but books were not posted appropriately. No confirmation was available to auditors to prove existence of the receivables. We were informed that some of the companies have merged; hence seeking confirmations from the companies was useless. However, the outstanding payables in respect of premium to Re-Insurers were Shs.3,375,903,617 as at 31st December, 2006. 3.1.7 Muhimbili National Hospital During the physical verification of the assets owned by the Muhimbili National Hospital it was noted that one building which was being constructed within the Hospital land is owned by a private person. The Hospital management explained that one person identified as Mr. Kiluvia approached management of the then Muhimbili Medical Centre to construct a commercial building currently housing National Micro Finance Bank, Pharmacy, Restaurant and other business units. The copy of agreement between the then Muhimbili Medical Centre and H.A.Kiluvia trading as Agent Store is available; agreement was signed on 11th April, 1987. The tenant (A.H.Kiluvia) was to occupy the building for five years with effect from 22nd December, 1987. The agreement period expired, but the building is still under ownership of the developer contrary to the agreement.
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46
Part B (i) 3.2.1 Current year audit findings This part deals with the audit findings which were revealed during the audit of the current financial year 2006/07. Part B is divided into two parts as mentioned earlier. Part one of part B deals with common audit findings which cut across PA&oBs in the country while part two of part B deals with specific audit findings which do not cut across PA&oBs as follows: Part B (i) Common Audit Findings The common issues that were revealed during the period under review include overpayments, excess expenditure over budget, outstanding imprests advances, outstanding staff receivables, long outstanding receivables, assets management, non compliance with statutory deductions requirement, non reconciliation of bank statements and cash book entries and observations regarding to banking. Detailed current year audit findings are as follows: 3.2.2 Over Payments and Excess Expenditure Examination of payments vouchers and the related records revealed that a total of Shs.375,144,226 was overpaid to the Commissioner of Domestic Revenue due to wrong interpretation of the VAT Act. It was also noted that some of the Public Authorities and other Bodies spent more that the approved budget to the tune of Shs.136,061,758 during the year under review as summarised below:
Client Name VAT/Tax Shs. Excess Expenditure Shs.
S/N
1 2
Tanzania Standard Newspapers Dodoma Urban Water Supply and Sewerage Authority
84,349,499 136,061,758
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47
3 4 Total
Tanzania Standard Newspapers Tanzania Postal Bank
184,260,776 106,533,951 375,144,226 136,061,758
It implies that the activities of the respective Public Authorities and other Bodies suffered to the tune of the amount of the VAT overpaid to the Commissioner of Domestic Revenue. Furthermore, the Dodoma Urban Water Supply and Sewerage Authority should seek retrospective approval from the Board for the excess expenditure of Shs.136,061,758 incurred during the year under review. 3.2.3 Long outstanding receivables imprests, advances and staff
During the year under review some of the Public Authorities and other Bodies closed their respective financial years with outstanding imprest, staffs advances and staffs receivable amounting to Shs.64,903,047. This is contrary to the financial regulations and best practice. Regulation No. 103 of the PFA of 2004 requires retirement of all imprests as soon as the necessity for them ceases to exist; while staff advances are required to be recovered before or by the close of business on the last day of the financial year in which they were issued. Analysis of the outstanding amounts is as follows:
S/N 1 2 3 4 Total Client Name Tanzania Standard Newspapers Dodoma Urban Water Supply and Sewerage Authority NEMC Tanzania Tobacco Board O/S Imprest SHS 29,428,647 11,888,822 O/S Advances SHS 30,059,60 1 22,954,624 6,535,600 47,853,069
30,059,60 1 22,954,624
Staffs Receivables
Amount SHS 29,428,647 41,948,423 22,954,624 6,535,600 100,867,29 4
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The management of the respective PA&oB were negligent in ensuring that the aforementioned financial regulations were taken into account in effecting payments of staff imprest and advances. 3.2.4 Long Outstanding Receivables and Payables The audit of the financial statements of the PA&oBs during the year of reporting revealed material amounts of outstanding receivables and payables amounting to Shs.58,191,036,467 and Shs.11,154,027,688 respectively. These were caused by some of the Public Authorities and other Bodies failing to collect the outstanding debts and discharge their due debts. The accounting procedures requires that where it is established beyond reasonable doubt that an outstanding receivable balance cannot be collected, then appropriate approval to write off from the books of accounts that amount should be sought from relevant management levels. The audit team was not given reason(s) for non recovery of the outstanding amounts and recoverability of the same could not be ascertained. Furthermore, no provision for impairment of receivables was made in the financial statements. The analysis of the outstanding amounts is as follows: Outstanding receivable and payables
S/ No 1 2 3 4 5 Auditee Name National Development Corporation (NDC) Tanzania Ports Authority (TPA) SIMU 2000 LIMITED Tanzania Education Authority (TEA) Tanzania Standard Newspaper LTD O/S Receivables 611,850,000 379,013,524 1,373,514,499 5, 705,009,906 1,574,660,254 O/S Payables
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49
6 7 8 9 10 11 12 13
Tanzania Postal Bank State Mining Corporation (STAMICO) Arusha International Conference Centre (AICC) Tanzania Petroleum Development Corporation (TPDC) Tanzania Cotton Board Mbeya Urban Water Supply and Sewerage Authority Songea Urban Water Supply and Sewerage Authority Cooperative Audit and Supervision Corporation (COASCO)
National Insurance Corporation (NIC)
196,973,814 213,094,332 86,385,415 103,315,841 430,782,985 493,478,776 252,234,884 1,860,000,000 24,070,863 31,148,664
14 15 16
33,179,238,931 16,800,000,000 584,686,433
Tanzania Electric Supply Limited (TANESCO) Tanzania Industrial Research Development Organisation (TIRDO)
National Social Security Fund (NSSF)
17 18 19 20 Total
965,299,082 1,264,423,677 2,360,891,699
2,012,559,823 3,124,322,338
Muhimbili National Hospital (MNH)

Tanzania Broadcasting Services (TBC)
Tanzania Board
Coffee 58,191,036,467
5,961,926,000 11,154,027,688
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3.2.5
Assets Management. A number of Public Authorities and other Bodies were noted to have poor and/or improper management of the non current assets. These were evident by lack of ownership, un-updated fixed asset registers, and non valuation of non current assets, lack of insurance cover and lack of assets identification code numbers. Detailed analysis of the concerned PA&oBs is as follows:
Auditee Name Tanzania Ports Authority (TPA) Title Deeds /Ownership Lack of title deeds/right of occupancy certificates for lake Victoria Ports. These ports are Bukoba, Kemondo Bay, Nansio, Musoma, and Shirati. Lack of title deed for blocks of residential flats located in Tabora Municipality at Cheyo Area. -Lack of title deeds for ranches at Ruvu, Kongwa, Kalambo, Kagoma, Kikulula, Makata and Mabale. amounting to Shs. 169,800,483 Non /over /under Valuation Insurance cover Assets Identification/ Existence A TPAs motor vehicle at Mwanza was still in Ugandan Registration No. UAG 299 K.
S/No 1.
2.
SIMU 2000
3.
National Ranching Company Limited (NARCO)
Motor vehicles not registered in the name of the company. -Title deeds are not in the name of NARCO. These ranches are Misenyi,
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51
Kitengule, Mkata, West Kilimanjaro and Plot 285 Regent Estate 4. National Social Security Fund (NSSF) Dar es Salaam Institute of Technolog y (DIT) Institute of Adult Education Lack of title deeds to the Funds properties. Missing title deed of the college Non valuation of the Property, Plant and Equipment Included in stocks and stores are reading materials reported at Shs.78,065,0 05. The item was acquired by the institutes some years back. Considering the prevailing reforms in education these items appear to be obsolete. Lack of Insurance cover
5.
6.
Lack of title deed.
7.
TCRA Consumer Consultative Council
No insurance cover on office furniture and equipment
Lack of Assets identification code numbers
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52
against various risks 8. State Mining Corporati on (STAMICO) PPE overstated to the tune of Shs.383,719, 204. The ownership of PPE of this amount were taken over by Tanzania Building Agency but still are shown in the books of STAMICO NCAA has not obtained title deed for its property in Njiro Arusha Unsecured title deeds to some of its plot of land in Ujiji plot 79 block A Kibirizi area, plot135 Katonga, Bangwe and plot 1/8 Mpanda No title deed for Boards properties amounting to Shs.27,455,050 . Non availability Non incorporation of values of the carrying costs of land plots which corporation intends to develop Uninsured building, machinery and equipment Failure No coding and addition in the register
9.
10.
Ngorongoro Conservat ive Area Authority (NCAA) Tanzania Petroleum Development Corporation (TPDC)
11.
Tanzania Library Services Board (TSLB) Muhimbili
12.
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13.
14.
15.
University of Health and Allied Science Tanga Urban Water Supply and Sewerage Authority Dar es salaam Water and Sewerage Corporati on (DAWASC O) Tanzania Tobacco Board (TTB)
of property title deed No title deed for PPE amounting to Sh.19,642,570, 800
to insure its assets
Fixed assets not coded Shs.129,406, 841
Unemployme nt of a competent valuer to state fair value of the PPE Lack of control of fixed assets: Neither physical count nor coding of newly acquired fixed assets amounting to Shs.508,973,184 Fixed assets register not updated for additions and deprecation
16.
Unit Trust of Tanzania (UTT)
17.
Tanzania Bureau of Standards (TBS)
Non valuation of PPE contrary to IAS 16
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54
18.
Mtwara Urban Water and Sewerage Authority Sugar Board of Tanzania
No title deed for buildings amounting to Sh.608,352,800 Lack of the title deed for the building on; -Plot No 45 at Alykhan Road. -6 houses on plot No 303 at Masaki. -Residential houses at Makambako Iringa.
Fixed assets are not valued
Fixed assets are not insured
Fixed assets are not updated in the books
19.
3.2.6 Non Compliance with the internal accounting manual &
staff regulations During the year under review some of the PA&oBs were found to have not been complying with their internal generated accounting manuals and staffs regulations. For the matter of best practice each entity should have its own procedures or regulations in order to carry out its business in an effective and efficient manner. Furthermore there are statutory requirements which must be complied with by every entity. These statutory requirements are the prevailing laws, regulations and directives issued by appropriate authorities. Detailed analysis of Public Authorities and other Bodies that do not comply with their accounting and staff regulations are as follows: S/N Auditee Name
1. Dar es salaam Sewerage (DAWASCO)
Remarks
Water and -Outdated procedures manual Corporation - Uncertain on the accounting treatment for the funds received from the Government of Tanzania of Sh.5 billion.
2.
National Social Fund (NSSF)
Security Outdated manual
accounting
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55
3. 4.
5. 6. 7.
8.
9. 10. 11.
Dar Es Salaam Institute of Outdated financial Technology (DIT) regulation and accounting manual Tanzania Petroleum Outdated financial and staff Development Corporation regulation which fails to (TPDC) accommodate changes resulting from the Corporations current needs. Songea Urban Water and Late submission of financial Sewerage Authority statements Tanzania Tobacco Board Non compliance with TTB (TTB) accounting manual on asset coding Tanzania Electric Supply Ilala region where new limited (TANESCO) customers were connected and added in the Custima without paying deposits as required by Companys regulations. -Late submission of financial statement Tanzania Institute of -Absence of accounting Bankers manual -Outdated financial regulation State Mining Corporation -Late submission of financial (STAMICO) statements Muhimbili college of Health Late submission of financial Science statements Public Procurement No Accounting and Regulatory Authority (PPRA) operational manuals have been established at the Authority Non bank reconciliation items, bank reconciliation and delays in banking The Public Finance Reg. No. 78 (1) of 2004 requires that all collections of revenue or other public moneys be paid 56
3.2.7
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into a bank daily or if this is not possible, at the earliest possible opportunity. It further states that when depositing collections into a bank, the full particulars of the amount and serial number of the cheque and the name of the bank shall be recorded with the departmental copy of the bank lodgement slip. However, contrary to the above regulation, a total of Shs.73,458,924 was not banked by the Parastatal Sector Reform Commission as required by law. However, during the audit of the financial statements and the related records of PA&oBs we noted that bank reconciliation statements were not prepared on a monthly basis as required by the financial regulations. Bank reconciliation statements should be prepared monthly and be checked by a senior person and approved by senior officers. Furthermore, public moneys were noted to have not been banked daily or at the earliest possible opportunity as required by regulation. Detailed analysis of the concerned PA&oBs that did neither prepare bank reconciliation statements on monthly basis nor banked public moneys as required by regulations are as follows:
S/No 1. Auditee Name Tanzania Engineering and Manufacturing Design Organisation (TEMDO) Reconciliation and banking Un-reconciled difference in bank reconciliation statements in all three accounts. -Recurrent A/c No. 014103000316- NBC -Project A/c No. 014103012343- NBC -Account No. 01J10337520 CRDB bank reconciliation Presidential Parastatal .Wrong Sector Reform Commission statement. The prepared bank reconciliation as at June, 2006 (PSRC) had overstated balance as per cash book of Shs.61,137,289.57
2.
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57
3. 4.
-Delay in banking of Shs.73, 458,924 for more than 30 days. State Mining Corporation Unreconciled items between (STAMICO) physical count Sheets and stores ledger Singida Urban Water and Unreconciled balance as Sewerage Authority physical and as per accounts for fixed assets hence balance of Shs. 70.5 million of movable fixed assets disclosed in the accounts could not be ascertained National Social Security Non reconciliation of movable Fund fixed Assets. National Insurance Difference of Shs.228,045,531 Corporation (NIC) between Performance analysis report and the General ledger Tanzania Electric Supply -Inventory balance of Sh.36 limited (TANESCO) billion as per subsidiary ledger do not tally with Scala (trial balance) -Un reconciled general ledger and schedule of capital WIP difference of Shs.915 million -There were discrepancies between the number of customers reported in the monthly sales reports as extracted from Custima and monthly engineers reports for, Ilala, Shinyanga, Arusha, Kilimanjaro, Mwanza, Morogoro and Mbeya regions. -In 31 December 2006 Shinyanga Branch reported cash transit of Shs.24,399,886 in the general ledger and Shs.9,172,789 of the reported cash in transit way banked. There was no satisfactory explanation provided by management to
5. 6. 7.
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8.
support the difference of Shs.15,167,020. Tanzania Broadcasting -Bank reconciliation statements Services (TBC) at zones are not prepared and submitted to the head office -There is a difference of Shs.61,561,884 between output VAT per sales summary and general ledger -Daily cash collections at Dodoma are kept at the office and banked at the end of the month
3.2.8
Poor Information Technology Systems Poor information systems in one way or another hinders smooth performance of PA&oBs and may also impair their internal control systems. The following Public Authorities and other Bodies were noted to have weak Information technology systems: Status of Information technology system Ports Weak IT system. -Lack of an IT security policy. The
Corporation should formulate an IT security policy which should be documented, communicated to staff and tested regularly.
S/No Auditee Name 1. 2.
Tanzania Authority (TPA) Dar es salaam Water and Sewerage Corporation (DAWASCO)
3.
National Insurance Corporation (NIC)
-Lack of Business Continuity plan (BCP) which incorporates a Disaster Recovery Plan (DRC) The computer hardware and software are outdated causing poor performance, thus risking integrity of data and suffers from
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59
4.
availability of both service and data back up. The maintenance and recovery of data from the computer system, especially main database, when there is a failure, takes a lot of time. The consequences of these problems have been to frequently interrupt the IT system manually to ensure accuracy of reports which is not a recommended IT practice. Tanzania National Neither standards accounts for Parks (TANAPA) consistent reporting nor standard template for validation, control and reconciliation to improve reports -Computerized database is not efficient to generate the update report on the member subscription at any point in time. -Lack of Business Continuity plan (BCP) which incorporates a Disaster Recovery Plan (DRC) Public Procurement No Business Continuity plan and Regulatory Authority Information Technology policy. (PPRA) Tanzania No intergraded accounting Broadcasting software package. In addition the Services (TBC) existing revenue package (MYOB) can not run other useful reports such as daily activities summary, journal vouchers and final accounting preparation. Twiga Bancorp -IT function does not monitor all the user accounts to identify dormant accounts or accounts with insignificant usage. The risk involved is that, people may have National Board of Accountants and Auditors (NBAA)
5.
6. 7.
8.
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access to company data, information and resources after they have left the office for extended period of time. -Also, it was noted that there is insufficient control of passwords the weakness detected includes; log of unsuccessful logons is not maintained and reviewed by senior personnel, the password history is not kept and alphanumeric complexity is not enforced. -The IT function does not have proper segregation of duties, the following activities have not been separated; User administration and system administration roles System modification and moving applications to production System modification and system administration The existing IT strategy is outdated and it does not provide necessary initiation and strategies to develop clients information system needs. Part B (ii) 3.3.0 Specific Audit Findings Part two of part B deals with specific audit findings which were revealed during the year under review. Some specific audit findings which need high attention and priorities are observed in Tanzania Electric Supply Company, Dar es salaam Water Supply Company, National
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Insurance Corporation, Tanzania Industrial Research Development Organisation, Co-operative Audit and Supervision Corporation, National Social Security Fund, Tanzania Library Service Board, Tanzania Tobacco Board, Muhimbili National Hospital, Arusha International Conference Centre, Tanzania Broadcasting Services, Tanzania Postal Bank, Tanzania Coffee Board, Capital Market and Securities Authority, Tanzania National Parks, and Simu 2000 Limited. Detailed current year audit findings under category of specific observations are as follows: 3.3.1 Tanzania Electric Supply Company Limited (TANESCO) (i) Hydro-Generation Facilities. The Company has been operating at a loss for a number of years. In addition, the prolonged drought situation in the country had limited the Companys hydrogenation capacity. Due to this, management and government sought alternative sources of power generation. These included gas, coal and thermal generation. Other alternative sources of power such as wind generated power are also being reviewed. As a result, the management need to assess the future plans on its reliance on hydrogenation from the existing dams and as to whether they will be used to full capacity. Should this not be the case, there may exist possible impairment of the assets. (ii) Pangani Hydro-Generation In our review of the additions to hydrogenation assets, we noted the purchase of air conditioning units amounting to Shs 315 million at the Pangani hydro-generation facility. From discussion with management we were informed that this asset was a replacement to the older unit
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62
Management was unable to write off the replaced asset as the unit cost could not be separated from the fixed assets register. (iii) Attainment of Key Mile Stones. Key milestones included in the Financial Recovery Plan [FRP] of TANESCO included: IPTL buy-out by March 2007; IPTL conversion by June 2008; Songas re-financing to create monthly savings of US$ 340,715; Syndicated loan finalization by June 2007; Permanent gas generation at Ubungo & Tegeta all to be completed by August 2007; and Improvement of line transmission and connection of new service lines. These factors noted above have to date only been partially met or not met at all as follows: (iv) IPTL buy-out negotiations are still on-going. IPTL conversion has been halted until the above mentioned negotiations are finalised Songas re-financing is still being negotiated. Syndicated loan is in the final stages of being disbursed. Permanent gas generation at Ubungo & Tegeta is on-going. Plans in progress to improve the transmission line.
Unreleased Project Funds Shs.2,097,999,000 During the year 2005 and 2006, the Government issued funds to TANESCO through the Ministry of Energy and Minerals for Rural Electrification Projects amounting to Shs.2,097,999,000
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However, verification of the amounts on the projects could not be made as the respective amounts were credited to TANESCO main account. (v) Non Capitalization of Capital Work Order Totaling Shs.382,140,366 Audit scrutiny of materials and capital work orders against records at various regions disclosed materials and capital work orders to have not been capitalized as shown below: Capital work order at Ilala regional office not posted in general ledger Shs.53,891,857. Materials undercapitalized from Ilala Shs.112,957,147 Materials issued from Ilala regional office not capitalized Shs.23,072,352 Materials undercapitalization from Ilala region Shs.8,193,708.16 Contribution to capital work orders from Temeke region not capitalized Shs.96,706,308 Advance received but not reflected in general ledgers Shs.18,592,006. Under collection of advances against completed capital work order Temeke Shs.5,328,704 Unpaid contribution towards capital advance Shinyanga Region Shs.63,398,282.84 (vi) Investment in Songas Shs.2,249,597,714. According to the audited financial statements of the SONGAS Ltd for the year ended 31st December, 2006 the Company recorded a loss of USD 7,410,000. In addition, total assets were less than total liabilities by USD 3,568,000 indicating that the company is insolvent. TANESCO has agreed to temporarily finance additional investment in SONGAS and up to 30th June, 2007 a total of Shs.2,249,597,714 being 64
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revenue of gas due to TANESCO have been retained by SONGAS for the additional Investment. However the investment is being made to a loss making company, a move which may result to loss of TANESCO funds. (vii) Independent Power Tanzania Limited (IPTL) It was noted that the Capacity payment charge from IPTL is given in blanket without the analysis of the involved components of cost or the module.
Liquidated Damages Due From M/S Dowans Holdings Shs.2,683,800,000
(viii)
Audit review of Power-Off Agreement disclosed that M/S Dowans Holdings failed to commission at full capacity of 100MW generation on the Commercial operation date (COD) effective from 2nd February, 2007 through 31st August, 2007 contrary to the agreement. (As at the time of writing this report in September 2007 i.e. 210 days, the default had attracted in a liquidated damages of USD 10,000 per day accumulating to USD 2,100,000 equivalent to Shs.2,683,800,000). The amount in question was not paid to the TANESCO up to the time of writing this report. No reasons were given to auditors for non payment of the liquidated damages. (ix)
Delays In Billing New Customers & NonEmployees Receiving Discounted Electricity We noted that in Ilala, Arusha, Kilimanjaro, Kinondoni South, Morogoro and Mbeya, newly connected customers received their first bills two or more months after connection.
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Also our review of staff accounts entitled for discounted electricity in Ilala, Arusha and Mbeya regions noted several names of ghost staff who are not employees of TANESCO as at 31 December 2006. 3.3.2 Dar es Salaam Water Supply Company (DAWASCO) (i) Accounting for the Government Grant During the year under audit, the Government of the United Republic of Tanzania disbursed Shs.5 billion. At the time of disbursing the funds, the Government through the Ministry of Finance specified that the full amount should be accounted for in the books of account as shareholders equity. However, the Board of Directors and management elected to recognize Shs.2 billion as contribution towards capital fund under shareholders interests in line with the Government notice number 139 dated 20 May 2005, and posted the remaining amount of Shs. 3 billion to income. In the absence of formal clarification from the Government, we are unable to confirm whether or not a portion of the disbursement (i.e. Shs. 3 billion) represents a revenue grant. Any adjustment to the shareholders equity account would result in a similar adjustment to the loss for the year. (ii) Issues on revenue reported As part of our audit procedures, we conducted a site visit sampling 40 customers, with the aim of identifying whether the customers were metered, receives bills regularly, had running water on their taps and whether connected or disconnected. Of the sample chosen, we managed to locate 25 customers out of the 40. Refer to the summary table below:
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Original sample selected
Number of custommers located
Number of customers metered
Number of custommers receiving bills
Number of customers who do not receive water
Number of Number of customers customers disconnected receiving water but still but not receiving bills receiving bills
40
25
12
12
13
This implies potential misstatement of revenue 3.3.3 National Insurance Company (NIC) (i) Interest on Policy Loan The Corporation charges interest at a rate of 9% on loans issued to policy holders. During the year under review, the total amount of Shs.54,959,092 was earned as interest and included in other income. The following anomalies were observed: - Non availability of workings showing how the interest was arrived at. The information given is that computer generates the amount automatically though no transactions print out was generated for audit. - Interest was charged on loans whose policies have matured whereas un-recovered loans whose policies are still in force are not charged. - Computation of interest is done at the time of maturity of policies, interest charge is not done on monthly basis and the allocation is not done correctly to appropriate financial year. Investment properties. Due to past historical and political factors, the corporation has tied up significant portion of its assets in properties. The investment in properties reported under life and pensions business is Shs.32.2 billion whereas total asset under the same business is Shs.55.6 billion. The ratio of total assets to investment in property is 58% and the return on this for the year under review is 7.6% equivalent to Shs.1.7 billion. The Commissioner for insurance 67
(ii)
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allows the 15% of the investments in properties in determining solvency margin, whereas other classes 100% is allowed. In this view, the assets are over invested in properties which contribute to financial difficulties in liquidating maturity obligations some of which have remained unpaid since 1992. This handicap has significantly eroded customers confidence in the Corporation. 3.3.4 Tanzania Industrial Organisation (TIRDO) (i) Research and Development
Encroachment on Plots 1408 and 1409 The previous management letters raised the issue of encroachment made by Comprehensive Community Based Rehabilitation in Tanzania (CCBRT) on Plots No. 1408/09 owned by TIRDO prior to 17th April, 1999. For unknown reasons the Organisations Plots No. 1408/09 issued with original certificate of occupancy No. 35626 dated 1st April 1994 tenured for period of 99 years was claimed to have been revoked by the President and CCBRT was issued a certificate of occupancy No. 47430 dated 17th April 1999 for plot No. 1409/1 within the original plot No. 1408/09 for a period of 99 years. CCBRT have already developed the plot. Further we observed that CCBRT have fenced the plot and some TIRDOs properties are in CCBRT plot i.e. buildings and sewerage pits. Since 1989 the organisation has been making a follow up in order to resolve the matter without success. In view of the foregoing, TIRDO has no legal right of occupancy to the plot in which its properties are located.
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3.3.5
Co-operative (COASCO) (i)
Audit
and
Supervision
Corporation
Property, Plant and Equipment (PPE) We observed during our site visit of the Corporations buildings that various houses such as those listed below with a total carrying amount of Shs.359,122,800 at 30th June,2007 were in dire need of renovation as their conditions were dilapidated:
Value at 30th 06, 2007 Shs.
S/N 1 2 3 4
Type /Location of Building House on Plot No.24 Block J. Makongoro Rd, Moshi Municipality Residential house on Plot 113 Bock C Changombe Dar es Salaam Residential House on Plot 26 Block 2 Shinyanga Office Block on Plot 54 Mwanza Rd, Shinyanga Municipality Total Shs.
64,550,600 38,000,000 33,407,700 223,164,500 359,122,800
Management explained that the bad state of the Corporations buildings was as a result of lack of funds for renovation as much of its internal revenue was tied up in trade and other receivables. (ii) Long outstanding Business Receivables The bulk of the Corporations business receivables constitute audit and consultancy fees earned over the years from various co-operative societies and/or unions across the country but remain uncollected. Various reasons for not collecting the debts have been advanced but notably economic factors, particularly agricultural cooperative societies/unions have been cited as the main reasons. We observed that as at 30th June, 2007 the Corporation was owed an amount of Shs.1.86 billion (2005/06): Shs.1.65 billion by the Cooperative societies/unions. Out of
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this, an amount of Shs. 1.17 billion (2005/06: Shs.1.15 billion) had been impaired or set aside as bad debts. The management had requested the Board to write off an amount of Shs.720,000,000 of cooperative debts which the government had earlier announced that it would take over. 3.3.6 National Social Security Fund (NSSF) 3.3.6.1 Investment and Loans. (i) Non-Repayment of Loans As pointed out in our previous reports, some of the beneficiaries of investment loans have not complied with terms and conditions of the loans granted to them. Specifically, they have not paid the installments as scheduled, thus resulting into accumulation of accrued interest. This is illustrated hereunder:Borrow er Name New Kilimanj aro Bazaar Mbowe Hotel Ltd Date of Borrowing Principal Amount Shs 99,445,000 Accumulated Interest up to 30th 06 2007 Shs 750,849,846 Total Loan as at 30th 06 2007 Shs. 850,294,846
Remarks
03.04.1990 26.08.1991 and 07.09.1992 10.03.1990
Legal action taken It was repayable fully by December, 1997. - Legal action taken. Shs 50m had been paid on 15.12.06 and Shs. 5m was paid on 22.01.07.
7,500,000
229,898,516
237,398,516
Ubungo Plaza Ltd
04.02.2004
834,188,285
340,648,593 1,174,836,878 It was repayable by July, 2004. So far only
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Shs.200m has been paid. Explained that loan rescheduled to 31st .12 .2006. The agreement yet to be seen. Kagera Sugar Company Ltd 11.02.2003 12,000,000,000 4,479,457,592 16,479,457,592 Repayment was to commence from September, 2004 Repayment due date was as follows:Interest31.12.05 Principal30.03.07 Apart from 85% govt. guarantee, security was specified receivables aggregating to $ 3,398,551.55 as at the date of agreement. Nothing has been collected so far in this regard However, out of the above amount, $1,465,837.60
General Tyre East Africa
08.02.2005
12,240,000,000
1,577,191,814 13,817,191,814
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was subsequently considered irrecoverable and written off. IMRA Holding 03.02.2006 474,000,000 106,857,143 580,857,143 Repayment due date was as follows :InterestDecember, 06 PrincipalDecember, 07 4,881,818,964 Repayment due date was as follows:InterestJune, 06 PrincipalDecember, 07
Continental Ventures
15.09.2005
4,438,000,000
443,818,964
Despite the managements follow up efforts, we are of the opinion that some of these loans and their respective accumulated accrued interests are doubtful of recovery. 3.3.6.2 Documents Relating to Loans We also observed that some documents pertaining to some of the loans granted to borrowers by the Fund, as provided for in the respective loan agreements, were not available for verification. These are illustrated hereunder:S/N 1. Name of the Loan Holder Imra Holdings Ltd Details Evidence that security to the loan was currently insured against insurable perils. Remarks Date of Agreement; 19th January, 2006 Amount Loaned; Shs 474,000,000. 72
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2.
Continental Ventures (T)
Performance progress reports (the loan agreement requires that quarterly progress reports are provided to the lender regularly) Government guarantees agreement. (The agreement stipulates that the government has guaranteed the loan by 100%)
Balance as at 30th 06 07. Shs.80,857,143 Date of Agreement: 19th April, 2005 Amount Loaned: USD 3.5 million Balance as at 30th 06 07. Shs.4,881,818,964
3.3.6.3
Loan to M/s Meditech Shs.1,525,368,425 The Fund had extended a loan of Shs.1,525,368,425 to M/s Meditech on 30th April, 2003 and agreed due date for repayment was December, 2004. We were notified that the loan was subsequently rescheduled for repayment to commence from 30th June, 2006. Agreement to substantiate this later development was yet to be availed for our verification. Furthermore, current correspondences made by the Fund regarding the loan, were observed to be addressed to M/s Emunio Tanzania Limited as the borrower. Legality for change of loan liability from M/s Meditech Ltd to M/s Emunio Tanzania Ltd could not be substantiated as no documentary support was availed to us in this regard.
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3.3.6.4
Sale of Houses - Kinyerezi Project In our review of transactions relating to the sale of low cost houses project at Kinyerezi, Phase 1 Housing Scheme, we observed that some of the purchasers did not comply with the terms and conditions of their agreements. The agreements provide that under no circumstances should the purchasers withhold the monthly repayments. Further, the agreements grant the seller (the Fund) the right to repossess the property once the purchaser withholds the monthly installments for three consecutive months. Cases of default in payment of the monthly installments for over six months were, however, observed and the purchasers still occupy the premises. We give the following cases observed during the audit for the year ended 30th June, 2007. S/N Defaulter Name Ishengoma J. Balyagati Ally Mohamed Libaba Monica Demelo Ben Mahenge Gaddiel S. Meena Sixmuind Kapungu Valeriano Ngairo Paschal Amount Defaulted Shs 4,012,000 4,836,000 5,954,000 4,528,000 3,448,000 1,580,000 653,000 836,000 No. of Months in Default 34 29 26 26 15 14 8 7 74 450,000 326,000 113,000 Subsequently Paid Shs.
1 2 3 4 5 6 7 8
300,000 500,000
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9 10 Total
Chuwa Patricia Bulemela Samwel Kilungu
1,104,000 702,000 27,653,000
6 6
526,000
2,215,000
3.3.6.5 Social Health Insurance Benefits (SHIB) (i) SHIB Monitoring and Evaluation Committee Section 60 of the Social Health Insurance Benefits regulations (NSSF Act), stipulates that SHIB monitoring and evaluation committee should be formed. The main aim of the committee is to act as an administrative body for the arrangement, stakeholders involvement forum and grievances administrative overseer. We noted that such a committee was yet to be established. (ii) Operational Guidelines for Fee per Case System The Fund uses two modes of operations in implementation of the Social Health Insurance Benefit scheme, namely capitation and fee per case. We observed, however, that the operational manual governing routine activities of the Social Health Insurance Benefit scheme covers only capitation system of operations but fee per case system was not covered. It should be noted that the SHIB regulations provide for only capitation system. 3.3.6.5 Tanzania Library Services Board (TSLB). The regional libraries were observed to have significant problems; this includes Arusha, Bukoba, Kilimanjaro, Mbeya, Musoma, Shinyanga, Songea, Rukwa, Tabora and Tanga. Detailed analysis of problems observed is as follows:
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(i)
Old and dirty buildings (Bukoba, Kilimanjaro, Mbeya, Musoma, Rukwa, Shinyanga and Tanga). Buildings are leaking, walls are cracked, roofs are collapsing, and window glasses are broken. Some buildings are too small to accommodate growing number of users in such a way that readers are required to sit under nearby trees. The buildings are not safe for employees and readers. Shortage of furniture (Arusha, Bukoba, Kilimanjaro, Musoma, Shinyanga, Songea, Tabora and Tanga) There is shortage of chairs and tables to accommodate the users; some lack shelves in such a way that reading materials are kept in boxes. Defective toilets and water problem (Mbeya, Songea, Rukwa and Tabora) The toilets are very dirty causing foul smell to the surrounding. There is no water in the toilets (especially Tabora) causing the toilets to be blocked with tissues, which is not hygienic and threatens the health of users. Books and Lights ( Arusha and Kilimanjaro) It was noted that Arusha and Kilimanjaro Regional Libraries are experiencing shortage of books, compared to the increasing number of users. It was also noted that lighting in these libraries was inadequate. Some lights were not working and hence readers are not comfortable with the reading environment.
(ii)
(iii)
(iv)
3.3.6.7
Tanzania Tobacco Board (TTB) (i) Poor Maintenance of Non current assets Register TTB maintains its register for non current assets manually as noted during the audit. The practice seems to attract more errors such as the
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purchase of motor vehicle SU 36720 which was recorded with the following information; Date of purchase: 05-09-2007 which is the date of audit and hence not correct as it is depreciated from 05-09-2006 Invoice number: 05-09-2007 which is not the invoice number but the date of invoice. Other vehicles carried less information as compared to others like Vehicle No. SU 36920, lack year of manufacturing (contrary to requirement of accounting manual chapter 7 item 5.0 (ii) Motor vehicle register had many alterations. Furthermore, the intangible asset bought in July 2006 for Shs 11,880, 184 were noted not to have been recorded in the register of assets. In the circumstance above the assets of TTB were noted to be poorly recorded and this may be an avenue for loss of public assets. 3.3.6.8 Muhimbili National Hospital (i) Issue on trade receivable amounting to Shs.998, 543,766. Audit review of the schedule of trade receivables and underlying records revealed the following shortcomings:
(ii) Expired service agreement Service agreement with AAR Health Services (T) Limited and University of Dar es salaam had expired, hence no legal contractual agreement was in place despite the fact that the hospital was continuing to extend services to the two institutions. (iii) Lack of Credit Policy. The hospital had no credit policy in place to guide how credit facilities extended to the hospital 77
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customers (such as health insurers) should be managed and controlled to ensure that the customers pay for the services enjoyed. In this regard, internal control over trade receivables emanating from credit facilities extended to the hospital customers was lacking. 3.3.6.9 Arusha International Conference Centre (i) Hospital Income During the year under review, the centre realised Shs.623,369,608 as medical income (budgeted medical income was Shs.578,643, 925). Medical expenses amounted to Shs.722,119,463 (budgeted expenditure was Shs.544, 209,668). Thus, the year ended with a deficit amounting to Shs.98,749,855, against budgeted surplus of Shs.34,434,257. From the above details, it can be noted that the Hospital operations continued to be financed by other profitable operations of the Centre during the year under review as has been the case in the past. We further noted that, plans to down-size operations of the Hospital, though already given a nod by the Centres Board of Directors were yet to be implemented. 3.3.6.10 Tanzania Broadcasting Services (TBC) (i) Accuracy and Completeness of revenue The marketing department raises broadcasting orders (BCOs) for the commercial advertisements and programme aired. However, no complete list of all BCOs raised during the year is maintained by the department. Furthermore, no complete records are kept for all commercial orders that were received from the customers. The Director of Marketing confirmed to the auditors that no such list and records are prepared and maintained by the department. Our review of minutes of the Board of Directors meetings revealed that such
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reports are not prepared, submitted and discussed by the board. Furthermore, we noted that the Programme section does not produce and maintain reports for all programme and commercial advertisement made. Lack of the above information makes it difficult to ascertain the completeness of revenue reported by the corporation for the financial year ended 30 June 2007. Also there are no monitoring procedures put in place for all programme and commercial advertisements made by the Corporation. Monitoring of programme and commercial advertisements enables management to ascertain whether all scheduled programme and commercial advertisements have been made in accordance with terms of contract with the customer and are invoiced for. Any discrepancies can be followed up and reconciled. Lack of the monitoring process at the Corporations makes it difficult to ascertain the completeness of the reported revenue. This may lead to loss of income resulting from uninvoiced aired programme and commercial advertisements. Any disputes by the customer can not easily be resolved. Unauthorized programme and commercial advertisements can be aired without management knowledge. The accuracy and completeness of the reported corporations revenues is uncertain. 3.3.6.11 Tanzania Postal Bank Loan Recoveries During the year under review, we observed that several customers were still not paying their dues in compliance with their loan agreements. As a result we noted large amounts remained unsettled beyond the expiry date of
79
the loans i.e. the recovered amount is small compared to the amount taken in relation to the period elapsed. Although efforts were being made by the bank management to recover overdue debts by use of the courts law, and the auctioneers to dispose the mortgage property, there was still no progress on recovery of overdue debt particularly from customers for business loans. Examples to substantiate our findings are as follows:
Name of Borrower Business loans (over 5 Mill.) Salim Koja Suzan Ernest Kisanji Muywangwa Gen. Ent. Co Kiswigo Kanga Mwakajinga EM Trucing Co. Ltd Rochoice Engineering Works Ltd Venance Methusalah Mwamtoto Hassy H.B Kitine Pili Hamis Mwamba Medson Andrea Sanga Malongoza Hesaya Godson Makala Idi Makala Samweli Frank Samweli Nicolaus Wilson Mushi Contract Date Principal loan amount Expiry date Balance as at 31.12.2006 5,301,726 8,414,108 15,831,043 5,472,628 9,420,598 23,653,656 16,240,586 38,390,797 5,909,349 5,803,546 5,762,608 7,729,464 8,470,460 5,792,068
21.12.2004 16.12.2003 02.01.2002 05.08.2004 16.08.2005 31.12.2003 19.03.2003 24.12.2004 27.04.2004 31.01.2002 30.06.2003 30.06.2003 30.06.2003 29.09.2003
13,970,726 17,468,926 35,079,845 13,500,000 30,000,000 41,206,954 19,000,000 41,916,788 7,000,000 15,125,000 8,200,000 8,100,000 11,200,000 8,462,671
21.08.2004 16.12.2005 19.09.2003 05.08.2006 16.11.2005 28.09.2006 27.03.2005 24.12.2006 27.08.2005 08.02.2004 30.12.2004 30.12.2004 30.12.2005 29.09.2005
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Karia Rajabu Msuya Omary Mahela Alawi Mkwema Abdalah Kivara Isaka Juma Customer loan (over 1 Mill) Iluminata Jane Ndile Saidi Idi Ndumbogani Total Shs.
31.12.2003 31.12.2003 17.12.2003 17.12.2003 11.03.2004 13.02.2003 06.10.2004
12,778,106 5,876,946 8,604,096 5,394,029 14,427,778 7,000,000 10,000,000 334,311,865
31.12.2005 31.12.2005 17.12.2005 17.12.2005 11.03.2004 27.02.2006 06.10.2006 456.1103
9,920,619 4,985,552 7,337,035 5,247,930 7,290,041 3,098,016 4,513,184 204,585,014
This list is not exhaustive. If concerted follow up on long outstanding loans is not taken the banks funds would be tied up in debts thus adversely affecting its working capital. 3.3.6.12 Tanzania Coffee Board (i) Coffee Loss Shs.64,378,000 Trade and other payables stated in the accounts at Shs.5,961,926,000 includes a balance of Shs.64,378,000 payable on account of coffee loss occasioned at Dar es salaam branch sometimes in 2005. However, on verification of the same, we noted an unexplained differences of Shs.74,856,435 between the amount disclosed in the accounts as coffee loss of Shs.64,378,000 and actual loss provided by the management totaling Shs.139,234,435 (USD 110,597.44) as Shown below: Name of Coffee buyer Kagera Co-operative Union KDCU Limited Total Exchange rate @ 1,258.93 Less: Balance as per accounts Un explained difference Un refunded coffee loss as at 30.06.2007 USD Shs 115,352,936 91,627.76 23,881,499 18,969.68 110,597.44 139,234,435 64,378,435 74,856,435
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In view of the above anomalies, we are of the opinion that the liability in relation to the coffee loss as disclosed in the accounts as at 30th June, 2007 is not fairly stated. 3.3.6.13 CAPITAL MARKETS AND SECURITIES AUTHORITY (i) Accounting for employees terminal benefits funds Included in the balance sheet under non current liabilities is an amount of Shs.461,370,960 being a fund from employees terminal benefits. The purpose of the account is to provide for a fund to cater for terminal benefits to the employees when an employee retires voluntarily, compulsorily or on medical grounds or who has served the authority for at least twenty years. The account was established pursuant to section 6.11 and 6.12 of the authoritys staff regulations and duly approved by the Board of Directors. In the context of International Accounting Standards (IAS No. 19) the authority is running a Defined Benefit Plan (BBP) in which case the authority is obligated to make good the difference in the event that the plan assets fall short of the actual benefit due at the material time the payment is to be effected. During the year under review the management made evaluation of the scheme in line with IAS No. 19 and established that the would-be total constructive obligations as at 30th June 2007 stood at Shs.759,061,592 while the size of the fund is only Shs.461,370,960 as shown in the balance sheet there by reflecting a would be shortfall of Shs.295,631,799. Assuming a payment to all employees was due at 30th June 2007, the management would have to raise the extra Shs.295,631,799 to meet the dues.
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How the extra funds would be raised poses a dilemma to the management. The authoritys management should consider relieving itself of the risk of managing the employees terminal benefits funds so as to avoid unnecessary burden of paying further compensation in the event that the plan assets fall short of the expectation. Management should therefore transfer the fund to a suitable pension or trust fund whereby it will be appropriately managed under a defined contribution scheme (DCS). In this case the Authority will only be paying the fixed amount to the scheme and avoid any legal or constructive obligation to pay additional contribution in case the fund assets are insufficient to meet the expectation of the employees. Thus CMSA will be full compliant with IAS 19. 3.3.6.14 Tanzania National Parks (i) Management information System TANAPA operates a manual accounting system where all transactions are recorded in manual books and records. Some subsidiary records are maintained on spreadsheet.
The characteristic and risk inherent in such a system is as follows: Higher risk of errors and/or irregularities occurring without being detected by management; Time consuming exercise to prepare accounts and extract information; Lack of audit trail and effective control; More difficult monitoring. With this system, all energy is on recording, reconciliation and validation of accounting information with little time left for financial analysis and management.
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With such a system, there should be enhanced management and supervisory control with alternative information being prepared and circulated to senior management for control and monitoring. 3.3.6.15 Simu 2000 Unsold properties for which the company has no title deed Balance of properties for sale stated in the financial statements at Shs.1,956,800,000 as at 31st December 2006 include blocks of residential flats located in Tabora Municipality at Cheyo Area which were said to be owned by National Housing Corporation (NHC). This implies that SIMU 2000 Ltd had no title on the property although the same was included in the list of assets taken over from TTCL as per Government Notice No.87 published on 11th May, 2005. We further noted that at the time of taking over of the assets by SIMU 200 Ltd, an agreement between the two parties TTCL and NHC had not been concluded, hence the title of the property has remained with NHC to date. In view of the foregoing, we could not ascertain the correctness of the balance of properties for sale stated in the financial statements as at 31st December, 2006. The Companys management in collaboration with TTCL should liaise with the National Housing Corporation to sort out the legal ownership of the block of residential flats situated in Tabora Municipality, Cheyo Area included in the Companys financial statements as available property for sale.
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CHAPTER FOUR FINANCIAL MANAGEMENT ISSUES 4.0 PUBLIC AUTHORITIES AND OTHER BODIES WITH GOING CONCERN PROBLEMS The International Accounting Standard No.1 (IAS 1), states that when preparing financial statements, management shall make an assessment of an entity to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or has no realistic alternative but to do so. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of the business. When financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern. During the year of reporting, we have noted a number of Public Authorities and other Bodies that have all indicators of going concern problems though the financial statements were prepared on going concern basis. Some of the specific indicators or assumptions of going concern problem include the following: Deteriorating working capital; Operating in losses for a number of years;
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Increasing in expenses with decreasing revenue; Inability of the entity to meet its maturing obligations i.e. an increase in outstanding amounts payable.
The following are some of the Public Authorities and other Bodies that have been experiencing liquidity problems: (i) Tanzania Electrical Supply Co. Ltd (TANESCO) (ii) Board of External Trade (BET) (iii) Dar es Salaam Water Supply and Sewerage Authority (DAWASCO) (iv) National Insurance Corporation (NIC) (v) Mtwara Urban Water Supply and Sewerage Authority (MTUWASA) (vi) Tanzania Posts Corporation (TPC) (vii) Tanzania Railways Corporation 4.1 Tanzania Electrical Supply Co. Ltd (TANESCO) The Companys financial position has continued to deteriorate over the years mainly as a result of expensive energy purchases from Independent Power Producers mainly being Independent Power Tanzania Limited and Songas Limited. This has come as a result of prolonged drought in the country which has limited the Companys hydro-generation capacity and therefore forced it to buy energy from the independent power producers (IPPs). In the financial year 2006 the cost of power purchase exceeded revenue generated by Shs 4,045 million. The impact of this is that the company is operating at a gross loss of Shs.137,959 million as compared to Shs.54,563 million in 2005. As at 31 December 2006, the liquidity position of company was in a critical phase as; The level of creditors dues had reached Shs. 87 billion; The overdraft facility used had reached Shs. 65,221 million which is an increase of Shs. 42,810 million from previous year;
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4.2.
Net cash outflow of Shs 10,901 million (2005: Shs. 5,281 million); Continued growth in debtor position mainly due to interest charges indicative of low level of collections for long outstanding debts; Current liability position indicative of weak working capital
Board of External Trade (BET) For the past five years i.e. from 30th June 2003 through 30th June 2007; the Board has been realising deficits from its operations. The increase in operating expenses has been not proportional to increase in revenue. Whereas operating expense increased by Shs.444,222,892 during the year June 2007, revenue increased by ended 30th Shs.1,377,074,978,833. Accumulated losses has soared from Shs.1,377,074,344 on 30th June 2003 to Shs.2,371,528,127 on 30th June 2007. On the other hand, the Boards working capital position improved slightly. During the year, the Board had negative working capital of Shs.152,924,130 compared to a negative of Shs. 167,972,831 for the previous year. Despite a slight improvement however, the Board would not meet her maturing obligations including statutory deductions in the event that the same matured at once. Current Ratio and Acid Test Ratio have been below normal ratios except for the year ended 30.06.2005 when the Acid Test Ratio was slightly above normal. Under the above circumstances, unless deliberate efforts are made to reverse the position, the Boards survival as a going concern may be in danger.
4.3.
Dar es Salaam Water Supply and Sewerage Authority (DAWASCO) The Corporation has reported a material loss during the year ended 30 June 2007. Furthermore, certain 87
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performance targets stipulated in the Lease Contract between DAWASCO and DAWASA were not complied with during the year. If this trend continues it would be difficult for the Corporation to operate as a going concern in the foreseeable future. The Board through management should device strategies to improve the financial performance as well as comply with the requirements of the Lease Contract. 4.4. National Insurance Corporation (NIC) Deteriorating Working Capital The Corporations working capital for the current year and the preceding four years is summarized in Annexure 5. It is distinctly seen in the annexure that the working capital has been on the decline from a negative balance of Shs.31.1 billion (2002) to a negative balance of Shs.58.7 billion (2006). Over a period of five years to 31st December, 2006, the Corporations working capital had been negative. This indicates that it can not be able to discharge in full all maturing obligations. Over this period the current ratios indicate that on average the Corporation had only Shs.15 available to pay liabilities amounting to Shs.100.
4.5. Mtwara Urban Water Supply and Sewerage Authority (MTUWASA) The Authoritys financial position has continued to deteriorate. Over the past three years it has consistently been making losses mainly caused by reduction of Government subvention. The Authority may cease to be a going concern as it had negative operating deficit of Shs.66,674,798; Shs.32,447,649; and Shs.310,310,890 for operating results for financial years ending 30th June 2005; 30th June 2006; and 30th June 2007 respectively. 4.6 Tanzania Posts Corporation (TPC) The Corporations working capital position as at 31st December 2006 continued to deteriorate steadily from negative balance of Shs.7,799,003,000 as at 31.12.2004; down to negative Shs.20,516,944,000 as at 31.12.2005 and
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further to negative Shs.25,659,701,000 as at 31.12.2006. The decrease in the Corporations working capital was mainly due to increase in un-remitted statutory deductions and the respective fines and penalties. Un-remitted payroll deductions increased from Shs.13,819,470,000 as at 31.12.2004 to Shs.18,681,610,000 as at 31.12.2005 and further to Shs.22,353,638,000. As at 31.12.2006 VAT remittances were still in arrears rising from Shs.1,674,963,000 as at 31.12.2004 to Shs.1,787,993,000 as at 31.12.2005 and accumulated to Shs.3,448,072,000 as at 31.12.2006. In general, creditors and other payables had increased from Shs.19,790,856,000 as at 31.12.2004 to Shs.25,905,505,000 as at 31.12.2005 and Shs.31,973,855,000 as at 31.12.2006. In the circumstances the Corporation may cease to be a going concern unless external funds are injected to improve the working capital position. 4. 7. Tanzania Railways Corporation The Corporations Liquidity position over the past four years from 2003 to 2006 are summarized below:Position as at 31/12/2006 Shs. 000 14,618,032 24,608,322 (9,990,290) Position as at as at 31/12/2005 Shs. 000 14,794,048 22,005,950 (7,211,902) Position as at as at 31/12/2004 Shs. 000 16,513,251 19,427,160 (2,913,909) Position as at as at 31/12/2003 Shs. 000 23,728,532 18,921,906 4,806,626
Item Current Asset Current Liabilities Working capital
31st December, 2003 to Shs.2,913,909,000 (negative) as at 31st December,2004, to Shs.7,211,902,000 (negative) as at 31st December, 2005 and to Shs.9,990,290,000 (negative) as at 31st December,2006.
The Corporations working capital position reflected a decreasing trend from Shs.4,806,626,000 (positive) as at
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The current and acid test ratios are far below the standard of 2:1 and 1:1 for current ratio and acid test ratio respectively. In view of the above, I consider that if the trend is not reversed timely, the corporation will fail to achieve its establishment obligations. PERFORMANCE REVIEW 4.8 Public Authorities and other Bodies operational performance and financial standing Audit of the accounts of Public Authorities and other Bodies revealed that some entities have been profitably operating while others have been operating at a loss. Operational performances of these entities have been measured in terms of the profit or loss generated during the year under review. Financial standing of these entities has also been evaluated in terms of the accumulated surplus or loss as at 30th September 2006, 31st December 2006 and 30th June 2007 for the respective entities closing their financial years at those dates. Paragraph 4.9 and 4.10 explain operational performance and financial standing of PA&oBs respectively. Summary of the Operational Performance of the PA&oBs During the year under review, operational performance of Public Authorities and other Bodies were measured in terms of the surplus or deficit made by these entities. The following is an overall performance of the Public Authorities and other Bodies:
Category of the Entity Water Authorities Regulatory Bodies Higher Learning Institutes Surplus for the year 513,326,431 40,353,856,228 7,104,614,520 Deficit for the year (1,640,910,109) (959,457,267) (1,496,270,873) Overall performance for the year (1,127,583,678) 39,394,398,961 5,608,343,647
4.9
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Public Parastatals Government Institutions Total
170,256,301,796 38,638,309,748 256,866,408,723
(211,387,124,998) (520,972,389) (216,004,735,636)
(41,130,823,202) 38,117,337,359 40,861,673,087
Interpretation The operational performance of Public Authorities and other Bodies during the year under review shows that Regulatory Bodies were leading in surplus making while Public Parastatals were leading in loss making. 4.10 Cumulative surplus or loss During the year under review, financial standing of Public Authorities and other Bodies were measured in terms of the accumulated surplus or deficit created over the life time of the entities. The following is an overall cumulative profit or surplus of Public Authorities and other Bodies: Cumulative surplus or loss
Category of the Entity Water Authorities Regulatory Bodies Higher Learning Institutes Public Parastatal Government Institutions Total Accumulated surplus 16,782,404,626 155,612,182,600 8,676,428,845 753,028,723,434 161,905,510,034 1,096,005,249,539 Accumulated deficit (4,886,062,810) (2,371,528,127) (7,172,682,203) (772,968,182,901) NIL (787,398,456,041) Overall cumulative surplus or deficit 11,896,341,817 153,240,654,473 1,503,746,642 (19,939,459,467) 161,905,510,034 308,606,793,499
Interpretation The financial standing of Public Authorities and other Bodies during the year under review shows that Government Institutions were leading in accumulating surplus while Public parastatals were leading in accumulating losses. The continuing accumulating losses being created by the Public Parastatals will eventually be borne by the Government. The earlier efforts are taken to
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arrest the situation the better for the economy of this country. 4.11 Unremitted statutory deductions During the period under review, five PA&oBs failed to remit statutory deductions amounting to Shs. 29,336,119,602 to relevant authorities. Of the amount in question, unremmited employees benefits (i.e. PAYE, PPF and NSSF PSPF) were Shs.23,643,858,878 while taxes were Shs. 2,210,703,119. Moreover, the Tanzania Posts Corporation failed to remit deductions of Shs.6,613,767 and Shs.196,741,985 relating to insurance premiums on staff life assurance policy and SACCOs loan repayment deductions respectively while Board of External Trade failed to remit land rent amounting Shs.142,859,539. The table below summarises the situation:
PA&oBs Name Employees Benefits Shs 127,480,646 20,229,572,555 Taxes VAT & PAYE Shs 135,018,821 4,451,932,167 433,995,067 2,913,339,535 373,466,142 204,064,237 121,035,141 Others Insurance, SACCOS, Land Rent Shs 203,355,752 142,859,539 Total
State Mining Corporations Tanzania Posts Corporation. Board of External Trade Muhimbili National Hospital National Ranching Company Limited Total
Shs. 262,499,467 24,884,860,474 576,854,606 3,117,403,772 494,501,283
23,643,858,878
5,346,045,433
346,215,291
29,336,119,602
Pictorially, the above information can be shown as follows:
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Non Remittance of Statutory Deductions

NRC 2% MNH STAMICO 11% 1% BET 2% STAMICO TPC BET MNH NRC TPC 84%
This indicates a critical situation of non compliance with related laws. Remedial measures should be sought to avoid penalties which may be charged by the respective authorities for failure to remit statutory deductions on due dates. On the other hand, this situation may cause insurmountable problems in the payment of employees final benefit on retirement age. TREASURY REGISTRAR 4.16 Outstanding Guarantees-Shs.175,396,043,686 During the year under review, loans amounting to Shs.175,396,043,686 were issued to Public Parastatals under Government guarantees. Up to the time of writing this general audit report i.e. March 2008, the amount in question has not been repaid by the respective Parastatals. However, the reasons for failure to repay the loans and efforts of the guarantor in fulfilling the guaranteed conditions were not disclosed. Non repayment of these loans may lead the government to bear the liability and loss of tax payers moneys.
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Government and the respective Accounting Officers should ensure that the outstanding loans are recovered and remitted to the respective authorities. 4.17 Outstanding loans issued by the Government Shs 63,241,256,898 The statement of outstanding loans issued by the Treasury Registrar, regarding loans issued by the Government to various beneficiaries, showed a cumulative overdue balance of Shs. 63,241,256,898. Even so, no explanations were given to justify the non recovery of the amounts in arrears. Management responded that the amount of Shs 15,239,348,940.88 is a TTCL loan which is being dealt with by the Technical Debt Management Committee (TDMC) under debt swap arrangements. The amount of Shs. 35,450,684,674.47 is a SONGAS loan which TANESCO has defaulted to repay. Efforts have been made to recover the arrears including issuing reminder letters to concerned institutions. 4.18 Questionable deletion of government Investments from records An examination of the Statement of Public Investments against PSRC reports on privatized Parastatal noted that though the government retained some shares with the organisations listed below, the investments have been deleted from the Treasury Registrar statement without any explanation. The concerned Public Authorities and other Bodies are as follows:
Entity Tanzania Tea Authority Lupembe Branch Morogoro Shoes Company Moro Tanneries Industrial Promotion Services Tanzania Electrical Goods Manufacturer Kilombero Sugar Company Share Sold 70% 70% 55% 70% 70% 75% Retained by the Government 30% 30% 45% 30% 30% 25%
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Thus the statement of Public Investments issued by the Treasury Registrar has been misstated and there is an obvious risk of loss of government shares in the concerned entities. Also there is a possibility of falsifications regarding cancellation of the investments. The Accounting Officer is advised to make reference to the government investment records and reconcile with the PSRC report in order to justify reasons behind the deletion. On the contrary, original Share certificates and the statement of investments should be adjusted accordingly. 4.19 Treasury Registrars Statement of Revenue as at 30th June 2007 Audit examination on the Treasury Registrars statement of revenue and related records revealed outstanding dividend and loans in arrears amounting to Shs.143,392,007 and Shs.46,010,427,626 respectively making total outstanding arrears of Shs.46,153,819,633. According to the Treasury Registrars Statement of revenue, the concerned Public Authorities and other Bodies are as follows: (i) Treasury Registrars statement of Dividend as at 30th June 2007
S/N Name of Parastatals Dividend Arrears B/F up to 2005/2006 Shs. 143,392,007 Dividend in Arrears as at 30.6.2007 Shs. 143,392,007 Remarks
General Tyre (E.A) Ltd
Loss making entity. Possibility of repayment is nil. Cash flow does not allow
Sub Total
143,392,007
143,392,007
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(ii)
S/N 1
Treasury Registrars statement of outstanding loans issued by the Government as at 30th June 2007
Name of Parastatals Steel Rolling Mills Ltd Total Balance/ Arrears as at 30.6.2007 78,750,428 Remarks Liquidation process was done under LART. The sale price was Shs.1.4 bill. Shs. 1.1 billion has already being paid. The buyer has requested for review of the balance sale price. Liquidated under PSRC. Request for write off under consideration. Efforts are being made to make sure that the loan is paid Efforts are being made to make sure that the loan is paid 11% interest per annum. TRC under restructuring 0% interest per annum. TRC under restructuring 7.92% interest per annum. TRC under restructuring Merger of loan No. 324, 325, 326, 380 and 381. Request for debt swap is under consideration by TDMC
TACOSHILI
6,790,000
3 4 5
Tanzania Airport Authority Tanzania Civil Aviation Authority Tanzania Railway Corporation Tanzania Railways Corporation Tanzania Railways Corporation
470,811,316 1,119,831,430 18,307,984,228
940,480,000
8,707,184,603
Tanzania Telecommunication Co. TTCL
16,378,595,621
Sub total Grand total
46,010,427,626 46,153,819,633
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The respective authorities should ensure that: Dividends in arrears are remitted to the MOF accordingly; Outstanding loans or balance in arrears are collected as agreed in the first place.
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CHAPTER FIVE 5.0 PRIVATIZATION OF PUBLIC ENTITIES This chapter deals with privatization of PA&oBs that were found to be material and that were captured from Treasury Registrars Statement of Government Investments and Public Interests and Presidential Public Parastatal Sector Reform Commission annual review report as at 30th June 2007. Privatized entities Privatization activities during the period under review had recorded significant progress. A number of divestitures were concluded, whereby 336 public entities were privatized to the stage of signing sales agreements while major divestitures were completed at the sale agreement signing stage during the year 2006/07. As at 30th June 2007, divestitures of 192 companies and 251 units were at sales agreement completion stage. All these had been approved by Cabinet and handed over to investors; the total number available for divestitures was 337 and 361 respectively; (whereas memoranda of understanding for divestiture in respect of 17 companies and 20 units were completed). These awaited either Cabinet approval or investors payment before signing of the Sales Agreement and handover of assets to the investors. Another 65 companies and 65 units were forwarded to LART for liquidation. Completed divestitures as at 30th June 2007 were 277 companies and 366 units. These companies had reached the signing of Memorandum of Understanding (or Sales agreement initialing) stage or handed over to LART.
5.1
Information on Privatisation from PSRC Annual Review 2006/07
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During the period 21 companies and 180 units due for divestitures units were acquired by Tanzanian Investors by 100% while 27 companies and 27 units were acquired by foreign investors by 100%. On the other hand, 16 companies and 25 units were in the process of divestiture at various stages. Below is a summary of Parastatal Sector Reform PSRC performance as at 30th June 2007: Description of Compa Units REMARKS Status nies Completed 192 251 All have been approved divestitures at by Cabinet and handed Sale Agreement over to investors stage Completed 17 20 Either Cabinet approval divestitures at or payment by investor Memorandum of awaited before signing Understanding Sale Agreement and stage handover of assets to investors 205 271 Total completed by PSRC as at 30th June 2007 Completed Under 65 65 These represent LART as at June parastatals sent to LART 2007 for liquidation
Total Completed Divestitures as at 30th June 2007 270 336 PSRC's level of effort is measured by counting all those which have reached the Memorandum of Understanding (or Sales agreement initialing) stage or handed over to LART, as completed
Total number of Parastatals for Divestiture as at 30th June 2007
337
361
These total figures represent parastatals available for divestiture
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Non-Core Assets Disposed off as at 30th June 2007 Total number of parastatals in the process for Divestitures as at 30th June 2007 Parastatals privatised 100% to Tanzanians Investors as at 30th June 2007 Parastatals privatised 100% to Foreign Investors as at 30th June 2007
67
666
17
25
These represent physical assets, mainly property, considered non-core to the main assets of the parastatals divested. Parastatals in this category are at various stages of divestiture These represent companies acquired by Tanzania Investors by 100% These represent companies acquired by foreign Investors by 100%
121
180
27
27
Pie chart of the status of divestitures is shown below:-
Categories of Privatisation by Nationality
18%
82%
Priivatisation to Tanzanians
Priivatisation to Foreigners
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5.2
Revenue earned from Privatisation The Government earned revenue amounting to Shs.120,133,616,259 and USD291,396372 from privatisation of public entities while investment was Shs.49,4006,730,416 and USD.3,035,898,250. Outstanding Revenue Proceeds As at 30th June 2007, a total of Shs.7,942,247,030 was receivables due to the government from investors of some of the divestitures that had been completed. Status of some of the Public Authorities and other Bodies According to the Treasury Registrars statement of Government Investments and Public Interest, there are 183 Public Authorities and other Bodies. Some of these PA&oBs operates under non going concern concept. Audit examination of the Treasury Registrars statement revealed that, fifteen (15) PA&oBs are not operating at all, eight (8) are under privatisation process, fourteen (14) are under liquidation process, two (2) are under restructuring, one (1) is undergoing winding up process and twenty five (25) operates under joint venture with various private firms. In summary, Public Authorities and other Bodies that are undergoing various legal processes are as shown in the table below:
Status of Public Entities PA&oBs not operating PA&oBs under privatisation process PA&oBs under liquidation process PA&oBs under restructuring process PA&oBs undergoing wound up process PA&oBs under joint venture operations Entity No 15 8 14 2 1 25 Total Investment Shs 21,411,004,827 113,850,245,230 10,691,271,115 14,928,597,881 (12,506,598,308) 275,874,849,133
5.3
5.4
Summary of the status of the PA&oBs

S/N 1. 2. 3. 4. 5. 6.
Source: Treasury Registrars Statement
PA&oBs 2006/2007
102
Pictorially, the above information can be presented in a pie chart as follows:
STATUS OF PUBLIC ENTITIES

PA&oB not Operating 15 23% 25 38% 8 12% 14 22% PA&oB under privatisation process PA&oB under liquidation process PA&oB under restructuring process PA&oB undergoing wound up process PA&oB under joint venture operations
1 2% 2 3%
5.5
Public Authorities and other Bodies under privatization process According to the Treasury Registrars statement of Government Investment and Public Interest as at 30th June 2007, eight (8) Public Authorities and other Bodies are under privatization process. Audit examination of the aforementioned statement revealed that government invested a total of Shs. 113,850,245,230 being paid up share capital and other investments to the PA&oBs that are under privatization process. The following are the Public Authorities and other Bodies that are under privatization process:
Name Of The Parastatal Datel Tanzania Limited Audited Accounts Date 31-Dec-05 Total Shs -323,000 Gvt. Owner ship% 35 Remarks
S/N
1.
Joint Venture (privatizetion).
PA&oBs 2006/2007
103
2. 3. 4.
National Insurance Corporation National Micro Finance Bank (NMB) Tembo Chipboards Ltd.
31-Dec-06 31-Dec-06 31-Dec-94
55,448,880,000 46,484,735,4000 975,000,000
100 51 80
Under Privatization 49% Privatized To be Privatized. Sale agreement signed. Deal not yet concluded. To be Privatized Undergoing restructurin g /To be a Regulatory Body Not operating. Under privatization at PSRC To be privatized. Sale agreement signed. Deal not yet concluded.
5. 6.
Usafiri Dar-EsSalaam (UDA) Tanzania Cotton Lint & Seed Board Teleshop Co. Limited
30-Jun-06 30-Jun-06
846,631,959 9,069,370,881
49 100
7.
31-Dec-02
50,950,000
49
8.
Tembo Chipboards Ltd.
31-Dec-94
975,000,000
80
Total
113,850,245,230
The respective management of the PA&oBs should speed up the process of the restructuring in order to avoid liquidation. 5.6 Public Authorities and other Bodies not operating According to the Treasury Registrars statement of Government investment and Public interest, fifteen (15) Public Authorities and other bodies were noted to have been not operating. Audit examination on the Treasury
PA&oBs 2006/2007
104
Registrars statement revealed Government had invested Shs.21,411,004,827 being paid up share capital and other investments. The concerned Public Authorities and other Bodies that have ceased to operate are as follows:
S/N Name of the Parastatal Embassy Hotel Limited Company Kisarawe Brick Factory (KIBRICO) Kilimanjaro Machine Tools Audited Accounts Date 31-Dec-00 Total Shs 58,603,264 Gvt. Owne rship % 40 Remarks
1.
Not operating. Government to sell its shares Not operating. Govt minority shares Sale in process. Not operating. Transferred to NDC to be used for development of export Processing Zone. Not operating. Was placed under liquidation (LART). The successor of LART to take over the liquidation process. Ceased to exist legally on 30/6/06, transferred to CHC May, 2007. Ceased to exist legally on 30/6/06, transferred to CHC May, 2007. Not operating.
2.
31.12.2003
-144,065,000
30
3.
31-Dec-89
-652,989,944
100
4.
Kiltimbers Co Ltd
31-Dec-90
69,093,720
100
5.
LART Tribunal
31-Dec-06
43,346,350
100
6.
7.
Loans Advances Realization Trust (LART) Mikumi Wildlife Lodges
30-Jun-06
1,575,250,000
100
30-Jun-96
1.
100
PA&oBs 2006/2007
105
8.
MMT Mangula
31-Dec-87
191,355,469
100
9.
National Milling Corporation Nyanza Glass Works PEHCOL
30-Jun-94
14,511,600
100
10.
30-Jun-00
7,710,570,174
100
11.
30-Jun-00
4,601,072,024
100
12.
13. 14.
15.
Tanzania Automobile Manufacturi ng Company (TAMCO) Tanzania Fertilizer Company Tanzania Fishing Company (TAFICO) TeleShop Co. Limited
31-Dec-99
2,532,882,162
100
31-Dec-05 30-Jun-94
5,094,295,942 266,129,065
100 100
Not operating. Privatized by PSRC. The process of handing over to the new investor (St. Mary International Schools) is in progress Not operating. Placed under PSRC for privatization. Not operating. Handed over to NDC by PSRC in March 2007. Not operating. Placed under PSRC for asset sale Not operating. Transferred to NDC to be used for development of export Processing Zone. Parastatal Not operating. Under privatization. Not operating. Under privatization at PSRC
31-Dec-02
50,950,000
49
Total
21,411,004,827
Despite the successes gained from privatization of other public bodies such as Tanzania Breweries Ltd and National Microfinance Bank, the Government does not seem to have any future plans on the above Public Authorities.
PA&oBs 2006/2007
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Government should put more efforts to ensure either the above Public Authorities resume their operations or are sold to private investors. 5.7 Public Authorities and other Bodies under liquidation process Audit examination of the Treasury Registrars Statement of Government Investments revealed that some PA&oBs are undergoing liquidation process. These are PA&oBs that can not settle their short and long term liabilities without selling their non current assets. According to the Treasury Registrars statement a total potential paid up share capital and other Government investment in these PA&oBs was Shs.10,691,261,115. The following are the PA&oBs that are under liquidation process:
Name of The Parastatal Basuto Farm Audited Accounts Date 30Sep-02 Total Gvt. investment Shs 644,449,423 Gvt. Owner ship % 100 Remarks
S/N
1.
Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process.
2.
BHESCO
30Jun-01
104,285,208
100
3.
Cooper Motors Services Company(C MSC)
30Sep-98
270,570,498
100
PA&oBs 2006/2007
107
4.
Gidagamowd
30Sep-98
239,723,885
100
6.
Imara Wood Products
31Dec-91
194,300,000
100
Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Not operating. Was placed under liquidation (LART). The successor of LART to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process.
7.
Kiltimbers Co Ltd
31Dec-90
69,093,720
100
8.
Mulbadaw Farm
30Sep-98
902,699,681
100
9.
Murjanda Farm
30Sep-98
461,940,530
100
10.
National Shipping Co. Ltd
30Jun-99
6,320,069,245
100
11.
Setchet Company
30Sep-00
1,010,576,396
100
PA&oBs 2006/2007
108
12.
Tanga -RTC
30Jun-01
126,152,332
100
Under Liquidation. The successor of LART (CHC) to take over the liquidation process. Under Liquidation. The successor of LART (CHC) to take over the liquidation process.
14. Tanzania Elimu Supplies Total 30Jun-94 347,400,197 100
10,691,261,115
5.8
Public Authorities and other Bodies under restructuring process Restructuring is the process of recapitalising the business after being incapable of meeting short and long term liabilities. This is a good method of rescuing an entity from being liquidated. According to the Treasury Registrars annual statement of Government investments, Public Authorities and other Bodies that are undergoing restructuring process had a paid up share capital and other Government investments amounting to Shs. 14,928,597,881. The following are the Public Authorities and other Bodies that are undergoing restructuring process:
Name of The Parastatal Tanzania Cotton Lint & Seed Board Tanzania Postal Bank Audited Accounts Date 30-Jun-06 Total Gvt. investment Shs 9,069,370,881.00 Gvt. Owner ship % 100 Remarks
S/N
1.
2. Total
31-Dec-06
5,859,227,000.00 14,928,597,881
45.3
Undergoing restructuring /To be a Regulatory Body To be restructured
PA&oBs 2006/2007
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The respective management of the entities in question should speed up the process of restructuring in order to avoid liquidation. 5.9 Public Authority undergoing winding up process Audit examination of the Treasury Registrars statement of Government investment noted that the Tanzania Hotels Investment Co. Ltd (TAHI) can not settle its short and long term liabilities and is subject to windup process. The Tanzania Hotels Investment Co. Ltd (TAHI) operates under negative investment of Shs. 12,506,598,308 according to the annual Treasury Registrars statement of investment.
Name of The Parastatal Tanzania Hotels Investment Co. Ltd (TAHI) Audited Accounts Date 30-Jun04 Total Gvt. investment Shs (12,506,598,308) Gvt. Owners hip % 100 Remarks
S/N
1.
To be wound up. All subsidiary companies divested under PSRC
Total
(12,506,598,308)
The respective authority is advised to speed up the windup process in order to avoid further deterioration. 5.10 Public Authorities and other Bodies under Joint Venture According to the Treasury Registrars statement of the Government investment and Public interest, twenty five (25) Public Authorities and other Bodies were noted to have been jointly operated. Audit examination revealed that the aforementioned authorities operate with a total government paid up share capital and other investments amounting to Shs.21,411,004,827. The concerned Public Authorities and other Bodies that operate under joint venture agreements are as follows:
PA&oBs 2006/2007
110
S/N
Name Of The Parastatal Aboud Soap Oil Industries BP (T) Ltd Celtel
Audited Accounts Date 31-Dec04
Total Shs 2,750,000,000.00
Gvt. Ownership % 20
Remarks
1.
2. 3.
31-Dec05 31-Dec05 31-Dec05 31-Dec06
48,566,000,000.00 136,687,334,000
50 40
4. 5.
Datel Tanzania Limited Friendship Textile Co.
-323,000.00 28,913,245,000.00
35 49
Joint venture with Aboud Soap Enterprises Ltd Joint venture with BP Africa Ltd Joint venture with CELTEL International Ltd Joint venture (privatization). Joint venture with Dieqiu Textile Dyeing and Printing Group Co Ltd (51%) Joint venture with Continental NA (26%). Specified under PSRC. Investigative audit requested. Joint venture with Diocare Ltd (60%) Joint venture with MottMacdonald Ltd, SA Infrastructure fund and Inter Consult Ltd
6.
General Tyre EA Ltd
30-Jun03
-322,000,000.00
74
7. 8.
Keko Pharmaceuti cals Ltd Kilimanjaro Airport Development Company Ltd
31-Aug05 30-Jun06
733,725,000.00 2,222,101,000.00
40 24
PA&oBs 2006/2007
111
9.
Kilombero Sugar Co. Kiwira Coal Mines
31-Mar07 30-Jun04
244,000,000.00
25
10.
2,172,760,559.00
30
11.
Light Source Manufacturers
30-Jun05
254,166,000.00
49
12. 13. 14. 15.
Mbeya Cement CO. Ltd Mbinga Coffee Curing Mbozi Coffee Curing Mwananchi Engineering And Construction
Company (MECCO)
31-Dec06 30-Jun06 30-Jun06 31-Dec06
2,424,712,000.00 1,287,092,000.00 901,560,384.00 443,732,000.00
25 43 32 25
Joint venture with Illovo & ED & F. Man (75%) Joint venture with TAN Power Resources Company. 2005 Accounts with the auditors. Joint venture with TATA Exports (51%). Govt is in process of disposing its 49% Shareholding. Joint Venture Joint venture with Coop. Unions Joint venture with Coop. Unions Joint venture with Sisi Construction Ltd (75%) Joint venture with TADEMA Overseas Ltd (77%). 2005/06 Accounts with auditors Joint venture. Other Shares held by Unions
16.
New African Hotel
30-Jun05
1,150,000,000.00
23
17.
TANICA
30-Sep05
1,110,400,000.00
10
PA&oBs 2006/2007
112
18.
Tanzania Breweries Co. Ltd Tanzania Cigarette Co. Ltd (TCC)
31-Mar07 31-Dec06
1,179,713,900.00
19.
50,000,000.00
2.5
20.
Tanzania Daesung Cables Tanzania Pharmaceuti cal Ltd Tanzania Planting Co.(TPC) Tanzania Zambia Railways Authority (TAZARA) TIPER Williamson Diamond Mines
31-Dec06 30-Jun04
159,820,540.00
29
21.
1,152,971,000.00
40
22.
30-Jun06 31-Dec05
831,724,250.00
25
23.
68,707,000,000
50
Joint venture with Indol International BV (96%) Joint venture with RJ Reynolds Tobacco Ltd (51%), JT International Hold BV (24%), Tanz. Public (19.5%) Joint venture with east African Cables Kenya (71%) Joint venture with Pharmaceutic al Investments Ltd (60%) Joint venture with Sukari Investment Co Ltd (75%) Joint venture with Zambian Government Joint venture with Oryx Oils Joint venture with Will croft Co. Ltd (30%)
24. 25.
31-Dec06 31-Dec05
7,135,894,500.00 32,880,780,000.00 275,874,849,133
50 30
Total
The audit is uncertain whether terms of the joint venture agreements are still valid. 5.11 Remarks on Information on Privatisastion The sources of information on privatisation of Public entities have been obtained from the Consolidated Holdings
PA&oBs 2006/2007
113
Corporation (pages 1 through 3) and the Treasury Registrar (page 12). These two sources give inconsistent sets of information on the same theme as it can be viewed throughout this chapter such as the exact number of the PA&oBs that have been privatized so far. It is therefore recommended to the said sources to harmonies the two sets of information for consistency and reliability.
PA&oBs 2006/2007
114
CHAPTER SIX 6.0 PUBLIC PROCUREMENT ISSUES This chapter deals with Procurement issues that were found to be material to be highlighted in this report and that were reported in the management letters to the respective PA&oBs during the financial year ended 30th June 2007. Report on Compliance with Procurement Legislation According to the Public Procurement Act No.21 of 2004 sect. 3(1) Procurement means buying, purchasing, renting, leasing or acquiring any goods, works or services by a procuring entity. Sect. 44 (2) of the PPA 2004 and Reg 31 of the Public Procurement Regulations of 2005 require every auditor of a public body in his annual report to state whether or not these regulations have been complied with in relation to competitive tendering and approval of procurement or disposal by tender by the appropriate tender boards. In view of my responsibility on the procurement legislation, I state that, I did not have a chance to adequately audit the procurement processes of all PA&oBs for the period under audit. However some significant weaknesses have been noted in some of the PA&oBs. The audit of Public authorities for the period covered in the report, has revealed significant weaknesses and irregularities regarding compliance with Section 44 of the Public Procurement Act No 21 of 2004 which states that notwithstanding instructions given under any law, it is the responsibility of every accounting officer to ensure that the procurement of goods, works or services is done in accordance with the procedures prescribed under the said Act and related Regulations
6.1
PA&oBs 2006/2007
115
Major deficiencies that have been cited in the procurement process of PA&oBs are such as unlawful tendering process, absence of Procurement management unit, lack of procurement specialists, lack of tender boards, and other procurement related gaps. Detailed audit findings are as follows: 6.2 Lack of Procurement Planning According to Section 45 of the Procurement Act, 2004, a procuring entity shall plan its procurement in a rational manner and in particular shall: Avoid emergency procurement whenever possible; Avoid splitting of procurement to defeat the use of appropriate procurement methods unless such splitting is to enable wider participation of local consultants, suppliers or contractors in which case the Authority shall determine such undertaking; and Integrate its procurement budget with its expenditure programme. However, contrary to Sect. 45 of PPA, the following PA&oBs did not have proper procurement plans for their procurement requirements during the year under review; S/N 1. Name of PA&oBs Tanzania Industrial Research and Development Organisation (TIRDO) Dar es Salaam Institute of Technology (DIT) Dar es Salaam Water Supply and Sewerage Authority (DAWASCO) Tanzania Tobacco Board Remarks Lack of procurement planning as stipulated in the procurement regulations, 2005. Non compliance with the PPA and its related regulations of 2005 Non compliance with Public Procurement Act, 2004 Non compliance with Public Procurement Act and its regulation on procurement totalling 116
2. 3. 4.
PA&oBs 2006/2007
5.
Tanzania Broadcasting Services
6. 7.
Babati Urban Water Supply and Sewerage Authority Tanzania Standard Newspapers Ltd
Absence of Procurement Management Lack of procurement plan for 2006/07. All contract awards for the year 2006/07 were not advertised to the public through a public media. The Authority Management has not established a sound internal control system since there is no proper segregation of duties. There were non competitive procurements worth Shs.51,835,500 Non compliance with procurement procedures. TSN procured stocks (printing materials) worth Shs.26,384,077, however no evidence of competitive tendering procedures were made. Furthermore, no procurement plan has been prepared and produced for audit verification.
In the absence of the procurement planning, it implies the following; Loss of efficiency and economy in procurement process Emergency, costly procurements Risk of breaching procurement thresholds; and Delay in the whole procurement process. 6.3 Absence of Management Procurement Units Sect. 3(1) of Public Procurement Act No.21 of 2004 defines Procurement Management Unit as a division or department in each procuring entity responsible for the execution of the procurement functions;
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117
In line with the above law, Sect. 34 of the PPA, 2004 requires every procuring entity to establish a procurement management unit staffed to an appropriate level. Furthermore, Sect. 35 of the same Act spells out the main functions of such a unit. Contrary to the above sections, the following Public Authorities and other Bodies were yet to establish Management Procurement Units: S/N
1.
Name of PA&oB
Unit Trust of Tanzania
Remarks
Absence of Procurement Management Unit contrary to Sec.34 (i) of the Public Procurement Act, 2004 Absence of Good Received Notes for newly acquired equipment.
2.
3.
Songea Urban Water Supply and Sewerage Authority

Tanzania Tobacco Board
Absence of Procurement Management Unit

Non compliance with Public Procurement Act and its regulation on procurement totalling Absence of Procurement Management Unit The TBC has not established a Procurement Management Unit contrary to Section 34 of the Procurement Act, 2004. The Authority Management has not established a Procurement Management Unit (PMU) contrary to Sect 34(1) of the Public Procurement Act No. 21 of 2004 Council has established a Procurement Management Unit (PMU). The PMU was however, not headed by a person with the requisite academic qualifications and experiences in procurement
Tanzania Broadcasting Services Babati Urban Water Supply and Sewerage Authority National Environmental Management Council (NEMC)
PA&oBs 2006/2007
118
functions. The PMU is headed by the Chief Administrative Officer who acts as a Secretary to the Tender Committee which is contrary to procedures set out under sec,34 of the Public Procurement Act 2004 and Public Procurement Regulation 2005
6.4
Procurements made without approval of tender board Tanga Urban Water Supply and Sewerage Authority made payments to suppliers of water treatment chemicals, pipes and pipes fittings on the strength of quotations without being approved by the tender board as explained below: Payee
Twiga Chemicals Industries Emje Enterprises Gomu Enterprises SN-Tech Limited Side out Enterprises
PV No.
155/7
Remarks
No Tender Requested five quotations, responded two. No Tender Quotations Three quotations No tender Three quotations No tender Three quotations No tender
Amount (Shs.)
32,400,000
161/10 162/10 163/10 562/12 Total
13,908,000 17,255,000 10,650,000 18,859,500 93,072,500
The Authority should ensure close adherence to the supply contracts. However, the whole process may cause the authority to incur high costs if tender procedures are not taken into account. 6.5 Specific Procurement Problems 6.5.1 Tanzania Tobacco Board Non Competitive Procurements Shs.223,695,649.00 Audit review of the procurement procedures during the audit of Tanzania Tobacco Board revealed that purchases
PA&oBs 2006/2007
119
were made without competitive tendering amounting to Shs. 223,695,649 contrary to the requirements of PPA No.21 of 2004. Analysis of the procurements is as follows: PAYEE/DETAILS AMOUNT BV.No CHQ 14/04 001116 Oryx Wananchi Service 1,230,250.00 19/11 12/07 19/12 16/01 29/02 16/09 17/08 13/06 04/07 01/07 02/09
Total
001076 002264 002365 002537
001027 000965
Station Oryx Wananchi Service Station Oryx Wananchi Service Station Oryx Wananchi Service Station Oryx Wananchi Service Station Oryx Wananchi Service Station Oryx Wananchi Service Station Oryx Wananchi Service Station Oryx Wananchi Service Station Toyota (T) LTD Software Applications (T) LTD Software Applications (T) LTD
1,598,320.00 1,447,160.00 1,709,880.00 788,100.00 1,424,850.00 1,056,000.00 1,685,385.00 1,132,175.00 199,743,345.00 5,461,000.00 6,419,184.00 223,695,649.00
6.5.2
Tanzania National Park Deposit to Supplier As at 30th June, 2007, TANAPA made deposit to suppliers amounting to Shs.1.9 billion, principally in relation to the purchase of furniture and equipment for phase II of building at TANAPAs headquarter in Arusha. Deposit ranges from 50% to 70% of the contract value for certain suppliers.
PA&oBs 2006/2007
120
We understand that procurement procedures were strictly adhered to for acquisition of these furniture and equipment and that these items have already been supplied after 30th June 2007. However, with such a large deposit made to the supplier while there was no security availed to TANAPA, TANAPA exposed itself to unnecessary and very higher risk in event of any force majeure forcing the supplier to be unable to fulfil his part of the obligations. Whereas price is an important factor in selection of the best quote from supplier, other terms and conditions are also important. Advance to suppliers should be minimised to avoid exposure of TANAPA to risk of non performance of the supplier In case of a significant deposit being required to be made to suppliers, TANAPA should use alternative financial instruments like bank guarantees or recoverable letters of credit to safeguard its position in case of default by the supplier. 6.5.3 Singida Urban Water Supply and Sewerage Authority (SUWASA) The Tender Board of SUWASA has six members. Our review of the tender board deliberations revealed that it does not convene regularly and even when it sits, it does so relatively late. We were availed with tender boards minutes that indicated that the committee convened on 29/06/2007 to open tender bids for 2007/08 it then convened on 10/08/2007 to evaluate the tenders before sitting on 17/08/2007 to award the tender. Going by this scenario, SUWASA operated for about 3 months without approved suppliers by tenders procedures or they operated without purchasing due to lack of approved suppliers.
PA&oBs 2006/2007
121
CHAPTER SEVEN 7.0 CORPORATE GOVERNANCE This chapter deals with corporate governance issues that were found to be material to be highlighted in this report and that were reported in the management letters to the respective PA&oBs during the financial year ended 30th June 2007. Corporate governance is a term often used to describe the systems and practices in place to manage information, resource and economic incentives problems inherent in the separation of ownership from control of the entity. The Government places significant trust in its Chief Executive Officers (CEOs) of Public Organisations and provides them with the tools necessary for the management of their entities in order to achieve the required outcomes. The required outcomes include: effective resource management, effective delivery of public services, compliance with the various statutory requirements and best practice. In return, CEOs are required to perform their duties honestly, openly, in good faith and with a high order of care and diligence. These requirements are essential principles of good management and can also be referred to as principles of corporate governance. 7.1 Treasury Registrars Responsibilities As provided in the Treasury Registrar Ordinance Cap. 418 and Sect. 6 of the Public Corporations Act No. 16 of 1983 the Treasury Registrar functions in relation to Public Corporations are: Shall keep or cause to be kept under permanent review the business and affairs of all persons and bodies of person in respect of which the Treasury Registrar holds any property or any interest in the property;
PA&oBs 2006/2007
122
(a) render advice to the Government relating to the establishment of public or statutory corporations, and the vesting of any business or property in any such organisations; (b) review the financial performance of public and statutory corporations with a view to recommending measures aimed at amalgamation, disestablishment or improvement of their performance; The Treasury Registrar shall unless the appointment is by virtue of office ensure that no person shall be appointed to be a member of more than three Boards of Directors at the same time. 7.2 The CEOs Accountability Obligations Relating to Good Governance The current climate of increased accountability in public sector organisations has brought to public attention the ethical dimension of corporate governance. The framework of accountability in government requires that CEOs are primarily accountable for their entitys activities. Public sector corporate governance encompasses a wide range of areas in which the CEO is accountable. Public sector entities have to satisfy a complex range of political, economic and social objectives and operate according to a different set of external constraints and influences than do businesses in the private sector. For instance, PA&oBs are required to operate within a system of checks and balances and value systems that emphasize issues of ethics, openness and public accountability. In contrast, private sector corporate governance pays greater attention to shareholders returns and preservation of shareholders values. A critical element of effective corporate governance in government is that entity decisions are not only fair, open and accountable, but are seen to be so. Decision makers
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should understand their responsibilities when making decisions. Decision makers also need access to relevant information, including government policies. CEOs are responsible for the conduct of their staff. It is necessary to set the public entitys values and the minimum standard of acceptable behaviour (such as the duty to avoid potential conflict of interest and to disclose such potential should it arises). The Public Finance Regulations 2001 makes it mandatory for Accounting Officers to institute sound resource management, including the establishment of sound internal control systems, effective internal audit function, and audit committee as a way of enhancing good governance and accountability in PA&oBs which are the basic principles of credibility, independence and transparency. 7.3 Members of Parliaments vs. Board membership I have noted instances where political leaders are vested with roles of public entity oversight. This can be reflected in some members of Parliament being members of board of directors or chairpersons of some board of directors of public entities. This is considered as departure from best practices as far as good governance is concerned. Internal Audit Services According to Reg. No. 33 of the Public Finance Regulations internal audit means an independent appraisal activity established within reporting unit which operates as a service to the head of unit involved. It controls functions by examining and evaluating the adequacy and effectiveness of internal controls to the unit reviewed and for conducting value for money audit throughout the unit in order to ensure that proper system of internal control and accounting system exist throughout the unit. Reg 34 (1) of the PFR 2004, describe duties and responsibilities of the Internal Audit Service Unit. Among the duties vested in the internal audit service are:
7.4
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124
(1) To evaluate the adequacy and effectiveness of the internal control in the entity. (2) To review and report on the adequacy of actions taken by managements in response to Internal and External Audit Reports. (3) Review and report on proper control over receipt, custody and utilization of all financial resources of the unit. (4) Review and report on conformity with financial and operational procedure laid down and good practice as from time to time Reg.28 of the Public Finance Regulation of 2001 requires the Accounting Officers of each public entity to establish an effective internal audit service unit. Contrary to the above regulations, we have noted some entities which were yet to establish the internal audit unit as shown in the table below: Public Authorities and other Bodies with no Internal Audit Unit S/No Name of PA&oBs Internal Audit Unit
1. 2. Tanzania Engineering and Manufacturing Design Organisation (TEMDO) Singinda Urban Water Supply and Sewerage Authority Failure to establish an internal audit unit. Absence of internal audit unit
3. 4.
5. 6. 7. 8.
Songea Urban Water Supply and Sewerage Authority Tanzania Commission for Universities
Singida Urban Water Supply and Sewerage Authority Mwalimu Nyerere Memorial Academy Tanzania Institute of Bankers Tanzania Engineering and
Absence of internal Audit Unit Absence of internal Audit Unit

Absence of internal Audit Unit Absence of internal audit unit Absence of internal audit unit Absence of internal
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125
Manufacturing Design Organisation (TEMDO) 9. Tanzania Industrial Research and Development Organisation
audit unit; no authorised accountant/auditor Absence of internal Audit Unit
10.
11.

Centre for Agricultural Mechanization and Rural Technology (CARMATEC)
Absence of internal Audit Unit

No internal audit unit; no authorised accountant
7.5.1
Audit Committees Reg. 30 of the Public Finance Regulations 2005 stipulates requirements for establishment and existence of audit committees in every government entity for maintaining a sound financial and risk management and internal control system as well as maintaining an effectively functioning system of internal audit. In addition, the committees assist respective accounting officers in overseeing: The safeguarding of assets; The operation of adequate systems and control processes; The preparation of accurate financial reporting and statements in compliance with all applicable legal requirements and accounting standards. The audit committee must comment in the annual report on; The effectiveness of internal control Its evaluation of the respective PA&oBs financial statements. An important role of the committee is to monitor and supervise the effective functioning of internal audit, ensuring that the roles and functions of the external audit are sufficiently clarified and coordinated with internal audit in order to provide an objective overview of the operational effectiveness of the respective PA&oBs internal control systems.
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7.5.1.1
Functions of Audit Committees According to Reg. 32(1) of PFR, the audit committees have the following responsibilities: (1) To approve the internal annual and strategic plans of the Public Authorities and other Bodies (2) To review all internal and external audit reports. (3) To advice the Accounting Officers on action to be taken on matters raised in the reports of the Internal Auditors and External Auditors. (4) Act as coordinators of audit programme conducted by Internal Auditors and External Auditors. (5) Provide advice to the Accounting Officers on the preparation, review and presentations of financial statements. (6) To prepare annual reports on its function copy of which shall be sent to the Accountant General and the Controller and Auditor General. (7) To meet at least quarterly. Public Authorities and other Bodies with No Audit Committees Public Authorities and other Bodies that do not have Audit Committees contrary to Reg. 30 of the PFRs 2005 are as follows: Name of PA&oBs Tanzania Engineering Manufacturing Design Organisation (TEMDO) Institute of Adult of Education Singinda Urban Water Supply and Sewerage Authority Songea Urban Water Supply Sewerage Authority Tanzania Tobacco Board Audit Committee and Failure to establish audit committee Lack of an audit committee Absence of audit committee and Absence of audit committee Absence of audit committee
7.5.1.2
S/No 1. 2. 3. 4. 5.
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6. 7. 8. 9. 10. 11.
12. 13. 14. 15. 16. 17. 18. 19.
Tanzania Bureau of Standards (TBS)
Absence of audit committee Tanzania Commission for University Absence of audit committee Dar es salaam Institute of Technology Absence of (DIT) audit committee Mwalimu Nyerere Memorial Academy Absence of audit committee Tanzania Institute of Bankers Absence of audit committee National Insurance Corporation (NIC) Absence of audit committee
Kariakoo Market Corporation No audit committee Tanzania Engineering and Manufacturing Absence of Design Organisation (TEMDO) committee Singida Urban Water and Sewerage Absence of Authority committee Tanzania Industrial Research and Absence of Development Organisation committee Tea Board of Tanzania Absence of committee Centre for Agricultural Mechanizations Absence of committee and Rural Technology (CARMATEC) Institute of Accountancy Arusha Absence of committee Moshi University College of Co-operative Absence of and Business Studies committee audit audit audit audit audit audit audit
7.5.2
Specific Audit findings in regarding to Audit Committees We have noted weaknesses during the period under review where a number of public entities have either operated without or with weak audit committees a sample of which are listed below along with brief explanation of the issues: Bank of Tanzania (BoT) An audit committee is supposed to be a specialised, independent oversight body of an organisation designed
7.5.2.1
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to improve the organisations overall governance framework, enhance the control framework and consequently assist the Chief Executive Officers to fulfil their stewardship, leadership and control responsibilities. However, I have noted that the Chief Executive Officer of BOT, who incidentally happens to be the Chairman of the Board of Directors, is also the Chairman of the audit committee. This practice may impair the independence of the audit committee and hence render it ineffective. 7.5.2.2 Tanzania Petroleum Development Corporation (TPDC) During the audit and review of the minutes of the audit committee, it was disclosed that they did not zero in and address the issue pertaining to the function of the audit committee as stipulated in the Public Finance Act no. 6 Reg.32 (1) of 2001; hence the committee is under performing. Tanzania Broadcasting Services The Corporation has audit committee that is required to meet at least four times in a year in pursuant with Reg. 32 (1) of the Public Finance Act, 2001. We noted that the audit committee at the Corporation met only twice during the year under review contrary to the above regulation. In order for an audit committee to be effective it should meet on regular basis as stipulated in the finance regulation and the notice and reports of such meetings should be communicated to the CAG. Internal Control System This is a system operated by an Organisation to ensure that financial and other records are reliable and complete. Pursuant to Reg 33 of the Public Finance Act 2001 (revised 2004) internal control system is a set of systems operated by an Organisation to ensure that financial and
7.5.2.3
7.6.0
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other records are reliable and complete and they adhere to management policies orderly and efficient conduct of the business and proper recording and safeguarding of assets and resources. We evaluated the efficiency and effectiveness of the internal control system and ascertained whether or not there are proper controls in place and duties of internal audit units have been carried out in accordance with the laid down rules and procedures of the respective PA&oBs. However, the following PA&oBs were noted to have deficiencies which might affect efficiency and effectiveness of the internal control system as follows: 7.6.1 Tanzania Petroleum Development Corporation (TPDC) Our view of the work of internal audit department shows the following shortcoming: Internal Audit working paper file In order to carry out the function of internal audit department effectively they were supposed to plan each audit assignment and conduct the examination and evaluation of information as per plan. Work performed was supposed to be supported by evidence, properly documented and filed in an audit work file.
It was further expected that sufficient, relevant and reliable evidence is obtained on which the internal auditor should draw reasonable conclusion and recommendation. We also evaluated performance of the internal audit department by scrutinizing the internal audit file and we noted that; the file does not contain any audit assignment, audit planning, notes/memorandum, audit programme, audit observation notes etc.
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The internal audit file contained therein internal audit reports with no backup details of audit working papers. We were of the opinion that the performance is not satisfactory. Annual Audit work plan We observed that, though the annual audit work plan was prepared and approved by the Board, yet most of the activities shown in the plan for the year 2006/07 were not accomplished. Other audit functions We also observed that the internal audit unit has not carried out verification of the accounting data provided by contractors under the Profit Sharing Agreements (PSA) such as Songas Tanzania Limited and Pan African Tanzania Limited. Data provided with regard to costs incurred by the two companies in relation to production and marketing of gas under the PSA have not been verified.
The Corporation has been accepting accounting data as given and no cross check has been made by the Corporations Internal Audit Department to ascertain its accuracy. In this case the Corporation may end up paying expenses which are unlawful. 7.6.2 Twiga Bancorp We noted that internal auditors engage in management activities by conducting what is known as pre-audit (reviewing and approving payment vouchers) before payment is effected. In this case the internal audit department may not discharge its function properly as it engages in pre auditing activities. Dodoma Urban Water Supply and Sewerage Authority (DUWASA) During the year under review it was observed that nearly all the internal auditors quarterly reports focus on the
7.6.3
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accounts department weaknesses. Other sections such as stores, technical and commercial departments had not been examined and included in the internal auditors reports. This shows weakness in internal audit unit which should try as much as possible to audit all the Authority departments and report their undertakings and not concentrate in one department. 7.6.4 National Institute of Transport (NIT) It was observed that, the Internal Audit Section which was manned by one person was understaffed considering the volume of operation transactions at the institute, hence monitoring of the accounting and operational transactions was inadequate. Under the circumstances, some of the operations were not examined by the auditor. 7.6.5 Tanzania Broadcasting Services (TBC) Internal audit function at the Corporation is not effective. This is attributed to limited staff in the unit. Total staff establishment of the unit is 4; however, currently there is only one staff. The unit is required to prepare internal audit report on a quarterly basis. We however, noted that only two quarterly reports were prepared during the financial year 2006/2007. Given the size and operations of the organisation we think that one audit staff can not adequately cover all operations of the Corporation hence limited internal audit function. Weaknesses and errors can not be detected timely due to lack of proper internal review. 7.6.6 Public Procurement Regulatory Authority (PPRA) We noted that the internal audit unit of PPRA did not carry out quarterly audits during the financial year 2006/2007. This was attributed to the limited human resources and lack of internal audit manual when the unit was established in October 2006. Consequently only one audit that covered the whole financial year was carried 132
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out. Furthermore the auditors are not clear whether the internal audit reports are submitted and discussed by the Board of Directors. The review of the internal audit work plan for 2007/2008 revealed that the plan did not include the review of compliance with the PPA, 2004 such as audit of procurement processes and contract management review. Also we observed that the internal audit unit does both pre and post audits of transactions at the Authority. In this way the independence of the internal audit unit is impaired when carrying out audits of the transactions that it was involved in during the approval stages. 7.7 General Observation on Governance of PA&oBs A departure from best practice as far as good governance is concerned has been noted in a number of public entities. There are instances where political leaders or some members of parliament, vested with roles of public entity oversight, are members of the boards of directors. Reg.28 of the Public Finance Regulation of 2001 requires the Accounting Officers of each public entity to establish an effective Internal Audit Service Units within their organisations; to the contrary a substantial number of public organisations have been noted to have not established the internal audit units as shown in paragraph 7.4 above. On the other hand; a substantial number of Public Authorities and other Bodies have not formed Audit Committees which are tools for monitoring and supervision of the functioning of internal control systems together with their roles, contrary to provisions of Reg. 30 of the PFRs 2005. That is why a number of PA&oBs have been noted to have been improperly structured and have weak internal audit sections as well as weak internal controls.
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CHAPTER EIGHT 8.0 LEGAL ISSUES AND CONTRACTS MANAGEMENT This chapter deals with legal issues and contracts that were found to be material and that were reported in the management letters to the respective PA&oBs during the financial year ended 30th June 2007. Introduction Contract is defined as an agreement based on sufficient consideration between two or more competent parties to do or not to do something that is legal. It is a legally enforceable agreement between two or more individuals or entities that confers rights and duties on the parties. Public Procurement Act No.21 of 2004 and its Regulation 2005 define contract as an agreement made between a procuring entity and a supplier or contractor or asset buyer, supply of goods or for the execution of works or for sale of public asset; In order to acquire goods, works or non consultancy services from external source there must be a contractual agreement between the parties. 8.2 Breach of Contract: is the failure of one part without legal excuse, to perform obligation according to contract agreement. Breach of contract attracts penalty and fines which may have bad reputation to an entity. During the year under review, we have noted some observations regarding legal issues and contracts which if left unresolved by the respective authorities might have negative future economic impact. Most of the observations are as the result of non compliance with statutory requirements, which may lead to misappropriation of public funds, hence obliterate the entity and bring doubtful reputations to the public.
8.1
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The common practice includes weak and vague contracts, breaching of contracts and absence of contracts. Outcomes of the review of some legal contracts that were entered into by some of the PA&oBs are as analysed below: 8.3 Weak and vague contracts Some contracts that were entered into by some PA&oBs are either not well defined or lack clauses that can cater for stewardship of public resources as explained in proceeding paragraphs. Tanzania Port Authority (TPA) Leased Container Terminal TPA Container Terminal was leased to a private operator M/s Tanzania International Container Terminal Services (TICTS) in May, 2000. Initially, the lease agreement was to last for a period of ten years. However, towards the end of year 2005, the lease agreement was extended for another term of fifteen years vide Addendum No.2 to the lease agreement executed on 30.12.2005 to make the lease period to be twenty five years. This is contrary to Section 69 (1) of the PPA 2004 which states that A procurement contract shall not be altered or amended in any way after it has been signed by both the parties unless such alteration or amendment is to the benefit of the Government or is not disadvantageous to the Government. Furthermore, Public Procurement Regulation No.117 (1) of 2005 states that Once signed, the contract or written agreement may not be altered, except when an alteration is necessary for the benefit of the procuring entity or when an alteration does not put the procuring entity in a disadvantageous position.
8.3.1
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This extension is also a breach of a clause of the specific agreement No. 9.1 Amendment of Lease which states that This lease including the schedules and appendixes, shall not be amended except by an instrument in writing agreed to and signed on behalf of each parties or their assignees, hereto after due consultation with all the parties who may be affected by such an amendment. Amendments of the term shall not be permitted. This clause sets the conditions for amendments to the contract, but explicitly rules out amendments to the terms of lease. As such the extension should be considered null and void. The extension made no reference to the Public Procurement Regulatory Authority, as required by law. PPRA is the body charged, among other things, with ensuring application of fair, competitive, transparent, and non discriminatory and value for money procurement standards and practices. In particular, given that the terms of extension were so unfavorable to the Government, the extension was clearly in breach of the PPA 2004. Operational problems have characterized the leased container terminal as evidenced by congestion of containers at the port. Whereas stakeholders were directed to work round the clock to ensure that there was no congestion of containers at the port, TPA (lessor) decided among other things to investigate the situation and came up with a report attributing the situation to varying factors among them being: Economic life span of 66% of the equipment at the Terminal had expired and therefore performance efficiency of the same has been significantly reduced.
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The few types of equipment procured by the lessee were not brand new and some of them had surpassed their economic lifetime. It was established that the lessee has been involved in cannibalization of equipment and typical example cited include one locomotive crane and one RTG (Rubber Tired Gantry) crane originating from the lessor. Reluctance by the lessee to transfer containers from port area to Ubungo Inland Container Depot has further complicated the situation of container congestion at the port while the depot at Ubungo remained underutilized. No investment has been made by lessee to replace the aged equipment which is used to transfer containers from port area to Ubungo Depot.
Operating the terminal beyond its designed capacity, citing the capacity of the pavement base constructed to stack three (3) containers but currently the lessee has been stacking five (5) containers. Generally, it can be observed that the lessee has not invested enough in operational equipments. The current prevailing situation at the terminal such as long queue of lorries/vehicles waiting to load and offload containers, container congestion, increased dwell time, and ship waiting time are the signs of existing problems. Despite of the shortfall pointed out above no remedial action has been taken to rectify the situation. In addition, the lease agreement itself does not contain a provision for mid review of the lease agreement and does not empower the lessor to force the lessee to implement provisions of the lease agreement in particular those related to the efficient operation of the terminal. In this
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regard, if there is no intervention by higher authorities in the government the lessee may end up running down the terminal and eventually forcing the lessor to re-invest in operating equipment at the expense of taxpayers money. We noted however that the Board of Directors wrote a letter to the Minister of Infrastructure Development regarding the matter which contained recommendations on the way forward to address the operational problems facing the terminal and shortcomings contained in the current lease agreement for Government consideration and decision. However, until the time of issuing this report there is still congestion at the port. 8.3.2 Tanzania Tobacco Board (TTB)
8.3.2.1 Contract No TTB/C/LCS/01/01 (TTB and Current Director General) The Board had entered into the above contract between the named parties on 28 July 2005. The review of the contract revealed the following weaknesses The contract does not specify the amount to be paid for utility, entertainment and promotion and states it as refundable, which may be a loophole for misuse of TTB resources. In the contract it is stated that the employee in this contract will be entitled to the cell phone prepaid to the tune of Shs 300,000 + Official Cell phone However it is not made clear in this provision whether the cell phone is bought once, monthly or annually. This circumstance may be used to misuse the resources of the Board. On the other hand the contract refers to gratuity stating that the rate will be 25% of total remuneration received by him. On this matter the total remuneration is not clearly defined whether it
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means net or gross pay or remuneration includes fringe benefits or not and the time for calculating the total remuneration is not well stated which may be another loophole for misuse of TTB resources. This contract lacks legal attestation and therefore there may be problems in case of breach of agreements between the parties. Also the witness for the employee was found to be a director who is a member of the engaging authority i.e. TTB-BOD. The contract of employment was signed on 28th July 2005 but backdated to 29th April 2005 at the salary of Shs.2,700,000 per month. The scrutiny however established that the employee started to work with TTB as a Director General at Shs 1,168,345 (TGS 18) before signing the engagement contract contrary to financial regulation 4.2.2 which requires the details to be made open before starting work. The contract signing led into computation of arrears and amendment of salary as authorized by the Finance Manager via item M. 52 of personal file no TTB/PF/U.3 The review of the recruitment process forming this contract seems to bear ambiguities as the BOD minutes from 7th to 10th meeting only specify TGS 18 as the salary which is Shs.1,168,345 per month but the contract was signed at Shs.2,700,000 per month without a clear authority (this calls for recovery of differences) The contract is not under seal contrary to S.31 (2) which requires all contracts to be under seal.
8.3.2.2
It implies that TTB may have entered into agreement that might be with ambiguities. The contract of security services This contract was between TTB and MOKU Security Company to offer security services at the house used by the Director General. Review of this contract found the following:-
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The contract is not under seal contrary to S.31 (2) which requires all contracts to be under seal. The contract requires MOKU to provide one security guard for 12 hours daily and TTB agrees to pay consideration of Shs 75,000 p.m per guard. However the scrutiny establishes that the number of guards required per month is uncertain as it has been proved via BV no 9/12 of 29/11/2006 that Shs 510,000 was paid to M/S MOKU being payment for 6 guards, 4 guards and 2 guards without clarification. The contract also requires MOKU to have insurance of Shs.100 million and deposit the copy of insurance policy and receipt of premium with TTB. The same were not provided to the audit team for perusal though requested. The contract does not show time limit of the parties relationship. Therefore it may be perceived to last forever. Also TTB office premises are under MOKU security but the contract for this service was not provided despite efforts of the auditors to request the same. It implies that legal procedures are not well observed by TTB management and therefore may lead into unforeseeable litigations. 8.3.2.3 Medical service contract Despite of the contract of medical service TTB continues to refund the medical bills and purchases of medicines contrary to staff regulation 6.10 (Medical benefits) and article 8 of the contract which details procedures for non working days and the procedures for handling cases above Aga Khan hospital capacity. Songosongo Gas Operations Payment of Corporation Tax Under the term of the production sharing agreement between Pan African Energy Tanzania Ltd and TPDC,
8.3.3 8.3.3.1
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where income tax is paid by the former (Pan Africa Energy Tz. Ltd), the same is recoverable from the profit available to the latter (TPDC). In this case the amount paid as corporation tax is deducted from the remittable proceeds to Government from the sale of additional gas. Audit examination of the financial statement during the year under review revealed that Shs.1,887,186,871 was deducted from proceeds which were supposed to be remitted to the government if the contract was in the benefit of the Government. This contract is not to the benefit of the Government or people of the Republic United of Tanzania. 8.4 Breach of contracts A number of Public Authorities and other Bodies have demonstrated significant weakness in the management of contracts. The situation has been manifested in breaches of contracts by several PA&oBs as explained in the proceeding paragraphs. Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO) Article 36.3 of the lease contract between DAWASCO and DAWASA requires that the First Time New Domestic Water Supply Connection Fund (FTNDWSCF) be used for provision of First Time New Domestic Water Supply Connections to domestic customers. During our audit we noted cumulatively Shs.965 million of the totals FTNDWSCF have been used for activities not related to first time water connection to domestic customers. This is non-compliance with the lease contract between the operator (DAWASCO) and DAWASA. For instance the Lease Contract stipulates that following an audit of the First Time New Domestic Water Supply Connection Fund where the auditors determine that the First Time New Domestic Water Supply Connection Fund has been used
8.4.1
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for purposes other than the provision of First Time New Domestic Water Supply Connections to domestic Customers, the operator shall immediately repay the amount determined by the auditors as used for activities other than the First Time New Domestic Water Supply Connection Fund. Persistent misapplication of the First Time New Domestic Water Supply Connection Fund by the operator shall make the operator liable to pay the amount set out in Article 46.1(f) of the lease contract and may be considered as material breach of the lease contract which could lead to termination of the agreement under Article 50.
It implies that the misapplication of the Fund by the DAWASCO attracts penalty equal to 0.5% of weekly revenue for each week of delay from the date when the Fund was misapplied until the misapplication is remedied. 8.4.2 Dar es Salaam Water Supply and Sanitation Project International Development Association IDA Credit 3771-TA Article III 3.04 of the Development Credit Agreement between the United Republic of Tanzania and the International Development Association (IDA) and article II section 2.04 of the Project Agreement between DAWASA and IDA, require DAWASA to open and maintain a project bank account for deposit of counterpart fund/contribution to the project. This account must be replenished to Shs.750,000,000 at the end of each project quarter or when the balance falls below Shs.250,000,000. However, as at 30th June 2007 the balance in the project account was only Shs.93,575,267. This is a breach of a credit agreement covenant which could lead to suspension of financing by the financiers as provided
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for under Article V of the Development Credit Agreement with IDA and Article 1.07 of the Finance Agreement with EIB. 8.4.3 Tanzania Broadcasting Services Corporation uses agents to get customers for programme and commercial advertisements. We however noted that most of the agents do not pay their outstanding balances promptly. For instance as at 30th June 2007, ZK Advertising had an outstanding balance of Shs 360m, Lowe Scanad Shs.73m, M&M Communication Shs.27m and FCB Shs.122m. Furthermore the detailed review of contract no TBS/TV/07/66, TBS/Radio/07/62 for ZK Advertising revealed that the customer is always required to pay outstanding balances within 5 days after the end of the month in which the transaction was carried out and any delays would amount to a penalty of 5% on the outstanding balances. However, there was no evidence that the Corporation applied the penalty clause on defaulted customers. In addition there was no clear justification from the management as to why the corporation kept on giving services to defaulting customers. The review of contracts with agents also revealed that contractual relationship between the Corporation and Agents is not that of agency but rather buyer-seller relationship and consequently they do not act on behalf of the corporation. It implies that the corporation may face financial difficulties because it is financing its customers businesses and thus contractual relationship with the agents is not clear.
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8.5
Absence of contracts It has come to our light that some PA&oBs have been involved into a number of agreements without legally binding contract arrangements. The situation has been violating best practices and several other laws as well as exposing the concerned PA&oBs to several risk as elaborated in the proceeding paragraphs. Ngorongoro Conservation Area Authority (NCAA) NCAA has been employing staff as casual workers and there were some instances where these casual workers have been working for a long time without contracts contrary to employment and labour relation Act, 2004sec.14 (1) which requires a person to be offered a contract which can either be for specific or unspecific period of time and for specific task. It implies that NCCA does not comply with regulation which might expose the Authority to unnecessary penalties and future contingencies against workers. The Presidential Parastatal Sector Reform Commission (PSRC) The commission entered into contractual agreement with Central Security Services Ltd for provision of security services on various assets under the Commission located at difference places. The original contract covered the period of three months from 25/08/2003 to 24/11/2003, and later extended to 31/07/2006. However, on expiration of the extended contract, the Commission continued to use the service of the firm and paid an amount of Shs.75,900,340 without renewing the contract agreement. It implies that extending services in the above manner deprived the Commission any opportunity for more economical services provided by similar or more competent firm.
8.5. 1
8.5.2
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CHAPTER NINE 9.0 SPECIAL AUDITS AND INVESTIGATIONS This chapter deals with special audits carried out during the financial years ended 30th September 2006, 31st December 2006 and 30th June 2007. The Controller and Auditor General is empowered to conduct special audits and audit investigations when required to do so. Sect. 34 of the Public Finance Act No.6 of 2001 further empowers the Controller and Auditor General to make recommendations for the purpose of: Preventing or minimizing the unproductive expenditure of public moneys; Maximizing the collection of public revenue; Averting loss by negligence, carelessness, theft, dishonesty; fraud and corruption relating to public moneys and resources. Special audits and investigation are audits that do not follow normal audit procedures. They are audits that go beyond accounting cycle and normally all audit opinion is not issued. During the year under review, Controller and Auditor General conducted special audit of the financial statements and its related records of the Bank of Tanzania (BOT), TANESCO and Air Tanzania Holding Company (ATHCO). The Special Audits were conducted following the request from the Government and the Board of Directors of the respective Parastatal. Outcomes of the special audit of the aforementioned parastatals are analysed in the proceeding paragraphs. 9.1 9.1.1 Special Audit Investigation on BoT EPA Account Introduction Treasury EPA Stock represents External Payment Arrears (EPA) that date back to 1980s when the defunct National Bank of Commerce had external commercial obligations that were in arrears for lack of foreign exchange. These were later on transferred to the BoT to facilitate their
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administration and control. According to the arrangement of sharing such obligations, the externalization of EPA obligations is done on the basis of agreed exchange rates. The exchange rate differential between the TZS exchange rate prevailing when the beneficiaries are paid and the rate ruling when the funds were initially deposited to the commercial banks resulted into exchange losses, which are recoverable from the government. 9.1.2 Audit Results The special audit of the BOT EPA account, concluded that Shs.134 billion was spent under the account out of which Shs.90 billion was fraudulently paid, while the Shs.44 billion needs further analysis to determine whether the amount was properly spent, and or accounted for. The matter is now under investigation by a special committee commissioned by the President of the United Republic of Tanzania, the deliberations and outcome of which will be dealt with later. Special Audit of Tanzania Electric Supply Co Ltd (TANESCO) Introduction The objective of this assignment was to undertake a consultancy on financial and management audit of the Tanzania Electricity Supply Company (TANESCO) in order to assess the financial and managerial performance of the Management Support Services Contractor (MSSC) as provided in the Terms of Reference of the contract signed on 12th April, 2002 (and as amended on 30th December, 2004). The assignment was jointly carried out by Deloitte and the National Audit Office from August to November 2006. Financial Performance TANESCOs financial performance significantly declined during NETGroups tenure. In 2006 TANESCOs gross margin was -41% which mandates the consistent reliance on GoT subventions and on bank overdrafts. Return on
9.2 9.2.1
9.2.2
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assets and equity have also significantly declined from 9.3% in 2000 to -32.7% in 2004 without government and donor fund injection. From our analysis, over 75% of the terms of reference were either not implemented or were minimally addressed during NETGroups tenure. Accounts Receivable As at July 2006, TANESCOs total receivables were Shs 201 billion, equivalent to one year annual revenue which added to the significant liquidity crisis to the company. It was noted however that the ratio of private individual accounts leapt from 25% in 2000 to 83.7% by July 2006. This signifies declining control of collections from private accounts. It was noted that most of the collection efforts undertaken by the MSSC campaign was on large power customers while efforts to collect from the smaller Tariff A customers were limited. Cash Management (Liquidity Position) TANESCOs liquidity position has continued to deteriorate significantly since 2004 with the shortfall registered in hydro generation. The combined costs of independent power purchase (IPP) capacity charges, new leased generation and fuel cost by far outstrips the income generated by TANESCOs revenue. With the gross margin at approximately -41% for 2005, overdraft in august 2006 was at -60 billion and the IPPs taking approximately 62% of TANESCO of the money. Emergency Power Producers (Aggreko (40MW), Richmond (100MW) and Alstom (100MW) continued to further deplete a significant portion of revenues through the capacity and energy charges. The external power purchase (EPP) during the period was approximated to be
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US$ 7 million per month which is approximately 30% of TANESCOs monthly revenue. 9.2.3 Power Generation: The 2006 power crisis resulted from a culmination of factors emanating from poor planning by the MSSC. In 2003, there was a significant discharge of water (6.77meters) at the Mtera reservoir without allowing a period of reservoir replenishment. The continued use of water resulted in the reduction of hydro generation from approximately 400MW in 2003 to 98MW by early 2006, a 75% drop. In addition to the hydropower shortfalls, lack of maintenance to existing thermal plants added to the power crisis. Lack of maintenance of thermal plants led to the closure of up to 80% of grid connected thermal plants. Power Losses Power losses have also increased substantially over time. By 2005, TANESCO was losing 33% of the power generated through both technical and non-technical losses. The greatest percentage of these losses in the year 2006 was on the distribution network. The technical losses here result from the overloading of lines and transformers while meter tampering and power theft accounted for the larger component of non-technical losses. A table showing Percentage of Power Losses to Total Generatiotn Year 2001 2002 %Losses* 29% 23% *%Units Generated less Units Sold 2003 28% 2004 36% 2005 33%
Source: Tanesco generation reports and consolidated distribution reports
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9.2.4
SONGAS & IPTL (IPPs) It was observed that during 2006, Songas experienced outages that cost TANESCO a combined total of approximately 170,000Kwhrs equivalent to Shs 13 billion of lost revenue for TANESCO. Inspite of all these losses, the payments made to Songas did not reflect a significant change particularly in relation to capacity charges1 which are based on project costs. This formed the basis of the approximately US$ 5 million monthly capacity charges that continue to significantly cripple TANESCOs liquidity. With regard to paying Songas and IPTL invoices, there has been no internal validation of invoices received by TANESCO personnel since inception. This displays a lack of control within TANESCO of invoices that constitute approximately 80% of total monthly payables.
9.2.5. Metering & Billing It was established that between 2005 and 2006 TANESCO lost approximately Shs 9 billion in revenue due to meter fraud and equipment tampering. With regard to connections, the backlog to new connections had significantly increased to 10 months in 2006 i.e. approximately 10,000 customers countrywide who fully paid for their service line charges were desperately awaiting connection. Further, accounts were not billed for up to 3 months after being connected due to lack of transparency between the operations and billing departments.
The calculation of capacity charge is purely based on the cost of equity and cost of debt used to finance the power plant. It is not a factor of the power generated.
1
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9.2.6
Shortcoming of the Billing System The CUSTIMA system has developed both technical and non technical weaknesses that have affected its performance. Due to these weaknesses the system has been the biggest cause of revenue losses to the Company. The sample evidence from internal audit reports showed that there were 46 occurrences of system manipulations that led to revenue losses amounting to Shs. 9,132,188,078 between August 2005 and May 2006.
9.2.7
Corporate Governance During our review, it was noted that apart from policy support, the MEM has been involved in committing TANESCO into contracts that were not fully vetted by the companys Board or management. An example of such commitment of TANESCO by MEM is the IPTL, Songas and Kiwira power purchase agreements (PPAs). We did not come across any tender Board evaluation or meeting minutes documentation relating to the procurement of power from the IPPs. The result of these PPAs has been a significant reduction in TANESCOs liquidity due to capacity and energy charges that are inhibitive to TANESCOs growth and sustainability. Another example is the commissioning of Richmond Development Co. Ltd as an Emergency Power Producer in April 2006 by MEM. Minutes from the tender board of 28th March 2006 reflected that none of the bids received for the 100MW gas generation tender qualified. Specifically Richmond had quoted for 2 year and 5 year periods as opposed to the stipulated 12 month period. TANESCO is now locked into a 2 year contract with Richmond now Dowans where TANESCO pay emergency power charges even if favourable hydrological conditions resume. Our findings indicated that the contract with Kiwira Coal Power was also signed while various stipulations pertaining to the power purchase agreement were still pending.
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9.2.8
Procurement There exists a weak tendering evaluation process that allows unqualified contractors to be approved for undertaking projects. The problem area identified however is in the evaluation of vendors which on many occasions has resulted in substantial financial losses to TANESCO. For example: Poorly executed construction of a 16km 33KV line in 2005 from Tegeta substation to Mwenge whereby 3 companies were contracted at a cost Shs 450 million. Poor workmanship resulted in TANESCO incurring an extra Shs. 81 million to rectify the problems. The upgrade of Custima to HiAffinity, (US$1.3 million project) contracted to M/S CPA Consultants in January 2004 that cost TANESCO Shs 1.12 billion was aborted before completion. CPA was contracted despite the company having no track record of implementing HiAffinity upgrades, failing to produce performance bond equivalent of 10% of the contract value from their bankers, and failing to avail their financial statements to TANESCO as was required. Selection of Rousant International Pty to provide 30 MW of leased generation in 2004 who then were not able to secure financing for the project thus resulting in TANESCO lacking a contingency to mitigate the consumption of the water in the Mtera reservoir. Emergency Procurement of 90 MVA, 132/33 KV Transformer in 2005 worth US$ 1,198,200 from India which was marred with irregularities: On arrival at the Dar es Salaam port the transformer was not inspected; US$ 20,000 was paid to Crompton Greaves Ltd for a site Engineer to supervise the commissioning of the Transformer, who left prior to commissioning of the transformer;
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TANESCO paid TANROADS Shs.159 million as overload surcharge fees for transporting the transformer without a permit; and Poor clearing and handling of the transformer by M/s Utegi, who was paid Shs.44 million and was offered the job without tendering.
9.2.9
Inventory Management Inventory management in 2006 continued to be one of the major areas of weakness within TANESCO. The company is faced with a problem of physical controls and poor record keeping as evidenced by the differences between stock cards and physical counts of stock. Electronic information differed from the manual system by Shs.97 billion, as at the end of August 2006.
9.2.10 Fuel Purchases TANESCO continued to suffer material fuel losses due to theft and supply of poor quality fuel. Examples include 12,190 litres (approximately Shs.13 million) were stolen at Ubungo storage Tank yard in March 2005; 27,205 litres (approximately Shs 27 million) were reported stolen at Kigoma region in November 2004; and 9,263 litres of sludge valued at Shs 4 million were disposed at Kigoma in 2002 because of poor quality fuel supplied by M/s GAPOIL(T). 9.2.11 Internal Audit It was noted that the Internal Audit Directorate at TANESCO performs rigorous investigations into areas where TANESCO resources have been illegally diverted or decisions made that are detrimental to the performance of the company. It was noted however that limited action is taken on a significant number of the perpetuators. However, the staffing of the Internal Audit department should be re-evaluated to increase auditors and mitigate the current shortfall which has resulted in the noncoverage of all TANESCO regions annually.
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9.3.0
Special Audit of the Air Tanzania Holding Corporation Capital Gain Tax and Transfer Fees not paid in the transfers facilitated by ATHCO Landed property situated on plot 988 Msasani Peninsula Audit scrutiny of invitation for tenders documents, list of applicants, evaluation reports, minutes of management meetings, tender committee meetings, and those of the Board of Directors, ATHCO offer of 25th May 2006 disclosed that the landed property situated on plot No 988 Msasani Peninsula was sold to M/s SMART HOLDING CO. (a legal person as per the Companys Act.) for a total amount of Shs.235,000,000. However, subsequent verification made to the Sale Agreement disclosed that the title to the landed property bear the name of the entitys Managing Director Mr. Hassan Abdul Khan as an individual indicating the transfer from successful bidder M/s Smart Holding to Mr. Khan without evidence of payment of the 10% capital gains tax as per Section 90 of the Income Tax Act amounting to Shs.23,500,000 and the transfer fees required by the land Act. Note that non payment of the 10% capital gains tax as per Section 90 of the Income Tax Act and transfer fees as per the Land Act, in the transaction between Smart Holding and Mr. Khan is contrary to the laws.
9.3.1
9.3.2
Landed Property situated on plot no 598A Kalenga Upanga West, Flat No KF. 3 Audit review of documents relating to properties sold by ATC and ATHCO disclosed a transaction whereby M/s Pirbhai and Bharwani were awarded a landed property situated on plot No 598A Kalenga Upanga West, Flat No KF. 3 for Shs 17,250,000 by the ATC (now defunct). The transaction was concluded by the Sale Agreement dated 19th November 2002.
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Subsequent reviews disclosed that ATHCO replaced the first sale agreements by issuing other sale agreements dated 4th August 2005, in favour of M/s Nasimbanu Mustafa Hassanali Pirbhai and Sofia Munir Bharwani without having evidence confirming eligibility for ownership of landed properties as per the Tanzania laws for the first bidders; payment of the 10% capital gain tax totaling Shs 1,725,000 as per Section 90 of the Income Tax Act and transfer fees as required by the Land Act. ATHCO facilitated in circumventing the law that does not allow foreigners to own such landed property by participating through re-issuing Sale Agreements to transfer a property from ineligible successful bidders to other persons. By so doing, ATHCO has facilitated to deprive the Government an amount of Shs.1,725,000 as the 10% capital gain tax contrary to Section 90 of the Income Tax Act, and the transfer fees required by the Land Act. 9.3.3 Landed properties Nos 121 Uganda Avenue and 12 flat No OBF 12B Oyster-bay. Audit scrutiny of the process for disposition of assets vested on ATHCO disclosed that Captain Milton L. Lazaro was awarded to purchase by the now defunct ATC house No. 121 Uganda Avenue at an agreed amount of Shs 215,000,000. We also noted that Captain Lazaro was the lowest bidder offering a price of Shs.15,000,000. Persons with higher bids with their respective amounts in brackets were ZEK Group (Shs 215,000,000); Furniture Centre (Shs 200,000,000); Shellys Pharmaceuticals Ltd (Shs 191,000,000). We further noted that Captain Lazaro was given privilege as a sitting tenant and ex-employee of ATC to purchase the house. He proceeded to purchase it. However, for
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reasons not made clear to us, the purchase was made on behalf of Elizabeth Thomas Ulotu and Frida Mbwilo whose names were not in the list of applicants therefore the consideration of ex-employee or sitting tenant privilege had not been properly applied because actual successful bidders were deprived what they deserved. It was further noted that the same Elizabeth Ulotu was given plot No12 flat No OBF 12B having title No 186037/140 resulting in double allocation while other contestants missed the landed properties on sale. ATHCO participated in transferring the controversial right by sale agreements dated 19th March 2004 (E. Ulotu vs. ATHCO); and that of 28th December 2005 (between F. Mbwilo & E.Ulotu vs. ATHCO) without evidence confirming payment of the 10% capital gain tax totaling Shs 21,500,000 as per Sec. 90 of the Income Tax Act and the transfer fees required by the Land Act. The property of a company was given to an individual who had not participated in the tendering process contrary to the Public Procurement Act; ATHCO has violated section 68 the Public Procurement Act of 2004, amplified in PPR No. 96 of 2005 that require successful bidder to be awarded the tender. 9.3.4 Expenditure incurred without budgetary provision Shs.5,000,000 An amount of Shs 5,000,000 was noted to have been paid to a supplier vide cheque number 130668 of March 1st 2006 supported by an official memo dated 27th February 2006, in respect of residential furniture of the General Manager. According to Regulation 3.7 of the ATHCO Staff Regulations and Fringe Benefits 2003 the furniture is an entitlement of the General Manager after every three years period since the General Manager received the first furniture entitlement. However, the expenditure has
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neither had a budget provision nor was sanctioned by the Board of Directors. No evidence was provided to indicate that the three years period had lapsed. It is implied that the internal control system of the ATHCO allows transaction to be executed without adherence to the Financial Regulations and management override the controls in place. 9.3.5 Conversion of other person imprest to private use US $2,642.67 Audit scrutiny of the accounts and their related records revealed an amount of US $2,642.67 paid vide cheque number 342118 on 30th December 2004 to General Manager as imprest on behalf of Ambassador Mzale who was in Riyadh Saudi Arabia, who agreed to assist, in collaboration with ATHCO and the Ministry of Foreign Affairs in Tanzania, to recover a debt from a debtor in Oman. However, the Tanzania part of delegation delayed to reach Oman as agreed which caused Ambassador Mzale to return to Riyadh. Imprest totaling to US $2,642.67 which was entitled to Ambassador Mzale remained with the General Manager and was not accounted for to ATHCO up to 20th March 2006 (a delay of about 14 months). We were not given satisfactory explanations about the procedures used to regularize the conversion of other persons imprest to be a private imprest and surcharges or penalties for violation of both financial regulations and for delays in recovery of the amount. It implies that the internal controls over payments of imprest are weak as a result transaction may be executed without adherence to financial regulation and management overrides the controls in place. 9.3.6 Tender Board minutes Audit verification made on the tender board minutes disclosed that some of the meeting minutes were found
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missing and others were not endorsed by the chairman and the secretary of the meetings as shown below: Description Tender Meeting Board Minutes Missing 1st,,2nd 3rd, 12th Minutes not endorsed
4th and 5th,6th,7th,and 14th
The authenticity of the minutes and the decision covered by the missing minutes and their implementation were not established. 9.3.7 Questionable approach used to release ATHCO right of tenancy Public Leadership Code of Ethics Act No. 13 of 1995 Part II Sec.6 (g)-(i) institute and invoke the following principle in respect of the conduct of public leaders, I quote:(g) in relation to preferential treatment, that public leaders Shall not step out of their official roles to assist private entities or persons in their dealing with the Government where this would result in preferential treatment to any person; (h) in relation to inside information, that public leaders Shall not knowingly take advantage of, or benefit from information which is obtained in the course of their official duties and responsibilities and that is not generally available to the public; (i) in relation to government property that public leaders Shall not directly or indirectly use, or allow the use of government property of any kind, including property leased to the government, for purpose of according economic benefit to the leader. However audit scrutiny of documents relating to the tenancy of ATHCO offices disclosed that ATHCO inherited right of tenancy as well as debt for rent arrears which amounted to Shs.127,080,958.95 in connection with apartments Nos 005,006, 007 and 102 TANCOT House.
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The rent in arrears were for the period from December 1999 to November 2002 (refer ATHCO/B4/1295/730 of 22nd November 2005). ATHCO management approached NHC management in response to NHC threat to evict ATHCO following its failure to pay outstanding rent amounting to Shs.127,080,958.95 inherited from ATC. The ATHCO management requested to be allowed to seek tenants for apartments No 007 and 009 who would settle part of the debt by paying Shs.10,000,000 each on the explanation that the same would be used to reduce the unpaid ATC rent arrears. However it was the officials who ended occupying the apartments or people known to them who ended up acquiring the rights of tenancy. Furthermore the transaction was noted to have a number of controversies as follows: The transaction has not been passed through transparent way that would enable the government to be relieved by paying less on the rent arrears left by defunct ATC by relinquishing its right of tenancy. Had the approach been competitive and transparent, more than Shs.20,000,000 would have been received therefore reduce the burden to the government in respect of rent in arrears left by the defunct ATC. The transaction appears to have been done inconsistent with sub section (g)-(h) above of the Public Leadership Code of Ethics Act No. 13 of 1995. 9.3.8 Motor vehicle uses Audit review of financial documents and their related records noted that ATHCO has two motor vehicles, one Nissan pick-up bought from D.T DOBIE (T) LIMITED on 5/4/2004 vide invoice no 12460 (value Shs.31,166,669) with registration number SU 35994 and a Land Rover with registration number SU 35541 bought on 27/02/03 vide
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receipt no. 0060 (value Shs.36,698,355) which was delivered on 11/3/03. The above vehicles have been allocated to General Manager (Land Rover Freelander), while the Finance and Administration Manager, Legal and Estate Manager were using the Nissan pick- up in common. Scrutiny of claim form from insurance company indicated that the Land Rover Freelander was involved in accident on 24/11/2004 and after the accident the Nissan pick up was handed over to the General Manager. Review of documents indicated that the maintenance of the Land Rover after the accident was done at Spring Enterprise Garage and the payment was done by the insurance company. However the Land Rover continued to have mechanical problem and frequently maintenance record indicated that the Land Rover was maintained at the CMC Land Rover with the following particulars of the dates taken to garage, dates released from garage as well as the speed meter reading on specific dates. Date received 27/7/2005 06/10/2005 31/10/2005 23/01/2006 Date Issued 01/09/2005 10/10/2005 22/10/2005 14/02/2006 Mileage(in kilometres) 56841 (differ) 57171 330 58747 576 59603 856
In trying to establish the whereabouts of the Land Rover Freelander which was not at ATHCO office during the hand over of the office by the General Manager, we were informed that the vehicle was first taken to a garage at Sinza where the Acting General manager collected it and transferred it to a garage in Mwenge Survey. On 11/08/06 audit made a physical inspection of the Land Rover at the
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garage and found the mileage read 63520 kilometres run. The vehicle had mechanical problems of the gear box and the air conditioning system, and the interior seat covers were torn. The garage to which the vehicle was taken estimated the maintenance cost of the vehicle to range from Shs.2,082,600 to Shs.4,080,000 depending on whether the gear box was to be overhauled or damaged spare parts replaced. The under listed general anomalies were also noted in connection with management of vehicles: The log book record for control of the use of the Land Rover Freelander was only up to 19/04/04 that is few days prior to engaging in accident. Despite of the progressive running of the meter shown in the maintenance review noted above no clear controls were kept to confirm the purpose for which the vehicle was put into. Log book controlling use of the Nissan Pick up has records of up to 28/09/2004. When the Land Rover Freelander was involved in the accident, the Nissan Pick up was released to the General Manager, we could not establish track record of its usage as from there. The vehicles may be subjected to unauthorized use and at the expense of the ATHCO with respect to the running cost, maintenance as well as wear and tear. There is also possibility of fabricated maintenance bills to be charged to the ATHCO account if the releases to garages are not properly checked. 9.3.9 Use of official bank account to sponsor son in United States. Audit review of record and interview made with officers revealed that the General Manager Mr. Gembe requested his subordinate Mr. Ngwanasayi to write a letter to USA Embassy giving his official standing (refer ATHCO/S.1/906 of 13th September 2004) while processing studies for his son Benjamin Lazaro Gembe.
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In the process the ATHCO bank statement was also released to USA for the purpose of indicating the financial credibility of the father. Audit is in the opinion that the manager allows personal interest to conflict with official one and unfair disclosure of office records contrary to leadership code of ethics. Contingent liability may be looming over the ATHCO accounts in case the General Manager fails to meet fees obligation for his two children in USA.
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CHAPTER TEN 10.0 CONCLUSIONS AND RECOMMENDATIONS 10.1 Introduction This chapter deals with conclusions and recommendations on the key audit findings which need attention of the Government and the management of the respective Public Authorities and other Bodies. These recommendations come from the mandate given to the Controller and Auditor General under Sect. 34 of the Public Finance Act No.6 of 2001 (revised 2004) for the purpose of preventing or minimizing unproductive expenditure of public moneys, maximizing the collection of public revenues; and averting loss by negligence, carelessness, theft, dishonesty, fraud and corruption relating to public moneys and resources. Having reviewed and concluded the audit of the financial statements of the PA&oBs for the period covered in this report, and using the powers vested in me, the following are my conclusions and recommendations. Addressing privatisation issues During the year under review, it was noted that the Treasury Registrars Office had not collected outstanding proceeds from investors arising from the sale of the privatized Public Parastatals. However, despite the success gained from privatization together with the lessons learnt in the process, some of the Public Authorities and other Bodies are not operating as intended while others have changed the original purposes of production and others have completely ceased operating. Recommendations Treasury Registrars Office should ensure that: Sound debt collection measures for long overdue debts from defaulting investors are instituted.
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Legal action is taken against investors who fail to fulfill their contractual obligations on privatisation; Public entities which are not operating are either revived or liquidated; Assets from defaulting investors are either repossessed or they made to pay. The Consolidated Holding Corporations the successor of PSRC and LART; is strongly advised to commission or carry out a Post Sale Audit of all divestitures to ascertain the conformance of the privatised entities to the business objectives and any other developments as per the sales agreements.
10.2 Weak Information Technology Systems During the year under review some Public Authorities and other Bodies were noted to have weak information technology systems while others are running old computer systems developed and installed as far way back as 1990s. It was also noted that since the adoption of the systems, they have not undergone any major upgrading or systems audit. This has resulted in the PA&oBs operating with unreliable operating information systems. Recommendations The respective PA&oBs should ensure that they install new and modern information technology systems. The existing information technology systems should be improved. 10.3 Preparation of financial and operational manuals During the period under review, it was noted that a number of Public entities lacked important operational and financial manuals as working tools in ensuring that operations and financial functions are properly carried out. Recommendations PA&oBs management should ensure that the operational and financial manuals are prepared and put in use. 163
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PA&oBs management should ensure that sound accounting policies are formulated so as to improve efficiency in implementing the PA&oBs objectives.
10.4 Good Governance It has also been noted that a number of Public Authorities and other Bodies have governance problems as explained below: have established neither internal audit units nor audit committees as required by law; internal Audit Units are not manned by professionally competent staff. head of Internal Audit Units are not reporting directly to the Chief Executive Officer; they are reporting to the Chief Accountant or Finance Manager; have ineffective internal audit units; internal auditors were carrying out pre-audit functions; and, some members of Parliament are members of some Boards of Directors of Public Bodies contrary to the principles of good governance. Recommendations PA&oBs management should establish effective Internal Audit Units manned by professionally competent staff with pre requisite resources and facilities to enable them to professionally execute their responsibilities; The Heads of Internal Audit Unit should report directly to the Chief Executive Officer and not to the Chief Accountant or Finance Manager; The membership of the Audit Committee as stipulated in Reg.31 of PFR 2001 (revised 2004) should be reviewed to allow for more external membership of the Committee in order for it to be more effective in giving the Chief Executive Officer appropriate and unbiased advice; In order to avoid conflict of interest, in as far as the oversight function is concerned, members of Parliament
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should not be members of the Board of Directors of public entities. 10.5 Compliance with Public Procurement Law A substantial part of the PA&oBs financial resources are utilized through procurement of works, goods, equipment, and acquisition of consultancy services so as to provide services to the public. In the course of audit examination of the accounts of Public Authorities and other Bodies, we have noted the following: Some PA&oBs have not established Procurement Management Units; Non adherence to best procurement methods and practices; Some PA&oBs have not established tender boards; Procurements are made without approval of the tender boards Major weaknesses in procurement contracts management; Procurement Management Units not manned by professionally competent staff with pre requisite resources and facilities to enable them to professionally execute their responsibilities; Recommendations In order to ensure compliance with the requirements of PPA No. 21 of 2004 and its related Regulations, I recommend the following: Establish capacity building at all levels in the procurement process; The Public Procurement Regulatory Authority (PPRA) needs to be given adequate capacity to regulate the procurement function in the country; Improvement in record keeping regarding procurement proceedings, and; Effective Tender Boards and Procurement Management Units should either be formed or substantially improved.
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10.6 Public Authorities with Going Concern Problems We noted that some public corporations have been experiencing persistent negative working capital to the extent of facing difficulties in liquidating their maturing obligations, a situation that does not reflect a healthy financial position of the entities. Recommendations Efforts should be taken by PA&oBs to increase/boost revenue and reduce operating costs; Loss making units/branches of PA&oBs should be identified and recommended for closure, divestiture or restructuring; Idle assets and investments of PA&oBs with poor returns should be sold; External financing should be secured to turn the loss making PA&oBs to profitable organizations; Employees morale/motivation should be enhanced to improve performance. Furthermore, prospective restructuring of particular entities should be well researched, hastened and considerations of the factors that bring inefficiencies and losses to the PA&oBs taken and rectified.
10.7 Water Billing in Water Authorities Audit of Water Authorities have revealed significant weaknesses in water billing. The gaps arise from incorrect application of rates and failure to collect data on water consumption, as well as problems in locating billed customers resulting into over or under billing customers. The effect of this weakness has been inaccuracy of records and accumulation of uncollectible debts. In addition, there has been enormous loss of treated water in most authorities above the accepted normal loss standard. These problems have resulted into most Water Authorities having
166
negative net operating operational difficulties.
results
thus
experiencing
Recommendations The respective Water Authorities should identify all billable customers; Meter installation to customers should be hastened to ascertain accuracy of bills receivables; The Water Authorities should make sure that only genuine customers are billed. The Ministry of Water and Irrigation, should assist the Water Authorities in improving their billing systems by recommending an appropriate software billing package to be uniformly applied. This should be coupled with the appropriate training on the application of the recommended software package. 10.8 Contracts Management A review of contracts entered by a substantial number of PA&oBs have revealed major weaknesses that have resulted into contractual problems and pending court cases that have adverse liquidated damages to the authorities. Recommendations PMUs and tender boards should be involved in the preparation of the procurement contracts; Improve capacity of PMUs and tender boards in contract management executions. Maintain contracts registers. 10.9 Assets Management A review of a number of Public Authorities revealed that they do not posses title deeds of some landed properties, poor record keeping, under or overstatement of the assets; non-revaluation for a long time and impairment not tested periodically.
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Recommendations Movable fixed assets should be properly recorded, disclosed and accounted for; Legal ownership of the properties should also be sought; Revaluation of assets should be done and impairment tested at recommended time interval. Management should regularly verify and ascertain the existence and conditions of the assets; Record keeping of assets should be improved. 10.10 Non recovery of Loans It was noted that large amounts of loans advanced to some customers by some PA&oBs have remained uncollected beyond the agreed dates. Recommendations The respective PA&oBs should carry out rigorous follow up on the outstanding amounts; Improve existing lending policies, 10.11 Improvement in financial management and control We noted during the year that some of the PA&oBs had weak financial management systems. The general weakness noted among PA&oBs include non submission of statutory deductions to the respective authorities, weak management of debtors and creditors and lack of key financial directives. Recommendations In view of the above weaknesses, I recommend the following: Management of the entities should ensure that there is compliance with the requirements of the laws and the effective financial control systems are in place; Debtors and creditors are to be dealt with promptly so as to safeguard public resources and protect the image of the entities in dealing with third parties.
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10.12 Results of BOT Special audit on EPA account The special audit conducted on the BOT- EPA Account which concluded that there was a misappropriation of funds, is found out to be a result of weakness in the financial management and control at the Central Bank. Recommendations To ensure such misappropriations do not recur, I recommend the following: Disciplinary action should be taken against BOT officials involved in the actions of facilitating the misappropriation Further investigation be performed on other EPA payments made to the remaining assignee companies for which the audit team could not conclude about their validity and authenticity during the investigation. It is further recommended that a clear Memorandum of Understanding, which should govern the relationship between the BOT and MOF on management of EPA transactions, should be drawn up as proposed in the investigation report. BOT functions should be streamlined, and the Institution should be relieved from non core functions of the Central Bank. 10.13 Results of TANESCO Special audit It was found out during special audit that TANESCO is overburdened by the liabilities imposed by various power purchase agreements (PPA) mostly entered without compliance with the requirements of Public Procurement Act and its regulations. Recommendations In decisions to enter into any contract in respect to TANESCO, the law governing public procurements in Tanzania should be complied with. The Governments interference in the management of TANESCO should be minimized in order for it to be held accountable.
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10.14 Muhimbili National Hospital Assets verification During physical verification of the assets owned by the Muhimbili National Hospital, it was noted that one building constructed within the Hospital land is owned by a private person. Verification of the agreement between the then Muhimbili Medical Centre and H.A.Kiluvia Trading as Agent Store disclosed that the agreement was signed on 11th April, 1987 and the tenant was to occupy the building for five years with effect from 22nd December, 1987 up to 21st November 1992. Although the agreement period expired, but the building is still under the ownership of the developer contrary to the contract agreement. Recommendations The Hospital management should ensure that the terms of the contract agreement are complied with.
10.15 Liquidated Damages Due From M/S Dowans Holdings
Audit review of Power-Off Agreement disclosed that M/S Dowans Holdings failed to commission at full capacity of 100MW generation on the Commercial operation date (COD) effective from 2nd February, 2007 through 31st August, 2007 contrary to the agreement. Recommendations The management of TANESCO should ensure that liquidated damages are paid by the defaulter as per provision of the contract agreement and any delay in paying the amount in question attracts interest charges. 10.16 Over payments and excess expenditure Examination of payment vouchers and the related records revealed that a total of Shs.375,144,226 was overpaid to
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the Commissioner of Domestic Revenue due to wrong interpretation of the VAT Act. It was also noted that some of the Public Authorities and other Bodies spent more than the approved budget to the tune of Shs.136,061,758 during the year under review. It implies that the activities of the respective Public Authorities and other Bodies suffered to the tune of the amount of VAT over paid to the Commissioner of Domestic Revenue. Recommendation The management of Tanzania Standard Newspaper and Tanzania Postal Bank should ensure recovery of Shs.268,810,275 and Shs.106,533,951 respectively ooverpaid to the Commissioner Domestic Revenue as VAT. The management of DUWASA should seek retrospective approval on the amount overspent. 10.17 Irregular Contract agreement Tanzania Ports Authority Container Terminal was leased to a private operator M/s Tanzania International Container Terminal Services (TICTS) since May, 2000. Initially, the lease agreement was to last for a period of ten years. However, the lease agreement was extended for another term of fifteen years vide Addendum No.2 to the lease agreement executed on 30.12.2005 to make the lease period to be twenty five years of which in my opinion there were irregularities. Recommendation The Government should revoke the un-procedural extension of the TICTs agreement and conduct a thorough evaluation of the 10 years agreement period before extension of the same is decided upon. Should there be need for an extension the Government is strongly advised to adhere to the Public Procurement Law and Regulations.
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11.0 ANNEXURES Annexure I Trend of audit opinion issued to PA&oBs for the past three years S/N Entity name Regulatory Bodies 1. Architects & Quantity Surveyors Registration Board 2. Board of External Trade( BET) 3. Cashewnut Board of Tanzania 4. Contractor Registration Board (CRB) 5. Deposit Insurance Board 6. Energy and Water Regulatory Authority (EWURA) 7. Engineers Registration Board (ERB) 8. Gaming Board of Tanzania 9. Higher Education Student Loans Board (HESLB) 10. National Board of Accountants and Auditor (NBAA) 11. National Board of Materials Managements (NBMM). 2006/07 Unqualified Unqualified Audit in progress Unqualified Unqualified Unqualified Unqualified Unqualified Audit in progress Unqualified Unqualified 2005/06 Unqualified Unqualified Unqualified Unqualified Unqualified Not in operation Unqualified Unqualified Unqualified Unqualified Unqualified 2004/05 Unqualified Unqualified Unqualified Unqualified Unqualified Not in operation Unqualified Unqualified Not in operation Unqualified Unqualified
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12. Presidential Parastatal Sector Reform Commission (PSRC) 13. Public Procurement Regulatory Authority (PPRA) 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. Sugar Board of Tanzania Tanzania Coffee Board Tanzania Commission for Universities Tanzania Communication Regulatory Authority (TCRA) Tanzania Cotton Board Tanzania Library Service Board (TLSB) Tanzania Sisal Board (TSB) Tanzania Tea Board Tanzania Tobacco Board (TTB) Tanzania Tourist Board
Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified No accounts Qualified Unqualified Audit in progress
Unqualified Not in operation Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified No accounts Qualified Unqualified Unqualified
Unqualified Not in operation Unqualified Unqualified Unqualified Unqualified UnqualifiedUnqualified No accounts Qualified Unqualified Unqualified
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S/N 2 3 5 6 7 8 9 11 12 14 15 16 17 18 19 20
Entity name Government Institutions Capital Market and Security Authority Loans and Advances Realization Trust (LART) National Bureau of Statistics (NBS) National Construction Council (NCC) National Council for Technical Education (NACTE) National Economic Empowerment Council-(NEEC) National Environment Management Council (NEMC) National Housing Corporation (NHC) National Museum of Tanzania Ngorongoro Pastoralist Council Rufiji Basin Development Authority (RUBADA) Tanzania Broadcasting Services Tanzania Education Authority (TEA) Tanzania Industrial Research and Development Organisation (TIRDO) Tanzania National Parks (TANAPA) Tanzania Port Authority (TPA)
2006/07 Unqualified Taken by CHC Unqualified Audit in progress Unqualified Unqualified Unqualified Unqualified Unqualified Accounts not submitted Qualified Unqualified Unqualified Unqualified Unqualified
2005/06 Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
2004/05 Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
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21 22 23
Tanzania Standard Newspaper (TSN) TCRA - Consumer Consultative Council Unit Trust of Tanzania (UTT)
Unqualified Unqualified Unqualified
Unqualified Unqualified Unqualified
Qualified Unqualified Unqualified
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S/N 1 2 3 4 5 6 7 8 9 10
11 12 14 15 16 17
Entity name Public Parastatal Arusha International Conference Centre (AICC) Centre for Agricultural Mechanisation and Rural Technology Consolidated Holding Corporation Co operative Audit and Supervision Corporation (COASCO) Dar es Salaam Stock Exchange (DSE) Dar es salaam Water Supply Company (DAWASCO) Kariakoo Market Cooperation (KMC) Muhimbili National Hospital National Development Corporation (NDC) National Health Insurance Fund (NHIF)
National Insurance Corporation (NIC) National Land Use Planning Commission National Social Security Fund (NSSF) Ngorongoro Conservative Area Authority (NCAA) Parastatal Pension Fund (PPF) SIMU 2000 LIMITED
2006/07 Unqualified Audit in progress Unqualified Audit in progress Audit in progress Qualified Audit in progress Unqualified Unqualified Unqualified
Qualified Audit in progress Unqualified Unqualified Unqualified Unqualified
2005/06 Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified-EM Qualified Unqualified Unqualified
Qualified Unqualified Unqualified Unqualified Unqualified Unqualified
2004/05 Unqualified Unqualified Unqualified Unqualified QualifiedExcept for Qualified Unqualified Unqualified
Qualified Unqualified Unqualified Unqualified Unqualified Unqualified
176
18 19 20 21 22 23 24 25 26 27 28 29 30
State Mining Corporation (STAMICO) Tanzania Atomic Energy Tanzania Bureau of Standards (TBS) Tanzania Electricity Supply Company Limited (TANESCO) Tanzania Engineering and Manufacturing Design Organisation (TEMDO) Tanzania Fertilizer Company Ltd Tanzania Investment Bank Limited (TIB) Tanzania Petroleum Development Corporation (TPDC) Tanzania Post Corporation Tanzania Postal Bank Tanzania Railway Corporation (TRC) Twiga Bancorp Limited Usafiri Dar es Salaam Limited
Unqualified Account not submitted Audit in progress Disclaimer Unqualified Unqualified Unqualified Unqualified Account not submitted Unqualified Unqualified Unqualified Audit in progress
Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Qualified Unqualified Unqualified Unqualified
Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Qualified Unqualified Unqualified
177
S/N 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19
Entity name Higher Learning Institutions Ardhi University College of Africa Wildife Management (Mweka) College of Business Education (CBE) Dar es salaam University of College Education (DUCE) Dar es Salaam Institute of Technology (DIT) Dar es Salaam Maritime Institute (DMI) Institute of Accountancy Arusha Institute of Adult Education Institute of Finance Management (IFM) Muhimbili University College of Health Science (MUCHS) Mwalimu Nyerere Memorial Academy Mzumbe University National Institute for Productivity National Institute of Transport (NIT) National Sugar Institute Open University of Tanzania Sokoine University of Agriculture (SUA) Tanzania Fisheries Research Institute
2006/07 Audit in progress Unqualified In progress Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Audit in progress Unqualified Audit in progress Unqualified Unqualified Unqualified Audit in progress Audit in progress Audit in progress
2005/06 Unqualified Unqualified Unqualified Not in operation Unqualified Unqualified Unqualified Unqualified Unqualified Qualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
2004/05 Unqualified Qualified Unqualified Not in operation Unqualified Unqualified Unqualified Unqualified Unqualified Qualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified
178
20 22 23 25 25
(TAFIRI) Tanzania Forest Research Institute (TAFORI) Tanzania Institute of Bankers Tanzania Institute of Education Tanzania Wildlife Research Institute (TAWIRI) University of Dar es salaam
Audit in progress Unqualified Accounts not submitted Accounts not submitted
Unqualified Unqualified Unqualified Accounts not submitted Unqualified
Unqualified Unqualified Unqualified Accounts not submitted Unqualified
179
S/N 1 2 3 4 5 7 8 9 10 11 12
Entity name Water Bodies Arusha Urban Water Supply and Sewerage Authority Babati Urban Water Supply and Sewerage Authority Bukoba Urban Water Supply and Sewerage Authority Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO) Dodoma Urban Water Supply and Sewerage Authority Iringa Urban Water Supply and Sewerage Authority Kigoma/Ujiji Urban Water Supply and Sewerage Authority Kyela Urban Water Supply and Sewerage Authority Lindi Urban Water Supply and Sewerage Authority Makambako Urban Water Supply and Sewerage Authority Mbeya Urban Water Supply and Sewerage Authority
2006/07 Unqualified Qualified Unqualified Qualified Unqualified Unqualified Unqualified Accounts not submitted Unqualified Accounts not submitted Unqualified
2005/06 Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Qualified Qualified Accounts not submitted Unqualified
2004/05 Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Qualified Not in Operation Unqualified Not operation Unqualified
180
13 14 15 16 17 18 19 20 21 22 23 24 25
Mbinga Urban Water Supply and Sewerage Authority Morogoro Urban Water Supply and Sewerage Authority Moshi Urban Water Supply and Sewerage Authority Mpanda Urban Water Supply and Sewerage Authority Mtwara Urban Water Supply and Sewerage Authority Musoma Urban Water Supply and Sewerage Authority Mwanza Urban Water Supply and Sewerage Authority Njombe Urban Water Supply and Sewerage Authority Shinyanga Urban Water Supply and Sewerage Authority Singida Urban Water Supply and Sewerage Authority Songea Urban Water Supply and Sewerage Authority Sumbawanga Urban Water Supply and Sewerage Authority Tabora Urban Water Supply and
Unqualified Unqualified Unqualified Audit in progress Qualified Unqualified Unqualified Accounts not submitted Unqualified Qualified Unqualified Unqualified Unqualified
Unqualified Unqualified Unqualified Audit in progress Qualified Adverse Unqualified Accounts not submitted Unqualified Qualified Unqualified Unqualified Unqualified
Not operation Qualified Unqualified Unqualified Qualified Adverse Unqualified Accounts not submitted Unqualified Qualified qualified Unqualified Qualified
181
26 27
Sewerage Authority Tanga Urban Water Supply and Sewerage Authority Tukuyu Urban Water Supply and Sewerage Authority
Unqualified Accounts not submitted
Unqualified Qualified
Unqualified Not in Operation
182
Annexure II
Trend of profit and loss made by PA&oBs for the past three years
S/N REGULATORY BODIES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Deposit Insurance Board Energy and Water Utility Regulatory Authority (EWURA) Engineering registration Board (ERB) Gaming Board of Tanzania (GBT) Tanzania Coffee Board National Board of Accountants and Auditor Tanzania Cotton Board Tanzania Tobacco Board (TTB) 573,242,711 774,881,160 21,895,207,692 525,770,000 273,600,965 1,222,709,572 3,903,596,000 3,543,410,000 (271,680,973) 6,502,171,807. 525,770,000 (41,528,489) 439,752,793.00 98,100,000 1,320,188,000 887,060,515 5,057,277,168.00 Not in operation 219,987,661 (32,858,261.00) (986,966,000) 525,846,000 118,299,512.00 35,369,000 546,725,000 149,549,944 3,714,938,985.00 Not in operation Architects & Quantity Surveyors Registration Board Board of External Trade (BET) Cumulative Profit or Loss Shs. 259,697,611 (2,371,528,127)
2006/2007 Shs. 23,670,773 (455,633,294.00) (184,792,034.00)
2005/2006 Shs. (5,149,734) (352,389,235.00) 738,388,145
2004/2005 Shs. 76,289,449 (183,721,258.00) 19,646,600
183
(NBAA) 11. 12. 13. 14. 15. 16. 17. 18. 19. Tea Board of Tanzania Contractor Registration Board (CRB) Presidential Parastatal Sector Reform Commission (PSRC) Higher Education Student Loans Board (HESLB) TOTAL 232,900,722 3,545,977,000 98,614,844,208 1,061,557,106 154,302,211,579 246,482,493 361,146,000 23,164,943,260 Audit in progress 39,274,142,060 1,590,619 219,856,000 75,449,900,948 1,061,557,106 93,895,672,173 Not in operation 12,020,387,134 17,959,299 No accounts Sugar Board of Tanzania Tanzania Commission for Universities Public Procurement Regulatory Authority (PPRA) Tanzania Communication Regulatory Authority(TCRA) National Board of Materials Managements (NBMM). 142,899,419 1,846,548,000 136,190,209 645,767,826 17,474,939,505 (1,513,872) 98,267,000.00 (4,308,605) 645,767,826 6,927,596,276 23,563,158 581,368,000. (40,703,146) Not in operation 10,547,343,229 29,297,697 329,103,000 (39,302,124) Not in operation 7,206,232,030
1 2
GOVERNMENT INSTITUTIONS National Environment Council (NEMC) Capital Market and Security Authority
244,092,214 414,477,198
168,264,729.00 9,682,722.00
56,427,451 (55,897,576)
18,817,900 108,174,523
184
3 4 5 6 7 8 9 10 11 12
National Council for Technical Education (NACTE) Ngorongoro Pastoralist Council (NPC) Tanzania Education Authority (TEA) Tanzania Ports Authority (TPA) Tanzania Industrial Research and Development Organisation (TIRDO). Unit Trust of Tanzania (UTT) Tanzania Standard Newspaper (TSN) National Housing Corporation (NHC) Tanzania Broadcasting Services Tanzania National Parks (TANAPA) TOTAL
88,336,760 256,754,033 8,014,594,925 84,624,388,508 485,601,850 4,458,775,629 357,275,607 12,893,631,536 4,871,829,592 45,195,752,182 161,905,510,034
(188,445,489.00) (24,458,841.00) 1,293 513, 654 24,118,502,065. (142,610,573) (165,457,486) 501,334,202.00 1,034,260,736 1,487,898,831.00 10,024,852,809 25,930,167,646
183,361,075 34,100,058 669,332,456 26,188,205 (224,053,216) (110,782,532) 477,467,715 255,179,321 1,286,363,693 8,624,914,906 2,597,686,650
(158,623,077)
(890,601,388.00)
1,769,954,043.00 23,895,070,498 1,108,623,637
5,636,407,795 31,487,823,931
1.
PUBLIC PARASTATALS Arusha International Conference Centre (AICC)
849,450,214
849,450,214.00
340,620,109.00
(454,278,329.00)
185
2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
Centre for Agricultural Mechanization and Rural Technology (CAMARTEC) Consolidated Holding Corporation Co 0perative audit and Supervision Corporation (COASCO) Twiga Bancorp Limited National Development Corporation (NDC) National Health Insurance Fund (NHIF) National Ranching Company (NARCO) Tanzania Electricity Supply Company Limited (TANESCO) SIMU 2000 LIMITED Tanzania Engineering and Manufacturing Design Organisation (TEMDO) Tanzania Fertilizer Company Ltd (TFC) Tanzania Investment Bank Limited (TIB)
148,809,893 (6,326,000,000) 218,060,433 1,044,556,000 2,660,929,000 127,763,426,655 706,564,000 (676,788,000,000) 3,067,828,842 170,151,099 (456,443,002) 4,729,822,000
89,305,550 2,150,000,000 (84,438,471.00) 876,570,000 1,767,599,000 39,887,267,718 36,734,000 (183,343,000,000 ) 409,084,382.00 91,085,970.00 269,685,930.00 1,889,216,000
(27,329,615.00) 2,844,000,000 18,966,034.00 1,239,643,000 1,617,574,000 28,882,963,790 47,532,000 (862,000,000) 188,720,509.00 30,373,642.00 677,802,902.00 2,089,051,000
31,183,998.00
(71,258,075.00) 515,803,000 (219,720,000) 20,499,867,968
1,384,458,912.00 (819,697.00) 886,732,193 2,072,201,000
186
14. 15. 16. 17. 18. 19. 20. 21.
Tanzania Petroleum Development Corporation(TPDC) Tanzania Post Corporation (TPC) Tanzania Postal Bank (TPB) Tanzania Railway Corporation (TRC) State Mining Corporation (STAMICO) Ngorongoro Conservative Area Authority (NCAA) National Social Security Fund (NSSF) Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO) TOTAL
(278,694,572) (25,828,877,327) 4,207,205,000 (54,489,166,000) 21,682,585 10,798,087,232 596,642,150,481 (8,801,002,000)

(19,939,459,467)
(354,240,251.00) (4,340,634,276.0 0) 924,199,000 (11,964,131,000. 00) 101,955,195 2,035,841,724.00 118,878,307,113 (11,300,681,000)

(81,107,396,470)
(229,521,736.00) (5,647,775,489) 609,378,000 (13,226,033,000) (80,272,610) 3,339,098,859 78,707,966,799 2,499,679,000

103,060,437,194
5,516,500,331
1,573,546,000
(22,866,822) 1,485,437,095 67,885,249,527
100,566,234,101
GOVERNMENT HIGHER LEARNING INSTITUTES 1. Ardhi University (3,630,555,196) (496,095,674) (558,406,577) (577,531,278.00)
187
2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
College of Africa Wildife Management (Mweka) Dar es salaam University College of Education (DUCE) Dar es Salaam Institute of Technology (DIT) Institute of Accountancy Arusha (IAA) Institute of Adult Education Institute of Finance Management (IFM) National Institute for Productivity (NIP) National Institute of Transport (NIT) Moshi University College of Cooperative and Business Studies Mwalimu Nyerere Memorial Academy National Sugar Institute TOTAL
(1,242,675,328) 3,541,913,000 (1,756,649,135) 1,056,311,903 839,096,644 2,475,598,000 27,789,709 324,348,833 (425,509,000) 411,370,756 (117,293,544) 1,503,746,642
86,220,291 3,541,913,000 (1,000,175,199.0 0) 549,598,685. 354,171,021 1,675,651,000 35,541,474 171,819,879 214,354,000 379,467,615 95,877,555 5,890,085,321
89,790,250
398,152,773
(48,985,791.00) 62,894,958 (442,859,679.00) 176,098,000 37,563,001 (27,260,594) (703,383,000) 31,903,141 (187,897,239) (867,160,530)
(338,862,582) 281,070,388 766,097,826. 428,557,000 (13,864,714) (316,027,636)
53,741,104 681,332,881
WATER BODIES
188
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Arusha Urban Water Supply and Sewerage Authority Babati Urban Water Supply and Sewerage Authority Bukoba Urban Water Supply and Sewerage Authority Dodoma Urban Water Supply and Sewerage Authority Kigoma/Ujij Urban Water Supply and Sewerage Authority Lindi Urban Water Supply and Sewerage Authority Mbeya Urban Water Supply and Sewerage Authority Moshi Urban Water Supply and Sewerage Authority Mtwara Urban Water Supply and Sewerage Authority Musoma Urban Water Supply and Sewerage Authority
1,494,626,000 49,146,891.35 (36,730,736.64) (470,959,659) 96,371,240.14 11,018,252,876 380,730,454 734,612,000 (439,375,506) (338,293,120)
264,355,000 34,325,772.01 (28,122,517.27) (124,066,322.00) 25,360,539.05 56,603,657.00 6,808,026 86,372,000 (271,754,755) (160,271,217.00)
62,134,000 14,821,119.34 (42,264,078.91) (649,757,567.00) (29,514,915) 16,829,796.10 5,377,912 34,901,000. 49,703,842 (254,017,238.00)
382,903,000 (4,460,795.55) (28,122,517.27) 57,741,504.00 (143,657,603) 42,185,654.79
194,500,000 55,128,614
189
11. 12. 13. 14. 15. 16. 17.
Mwanza Urban Water Supply and Sewerage Authority Songea Urban Water Supply and Sewerage Authority Sumbawanga Urban Water Supply and Sewerage Authority Tabora Urban Water Supply and Sewerage Authority Tanga Urban Water Supply and Sewerage Authority Morogoro Urban Water Supply and Sewerage Authority Singida Urban Water Supply and Sewerage Authority Sub Total Grand Total
699,155,696 (352,770,521) 275,851,368.01 2,340,756. (3,083,010,000) 2,031,317,345 (164,923,267) 11,896,341,817 308,606,793,499
(134,569,522) (124,883,323.00) 26,687,981.08 12,813,455.82 (197,558,000.00) (561,017,165) (38,667,288.00) (1,192,445,654) (11,205,447,097)
38,304,208.00 (61,342,678.00) 175,276,509.62 271,796,111.84 (367,062,000) (479,904,773 (48,700,388.00) (783,514,366) 196,841,564,015 628,839,215 145,384,617,262 (182,550,149.00) 73,886,877.31 181,819,374.30 (534,745) (45,292,871.00
190
Annexure III The Treasury Registrars Statement of Government Investments and Public Interests
S/N 1 2 3 Name Of The Parastatal Aboud Soap Oil Industries Air Tanzania Company Ltd Arusha International Conference Centre (AICC) Audio Visual Institute/Televisio n Tanzania (Taasisi ya Utangazaji Tanzania TUT) Bank of Tanzania (BOT) Baraza La Kiswahili Tanzania Basuto Farm Audited Accounts Date 31-Dec-04 31-Mar-06 30-Jun-06 Total Investment Shs 2,750,000,000.00 18,034,359,000.00 20,057,644,235.00 % Gvt. owners hip 20 100 100 Remarks Joint Venture with Abound Soap Enterprises Ltd Parastatal Parastatal
30-Jun-06
22,504,436,872.00
100
Government Institution
5 6 7
30-Jun-06 30-Jun-06 30-Sep-02
588,811,438,000.00 121,611,213.00 644,449,423.00
100 100 100
Parastatal Government Institution Under Liquidation. The successor of LART(CHC) to take
191
over the liquidation process. 8 BHESCO 30-Jun-01 104,285,208.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Parastatal Joint Venture with BP Africa Ltd Joint Venture with CELTEL International Ltd Government Institution Regulator Parastatal Government Institution
9 10 11 12 13 14 15
Board of External Trade (BET) BP (T) Ltd Celtel Capital Development Authority(CDA) Capital markets and Securities Authority Carmatec Centre for Foreign Relations
30-Jun-06 31-Dec-05 31-Dec-05 30-Jun-05 30-Jun-06 30-Jun-06 30-Jun-06
960,898,128.00 48,566,000,000.00 136,687,334,000.00 14,776,640,847.00 2,229,627,569.00 242,375,647.00 937,491,382.00
100 50 40 100 100 100 100
192
16 17
Chinese Tanzania Shipping Company Ltd College of Business Education Consolidated Holding Corporation Ltd Construction Registration Board Cooper Motors Services Company(CMSC)
31-Dec-04 30-Jun-05
45,147,921,192.78 319,394,437.00
50 100
Joint venture with Chinese Govt. Government Institution. 2005/06 Accounts with Auditors. Government Institution Government Institution Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Government Institution Government Institution Government Institution
18 19 20
31-Dec-06 31-Dec-06 30-Sep-98
6,939,000,000.00 3,831,574,348.00 270,570,498.00
100 100 100
21 22 23
30-Jun-06 Community Development Trust Fund Cooperative Audit 30-Jun-06 and Supervision Corporation(COASCO) 30-Jun-06 Dar es Salaam Institute of Technology(DIT)
315,932,948.00 2,819,434,184.00 6,700,815,617.00
100 100 100
193
24 25 26 27 28 29
Dar-es-Salaam Maritime Institute Datel Tanzania Limited DAWASA Embassy Hotel Limited Company Engineers Registration Board Friendship Textile Co.
30-Jun-06 31-Dec-05 30-Jun-06 31-Dec-00 30-Jun-06 31-Dec-06
1,084,384,050.00 -323,000.00 63,453,000,000.00 58,603,264.00 334,068,844.00 28,913,245,000.00
100 35 100 40 100 49
30 31
Gaming Board of Tanzania General Tyre EA Ltd
30-Jun-06 30-Jun-03
894,562,279.00 -322,000,000.00
100 74
Government Institution Joint Venture (privatisation). Government Institution Not operating. Government to sell its Shares Government Institution Joint Venture with Dieqiu Textile Dyeing and Printing Group Co Ltd (51%) Regulatory Board Joint Venture with Continental NA (26%). Specified under PSRC. Investigative audit requested.
194
32
Gidagamowd
30-Sep-98
239,723,885.00
100
33 34
Government Employee Provident Fund Imara Wood Products
30-Jun-06 31-Dec-91
24,180,600,018.00 194,300,000.00
100 100
Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Government Fund Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Government Institution Government Institution Government Fund Government Fund
35 36 37 38
Institute of Accountancy Arusha (IAA) Institute of Finance Management (IFM) Institute of Rural Development Planning Insurance Deposit Fund
30-Jun-06 30-Sep-06 30-Jun-05 30-Jun-05
2,176,963,355.00 20,884,633,000.00 445,103,190.00 18,357,821,303.00
100 100 100 100
195
39 40 41 42 43 44
Insurance supervisory Department Joint Finance Commission Kariakoo Market Keko Pharmaceuticals Ltd Kibaha Education Centre Kisarawe Brick Factory (KIBRICO)
30-Jun-06 30-Jun-06 30-Jun-04 31-Aug-05 30-Jun-05 31.12.2003
827,993,485.20 1,011,360,837.00 1,851,413,119.00 733,725,000.00 2,464,670,612.00 -144,065,000.00
100 100 100 40 100 30
Government Institution Government Institution Parastatal Joint Venture with Diocare Ltd (60%) Government Institution Not operating. Govt minority Shares Sale in process. Joint Venture with Mott-Macdonald Ltd, SA Infrastructure fund and Inter Consult Ltd Not operating. Transferred to NDC to be used for development of export Processing
45
Kilimanjaro Airport 30-Jun-06 Development Company Ltd
2,222,101,000.00
24
46
Kilimanjaro Machine Tools
31-Dec-89
-652,989,944.00
100
196
Zone.
47
Kiltimbers Co Ltd
31-Dec-90
69,093,720.00
100
48 49
Kilombero Sugar Co. Kivukoni College (Mwalimu Nyerere Memorial Academy) Kiwira Coal Mines
31-Mar-07 30-Jun-06
244,000,000.00 4,772,902,212.00
25 100
Not operating. Was placed under liquidation (LART). The successor of LART to take over the liquidation process. Joint Venture with Illovo & ED & F. Man (75%) Government Institution Joint venture with TAN Power Resources Company. 2005 Accounts with the auditors. Ceased to exist legally on 30/6/06,
50
30-Jun-04
2,172,760,559.00
30
51
LART Tribunal
31-Dec-06
43,346,350.00
100
197
transferred to CHC May, 2007. 52 Light Source Manufacturers 30-Jun-05 254,166,000.00 49 Joint Venture with TATA Exports (51%). Govt is in process of disposing its 49% Shareholding. Government Fund Ceased to exist legally on 30/6/06, transferred to CHC May, 2007. Recently Established. Joint Venture Government Institution. 2005/06 Accounts with Auditors. Joint Venture with Coop. Unions
53 54
Local Authority Provident Fund Loans Advances Realization Trust (LART) Marine Service Co. Mbeya Cement CO. Ltd Medical Stores Department Mbinga Coffee Curing
30-Jun-04 30-Jun-06
73,622,024,365.00 1,575,250,000.00
100 100
55 56 57
31-Dec-06 31-Dec-06 30-Jun-05
11,617,182,854.00 2,424,712,000.00 44,362,791,187.00
100 25 100
58
30-Jun-06
1,287,092,000.00
43
198
59 60
Mbozi Coffee Curing Mikumi Wildlife Lodges MMT Mangula
30-Jun-06 30-Jun-96
901,560,384.00 1.00
32 100
Joint Venture with Coop. Unions Not operating. Under privatisation. Not operating. Privatised by PSRC. The process of handing over to the new investor (St. Mary International Schools) is in progress Government Institution
61
31-Dec-87
191,355,469.00
100
62
63 64
Moshi University College of Cooperative and Business Studies (MUCCOBS) Muhimbili National Hospital (MNH) Muhimbili orthopedic Institute (MOI)
30-Jun-04
6,240,509,848.00
100
30-Sep-06 30-Jun-06
19,544,458,351.00 11,818,906,000.00
100 100
Government Institution Government Institution
199
65
Mulbadaw Farm
30-Sep-98
902,699,681.00
100
66
Murjanda Farm
30-Sep-98
461,940,530.00
100
67
68 69
Mwananchi Engineering And Construction Company(MECCO) Mzumbe University National Agricultural Food Co. (NAFCO) National Arts Council National Bank of Commerce (NBC)
31-Dec-06
443,732,000.00
25
Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Joint Venture with Sisi Construction Ltd (75%) Government Institution To be wound up. All subsidiary companies divested under PSRC. Government Institution Joint Venture
30-Jun-06 30. 06. 1996
11,298,079,799.00 279,888,449.00
100 100
70 71
30-Jun-06 31-Dec-06
192,655,748.00 24,561,300,000.00
100 30
200
72 73
74
75 76 77 78 79
National Board of Accountants and Auditors (NBAA) National Board of Architects Quantity Surveyors and building Contractors National Board of Materials Management (NBMM) National Bureau of Statistics National Construction Council National Council for Technical Education National Development Corporation (NDC) National Examination Council
30-Jun-06 30-Jun-06
3,020,183,000.00 259,697,611.00
100 100
Regulatory Institution Regulatory Institution
30-Jun-06
144,702,172.00
100
Regulatory Institution Government Institution Government Institution Government Institution Government Institution Government Institution
30-Jun-05 30-Jun-06 30-Jun-06 31-Dec-06 30-Jun-05
2,241,127,565.00 519,025,318.00 1,640,975,525.00 16,407,414,000.00 6,746,659,238.00
100 100 100 100 100
201
80 81 82 83 84 85 86
National Health Insurance Fund National Housing Corporation National Institute for Medical Research National Institute for Productivity National Institute of Transport (NIT) National Insurance Corporation National Land use Planning Commission (NLPC) National Micro Finance Bank (NMB) National Milling Corporation National Museum of Tanzania National Ranching Company (NARCO)
30-Jun-06 30-Jun-06 30-Jun-06 30-Jun-04 30-Jun-06 31-Dec-06 30-Jun-05
116,758,852,725.00 222,094,480,695.00 1,326,559,145.00 29,772,001.00 5,766,488,722.00 55,448,880,000.00 10,458,086.00
100 100 100 100 100 100 100
Government Institution Parastatal Government Institution Government Institution Government Institution Under Privatization To be transformed into Rural Land use Planning Commission 49% Privatized Not operating. Placed under PSRC for privatisation. Government Institution Under Privatization
87 88 89 90
31-Dec-06 30-Jun-94 30-Jun-06 30-Jun-06
46,484,735,400.00 14,511,600.00 1,785,801,862.00 1,102,313,056.00
51 100 100 100
202
91
National Shipping Co. Ltd
30-Jun-99
6,320,069,245.00
100
92 93 94 95 96
National Social Security Fund National Social Welfare Institute National Sports Council National Sugar Institute New African Hotel
30-Jun-06 30-Jun-04 30-Jun-06 30-Jun-06 30-Jun-05
430,790,110,414.00 789,899,000.00 -5,630,784.00 279,253,211.00 1,150,000,000.00
100 100 100 100 23
Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Parastatal Government Institution Government Institution Government Institution Joint venture with TADEMA Overseas Ltd (77%). 2005/06 Accounts with auditors Government Institution Not operating. Handed over to NDC by PSRC in March 2007.
97 98
Ngorongoro Conservation Area Authority Nyanza Glass Works
30-Jun-06 30-Jun-00
8,762,245,508.00 7,710,570,174.00
100 100
203
99 100 101 102
Open University of Tanzania Parastatal Pension Fund Parastatal Sector Reform Commission (PSRC) PEHCOL
30-Jun-05 31-Dec-06 30-Jun-06 30-Jun-00
1,746,096,153.00 266,674,752,000.00 51,718,618,772.00 4,601,072,024.00
100 100 100 100
Government Institution Parastatal Government Institution Not operating. Placed under PSRC for asset sale A Project Incorporated Under Cap. 212 as a limited Co. by Guarantee Government Institution Government Institution Under Liquidation. The successor of LART(CHC) to take over the liquidation process.
103
Pride Tanzania
30-Jun-06
4,499,411,755.00
100
104 105
106
Public Service Pension Fund (PSPF) Rufiji Basin Development Authority (RUBADA) Setchet Company
30-Jun-06 30-Jun-06
359,793,167,627.84 3,364,247,755.00
100 100
30-Sep-00
1,010,576,396.00
100
204
107 108 109 110 111 112 113 114
SIMU 2000 Ltd Small Industries Development Org. Sokoine University State Mining Corporation (STAMICO) Sugar Board Suma JKT TAFORI Tanga -RTC
31-Dec-06 30-Jun-06 30-Jun-06 31-Dec-06 30-Jun-05 30-Jun-03 30-Jun-05 30-Jun-01
43,219,372,955.00 12,613,605,000.00 21,412,861,917.00 3,417,652,762.00 7,735,220,000.00 1,368,287,722.10 767,159,747.00 126,152,332.00
100 100 100 100 100 100 100 100
Government Agency Government Institution Government Institution To be an Executive Agency Regulator Government Institution Government Institution Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Regulator Joint Venture. Other Shares held by Unions
115 116
Tanganyika Pyrethrum Board TANICA
30-Jun-05 30-Sep-05
-115,028,900.00 1,110,400,000.00
100 10
205
117 118 119
Tanzania Airports Authority Tanzania Atomic Energy Commission Tanzania Automobile Manufacturing Company (TAMCO) Tanzania Automobile Technology Centre Tanzania Breweries Co. Ltd Tanzania Building Agency Tanzania Bureau of Standards(TBS) Tanzania Cashew nut Board Tanzania Central Freight Bureau(now SUMATRA)
30-Jun-06 30-Jun-05 31-Dec-99
43,997,515,509.00 593,977,749.00 2,532,882,162.00
100 100 100
120 121 122 123 124 125
30-Jun-05 31-Mar-07 30-Jun-06 30-Jun-06 30-Sep-05 30-Jun-06
3,655,986,000.00 1,179,713,900.00 104,169,000.00 2,687,699,002.00 1,947,440,000.00 1,720,462,655.00
100 4 100 100 100 100
Government Institution Government Institution Not operating. Transferred to NDC to be used for development of export Processing Zone. Parastatal Joint Venture with Indol International BV (96%) Government Agency Government Institution Regulatory Body Changed to SUMATRA(Surface and Marine Transport Regulatory Authority)
206
126
Tanzania Cigarette Co. Ltd (TCC)
31-Dec-06
50,000,000.00
2.5
127 128 129
Tanzania Civil Aviation Authority Tanzania Coffee Board Tanzania Commission for Science & Technology Tanzania Commission for Universities
30-Jun-06 30-Sep-06 30-Jun-05
10,603,438,000.00 1,235,820.00 1,601,664,363.00
100 100 100
Joint Venture with RJ Reynolds Tobacco Ltd (51%), JT International Hold BV (24%), Tanz. Public (19.5%) Government Institution Regulatory Body Government Institution Government Institution. Originally Higher Education Accreditation Council Private Company. Government owns one Golden Share
130
30-Jun-06
205,339,023.00
100
131
Tanzania National Re-Insurance Corporation Ltd (TAN-RE)
35,471,447.98 31-Dec-05
207
132
133
Tanzania Communication Regulatory Authority (TCRA) Tanzania Cotton Lint & Seed Board Tanzania Daesung Cables Tanzania Development Finance Ltd Tanzania Education Authority Tanzania Electric Supply Co. Ltd. (TANESCO) Tanzania Elimu Supplies
30-Jun-06
15,610,400,955.00
100
Government Institution/Regulat or Undergoing restructuring /To be a Regulatory Body Joint Venture with east African Cables Kenya (71%) All Government Shares to be sold Government Institution Parastatal Under Liquidation. The successor of LART(CHC) to take over the liquidation process. Parastatal
30-Jun-06
9,069,370,881.00
100
134 135 136 137 138
31-Dec-06 31-Dec-05 30-Dec-05 31-Dec-05 30-Jun-94
159,820,540.00 7,037,476,000.00 8,037,281,004.00 453,388,000,000.00 347,400,197.00
29 32.1 100 100 100
139
Tanzania Fertilizer Company
31-Dec-05
5,094,295,942.00
100
208
140
Tanzania Fishing Company (TAFICO) Tanzania Fishing Research Institute (TAFIRI) Tanzania Food and Nutrition Centre (TFNC) Tanzania Harbours Authority Now (Tanzania Ports Authority(TPA) Tanzania Hotels Investment Co. Ltd (TAHI) Tanzania Institute of Accountancy Tanzania Institute of Adult Education Tanzania Institute of Education Tanzania Institute of Research and Development
30-Jun-94
266,129,065.00
100
Not operating. Under privatisation. Government Institution Parastatal Parastatal
141 142 143
30-Jun-04 30-Jun-05 30-Jun-06
1,237,416,116.00 1,790,842,978.00 46,495,785,619.00
100 100 100
144
30-Jun-04
-12,506,598,308.00
100
145 146 147 148
30-Jun-06 30-Jun-06 30-Jun-04 30-Jun-06
2,474,380,236.00 5,086,564,984.00 1,843,663,167.00 1,261,850,037.00
100 100 100 100
To be wound up. All subsidiary companies divested under PSRC Government Institution Government Institution Government Institution Government Institution
209
Organisation (TIRDO) 149 150 151 152 153 154 155 156 Tanzania Investment Bank (TIB) Tanzania Investment Centre (TIC) Tanzania Library Service Tanzania Meteorological Agency Tanzania Merine Parks Tanzania National Parks (TANAPA) Tanzania Oxygen Ltd Tanzania Petroleum Development Corporation Tanzania Pharmaceutical Ltd 31-Dec-06 30-Jun-05 30-Jun-05 30-Jun-06 30-Jun-06 30-Jun-06 31-Dec-06 30-Jun-06 25,093,084,000.00 3,390,592,206.00 1,243,033,659.00 6,019,623,360.00 873,134,574.00 873,134,574.00 356,319,476.00 14,133,058,431.00 99.00 100.00 100 100 100 100 11 100 Parastatal Government Institution Government Institution Government Institution Government Institution Government Institution Joint Venture Oil exploration Govt. Dept and oil business liberalised. Joint Venture with Pharmaceutical Investments Ltd (60%)
157
30-Jun-04
1,152,971,000.00
40
210
158 159 160 161 162 163 164 165 166 167 168
Tanzania Planting Co.(TPC) Tanzania Postal Bank Tanzania Posts Corporation Tanzania Pyrethrum Board Tanzania Railways Corp. Tanzania Revenue Authority (TRA) Tanzania Sisal Board Tanzania Standard Newspapers (TSN) Tanzania Tea Board Tanzania Tea SmallHolders Development Agency Tanzania Telecommunicatio n Company Ltd (TTCL)
30-Jun-06 31-Dec-06 31-Dec-05 30-Jun-06 31-Dec-06 30-Jun-06 31-Dec-05 31-Dec-06 30-Jun-06 30-Jun-06 31-Dec-06
831,724,250.00 5,859,227,000.00 4,018,596,507.00 -113,047,500.00 90,056,490,549.00 45,502,835,159.00 142,928,575.00 3,655,797,433.00 291,482,270.00 197,855,048.00 353,894,000,000.00
25 45.3 100 100 100 100 100 100 100 100 65
Joint Venture with Sukari Investment Co Ltd (75%) To be restructured Specified Regulatory body Parastatal (under privatization) Executive Agency Government Institution Parastatal Regulatory body Tea Agency Public Corporation(35% Privatized)
211
169 170 171 172 173
Tanzania Tobacco Board Tanzania Tourist Board (TTB) Tanzania Wildlife Research Institute (TAWIRI) Tanzania Zambia Railways Authority (TAZARA) TeleShop Co. Limited Tembo Chipboards Ltd. TIPER Tropical Pesticides Research Institute Twiga BankCorp Unit Trust of Tanzania
30-Mar-06 30-Jun-06 30-Jun-05 31-Dec-05 31-Dec-02
1,614,700,456.00 1,544,203,132.00 744,735,000.00 68,707,000,000.00 50,950,000.00
100 100 100 50 49
Government Institution Government Institution Government Institution Joint venture with Zambian Government Not operating. Under privatization at PSRC To be privatised. Sale agreement signed. Deal not yet concluded. Joint Venture with Oryx Oils Government Institution Government Institution Government Institution.
174
31-Dec-94
975,000,000.00
80
175 176 177 178
31-Dec-06 30-Jun-04 31-Dec-05 30-Jun-06
7,135,894,500.00 3,759,658,771.00 3,624,155,000.00 17,356,469,962.00
50 100 100 100
212
179
180 181 182 183 TOTAL
University College of Lands, Architecture and Surveys (UCLAS) University of Dar es Salaam Usafiri Dar-esSalaam (UDA) Vocational Education Training Authority(VETA) Williamson Diamond Mines
30-Jun-05
7,299,364,443.00
100
Government Institution Government Institution To be Privatised Government Institution Joint Venture with Willcroft Co. Ltd (30%)
30-Jun-06 30-Jun-06 31-Dec-04 31-Dec-05
136,795,971,000.00 846,631,959.00 35,512,555,000.00 -32,880,780,000.00 4,463,097,740,897.90
100 49 100 30
213
Annexure IV S/No Client Name AUDITED ACCOUNTS SUBMITTED TO CAG Year End Audited Accounts Submitted 30th June 30th June 30th June 30th June 30th June 30th June 30th June 30th June 30th June 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 Auditors
WATER AUTHORITIES 1 Tanga Urban Water Supply and Sewerage Authority 2 Dar es Salaam Water and Sewerage Corporation (DAWASCO) 3 Mtwara Urban Water Supply and Sewerage Authority 4 Arusha Urban Water Supply and Sewerage Authority 5 Singida Urban Water Supply and Sewerage Authority 6 Iringa Urban Water Supply and Sewerage Authority 7 Moshi Urban Water Supply and Sewerage Authority 8 Dodoma Urban Water Supply and Sewerage Authority Sumbawanga Urban Water Supply 9 and Sewerage Authority
Shebrila & Company Joint Audit NAO & PWC Shebrila & Company AMAS Associates Quintex Financial Services Malundo & Company AMAS Associates Trion & Company National Audit Office
214
10 11 13 14 15 16 17 18 19 20 21
Shinyanga Urban Water Supply and Sewerage Authority Lindi Urban Water Supply and Sewerage Authority Songea Urban Water Supply and Sewerage Authority Bukoba Urban Water Supply and Sewerage Authority Tabora Urban Water Supply and Sewerage Authority Kigoma Urban Water Supply and Sewerage Authority Musoma Urban Water Supply and Sewerage Authority Mwanza Urban Water Supply and Sewerage Authority Morogoro Urban Water Supply and Sewerage Authority Babati Urban Water Supply and Sewerage Authority Mbeya Urban Water Supply and Sewerage Authority
30th June 30th June 30th June 30th June 30th June 30th June 30th June 30th June 30th June 30th June 30th June
2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007
National Audit Office National Audit Office National Audit Office National Audit Office National Audit Office National Audit Office Trion & Company SMW National Audit Office National Audit Office National Audit Office
PUBLIC PARASTATALS 1 Tanzania Fertilizer Company Ltd
31st
2006
TAC Associates 215
2 3 4 5 6 7 8 9 10 11 12
Ngorongoro Conservation Areas Parastatal Pension Fund Tanzania Post Corporation Tanzania Postal Bank Tanzania Petroleum development Corporation. Arusha International Conference Centre. Tanzania Industrial Research and Development Organisation (TIRDO). Tanzania Engineering and Manufacturing Design Organisation National Ranching Company(NARCO) National Health Insurance Fund National Insurance Corporation (T) Limited.
December 30th June 31st December 31st December 31st December 30th June 30th June 30th June 30th June 30th June 30th June 31st December
2006/2007 2006 2006 2006 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 2006
ERNST & Young TAC Associates Global Accountancy TAC Associates SBC Consultants TAC Associates Reliable Consultants. TAC Associates Shebrila & Company TAC Associates TAC Associates
216
13 14 15 16 17 18 19 20 21 22 23 24 25 26
Simu 2000 limited National Environment Management Council (NEMC) Consolidated Holding Corporation Tanzania Investment Bank Limited National Development Corporation Tanzania Electric Supply Company Limited. Tanzania Commission for Universities. National Environment Management Council. State Mining Corporation Tanzania National Park Authority Tanzania Ports Authority Muhimbili National Hospital (MNH) Tanzania Broadcasting Services Public Procurement Regulatory
31st December 30th June 31st December 31st December 31ST December 31st December 30th June 30th June 31st December 30th June 30th June 30th June 30th June 30th June
2006 2006/2007 2006 2006 2006 2006 2007 2007 2006 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007
TAC Associates TAC Associates PriceWaterHouseCoopers TAC Associates TAC Associates Joint Audit NAO & PWC TAC Associates TAC Associates TAC Associates De Chazal Du Mee TAC Associates TAC Associates. Innovex Auditors Innovex Auditors 217
27 28 29 30 31 32 33
Authority TWIGA BANCORP LIMITED Unit Trust of Tanzania Tanzania Investment Bank National Social Security Funds Tanzania Railways Corporation COASCO CARMATEC
31ST December 30th June 31st December 30th June 31st December 30th June 30th June 31st December 30th June 30th June 30th June 30th June 30th June 30th June 30th June
2006 2006/2007 2006 2006/2007 2006 2006/2007 2006/2007 2006 2006/2007 2007 2006/2007 2007 2007 2007 2007
Ernst &Young TAC Associates TAC Associates TAC Associates TAC Associates TAC Associates TAC Associates TAC Associates TAC Associates National Audit Office TAC Associates Philip & Co. TAC Associates TAC Associates PKF
REGULATORY BODIES 1 Architects and Quantity Surveyors Registration Board 2 Deposit Insurance Board 3 Tanzania Tobacco Board 4 5 6 7 8 Board of External Trade Gaming Board of Tanzania Sugar Board of Tanzania Tanzania Cotton Board National Board Of Accountants and Auditors
218
9 10 11 12 13 14
Tanzania Tea Board Engineers Registration Board. (ERB) Contractors Registration Board Tanzania Small Holders Tea Development Tanzania Coffee Board National Board of Material Management
30th June 30th June 31st December 31st December 30th June 30th June
2007 2007 2006 2006 2006/2007 2006/07
TAC Associates Reliable Consultants Philip & Co. TAC Associates TAC Associates TAC Associates
GOVERNMENT INSTITUTIONS 1 2 3 4 5 6 Tanzania Standard Newspaper Capital Market and Security Authority Presidential Parastatal Sector reform Commission. Tanzania Education Authority TCRA Consumer Consultative Council Tanzania Communication Regulatory Authority 31st December 30th June 30th June 30th June 30th June 30th June 2006 2007 2007 2007 2007 2007 National Audit Office TAC Associates National Audit Office E.K. Mangesho & Company TAC Associates TAC Associates
219
7 8 9
Energy and Water Utilities Regulatory Authority (EWURA) National Council for Technical Education National Economic and Empowerment Council
30th June 30th June 30th June
2006/2007 2007 2006/07
MEKONSULT TAC Associates Trion and Co.
HIGHER LEARNING INSTITUTES 1 2 3 4 5 6 7 8 9 Dar es Salaam institute of Technology Institute of Finance Management Tanzania Institute of Bankers National Institute for Productivity Institute of Adult Education Moshi University College of Co operative College of African Wildlife Management- MWEKA Mwalimu Nyerere Memorial Academy National Institute of Transport 30th June 30th September 31st December 30th June 30th June 30th June 30th June 30th June 30th June 2006/2007 2006 2006 2007 2006/2007 2006/2007 2006/2007 2006/2007 2006/2007 TAC Associates TAC Associates TAC Associates TAC Associates TAC Associates TAC Associates Reliable Consultants TAC Associates TAC Associates 220
10 11 12 13 14
Dar es Salaam University College of Education Institute of Accountant Arusha National Sugar Institute Open University Sokoine University of Agriculture
30th June 30th June 30th June 30th June 30th June
2006/2007 2006/2007 2006/2007 2006/2007 2005/2006
Global Accountancy TAC Associates TAC Associates Trion & Co TAC Associates
221
Annexure V Pre-qualified list of audit firms that are working with the CAG S/N 1 2 3 4 5 6 Category A PricewaterHouse Coopers, Deloitte & Touch KPMG Ernest & Young De Chazal Du Mee (DCDM), PKF Tanzania 6 7 Category B 1 2 3 4 5 6 7
Trion& Co,
S/N 1 2 3 4 5
Category C Reliable consultants, Pima Associates, SMW management consultants, MURL-AATEC Associates, Kavugha & Musambwa Auditors, Y.H Malundo & co, Nyange & Associates, SR Financial & Business consultants, Tanna & co, RS & Partners, C.H. Halinga & Associates, Amas Associates, Ndolimo & Co Micro Business Consultants AA - Adolph Associates,
8 9 10 11 12 13 14 15
MEKONSULT
Cooperative Audit and Supervision Corp, SBC Consultancy Services, E.K. Mangesho & Company Financial consultants& Services, Mhasibu consultants,
222
8 9 10 11 12 13 14 15 16 17 18 19 20
Organisation & efficiency consultant, Martec & company, Baccon Certified Public Accountants, Globe Accountancy Services Quintex Financial Services, TAC Associates,
16 17
Pan & Associates, W.M. Kilele & Company,
D.G Patel & co, Shebrila & company, INNOVEX Auditors Philips& company, Stephen Shayo Haron and Company Hassanali Rutakyamirwa & Co
223
12.0
GLOSSARY
ABC AFDUC BBP BET BoT BPC CAG CAGR CAIDI CAPEX CARMATEC CCBRT CEB CEO CHC CMS CMSA CPA CRDB DA DANIDA DAWASA DAWASCO DCS DF DIS DIT DoD DSTi DUCE EDM ENE EPA ERB
Activity Based Costing Allowance for Equity Funds Used During Construction Defined Benefit Plan Board of Directors Bank of Tanzania Botswana Power Corporation Controller and Auditor General Compounded Annual Growth Rate Customer Average Interruption Duration Index Capital Expenditure Centre for Agricultural Mechanizations and Rural Technology Comprehensive Community Based Rehabilitation in Tanzania Central Electricity Board, Mauritius Chief executive Officer Consolidated Holdings Corporation Customer Management Support Capital Markets and Securities Authority Computer and Programme Africa CRDB Bank District Accountant Danish International Development Agency Dar es Salaam Water and Sanitation Authority Dar r Es Salaam Water and Sewerage Co. Ltd Defined Contribution Scheme Director of Finance Director of Information System Dar es salaam Institute of Technology Director of Operations DAYSTAR TECHNOLOGIES, INC. Dar es Salaam University College of Agriculture Electricidade de Mocambique Empresa Nacional de Electricidade, Angola External Payment Arrears Engineers Registration Board 224
ERB ERP ERV ESCOM FIFO FM FTNDWSCF GAAP GoT GoT GRN GTEA HR IAS IDA IFRS INTOSAI IPP IPPs IPTL ISA IT JFC JICA KPLC LAN LART LEC LPOs LPP LUKU MAS MC MD MEM MSSC MTUWASA
Engineers Registration Board Enterprise Resources Planning Exchequer Receipt Voucher Electricity Supply Corporation of Malawi Ltd. First In First Out Financial Manager First Time New Domestic Water Supply Connection Fund Generally Accepted Accounting Principles Government of Tanzania Government of Tanzania Good Received Note General Tyre East Africa Human Resources International Accounting Standards International Development Association International Financial Reporting Standards International Organisation of Supreme Audit Institutions Independent Power Producers Independent Power Producers Independent Power Tanzania Limited International Standards on Auditing Information Technologies Joint Finance Commission Japanese International Cooperation Agency Kenya Power and Lighting Company Ltd. Local Area Network Loans and Advances Realisation Trust Lesotho Electricity Corporation Local Purchasing Orders Late Payment Penalty Lipa Umeme Kadri Unavyotumia Meter Advance Slip Monitoring Consultant Managing Director Ministry of Energy and Minerals Management Support Service Contract Mtwara Urban Water Supply and Sewerage Authority 225
NamPower NAO NAOT NARCO NBAA NBC NBC NCAA NDC NEMC NHC NIC NMB NORAD NPC NSSF NSSF PA&oBs PACA PAMP PAYE PAYE PFA PFR PMU PoS PPAs PPCB PPE PPE PPF PPF PPRA PSRC PWC Reg. RFA ROA ROE
Nambia Power, Namibia National Audit Office, Tanzania National Audit Office Tanzania National Ranching Company National Board of Accountant and Auditors National Bank of Commence National Bank of Commerce Ngorongoro Conservation Area Authority National Development Corporation National Environment Management Council National Housing Corporation National Insurance Corporation National Microfinance Bank Norwegian Agency for Development Cooperation Ngorongoro Pastoralist Council National Social Security Fund National Social Security Fund Public Authorities and Other Bodies Principal Accountant Customer Accounts PA Principal Accountant Major Projects Pay As You Earn Pay As you Earn Public Finance Act 2001 (revised 2004) Public Finance Regulations Procurement Management Unit Point of Sales Power Purchase Agreements Prevention of Corruption Bureau Property Plant and Equipment Property, Plant and Equipment Parastatal Pensions Fund Public Pension Fund Public Procurement Regulatory Authority Presidential Sector Reform Commission Pricewaterhousecoopers Regulation Regional Financial Accountant Return on Assets Return of Equity 226
RRA RTP RUBADA SDL SEB Sect. Shs. SIDA SMZ STAMICO STAMICO TAC TACOSHILI TAHI TANAPA TANESCO TANESCO TANROAD TAZARA TBS TBS TCRA TDMC TEMDO TEMDO TICTS TICTS TIRDO TP&TC TPC TPDC TRA TSLB TTA TTB
Regional Revenue Accountant Requisition to Purchase Rufiji Basin Development Authority Skills and Development Levy Swaziland Electricity Board Section Tanzanian Shillings Swedish International Development Cooperation Agency Serikali ya Mapinduzi Zanzibar State Mining Corporation State Mining Corporation Tanzania Audit Cooperation Tanzania Coastal Shipping Ltd Tanzania Hotels Investment Co. Ltd Tanzania National Parks Tanzania Electric Supply CO. Ltd Tanzania Electricity Supply Company Ltd. Tanzania Road Agency Tanzania Zambia Railways Authority Tanzania Broadcasting Services Tanzania Bureau of Standards Tanzania Communication Regulatory Authority Technical Debt Management Committee Tanzania Engineering and Manufacturing Design Organisation Tanzania Engineering and Manufacturing Design Organisation Tanzania International Container Terminal Tanzania International Container Terminal Services Tanzania Industrial Research and Development Organisation Tanzania Posts and Telecommunications Corporation Tanzania Posts Corporation Tanzania Petroleum Development Corporation Tanzania Revenue Authority Tanzania Standard Newspapers Ltd Tanzania Tea Authority Tanzania Tobacco Board 227
TTCL TTCL UMEME URT UTT VAT VAT WAN
Tanzania telecommunication Co. Ltd Tanzania Telecommunication Corporation Limited UMEME Limited, Uganda United Republic of Tanzania Unit Trust of Tanzania Value Added Tax Value Added Tax Wide Area Network
228

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UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

REPORT OF THE CONTROLLER AND AUDITOR GENERAL

THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL

Office of the Controller and Auditor General

Office of the Controller and Auditor General, National Audit Office

Office of the Controller and Auditor General

Office of the Controller and Auditor General

4.5. 4.6 4.7.

Office of the Controller and Auditor General

6.1 6.2 6.3 6.4 6.5

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Non Remittance of Statutory Deductions

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

RESPONSIBILITIES OF CAG AND LEGAL FRAME WORK

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Office of the Controller and Auditor General

Moshi University College of Cooperative and Business Studies

Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified Unqualified

Institute of Accountancy Arusha Tanzania Coffee Board

Office of the Controller and Auditor General

PA&oBs issued with unqualified opinion with emphasis of matters

Tanzania Railways Corporation

Unqualified opinion with emphasis of matters.

Office of the Controller and Auditor General

Kigoma Urban Water Supply and Sewerage Authority