PUBLIC AUTHORITIES AND OTHER BODIES GENERAL REPORT 2008-2009

ANNUAL GENERAL REPORT OF THE

CONTROLLER AND AUDITOR GENERAL

On the Audit of Public Authorities and Other Bodies for the financial year 2008/2009

Office of the Controller and Auditor General PA&oBs 2008/09

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THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

Telegram: “Ukaguzi" Telephone: 255(022)2115157/8 Fax: +255(022)2117527 E-mail: [email protected] Website: www.nao.go.tz In reply please quote

Ref.No.CA.4/37/01/2008/09

Office of the Controller and Auditor General, Samora Avenue, P.O. Box 9080, DAR ES SALAAM.

26th March, 2010.

H. E. Dr. Jakaya Mrisho Kikwete, The President of the United Republic of Tanzania, State House, P.O. Box 9120, DAR ES SALAAM. Re: Submission of the Annual General Report of the Controller

and Auditor General on the Audit of Public Authorities and Other Bodies for the Financial year 2008/2009

Pursuant to Article 143 of the Constitution of the United Republic of Tanzania of 1977 (as amended in 2005), I hereby submit to you my third Annual General Report on the Audit of the Public Authorities and Other Bodies as defined in Sect.3 of the Public Audit Act No. 11 of 2008.

This report includes audit reports of Public Authorities and Other Bodies for the financial periods ended 30th September 2008, 31st

December 2008 and 30th June 2009.

I submit,

Ludovick S. L. Utouh

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 under Article 143 of the Constitution of the United Republic of Tanzania of 1977 as amended from time to time and amplified by the Public Audit Act, No. 11 of 2008.

Vision To be a centre of excellence in public sector auditing.

Mission To provide efficient audit services in order to enhance accountability and value for money in the collection and use of public resources.

Core Values:-

Objectivity: We are an impartial organization, offering

services to our clients in an objective and unbiased manner;

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

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

People 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 utilisation:

We are an organization that values and uses public resources entrusted to it in efficient, economic and effective manner.


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TABLE OF CONTENTS PAGE

Vision, MISSION AND CORE VALUES ..................................................... iv List of Abbreviations/Acronyms ......................................................... ix ACKNOWLEDGEMENT ..................................................................... xiii FOREWORD ................................................................................. xv EXECUTIVE SUMMARY ................................................................... xvii CHAPTER ONE ............................................................................... 1 Background Information……………………..……………………….……………………………..…... 1 CHAPTER TWO .............................................................................. 9 Basis and Trend of Audit Opinion…………………………………………….……………………..….9 CHAPTER THREE ........................................................................... 25 Summary of the Outstanding Audit Recommendations.............................. 25 CHAPTER FOUR ............................................................................ 33 Revenue and Expenditure Management ............................................... 33 CHAPTER FIVE .............................................................................. 41 Procurement and Contracts Management ............................................. 41 CHAPTER SIX ............................................................................... 51 Assets Management ....................................................................... 51 CHAPTER SEVEN ........................................................................... 61 Human Resource Management .......................................................... 61 CHAPTER EIGHT ........................................................................... 69 Corporate Governance ................................................................... 69 CHAPTER NINE ............................................................................. 81 Performane Review and Post Privatization ……………………….…………………..………..81 CHAPTER TEN .............................................................................. 91 Information and Communication Technology ......................................... 91 CHAPTER ELEVEN .......................................................................... 95 Results of Special Audits ................................................................. 95


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CHAPTER TWELVE ....................................................................... 105 Significant Audit Matters which were not Reported in the Previous Year’s General Report………………………………………………………………………………………………… 105 CHAPTER THIRTEEN……………………………………………….……………………………….….....111 Conclusions and Recommendations…………………….………………………………………... 111


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LIST OF TABLES

Table 1: Allocation of Audit Assignments .............................. 7 Table 2: Matrix for the Basis of Expressing an Audit Opinion .... 14 Table 3: Analysis of PA&OBs by TR and CAG ......................... 16 Table 4: Submission of Financial Statements ........................ 16 Table 5: Unqualified Opinion ........................................... 18 Table 6: Opinion with Matters of Emphasis .......................... 20 Table 7: Qualified Opinion .............................................. 21 Table 8: Outstanding Recommendations ............................. 25 Table 9: Improperly Supported Payments ............................ 36 Table 10: Compliance with PPA ........................................ 43 Table 11: Owneship of Assets .......................................... 52 Table 12: Assets not Disclosed at Fair Value ......................... 54 Table 13: Maintenance of Assets....................................... 55 Table 14: Investments in non Performing Companies .............. 56 Table 15: Management of Accounts Receivables .................... 58 Table 16: Weaknesses in Staff Record Keeping...................... 63 Table 17: Performance Appraisal System ............................ 64 Table 18: Shrotage of Staff ............................................. 66 Table 19: Staff Training ................................................. 68 Table 20: Dividends Received .......................................... 84


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List of Abbreviations/Acronyms

AO Accounting Officer AFROSAI-E African Organisation of Supreme Audit Institutions-

English APP Annual Procurement Plan ATCL Air Tanzania Company Limited ATM Automatic Teller Machine ARU Ardhi University ARUWASA Arusha Urban Water and Sewarage Authority AU Africa Union BET Board of External Trade BoD Board of Directors BoT Bank of Tanzania CAG Controller and Auditor General CARMATEC Centre for Agricultural Mechanizations and Rural

Technology CEO Chief Executive Officer CHC Consolidated Holdings Corporation CMSA Capital Markets and Securities Authority CPSP Certified Procurement and Supplies Profession CRDB CRDB Bank DANIDA Danish International Development Agency DAWASA Dar es Salaam Water and Sanitation Authority DAWASCO Dar es Salaam Water and Sewerage Co. Ltd DCS Defined Contribution Scheme DF Director of Finance DG Director General DIS Director of Information System DIT Dar es Salaam Institute of Technology DO Director of Operations DUCE Dar es Salaam University College of Education DUWASA Dodoma Urban Water and Sewarage Authority DRP Disaster Recovery Plan EAC East Africa Community ERB Engineers Registration Board ERV Exchequer Receipt Voucher EWURA Energy and Water Regulatory Authority ETC Export Trading Company


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FIU Finance Intelligence Unit FM Financial Manager GEPF Government Employee Provident Fund G.N Government Notice GoT Government of Tanzania GRN Good Received Note GTEA General Tyre East Africa HESLB High Education Students Loans Board HPMU Head of Procurement Management Unit HRM Human Resource Management IAS International Accounting Standards ICT Information and Communication Technology IDA International Development Association IFAC International Federation of Accountants IFM Institute of Finance Management IFRS International Financial Reporting Standards INTOSAI International Organisation of Supreme Audit

Institutions IPSAs International Public Sector Accounting Standards IPPs Independent Power Producers IPTL Independent Power Tanzania Limited ISA International Standards on Auditing IASB International Accounting Standards Board JFC Joint Finance Commission KADCO Kilimanjaro Airport Development Company LAN Local Area Network LART Loans and Advances Realisation Trust LUKU Lipa Umeme Kadri Unavyotumia MD Managing Director MEM Ministry of Energy and Minerals MoFEA Ministry of Finance and Economic Affairs MNH Muhimbili National Hospital MSCL Marine Sevices Company Limited MTUWASA Mtwara Urban Water Supply and Sewerage Authority NACTE National Council for Technical Education NAO National Audit Office NARCO National Ranching Company NBAA National Board of Accountants and Auditors NBC National Bank of Commence


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NBMM National Board for Materials Management NCAA Ngorongoro Conservation Area Authority NDC National Development Corporation NECO National Engineering Company NECTA National Examinations Council of Tanzania NEEC National Economic Empowermnet Council NEMC National Environment Management Council NHC National Housing Corporation NIC National Insurance Corporation NIP National Institute for Productively NMB National Microfinance Bank NORAD Norwegian Agency for Development Cooperation NPC Ngorongoro Pastoralist Council NSSF National Social Security Fund PA&oBs Public Authorities and Other Bodies PAA Public Audit Act 2008 PAYE Pay As You Earn PCCB Prevention and Combating of Corruption Bureau PE Procuring Entity PFA Public Finance Act 2001 (revised 2004) PFR Public Finance Regulations PMU Procurement Management Unit POAC Parastatal Organisations Accounts Committee PPAs Power Purchase Agreements PPE Property Plant and Equipment PPF Parastatal Pensions Fund PPRA Public Procurement Regulatory Authority PSRC Presidential Sector Reform Commission PWC PricewaterhouseCoopers Reg. Regulation RFA Regional Financial Accountant RUBADA Rufiji Basin Development Authority SADC Southern Afica Development Community SADCOPAC Southern Afican Development Community

Organisation of Public Accounts Committee SCOPO Standing Committee of Parastatal Organisations SDL Skills and Development Levy Sect. Section


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SIDA Swedish International Development Cooperation Agency

SNAO Swedish National Audit Office STAMICO State Mining Corporation TAHI Tanzania Hotels Investment Co. Ltd TANAPA Tanzania National Parks TANESCO Tanzania Electricity Supply Company Ltd. TAWASA Tanga Urban Water and Supply and Sewage Authority TAZARA Tanzania Zambia Railways Authority TBC Tanzania Broadcasting Corporation TBS Tanzania Bureau of Standards TCCA Tanzania Civil Aviation Athority TCRA Tanzania Communication Regulatory Authority TCU Tanzania Commission for Universities TEMDO Tanzania Engineering and Manufacturing Design

Organisation TFNC Tanzania Food and Nutrition Centre TIC Tanzania Investment Centre TIRDO Tanzania Industrial Research and Development

Organisation TP&TC Tanzania Posts and Telecommunications Corporation TPA Tanzania Ports Authority TPC Tanzania Posts Corporation TPCC Tanzania Portland Cement Limited TPDC Tanzania Petroleum Development Corporation TR Treasury Registrar TRA Tanzania Revenue Authority TSN Tanzania Standard Newspapers TTB Tanzania Tobacco Board TTCL Tanzania Telecommunication Corporation Limited TZS Tanzanian Shillings UDA Usafiri Dar es Salaam URT United Republic of Tanzania UTT Unit Trust of Tanzania USD United States Dollar VAT Value Added Tax WAN Wide Area Network WUI Western Union International


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ACKNOWLEDGEMENT I am obliged to extend my gratitude to His Excellency Dr. Jakaya Mrisho Kikwete, the President of the United Republic of Tanzania, for always drawing attention to, and laying emphasis on this general report. Similarly, I am grateful to express my appreciation to the Honorable Speaker of the Parliament of the United Republic of Tanzania, Chairpersons and Honorable members of various oversight Committees of Parliament and the whole Parliament for their commitment in deliberating on the contents of the reports and issue directives for corrective measures. I equally wish to express my gratitude to the Boards of Directors, Chief Executive Officers and all employees of the audited Public Authorities and Other Bodies for the cooperation extended to my audit teams. I would also like to thank staff of the Government Printer for expediting the printing of this report and therefore making it possible to be submitted it to the President of the United Republic of Tanzania on the statutory due date. Further, I wish to express my deepest gratitude to the Development Partners who have been supporting NAOT especially the Public Financial Management Reform Programme (PFMRP) under the Coordination of the World Bank, the Swedish National Audit Office (SNAO), the Government of Sweden through the Swedish International Development Agency and all other well wishers who have contributed immensely towards the modernization of the office. Further more, I wish to thank all the private auditing firms that have been working with NAOT in the audits of Public Authorities and Other Bodies on my behalf. Finally, with much appreciation I would like to thank the members of staff of the National Audit Office. Their commitment


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and dedication has been very inspirational to me. I urge all the staff of the National Audit Office to uphold the same team spirit they have demonstrated in all their future endeavors so that we could raise higher the banner of the office in providing efficient audit services in order to enhance accountability and value for money in collection and use of pulic resources.


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FOREWORD

I am pleased to present the 3rd annual general report on the audit of Public Authorities and Other Bodies for the year ended 30th June, 2009. This report presents a compiled version of individual reports on the audit of Public Authorities and Other Bodies. In this report, the highlights of pertinent issues that impede the efficiency of Public Authorities in discharging the establishment objectives are presented.

The intent of this report is to inform the Executive, Legislature, Judiciary, Development Partners and the General Public at large about the main findings, conclusions and recommendations drawn on the performance of Public Authorities and Other Bodies during the year 2008/2009. In the era of increased need for accountability, transparency and good governance, informed decisions are very vital. To this end therefore, I have prepared this report to ensure that decision makers in the country are served with relevant, uptodate information with technical recommendations on the financial reporting and public resources management of the Public Authorities and Other Bodies in the country. I have prepared this report in compliance with Article 143 of the Constitution of the United Republic of Tanzania and Sect 34 of the Public Audit Act No. 11 of 2008.

To ensure that the work of the CAG adds value in the economic development of the country, we have been reviewing our audit approaches to ensure that the reported findings meet the expectations of our stakeholders. Capacity building of our Auditors has been an area of first priority in ensuring understanding of relevant laws, regulations, circulars, directives, various emerging issues both locally and globally such as those of the ongoing reforms in financial reporting frameworks issued by the International Federation of Accountants (IFAC), INTOSAI and other professional bodies to which NAOT is a member.

It is worth noting that, while there is a key role for oversight organs to play in overseeing compliance with laws, regulations and procedures in public entities, ultimately, the responsibility


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for the maintenance of a compliant financial reporting framework lies with Boards of Directors and in particular each Chief Executive Officer of the PA&oBs. However, I have to commend the role played by his Excellency the President of the United Republic of Tanzania, Dr. Jakaya Mrisho Kiwete and his entire Government, the Parastatal Oganisation Accounts Committee (POAC), the Parliament at large and the Development Partners especially the World Bank for their continued support in ensuring the existence of enhanced accountability leading to improved governance in the Country.

Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL

26th March, 2010


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EXECUTIVE SUMMARY

1.0 Introduction This part of the report provides a summary of major findings and recommendations of the audits of Public Authorities and Other Bodies for the periods ended 30th September, 2008; 31st December, 2008 and 30th June, 2009 respectively. This synopsis is divided into parts A, B and C. Part A deals with audit opinions issued to the concluded audits of PA&OBs whose audited accounts have been tabled in the Boards of Directors for adoption. It also dwells on follow-up of outstanding previous audit recommendations which need the attention of the Government, Parliament, Boards of Directors and Chief Executive Officers of the respective Public Authorities and Other Bodies. Part B dwells on the external and governance issues which are beyond the ability of the individual managements and Boards of Directors of the PA&OB’s while part C deals with the internal issues (issues within the ambit of the PA&OBs themselves) which require the attention and action of the individual managements and Boards of Directors of the respective PA&OBs. These matters and their recommendations are discussed in detail in chapters two to thirteen of this report.

2.0 PART A: AUDIT OPINIONS AND FOLLOW-UP OF THE

PREVIOUS YEARS’ RECOMMENDATIONS This part discusses in summary audit opinions issued to PA&OBs and follow-up of the previous outstanding CAG’s recommendations which requires the action of the Government, Parliament, Managements and Boards of Directors of the respective Public Authorities and Other Bodies:

2.1 Audit Opinions Due to various reasons including late submission of financial statements for audit purposes, failure of managements of PA&OBs to respond timely on the observations raised by


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auditors, lack of Boards of Directors in some PA&OBs which are responsible for the adoption of financial statements, disagreement on audit fees between contracted auditors and auditees, non submission of financial statements and other reasons which were beyond my ability, as at 17th February 2010, I had managed to conclude and table to the respective Boards of Directors only 51 (30.7%) individual audit reports of Public Authorities and Other Bodies out of 166 PA&OB which are subject to my ambit of audit. This is an unacceptable situation which requires the attention of the Government and Parliament. Out of the concluded audits, 45 PA&OBs were issued with unqualified audit opinion representing 88%, while 2 were issued with unqualified audit opinion with emphasis of matters representing 4% and 4 were given qualified audit opinion representing 8%. During the year under audit, no audited PA&oBs were issued with either an adverse or, disclaimer of opinion. Detailed audit opinions are included in each PA&oB’s individual audit reports.

2.2 Follow Up of the Previous Year’s Audit Recommendations Most of the key matters related to governance in Public Authorities raised in my previous year’s General Report of Public Authorities and Other Bodies, are still outstanding and therefore reiterated in brief in this year’s annual audit report. The outstanding matters need the attention of the concerned parties including the Government, Parliament, Boards of Directors and Chief Executive Officers if at all the Public Authorities are to deliver to the expectations of Tanzanians. I would like to appreciate the efforts made by PPRA in carrying out further investigations on the procurement issues pointed out in my previous annual general audit reports. Also I would like to register my appreciation to the Prevention and Combating of Corruption Bureau (PCCB) for making use of my report in fulfilling its responsibilities. These outstanding matters are detailed under Chapter 3 of this report.


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The Government, Parliament, Boards of Directors and the Chief Executive Officers of the respective Public Authorities should exert more efforts to ensure that the outstanding previous audit recommendations are timely implemented.

3.0 PART B: EXTERNAL AND CORPORATE GOVERNANCE ISSUES This part discuss in summary external and corporate governance issues which requires the action of the Government and Parliament of the United Republic of Tanzania:

3.1 Apparent conflict of interest of MPs being members in

the Boards of Directors of Public Authorities and Other Bodies Members of Parliament are still serving as members in Boards of Directors of Public Authorities and Other Bodies which makes the functioning of the Boards of Directors to be impaired. This is also against best practice and contrary to the principles of Good Governance. I would like to appreciate the action by the Governor of the Central Bank of Tanzania in issuing a Circular to Public Financial Institutions which restricts Members of Parliament to be Members in the Boards of Directors of the Public Financial Institutions in our country. It is the right time now for the Government to follow suit by issuing a Circular to restrict Members of Parliament from being members in the Board of Directors of Public Authorities and Other Bodies.

As recommended in my previous report and since Parliament is the highest representative organ of the people charged with the responsibility of scrutinizing the performance (oversight role) of Parastatal Organizations through the POAC, and in order to avoid conflict of interest, members of Parliament should not be members of Boards of Directors of Public Authorities and Other Bodies. This practice is unique in Tanzania and is not applicable in any Regional Grouping in which Tanzania is a member eg. EAC, SADCOPAC, SADC, AFROSAI-E, AU etc.


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3.2 Appointment of the Members of Boards of Directors and Chief Executive Officers Currently, Chairpersons of Boards of Directors of Public Authorities and Other Bodies in our Country are appointed by the President of the United Republic of Tanzania while the members to such Boards are appointed by the Ministers of the Parent Ministries of such PA&OBs. At the same time, Chief Executive Officers of the PA&OBs are also appointed by the President a situation which creates a tag of power supremacy since both parties are appointed by the same authority. The best practice should have been for the Chief Executive Officers to be appointed by the Board of Directors instead of being appointed by the same appointing authority. The President should be left with the responsibility of appointing Chairpersons of the Boards of Directors while the appointment of Chief Executive Officers of such PA&OBs should be the responsibility of the Boards of Directors.

3.3 Boards of Directors and Accountability

The Government should enter into performance contracts with Boards of Directors of PA&oBs and set the pre determined deliverables to be achieved during the tenure of such Boards which should be made public. In this regard, Boards of Directors should also sign performance contracts with the Chief Executive Officers who will also sign performance contracts with their subordinates. In this way, I hope, performance in our PA&OBs will greatly improve and therefore immensely contribute more to the development of the nation. As recommended in my previous report, the Boards of Directors of PA&oBs should be accountable to the Government for the results of their performance, likewise management of Public Authorities should also be accountable to the Board of Directors for results.


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3.4 A need for the Establishment of a Public Investment Fund Monies generated from privatisation are deposited in a special account with the Consolidated Holding Company and are used under the authority of the Minister for Finance and Economic Affairs. Withdraws from this account are used either to finance recurrent expenditure or pay for outstanding liabilities and commitments of the privatized entities. In my view, this is a departure from best public investment practices. It is not a secret that Public Entities in Tanzania are currently characterized with a number of problems mainly of under capitalization which is vital to the successful operations of the PA&OBs. The Government should establish the Public Investment Fund in order to be able to meet these challenges. Dividends realized and donor support received in this direction may also be deposited in this Fund to enhance its liquidity. Such funds should not be used to finance recurrent activities rather would best be utilised to finance capital expenditure such as new investments, increasing capital structures and extending bridging finances to the existing PA&OBs.

3.5 A Need for Establishment of the Treasury Registrar’s Office in Accordance with the Treasury Registrar Ordinance Cap.418 In my 2007/08 Annual General Report, I recommended on

the need for the Treasury Registrar to assume greater responsibilities of rendering effective supervision of the PAO&OB after the abolishment of the Standing Committee of Parastatals Organisation (SCOPO).

I appreciate the positive action taken by the Paymaster General in establishing a new section called Public Enterprises Management under the Treasury Registrar’s Division to be responsible for the functions which were undertaken by the former Standing Committee on Parastatal Organizations and renaming the current Public Enterprises Reform Section in the Treasury Registrar’s


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Division, the Public Enterprises Restructuring and Monitoring Section and redefining its mandate to focus on post privatization activities. In spite of the improvements being proposed in the set-up of the Treasury Registrar’s Office, it is still important that the office of the Treasury Registrar be established in accordance with the Treasury Registrar Ordinance Cap.418. Section 3 (1)-(2) of Cap 418 of the Treasury Registrar Ordinance of 13th November 1959 on “Powers and Functions” states that upon coming into operation of this Ordinance, there shall be established the Office of the Treasury Registrar. Such person as the President may appoints to the office of the Treasury Registrar shall be a Corporation Sole by the name of the Treasury Registrar and by that name shall have perceptual succession and an official seal with capacity and powers to acquire, hold, manage, and dispose of investments, to sue and be sued, to execute deeds and instruments, using his official seal, to enter into agreement binding himself and his successors in office, to exercise all rights, conferred by the holding of investments including powers of holding immovable and other property, and to do all the acts and things necessary for expedient and to be done in the execution of the duties of his Office or which is required to be done or may be done by the Treasury Registrar under this and any other written law.

If implementation of this Ordinance is found not feasible, then the Government should establish a strong and effective Regulatory Authority which will be responsible for regulating the performance and operations of all 166 PA&OBs with a total equity amounting to Shs.6.1 trillion in order to enhance accountability and transparency for better service delivery to the public.


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3.6 Permanent and Pensionable Vis-a-Vis Contract Employment of staff in PA&OBs

The employment system in the public sector in the country for MDAs, LGAs and PA&OBs is on permanent and pensionable terms. This system good as it is, has got some weak points due to the fact that it is not performance based. The other mode of employment system under use in the public sector is the contract employment system.

During audit of PA&OBs for the period under review, we noted some PA&OBs changing the terms of employment of some of their employees from permanent and pensionable terms to contract terms, a system which is highly commendable. However, there were some weaknesses noted in this contract employment system due to fact that each Public Authority and Other Body sets its own remuneration criteria, contract time period etc. In both entities reviewed, it was apparent that there was no much transparency of effected changes and neither were there any concrete performance criteria to be used as the basis for evaluation at the end of contractual period. Given the fact that all PA&OBs work for the interest of the nation, there is need of harmonizing the employment environment by having clear policies and guidelines across PA&OBs to monitor and control this emerging change of employment terms. There is a need for the Government through the Ministry of Finance and Economic Affairs and the President’s Office Public Service Management (POPSM) to be involved in the approval of this change of employment terms of members of staff of PA&OBs from permanent and pensionable terms to contracts termss from permanent and pensionable terms to contracts terms.

3.7 Delays in Appointing New Boards of Directors of PA&OBs


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It is the practice when a Board’s tenure of office comes to an end, another Board is appointed by the relevant appointing authorities. The tenure of the Board of Directors refers to the time that the Board remains with responsibility of oversight function over an entity. In Tanzania the common period of tenure of most Boards is three years. Timely appointment of Boards is an important element given the fact that Boards play a key role of approving high level decisions and giving guidance on various strategic operating issues. The Government and the relevant appointing authorities should ensure that Boards of Directors are timely appointed once the tenure of the office lapses since there are some consequences for delaying in appointing of Boards of Directors of Public Authorities and Other Bodies. 3.8 Special Audit at TRL 3.8.1 Payment Top Up Salary The Government committed itself to furnish TRL with salary top- up for 5 months w.e.f. March to July 2008 which was to avert the workers strike that would have taken place in case salary increase was not effected. We however, noted that the TRL claims exceeded the Government commitment due to fact that TRL continued to claim beyond the Government commitment period of 5 months (March – July, 2008) i.e. from August 2008 to June 2009 (the time of audit) to which a total of Shs.6.6 billion was paid. TRL claims included salary and allowances unrelated to the Government commitment. The amount which was supposed to have been claimed and released as Government top-up of salaries for the period of March to July 2008 would correctly have amounted to only Shs.1.4 and not Shs.9.8 billion.

Therefore, Tanzania Railways Ltd over claimed Shs.8.4 billion from the Government.


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The Government should take appropriate action to have the outstanding amount paid without delay as per the Concession Agreement. 3.8.2 Unpaid Concession Agreement fee Shs.16.1 billion According to Part 12 – of the Concession Agreement payments, TRL is required to pay fixed concession fee as set out in Part 1 of schedule 11 and a variable concession fee of 5% per cent annually for years 1 to 5, and 7.5% per cent annually for years 6 to 25 of the concessionaire’s gross revenue. The payments are required to be paid to RAHCO at such time and in such manner as prescribed in parts 2 and 3 of schedule 11 (Part 12 – 2 of the Concession Agreement refers). Again, the Concessionaire’s obligation to pay the concession payments to RAHCO is absolute and unconditional and not subject to any type of set – off or conditional upon the full enjoyment of the rights granted to it under the Concession Agreement. However, apart from the first quarter fixed concession fees of USD.1.8 million paid, TRL has not paid any of the subsequent payments. As at the date of this report, the figure of outstanding concession fees stand at Shs.16.3 billion.

The Government should evaluate its partnership with RITES, the current status of the venture, non adherence of the contract agreement, problems currently facing operations and the going concern of TRL and come up with a lasting solution.

3.9 PSPF Loan Shs.58 billion and Student’s Loans Repayments Shs.51.1 billion The Higher Education Students Loans Board owes an outstanding loan of Shs.58 billion from PSPF under full Government Guarantee secured way back in year 2006. The amounts were borrowed from PSPF in order for the Board to issue loans to students pursuing Higher Learning Education.


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Further, the Board initiated efforts towards collection of the inherited loans portfolio from MSHET of Shs.51.1 billion disbursed to 113,240 student beneficiaries who pursued studies in Higher Learning Institutions between 1994/95 and 2004/2005. The responses are not satisfactory since up to the time of audit, only few loanees have been identified. Out of the few loanees identified, only a minority percentage is repaying the loans as compared to the monthly projected collections. The Government should ensure that the outstanding loans both principal and interest amounts borrowed from PSPF are paid without further delay to avoid any further costs in terms of interest and penalties. The Board should start implementing the laid down legal action against employers and individual loanees who are hesitating to cooperate with the Board as per the HESLB Act, 2004 No. 19A-23.

4.0 PART C: INTERNAL ISSUES

This part discusses in summary issues which requires the action of the managements and Boards of Directors of the respective Public Authorities and Other Bodies:

4.1 Revenue and Expenditure Management

Our review of the revenue has revealed that Public Authorities have weak revenue management systems which lead to untimely billing of customers, late collection of revenue, lack of accuracy and complete revenue data and lack of security over cash collections. On the other hand, evaluation of expenditure of PA&OBs has revealed that some Public Authorities have weak expenditure management systems which lead to some of the payments being made without proper authorization and some not adequately supported by relevant documents. The Board of Directors and Chief Executive Officers of the respective Public Authorities should ensure that effective systems of revenues and expenditures management are in place in order to avoid misuse of taxpayer’s moneys.


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4.2 Procurement and Contracts management Tanzania embarked into a major restructuring of its procurement system which led into the enactment of the Public Procurement Act, 2001 and later repealed by the Public Procurement Act No.21 of 2004, together with the establishment of the Public Procurement Regulatory Authority (PPRA) and the Public Procurement Appeals Authority (PPAA). Despite of the Government efforts, Public Authorities and Other Bodies are still not complying fully with the requirements of the Public Procurement Act No.21 of 2004 and it’s related Regulations of 2005. This has been evidenced by audit findings of the Public PPRA which in summary are included in this general report. The Procurement Professional Body (Procurement, Supplies and Technician Board) should speed up professionalisation of the procurement cadre, enhancing coordination with training institutions to align their curricular to meet the requirements in the market, and to enhance training and compliance monitoring. The Board of Directors and Chief Executive Officers should fully comply with the provisions of the PPA, 2004 and its Regulations of 2005.

4.3 Assets Management I have realized that some of the Public Authorities and Other Bodies are still making investments in non-performing companies. These kinds of investments would appear to be a misuse of public monies and eventually causing losses of the monies that otherwise would have been made available for other development activities. Another major problem in some Public Authorities is the lack of title deeds of their properties including lack of legal ownership of motor vehicles.

Government, Boards of Directors and Chief Executive Officers of Public Authorities and Other Bodies should ensure that investments are made in companies which are


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performing. Further, Boards of Directors of Public Authorities and Other Bodies should ensure that legal ownership of their plants, property and equipment are obtained and secured.

4.4 Human Resources Management

Review of Human Resource Management has revealed weaknesses in some of the Public Authorities and Other Bodies such as lack of proper maintenance of employees’ records, absence of staff performance appraisal systems and the problem of under staffing. Human Resource Managers appeared to have given little weight on anomalies which may create inconvenience in case of termination or retirement of employees by not remitting employees contributions to the respective Pension Funds. Some of the Public Authorities and Other Bodies have been providing incentives to the employees such as free or susbsidised use of electricity, water etc. which are very difficult to control and manage. Some of these incentives are being misused by the employees. For instance, TANESCO has been giving certain discount on the bills of electricity used by its employees which were supposed to be paid by its staff. Audit review of staff accounts entitled for discounted electricity in Ilala, Arusha and Mbeya regions revealed several names of ghost staff who are not employees of TANESCO as at 31 December 2006 enjoying the incentive of discounted bills. This exposes TANESCO to a risk of loosing the much needed revenue from the use of the services it is selling. Public Authorities and Other Bodies are advised to provide cash incentives and let the employees pay for the services they are enjoying as any other customers instead of offering discounted bills or free service like electricity, water etc as an incentive to employees which are highly abused. Statutory contributions and other deductions should also timely be remitted to all relevant Authorities in full as stipulated in the respective governing laws.


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4.5 Information and Communication Technology Information and Communication Technology is paramount important and inevitable for National Development given the importance of ICT. Review of ICT systems and networks has revealed that most of the Parastatals lack proper ICT policies and guidelines to enhance control over the effective use of computers and internet services. Disaster recovery plans have not been developed which exposes both computer hardware and software into risk. Public Authorities were noted to have poor computer network infrastructure which could serve to provide data/information.

Management of Public Authorities should establish ICT units responsible for development and maintenance of computer information systems and ensure that ICT policies are developed and used for effective management of the same within the organizations. Also, PA&OBs should have well structured disaster recovery plans and strategies to ensure that computer hardware and software are properly covered during business disruption event.

4.6 Results of the Special Audits Conducted at TANESCO

In the course of the special audit, conducted by my office in TANESCO nothing came to my attention to indicate outright theft of cash at TANESCO. However, there are some problems regarding renovation of six residential houses and uncertainty whether the total amount of the loan of Shs.300 billion was properly utilized for the purpose for which the syndicated loan was secured. Most of the works in the variation orders involving the six houses could have been established during the design stage if adequate assessment detailed designs were done in advance. The procurement process used did not fully comply with PPA and its Regulations as reported in chapter 11 of this report. A simple analysis by the investigation team revealed that a 59.2 KVA generator was installed in house No. 13 instead of a 15 KVA which would have been sufficient for the same house which leads to the conclusion that a needs


xxx

assessment of the power supply to the house was not done and there was no value for money with particular procurement transaction.

The Board of Directors and Management of TANESCO should comply with the Public Procurement Act No. 21 of 2004 and its related Regulations of 2005 and ensure Value for Money is obtained when overseeing daily undertakings of the Company.

4.7 Performance Review of the Existing and Privatized Public Entities As of 30th June, 2009 there were some PA&oBs with liabilities amounting to Shs.102.5 billion which accounted for 25% of the total outstanding guarantees whose repayments were due as at 30th September 2009 according to the Treasury Registrar’s Statement of Government Investments. At the same time there were arrears of revenue amounting to Shs.110.1 billion including Shs.93.4 billion of loan in arrears that were supposed to be collected in previous years. Further, a total amount of revenue collected from loans as principal and interest decreased by 36% from Shs.10.6 billion in the year 2007/08 to Shs.6.7 billion in the year 2008/09. As far as post privatisation is concerned, the Consolidated Holding Company evaluated a total of 62 entities, out of which 12 entities were performing well and had implemented the investment plans as per the Sale Agreements while 27 entities had partially implemented the investment plans and were operating at a loss. The remaining 23 entities were still closed mainly on account of poor capital base and unresolved Court cases. The Government should ensure that the liabilities of PA&oBs whose repayments are due but not being serviced are recovered from the beneficiaries to avoid the Government from paying the loans and the revenue in arrears is collected without further delay.


xxxi

The Consolidated Holdings Corporation should make a close follow up to ensure that, the privatised entities are working as per the sales agreements and take appropriate action on those entities operating without taking into account the terms in the sales agreements.

Ludovick L. S. Utouh

CONTROLLER AND AUDITOR GENERAL _______________________________ National Audit Office-Dar es Salaam, 26th

March, 2010


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CHAPTER ONE

BACKGROUND INFORMATION

1.0 Legal Framework for Public Audit in Tanzania The Office of the Controller and Auditor General of the United Republic of Tanzania is a constitutional office established in accordance with Article 143 of the Constitution of the United Republic of Tanzania 1977 as amended from time to time. Public audit in Tanzania is emphasized under the Public Audit Act No. 11 of 2008 and under Sect.44 (2) of the Public Procurement Act No.21 of 2004.

Sub Article (5) of Article 143 of the Constitution of the URT requires the Controller and Auditor General to audit all Public Authorities and other Bodies at least once in every financial year. Moreover, Section 33 of the Public Audit Act No 11 of 2008 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 his behalf the books of account of any body that the CAG may be required to audit.

In understanding the legal framework governing the audit of Public Authorities, one has to take into consideration the fact that a number of Public Authorities are required to operate under the accrual basis of accounting system which will necessitate these authorities to be IFRS compliant. In such situation, the Public Authorities 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 Public Authorities.


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1.1 Function and Reporting Mandate of CAG 1.1.1 CAG Reporting Mandate

Article 143 (4) of the Constitution of the URT of 1977 requires the Controller and Auditor General to submit the CAG’s annual reports to the President of the URT by 31

st

March each year. 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 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 Assembly, then the Controller and Auditor General shall submit a copy of 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.

1.1.2 Audit mandate The Controller and Auditor General is mandated to

conduct both financial and performance audits of all Public Authorities and other Bodies as per Section 32 and 30 of the Public Audit Act No.11 of 2008 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.


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1.2 Scope and Applicable Audit Standards 1.2.1 Scope of Audit

Audit scope refers to the auditable areas covered by an audit. Audit scope includes, where appropriate audit objectives, nature and extent of auditing procedures performed, time period audited and related activities not audited in order to delineate the boundaries of the audit. The main objective of conducting the audit is to facilitate my responsibility of expressing an independent opinion on the financial statements of the Public Authorities and Other Bodies for the financial year ended 30th June 2009. Specifically, it covers audited accounts of the periods ended, 30th September 2008, 31st December 2008 and 30th June 2009. It also, covers outstanding and unimplemented audit recommendations made in previous years audit reports. The audit covers the evaluation of the effectiveness of the financial accounting systems and the internal controls over their activities, examination and verification of the accompanying financial statements, the performance report and other auditing procedures as were considered necessary under each circumstance for the purpose of forming an opinion on the financial statements of these entities. The audit is carried out on a risk and materiality, therefore the audit findings are confined to the extent that records, documents and information requested for the purpose of audit are made available to me.

1.2.2 Applicable Auditing Standards

The National Audit Office (NAO) is a member of the International Organisation of Supreme Audit Institutions (INTOSAI), the African Organisation of Supreme Audit Intitutions (AFROSAI) and the African Organisation of Supreme Audit Intitutions of English speaking Countries (AFROSAI-E). We therefore apply in our audit procedures, the auditing standards issued by INTOSAI and the


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International Standards on Auditing (ISA) issued by the International Federation of Accountants (IFAC). The National Audit Office has a unique responsibility to ensure that there is proper public 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.

1.3 Responsibilities of the Board of Directors and Chief

Executive Officers 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 Public Authorities. From this responsibility and other, is where the question of confict of interest surface as one can not over see what he has been responsible for. International Financial Reporting Standard (IFRS 1) and International Accounting Standards (IAS 1) specify the types of financial statements to be prepared. Public Authorities in Tanzania are required to prepare their financial statements in compliance with the International Financial Reporting Standards (IFRS) or the International Public Sector Accounting Standards (IPSAS) depending on the nature and objectives of the Public Authorities in question. This is in line with the decision taken by the National Board of Accountants and Auditors (NBAA) and endorsed by the Government that effective from July 2004 reporting entities in Tanzania shall embrace the International Accounting Reporting Standards while auditing will be conducted in accordance with International Standards on Auditing (ISA), and standards and guidelines issued from time to time by the National Board of Accountants and Auditors.

The preparation and submission of Public Authorities accounts is a legal requirement as per the requirements of the individual Public Authorities enabling Acts, the


5

Companies Act of 2002 and the Public Finance Act No. 6 of 2001 (revised 2004) and the PAA of 2008. Public Authorities 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 and transparency in the use of public resources.

1.4 Internal Control System Internal controls refer to all means by which public resources are directed, monitored, and measured. Internal controls play an important role in preventing and detecting frauds/misappropriations and protecting the public resources, both physical and intangible. At the organizational level, internal control objectives relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations. At the specific transaction level, internal controls refers to the actions taken to achieve a specific objective (e.g., how to ensure that payments to suppliers and service providers are for valid goods and services rendered). Checking of compliance with internal controls is the role of an internal auditor which means the weaknesses in the functioning of the internal audit unit, equally means the weaknesses in operationalisation of the internal controls. Reg. 34 of the PFR 2001 (revised 2004) details what roles are to be played by the internal auditor in respect of the internal control system. Moreover, Reg.35 (2) of PFR 2001 (revised 2004) emphasizes on the responsibility of management in prevention, detection and investigation of frauds.

1.5 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, states that the Treasury Registrar has the functions and responsibilities for oversight over Public Authorities and closely monitoring, controlling


6

and managing them effectively in collaboration with the Board of Directors of the respective entities.

1.6 Organisation of Audit Work The report provides a summary of the final results of the audit exercise, which was carried out by NAO and those audit carried out by private audit firms registered with NAOT on behalf of the CAG. In order for my Office to effectively handle this task of auditing all Public Authorities in the country, I decided to use the constitutional powers vested on 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 the audit of the Public Authorities while the majority of such audits were wholly outsourced. Such outsourced audits were subjected to the quality review process of NAOT.

During the year under review, NAOT worked hand in hand with private audit firms registered/shortlisted with NAOT and registered with the National Board of Accountants and Auditors (NBAA) as Certified Public Accountants in Public Practice (CCPA-PP).

1.7 Submission of Financial Statements to CAG for Audit

Section 31 of the Public Audit Act No.11 of 2008 requires public authorities and other bodies to submit their financial statements to the Controller and Auditor General for audit purposes within three months after the end of the respective financial year to which the accounts relate.

1.8 Outsourcing of Audit Work to Eligible Private Audit Firms Sub-Section 5 of Section 33 of the Public Audit Act No. 11 of 2008, empowers the CAG to authorise any person or body eligible to be appointed as an auditor under the Auditors and Accountants (Registration) Act No. 33 of 1972 as amended in 1995 to conduct the audit of Public Authorities and Other Bodies on behalf of the CAG and make a report to me for the subsequent processing to


7

Parliament. Furthermore, the appointed/authorized auditors shall be bound by the provision of the law that they shall not divulge any information which relates to the business secrets of the auditee which comes to their knowledge in the course of the audit. The audit opinion shall remain the sole responsibility of the Controller and Auditor General. During the year of reporting, NAOT worked together with private audit firms 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. In the year of audit, the audit of the 51 Public Authorities and Other Bodies we are reporting on was conluded as follows:-

Table 1: Allocation of Audit Assignments S/n Details No of PA’s 1. Public Authorities wholly audited by

NAOT 3

2. Public Authorities jointly audited by NAO and private audit firms

10

3. Public Authorities whose audits were wholly outsourced to private audit firms by NAO

38

Total 51

The above information can be presented in a histogram as follows:


8

Histogram showing Status of Audits of PA&OBs

Reading from the histogram above, most of the PA&OBs whose audits has been concluded and their accounts adopted by the Board of Directors, are those which were jointly audited by staff of the National Audit Office and Private Audit Firms.

The full list of the private audit firms which had business dealings with the CAG in the year of audit is shown as Appendix I to this report.

28

18

120

3

10

38

0

20

40

60

80

100

120

PA&OBs to beaudited

Concluded audits ofPA&OBs

Status of Audit of PA&OBs

Public Authorities wholly audited by NAOT

Public Authorities jointlyaudited by NAO and private audit firms

Public Authorities whose audit was wholly outsourced to private audit firms


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CHAPTER TWO

BASIS AND TREND OF AUDIT OPINIONS

2.0 Introduction The Oxford English dictionary of accounting defines an audit opinion as an opinion contained in an auditor’s 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.

Article 143 (2) (c) of the Constitution of the United Republic of Tanzania as amplified under Section 34 (1) of the Public Audit Act No.11 of 2008 states that on receipt of accounts prescribed in relevant laws, the Controller and Auditor General shall cause the accounts to be audited and shall within a period of nine months after the end of the year to which the accounts relate express a professional opinion, in respect of each account and the results of the audit.

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 auditor’s opinion as to whether the financial statements give a true and fair view and where appropriate, whether the financial statements comply with statutory requirements”.

Audit opinion is issued by an independent external auditor as a result of an audit or evaluation performed on an entity or subdivision thereof (called an “auditee”). The audit opinion is provided to a user as an assurance service in order for the user to make decisions based on the results of the audit. In ordinary language, the opinion is an assurance on whether the financial information presented by the auditee is materially correct and trustworthy for


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making various decisions by users of the financial statements.

An auditor’s opinion is considered an essential tool when reporting financial information to users. It is intended to advise Parliament and other users on whether Public Authorities financial statements have been prepared in accordance with the standards issues by the National Board of Accountants and Auditors being the regulator of the accounting and auditing profession in Tanzania as well as International Financial Reporting Standards issued by the International Accounting Standard Board (IASB) and the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants (IFAC).

2.1 Types of audit opinion There are five common types of audit opinions, each one presenting a different situation encountered during the auditor’s work. The five opinions are as follows:

2.1.1 Unqualified opinion Unqualified Opinion is sometimes regarded by many as equivalent to “Clean opinion”. This type of opinion is issued when the financial statements presented are free of material misstatements and were prepared in accordance with the standards issued by the National Board of Accountants and Auditors (NBAA) or International Financial Reporting Standards issued by the International Accounting Standards Board (IASB), or International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants (IFAC) which in other words means that the Public Authorities financial performance, financial position, change in owners equities and cash flows are fairly presented in the financial statements. It is the best type of opinion an auditee may receive from an external auditor.


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2.1.2 Unqualified opinion with emphasis of matter In certain circumstances, the unqualified audit opinion may

be modified by adding an emphasis of matter paragraph to highlight matters affecting the financial statements. 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 Chief Executive Officer and users of financial statements warning them about those matters requiring their urgent attention 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 given.

2.1.3 Qualified Opinion

This type of opinion is issued when the Controller and Auditor General disagrees with management or there exists uncertainty which has a material but not fundamental effects on the accuracy of the financial statements. The wording of the qualified opinion is very similar to unqualified opinion, but an explanatory paragraph is added to explain the reasons for the qualification. It will therefore show that the financial statements present fairly the state of affairs except for the effects of a specific audit observation. The explanatory paragraph comes before the opinion paragraph.

2.1.4 Adverse Opinion An Adverse Opinion is issued when the Controller and Auditor General determines that the financial statements of the Public Authority are materially misstated and, when considered as a whole, do not conform to the standards issued by the National Board of Accountants and Auditors (NBAA) or International Financial Reporting Standards issued by International Accounting Standard Board (IASB) or


12

the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants (IFAC). This opinion is considered the opposite of an unqualified opinion, essentially stating that the information contained in the financial statements is materially incorrect, unreliable, and inaccurate in order to assess the authority’s financial position and results of performance. The wording of the adverse report are clear in which the auditor states that the financial statements are unreliable, inaccurate, and do not present a fair view of the auditee’s financial position and operations.

2.1.5 Disclaimer of Opinion A Disclaimer of Opinion, commonly referred to simply as a Disclaimer, is issued when the Controller and Auditor General could not form an audit opinion on the financial statements. This type of opinion is expressed when the Controller and Auditor General tried to audit an entity but failed to complete the audit work due to various reasons and therefore finds himself in a position of not being able to issue an oppinion. Certain situations where a disclaimer of opinion may be appropriate includes a lack of independence, or, when there are significant scope limitations, whether intentional or not, which hinders the Controller and Auditor General to obtain evidence and perform procedures, example where an auditee will fully hides or refuses to provide evidence and information to the Controller and Auditor General in significant areas of the financial statements and when there are significant uncertainties within the auditee.

2.2 Basis of Expressing Other than Unqualified Audit Opinion The nature and the circumstances giving rise to the qualification of opinion will generally fall into one or two categories.

(a) Where there is an uncertainty which prevents the auditor from forming an opinion on a matter


13

Sub section (5) of Article 143 of the Constitution of the United Republic of Tanzania as amplified by Sect. 15 of the Public Audit Act No. 11 of 2008 empowers the Controller and Auditor General to access all records, books, vouchers, documents, securities, stores of public property in the possession of any officer or any other person who has received any public money or property.

Other than unqualified audit opinion is issued when

the Controller and Auditor General is 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 that he can not issue an opinion.

(b) Other than unqualified audit opinion is issued where

the auditor is able to form an opinion on a matter but this conflicts with the view given by the financial statements (Disagreement in best practice on records keeping and non compliance with standards issued by the National Board of Accountants and Auditors or the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) or the International public Sector Accountung Standard (IPSAS) issued by the International Federation of Accountant (IFAC).

Each of these categories gives rise to alternative forms

of qualification depending upon whether the subject matter of the uncertainty or disagreement is considered to be FUNDAMENTAL so as to undermine the view given by the financial statements taken as a whole. The forms of qualification which should be used in different circumstances are as shown below:


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Table 2: Matrix for the Basis of Expressing an Audit Opinion Nature of

Circumstances Material but not

fundamental Material and Fundamental

Disagreement “EXCEPT” FOR OPINION (QUALIFIED OPINION)

ADVERSE OPINION

Uncertainty “EXCEPT” FOR OPINION (QUALIFIED OPINION)

DISCLAIMER OF OPINION

The above table gives guidance on the formation of audit opinios. The interpretation of the table is as explained below:- (i) Where audit findings constitute disagreement and

• the matter is material but not fundamental, the opinion is qualified (Except for)

• the matter is material and fundamental, the opinion is adverse

(ii) Where audit findings constitute Uncertainty and • the uncertainty is material but not

fundamental, the opinion is qualified (Except for)

• the uncertainty is material and fundamental, disclaimer of opinion is expressed.

NAO’s objective is to produce reports that present a balanced perspective, place primary emphasis on critical matters requiring attention, and identify workable opportunities for improvements. In accordance with the International Standards on Auditing (ISA) issued by the International Federation of Accountants, audit reports will generally provide reasonable, but not absolute, assurance. In relation to the opinion given against the audit objectives, a reasonable level of assurance is provided by designing procedures so that the auditor’s professional judgment, the risk of an inappropriate conclusion is reduced to a low level through procedures such as inspection, observation, enquiry, confirmation, computation, analysis, discussion and effective quality review procedures.


15

Absolute assurance is not attainable as a result of factors such as limitations on the use of risk materiality, inherent limitations of the internal controls in the Public Authority and the fact that much of the evidence available to the auditors is persuasive rather than conclusive in nature. The level of assurance will, to some extent, also be influenced by the degree of precision associated with the subject matter itself. It is important to note that an unqualified audit opinion does not give absolute or total assurance that the financial statements are completely free of errors or misstatements.

2.3 Status of the Audit of Public Authorities According to the Treasury Registrar Statement of Government Investments there are 238 Public Authorities and Other Bodies in the Country. Out of 238 PA&OBs, 62 PA&OBs are Public Enterprises which the Government owns minority interest (less than 50% shares) whose audits does not fall under my ambit. 36 PA&OBs are Executive Agencies which are audited by me under division dealing with the audit of the Accounts of MDAs and therefore not recognized as PA&OBs for our audit purposes. Therefore, after inclusion of General Tyre East Africa and Kilimanjaro Airport Development Company Ltd, in the list of the CAG PA&OBs, this annual general report will cover individual audit reports of 166 Public Authorities and Other Bodies as compared to the 164 PA&OBs reported in my last year general report. The list of the Treasury Registrar’s statement of Government investments does not include 26 Water Authorities which in my opinion should be included in the list of PA&OBs since they are autonomous bodies managed under their respective Boards of Directors. Currently, TR recognizes only two Water Authorities which are DAWASA and DAWASCO as PA&OBs. In as far as my Office is concerned; we recognize 166 Public Authorities and Other Bodies for audit purposes. The difference of the


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TR and CAG figure of PA&OBs of 238 vis-a-vis 166 is analysed as shown below:.

Table 3: Analysis of PA&OBs by TR and CAG S/n Category TR CAG 1 Water Authorities 2 28 2 Regulatory Authorities 35 35 3 Executive Agencies 36 - 4 Higher learning Institutions 25 25 5 Public Parastatals 39 39 6 Government Institutions 39 39 Gvt. Investments with Minority

Shareholding 62 -

Total 238 166 During the period ended 30th June 2009, Chief Executive Officers of 156 Public Authorities and Other Bodies submitted to my office their financial statements for audit purposes of which 51 audits were concluded and adopted by the respective Boards of Directors. Audits of the financial statements of 105 Public Authorities are in progress. Chief Executive Officers of 10 Public Authorities did not submit their financial statements for audit. In summary, the above information is shown in the table below:

Table 4: Submission of Financial Statements S/No Category of

the Entity No of PA in each

Category

Audits concluded

& adopted by BoD

Audits in

Progress

F/S not Submitted

Total

1 Water Authorities 28 10 16 2 28 2 Regulatory

Bodies/Authorities 35 12 22 1 35

3 Higher Learning Institutions

25 3 21 1 25

4 Public Parastatals 40 21 17 2 40 5 Government

Institutions 38 5 29 4 38

Total 166 51 105 10 166


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Status of the audit of Public Authorities and Other Bodies as at 17th February 2010 which shows financial statements submitted to my office for audit purposes, audits concluded and its accounts adopted by the respective Boards of Directors, audits in progress, financial statements not submitted to CAG’s office for audit purposes is shown in Appendix II.

2.4 Opinions Issued to Public Authorities Due to various reasons including late submission of financial statements to my office for audit purposes, failure of some of the management of PA&OBs to respond in time on the observations raised by auditors, lack of Boards of Directors in some of the Public Authorities and Other Bodies, I have managed to conclude and table to the respective Boards of Directors only 51 (30.7%) audit reports out of 166 PA&OBs supposed to have been audited by me. Out of the concluded audits, 45 PA&OBs were issued with unqualified opinion representing 88% while 2 Public Authorities representing 4% were issued with unqualified opinion with emphasis of matters and 4 Public Authorities representing 8% were issued with qualified opinion as shown in appendix III.

Analysis of Opinion Issued to PA&OBs

PA & oBs Unqualified opinion

Unqualified opinions with matters of

emphasis

Qualified opinions

51 45 2 4 100% 88% 4% 8%

This can be presented in a pie chart as shown below:


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2.4.1 Unqualified Opinion

In the year under review, forty five (45) PA&oBs have been issued with unqualified opinion. The concerned Public Authorities and Other Bodies are listed below:

Table 5: Unqualified Opinion

S/N Name of PA&oBs

1. Architects & Quantity Surveyors Registration Board 2. Ardhi University 3. Arusha International Conference Centre 4. Arusha Urban Water Supply and Sewerage Authority 5. Bank of Tanzania 6. Capital Market Security Authority 7. Consolidated Holding Company 8. Contractor Registration Board 9. Tanzania Bureau of Standards 10. Dar es Salaam Maritime Institute (DMI) 11. Dar es Salaam Stock Exchange (DSE) 12. Deposit Insurance Board 13. Dodoma Urban Water Supply and Sewerage Authority 14. Energy Water and Utility Regulatory Authority 15. Gaming Board of Tanzania 16. Government Employee Provident Fund 17. Institute of Finance Management

Audit opinions Issued to PA&OBs

88%

4% 8% Unqualified opinion

Unqualified opinions with matters of emphasis Qualified opinions


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S/N Name of PA&oBs 18. Iringa Urban Water Supply and Sewerage Authority 19. Lindi Urban Water Supply and Sewarage Authority 20. Local Providend Fund (LAPF) 21. Mbeya Urban Water Supply and Sewerage Authority 22. Moshi Urban Water Supply and Sewerage Authority 23. Mwanza Urban Water Supply and Sewerage Authority 24. National Board of Accountants and Auditors 25. National Council for Technical Education 26. National Development Corporation 27. National Health Insurance Fund 28. National Institute of Productivity 29. National Ranching Corporation (NRC) 30. Ngorongoro Conservation Area 31. Public Pension Fund 32. Reli Assets Holding Company 33. Shinyanga Urban Water Supply and Sewerage Authority 34. State Maning Corporation 35. Sugar Board of Tanzania 36. Surface and Marine Transport Regulatory Authority

(SUMATRA) 37. Tanzania Civil Aviation Authority 38. Tanzania Forest Research Institute 39. Tanzania Petroleum Development Corporation 40. Tanzania Ports Authority 41. Tanzania Postal Bank 42. Twiga Bancop Limited 43. Ubungo Plaza Limited 44. Tanzania Fertilizer Company 45. Tanzania Investment Bank

2.4.2 Unqualified Opinion with Emphasis of Matter

In the year under review, two (2) PA&oBs have been issued with unqualified opinion with emphasis of matter. The concerned Public Authorities and the matters which have been emphasised are listed below:


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Table 6: Unqualified Opinion with matters of emphasis S/N Name of

PA&oBs Type of Opinion Emphasis of matter

1. TANESCO Unqualified opinion with emphasis of matters

• Material uncertainity which cast significant doubt on the Corporation to continue as a going concern entity due to accumulated losses amounting to Sh. 734,874 million against share capital of Shs.986,717million.

2. TTCL Unqualified opinion with emphasis of matters

• The Company incurred significant loss of Sh.42,041 million and generated negative cash flow from operating activities of Sh.3,255 million as shown in Note 2, the condition which indicates material uncertainity which cast doubt on the Company to continue as a going concern entity.

2.4.3 Qualified Opinion

In this year under review, four (4) Public Authorities have been issued with qualified opinion. The concerned Public Authorities and the basis which has lead to qualification of the opinion are listed below:


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Table 7: Qualified Opinion S/N Name of

PA&oBs Type of opinion issued

Basis of qualification

1. Dar es SalaamWater SupplyCompany (DAWASCO)

Qualified opinion

• Non metered customers are billed on flat rates, were charged as if they were metered customers which resulted to an overcharge of Sh.483 million

• Significant adjustments amounting to Sh. 1.9 billion were passed to write off customer’s receivables balances subsequently to year end. The Corporation continues to process similar adjustments as part of the clean up exercise, no estimates could be made on the amount and timing of these adjustments

• Further, I am unable to confirm on the accuracy and completeness of the reported revenue amounting to Shs 17 billion and related trade debtors balance of of Sh. 5.3 billion as at 30th June 2009.

• Material uncertainity which cast significant doubt on the Corporation to continue as a going concern entity due to net loss of Sh. 12.6 billion for the year ended 30th June 2009 and as at that date the liabilility exceeded its total assets by Sh.26.8 billion as disclosed in


22

S/N Name of PA&oBs

Type of opinion issued


Note 2 of the financial statements.

2. DAWASA Qualified opinion

• The Authority was unable to establish the correct amount of the revaluation reserve on property, plant and equipment as at 30th June 2009 recognised in the financial statements.

• The Authority was unable to quantify how much unaccounted water has been supplied to customers or lost through leakages or to identify individual consumers who have not been billed for their consumption.

3. Marine ServiceCompany

Qualified opinion

• There was no explanation to reconcile the noted difference of Shs.7,581,161 between bank statement balance of the main local bank account and the closing balance in the General Ledger of the same bank account.

• Due to big expenditure and poor control on transaction of gas oil, the company suffered a loss of Shs.82,998,550 as compared to shs.75,353,784 last year.

• A loss of Shs.75,353,784 incurred in 2007 was written off without authority of the Board of Directors.

• Staff creditors of Shs.121,114,014 included in


23

S/N Name of PA&oBs



Trade and Other Payables was not analysed to show names of the individual staff creditors with documentary evidence to authenticate the liabilities. Hence, existence and correctness of the creditors could not be confirmed.

4. National Insurance Corporation

Qualified opinion

• I am unable to obtain sufficient appropriate audit evidence on the completeness and accuracy of outstanding claim balances in respect of individual life business amounting to Tzs 17 billion due to the limitations in the premium/claims processing information system and shortage of staff to handle the large volumes of claims.

• Investment properties include certain buildings that are held for “dual use” i.e. used for own purposes as well as for earning rental income. IAS 40 – Investment Property requires that when a property is held for dual use, such property can be accounted for as an investment property only if the portion that is held for own use is insignificant. In the case of the Corporation, the portion of the investment properties held for own use is significant and has not been separated from the investment property to be


24

S/N Name of PA&oBs



accounted for as property, plant and equipment. As a result, the entire fair value surplus on these properties amounting to Tzs 27.8 billion has been credited to the Income Statement as opposed to recognising the portion of fair value surplus relating to property, plant and equipment into Revaluation Reserve within Equity.

2.4.4 Adverse Opinion and Disclaimer of Opinion

During the period under review, there were no PA&oBs that were issued with an adverse opinion or disclaimer of opinion.

I have taken efforts of identifying the reasons for 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

SUMMARY OF OUTSTANDING AUDIT RECOMMENDATIONS 3.0 Introduction

This chapter summarises the outstanding recommendations from the previous year General Audit Report which were either partly implemented or not implemented as at the time I concluded the audits of Public Authorities and Other Bodies. These recommendations require further attention and action of the Government, Board of Directors and Chief Executive Officers of the respective PA&oBs.

3.1 Responses on the Previous Year’s Audit Report

I have received responses to the previous General Report from the Government through the Permanent Secretary and Paymaster General through his letter with Ref. No. ED/AG/AUDIT GEN/08/VOL.II/14 dated 14th August, 2009. However, there are major outstanding recommendations that require further attention and action of the Government, Parliament, Boards of Directors and Chief Executive Officers in relation to the General report for the financial year ended 30th June, 2008 as summarised in the table below:-

Table 8: Outstanding recommendations S/N RECOMMENDATIONS PMG’S

RESPONSE STATUS

1. TANESCO management should justify the payment of USD 4,865,000 paid to M/s Dowans in respect of charter aircraft charges for the three shipments of electric power generation equipment, consumables and accessories to Dar es Salaam without proper authority and

None

Not implemented


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S/N RECOMMENDATIONS PMG’S RESPONSE

STATUS

provision in the contract agreement.

2. The Treasury Registrar (Shareholder) should ensure that the under capitalized PA&oBs are provided with adequate working capital.

None Not implemented

3. The Government should establish a strong Regulatory Authority which will be responsible for regulating the performance and operations of the Public Authorities and Other Bodies

Partially Responded

Not implemented

4. With abolition of SCOPO, the Treasury Registrar should assume greater responsibilities of rendering effective supervision of the PA&OB. With the current set up of the Treasury Registrar Office, it will not be possible to achieve this goal. I strongly once again recommend that Treasury Registrar’s Office be set up in line with the requirement of the Treasury Registrar Ordinance Cap. 418

Partially Responded

Not implemented

5. Corporate Governance: Hon. Speaker should consider expanding the role of the POAC to rename it as the Public Investments Committee and expand its mandate to cover all public enterprises i.e. those in which the Government has controlling and non controlling interest as agreed in PA&OBs accountability Conference held



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STATUS

at Karimjee Hall in 23rd to 24th January 2009 under the chairmanship of POAC. Also, to expand its mandate, there is a need to continue strengthening the Committee so that it is able to discharge its responsibilities more effectively. TANESCO Management should ensure that it implements its generation capacity addition program within the timeline indicated and also to build the required transmission network to shift this power to the required load centers.


The Government should enter into performance contracts with Boards of Directors of PA&oBs and set the pre determined deliverables to be achieved during its tenure which will be made public. In this regard, Boards of Directors should also sign performance contracts with Chief Executive Officers who will also sign performance contracts with their subordinates. By doing so, it will greatly improve performance of our PA&OB.


The Government should consider splitting TPDC into two entities, one that is responsible for commercial activities and a second one that is responsible for awarding licenses, undertaking inspections and



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STATUS

doing more regulatory work. In the short term, TPDC needs financial support (which could be a share of the subventions earned from existing gas contracts) to enable it to discharge its responsibilities as recommended by Parastatals Accountability conference held on 23 -24 January 2009. Dar es Salaam Water and Sewerage Corporation (DAWASCO) investments should be fast tracked, and groundwater resources be used to meet the water needs of the larger unserved parts of Dar es Salaam. Also, the water tariffs should be reviewed to enable DAWASCO to meet its operating costs, and that those tariffs should be adjusted in line with inflation as recommended by Parastatals Accountability conference held on 23 -24 January 2009.


The Boards of Directors of PA&oBs should hold senior management of Public Authorities more accountable for results. The results that senior management are accountable for should be made public. In this connection, there is a need to consider the practice of having CEO’s appointed through the Board of Directors instead of



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STATUS

them being appointed through Presidential Appointments. The President should be left with the responsibility of appointing Chairpersons of the Boards of Directors. Since Parliament is the highest representative organ of the people charged with the responsibility of scrutinizing the performance of Parastatal Organizations through POAC, and in order to avoid conflict of interest over the oversight role, the Parastatals Accountability conference held on 23 -24 January 2009 recommended that members of Parliament should not be members of Boards of Directors of public entities.

None Not implemented. Members of Parliament are still serving as members of Boards of Directors of the Public Authorities.

6. Global Economic crisis Mobilize internal financial resources – improvement in revenue collections in non- tax revenue is required, curbing tax loopholes in evading tax revenue especially on fuel, tax exemptions and the like, expanding the tax base, and improving tax systems to enhance compliance.

None

Not implemented


30


STATUS

Institute expenditure controls – the government should streamline its expenditure pattern to avoid unnecessary expenditures such as those already taken on purchase of luxurious motor vehicles and minimization of seminar expenses. Also, recurrent expenditure trend should be monitored so that additional revenue collections are ploughed back to development activities.


Better use of our natural resources – the use of our natural resources should get the outmost attention so as to get the maximum value from natural resources.


Cease opportunities –The government can explore areas that have an added advantage and work on such opportunities for the better performamnce of our economy. Such areas as improving harbour services to attract more use of it by our neighbours, constructing dams for irrigation activities, improving sea fishing and putting to a maximum use the huge gas reserves available in the country.


7. Human Resources management The Government should establish



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STATUS

a strong Regulatory Authority which will be responsible for regulating the performance and operations of the Public Authorities and other Bodies to enhance accountability and transparency for better service delivery to the public.

8. Air Tanzania Corporation Limited (ATCL) should ensure that any decision taken regarding the current Joint venture negotiations taking place to be based upon the interests of consumers. Also, Tanzania Region should immediately confirm its acceptance of and adhere to the Yamoussoukro decision that Tanzania is legally bound to comply with as recommended by Parastatals Accountability conference held on 23 -24 January 2009.

None

Not implemented


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CHAPTER FOUR

REVENUE AND EXPENDITURE MANAGEMENT

4.0 Introduction This chapter deals with revenue and expenditure management in Public Authorities and Other Bodies reported in the respective management letters for the year ended 30th September 2008, 31st December, 2008, and 30th June, 2009. During the audit of Public Authorities, various issues were raised in respect of revenue and expenditure of these Authorities. However, for the purpose of reporting in this annual general report, we have decided to divide this chapter into two major parts. The first part is on revenue management and the second part on expenditure management as elaborated in the subsequent paragraphs.

4.1 Revenue Management

The following are general observations emanating from the assessment made on the revenue management of Public Authorities and Other Bodies for the year ended 30th September 2008, 31st December, 2008, and 30th June, 2009.

4.1.1 Unreliable Customers Data Bases Audit of Public Authorities and Other Bodies which deals with utility noted undjusted credits and debts caused by incorrect meter readings and estimated consumption. Also, audit observed a number of meter readings which did not match with customer accounts in the billing database and hence they were not billed. We further noted that the data base included customers who formerly connected with services, but later the service has been disconnected. Furthermore, the data base in place includes customers who could not be located and customers who were disconnected in the past but still continued to be billed. The effect of all this is for the utility entities to end up with very unreliable debtors, hence misleading the users of the financial statements.


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4.1.2 Delays in Billing New Customers During the audit Public Authorities and Other Bodies dealing withs with utility we noted new customers who received their first bills on average two months or more after connection. This might affect cash flow of the entity. In addition, disputes from customers could also increase as a result of delayed billing. This has been a common weakness in almost all Public Authorities and Other Bodies which deals with utility. Customer bills should be processed and issued timely. We argue management of PA&OBs to institute strong controls over the billing process to ensure that new customers are billed within reasonable time after installation of the service supply is completed.

4.1.3 Consumtion of Water and Electricity not Accounted for Audit review of water and power production revealed significant losses of water and electricity not accounted for. This has been a common phenomenon to all Urban Water Supply and Sewerage Authorities. However, the unaccounted water has not been analyzed by the management of the respective Authority. This has been attributed to unbilled consumption and connections that are incorrectly flagged as disconnected and hence not billed. For instnance, DAWASA’s whole water production as compared to entirety water billed during the year shows that only 43% (41.2million cubic meters) of the entirety water produced (95.2 million cubic metres) was billed and the remain 57% was not billed. The estimates that have been prepared by management indicate significant amount of potential revenue that has not been recorded. Management efforts should be exerted to validate connections and issue appropriate bills.

Further, audit review carried out on units of electricity generated and units sold at TANESCO revealed power losses at a tune of 23%. The management of TANESCO could not provide an analysis showing the nature and reasons for the


35

loss. In the absence of the loss analysis, management may not be able to take action to minimize the loss. 4.1.4 Inconsistent Cut Off Dates for Revenue Transactions Policy of Tanzania Telecommunication Company Limited (TTCL) on revenue is to record transactions (issuing telephone bills to customers) from 29th of the recording month to 28th of the following month for administrative purposes. However, this practice is not applied consistently for all revenue sources. For instance, we noted instances of manual switches, whose cut-off date was 26th of the month. The policy on revenue cut off dates should be consistent for all sources of revenue such as Broadband, Prepaid, or Postpaid Revenue streams. This will enhance accuracy of management information for decision making purposes. In 2009, management changed the Company’s billing policy and processes to ensure that the billing monthly cycle followed the month end calendar dates.

4.1.5 Lack of Reconciliation Between Daily Sales of LUKU and NMB Collections Reports

Audit review on reconciliation between dailly sales of LUKU and NMB collection reports noted that Tanzania Electric Supply Company Limited earned revenue from the sale of LUKU through NMB ATM machines which is directly credited to NMB LUKU recharge account. At the same time, the amount received from the customer by NMB is recorded in TANESCO’s LUKU collection account. The accounting procedures require management to perform reconciliations between these two accounts. However, such reconciliations were not performed for three months with effect from October to December 2008. To avoid misappropriation of funds these two accounts should be reconciled monthly.

4.2 Expenditure Management The following are general observations emanating from the assessment made on the expenditure management by Public Authorities and Other Bodies for the year ended 30th September 2008, 31st December, 2008, and 30th June, 2009.


36

4.2.1 Transactions not Adequately Supported Reg. 95 of the Public Finance Regulation of 2001 (revised 2004) states that any payment voucher which is incomplete because of its supporting documents are missing shall be regarded as a missing voucher. Audit of Public Authorities for the period under review revealed expenditures amounting to Shs.605,257,400 which were not properly supported as shown in the table below:

Table 9: Improperly Supported Payments S/No Auditee

Name Amount (Shs)

Description

1. Tanzania Postal Bank

9,965,530 Various payments without acknowledgement receipt and other vouchers not stamped “PAID” to re use.

2. Tanzania Ports Authority

292,003,630

Payment on strength of Proforma invoice to suppliers

55,000,000 Two contracts for staff loans were not made available.

248,288,240. Payments to private labourers not supported by Certified Utilization Forms .

3. Ardhi University

Various expenses in respect of Consultancy

Signed pay-lists for consultants, invoices for air travel together with air tickets/boarding passes, etc. In other cases, payments were only supported by the payment schedule in the consultancy contracts.

4.2.2 Irregular/Questionable Transactions

Audit of the financial statements of Public Authorities and Other Bodies revealed questionable expenditure (sum of transactions) amounting to Tsh.1,479,466,256 resulted from acquiring works, goods, and services without proper contracts, overpayment of allowances, and expenditure which was not approved by the respective authority. These scenario was observed during the audit of Tanzania Ports


37

Authority both at the headquarter and branches and National Insurance Corporation.

4.2.3 Weaknesses in Tax Administration During the audit of Public Authorities, we noted some anomalies in regards with taxes as shown below:- 4.2.3.1 Recognition of Fixed Deposits Interest Income

Basing on Net Amounts We noted that the Government Employees Provident Fund recognizes fixed deposits interest income based on net amounts that are received by the Fund from investee’s banks. The practice does not enable the fund to track payment of withholding taxes as some banks pay gross amounts while others banks pay net amount after deducting withholding taxes. The two treatment to same fixed deposit interests income is due to the fact that tax status of the Fund was not clear as whether it is tax exempted or not. The fund may fail to substantiate amounts of withholding taxes that it has paid when tax status of the Fund is established and the fund is either required to pay withholding taxes on all fixed deposits interest it has earned from the previous years or claim all withholding taxes it has been paying on some fixed deposit interests. 4.2.3.2 Incorrect Computation of Taxable Income We noted that computation of taxable income made by Ardhi University was not correctly done. No allowance was made with regard to the retirement benefits contributed to the Pension Fund which is exempted in the computation of PAYE as per Section 7 (3) of the Income Tax Act 2004. This is against the requirement of the Income Tax Act of 2004 - non compliance to statutory requirement which has led the employees been overtaxed due to the overstated taxable income.


38

4.2.3.3 Transactions with WUI which were not taxed Tanzania Postal Bank entered into an agreement with Western Union International for the bank to facilitate the transfer or receipts of funds by WUI customers. Such arrangements attract withholding taxes according to the Income Tax Act, 2004. Like the WUI is the core banking services and therefore is not exempted from VAT like other core banking services. For the year under review the bank earned a total Shs. 2,500,000,000 from transactions with WUI which were not taxed. 4.2.3.4 Un Adjusted Deffered Tax Liability Shs.3,462,835,041 We noted that TZS 3,462,835,041 being Deferred Tax liability has been outstanding in the books of account of the Marine Service Company Ltd unadjusted since December 2005. According to International Accounting Standards No 12 (IAS 12)-Income Taxes ‘‘current tax liability (assets) for the current and prior periods shall be measured at the amount expected to be paid or to be recovered from the taxation authorities using the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date’’. Failure to adjust deferred tax accounts either overstates or understates tax liabilities or assets.

4.2.3.5 Allocation of Expenses between Life Assurance

and General Insurance Business During the course of audit, it was noted that NIC management has been apportioning expenses in the ratio of 30:70 between Life and Non-Life Business based on an analysis that was carried out more than ten years ago. We were not provided with analysis to review as to whether the ratio of 30:70 is still economically viable considering current state of operations. This implies that, the apportionment ratio of 30: 70 may not represent current state of operations and this may result into mis-allocation of expenses between life and non life business. Therefore it follows that there will be understatement/overstatement of profit subject to the corporation tax for non life business


39

and investment income in case of life business and solvency ratios, etc. will also be affected. The management is advised to reconsider the apportionment ratio of 30:70 in order to fairly reflect current state of operations.


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CHAPTER FIVE

PROCUREMENT AND CONTRACTS MANAGEMENT

5.0 Introduction Tanzania embarked into a major restructuring of its procurement system which led into the enactment of the Public Procurement Act, 2001 which later was repealed by the Public Procurement Act No.21 of 2004. This law brought above the reconstituted Public Procurement Regulatory Authority (PPRA) and the Public Procurement Appeals Authority (PPAA). To ensure the existence of procurement compliance in Tanzania, Section 44 (2) of the PPA requires the auditor of each public entity to state in his annual report whether or not the audited entity has complied with the procurement law and its Regulations.

Further, Reg. 31 of the Public Procurement (goods, works, non-consultant services and disposal of public assets by Tender) Regulations of 2005 requires the auditor of public bodies to state in his annual report whether or not these regulations has been complied with in relation to competitive tendering and approval of the procurement or disposal by tender by appropriate Tender Boards. In view of the mandate given above, the National Audit Office reviewed the procurement system and activities of 66 Public Authorities which were conducted during the audit of their financial statements for the financial year 2008/2009. To ensure consistency in the reporting mechanism in the Country, the Controller and Auditor General and the Board of Directors of the Public Procurement Regulatory Authority (PPRA) held a joint meeting and agreed that PPRA shall submit to the National Audit Office all procurement Audit Reports as input to the CAG’s annual reports. This was done to comply with Sect. 11(2) of the Public Audit Act No.11 of 2008. Therefore, this report includes audit findings and recommendations


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from audit done by both the National Audit Office (NAO) and the Public Procurement Regulatory Authority (PPRA) for the period under review.

The chapter also deals with management of contracts that were found material from the respective management audit reports of Public Authorities during the year. Audit of contracts was conducted during the routine audit of the financial year ended 30th September, 31st December, 2008 and 30th June 2009 as part of our review. The noted 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 Public Authorities are as analyzed in part two of this chapter:-

5.1 Procurement Management

In accordance with the outcome of the procurement audit conducted in PA&OBs by the PPRA in the financial year ended 30th June, 2009 indicated an average level of compliance of sixty percent (60%) computed from thirteen established compliance indicators. The Tanzania Bureau of Standards attained the highest average compliance level of eighty five percent (85%) while Mtwara Urban Water and Sewerage Authority recorded the lowest compliance level of nineteen percent (19%). The areas where Public Authorities performed above average (Above 50%) were: Establishment and composition of Tender Boards; Advertisement of bid opportunities; Establishment and composition of Procurement Management Units (PMUs); Complying with tender preparation time as stipulated in the Regulations; Independence of functions between AO, TB, PMU, Evaluation Committees and User Departments; Preparation of Annual Procurement Plans; Complying with compulsory approvals; The use of Standard Tender Documents; and Contracts implementation; and Complying with the methods of procurements as stipulated in the Regulations.


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The areas where Public Procuring entities performed below average were: Publication of awards; Record keeping; and Quality assurance and control. Good performance is a result of various strategies which are being implemented by the PPRA which include the System for Checking and Monitoring and Capacity Building Strategy. A list of the audited procuring entities and their average compliance levels is shown in the table below:-

Table 10: Compliance with PPA S/n Procuring Entity Average

Compliance (%) 1. Tanga Urban Water Supply and

Sewerage Authority 51

2. Ngorongoro Conservation Area Authority

53

3. Mtwara Urban Water Supply and Sewerage Authority (MTUWASA)

19

4. Tanzania Atomic Energy Commission 61 5. Parastatal Pension Fund 65 6. Gaming Board of Tanzania 52 7. National Bureau of Statistics (NBS) 65 8. Dar es Salaam Water Supply and

Sewage Corporation (DAWASCO) 55

9. Muhimbili Orthopaedic Institute (MOI)

74

10. Institute of Social Work 63

11. Kibaha Education Centre 60 12. Tanzania Institute of Education 63 13. Dar es Salaam University College of

Education (DUCE) 70

14. National Economic Empowerment Council (NEEC)

61

15. National Board of Materials Management

57

16. Mwalimu Nyerere Memorial Academy (MNMA)

70


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S/n Procuring Entity Average Compliance (%)

17. Board of External Trade 46 18. Tanzania Industrial Research and

Development Organisation (TIRDO) 71

19. Tanzania Education Authority (TEA) 79 20. Dodoma Urban Water Supply and

Sewerage System Authority (DUWASA)

55

21. Unit Trust of Tanzania 64 22. Tanzania Commission for Universities

(TCU) 58

23. Energy and Water Utilities Regulatory Authority (EWURA)

79

24. College of Business Education (CBE) 23 25. Tanzania Petroleum Development

Corporation (TPDC) 73

26. National Institute of Transport (NIT) 64 27. Occupational Safety and Health

Authority (OSHA) 22

28. Tanzania Food and Nutrition Centre (TFNC)

53

29. Higher Education Students Loans Board (HESLB)

76

30. Tanzania Bureau of Standards (TBS) 85

The above information was extracted from PPRA annual report for the year ended 30th June 2009. General observations made from the assessment include the following:-

(a) Inadequate Staffing - Procurement Management Unit (PMU)

In most cases Public Authorities and Other Bodies have complied by the Public Procurement Act, 2004 in establishing the Procurement Management Units. We however noted that the PMU are not adequately staffed


45

with personnel with sufficient professional and academic qualifications and other technical specialists together with necessary supporting administrative staff as required by Section 34 of PPA 2004. For instance the Heads of PMUs were found to hold certificates of Higher Standard Store Management qualifications instead of Professional qualification issued by the procurement professional body i.e National Board Material Management (NBMM).

(b) Non Preparation of Annual Procurement Plans (APP)

Audit established that the non – preparation of Annual Procurement Plans was contributed by lack of qualified procurement specialists in the PMUs, lack of appropriate skills, lack of coordination between PMUs and user departments, reluctance to change and lack of integration of the APPs preparation with budget preparation process. Lack of APPs contributes to inefficiency, lack of control, increased procurement transaction costs, emergency procurement, splitting of procurement to avoid competitive procurement methods and excessive use of minor value procurement method.

(c) Non use of Standard Bidding Documents

We noted that PEs did not use standard bidding documents (SBDs) which was contributed by lack of qualified procurement specialists, lack of awareness on the available SBDs, lacks of skills on how to use SBDs, and some of the SBDs are complex and voluminous compared to the type and value of procurements resulting to high costs of preparing tender documents. The effects of not using SBDs includes unfair contract awards, complaints and inappropriate allocations of rights, obligations and risks in the contracts resulting to contract disputes, delayed completion of projects, poor quality of works and services etc.


46

(d) Poor Record Keeping by Procuring Entities Poor record keeping was caused by lack/inadequate record management skills, inadequate facilities, inadequate office space, and deliberate misplacement of documents. The effects of poor record keeping include poor management of procurements, corruption, theft and loss of public properties.

(e) Lack of Quality Assurance and Control

In most cases, the Goods Inspection and Acceptance Committees were not appointed by Accounting Officers. This is contrary to the requirement of Reg. 127 of GN. 97.

(f) (Functioning of Accounting Officers (AOs), Tender

Boards (TBs), PMUs There was interference among individual functions of AO, TB, PMU, Evaluation committees and User Deportments contrary to Section 38 of PPA, 2004. These include procurements made through quotations which are not approved by Tender Board contrary to Section 31 of CAP 410, Quotations are not evaluated and award recommended by Evaluation Committees, Tender opportunities are advertised by the Secretary of Tender Board and Communication of awards are made by the Secretary of the Tender Board contrary to Section 33 (f) of APP, 2004.

(g) Evaluation of Tenders

Tender evaluations did not follow the set guidelines as provided for by the PPRA. This was contrary to the requirements of Reg. 90 (4) of GN No. 97. Tender evaluation reports did not contain all the necessary attachments (e.g. tender adverts, minutes of tender opening, tender opening checklist, signed personal covenant forms and other pertinent information in the standard tables as provided in the guidelines.


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(h) Establishment and Composition of Tender Board (TB) Some Tender Boards (TB) had not been established in accordance with Section 28(2) and Section 2 of the second schedule of CAP 410 while some other Tender Board had only Chairman and three members, Secretary and Assistant Secretary.

(i) Knowledge of PPA No. 21 of 2004 and its Regulations

of 2005 Management of Procuring Entities including both Members of Tender Boards, Accounting Officers and User Departments were found to possess inadequate knowledge of the PPA No. 21 of 2004 and its Regulations of 2005.

(j) Publication of Contract Awards Contract Awards are not published to the public. This is contrary to the requirement under Reg. 97 (12) of GN. No.97 which requires the results of tender award to be published in the PPRA’s website and Journal, Government Gazette and at least two newspapers of wide circulation and or any other appropriate information media on regular basis.

(k) Implementation of the System for Checking and Monitoring Compliance PPRA observed that, a number of entities did not attended the PRRA training regarding the System for Checking and Monitoring Procurement activities, and therefore, they have not implemented the System during the FY 2008/2009.

5.2 Specific Contracts Management Review The following are weaknesses noted on specific contracts from individual Public Authorities and Other Bodies:-

(a) Poor Contract Performance by Supplier M/S

Diamond Motors Ltd The Tanzania Ports Authority (TPA) signed two contracts with M/s Diamond Motors Ltd for supply


48

and commissioning of five units (5) 2WD, single cabin pickups and another for five units (5) 2WD single Light pickups on 22/1/2007 and 16/5/2007 respectively. The contracts were awarded through tender No. 7 and No. 14 of 2006/2007 for Japanese Yen (JPY) 8,992,090 equivalent to Tshs.112,041,441 and JPY 9,778,720 equivalent to Tshs.102,285,441.20, respectively. Review of the contract performance revealed the following weaknesses which occured during the contracts execution:-

• Change of Country of Origin Contrary to the requirements of tender documents and contract agreement, the supplier changed the country of origin from Japan to Thailand without the consent of the purchaser (TPA). This is a serious breach of condition number two (2) to the contract which defines the country of origin as Japan. This breach could amount to the termination of the contract but the purchaser did not take any action against the supplier for such breach. • Failure to Impose Liquidated Damages Despite

Excessive Delay Clause 13, of the contract states that delivery of goods shall be made by the supplier within 120 days from the date of contract execution. In addition, Clause 14 states that if the supplier fails to deliver the goods within the period specified in the contract, the purchaser shall, without prejudice to other remedies available under the contact, deduct from the contract price, as liquidated damages, a sum equivalent to 0.5% of the contract price per week for each week of delay until actual delivery, but up to a maximum of 10% of the contract price. Once the maximum is reached, the purchaser may consider termination of the contract. However, despite of severe delay of more than two years now,


49

no liquidated damages have been imposed to recover the loss suffered by the purchaser.

(b) Review of a Joint Venture Agreement at National

Development Corporation National Development Corporation (NDC) entered into a joint venture agreement with ETC Holding Ltd for developing an inland container Depot and agro processing plant on plots No.1-66 and 101 Block R, Mbagala Rangi Tatu, Dar es Salaam. Parties agreed to establish a company namely ETC CARGO Ltd. The tendering process started in year 2008 and contract was signed on 14th January 2009.

Review of the contract/agreement noted the following weaknesses:- Clause 2.1 of the agreement stipulates that NDC shall be entitled to a total of 25,000 shares and ETC Holding shall be entitled to a total of 75,000 shares, However, part (A) of the agreement states that two shares were registered and subscribed by the name of Maheshkumar Raojibhai Patel and one share subscribed by and registered in the name of Ketankumar Vinubhai Patel. We could not rule out how the two individuals mentioned in the agreement came as shareholders apart from NDC and ETC holding who are the shareholders and parties to the agreement. In addition, the authorized share capital of the company is 100,000 shares which have already been distributed to NDC and ETC. We could not establish how the three shares already subscribed and full paid for were again distributed to the two individuals making a total number of 100,003 shares. Clause 3.2.4 of the agreement stipulates that NDC shall undertake and sign relevant conveyance documents transferring property to the company and handover documents of title of such property to the


50

company. Such transfer of the property of the company shall be settled by allotment and issue by the company to NDC Tshs.2,500,000,000 of its authorized share capital credited as fully paid up consisting of 25,000 shares. According to the valuation report of May 2007, the value of Land and Buildings was estimated to be Tshs. 4.3 billion, which implies that the transfer of assets will result into a loss of Tshs 1.8 billion. The circumstance which led to the undervaluation of land and buildings at Mbagala could not be established. We recommend that Management should re-visit the contract and rectify the noted weakness by signing an addendum.


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CHAPTER SIX

ASSETS MANAGEMENT

6.0 Introduction

In financial accounting, assets refer to economic resources owned by an entity for the discharge of its functions. It is anything tangible or intangible that the entity possess and simplistically stated, assets are things of value that can be readily converted into cash (although cash itself is also considered as an asset). The assets includes properties, plants, equipments, investments, Cash and cash equivalents, receivables inventory, software, website and the prepaid expenses just to mention a few.

This chapter is considered important in this report due to the significant challenges facing many public authorities in tracking the location, quantity, condition, and maintenance and depreciation/amortization status of their assets. Further, apart from the challenges it is this avenue that unscrupulous employees use to mismanage and embezzle the entity’s public resources.

During the year under review the following important issues are pointed out in this report so that our August Parliament can direct the PA&OBs on the best practices in the management of the public assets.

6.1 Property, Plants and Equipments 6.1.1 Lack of Legal Ownership of Non Current Assets Held

We noted instances whereby the public entities lack legal ownership over some of the assets owned. The major problem was noted on the lack of title deeds of the land owned by many public entities.

Also, many public authorities were noted to have problems in the legal ownership of motor vehicles and cycles. The


52

assets have remained in the name of the donors even after the completion of the projects which would have attracted the change in ownership of the assets to the respective public authority. These include the following:

Table 11: Owneship of Assets

Entity Asset Anomaly IRUWASA

Land of the Authority No tittle deed 6 Motor vehicles and 2 motor cycles

Registered under STJ

MBEYA UWSA

16 plots No tittle deeds 3 Motor vehicles Registered in the name of

GKW Consult /Co Architecture.

Tanzania Food and Nutrition Centre (TFNC)

3 Motor vehicles Registered in the name of the donor, the Ministry of Health and Social Welfare.

Tanzania Ports Authority (TPA)

Lake Ports

The Ports were transferred to TPA from MSCL

6.1.2 Capitalization and Insurance of the Assets

Although guided by International Accounting Standard (IAS) 16 on how to deal with the property, plant and equipments, the management of the same has remained a weakness in several public authorities. We have noted instances where the Public Authority has no policy on the capitalization of assets as it is the case for Government Employees Provident Fund (GEPF). Also some Authorities have been improperly treating non current assets as expenses instead of capital item. In this case, Tanzania Ports Authority (TPA) for example, expensed assets worth 1.1 Billion during 2008/2009 under the name of minor assets. These assets includes office furniture, office equipments and fixtures and fittings which are capitalized


53

in other public authorities as clearly stated under Para 37 of IAS 16 (2009).

Further, proper management of assets requires the same to be insured. Insurance is a form of risk management primarily used to hedge against the risk of a contingent loss. On the aspect of insurance of assets we noted that, some public authorities were not insuring their assets against unforeseeable losses as it was noted for the case of IRUWASA (buildings) and MBEYA UWSA (inventory) at the value of Tshs 310,656,000 and Tshs 414,630,200 respectively.

6.1.3 Maintenance of non Current Assets Registers and Coding

of the Assets We noted this weakness in various public authorities such that in some, this register was not maintained at all while in other entities the register was poorly maintained as it was missing some of key information like locality, date of acquisition and others. Some of these public authorities with this weakness include Tanzania Telecommunications Company Limited (TTCL), Institute of Finance Management (IFM), Muhimbili National Hospital (MNH), Dodoma Urban Water Supply and Sewerage Authority (DUWASA) and Arusha Urban Water Supply and Sewerage Authority (ARUWASA).

Further, we noted that some public authorities put less weight on the aspect of coding the assets which stands as a mitigation of loss risk. Entities which were noted to have not coded their assets includes EWURA and TPA.

6.1.4 Assets not disclosed at Fair Value

We noted that there is failure to comply with IAS 16 on the proper valuation of non current assets since no revaluation has been conducted for the purpose of financial reporting on some category of assets in some public authorities although some assets remains with token book value while physically still contributing to the operations of the entity.


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The situation is indicative of lack of annual reviews of the relevant assets’ useful lives and their residual values as required by paragraph 51 of the International Accounting Standard (IAS) No 16 – Property, Plant and Equipment understating value of relevant assets in the financial statements. The following are examples which support this argument:

Table 12: Assets not disclosed at Fair Value

Entity Net carrying amount

Details

National Institute of Productivity

390,380,000 No valuation of land in Dar and Morogoro

Tanzania Food and Nutrition Centre (TFNC)

1.0 land, buildings, motor vehicles, furniture and equipment

Tanzania Posts Corporation

148 148 vehicles

Ardhi University 9,200 Building 63,750 Motor Vehicles 5,310 Computer and

accessories 6.1.5 Management of Assets Owned By Public Authorities

Among the wealth of public authorities includes buildings for office, residence and investment properties. Since these assets represent a significant portion of entities wealth, the management of the same is as important as the management of cash which is valued so much. Because of this importance, we conducted a physical survey of the Tanzania Food and Nutrition Centre (TFNC) buildings and observed that some of the buildings were dilapidated and physically in bad state. They have had no repairs or maintenance for a long time. The following are the buildings in reference:-


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Table 13: Mismanagment of Assets Buildings Book Value

(Tshs) Plot No 189 BL A1 Kinondoni Shamba Dsm 20,000,000 Plot No 15 BL A1 Kinondoni Morocco Dsm 30,000,000 Total 50,000,000

Also, we noted that NDC owns 30 Residential estates at Nyegezi in Mwanza transferred to it from PSRC formally owned by Nyanza glass works, which are leased on contractual terms of Shs.150,000 per month. However, most of the houses are cracked and the surrounding concrete areas of the buildings are eroded, in short the buildings are in shambles and miserably dilapidated. We noted that, some tenants have so far not paid rent for more than two years and yet the Corporation has not taken any stringent measures against the defaulters, at the time of this audit there has been a total Tshs 40,245,428 as unpaid rent which could be a starting point to renovate the residential houses.

6.1.6 Title deed to TPDC share of Benjamin Willliam Mkapa Pension Towers The Corporation has ownership to part of the Benjamin William Mkapa Pension Towers building, a building which is also co-owned by NSSF. During the course of the audit, we observed that the Corporation has not yet secured the title deed for its part of the building.

We noted that the management is following up the issue with the Commissioner of Lands although the Commissioner of Lands is waiting for the issue of regulations before he/she can proceed with the issuing of title deed to buildings which are owned on a sharing basis.

6.1.7 Non-recognition and Accounting for Intangible Asset

Para 8 of IAS 38 defines an Intangible asset as an identifiable non-monetary asset without a physical


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substance. To the public authorities, intangible assets include computer software, website costs etc. On accounting for intangible assets, we noted that there has been various practice among public entities such that some were noted to account while others were not accounting for the same. We noted that although some entities were using computer based payroll package for preparation of staff salaries, the entities did not recognize and record them in the books of accounts which implies an understatement of total assets of the entities. An example of the entities for this matter includes Tanzania Food and Nutrition Centre (TFNC) and Tanzania Ports Authority (TPA).

6.2. NDC’s Investments in non Performing Companies We noted that the National Development Corporation (NDC) has made investments in various companies which were noted to be non-performing. These kinds of investment would appear to be a misuse of public monies and eventually causing losses of the monies that otherwise would have been available for other development activities. A table of non performing investments is as follows:-

Table 14: Investment in non Performing Company

Associate Comp NO. of

Shares % of

Equity Value as at 31st

Dec.2008 ‘000’

Value as at 31st Dec, 2007 ‘000’

Addi-tional invest-ment during the year

Uhuru Infrastructure 127,493 50 - 127,493 Mwananchi Gold Co. 2,250 15 1 1 Ace – Audit & expertise (BVI)

150 30 1 1

Lake Natron Resources Ltd

500 50 500 500

Matinje Gold Co. Ltd 968,087 590,454 377633 Total 968,589 718,449


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The general conclusion on these losses is that most of the investments were done without a detailed technical analysis.

6.3. Weak Management of Inventories

According to Para 6 (c) of IAS 2 (2009) inventory refers to assets in the form of materials or supplies to be consumed in the production process or in the rendering of services. From this definition, it is clear that inventory is a very important item which needs an equal attention in public authorities as money does. In respect to inventory management, we have noted in some public authorities a non involvement of Internal Auditors in stock taking exercise, lack of bin cards to monitor movement of inventory, wrong valuation of inventory items, overstocking with supplies not really needed for immediate use, delay in stock taking exercise to establish the correct value of inventory for financial reporting purposes, non identification of obsolete inventories to be removed from stores as well as the weakness in the security of stores.

For example on TANESCO inventory management, we noted that there is no timely recording of incoming goods, outgoing shipments and internal transfers; also some items are recorded as issued but still held in the store without a clear indication of the owner, some damaged and obsolete items were not clearly segregated from other stock items for the purpose of showing valuable inventory, some items had no bin cards to record a correct movement of the inventory and the aspect that the central store was untidy and poorly arranged. At Muhimbili National Hospital (MNH) we noted most of the sub-stores for medicine (e.g. Kibasila and Mwaisela) being not conducive for storing medicines which are sensitive to expiry if they are not stored properly. These stores are small and lack some important devices like Air conditioning, fire extinguishers, etc.


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6.4 Accounts Receivables 6.4.1 Weaknesses in the Management of Accounts Receivables

We noted that most of public authorities have no strong credit policies since these has been a substantial accumulation of the accounts receivable and some ends up on the write off. The following are examples of the debts accumulation whose destiny is uncertain.

Table 15: Management of Accounts Receivables S/N Entity Amount (Shs) Debtor /Details 1. RAHCO 16,377,165,707 Un paid concession fees

from TRL 2. Tanzania Sisal Board 182,906,267 Long overdue amounts 3. TPA

133,179,200 Dunhill Motors 362,995,415 Government of Tanzania

1,088,927,214 Empty containers 26,654,575 MSCL

4. EWURA 24,300,000 Arrears from October 2008 5. TANESCO 7,500,000,000 GoT 6. CHC

41,400,000,000 Privatization receivables

388,731,903 Sundry receivables 4,058,000,000 EX ATHCO receivables 2,630,000,000 Escrow Bank account

receivable from Tanga Cement, Mbeya Cement and TAHI

7. MNH 141, 442,424 Medical charges for MUHAS 8. TPDC 202,485,841 Rental income which is

long overdue The audit verification further noted that some customers were being given additional credit facility before settling their previous outstanding bills. This practice resulted into accumulation of huge outstanding receivable balances implying that cash has been tied up into debts and causing liquidity problems to the Authorities. In some instances, it was noted that, although the credit contracts have provisions on how to deal with payment defaults but the same were not exercised.


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6.4.2 Irregularities Noted in Car Loans at TPA We noted that during the year, Tanzania Ports Authority decided to increase the amount it had set aside for car loans from Tshs.400 million to Tshs.1,150,000,000 through circular number 4/2008 issued on 5th September, 2008. However, in the process of these loans, we noted that loan agreements and the chattel mortgage agreements were not prepared and signed between the staff and the Authority although this were among the requirements before the loans were issued. The agreements were supported by letters written to inform the applicant on the approval of the loan. Also keeping of loans information and its recoverability was noted to be weak since it missed some loans issued. It was also noted that the loans provided have some indicators of inequity since some criteria were not equally used in judging the loan applicants.

Further, although the loans policy at TPA requires a joint registration of the motor vehicles under loan, there were 6 motor vehicle loans worth Tshs 142,904,160 without an indication of a joint registration.


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CHAPTER SEVEN

HUMAN RESOURCE MANAGEMENT

7.0 Introduction

Human resource management (HRM) is the strategic and coherent approach to the management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business. In simple common sense, HRM means employing people, developing their resources, utilizing, maintaining and compensating their services in tune with the job and organizational requirement. Results of various audits showed that some of the Public Authorities have weaknesses in effective management of human resources. In several instances, it was noted that recruitments are not done in a transparent manner and in accordance with public sector standing procedures. It was also noted that, most organizations have problems in keeping vital staff records. Apart from not having staff database; review of employee’s personal files revealed that basic particulars such as employment letters, confirmations and promotions are not filed.

Other serious problems include shortage of key staff, lack of employment contracts, meritocratic principles not adhered to during recruitment, academic and professional certificates, marriage certificates, birth certificates, letters of appointment, salary increments, photographs, job description are missing from personell files and non payment of statutory deductions. The effects of these weaknesses include high staff turnover, low working moral and ultimate low productivity. In briefs, these problems are given in the following paragraphs.


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7.1 Payments in Lieu of Leave Exceeding Allowed Months As part of internal control, staffs are required to take annual leave. Section 31 (9) of the Employment and Labour Relations Act states that an employee is not entitled to be paid any pro rata amount for accrued annual leave if the employee has not taken the leave within the period of not later than six months after the end of the leave cycle or twelve months after the end of the leave cycle the extension is justified by the operational requirements of the employer.

Review of payroll revealed instance in one of the Public Authorities where an employee sold his 142 days (accumulated leave days for approximately 5 years) to the Authority leading to the receipt of Tshs.14,533,700 (including PAYE) contrary to the above law. Also, Part D item number 1-02 scheme of service of the concerned Public Authority, among other things prohibits the accumulation of leave days except for 1 year with approval of the stated authorities and also prohibits buying of the leave days. This practice of accumulating leave for more than one year may lead to underperformance of the concerned employee

7.2 Weakness in Records Keeping Systems

The review of personal files in Public Authorities noted some weaknesses which needs immediate corrective measures. Important records such as employment contracts, copies of academic certificates, marriage and birth certificates and letters of appointment are missing from the respective personal files. Other important records include, promotions, transfers, academic and professional certificates, salary increments, training bond, photographs, job description and performance appraisal forms. While those records are essential for promotions and proper remuneration as well as settlement of terminal benefits, Human Resource Managers have given little weight on ensuring completeness of employees’ records


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and data base. From a sample of Public Authorities which were selected to test whether they maintain adequate staff records, Arusha Urban Water Supply and Sewerage Authority and Tanzania Development Petroleum Corporation were found that academic and professional certificates, marriage certificates, birth certificates, letters of appointment, training bond, salary increments, photographs, job description are missing from personell files. Analysis of the missing essential particulars is shown below:

Table 16: Weaknesses in staff record keeping S/No Entity Details 1. AWUSA Academic and professional certificates,

marriage certificates, birth certificates, letters of appointment, training bond, salary increments, photographs, job description.

2. TPDC Personal files were lacking educational certificates, latest performance appraisal records, letters of promotions and salary increments.

7.3 Staff Performance Appraisal

The purpose of performance appraisal is to discover, evaluate and document the potential and shortcomings of individuals. The information obtained through performance appraisal is useful in awarding or withholding increments, planning job rotation and training programmes. The appraising system helps the management to monitor progress of employees and make recommendations on various matters relating to training, promotions, transfers or termination. The appraising system is made yearly and it is openly made through filling a well designed form in which the employee and employer has to agree on the recommendations.


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Analytical review of the staff personal files in some of the Public Authorities has demonstrated significant weakness in the performance appraisal of employees.

Three Public Authorities did not appraise their employees as a result they had no basis for approving training, promotions, transfers or termination of employees. Such decisions are therefore made on ad hoc basis and therefore overshadowed by subjectivity. This situation is injurious, primarily to staff working morale and finally the corporate productivity. Nevertheless, other organizations though appraised their staff; the process was incomplete and did not follow the open appraisal approach. The table below is a list of Public Authorities with staff appraisal problems:

Table 17: Performance appraisal system

S/No Auditee Weakness1. TSN Performance appraisal for the employee

had not been undertaken since the year 2005, for the simple reason that the Organization has no enough funds to raise employee’s salaries of which is not the reason for not undertaking the performance appraisal.

2. RAHCO Performance appraisal was not carried out during the year ended 30th June, 2008.

3 NDC Performance appraisal for the employee was not undertaken during the year ended 31st December 2008

4 TPDC For the year under review, we could not ascertain whether an annual staff appraisal was carried out as no assessment forms were filed in respective personal files.

Employees are denied their right in terms of development resulting from performance appraisal. This may lead


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employees to remain reluctant and not performing to their highest standards as they lack stimulants that could be attained from undertaking performance appraisal. Absence of performance appraisal indicates laxity and uneffectiveness of the human resource department in the concerned Public Authorities.

7.4 Salary Deductions Above Allowed Limit

The audit of the payroll revealed that some of the Public Authorities allows deductions over and above the allowed limit. We noted that staff regulations of some of the Public Authorities stipulate that in any case an employee should not put him/herself in a way of pecuniary embarrassment. They should make sure that their take home is not below 2/3 of the employee gross salaries. In contrary some of the employees were getting below 2/3 of their monthly gross salary and some were getting nil balances. Staffs are being subjected to pecuniary embarrassment. Government Standing Order and staff regulations of the respective Public Authorities should be taken into account in advancing payments to employees and in any case, deductions should not be higher than 1/3 of the employee’s gross pay.

7.5 Shortage of Staff in Public Authorities As part of audit procedures, I reviewed some organizations staffing of different Public Authorities and noted serious problem of inadequate staffing. Inadequate staffing may hinder attainment of corporate goals since a good mix of skills and abilities may not be possible. In addition, segregation of duties and staff rotation which are necessary attributes of internal controls system may not be exercised effectively. Some of the Public Authorities which are suffering from shortage of key staff are shown below.


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Table 18: Shrotage of Staff

Public Authority Department/ Post Remarks TPA- Kigoma Branch

HRM, Marine, Operations, Finance, Engineering & Fire and safety

16 various personel posts are vacant.

Arusha Water Authority

Water Production Post of Water Production Engineer is vacant

National Institute of Productivity

Administration The posts for Director of Human Resources and Administration (DHRA) & Director of Management Consultancy (DMC) are vacant.

7.6 Statutory Deductions Not Remitted to the Relevant

Authorities Despite of my previous general reports pointing out instances of some public authorities and other bodies failing to remit statutory deductions such as PAYE, PPF, NSSF, VAT, SDL and SACCO’s contributions to the respective authorities contrary to the requirements enshrined in the respective statutes, this habit is still carried on by some of the Public Authorities. Where deductions are effected, remittances are not made in full and deadlines for submissions are not observed. The organizations suffer heavy penalties which can be avoided. As at 30th June 2009, Ardhi University had outstanding deductions of Shs. 48,065,446 being statutory deductions in respect of contribution to NSSF, PPF and PAYE. This is non compliance with the statutory requirements and may lead into the University suffering unnecessary fines and/or penalties and being subjected to litigation. Human Resource Managers appeared to have given little weight on anomalies which may create inconvenience in case of termination or retirement of an employee by not remitting employees contributions to the respective Pension Funds.


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7.7 Staff Regulations not in line with Government Standing Orders Under normal practice and in accordance with Section D.48 of the Standing Orders for the public service, 1994, officers promoted to a new managerial post should serve on trial for a period of six working months (leave exclusive). We further noted that para 2.2 (v) of the Arusha Urban Water Supply and Sewerage Authority’s staff regulations issued in December 2006, states that “No employee shall be promoted to any post on trial for a period not exceeding six (6) months”. This means that the officer can be on trial for a period between one (1) day and six months as well as being confirmed between one day and six months. As noted above the staff regulations contain paragraphs which contradict the Government Standing Orders. We are of the view that the confirmation which was based on the Authority’s staff regulations was pre mature. As a result the by then Water Production Engineer of the Authority was appointed as acting Technical Manager w.e.f 21st February 2009. About four months later, the manager was confirmed as Technical Manager w.e.f 1st June 2009. We noted that the letter of confirmation does not state the trial period. The Authority’s staff regulations may give room to appointing Authority to make decisions which are preconception on staff promotions and confirmations.

7.8 Staff Training

Public Authorities understands the need to train staff and has the responsibility to provide training to staff at all levels. The employees also have responsibility to continue with individual further studies so as to increase their education and skills. However, review of the staff personal files under the Department of Finance in some of the public authorities and other bodies noted a number of staff not having adequate education and training which would assist them in carrying out their duties efficiently. Without proper qualifications staffs may not be able to carry out the duties assigned to them effectively.


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The table below illustrates the level of education possessed by staffs:- Table 19: Staff Training S/n Public

Authority Department/

Post Remarks

1 NDC HRM Department

Employees are not given financial support by the corporation to finance their further studies in various courses taken on part time basis.

2 TPA- Mtwara branch

HRM Department

Potential number of staff has no adequate professional qualification.

There is a need for Public Authorities and other bodies in our Country to encourage their staff to take further studies in order to improve their education for better performance and where necessary sponsorship should be granted to cover cost of training.


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CHAPTER EIGHT

CORPORATE GOVERNANCE 8.0 Introduction

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 individual management letters to the respective public authorities during the financial year ended 30th September 31st December,2008 and 30th June 2009.

Corporate governance is a combination of processes and organizational structures implemented by the Board of Directors to inform, direct, manage, and monitor the organization's resources, strategies and policies towards the achievement of the organization’s objectives. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. The pillars of corporate governance include the internal auditor, Board of Directors including the audit committee of the board, management, and the external auditor. In this chapter, highlights are made on material matters which need the attention of the entity’s managements and others which need Parliamentary directives to bring efficiency in the performance of our public authorities so as to meet Tanzanians expectations. These matters include the following:-

• Members of Parliament serving in the Board of Directors of Public Entities

• Delay in the appointment of the Board of Directors of Public Authorities.

• Establishment and functioning of the audit committees


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• Establishment and functioning of the internal audit units

• Management and effective use of Public natural resources.

• Performance of audit committees and internal audit units

8.1 Effectiveness of the Boards of Directors

A board of directors or sometimes known as board of trustees, board of governors, or the executive board is a body of appointed members who jointly oversee the activities of public authorities. Its activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an appointing authority. These matters are typically detailed in the organization's policies which specify the number of members of the board, how they are to be chosen, and when they are to meet.

In the entities operating under the principles of corporate governance, typical duties of Boards of Directors includes governing the organization by establishing broad policies and objectives; selecting, appointing, supporting and reviewing the performance of the Chief Executive or the top management; ensuring the availability of adequate financing, and accounting to the appointing authorities on the performance.

8.1.1 Board Members with Multiple Titles/Designations in the Society We noted some Boards of Directors with members having loads of responsibilities in the society which could be an impediment in effective delivery of the Board’s Director’s responsibilities. It is unjustifiable in terms of performance for one person serving a society as a Regional Commissioner (RC), Member of Parliament (MP), Board member and the chairperson of an audit committee in Public Authority. This is difficult considering the aspect that only calculating the costs involved in traveling alone between the Constituency, Dodoma Parliament sessions, the Region heading and Dar es


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Salaam to attend Audit committee and the Board meeting appears to be uneconomical to the Nation. If at all the Boards Directors are looked as the Governance pillars in the public entities, then this organ should be strengthened.

8.1.2 Appointment of Chairman of the Boards of Directors and

Chief Executive Officers The appointment of the Chairman of the Boards of Directors in the Public entities and the Chief Executive Officers of the same are done by the same appointing authority which brings a conflict of power between them since one should be supervising the other. The best practice should have been for the Chief Executive Officer to be appointed by the Board instead of him/her being appointed by the same appointing authority appointing the Chairman of the Board of Directors.

8.1.3 Delay in Appointing New Board of Directors after Lapse of Tenure The tenure of the Board of Directors refers to the time that the Board remains in oversight function of an entity. In Tanzania the common tenure of most Boards is three years. In reviewing the management and the Boards of various public authorities we noted a delay of appointing new Boards. This substantially affects the operations of the entities such as approval of budgets, policies and the audit process. In this year, audit was affected with the above problem at Tanzania Standard Newspapers (TSN), Tanzania Tobacco Board (TTB), Tanzania Tourist Board (TTB), Tanzania Commission for Universities (TCU), Institute of Social Welfare (ISW) and the National Institute of Productivity (NIP).

8.2 Non Implementation of CAG Recommendations for 2007/08 General Report Although raised in the previous year’s report, most of the key matters related to the governance of our Public Authorities are still outstanding and therefore reiterated in this year’s report although in brief, it is important to


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underscore the importance of the issues raised to be acted upon if at all the public authorities are to deliver to the expectations of Tanzanians. The issues to be addressed are as follows:-

8.2.1 Lack of Accountability for the Boards of Directors The appointed Boards of Directors of Public Authorities have been serving the entities until when their tenure expires without being required to account for their performance. We are of the view that performance contracts should be entered into between the appointing authorities and the Boards, the Board and management and then downward to ensure value addition and that the Public Authorities delivers to the intended objectives.

8.2.2 Unregulated Remunerations of the Board of Directors Following the dissolution of SCOPO whose function was to standardize the conduct of the public corporations, there has been a vacuum in the control of the same. One of the areas with substantial variations is on the Board of Directors remuneration rates and other benefits such as communication allowance, entertainment allowance, office accommodation for chairpersons and official transport allocation some of which may appear to conflict with the principles of good corporate governance since these non executive directors are demanding rights and being paid entitlements exclusively reserved for executive directors.

8.2.3 Weaknesses noted in Functioning of Various Boards of Directors The review of the functioning of various Boards of Directors against the best practice of the oversight organs revealed inconsistency on who should be a secretary of the Board in the Public Corporations. In some entities, the CEO is the secretary to the Board, example National Social Security Fund (NSSF), National Board for Materials Management (currently the Procurement and Supplies Professional and Technicians Board), Tanzania Education Authority (TEA), Unit Trust of Tanzania (UTT), Tanzania Investment Centre


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(TIC) just to mention a few while in other entities the CEO is a member of the Board leaving the secretary duties to the corporation secretary (Legal officer) example of those entities includes Public Procurement Regulatory Authority (PPRA), Tanzania Communications Regulatory Authority (TCRA), Mzumbe University, Ardhi University (ARU) and University of Dar es salaam (UDSM) just to mention a few. Further, we noted instances of some members served more than three Boards which is contrary to the requirement of Section 12 of the Public Corporations Act, 1992.

8.2.4 Questionable Composition of BOT Board of Directors The audit noted that the Governor of the Central Bank who is the Chief Executive Officer, at the same time is the chairman of the Boards of Directors while the three Deputy Governors are also members of Board of Directors of the Bank in the Board of Directors where (one of them is the deputy chairman in order determined by the Governor), which is as per Section 9(2) of the Bank of Tanzania Act, 2006.

It is therefore difficult to separate the issues of oversight and the managerial aspects in the entity since the ratio of management and the outsiders in the Board is 4:5 respectively. This practice is not demonstration of best practice and it seem to contradict the principles of corporate governance introduced in the USA in year 2002 via the Sarbanes-Oxley Act, intending to restore public confidence in corporate governance.

8.2.5 Members of Parliament serving as Directors in Various Boards of Directors of Public Authorities One of the most important roles of Parliament and the Judiciary is to exercise scrutiny and oversight over the Executive. The parliamentary and judicial oversight roles emphasize the separation of powers and checks and balances within the Government machinery.


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Contrary to the concept of separation of powers to allow checks and balances, most of the Board of Directors for public corporations in Tanzania have been noted to have been composed of members of Parliament which may seem to be impairment of their oversight role since they take part in whatever questionable and unfruitful decisions that would be made by the entities. This aspect remained a problem in Public Authorities as evidenced by the following sampled public authorities with the number of MPs in brackets, IRUWASA (1 MP), MBEYA UWSA (1 MP), NIP (2 MPs), CMSA (2 MPs), PPF (2 MPs), NBAA (1 MP) and IFM (1 MP) just to mention a few, except for Public financial institutions whereby the Bank of Tanzania took a solid action on the matter which is highly commended.

8.3 Performance of Audit Committees

The audit committee is an integral part of the Governance process of an entity, designed to enhance the control framework of an organisation. An effective Committee has the potential of strengthening the control environment, and consequently assisting the Chief Executive Officers to fulfil their stewardship, leadership and control responsibilities as well as facilitating the internal audit functions and enhancing financial reporting. Although this has been clear, we noted the conduct of the committees in Public Authorities to be unsatisfactory as evidenced by weak performance of the internal audit units. The weak performance of internal audit units and the aspect that the entities were receiving a big volume of audit queries from external auditors indicates that the audit committees have failed to oversee the role of internal auditors. We noted also that Marine Service Company Limited (MSCL) has not established the committee while Tanzania Postal Bank’s committee met only three times a year instead of at least quarterly.


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For Dodoma Urban Water Supply and Sewerage Authority (DUWASA), we noted that the audit committee is wrongly composed since it includes the Managing Director and the Internal Auditor who in the first place is not supposed to be a member of the Committee, as the members apart from the internal auditor no any other member has expertise in accounting and finance as is required by the PFR 2001 (revised 2004).

8.4 Performance of Internal Audit Units in Public Authorities We noted that the internal audit performance in various public entities leaves a lot to be desired in terms of the audit coverage, quality of their reports and their desire to get involved in operational activities of which they are expected to review and appraise in order to be a service to management as well as comply with their responsibilities. We noted further that, internal audit units have been influenced by their employees to get involved in operational activities such as bid opening, tender evaluation and pre-audit of some payments. It is with this aspect that they fail to appraise the systems of controls in the organization which has resulted into operations based on outdated directives such as accounting manuals, staff regulations, incentive schemes and the like. For example, the review of the internal audit function of Ardhi University revealed to have a Chief Internal Auditor who has been acting in that position for 9 years since year 2000 with one assistant internal auditor who has less than a year experience in internal audit. Further, there is no internal audit manual to guide the internal audit activities of the University; and there is no approved internal audit plan/programme to guide the activities of the internal audit function.

At the Bank of Tanzania, we noted that internal audit activities at the Head Office in Dar es Salaam and in each of the Branches operate separately, uncoordinated and unrelated since there is no entity’s audit plan and the


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directorate of internal audit issues no guidelines to the branches internal auditors.

8.5 Inequity in Management and Use of Public Resources

The audit has noted a substantial variance in the management and use of public resources which are under the jurisdiction of the specific public authorities including the remuneration of the officers working with the same. It has been a wrong conception that some public authorities makes a lot of money than others ignoring the fact that the monies collected is due to nature available such as tourism attractions and the ocean and it has to be enjoyed by every Tanzanian. Because of this wrong conception, some public entities have been paying higher salaries, allowances and other remuneration packages such as various categories of loans to staff while other public authorities suffering from financial distress and struggling to meet the establishment objectives. A good track of this fact may be made by analysing the situations of Tanzania Ports Authority (TPA), TANESCO, TANAPA, Ngorongoro CAA, Pension Funds, Regulatory Authorities and BOT on the one hand against other public authorities such as Water Authorities and Crop Boards on the other hand. There is need of standardizing and harmonizing the benefits enjoyed by the Boards of Directors and managements of our public authorities since the resources being used are all public resources. There is a need to establish Regulatory Board which will take care and hamonising benefit enjoyed by the Boards of Directors and managements of our Public Authorities since the resources being used are all public resources.


The employment system in the public sector in the country for MDAs, LGAs and PA&OBs is on permanent and pensionable terms. This system good as it is, has got some weak points due to the fact that it is not performance


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based. The other mode of employment system under use in the public sector is the contract employment system.

During audit of PA&OBs for the period under review, we noted some PA&OBs changing the terms of employment of some of their employees from permanent and pensionable terms to contract terms, a system which is highly commendable. However, there were some weaknesses noted in this contract employment system due to fact that each Public Authority and Other Body sets its own remuneration criteria, contract time period etc. In both entities reviewed, it was apparent that there was no much transparency of effected changes and neither were there any concrete performance criteria to be used as the basis for evaluation at the end of contractual period. Given the fact that all PA&OBs work for the interest of the nation, there is need of harmonizing the employment environment by having clear policies and guidelines across PA&OBs to monitor and control this emerging change of employment terms. There is a need for the Government through the Ministry of Finance and Economic Affairs and the President’s Office Public Service Management (POPSM) to be involved in the approval of this change of employment terms of members of staff of PA&OBs from permanent and pensionable terms to contracts termss from permanent and pensionable terms to contracts terms.


the need for the Treasury Registrar to assume greater responsibilities of rendering effective supervision of the PO&OB after the abolishment of Standing Committee of Parastatals Organisation (SCOPO).


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I appreciate the positive action taken by the Paymaster General in establishing a new section called Public Enterprises Management under the Treasury Registrar’s Division to be responsible for the functions which were undertaken by the former Standing Committee on Parastatal Organizations and renaming the current Public Enterprises Reform Section in the TR Division, the Public Enterprises Restructuring and Monitoring Section and redefining its mandate to focus on post privatization activities.

In spite of the improvements being proposed in the set-up of the Treasury Registrar’s Office, it is still important that office of the TR be established in accordance with the Treasury Registrar Ordinance Cap.418 charged with the responsibility of overseeing the operations of all Public Authorities and Other Bodies in Tanzania. Section 3 (1)-(2) of Cap 418 of the TR Ordinance of 13th November 1959 on “Powers and Functions” states that upon coming into operation of this Ordinance, there shall be established the Office of the Treasury Registrar. Such person as the President may appoints to the office of the Treasury Registrar shall be a Corporation Sole by the name of the Treasury Registrar and by that name shall have perceptual succession and an official seal with capacity and powers to acquire, hold, manage, and dispose of investments, to sue and be sued, to execute deeds and instruments, using his official seal, to enter into agreement binding himself and his successors in office, to exercise all rights, conferred by the holding of investments including powers of holding immovable and other property, and to do all the acts and things necessary for expedient and to be done in the execution of the duties of his Office or which is required to be done or may be done by the Treasury Registrar under this and any other written law.

If it is found not feasible to be implemented, then the Government should establish a strong and effective Regulatory Authority which will be responsible for


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regulating the performance and operations of the 166 PA&OBs with a total equity amounting to Shs.6.1 trillion in order to enhance accountability and transparency for better service delivery to the public.


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CHAPTER NINE

PERFORMANCE REVIEW AND POST PRIVATIZATION 9.0 Introduction

This chapter deals with matters relating to performance review of existing Public Authorities and Other Bodies which the Government has both Controlling and non-controlling interest and the entities which were privatised. In the 1990s, the Government decided to disengage itself from commercial running of its PA&oBs through the process of privatization. The Government decided to engage itself on the regulatory roles, leaving commercial activities in the hands of the private sector. Such a decision was attributed to several reasons including under performance of the entities owned entirely by the Government. However, all Public Authorities were privatized as some were specified for privatization and later de-specified by the Government and some of the entities formely specifies were later de-specified, and subsequently, the government instituted a restructing process aimed at making those type of public authorities once again operational.

To enhance service provision, supervisory and regulatory role, the Government has established new PA&oBs and vested them with the regulatory roles, others with the role of providing service and a few with both roles. This chapter includes highlights of important matters extracted from the 2009 annual reports of Consolidated Holding Corporation, and the Treasury Registrar statement as at 30th June 2009. This is divided into two parts in which part one deals with the performance of existing Public Authorities and Other Bodies while part two will cover the post privatistion performance.


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9.1 Performance of Existing PA&OBs Analysis carried out during the year under review noted that some Public Authorities are not performing satisfactorily as expected by stakeholders. Factors attributed to the setback of Public Authorities in the Country are bureaucratic in offering policy guidance and legal advice by the responsible Ministries, weak legal and regulatory frameworks governing the operations of the Public Authorities, weak supervisory capacity by Treasury Registrar’s office, Ministries and Board of Directors inability to play their roles as oversight organs, lack of entrepreneurial organizational culture, incompetent management, lack of professionalism, organizational and management structures and systems processes set without objective, inefficient planning, budgeting, financial management due to lack of competent staff, accountability, transparency, inadequate procurement procedures and processes, poor assets management and under capitalization of the PA&oB.

The operations of Public Authorities and Other Bodies for the year under review has been measured in terms of financial performance through evaluation recorded surplus or deficit. Operations were also evaluated in terms of loans repayment involving both advanced and those guaranteed by the Government and going concern of the Public Authorities and Other Bodies was taken into account.

9.1.1 Outstanding Liabilities Guaranteed by the Government –

Tshs. 410,111,988,412.86 According to the TR statement as at 30th June, 2009, the total outstanding liabilities of the amount guaranteed by the Government to the Public Authorities and Other Bodies stood at the tune of Tshs 410,111,988,412.86. These liabilities are grouped as follows:- (i) Liabilities of Parastatals which are under receivership

and whose repayments are to be done through the normal receivership procedures are Tanzania Sisal Authority Shs.1,648,936,493, State Motor Corporation


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Shs.3,065,026,923 and General Tyre East Africa with loan amounting to Shs.10,037,650,000 which accounts for Shs.24,891,107,928 or 6.0% of the total outstanding guarantees.

(ii) Liabilities of Parastatals whose repayments are not yet due. They include Friendship Textile loan of Tshs 25,781,394,288.75 which accounts for 6.3% of the total outstanding guarantees.

(iii) Liabilities of Parastatals whose repayments are due but not being serviced e.g. Higher Education Students Loans Board amounting to Shs.68,131,780,822, Tanzania Fertiliser Company loan of Shs.31,900,000,000, Air Tanzania Corporation lease of Shs.1,122,668,554 and University of Dar es Salaam loan amounting to Shs.1,400,000,000. The total liability under this group is Shs.102,554,449,376 which accounts for 25.01% of the total outstanding guarantees.

(iv) Liabilities of Cooperative Unions which the Government has agreed to take over their debts because they are not able to pay as per request of the Minister of Agriculture Food Security and Cooperative made to the Minister for Finance and Economic Affairs to pay the debts owed by the Cooperative Unions amounting to Shs.8,502,977,181 in respect of Mara Cooperative Union, which accounts for 2.07% of the total outstanding guarantees.

(v) Liabilities of Parastatals whose repayments are being serviced regularly, they are syndicated loans of TANESCO of Shs.235,000,000,000 and Air Tanzania Corporation lease of Shs.13,389,059,639 which in total amounting to Shs.248,389,059,639 accounts for 60.6% of the total outstanding guarantees.

9.1.2 Collected Revenue by Treasury Registrar - Shs.84,120,129,620 The Treasury Registrar’s Statement of Revenue shows the amount of revenue collected by the Office of the Treasury Registrar in respect of dividends, loan repayments and other proceeds from the Parastatals and other entities. As of 30th


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June 2009 the total collection of revenue was Shs.84,120,129,620 as compared with Shs.76,951,126,934 collected during 2007/08 recording an increase of Shs.7,169,002,686.05 equivalent to 9.32% increase.

The increase was caused by “Other Proceeds and Remittances” which increased from Shs.8,300,000,000 of the previous year 2007/08 to Shs.46,001,873,960 during the year 2008/09. Remittances from Consolidated Holding Corporation during the year 2008/09 was of Shs.795,210,000 while remittance from the Gaming Board of Tanzania was Shs. 200,000,000 only. During the previous year 2007/08, quite a number of Government Institutions remitted surpluses to the Government; including TANAPA, Ngorongoro Conservation Area Authority, Gaming Board of Tanzania, Consolidated Holding Corporation (CHC) and SIMU 2000 Limited. However, during the same year dividend decreased from Shs.57,147,501,890 to Shs.31,323,253,590 in 2008/09. The decrease is because some Institutions have not declared dividend to the Government due to planned heavy investment projects undertaken such as that of Zain (Celtel) Tanzania – to migrate from using TTCL Infrastructure, East African Cables – to acquire new machinery, Tanzania Standard Newspaper – to acquire new plant, Tanzania Ports Authority – expansion of berth and investment in inland ports and National Housing Corporation to construct more houses for sale. In summary, the revenue collected in respect of dividend, loan repayment remittances and other revenue from sale of shares was as follows:

Table 20: Dividend Received

ITEM 2005/06 (Shs) 2006/07 (Shs) 2007/08 (Shs) 2008/09 (Shs)

Dividends 12,208,498,674 13,389,709,985 57,147,501,891 31,323,253,591 Principal& Interest

12,178,605,210

12,664,740,770

11,503,625,043

6,795,002,069

Other Proceeds & Remittance

36,309,197,460

330,000

8,300,000,000

46,001,873,960

TOTAL 60,696,301,343 26,054,780,755 76,951,126,934 84,120,129,620


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9.1.3 The Statement of Arrears in Revenue Shs.110,124,739,744 The Revenue Statement shows also that there were arrears in revenue amounting to Shs.110,124,739,744 of which Shs.93,464,988,367 are loans in arrears that were supposed to be collected. The causes of the arrears are due to non-performing Parastatals which are under liquidation. The anticipated revenue as loan repayment from these parastatals may be recoverable from liquidation proceeds. Parastatals like TANESCO and TRC (now Reli Assets Holding Corporation (RAHCO) are financially constrained to repay the loans as they are under restructuring process. Zanzibar loan arrears which are denominated in foreign currency were on-lent and are still under review by the Governments under the Joint Finance Commission initiatives.

9.1.4 The Government Investments (Domesti

The Treasury Registrar statement of investment for Domestic Organisation shows that as of 30th June, 2009, the Government holds shares and other shareholder’s funds to the tune of Shs.6,143,660,803,205 in 216 Parastatals and Government Institutions. Government investments have increased by Shs.1,004,688,258,703 from Tshs 5,140,499,602,258 as at 30th June, 2008 to Tshs 6,145,187,860,961 as at 30th June, 2009 an increase is due to the fact that most of the Government Institutions and Parastatals have submitted the most current Audited Accounts which portray current values in shareholding and capital and other shareholder’s funds while 13 more institutions and parastatals have been added into the Treasury Registrar Investment Statement this financial year 2008/09. The value of the Government Investments would have increased substantially but 23 more Institutions in which the Government has its investments have not yet submitted their Audited Accounts. Among these, there are new


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institutions which have just started their operations; others have operated for some time without submitting the Accounts to the Treasury Registrar.

9.1.5 Government Investments (Foreign) According to the Treasury Registrar Statement of Investments (Foreign), Government holds investments of a value of Shs.931,255,007,966 in nine (9) Foreign Institutions with an increase of Shs.221,299,427,316 compared to the value of Shs.709,955,580,650 recorded in the previous year 2007/2008. The shareholdings right held by the Government in Foreign Institutions are constant and remain almost the same in all institutions but the value of investments has been increasing due to foreign exchange rate fluctuations.

9.1.6 Government Outstanding Loans to Parastatals and Other Entities The Treasury Registrar Statement of Loans shows the position of indebtedness of Parastatal and other entities to the Government as at 30th June, 2009. The loan balance outstanding as at 30th June, 2009 has decreased to Shs.479,355,073,257 as compared to Tshs.480,054,149,706 in the year 2007/08. The decrease is not very considerable because of exchange rate fluctuations. Most of the huge outstanding loans are in foreign currencies and therefore the loans tend to increase yearly. However, the decrease of most of the outstanding loans has been due to repayments made. Some parastatals e.g. Tanzania Ports Authority (TPA), Tanzania Portland Cement Company (TPCC), Tanzania Civil Aviation Authority (TCAA), and Kilimanjaro Airport Development Company Ltd (KADCO) have been servicing their loans according to the loan repayment schedules. The total arrears have increased from Tshs 82,471,997,695 during the year 2007/08 to Tshs 93,464,988,367 in the year 2008/09, which is equivalent to 13.3%. The increase was


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due to exchange rate fluctuations and the long period of the un-serviced loans.

The statement shows that the total amount of revenue collected from loans as principal and interest decreased by 36.4% from Tshs 10,653,625,043.26 in the year 2007/08 to Tshs 6,795,002,068.47 in the year under review. The shortfall was attributed to decrease in total interest payments which depend on the outstanding amount of the loans, late payment of 2nd installments by TPA for loan Nos. 115 – IDS CR.1536 TA and 273 – IDA CR.2095 – TA. Though the statement is earmarked to show the parastatals’ indebtedness to the Government but it includes the loans issued to private companies and those issued to the Government of Zanzibar because at the time when these loans were issued, agreements were being prepared by the Treasury Registrar and had to appear in the Treasury Registrar’s Statement. However, Private Companies which M/s De leuw Cather International, M/s Ginaac Industries Ltd, M/s Mansons Government and the Zanzibar Government were also granted loans. Out of the total outstanding amount of Tshs 93,464,988,367 as of 30th June, 2009, Tshs 20,266,2638,820 are Zanzibar loans, Tshs 21,467,884,301 are TTCL loans which are under debt swap arrangement, Tshs 37,013,934,001 are TRC loans and Tshs 12,431,892,883.90 are outstanding in respect of TANESCO’s loan. These four Institutions account for 97% of the total arrears supposed to have been paid as per contract terms.

9.1.7 Questionable TTCL Going Concern Tanzania Telecommunication Company Limited successfully reduced its operational costs during the year 2008. However, the Company incurred cumulative accounting loss of Shs.42,041 million of which Shs. 28,005 million was brought forward from the year ended 31st December 2007. This was largely caused by sharp decline of its wholesale

______________________________________________________ Office of the Controller and Auditor General PA&oBs 2008/09

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revenue by Shs.14.5 billion during the year ended 31st December 2008 and unrealized foreign exchange loss of Shs.8.6 billion from the outstanding USD dominated shareholder loan. During the year 2008, the company generated negative cash flow from operations at the tune of Shs.3,255 million as compared to Shs.6,657 million generated in the previous year 2007.

This was primarily caused by limited access to capital which is needed to increase its retail network capacity and advertise current products and services at the market rate. While TTCL’s current liabilities exceeded its current assets by Shs 24,716 million including Shs 2,045 million of the year 2007, the difference is largely the result of Shs 39.2 billion classified as current liabilities that have accrued from the shareholder loan. In order for TTCL to remain as a going concern entity, the Company will need to deleverage its shareholder loan and secure access to external funding to refinance its working capital and expand its network capability and improve its working capital position. The financial statements have been prepared on a going concern basis on the assumption that the Company will be able to generate and obtain sufficient financing to meet its obligations as they fall due in the normal course of business in the foreseeable future. Management have reached this conclusion having regard to the fact that the Government of Tanzania (the majority shareholder) has accepted to provide guarantees that the Company requires to support borrowing that it requires to implement its Strategic Business Plan. This decision was communicated formally by the Ministry of Communications, Science and Technology.


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9.2 Post Privatization Performance By 31st December, 2009 a total of 336 Public Enterprises (PEs) were privatised. The forms of privatization ranged from outright sale of the Government's entire stake, partial sale, concessions, leases, management contracts and sale of non-core business activities/assets to private investors.

Out of the 336 concluded transactions, 180 PEs have been divested 100% to Tanzanians; 27 PEs have been divested 100% to foreign investors, while the remaining 129 PEs are being operated under Joint ventures agreements between the Government, local private investors and foreign private investors.

Evaluation of the status of the performance of 62 privatized entities which were extracted from the Consolidated Holding Company’s Performance on Post-Privatization Monitoring and Evaluation reports for the year 2009 shows that 23 PE’s were still closed mainly on account of poor capital base and unresolved cases, 12 PE’s were performing well and had implemented the investment plans as per Sale Agreements and 27 PE’s partially implemented the investment plans and were operating at a loss (Appendex IV)

The above information can be presented in a pie chart as shown below:

19%

44%

37%

Good performanceOperating at a lossClosed entities


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In general, about 63% of the entities evaluated during the year 2009 are operating although some of them are operating at a loss. However 37% of the divested entities are still closed due to various reasons. Therefore, the Consolidated Holding Corporation has a duty to make close follow up in order to ensure that the objectives of privatization are fulfilled.

9.3 A need for the Establishment of a Public Investment Fund Monies generated from privatisation are deposited in a special account with the Consolidated Holding Corporation and are used under the authority of the Minister for Finance and Economic Affairs. Withdraws from this account are used either to finance recurrent expenditure or pay for outstanding liabilities and commitments of the privatized entities. In my view, this is a departure from best public investment practices. It is not a secret that public entities in Tanzania are currently characterized with a number of problems mainly of under capitalization, which is vital to the successful operations of the PA&OBs. This fund will also be responsible for investment appraisal of public sector investments. There is a need for such a Fund considering the current situation where negative returns are being earned on GoT investments. The Government should establish the Public Investment Fund in order to be able to meet these challenges. Dividends realized and donor support received in this direction may also be deposited in this Fund to enhance its liquidity. Such funds should not be used to finance recurrent activities rather would best be utilised to finance capital expenditure such as new investments, increasing capital structures and extending bridging finances to the existing PA&OBs.


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CHAPTER TEN

INFORMATION AND COMMUNICATION TECHNOLOGY

10.0 Introduction Information and Communication Technologies (ICT) has been

advancing since the end of the 20 th

Century and led to multiple convergences of content, computing, telecommunication and broadcasting which brought changes in other areas, particularly in knowledge management and human resources development. An increasing capacity of ICT has further been empowered by the growth of a global network of computer networks known as the Internet. The growth has impacted the way business is conducted, facilitated learning and knowledge sharing, generated global information flows, empowered citizens and communities in ways that have redefined governance, and have created significant wealth and economic growth resulting in a global information society. Tanzania introduced the National Information and Communication Technologies Policy in March 2003 which empowered ICT development in the Country. The development of ICT has actively contributed to these achievements by investing support facilities, training centres and sales outlets. These efforts have enabled government and Public Authorities to address their individual problems most appropriately. Therefore, this report highlights some of the weaknesses which were noted in this regard during the audit of Public Authorities and Other Bodies for the year ended 30th June 2009.

10.1 Absence of ICT Policies and Unit Review of the implementation of ICT projects has observed that most of the Public Authorities and Other Bodies have no ICT policies hence safety and control over the use of computers and internet facilities is not enhanced. Further, the Public Authorities activities necessitate the establishment of an ICT Unit; during the audit we noted that the most public authorities audited did not have such units hence making it difficult for the public authorities to make tangible developments in their ICT activities.


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10.2 Information and Communication Technology Securities In reviewing of ICT, we observed that the server rooms were not well protected against human hazards though being kept locked using a simple lock and key. Their location and accessibility by unauthorized staff is easy which makes the servers vulnerable to security risks which render business data unsecured. In addition, security to the Public Authorities information systems network is of paramount importance to protecting business data/information. Internet being a global network, security and usage control issues is of much concern. We noted that some of the Public Authority employees are connected to the internet and are able to surf, send and receive emails but there is no apparent internet policy developed that highlights security concerns for them to consider when connecting to the internet. The incidence was noted to be common at Surface and Marine Transport Regulatory Authority and Tanzania Posts Corporation.

10.3 Need to Strengthening Controls over Management of Incidents and IT Changes Management at the Central Bank The Bank of Tanzania has a new system for managing IT changes i.e. Incident Management System (IMS) which has been introduced. The system lacks key standard control features which are critical to managing incident and IT changes. For example, user acceptance tests are not documented and incidents closures (approvals of change) are not signed-off. The deficiency in the new system means risk exposure continues and the Bank is not achieving the expected efficiency from the new system. Intermediary controls should be effected to mitigate the risk exposure while considering an upgrade.

10.4 Controls Over Access to the BOT’s Systems Need Improvements While the Bank of Tanzania has instituted good controls in this area, we observed that these have not been operating effectively and consistently posing risk to the bank. User access request procedures are not duly followed across the board (at branches and at head quarters). Deletion/Deactivation of staff who have resigned from the Bank or left temporarily from the Bank’s IFMS has not been effected timely. Efforts should be made to improve on awareness and compliance with the Bank’s ICT Security Policy


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across the Bank. It was observed that the level of awareness and compliance may differ between staff located at the Head Office and those based at Branches. If it is felt that certain staffs are not complying, then the Bank should also enforce consequence management for breaches of IT Security Policy in those few incidents.

10.5 Disaster Recovery Plan

A Disaster Recovery Plan (DRP) covers the data, hardware and software critical for a business to restart operations in the event of a natural or human-caused disaster. We noted that Public Authorities have no reliable recovery strategies in place. There are neither plans nor recovery documentation that exists for guidance on restoration of data and applications from backups should a disaster happen which implies that, absence of plans set-up and documentation that outlines how a business can continue should a disaster happen, it becomes difficult to rely on such systems which do not guarantee continuity of which the effects of disaster may lead to lost revenue and business interruption, lost competitiveness, corporate reputation and lost business. We are of the opinion that managements of Public Authorities should have well planned disaster recovery strategies to cover the data, hardware and software which are critical for a business to restart operations in the event that natural and/or human-caused disaster occurs. Backup media should be stored in a safe that is fire-proofed and located in a place other than the server room. Either TPC can consider installing redundant server for off-site/online backup where data can be restored/replicated and accessed instantly should the HQ central server(s) fail.

10.6 Network Infrastructure Public Authorities have employed different types of systems running on different types of computers in a network to provide services for data/information, email and internet. The networks in which these systems are deployed, are not in a manner that can be easily managed or have a high risk of network bottleneck which give rise to communication break between clients and server resulting into server/service freeze. This may imply that network structures are weak in security, reliability and labour


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intensive in administration. Frequent communication breakdown that happens may lead to loss of data en route clients/servers causing reconciliation difficulties within the system modules. We are of the opinion that Public Authorities should consider improving their computer networks to be capable of handling all business systems needs. This should include setting-up a dedicated data communication link and bandwidth that will provide quick and efficient access between clients/server computers. Either, a network infrastructure setup that will simplify administration (preferably centralized management) may be considered as this will reduce time taken to solve network problems in areas where no or little IT experts are available.


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CHAPTER ELEVEN

RESULTS OF SPECIAL AUDITS

11.0 Introduction Section 29(2) of the Public Audit Act, No. 11 of 2008 empowers the Controller and Auditor General to carry out special audits. The Act spells out clearly that CAG may on request by any person, institution, public authorities, Ministries, local Government and such other Bodies to undertake any special audit. It is in this respect the Office of the Controller and Auditor General conducted special audit on Tanzania Electric National Company (TANESCO), Tanzania Railway Limited (TRL) and Kariakoo Market Corporation during the year 2008/2009.

11.1 Special Audit on TANESCO The Government through the Ministry of Energy and Minerals directed the Board of Directors of TANESCO to establish the truth about allegations of misuse of public funds by TANESCO’s management in renovating the Company’s six residential houses. The TANESCO Board of Directors at its meeting held on 6th August 2009 resolved to request the Controller and Auditor General (CAG) to investigate the matter for the purpose of revealing the truth of the matter. The findings of this special audit were as follows:-

11.1.1 Budget Not Approved for Renovation of Six Houses Shs.794,727,151 Examination of records noted that total contracted amount for the renovation of the six houses added to Tshs.1,476,231,158 and the total amount paid as at 30th September 2009 was Tshs. 982,217,975. However, review of the records established that the total amount approved by the Board of Directors for renovation of the six houses only was Tshs. 681,504,000 as parts of total budgets vide Board’s papers No. 2491 of 16th December 2006 and 2644 of 26th November 2007 for the budget year 2007 and 2008


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respectively. The allocation was Tshs. 281,504,000 for year 2007 (house No. 13, 315, and 459) and Tshs. 400,000,000 for year 2008 (house No. 93, 459, 46 and 89). Therefore, the total contracted amount of Tshs.1,476,231,151 (including additional works) exceeded the approved budget by Tshs.794,727,151. However, management explained that the extra commitment of Tshs.794,727,151 was obtained through reallocations but did not furnish any evidence showing that the Board of Directors assented to these reallocations.

11.1.2 Variation Order Issued to Contractors Shs.498,101,141 It was established that BOQs were prepared before tenders were invited. However, it was revealed that there was no proper assessment and adequate scoping of works before inviting tenders. This is confirmed by the extent of the variation orders issued to contractors amounting to Tshs. 498,101,141 which is 51% of the total original contract sums. Most of the works in the variation orders could have been established during the design stage if adequate assessment of detailed designs were done in advance.

11.1.3 Compliance with the Public Procurement Act, 2004 In order to establish whether there was compliance to PPA, in the procurement process, assessment was done and revealed that the procurement processes used did not fully comply with the PPA and its Regulations due to fact that inappropriate methods were used to procure the contractors as well as the use of wrong tender documents contrary to the requirement under Regulation 83 (3) of GN No. 97 of 2005 which requires procuring entities to use the appropriate standard tender documents issued by the Public Procurement Regulatory Authority (PPRA). Furthermore, the Secretary to the Tender Board (TB) appointed members of the evaluation committees for tenders No. PC/LP/037/2007, PA/001/08/HQ/W/156, and PA/001/08/HQ/W/69 contrary to Section 37(2) of the PPA which requires the membership of the tender evaluation committees to be recommended by


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the Procurement Management Unit and appointed by the Accounting Officer. The award decisions were made before concluding negotiations as a result, the agreed contract amount was different from the amount communicated through letters of acceptance. (Negotiation was done on 8th March 2007 while communication of award decision was made on 23rd February 2007). Actual award for House No.13 was Tshs. 106,470,405 and House No.315 was Tshs. 78,773,060 compared to erroneously communicated contract prices of Tshs.128,400,000 and Tshs. 84,000,000 for House No.13 and House No. 315 respectively.

Approval procedures were not adhered to in issuing instructions for additional works. Works supervisors persistently issued instructions to the contractors for additional works without getting prior approvals of the Tender Board (TB) contrary to the requirements of Section 69 of PPA and Regulation 117(2) of GN. No. 97 of 2005. The Tender Board granted retrospective approvals irrespective of the fact that it has no mandate to do so.

11.1.4 Value for Money in Respect of the Renovation Works Generally, the contract prices were competitive with exception of new items under “additional works” worth Tshs. 498,101,141 which were not part of the original tender. If these items were included in the original tender, more competitive prices would have been obtained. According to the available records, the houses under investigation were not in good condition. Nevertheless, there were unnecessary additional works which were based on individual tests rather than renovation policy; which resulted into rampant variations worth Tshs.498,101,141.28 which were not approved by the Board of Directors. The assessment has indicated that the contractors delayed the completion of works between 2 weeks to 7 months


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making total delayed period of 28.5 months. During the delay M/s TANESCO continued to pay housing allowance of Tshs. 800,000 per month to its 7 senior staff, thus resulting into a loss of Tshs.22,800,000. On the other hand, Management did not assess and recover liquidated damages amounting to Tshs. 118,128,049.45 as opposed to the provisions of the contracts. TANESCO purchased a 59.2 KVA Generator worth Tshs. 31.8 million for one of the renovated houses. However, there is no evidence that TANESCO’s management conducted a proper needs assessment to determine power requirements of the MD’s residential house. A simple analysis by the investigation team revealed that a 15 KVA generator could have been sufficient for the same house which leads to the conclusion that there is no value for money for the generator acquired.

11.1.5 Utilisation Bank Loan Amounting to Shs.300billion We noted that as at October 2009, M/s TANESCO had already received Shs. 235 billion out of the total syndicated loan of Shs. 300 billion.

According to Section 3.1 of the Syndicated Term Loan Facility Agreement and the resolution of the Board of Directors, the purposes of the Syndicated Term Loan Facility were to refinancing the existing debt and implementation of the Financial Recovery Plan. As at the time of the investigation, a sum of Tshs.235,231,383,340 had so far been utilized. Results on the expenditure of the syndicated loan will be reported in my next report since the audit verification on the syndicated loan is still in progress.

11.2 Special Audit on TRL

The Permanent Secretary and Paymaster General requested the Controller and Auditor General (CAG) to conduct a special audit of the funds paid by the Government to


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Tanzania Railways Limited (TRL) as top-up salaries to TRL employees from March, 2008 vide letter reference No. TYC/T/200/78 dated 4th December 2008. The findings of this special audit were as follows:-

11.2.1 Questionable Funding of TRL Employees’ Top-Up Basic

Salaries Shs.8,753,381,582 A review of documents pertaining to top up salaries to TRL

employees disclosed that a sum of Shs.8,753,381,582 has been paid by the Government to TRL between March, 2008 and June, 2009 as basic salary top-up funds. The audit team had meetings with the officials from the Treasury Registrar, TRL and RAHCO between 19th May, 2009 and 24th June, 2009. In these meetings, it was noted that no formal agreement was entered into between the two parties (TRL and the Government) which show the terms and nature of the salary top-up funds disbursed. In addition, the Government made the payments without any analytical review and there was no evidence to confirm the correctness of the TRL’s requests and payments made. We observed that TRL request was based on merely approximation made vide letter with ref. No. TRL/MD/SAL/08 dated 8th April, 2008. In the absence of an agreement to support funds disbursed amounting to Shs.8,753,381,582 the audit could not establish whether the funds were issued as a loan or equity, taking into account TRL is required to run the company. Further, funds disbursed to TRL had no budgetary provision and were made without parliamentary approval.

11.2.2 Top-up Funds not Confirmed to Have Been Credited to

Relevant Bank Account Shs.3,982,990,791 Out of the total of Shs. 8,753,381,582 noted to have been

disbursed to TRL by the Government, only Shs. 4,770,390,791 was ascertained to have been accounted for in the TRL bank statements. The remaining amount of Shs.3,982,990,791 could not be verified to have been credited to the relevant bank accounts due to non provision of the respective bank statements for the months of July, 2008 to February, 2009.


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In the absence of the bank statements, receipt and accountability of Shs.3,982,990,791 in the TRL books of account could not be ascertained.

11.2.3 Unpaid Concession Fees Tshs.16.4 Billion

According to Part 12 – concession payments, TRL is required to pay fixed concession fee as set out in Part 1 of schedule 11 and a variable concession fee of 5% per cent annually for years 1 to 5, and 7.5% per cent annually for years 6 to 25 of the concessionaire’s gross revenue. The payments are required to be paid to RAHCO at such time and in such manner as prescribed in parts 2 and 3 of schedule 11 (Part 12 – 2 of the Concession Agreement refers). Again, the Concessionaire’s obligation to pay the concession payments to RAHCO is absolute and unconditional and not subject to any type of set – off or conditional upon the full enjoyment of the rights granted to it under the agreement. We however noted that, apart from the first quarter fixed concession fees of USD. 1.8 Million paid, TRL had not paid any of the subsequent payments. Hence, up to 30th June 2009 TRL owes RAHCO a sum of Shs. 16,377,165,707 (including Shs.10,017,450,443 owed to to December, 2008 as per the audited accounts), the additional outstanding debt relates to the period of up to June, 2009. This is a serious non compliance with the conditions of the Concession Agreement which indicates a sign of financial incapability on the part of the investor. The resources of the RAHCO are constrained and the burden of expenditure such as pension of former TRC workers which were to be paid by RAHCO is likely to be transferred to the Government. The Government should take appropriate action to have the outstanding amount paid without further delay as per the Concession Agreement.

11.2.4 Top-Up Funds Over-Released by Shs.7,397,867,348 The Government committed itself to furnish TRL with funds to top- up the salary increase for 5 months w.e.f. March to July 2008 which were to avert the workers strike that would have taken place in case salary increase was not effected.


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However, we noted that the TRL claims exceeded the Government commitment as analysed below:

(i) TRL continued to claim beyond the Government commitment period of 5 months (March – July, 2008) i.e. from August 2008 to June 2009 (the time of audit) to which a total of Shs.6,621,693,933 was paid.

(ii) Despite having increased the salary of its employees by 15%

in February, 2008, TRL based its calculations on the January, 2008 payroll figures (i.e. before the increase) when requesting funds for top-up salary claims from the Government i.e. TRL started from the minimum wage of Shs.87,600 instead of Shs.100,740 which was already effected, and therefore unjustly relieved itself at the expense of the Government the burden of the margin for all salary level e.g. Shs 13,140 (100,740-87,600) for minimum wage.

(iii) TRL claims included allowances unrelated to the

Government commitment such as: acting/duty allowance, on call allowance, house allowance, aggregate allowance, enhancement house allowance, current overtime hours, overtime running staff, subsistence allowance, instruction allowance and responsibility allowance all totalling Shs.2,672,403,103.50 which are mostly performance oriented allowances that could be met by operational out-turn.

(iv) The claim included Statutory contributions totalling

Shs.1,200,950,604 in respect of National Social Security Fund (NSSF), Public Pension Scheme (PPS), Skills Development Levy (SDL) and Public Service Pensions Fund (PSPF) which were to have been deducted from the salary payments.


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(v) Also the claim included Salary top-up portion to 44 newly recruited employees which were not part of the Government commitment to provide salary top-up funds.

Therefore, the amount which was supposed to have been claimed and released as Government top-up of salaries for the period of March to July 2008 would correctly have amounted to only Shs.1,355,514,234.

In view of the above Shs 8,419,373,997 was over claimed by TRL and Shs.7,397,867,348 was over released by the Government for the period March, 2008 to June 2009. Therefore, TRL management misled the Government and obtained the funds unjustly and the Government paid funds without observing its commitment as per the directive issued by the Prime Minister which was the authority for the release of such funds.

11.3 Special Audit on Kariakoo Market Corporation The Controller and Auditor General received a request from the Prime Minister to carry out special audit on the accounts of Kariakoo Market Corporation (KMC) vide letter with Ref. No.PM/P/2/567/33 dated 19 March, 2009. The Controller and Auditor General accepted the request and in accordance with Sect 29 of the Public Audit Act No.11 of 2008 conducted the special audit.

The following are the finding of the special audit:

11.3.1 Poor Contract Management

During the course of the special audit of Kariakoo Market Corporation we were able to establish that the Corporation had a binding contract with Kariakoo Society Limited which ended up with a court case. On 2nd March 2003 Kariakoo Market Corporation entered into a binding contract with Kariakoo Society Limited to collect market levy on its behalf for a duration of one year with a condition that the Society will be on trial for three months term with effect from August to October 2003. If the Corporation will be satisfied with the performance of the Society during the trial period, then the Society will be


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allowed to continue with the contract for the remaining period otherwise the contract will be terminated as stipulated in Section 12 of the agreement. Further, Section 13 of the contract agreement state that in case of dispute during execution of agreement will be solved amicably by both parties out of the court and the Court will be the last resort of finding solution.

On 25th August 2003 – i.e 21 days after entering into the contract agreement, Kariakoo Society Limited failed to remit amount levy fee as agreed in the contract and the Kariakoo Market Corporation decided to announce through loudspeakers that the Kariakoo Society Limited were no longer allowed to collect market levy on its behalf. However, after that announcement, Kariakoo Society Limited decided to file a case at Ilala District Court – Samora Street on ground that no section in the contract agreement allowed Kariakoo Market Corporation to terminate the contract through loudspeakers when Kariakoo Society Limited failed to remit the agreed amount of market levy within the three months period of trial (i.e. August to October, 2003.) On the filed case, Kariakoo Society Limited claimed Shs.2, 528,000 and 30% being cost incurred in producing levy receipt books. Further, they claimed Shs.20,000,000 and 30% damages for breaching the contract agreement. The Magistrate of Ilala District Court decided the case in favour of Kariakoo Society Limited in the absence of the defendant after the defendant (Karikoo Market Corporation) failed to appear before the court despite of several calls. It was decided that one building with two storeys with a value of Shs.121 million property of Kariakoo Market Corporation should be sold to foot the claim which amounted to Shs.22,528,000.

11.3.2 Missing Receipts Book With a Revenue Collection of Shs.1,793,356, 256 Kariakoo Market Corporation normally issues revenue receipt books to collectors of revenue for revenue collections from various sources of revenue. Copies of receipt (book copy) should remain in the receipt book for the internal and external audit purposes. However, during the course of the special audit


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revenue receipt (book copy) with a value of Shs.1,793,356,256 posted in the cash book were not made available for auditing purposes despite of several requests. Further, it was reported in one of the internal auditor report of the Kariakoo Market Corporation that there were people who were not Sub Cashiers who were given receipt books for revenue collection and that receipts were not issued to these Sub cashiers when delivering cash to Main Cashier. In the absence of revenue receipt (book copy) audit team could not establish exactly the correctness of the amount of revenue reported in the Corporation’s cash book.


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CHAPTER TWELVE

SIGNIFICANT AUDIT MATTERS WHICH WERE NOT REPORTED IN THE PREVIOUS YEAR’S GENERAL REPORT

12.0 Introduction

This chapter highlights matters which relates to the audit reports for the financial year ended 30th June 2008 which were not included in the previous year’s General Report issued on 26th March 2009. It is important to understand that Public Authorities whose audits have not been completed as at the time of issuing this report, March 2010 we will be compelled to include their findings in the forthcoming annual general report of the Controller and Auditor General. The following were some of the significant matters considered worth reporting which relates to the previous years audit reports for some of the audited Public Authorities and Other Bodies whose audits had not been completed by the time I concluded preparation of the previous year (2007/2008) general report of PA&OBs.

12.1 Laptop Computers Issued to Commissioners Who have

Completed their Tenure- Shs.11,310,000 The Joint Finance Commission purchased ten (10) Pcs Laptop Computers from M/s City Multi Tech Zone on 3rd December 2007. We noted that, the five years term of Commissioners’ appointments expired on 11th March 2008. However, six laptops out of ten were not returned by the Commissioners as at the time of the audit (March 2009), and no evidence was produced to show that the Commission made efforts to have the laptop returned. We suggest to management to ensure that the laptops are returned to the Commission.

12.2 Overdue Accounts Receivable and Payable Our review of the financial statements of the Tanzania Sisal Board as at 30th June, 2008, reflected the accounts of receivables and payables of Shs.182,906,267 and Shs.68,579,963 respectively. However, management could


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not validate the existence of the stated balances of the accounts. It was further noted that both debtors and creditors were not closely monitored to ensure that debt are timely collected and credit settled. Also, this cast doubt on the accuracy and completeness of the balances stated in the financial statements. We are of the opinion that management should trace all the relevant documents that were used to recognize the debtors and creditors in the books of account for audit verification.

12.3 Absence of Tenancy Contract Our examination of Office and other administrative expenses noted that Tanzania Sisal Board does not pay rental expenses although it is housed in the premises of KATANI LTD since it was established. However upon inquiry, management did not make available any contract between TSB and Katani ltd that would disclose the terms of the tenancy that are binding. Moreover, we noted that no provision has been made in the accounts that would cushion the Board against any claims that may arise besides fair reflection in the year-end financial statements. Management is advised to establish a rental agreement between the Board and M/s Katani Ltd and accordingly adjust its financial statements.

12.4 Accrued Charges not Documented- Shs.25,026,694 Our examination of the financial statements of the Tanzania Sisal Board noted that as at the end of the year, management had provided for accrued charges aggregating to Shs.25,026,694. However there were no documents supporting the booked figures that would authenticate the existence, accuracy and completeness of the liabilities. In the absence of the relevant documents to support the accrued charges provided for, the reported figure cannot be authenticated. Management should trace and submit for audit verification; all the relevant supporting documents that formed the basis for recognition and provision for the liabilities.


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12.5 Exim Bank Claims and Land Case No 95 of 2008 The Coffee Board of Tanzania guaranteed M/s African Consulting Group Ltd a bank loan amounting to Shs.330 million at an interest rate of 28% p.a way back on 6th March, 2003 to facilitate the Company to secure funds for the supply of coffee inputs to Mbozi Cooperative Union. TCB agreed to act as a facilitating guarantor for that arrangement for a period of three months effective from the date of disbursement of the loan to African Consulting Group (Refer letter EX-7/ dated 6/3/2003). However, after some years, African Consulting Group failed to repay the loan and hence attracted legal proceeding against the guarantor (TCB). Our review on the case has revealed that the Guarantee was given without the approval of the Board of Directors contrary to TCB financial regulations. Exim bank (T) Ltd appointed a receiver and manager of TCB building on 14/04/2008, for the purpose of selling the building to recover the loan granted to African Consulting Group. The receiver on 28/4/2008 invited bids for the purchase of Kahawa House in Moshi which was subsequently countered by opening land case No. 95 of 2008 and the court granted court injunction on 2/05/2008. TCB engaged a law firm Maira and Co. Advocates at a contract sum of Shs.30 million to present TCB in this case at the High Court. The case is still pending at the High Court which creates uncertainty on the future outcome and its impact to TCB. Management should resolve the matter amicably to avoid all risks and costs associated to this case.

12.6 Unclaimed Prepaid Tax Shs.91,841,000 During the year under audit, we noted that TCB paid a provisional tax amounting to Shs.91, 841,000 with the Commissioner of Income Tax way back in year 2004/2005. TCB did not file final annual returns that could enable clearance of its Tax obligation due to the introduction of the Coffee Industry Act, 2001 which exempted TCB from paying the income tax. Under the circumstances, the TCB was in a position to claim the provisional tax submitted to TRA. In view of this


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scenario, accounting treatment of this transaction is appearing in the books of account as prepaid income tax in which the board does not expect to file an annual return any more.

12.7 Allocation of loan to Students Studying Abroad with fake

Documents-Tshs 32,488,000 During the audit, we noted that fifteen (15) first year students forged examination results (forged A-level and O-level results) and 6 students out of them managed to get sponsorship from the Board for abroad studies for the year 2008/2009 totaling to Shs.32,488,000 as explained by the letter from the Executive Director of HESLB with reference No.AB 55/60/02 to the Permanent Secretary-Ministry of Education and Vocational Training.

Further, it was found that the same weaknesses existed in the allocation of loans to the students studying in local colleges were nine (9) students were given loans based on fake certificates submitted to the Board.

Since the Government through the Ministry of Education and Vocational Training is responsible for processing sponsorship of the aforesaid students, there is a need for strengthening the system of identifying the genuineness of the information supplied by applicants before submission the same to the Higher Education Students Loans’ Board for loans processing. Higher Education Students Loans’ Board should also ensure that only eligible beneficiaries are advanced loans.

12.8 Loan Repayment not Satisfactory Tshs.51,103,685,914 The Board initiated efforts towards collection of inherited loan portfolio from MSHET of Tshs 51,103,685,914 disbursed to 113,240 beneficiaries who pursued studies in Higher Learning Institutions between 1994/95 and 2004/2005. The repayment campaign started by tracing and allocating loanees, subsequently, some of whose were identified and instantly responded by commencing the repayment. However, the responses are not satisfactory since up to the


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time of audit, only few loanees have been identified. Out few loanees identified, only minority percentage are repaying as compared to the monthly projected collection. It is more likely that, appropriate strategies haven’t been identified and make use of them to boost the collection effectiveness. If the trend will persist, the Board won’t be able to pull out from depending on external financiers, leaving alone to service already secured loans. The Directorate of Loan Repayment and Recovery and Planning, Research and ICT should find effective ways, through which collection can be increased and the board should start implementing the laid down disciplinary action against employers and individuals who are hesitating to corporate as per the HESLB Act,2004 No. 19A-23.

12.9 PSPF Loans not paid Shs.58,435,000,000 The Board secured from the Public Service Pension Fund (PSPF) under the government guarantee three loans of Shs.20,000,000,000 and Shs.11,000,000,000 and thereafter Shs.22,000,000,000 on an interest rates of 15%, 13.5% and 15% respectively, to cover for the budget deficit in respect of Higher Learning Students loans, of which have became due for repayment and has led to an attraction of penalty. The interest and penalty amounts will continue to accrue, hence accumulating huge loan burden to the Government and the Board is likely to loose its creditability status before viable financiers. There is a need of immediate action by the Government to ensure that the outstanding loans including principal amount and interest are paid to the respective Public Authority without further delay since there is an increase in accumulated and accrued interest

12.10 Less Efforts to Recover Outstanding Receivables Shs.627,992,280 Our review of the balance sheet and related records of the Insurance Supervisory Department (ISD) revealed an increase in the outstanding debtor’s balances to the tune of Shs.627,992,280 in the current year between 48% and 181% compared to the previous year suggesting that management


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did not take appropriate action in collecting premium levy timely. Our further enquiries noted that management neither enforced insurance players to remit levies nor defined credit policy to ensure quick recovery of debts. The Department has risks of losing revenue in the absence of appropriate credit policy and debts recovery enforcement plan. Management is advised to institute a clear credit policy and debt recovery enforcement plan since the current system of administering premium levy has proved to be ineffective. Management should look for an alternative strategy of handling premium levy returns.


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CHAPTER THIRTEEN

CONCLUSIONS AND RECOMMENDATIONS

13.0 General Overview This chapter deals with conclusions and recommendations on the key audit findings which need the attention and action of the Government, Board of Directors and management of the respective Public Authorities and other Bodies as pointed out in the individual chapter of this report. These recommendations come from the mandate given to me under Section 12 of the Public Audit Act No.11 of 2008 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 or corruption relating to public resources for the purpose of better service delivery to the public. Having reviewed and concluded the audit of the financial statements of the 51 PA&oBs which were tabled to the Boards of Directors for the periods ended 30th September, 2008 31st December 2008 and 30th June 2009 respectively, using the powers vested to me, I would like to make general conclusions and recommendations pertaining to the audit of Public Authorities and Other Bodies for the period under review as follows:-

13.1 Audit Opinions

Due to various reasons including late submission of financial statements for audit purposes, failure of managements of PA&OBs to respond timely on the observations raised by auditors, lack of Boards of Directors in some PA&OBs which are responsible for the adoption of financial statements, disagreement on audit fees between contracted auditors and auditees, non submission of financial statements and other reasons which were beyond my ability, as at 17th February 2010, I have managed to conclude and table to the respective Boards of Directors only 51 (30.7%)


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individual audit reports of Public Authorities and Other Bodies out of 166 PA&OB which are subject to my ambit of audit . This is an unacceptable situation which requires the attention of the Government and Parliament. Out of the concluded audits, 45 PA&OBs were issued with unqualified audit opinion representing 88%, while 2 were issued with unqualified audit opinion with emphasis of matters representing 4% and 4 were given qualified audit opinion representing 8%. During the year under audit, no audited PA&oBs were issued with either an adverse or, disclaimer of opinion. Detailed audit opinions are included chapter two of this report and in each PA&oBs individual reports.

13.2 Follow Up of the Previous Year’s Audit Recommendations

Most of the key matters related to governance in Public Authorities raised in the previous year’s CAG’s General Report of Public Authorities and Other Bodies, are still outstanding and therefore reiterated in brief in this year’s annual audit report. The outstanding matters need the attention of the concerned parties including the Government, Parliament, Boards of Directors and Chief Executive Officers if at all the Public Authorities are to deliver to the expectations of Tanzanians. I would like to appreciate the efforts made by PPRA in carrying out further investigations on the procurement issues pointed out in my previous annual general audit reports. Also I would like to register my appreciation to PCCB for making use of my report in fulfilling its responsibilities. These outstanding matters are detailed under Chapter 3 of this report. Recommendation The Government, Parliament, Boards of Directors and the Chief Executive Officers of the respective Public Authorities should exert more efforts to ensure that the outstanding previous audit recommendations are timely implemented.


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the need for the Treasury Registrar to assume greater responsibilities of rendering effective supervision of the PO&OB after the abolishment of the Standing Committee of Parastatals Organisation (SCOPO).

I appreciate the positive action taken by the Paymaster General in establishing a new section called Public Enterprises Management under the Treasury Registrar’s Division to be responsible for the functions which were undertaken by the former Standing Committee on Parastatal Organizations and renaming the current Public Enterprises Reform Section in the Treasury Registrar Division, the Public Enterprises Restructuring and Monitoring Section and redefining its mandate to focus on post privatization activities.

In spite of the improvements being proposed in the set-up of the Treasury Registrar’s Office, it is still important that office of the Treasury Registrar be established in accordance with the Treasury Registrar Ordinance Cap.418. Section 3 (1)-(2) of Cap 418 of the Treasury Registrar Ordinance of 13th November 1959 on “Powers and Functions” states that upon coming into operation of this Ordinance, there shall be established the Office of the Treasury Registrar. Such person as the President may appoints to the office of the Treasury Registrar shall be a Corporation Sole by the name of the Treasury Registrar and by that name shall have perceptual succession and an official seal with capacity and powers to acquire, hold, manage, and dispose of investments, to sue and be sued, to execute deeds and instruments, using his official seal, to enter into agreement binding himself and his successors in office, to exercise all rights, conferred by the holding of investments including powers of holding immovable and


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other property, and to do all the acts and things necessary for expedient and to be done in the execution of the duties of his Office or which is required to be done or may be done by the Treasury Registrar under this and any other written law. Recommendation If implementation of this Ordinance is found not feasible, then the Government should establish a strong and effective Regulatory Authority which will be responsible for regulating the performance and operations of the 166 PA&OBs with a total equity amounting to Shs.6.1 trillion in order to enhance accountability and transparency for better service delivery to the public.

13.4 Apparent conflict of interest of MPs being members in the Boards of Directors of Public Authorities and Other Bodies Members of Parliament are still serving as members in Boards of Directors of Public Authorities and Other Bodies which make functioning of the Boards of Directors to be impaired. This is also against best practice and contrary to the principles of Good Governance. I would like to appreciate the action by the Governor of the Central Bank of Tanzania in issuing a Circular to Public Financial Institutions which restricts Members of Parliament to be Members in the Boards of Directors of the Public Financial Institutions in our country. It is a right time now for the Government to follow suit by issuing a Circular to restrict Members of Parliament from being members in the Board of Directors of Public Authorities and Other Bodies.

Recommendation As recommended in the previous CAG’s report and since Parliament is the highest representative organ of the people charged with the responsibility of scrutinizing the performance (oversight role) of Parastatals Organizations through the POAC, and in order to avoid conflict of interest, members of Parliament should not be members of


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Boards of Directors of Public Authorities and Other Bodies. It is best practice and this practice is not applicable in any Regional Grouping in which Tanzania is a member eg. EAC, SADCOPAC, SADC, AFROSAI-E, AU etc.

13.5 Appointment of the Members of Boards of Directors and

Chief Executive Officers Currently, Chairpersons of Boards of Directors of Public Authorities and Other Bodies in our Country are appointed by the President of the United Republic of Tanzania while the members to such Boards are appointed by the Ministers of the Parent Ministries of such PA&OBs. At the same time, Chief Executive Officers of the PA&OBs are also appointed by the President a situation which creates tag of power supremacy since both parties are appointed by the same authority. Recommendation The best practice should have been for the Chief Executive Officers to be appointed by the Board of Directors instead of being appointed by the same appointing authority. The President should be left with the responsibility of appointing Chairpersons of the Boards of Directors while the appointment of Chief Executive Officers of such PA&OBs should be the responsibility of the Boards of Directors.

13.6 Boards of Directors and Accountability The Government should enter into performance contracts with Boards of Directors of PA&oBs and set the pre determined deliverables to be achieved during the tenure of such Boards which should be made public. In this regard, Boards of Directors should also sign performance contracts with the Chief Executive Officers who will also sign performance contracts with their subordinates. In this way, I hope, performance in our PA&OBs will greatly improve and therefore immensely contribute more to the development of the nation.


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Recommendation As recommended in my previous report, the Boards of Directors of PA&oBs should be accountable to the Government for the results of their performance, likewise management of Public Authorities should also be accountable to the Board of Directors for results. The results of which the Board of Directors and Management of PA&OBs are accountable for should be made public.

13.7 A Need for the Establishment of a Public Investment Fund

Monies generated from privatisation are deposited in a special account with the Consolidated Holding Company and are used under the authority of the Minister for Finance and Economic Affairs. Withdraws from this account are used either to finance recurrent expenditure or pay for outstanding liabilities and commitments of the privatized entities.

In my view, this is a departure from best public investment practices. It is not a secret that public entities in Tanzania are currently characterized with a number of problems mainly of under capitalization, which is vital to the successful operations of the PA&OBs. This fund will also be responsible for investment appraisal of public sector investments. There is a need for such a Fund considering the current situation where negative returns are being earned on GoT investments. Recommendation The Government should establish the Public Investment Fund in order to be able to meet these challenges. Dividends realized and donor support received in this direction may also be deposited in this Fund to enhance its liquidity. Such funds should not be used to finance recurrent activities rather would best be utilised to finance capital expenditure such as new investments, increasing capital structures and extending bridging finances to the existing PA&OBs.


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The employment system in the public sector in the country for MDAs, LGAs and PA&OBs is on permanent and pensionable terms. This system good as it is, has got some weak points due to the fact that it is not performance based. The other mode of employment system under use in the public sector is the contract employment system.

During audit of PA&OBs for the period under review, we noted some PA&OBs changing the terms of employment of some of their employees from permanent and pensionable to contract terms, a system which is highly commendable. However, there were some weaknesses noted in this contract employment system due to fact that each Public Authority and Other Body sets its own remuneration criteria, contract time period etc. In both entities reviewed, it was apparent that there was no much transparency of effected changes and neither were there any concrete performance criteria to be used as the basis for evaluation at the end of contractual period. Given the fact that all PA&OBs work for the interest of the nation, there is need of harmonizing the employment environment by having clear policies and guidelines across PA&OBs to monitor and control this emerging change of employment terms. In addition, there is need to extend such change of contract employment terms even to low levels of employees for such changes to be transparent, unbiased and enhancing performance at all levels which if properly managed will greatly improve performance of our PA&OBs. Recommendation There is a need for the Government through the Ministry of Finance and Economic Affairs and the President Office Public Service Management (POPSM) to be involved in the approval of change of employment terms of members of


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staff of PA&OBs from permanent and pensionable terms to contracts terms.

13.9 Delays in Appointing New Board of Directors of PA&OBs

It is the practice when a Board’s tenure of office comes to an end, another Board is appointed by the relevant appointing authorities. The tenure of the Board of Directors refers to the time that the Board remains with responsibility of oversight function over an entity. In Tanzania the common period of tenure of most Boards is three years. Timely appointment of Board is an important element given the fact that Board play a key role of approving high level decisions and giving guidance on various strategic operating issues. In reviewing the management and the Boards of Directors of various public authorities we noted a delay of appointing new Boards of Directors. This substantially affects the operations of the entities such as approval of budgets, policies and the audit process. In this year, the audit of PA&OBs was faced with the above problem at Tanzania Standard Newspapers (TSN), Tanzania Tobacco Board (TTB), Tanzania Tourist Board (TTB), Tanzania Commission for Universities (TCU), Institute of Social Welfare (ISW) and the National Institute of Productivity (NIP). The above audit circle could not be concluded, as the accounts of the PA&OB have to be adopted by the Board of Directors before signing of the opinion by the CAG. In the absence of Boards of Directors, some functions of the PA&OB could not have been carried out. Recommendation The Government and the relevant appointing authorities should ensure that Boards of Directors are timely appointed once the tenure of the office lapses since there are some consequences for delaying in appointing of Boards of Directors of Public Authorities and Other Bodies.


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13.10 In Equity in Management and Use of Public Resource

Remunerations and other incentives of the employees and members of the Board of Directors of Public Authorities and Other Bodies differ in large extent from one entity to another. Some public entities were noted to have been paying higher salaries, allowances and other remuneration packages such as various categories of loans to staff while other Public Authorities are suffering from financial distress and struggling to meet the establishment objectives. A good track of this fact may be made by analysing the situations of Tanzania Ports Authority (TPA), TANESCO, TANAPA, Ngorongoro CAA, Pension Funds, Regulatory Authorities and BOT on the one hand and other Public Authorities such as, Institutions of Higher Learning, Water Authorities and Crop Boards on the other hand. Recommendation There is a need of standardizing and harmonizing the benefits enjoyed by the Boards of Directors and managements of our Public Authorities since the resources being used are all public resources as it used to be before the dissolution of the Standing Committee of Parastatals Organisations (SCOPO

13.11 Special Audit at TRL 13.11.1 Payment of Salary Top up The Government committed itself to furnish TRL with salary top- up for 5 months w.e.f. March to July 2008 which were to avert the workers strike that would have taken place in case salary increase was not effected. We however, noted that the TRL claims exceeded the Government commitment due to fact that TRL continued to claim beyond the Government commitment period of 5 months (March – July, 2008) i.e. from August 2008 to June 2009 (the time of audit) to which a total of Shs.6.6 billion was paid. TRL claims included salary and allowances unrelated to the Government commitment. The amount which was supposed to have been claimed and released as


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Government top-up of salaries for the period of March to July 2008 would correctly have amounted to only Shs.1.4 and not Shs.9.8 billion.

Therefore, Tanzania Railways Ltd over claimed Shs.8.4 billion from the Government. Recommendation The Government should take appropriate action to have the outstanding amount paid without delay as per the Concession Agreement. 13.11.2 Unpaid Concession fee Shs.16.1 billion According to Part 12 of the Concession Agreement payments, TRL is required to pay fixed concession fee as set out in Part 1 of schedule 11 and a variable concession fee of 5% per cent annually for years 1 to 5, and 7.5% per cent annually for years 6 to 25 of the concessionaire’s gross revenue. The payments are required to be paid to RAHCO at such time and in such manner as prescribed in parts 2 and 3 of schedule 11 (Part 12 – 2 of the Concession Agreement refers). Again, the Concessionaire’s obligation to pay the concession payments to RAHCO is absolute and unconditional and not subject to any type of set – off or conditional upon the full enjoyment of the rights granted to it under the agreement. However, apart from the first quarter fixed concession fees of USD.1.8 million paid, TRL had not paid any of the subsequent payments. As at the date of this report, the figure of outstanding concession fees stand at Shs.16.3 billion. Recommendation The Government should evaluate its partnership with RITES, the current status of the venture, non adherence of the contract agreement, problems currently facing operations and the going concern of TRL and come up with a lasting solution.


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13.12 PSPF Loan Shs.58 billion and Students Loans Repayments Shs.51.1 billion

The Higher Education Students Loans Board owes an outstanding loan of Shs.58 billion from PSPF under full Government Guarantee secured way back in year 2006. The amounts were borrowed from PSPF in order for the Board to issue loans to students pursuing Higher Learning Education. Given the surrounding circumstances of the students who received the loan and the nature of operations of the Board, the possibility of repayment most of the loaned amounts is uncertain. Further, the Board initiated efforts towards collection of the inherited loans portfolio from MSHET of Shs.51.1 billion disbursed to 113,240 student beneficiaries who pursued studies in Higher Learning Institutions between 1994/95 and 2004/2005. The responses are not satisfactory since up to the time of audit, only few loanees have been identified. Out of the few loanees identified, only a minority percentage are repaying as compared to the monthly projected collections. It is more likely that, appropriate strategies haven’t been identified and make use of them to boost the collection effectiveness. If the trend will persist, the Board won’t be able to pull out from depending on external financiers, leaving alone to service the already secured loans. Recommendation The Government should ensure that the outstanding loans both principal and interest amounts borrowed from PSPF are paid without further delay to avoid any further costs in terms of interest and penalties. The Board should start implementing the laid down legal action against employers and individuals who are hesitating to cooperate as per the HESLB Act, 2004 No. 19A-23.


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13.13 Revenue and Expenditure Management Our review of the revenue has revealed that Public Authorities have weak revenue management systems which lead to untimely billing of customers, late collection of revenue, lack of accuracy and complete revenue data and lack of security over cash collections. On the other hand, evaluation of expenditure of PA&OBs has revealed that some Public Authorities have weak expenditure management systems which lead to some of the payments being made without proper authorization and some not adequately supported by relevant documents. Recommendation The Board of Directors and Chief Executive Officers of the respective Public Authorities should ensure that effective systems of revenues and expenditures management are in place in order to avoid misuse of taxpayer’s moneys.

13.14 Procurement and Contracts management

Tanzania embarked into a major restructuring of its procurement system which led into the enactment of the Public Procurement Act, 2001 and later repealed by the Public Procurement Act No.21 of 2004, together with the establishment of the Public Procurement Regulatory Authority (PPRA) and the Public Procurement Appeals Authority (PPAA). Despite of the Government efforts, Public Authorities and Other Bodies are still not complying fully with the requirements of the Public Procurement Act No.21 of 2004 and it’s related Regulations of 2005 which made me to conclude that there is little awareness in Public Authorities and Other Bodies on the requirements of the Public Procurement Act of 2004 and its Regulations of 2005. This has been evidenced by audit findings of the Public Procurement Regulatory Authority which in summary are included in this general report. Further, audit of PA&OBs concluded that there were no full compliance with the provisions of the PPA, 2004 and its Regulations of 2005 and the procurement process is not


123

carried out transparently, efficiently and with economy so as to realize value for money in all procurements transactions and some of the PA&OBs did not administer contracts agreements properly. Recommendation The Procurement Professional Body (Procurement, Supplies and Technician Board) should speed up professionalisation of the procurement cadre, enhancing coordination with training institutions to align their curricular to meet the requirements in the market, and to enhance training and compliance monitoring. The Board of Directors and Chief Executive Officers should fully complied with the provisions of the PPA, 2004 and its Regulations of 2005 and should ensure proper contract management is applied; including use of complete and correct contract documents, correctly specifying rate of liquidated damages and contracts should be witnessed.

13.15 Assets Management I have realized that some of the Public Authorities and Other Bodies are still making investments in non-performing companies. These kinds of investments would appear to be a misuse of public monies and eventually causing losses of the monies that otherwise would have been made available for other development activities. Another major problem in some Public Authorities is the lack of title deeds of their properties including lack of legal ownership of motor vehicles.

Recommendation Government, Boards of Directors and Chief Executive Officers of Public Authorities and Other Bodies should ensure that investments are made in companies which are performing. Further, Boards of Directors of Public Authorities and Other Bodies should ensure that legal ownership of their plants, property and equipment are obtained.


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13.16 Human Resources Management Review of Human Resource Management has revealed weaknesses in some of the Public Authorities and other Bodies such as lack of proper maintenance of employees’ records, absence of staff performance appraisal systems and the problem of under staffing. Human Resource Managers appeared to have given little weight on anomalies which may create inconvenience in case of termination or retirement of employees by not remitting employees contributions to the respective Pension Funds. Some of the Public Authorities and Other Bodies have been providing incentives to the employees such as electricity, water etc. which are very difficult to manage. Some of these incentives are being misused by the employees. For instance, TANESCO has been giving certain discount on the bills of electricity used by its employees which were supposed to be paid by its staff. Audit review of staff accounts entitled for discounted electricity in Ilala, Arusha and Mbeya regions revealed several names of ghost staff who are not employees of TANESCO as at 31 December 2006 enjoying the incentive of discounted bills. This exposes TANESCO to a risk of loosing the much needed revenue from the use of the services it is selling. Recommendation Public Authorities and Other Bodies should provide cash incentives and let the employees pay for the services they are enjoying as any other customers instead of offering discounted bills or free service like electricity, water etc as an incentive to employees. Staff performance appraisal systems should also be enhanced to assist in the attainment of the organization’s strategic objectives. Statutory contributions and other deductions should also timely be remitted to all relevant Authorities in full as stipulated in the respective governing laws. On the other hand, human resource is the key asset of any organization; therefore the Chief Executive Officers of


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Public Authorities and Other Bodies should ensure that human resource management is given high priority and attention to assist in the attainment of the strategic corporate goals.

13.17 Information and Communication Technology

Information and Communication Technology is paramount important and inevitable for National Development given the importance of ICT. Review of ICT systems and networks has revealed that most of the Parastatals lack proper ICT policies and guidelines to enhance control over the effective use of computers and internet services. Disaster recovery plans have not been developed which exposes both computer hardware and software into risk. Public Authorities were noted to have poor computer network infrastructure which could serve to provide data/information. Recommendation Management of Public Authorities should establish the ICT units responsible for development and maintenance of computer information systems and ensure that ICT policies are developed and used for effective management of the same within the organizations. Also, PA&OBs should have well structured disaster recovery plans and strategies to ensure that computer hardware and software are properly covered during business disruption event.

13.18 Results of the Special Audits Conducted at TANESCO

In the course of the special audit, conducted by my office in TANESCO nothing came to my attention to indicate outright theft of cash at TANESCO. However, there are some problems regarding renovation of six residential houses and uncertainty whether the total amount of the loan of Shs.300 billion was properly utilized for the purpose for which the syndicated loan was secured. Most of the works in the variation orders involving the six houses could have been established during the design stage if adequate assessment detailed designs were done in advance. The


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procurement process used did not fully comply with PPA and its Regulations as reported in chapter 11 of this report. A simple analysis by the investigation team revealed that a 59.2 KVA generator was installed in house No. 13 instead of a 15 KVA which would have been sufficient for the same house which leads to the conclusion that a needs assessment of the power supply to the house was not done and there was no value for money with particular procurement transaction.

Recommendation The Board of Directors of TANESCO should comply with the Public Procurement Act No. 21 of 2004 and its related Regulations of 2005 and ensure Value for Money is obtained when overseeing daily undertakings of the Company.

13.19 Performance Review of the Existing and Privatized Public Entities

As of 30th June, 2009 there were some PA&oBs with liabilities amounting to Shs.102.5 billion which accounted for 25% of the total outstanding guarantees whose repayments was due as at 30th September 2009 according to the Treasury Registrar Statement of Government Investments. At the same time there were arrears of revenue amounting to Shs.110.1 billion including Shs.93.4 billion of loan in arrears that were supposed to be collected in previous years. Further, a total amount of revenue collected from loans as principal and interest decreased by 36% from Shs.10.6 billion in the year 2007/08 to Shs.6.7 billion in the year 2008/09. As far as post privatisation is concerned, the Consolidated Holding Company evaluated a total of 62 entities, out of which 12 entities were performing well and had implemented the investment plans as per the Sale Agreements while 27 entities had partially implemented the investment plans and were operating at a loss. The remaining 23 entities were still closed mainly on account of poor capital base and unresolved Court cases.


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Recommendation The Government should ensure that the liabilities of PA&oBs whose repayments are due but not being serviced is recovered from the beneficiaries to avoid the Government from paying the loans and the revenue in arrears is collected without further delay.

The Consolidated Holdings Corporation should make a close follow up to ensure that, the privatised entities are working as per the sales agreements and take appropriate action on those entities operating without taking into account the term in the sales agreements.


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Appendix I

List of Private Audit Firms Auditing of PA&OBs

S/n Name of Audit Firm 1. AA - Adolph Associates 2. ABA Alliance 3. AMAS Associates

4. ATAM Consultancy 5. ATEKAY Accountants and Auditors 6. Baccon Certified Public Accountants 7. Baker Tilly DGP & CO 8. Citizen Certified Partners Consortium 9. Co-operative Audit and Supervision Corp 10. DCDM 11. Delloite & Touche 12. E.K Mangesho & Company 13. Ernst & Young 14. Financial Consultants & Services 15. Fincare and Company 16. Global Finance and Business Solution 17. Globe Accountancy Services Association

with Haron & Company 18. Hassanali Rutakyamirwa & Company 19. HLB Ashvir 20. Horwath Tanzania 21. INNOVEX Auditors 22. Kavugha & Musambwa Auditors, 23. KPMG 24. Martec &Company 25. MATSAB & Company 26. MEKONSULT Auditors 27. MGK Certified Public Accountants 28. MHASIBU Consultant 29. MM Micro Business Consultants 30. MURL-AATEC Associates 31. Nyange & Associates,


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32. OREFCO 33. PAN Associates 34. Paul Clem Associates 35. PIMA ASSOCIATES 36. PKF Tanzania 37. PriceWaterCoopersHouse 38. Quintex Financial Services 39. R&S Associates 40. Reliable Consultants, 41. RS & Partners 42. SBC Consultancy Services 43. Shebrila & Co 44. SMW Management Consultants 45. TAC Associates 46. Tana & Company 47. TANSCOTT 48. TMC Associates/TOP Consultants Consortium 49. Trion & Company 50. VA Business Assurance Services 51. WISCON Associates 52. Y.H Malundo & Co,


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Appendix II

Status of the Audits of Public Authorities as at 17th February 2010

S/n F/S Submi-

tted

Audits concluded

& adopted by BoD

Audits in

prog-ress

F/S not submitted

Remarks

Water Authorities

Grade A 1. Arusha Urban

Water Supply and Sewerage Authority

Yes Yes _ _ _

2. Babati Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

3. Bukoba Urban Water Supply and Sewerage Authority

Yes _ Yes

4. Dar es Salaam Water Supply and Sewerage Authority (DAWASA)

Yes Yes _ _ _

5. Dar es Salaam Water Supply and Sewerage Company (DAWASCO)

Yes Yes _ _ _

6. Dodoma Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

7. Iringa Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

8. Kigoma/Ujiji Urban Water Supply and

Yes _ Yes


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Sewerage Authority

9. Lindi Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

10. Mbeya Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

11. Morogoro Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

12. Moshi Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

13. Mtwara Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

14. Musoma Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

15. Mwanza Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

16. Rukwa Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

17. Shinyanga Urban Water Supply and Sewerage Authority

Yes Yes _ _ _

18. Singida Urban Water Supply and Sewerage Authority

Yes _ Yes _ _


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19. Ruvuma Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

20. Tabora Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

21. Tanga Urban Water Supply and Sewerage Authority

Yes _ Yes _ _

Grade B

22. Njombe Water Supply Authority

No No No _ _

23. Mbinga Water Supply Authority

Yes Yes _ _

24. Makambako Water Supply Authority

No No No _ _

25. Kyela Water Supply Authority

Yes _ Yes _ _

26. Mpanda Water Supply Authority

Yes _ Yes _ _

27. Tukuyu Water Supply Authority

Yes _ Yes _ _

28. Korogwe Water Supply Authority

Yes _ Yes _ _

Regulatory

Bodies/Authorities

1. Architects & Quantity Surveyors Registration Board

Yes Yes _ _ _

2. Board of Yes Yes


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External Trade( BET)

3. Capital Market and Security Authority

Yes Yes _ _ _

4. Cashewnut Board of Tanzania

Yes _ Yes

5. Contractors Registration Board

Yes Yes _ _ _

6. Tanzania Bureau of Standards

Yes Yes _ _ _

7. Energy and Water Regulatory Authority (EWURA)

Yes Yes _ _ _

8. Engineers Registration Board (ERB)

Yes _ Yes _ _

9. Export Processing Zone Authority (EPZA)

Yes _ Yes _ _

10. Fair Competition Commission

Yes _ Yes _ _

11. Gaming Board of Tanzania

Yes Yes _ _ _

12. Higher Education Students Loans Board

Yes _ Yes _ _

13. Insurance Deposit Board/Fund

Yes Yes _ _ _

14. Kibaha Education Centre

Yes Yes _ _

15. National Board of Accountants

Yes Yes _ _ _


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and Auditor (NBAA)

16. National Board of Materials Managements (NBMM).

Yes _ Yes _ _

17. Ngorongoro Conservation Area Authority (NCAA)

Yes Yes _ _ _

18. Public Procurement Regulatory Authority (PPRA)

Yes _ Yes _ _

19. Rufiji Basin Development Authority (RUBADA)

No No No _ _

20. Sugar Board of Tanzania

Yes Yes _ _ _

21. Surface and Marine Transport Regulatory Authority

Yes Yes _ _ _

22. Tanzania Airport Authority

Yes _ Yes

23. Tanzania Civil Aviation Authority

Yes Yes _ _ _

24. Tanzania Coffee Board

No _ _ Yes

25. Tanzania Communication Regulatory Authority (TCRA)

Yes _ Yes _ _

26. Tanzania Cotton Board

Yes _ Yes _ _

27. Tanzania Education Authority

Yes _ Yes _ _


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(TEA) 28. Tanzania Food

and Drugs Authority

Yes _ Yes _ _

29. Tanzania Pyrethrum Board

Yes _ Yes _ _

30. Tanzania Sisal Board

Yes _ Yes _ _

31. Tanzania Tea Small Holders Development Agency

Yes _ Yes _ _

32. Tanzania Tea Board

Yes _ Yes _ _

33. Tanzania Tobacco Board (TTB)

Yes _ Yes _ _

34. Tanzania Tourist Board

Yes _ Yes _ _

35. Vocational Education and Training Authority

Yes _ Yes _ _

Higher

Learning Institutions

1. Ardhi University

Yes Yes _ _

2. College of African Wildlife Management (Mweka)

Yes _ Yes _ _

3. College of Business Education

Yes _ Yes _ _

4. Dar es Salaam Institute of Technology (DIT)

Yes _ Yes _ _

5. Dar es Salaam Maritime Institute (DMI)

Yes Yes _ _ _

6. Dar es Salaam Yes _ Yes _ _


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University College of Education

7. Institute of Accountancy Arusha

Yes _ Yes _ _

8. Institute of Adult Education

Yes Yes _ _

9. Institute of Finance Management (IFM)

Yes Yes _ _ _

10. Institute of Rural Development Planning

Yes _ Yes _ _

11. Institute of Social Work

Yes _ Yes _ _

12. Mbeya Institute of Science and Technology

Yes _ Yes 2007/08 in progress

13. Moshi University College of Co-op. and Business Studies

Yes _ Yes _ _

14. Mkwawa University College of Education


15. Muhimbili University College of Health Science (MUCHS)

Yes _ Yes _ _

16. Mwalimu Nyerere Memorial Academy

Yes _ Yes _ _

17. Mzumbe University

Yes _ Yes _ _

18. National Yes _ Yes _ _


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Institute of Transport

19. Open University of Tanzania (OUT)

Yes _ Yes _ _

20. Sokoine University of Agriculture (SUA)

Yes _ Yes _ _

21. Tanzania Institute of Accountancy

Yes _ Yes _ _

22. Tanzania Institute of Education

Yes _ Yes _ _

23. Tanzania School of Journalism (TSJ)

Yes _ Yes _ _

24. University of Dodoma

No _ Yes Confirmed

25. University of Dar es Salaam

Yes _ Yes _ _

Public

Parastatals

1. Air Tanzania Corporation Ltd


2. Bank of Tanzania

Yes Yes _ _ _

3. Consolidated Holding Co. CHC

Yes Yes _ _ _

4. Cooperative Audit & Supervision Corporation

Yes _ Yes _ _

5. General Tyre East Africa

No Yes

6. Government Employees Provident Fund

Yes Yes _ _ _


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7. Local Authority Pension Fund

Yes Yes _ _ _

8. Marine Service Company

Yes Yes _ _ _

9. Medical Store Department (MSD)

Yes _ Yes _ _

10. Muhimbili National Hospital (NMH)

Yes _ Yes _ _

11. National Development Corporation (NDC)

Yes Yes _ _ _

12. National Health Insurance Fund (NHIF)

Yes Yes _ _ _

13. National Housing Corporation

Yes Yes

14. National Insurance Corporation (NIC)

Yes Yes _ _ _

15. National Radiation Corporation

Yes Yes _ _

16. National Ranching Company (NARCO)

Yes Yes _ _

17. National Social Security Fund (NSSF)

Yes _ Yes _ _

18. NHC/PPF/IPS Co. Ltd

Yes _ Yes _ _

19. Parastatal Pension Fund (PPF)

Yes Yes _ _ _

20. Public Sector Pension Fund

Yes Yes _ _


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PSPF 21. Reli Assets

Holding Company

Yes Yes _ _ _

22. Small Industry Development Organisation

Yes Yes _ _

23. State Mining Corporation (STAMICO)

Yes Yes _ _

24. Tanzania Brodcasting Corporation (TBC)

Yes _ Yes _ _

25. Tanzania Electricity Supply Company Limited (TANESCO)

Yes Yes _ _ _

26. Tanzania Engineering and Manufacturing Design Organisation (TEMDO)

Yes _ Yes _ _

27. Tanzania Fertilizer Company Ltd

Yes Yes _ _ _

28. Tanzania Investment Bank Limited (TIB)

Yes Yes _ _ _

29. Tanzania National Parks (TANAPA)

Yes _ Yes _ _

30. Tanzania Petroleum Development Corporation (TPDC)

Yes Yes _ _ _

31. Tanzania Port Authority (TPA)

Yes Yes _ _ _

32. Tanzania Post Yes _ Yes


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Corporation 33. Tanzania

Postal Bank Yes Yes _ _ _

34. Tanzania Standard Newspaper (TSN)

Yes _ Yes _ No Board of Directors

35. Tanzania Telecommunication Company

Yes Yes _ _ _

36. Twiga Bancorp Limited

Yes Yes _ _ _

37. Ubungo Plaza Co. Ltd

Yes Yes _ _ _

38. Kariakoo Market Corporation

Yes _ Yes _ _

39. Kilimanjaro Airport Development Company Ltd

No _ _ Yes _

40. Usafiri Dar es Salaam (UDA)

Yes _ Yes _ _

Government

Institutions

1. Arusha International Conference Centre (AICC)

Yes Yes _ _ _

2. CARMATEC No _ _ Yes 3. Dar es Salaam

Stock Exchange (DSE)

Yes Yes _ _ _

4. Insurance supervisory Department

Yes _ Yes _ _

5. Joint Finance Commission

Yes _ Yes _ _

6. Mzinga Corporation Limited

Yes _ Yes _ _


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7. National Arts Council

Yes _ Yes _ _

8. Muhimbili Orthopedic Institute (MOI)

Yes _ Yes _ _

9. National Bureau of Statistics (NBS)

Yes _ Yes _ _

10. National Construction Council (NCC)

Yes _ Yes _ _

11. National Council for Technical Education (NACTE)

Yes Yes _ _ _

12. National Economic Empowerment Council-(NEEC)

Yes _ Yes _ _

13. National Environment Management Council (NEMC)

Yes _ Yes _ _

14. National Examination Council Tanzania

Yes _ Yes _ _

15. National Institute for Productivity

Yes Yes _ _ _

16. National Kiswahili Council

No

_ _ Yes

17. National Land and Planning Commission (NLPC)

Yes _ Yes _ _

18. National Museum of Tanzania

Yes _ Yes _ _

19. National Yes _ Yes _ _


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Sports Council 20. National

Sugar Institute

Yes _ Yes _ _

21. Suma JKT Company

Yes _ Yes _ _

22. Tanzania Atomic Energy Commission

Yes _ Yes _ _

23. Tanzania Automobile Technology Centre (NYUMBU)

Yes _ Yes _ _

24. Tanzania Bureau of Standards (TBS)

Yes _ Yes _ _

25. Tanzania Commission for Science & Technology

Yes _ Yes _ _

26. Tanzania Commission for Universities


27. Tanzania Food and Nutrition Centre

Yes _ Yes Confirmed

28. Tanzania Industrial Research and Development Organisation (TIRDO)

Yes _ Yes _ _

29. Tanzania Investment Centre

Yes _ Yes _ _

30. Tanzania Library Services

Yes _ Yes _ _

31. Tanzania Marine Parks

Yes _ Yes _ _

32. Tanzania National Business

Yes _ Yes _ _


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Council 33. Tanzania

Wildlife Research Institute (TAWIRI)

No No No Yes _

34. Tropical Pesticides Research Institute

Yes _ Yes _ _

35. Unit Trust of Tanzania (UTT)

Yes _ Yes _ _

36. National Institute of Medical Research

Yes _ Yes _ _

37. Tanzania Fisheries Research Institute (TAFIRI)

Yes _ Yes _ _

38. Tanzania Forest Research Institute (TAFORI)

Yes Yes _ _ _


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Appendix III

Trend of Audit Opinion Issued for the past consecutive three years S/n Name of PA&oBs 2008/09 2007/08 2006/07

Regulatory Bodies 1. Architects & Quantity

Surveyors Registration Board

Unqualified Unqualified Unqualified

2. Sugar Board of Tanzania


3. Capital Market Security Authority


4. Tanzania Bureau of Standands


5. Deposit Insurance Board


6. Energy Water and Utility Regulatory Authority


7. Contractor Registration Board


8. Gaming Board of Tanzania


9. National Board of Accountants and Auditors (NBAA)


10. Ngorongoro Conservation Area (NCCA)


11. Surface and Marine Transport Regulatory Authority (SUMATRA)


12. Tanzania Civil Aviation Authority

Unqualified Qualified opinion

Unqualified

Public Parastatal 13. Bank of Tanzania Unqualified Unqualified

opinion with emphasis of matters

Unqualified opinion with emphasis of matters

14. Consolidated Holding Company

Unqualified Qualified (six moths accounts Dec. 2007)

Unqualified


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15. Local Providend Fund

(LPA) Unqualified Unqualified Unqualified

16. Public Pension Fund Unqualified Unqualified Unqualified

Reli Assets Holding Company


17. National Development Corporation


18. Government Employee Provident Fund

Unqualified Qualified Unqualified

19. National Health Insurance Fund


20. National Ranching Company (NARCO)


21. Tanzania Electric Supply Company (TANESCO)


Unqualified Disclaimer

22. Tanzania Fertilizer Company


23. National Insurance Corporation

Qualified opinion


Qualified opinion

24. Tanzania Telecommunication Company Ltd




25. Tanzania Ports Authority Unqualified Unqualified Unqualified

26. Marine Services Company

Qualified opinion

Qualified opinion

Qualified opinion

27. State Mining Corporation (STAMICO)


28. Tanzania Petroleum Development Corporation (TPDC)


29. Tanzania Investment Bank (TIB)


30. Tanzania Postal Bank Unqualified Unqualified Unqualified 31. Twiga Bancorp Unqualified Unqualified Unqualified 32. Ubungo Plaza Ltd Unqualified Unqualified Unqualified Government

Institutions

33. Arusha International Unqualified Unqualified Unqualified


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Conference Centre 34. Dar es Salaam Stock

Exchange Unqualified Unqualified Unqualified

35. National Council for Technical Education


36. National Institute of Productivity


37. Tanzania Forest Research Institute


Higher Learning

Institutions and Colleges

38. Ardhi University Unqualified Unqualified Unqualified 39. Institute of Finance

Management Unqualified Unqualified Unqualified

40. Dar es Salaam Maritime Institute


Water Bodies 41. Arusha Urban Water

Supply and Sewerage Authority


42. DAWASA Qualified opinion

Qualified opinion

Qualified opinion

43. DAWASCO Qualified opinion

Qualified opinion

Qualified opinion

44. Lindi Urban Water Supply and Sewerage Authority


45. Mbeya Urban Water Supply and Sewerage Authority


46. Moshi Urban Water Supply and Sewerage Authority


47. Mwanza Urban Water Supply and Sewerage Authority


48. Dodoma Urban Water Supply and Sewerage Authority


49. Shinyanga Urban Water Supply and Sewerage Authority


50. Iringa Urban Water Supply and Sewerage Authority



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Appendix IV

Post Privatisation Status of Performance

SN NAME OF ENTITY/UNIT

STATUS BEFORE PRIVATIZATION

EVALUATION STATUS

REMARKS

1. Ubungo Garment Ltd- DSM.

Closed Still closed There is a pending dispute with the buyer.

2. Morogoro Polyester Textile Mill Ltd

Closed Operating

3. Mbeya Textile Mill Ltd.

Closed Operating at a loss

It has a problem of getting raw materials (cotton lint).

4. Mbeya Ceramics Ltd.

Closed Still closed It is in process of being repossessed

5. Keko Pharmaceutical Industries Ltd- DSM

Operating at a loss

Operating at a profit

The coy is doing well

6. New Savoy Hotel – Morogoro


The quality Services are below std.

7. Mount Meru Hotel - Arusha

Operating at a loss

Closed It is under rehabilitation

8. Dakawa Rice Mill Complex Morogoro

Closed Operating It has been Rehabilitated

9. Ex-NMC Rice Mill & Godowns Ltd- Mbeya

Not operating Operating at a loss

10. Gomba Sisal Estate Ltd.- Tanga

Not producing Producing at a profit

It is doing well

11. Mkumbara Sisal Estate

Not producing Producing at a loss

No Investment


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Ltd.- Tanga plan was agreed at a time of sale

12. Toronto Sisal Estate Ltd.- Tanga.


Investment plan not completed

13. Muheza-Kitisa Sisal Estate Ltd. - Tanga



14. Kumburu Sisal Estate Ltd.- Tanga



15. Masasi Cashewnut Processing Plant- Lindi


Partial rehabilitation has been made

16. Likombe Cashewnut Processing Plant- Lindi

Closed Still Closed No any investment has been made

17. Mtwara Cashewnut Processing Plant- Lindi



18. Newala I Cashewnut Processing Plant- Lindi


Full rehabilitation has been made

19. Newala II Cashewnut Processing Plant- Lindi

Closed Still closed No any investment has been made

20. Tanzania- China Friendship Textile- DSM

Operating at a loss

Operating at a loss


21. Tanzania Shoe Company- DSM



22. Auto- Mech Ltd –DSM

Operating at a loss


Full rehabilitation


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has been made

23. Ilemela Fish Processing Plant- Mwanza

Closed Still closed No any investment has been made

24. Pasiansi Boatyard Project- Mwanza

Closed Operating at a profit

It has been rehabilitated

25. Nyanza Engineering & Foundry Co. - Mwanza

Closed Still closed It is in the process of being repossessed.

26. New Mwanza Hotel- Mwanza

Operating at a loss



27. Minjingu Phosphate Mines- Manyara

Operating at a loss



28. TPL Shinyanga Meat Plant- Shinyanga

Closed Closed No any investment has been made

29. CDA Zuzu Plant- Dodoma

Closed Closed The sale had no any commitment on rehabilitation.

30. Aggregate Processing Plant –Dodoma


31. Pipe Vibrated Concrete Plant- Dodoma



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32. Concrete Roof Tiles Plant- Dodoma


33. Tanzania Tobacco Processors Ltd. Morogoro

Operating Operating at a Profit

The machines have been fully rehabilitated

34. New Morogoro Rice Mill Complex- Morogoro

Closed Closed, but rehab was in final stages

The machines have been fully rehabilitated

35. MOPROCO- Morogoro

Closed Closed Due to High production costs

36. Hotel Seventy Seven Ltd- Arusha

Closed Closed Rehabilitation is yet to start due to a pending matter of Land Rent arrears.

37. Mafia Island lodge- Coast

Operating at a loss

Operating at a loss

Investment plan partly done

38. Mtama Cashewnut Processing Plant (Lindi)

Closed

Closed

Rehabilitation has been completed

39. Nachingwea Cashewnut Processing Plant

Closed

Closed

About 70% of the plant has been rehabilitated.

40. Tunduru Cashewnut Processing Plant


About 55% of the plant has been rehabilitated

41. Lindi Closed Closed The investor


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Cashewnut Processing Plant

still looking for funds.

42. Kibaha Cashewnut Processing Plant

Closed Closed There is a pending case

43. Lake Manyara Hotel (Manyara)

The facilities of the hotel were in poor state of repair.

Operating at a loss

The investment plan has been implemented by 98%

44. Ngorongoro Wildlife Lodge (Manyara)

The facilities of the lodge were in poor state of repair.

Operating at a loss


45. Seronera Wildlife Lodge (Mara)


Operating at a loss


46. Lobo Wildlife Lodge (Mara)


Operating at a loss


47. Mount Meru Hotel

The facilities of the hotel were in poor state of repair.

Closed for rehabilitation

Rehabilitation of the hotel started in June ’09 and is proceeding well.

48. Tanganyika Planting Co. Ltd (TPC) –MOSHI

Operating at a loss

It is operating at a Profit

The investment plan has been implemented in full.


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49. Moshi Leather Industries


The investment plan has been implemented in full.

50. Sao Hill Industries Ltd Iringa

Operating Operating at a profit

Rehabilitation has been completed

51 Mahenye Farm Ltd Iringa

Closed It has started operations

It is operating at a loss

52. Ludodolelo Farm Ltd Iringa

Closed It has started operations

It is operating at a loss

53. Mbozi Coffee Curing Company Ltd- Mbeya

Operating Operating at a loss

It is operating under capacity

54. Kagera Tea Company Ltd

Closed

Operating at a loss

High operating costs

55. Kagera Sugar Company Ltd


The company has high cost of capital due to bank debts.

56. Kagera Region Transport Company Ltd

Closed Closed No any investment has been made

57. Ubungo Farm Implements (UFI) DSM


The investment plan has been implemented in full

58. TDL Tanga Plant


The investment plan has been implemented in full

59. Mkata Sawmills

Closed Closed The investor is still looking


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Limited Tanga

for funds.

60. Mbarali Rice Farm Mbeya

Closed Operating About 50% of the investment plan has been implemented

61. Tanganyika Packers Ltd. Kawe Plant- DSM

Closed Closed There are 2 pending cases hindering implementation of the investment plan.

62. Dar Brew Limited DSM

Operating

Operating at a loss

High operating costs

SUMMARY

S/NO. Name No. Remarks 1. Public Enterprise still

closed 23 Lack capital

unresolved court case

2. Public Enterprise peforming well

12 Has implemented the investment plan as per sales agreement

3. Public Enterprise operating at a loss

27 Partially implemented investment plan.

Total 62

PUBLIC AUTHORITIES AND OTHER BODIES GENERAL REPORT 2008-2009

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Transcript of PUBLIC AUTHORITIES AND OTHER BODIES GENERAL REPORT 2008-2009