-
O f f i c e o f t h e C o n t r o l l e r a n d A u d i t o r G
e n e r a l A G R / C G / 2 0 1 2 / 1 3
2012/2013
THE UNITED REPUBLIC OF TANZANIA
NATIONAL AUDIT OFFICE
THE ANNUAL GENERAL REPORT OF THE CONTROLLER AND AUDITOR GENERAL
ON THE
FINANCIAL STATEMENTS OF THE CENTRAL GOVERNMENT (MDAs) FOR THE
YEAR ENDED 30TH
JUNE, 2013 The Controller and Auditor General, National Audit
Office Samora Avenue/Ohio Street P. O .Box 9080 Tel: +255 (022)
2115157/8 Fax: +255 (022) 2117527 e-mail [email protected] website:
www.nao.go.tz Dar es Salaam. This general report covers 60
Ministerial Votes, Departments and Agencies, 25 Regional
Administrative Secretaries and 32 Embassies
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In reply, please quote Ref.Na.FA.27/249/01/2012/13 28th March,
2014 Your Excellency Dr. Jakaya M. 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 FINANCIAL
STATEMENTS OF THE CENTRAL GOVERNMENT FOR THE FINANCIAL YEAR ENDED
30TH JUNE, 2013
Pursuant to Article 143(4) of the Constitution of the United
Republic of Tanzania of 1977 (revised 2005), and Section 34 (1) (c)
of the Public Audit Act No. 11 of 2008. I have the honour and
respect to submit to you the General Audit Report on the Central
Government for the financial year ended 30th June, 2013 for your
information and necessary action.
THE UNITED REPUBLIC OF TANZANIA
NATIONAL AUDIT OFFICE
Office of the Controller and Auditor General, Samora Avenue,
P.O. Box 9080, DAR ES SALAAM. Telegram: Ukaguzi", Telephone:
255(022)2115157/8,
Fax: 255(022)2117527, E-mail: [email protected], Website:
www.nao.go.tz
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I have provided constructive recommendations which if
implemented can mitigate the incidence of irregularities and
substantially improve financial accountability in the Government. I
submit.
Ludovick S. L. Utouh CONTROLLER AND AUDITOR GENERAL
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TABLE OF CONTENTS
LIST OF TABLES ...............................................
ix Office of the Controller and Auditor General ............. xii
Vision, Mission and Core Values ............................. xii
Foreword .......................................................
xiv Acknowledgement ............................................
xix LIST OF ABBREVIATIONS ..................................... xxi
Executive summary ..........................................
xxiv
CHAPTER ONE .................................................. 1
1.0 BACKGROUND AND GENERAL INFORMATION .......... 1 1.1. Audit
Mandate and Rationale for Audit. .............. 1 1.2 Applicable
Auditing Standards and Reporting
Procedures. ............................................... 5
1.3 Number of audited entities and NAOTs set up ...... 7 1.4
Statutory Responsibilities of the audited entities ... 9
CHAPTER TWO ................................................. 12
AUDIT OPINION OVERVIEW, TYPES, BASIS AND THE ACTUAL AUDIT RESULTS
...................................... 12 2.0 An overview of the
audit opinion ..................... 12 2.1 Types of the audit
opinions ............................ 13 2.2 Basis of the audit
opinion and the actual audit
results .................................................... 14
2.3 Trend of Audit Opinions ................................ 24 2.4
Audited entities issued with qualified, adverse and disclaimer of
opinions with their actual specific
basis of their qualifications ........................... 28
CHAPTER THREE .............................................. 56
FOLLOW UP ON THE IMPLEMENTATION OF THE PREVIOUS YEARS' AUDIT
RECOMMENDATIONS .............. 56 3.0 Introduction
.............................................. 56 3.1 Responses of
accounting officers/ heads of
departments on individual reports submitted to them by the
Controller and Auditor General ....... 57
3.2 Follow up on the PMG's structured responses upon the
recommendations issued by the Controller and
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Auditor General on the general report of Central Government in
2011/2012 ............................. 60
3.3 Responses on implementation of the PACs recommendations
....................................... 74
CHAPTER FOUR ................................................ 88
PUBLIC FINANCE MANAGEMENT .............................. 88 4.1
REVENUE COLLECTION AND FUNDING ANALYSIS .... 88 4.2 NATIONAL
ACCOUNTS ................................. 103 4.3 EXPENDITURE
MANAGEMENT ........................ 134
CHAPTER FIVE ............................................... 150
EVALUATION OF INTERNAL CONTROL SYSTEM AND GOVERNANCE ISSUES
........................................ 150 5.0 Introduction
............................................ 150 5.1 Inadequate
Performance of Internal Audit Units . 151 5.2 Inadequate
Performance of Audit Committees ... 152 5.3 Inadequate Risk
Management process ............. 154 5.4 Weaknesses in Information
Technology - General
Controls ................................................ 154
5.5 Inadequate Fraud Prevention and Control ........ 156 5.6
Inadequate utilization of IFMS/Epicor System .... 157
CHAPTER SIX .................................................
160 HUMAN RESOURCES AND PAYROLL MANAGEMENT ....... 160 6.0
INTRODUCTION ........................................ 160 6.1 Key
issues raised from audit of MDAs and RS ..... 161 6.2
Absence/Inadequate Open Performance Review and Appraisal System
(OPRAS) ...................... 167 6.3 Outstanding staff claims
............................. 168 6.4 Inadequate number of staff
......................... 169 6.5 Deductions made to employees
above two third
(2/3) of the gross salary ............................. 170 6.6
Problems associated with the application of Human Capital
Management Information System
(HCMIS) LAWSON ...................................... 171 6.7
Absence of Important Posts of Tourist Officer .... 172
CHAPTER SEVEN ............................................. 174
REVIEW OF PROCUREMENT MANAGEMENT ................ 174 7.0
INTRODUCTION ........................................ 174
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7.1 Major Issues Identified on Procurement Audit .... 175 7.2
Procurement without competitive quotation ..... 175 7.3 Assets
Procured but not operational ............... 177 7.4 Payments Made
Above Invoice/Contractual Amount
................................................. 178 7.5
Procurements out of Annual Procurement Plan .. 179 7.6 Procurement
without approval of Tender Board . 180 7.7 Procurement using
Imprests ......................... 181 7.8 Stores procured but not
accounted for in stores
ledgers .................................................. 183
7.9 Issues Identified by PPRA ............................ 184 7.10
Compliance with PPA 2004 and its regulations of
2005 ..................................................... 185
7.11 Assessment of contracts management ............. 185 7.12
Management of procurement records .............. 186 7.13
Evaluation of Procurement Information Management System (PIMS)
.......................... 186 7.14 Recommendations given by PPRA
................... 187 7.15 Anomalies in procurement and stores
management
observed by Directorate of Government Assets Management Division
(Stock Verifier) .............. 189
CHAPTER EIGHT ............................................. 192
ASSETS MANAGEMENT AND LIABILITIES ................... 192 8.0
INTRODUCTION ........................................ 192 8.1 Non
maintenance/establishment of proper Non
current asset register ................................ 193 8.2
Grounded and un-serviceable Noncurrent asset .. 196 8.3 Partial
revaluation of Property, Plant and
Equipment ............................................. 197 8.4
Property, Plant and Equipment lacking ownership
documents ............................................. 198 8.5
Improper recognition of intangible assets ......... 199 8.6 Absence
of monitoring devices (CCTV camera) at
weighbridge stations ................................. 200 8.7
Misclassification of Development Funds Transfer 201 8.8 Inadequate
management of Ivory tusks stockpile and
other trophies ......................................... 202 8.9
Non disclosure of imprest as receivables .......... 205
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8.10 Unsettled liabilities amounting to . ..... 206
CHAPTER NINE ............................................... 208
9.0 SPECIAL AUDIT ......................................... 208 9.1
Introduction ............................................ 208 9.2
Report on the audit conducted on Designated objectives.
............................................. 210 9.3 Ministry of
Works on Procurement of MV Misungwi for financial year 2004/2005
............ 211 9.4 Ministry of Agriculture, Food Security and
Cooperatives on the National Agricultural Inputs Voucher Scheme
(NAIVS) ............................. 213
9.5 Ministry of Health and Social Welfare on financial
impropriety of training fees at Mkomaindo
Nursing Training Centre .............................. 217
CHAPTER TEN ................................................ 219
OTHER ISSUES ................................................ 219
10.0 INTRODUCTION ........................................ 219 10.1
Government Agency Appraisal ...................... 219 10.2 Payment
of Rent Charges by MDAs 226 10.3 Challenges facing Tanzania Prison
Service (TPS) . 228 10.4 The role of Controller and Auditor General
in
Auditing PPP projects ................................ 234 10.5
Common issues emerging from the ongoing audit of
Political Parties accounts .......................... 243
CHAPTER ELEVEN ........................................... 247
11.0 CONCLUSION AND RECOMMENDATIONS ............. 247 11.1 Non
implementation of some of the previous years recommendations
............................. 248 11.2 Procurement Management
........................... 249 11.3 Unattended Shortage of
Workforce in MDAs and RS 251 11.4 Salaries Paid to non Exiting
Employees .......... 252 11.5 Expenditure Management
............................ 253 11.6 Operation of Embassies
.............................. 255 11.7 Operations of Designated
Hospitals ................ 257 11.8 National Agricultural Inputs
Voucher Scheme
(NAIVS).................................................. 259 11.9
IPSAS preparedness and implementation .......... 260
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11.10 Monitoring and evaluation of projects financed through
debt proceeds .............................. 265
11.11 Lack of Unified Debt Management Office ........ 266 11.12
Converted Liquidity Papers into financing papers . 266 11.13
Release of funds towards the end of the financial year
......................................... 267 11.14 Management of
Customs and Bonded Warehouses
............................................ 268
14.0 ANNEXURES ............................................
270
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LIST OF TABLES
Table 1: Number of Auditees
....................................... 7
Table 2: List of the audited entities issued with unqualified
opinion .....................................................
15
Table 3: List of audited entities issued with unqualified
opinion with other matters ............................ 18
Table 4: Trend of audit Opinion for the past four years .....
26
Table 5: List of MDAs issued with Qualified Opinion and the
their basis .................................................
30
Table 6: List of audited entities issued with Adverse
Opinion
and the basis of adverse opinion ...................... 55
Table 7: PMG's structured responses ............................
61
Table 8: PAC's recommendations from the report ............
75
Table 9: The estimates and actual revenue performance for
the financial year 2012/2013 and
2011/2012 .................................................
90
Table 10: Analysis of Exchequer issues released for Supply
vote:........................................................
93
Table 11: Analysis of Exchequer issues released for
Development vote: ...................................... 94
Table 12: Analysis of exchequer issues and actual
expenditure for the supply vote for the financial
years 2011/2012 1nd 2012/2013. ..................... 95
Table 13: Analysis of exchequer issues released for
development vote. ...................................... 96
Table 14: Summary of non-tax revenue ..........................
98
Table 15: Analysis of Expenditure arrears is shown below:- .
101
Table 16: Outstanding matters for TRA for 2010/2011 and
2011/2012 ................................................
114
Table 17: TRA Revenue Performance Tanzania
Mainland ..................................................
115
Table 18: TRA Revenue Performance - Zanzibar ...............
115
Table 19: TRA Revenue Collection Pattern - Tanzania
Mainland ..................................................
116
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Table 20: TRA Revenue Collection Pattern - Tanzania Zanzibar
.................................................. 117
Table 21: Summary of tax exemptions issued to institutions
119
Table 22: TRA Exemptions against actual collection for
financial year 2011/12-2012/13 ..................... 120
Table 23: TRA Revenue Yield for Tanzania with Exemptions
considerations ..........................................
121
Table 24: Recurrent expenditure trend .........................
126
Table 25: Exchequer issues released in each quarter .........
127
Table 26: Long outstanding imprests ............................
135
Table 27: Summarized results of long outstanding imprests:
135
Table 28: Summarized payments charged to wrong expenditure
codes: ..................................... 136
Table 29: Overpayment
............................................ 137
Table 30: Summarized payments overcharged: ................
138
Table 31: Summarized payments made out of approved
budget: ...................................................
139
Table 32: Summarized payments inadequate
supported:................................................
140
Table 33: Missing acknowledgement receipts/ EFR receipts 142
Table 34: Payments without statement of expenditure ......
143
Table 35: Summarized payments whose vouchers were
missing: ...................................................
146
Table 36: Deferred payments
..................................... 148
Table 37: List of MDAs and RS with unclaimed salaries .......
162
Table 38: Penalty for Delayed Staff Deductions ...............
164
Table 39: Payment to employees who were no longer in
service ....................................................
165
Table 40 Unauthorized statutory deductions from ex-
government employees ................................ 165
Table 41: Absence/inadequate Open Performance Review
and Appraisal System (OPRAS) ........................ 167
Table 42: Outstanding staff claims
............................... 169
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Table 43: Deductions made to employees over and above two third
(2/3) of the gross salary ................... 170
Table 44: MDAs/RSs which did procurement without
quotation .................................................
176
Table 45: Assets Procured but not operational ................
177
Table 46: Payments Made Above Invoice/Contractual ........
178
Table 47: Procurements out of Annual Procurement Plan ...
180
Table 48: Procurement without approval of Tender
Board ......................................................
181
Table 49: Procurement using Imprest............................
182
Table 50: Stores procured but not accounted in store
ledgers ....................................................
184
Table 51: Stock Verifier Reports
.................................. 190
Table 52: List of MDAs/RS noted with anomalies in asset
register management .................................. 195
Table 53: List of MDAs and RS lacking ownership documents
198
Table 54: List of MDAs and RS with Transfer of Development
funds ......................................................
202
Table 55: List of MDAs and RS Non disclosure of receivables
205
Table 56: Insufficiency in government funding of
agencies ..................................................
222
Table 57: Under collection of own source revenue ...........
224
Table 58: Payment of Rent Charges by MDAs ...................
227
Table 59: Limited budget
.......................................... 230
Table 60: Under release of funds
................................. 231
Table 61: TPS increase of liabilities from suppliers and
staff
claims to 30th June 2013 .............................. 232
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Office of the Controller and Auditor General, National Audit
Office, United Republic of Tanzania, (Established under Article 143
of the Constitution of the URT) The statutory duties and
responsibilities of the Controller and Auditor General are given
under Article 143 of the Constitution of the URT of 1977 (revised
2005) together with Sect. 10 (1) of 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 In providing quality services, NAO is guided by the
following Core Values:
Objectivity: We are an impartial organization, offering services
to our clients in an objective and unbiased manner;
Excellence: We are professionals providing the highest quality
audit services based on best practices;
Integrity: We observe and maintain the highest standards of
ethical behavior and the rule of law;
People focus: We focus on our stakeholders needs by building a
culture of good customer care and having competent and motivated
work force;
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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 utilization: We are an organization that values
and uses public resources entrusted to it in an efficient,
economic, and effective manner. We do this by:
Contributing to better stewardship of public funds by ensuring
that our clients are accountable for the resources entrusted to
them;
Helping to improve the quality of public services by supporting
innovation on the use of public resources;
Providing technical advice to our clients on operational gaps in
their operating systems;
Systematically involve our clients in the audit process and
audit cycles; and
Providing audit staff with appropriate training, adequate
working tools and facilities that promote their independence. This
audit report is intended to be used by Government Authorities.
However, upon receipt of the report by the Speaker and once tabled
in Parliament, the report becomes a matter of public record and its
distribution may not be limited.
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Foreword
Mr. Ludovick S. L. Utouh (CAG)
This is the first year the MDAs and RSs are preparing their
financial statements under IPSAS accrual basis of accounting. I
congratulate the Government through the Accountant General for the
deliberate effort undertaken to adopt the IPSAS accrual basis of
accounting.
Apart from the challenging nature, it is beyond doubt that if
compared with the cash basis of accounting; accrual basis of
accounting provides a more comprehensive financial information that
is important in guiding managements and other users of financial
information in arriving at more informed decisions. While I commend
this effort, I also urge the government through the Accountant
General again, to correctly monitor and evaluate implementation of
the roadmap towards the full adoption of the IPSAS accrual basis of
accounting.
This report is being submitted to the President of the URT in
accordance with Article 143 of the Constitution of the United
Republic of Tanzania (revised 2005) and Section 34(1) & (2) of
the Public Audit Act No.11 of 2008.
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Pursuant to Article 143(2) (c) of the Constitution of the URT,
the Controller and Auditor General shall, at least once every year,
audit and issue an audit report in respect of the accounts of the
Government of the United Republic, the accounts managed by all
officers of the Government of the United Republic, the accounts of
all Courts of the United Republic and the accounts managed by the
Clerk of the National Assembly.
Under Article 143(4) of the Constitution of the URT, the
Controller and Auditor General is required to submit to the
President of the URT every report he makes pursuant to the
provisions of Sub Article (2) of the same Article. Upon receipt of
such reports, the President shall direct the persons concerned to
submit these reports before the first sitting of the National
Assembly, preferably before the expiration of seven days from the
day the sitting of the National Assembly began.
Operational independence of my office has greatly improved
following the enactment of the Public Audit Act No. 11 in 2008 and
the Public Audit Regulations (GN.47) of 2009. However, in
accordance with international standards and best practice, there is
need for further improvement in terms of control of salaries and
recruitment of staff to enable me to effectively fulfill my
Constitutional mandate.
It is worth noting that while my office reports on any non
compliance with various laws, rules and regulations and on
weaknesses in internal control
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systems across the public sector entities and in particular the
Central Government, the ultimate responsibility for the maintenance
of an effective and adequate system of internal control and a
compliant financial management framework lies with each Accounting
Officer.
The Parliament and the Tanzanian citizens look upon the
Controller and Auditor General for assurance in regard to financial
reporting and public resources management in the public sector in
relation to efficiency and effectiveness of programs
administration. My office contributes through recommendations given
towards improvements in the public sector performance. In this
regard, the Central Government and my office each has a role to
play in contributing to Parliamentary and public confidence
building in public resources management. However, while the roles
of Public Sector entities and NAO may differ, the desire for
efficient utilization of public resources remains a common ground.
In order to meet the expectations of the Parliamentarians and the
public at large, NAO continuously reviews its audit approaches and
processes to ensure that the audit coverage provides an effective
and independent review of the performance and accountability of
public sector entities. Moreover, we seek to ensure that our audit
coverage is well targeted and addresses priority areas so as to
maximize our contribution in improving public administration. Since
our work acts as a catalyst in improving financial management, we
continue to discuss with our
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auditees contemporary issues and developments that impact on
public sector management, particularly financial reporting and good
governance. The Public Accounts Committee (PAC), one of the
oversight committees of the Parliament, has increased interactions
with all Accounting Officers of MDAs and RS. With these efforts, I
believe the Central Government has a crucial role to play in order
to make sure that the Committee is empowered to ensure that the
Accounting Officers take actions on the recommendations issued to
them. The Committee should also make full use of the already
existing powers they have in this regard.
I would like to acknowledge the professionalism and commitment
of my staff in achieving our goals and undertaking the work
associated with meeting our ambitious audit programs despite
working for many hours in very difficult conditions marked with,
insufficient of working tools, low salaries and sometimes working
in very remote locations which are not easily accessible. I would
also like to acknowledge the work done by the Division of
Government Assets Management under the Ministry of Finance for
preparing and submitting reports on stock verification for the
sampled MDAs and RSs for the financial year 2012/13 that
highlighted issues which features in this report. I appreciate the
work done by this Division which I found appropriate and relevant
to be incorporated in my report.
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I hope that the National Assembly will find the information in
this report useful in holding the Government to account for its
stewardship of public funds and its delivery of improved public
services to Tanzanians. In this regard, I will appreciate to
receive feedback from the users of this report on how to further
improve it in the future.
Ludovick S. L. Utouh CONTROLLER AND AUDITOR GENERAL
_____________________________ National Audit Office, Dar es Salaam,
March, 2014
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Acknowledgement I would like to express my special appreciation
and thanks to every member of my staff for their tireless efforts
in ensuring that the statutory reporting deadline of submitting the
report to H.E the President of URT of 31st March was met. I would
like also to thank members of the Parliamentary Oversight Committee
- the Public Accounts Committee, for their brilliant comments,
directives and suggestions during the hearing of Accounting
Officers. As an institution charged with providing assurance and
confirming credibility in respect of how public funds have been
utilized, we pay critical attention to the accountability role our
Committee plays in facilitating common understanding of the
Controller and Auditor-Generals mandate to both internal and
external stakeholders.
I acknowledge with thanks the donor community particularly the
Government of Sweden through SIDA and SNAO, the World Bank through
the PFMRP project, the African Development bank (AfDB), GIZ, USAID,
Government of China and all well wishers who have contributed
immensely towards the transformation of my office. Their
contributions in developing the human resource, IT systems and
physical assets of our office has had tremendous impact in our
success. I am equally indebted to all other stakeholders including
the Minister of Finance, the Paymaster General, all Accounting
Officers of the MDAs and
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RS; Division of Government Assets Management and Public
Procurement Regulatory Authority under the Ministry of Finance for
their cooperation and provision of vital information needed for the
preparation of this report. I would also like to thank the
Government Printer for expediting the printing of this report for
its timely submission. Last but not least, I would like to thank
all our stakeholders including the public servants, media,
activists and the public at large without forgetting the role of
taxpayers of this country to whom this report is dedicated. Their
invaluable contributions in building the nation cannot be
underestimated. May the almighty God bless you all as we commit
ourselves to promote accountability on the use of public resources
in the country.
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LIST OF ABBREVIATIONS
AAG Assistant Auditors General
ADS Administrative Sector
AfDB African Development Bank
AFROSAI-E African Organization of Supreme Audit Institutional-
English Speaking Countries
AGR Annual General Report
ATCL Air Tanzania Company Limited
BoT Bank of Tanzania
CAG Controller and Auditor General
CCTV Closed Circuit Television
CEO Chief Executive Officer
CG Central Government
CS-DRMS Commonwealth Secretariat-Debt Recording and Management
System
DAG Deputy Auditors General
DDH Designated District Hospitals
DGAM Directorate of Government Assets Management
DMO Debt Management Office
DSA Debt Sustainability Analysis
EFD Electronic Fiscal Device
EPS Economic and Productive Sector
GIZ German International Cooperation
GN Government Notice
GoT Government of Tanzania
H.E His Excellency
HCMIS Human Capital Management Information System
IFAC International Federation of Accountants
IFMS Integrated Financial Management System
IFRS International Financial Reporting Standards
INTOSAI International Organization of Supreme Audit
Institutions
IPSAS International Public Sector Accounting Standards
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ISA International Standards on Auditing
ISSAIs International Standards of Supreme Audit Institutions
IT Information Technology
LGA Local Government Authorities
MAFC Ministry of Agriculture, Food Security and Cooperatives
MDAs Ministries, Departments and Agencies
MFAIC Ministry of Foreign Affairs and International
Cooperation
MoF Ministry of Finance
MoHSW Ministry of Health and Social Welfare
MTEF Medium Term Expenditure Framework
NA National Accounts
NAIVS National Inputs Voucher Scheme
NAO National Audit Office
NAOT National Audit Office of Tanzania
NHIF National Health Insurance Fund
NIDA National Identification Authority
NSSF National Social Security Fund
OPRAS Open Performance Review and Appraisal System
PA Public Authorities
PA&S Performance Audit and Specialized Audit
PAA Public Audit Act No. 11 of 2008
PAC Public Accounts Committee
PAR Public Audit Regulations
Para Paragraph
PCCB Prevention and Combating of Corruption Bureau
PE Procuring Entities
PFA Public Finance Act
PFMRP Public Financial Management Reform Programme
PFR Public Finance Regulations
PIMS Procurement Information Management System
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PMG Paymaster General
PMO-RALG Prime Ministers Office Regional Administration and
Local Government
PMU Procurement Management Unit
PO-PSM Presidents Office Public Service Management
PPA Public Procurement Act
PPE Property, Plant and Equipment
PPF Parastatal Pensions Fund
PPP Public Private Partnership
PPRA Public Procurement Regulatory Authority
PSPF Public Sector Pension Fund
RAS Regional Administration Secretariat
RAs Resident Auditors
REA Rural Electrification Agency
RS Regional Secretariat
Sect. Section
SES Service Sector
Shs. Tanzania Shillings
SNAO Swedish National Audit Office
SOS Social Sector
SSRA Social Security Regulatory Authority
TANROADS Tanzania Roads Agency
TCRA Tanzania Communications Regulatory Authority
TRA Tanzania Revenue Authority
TSSU Technical Support Services Unit
URT United Republic of Tanzania
USAID United State Agency for International Development
VAH Voluntary Agency Hospitals
VAT Value Added Tax
VT Vote
AccGen Accountant General
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Executive summary This general report provides a summary of the
final audit results of the financial statements of Central
Government (MDAs, Embassies & RS) in the country for the
financial year ended 30th June, 2013. An audit of financial
statements is the examination of the financial statements of an
entity with the view of expressing an independent opinion on
whether they present true and fair view of its operations in
accordance with the adopted financial report framework. This part
of the report therefore, gives an overview of the audit outcomes
followed by highlights of salient features noted in the course of
audit and summary of recommendations.
(i) General trend of audit opinions
The statutory audit on the financial statements for the year
ended 30th June, 2013 which comprised of 60 MDAs, 25 RSs and 32
Tanzania Missions has been completed. The summary of the main
findings of the audit is incorporated in this general report and
the details of the same have been issued separately in the
management letters to Accounting Officers. The following table
shows the outcome of the audit opinion issued including the general
trend:
Trend of audit opinion for the last four years
Opinion
Years Total % Total % Total % Total %
2009/10 78 76 21 21 2 2 1 1 102
2010/11 99 93 8 7 0 0 0 0 107
2011/12 103 95 5 5 0 0 0 0 108
2012/13 85 72 30 26 1 1 1 1 117
Unqualified Qualified Adverse DisclaimerTotal
Audited
entities
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The Adverse Opinion was issued to Tanzania Embassy in Muscat and
disclaimer opinion was issued to National Consolidated Accounts.
Generally, there has been a significant regression of the audit
opinions as compared to the previous years. Entities issued with
unqualified opinion regressed from 46 to 26 entities, representing
a decrease of 43% as compared to last years results. While entities
issued with unqualified opinion with matter of emphasis increased
to 59 from 57 recorded in the last year. Entities issued with
qualified opinions increased from 5 entities of last year audit to
30 entities which is 6 times the last year. Also 1 entity was
issued disclaimer of opinion and 1 entity was issued with adverse
opinion during the year which was not the case for the last year's
audit.
These audit results are not good as they signifies that, the
financial statements did not sufficiently meet the requirements of
the International Accounting Standards, in this case; IPSAS accrual
basis of accounting. This means that, there were some areas of the
financial statements which did not portray fair results of the
operations of the audited entities. The possible causes of these
setbacks may be due to the following factors: a) The migration to
IPSAS accrual basis of
accounting. Areas that need improvement include accounting
treatment of; expenses incurred during the year, recognition of
capital grants received in the cash flows statement, identification
and recognition of intangible assets
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and reconciliation between cash book and Bank statement.
b) Weaknesses in the IFMS, whereby the same
Epicor configurations used in IPSAS cash basis of accounting was
used in IPSAS accrual basis of accounting. As a result, accounting
transactions such as imprests were directly expensed, the system
did not recognize accrual transactions such as payables and
receivables, etc.
c) There was inadequate, capacity building through training
across departments of the audited entities to staff who are either
indirectly or directly involved in the preparation of financial
statements.
d) Financial reporting framework is under IPSAS accrual basis of
accounting while the basis of accounts of the budget is still under
cash basis which has resulted into mixed concepts on accounting for
various items of expenditure in the financial statements e.g.
accrual expenses were not reported in the statement of financial
performance.
e) Adoption of IPSAS accrual basis of accounting prior to
amendment of the existing legislation e.g. Public Finance Act No. 6
of 2001 (amended 2004) contradicts with the IPSAS accrual basis of
accounting philosophy.
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(ii) Highlights of the salient features in the current years
audit During the course of the audit, we once again noted a number
of weaknesses which are covered in details under the respective
chapters of this report. These weaknesses are mainly on non
compliance with the existing legislations/regulations, lack of
proper internal control systems and where such systems exist they
are to a large extent neglected. Major irregularities and
weaknesses noted during the course of my audit include the
following:
(a) Follow up on the implementation of audit
recommendations In my previous general reports I issued several
recommendations that needed Government's responses. In last year's
audit my report had 28 issues that needed PMG's structured
responses. I received responses from the PMG in which five (5)
issues have been cleared while the remaining 23 issues were still
awaiting for responses.
I also made a follow up on the implementation of my
recommendations on the individual audit reports issued to each of
the Accounting Officers of the MDAs. For MDAs, there were 960
issues from 52 MDAs. Out of 960 issues, 401 (42%) were completely
implemented, 276 (29%) were partially implemented and 283 (29%)
were not implemented at all. For Regional Secretariats (RS), there
were 578 issues from previous years' observations in 21 RAS out of
which 272 (45%) were completely implemented, 105 (18%) were
partially implemented and 201 (37%) were not implemented at
all.
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The analysis shows that implementation of my recommendations is
below 50%. This is not good pace in improving Government operations
and accountability. Failure to implement audit recommendations
causes the recurrence of weaknesses in future operations. I advise
government to hold public officers accountable and implement the
outstanding recommendations.
(b) Follow up on the PAC report
The Public Audit Act, 2008 requires the PMG to prepare responses
and action plan on the reports of the CAG by taking into account
observations and recommendations of the Parliamentary Oversight
Committees. Last year Parliamentary Oversight Committees set and
discussed observations as raised in my reports from MDAs/RS. PAC
issued a total of eleven (11) recommendations to government for
implementation through its report which was tabled in the National
Assembly on 7th December 2013. Up to the time of writing this
report, I had not received any responses from government concerning
the implementation of the PAC recommendations but I expect to make
follow up on their implementation in the forthcoming audit.
(c) Funds release and budget
There have been remarkable delays in release of funds from
Treasury and probably development partners for implementation of
development projects. This has led to delayed implementation or non
implementation of
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earmarked projects and increase in project costs as well as
having huge amounts of unspent balances at the year end. During the
year under review, development funds to the tune of
Shs.997,940,092,853 was not released while Shs.44,428,749,202 of
the released funds were not spent. Recurrent account had
Shs.315,463,083,291 unreleased while Shs.35,141,163,606 of the
released funds were not spent. In order to tackle the challenge of
late release of approved funds, the government is advised to align
Exchequer Issues with budget and revenue collections to avoid
release of funds close to the end of the financial period. By so
doing, it is expected that planned activities will be implemented
according to the approved timetable. In order for the Government to
reduce reliance in the external assistance for implementation of
the national development plans, the government is encouraged to
explore alternative internal sources of revenue. Details of
findings are in chapter four of this report.
(d) Expenditure management
On expenditure, we have noted weaknesses in internal control
systems over payments, lack of supporting documents in payments,
fruitless and wasteful expenditure, unauthorized expenditure,
missing payment vouchers non retirement of imprests and weak
budgetary controls together with, funds being used for
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unintended purposes. These weaknesses are detailed under chapter
four of this report.
(e) Lack of Debt Management Office
The continuous absence of a unified Debt Management Office (DMO)
is becoming a major concern in Public Debt management in the
country. The records about the public debts have become scattered
across various players thus making it difficult to have an accurate
data without cross examining with data from other players.
Coordination, which is a key aspect of debt management, is not
clearly defined as BoT, Planning Commission, AccGen, External
Finance Department, and Treasury Registrar are all tasked with
different functions of debt management apart from their core
activities. Thus, the absence of a unified DMO has derailed smooth
coordination and operations of public debt management.
(f) Government preparedness in implementation
of IPSAS accrual basis On reviewing the progress of IPSAS
accrual implementation, I noted that the government still faces
challenges such as backlog activities, lack of adequate
coordination, high risk on property, plant and equipment, and
governments budget system, financial procedures, and policies are
still on cash basis.
On reviewing the consolidated financial statements of the United
Republic of Tanzania, I
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observed that they did not include the revenue, expenditure,
assets and liabilities of the Local Government Authorities (LGAs)
and Parastatal Institutions which are in fact using the same IPSAS
accrual financial reporting framework. This is contrary to IPSAS 6
which requires a Controlling entity to issue consolidated financial
statements which consolidates all government controlled entities,
foreign and domestic.
I also noted that, the government lacked actuarial valuation of
benefits plan for Government retirees contrary to IPSAS 25. Without
performing actuarial valuation, the government has failed to arrive
at the initial liability for the Defined Benefit Plans and for that
case, the Government could neither determine the amount of
actuarial gains/losses, the past and current services nor interest
cost of the benefit plan.
(g) Assessment of Internal control system
During the year under audit, I noted that Internal Audit and
audit committees underperformed due to inadequate staffing,
resources, and inadequate composition of audit committees. It was
also noted that most of the MDAs/RS had no documented IT policy and
IT disaster recovery plans. Details of these observations are in
chapter five of this report.
(h) Human resources and payroll
Human resource is a driver of other resources and therefore, it
needs a special attention. On
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Human Resource Management, we noted non updating of staff
records on the payroll, shortage of staff as compared to
established level, weakness in staff performance appraisal systems
and delayed submission of statutory deductions. Details of these
anomalies and recommendation thereon have been detailed in chapter
six of this report.
(i) Procurement and contract management
On procurement and contracts management, we wish to recognize
efforts made by the Public Procurement Regulatory Authority (PPRA)
in capacity building programmes which have significantly
contributed in enhancing Procuring entities to be more compliant
with the requirements of the Public Procurement Act No. 21 of 2004
together with its underlying Regulations of 2005. However, some
MDAs and RS still do not comply fully with the requirements of the
Public Procurement laws in approving tenders, functioning of
procurement management units, appointment of tender evaluation team
and goods inspection and acceptance committees. These are detailed
in chapter seven of this report.
(j) Asset and liability management
Assets management is a key function to ensure MDAs and RAS
efficiently meet their objectives so as to generate economic
benefits. Major problems are the lack of evidence of legal
ownership of properties and equipments Non maintenance of fixed
asset register, grounded and un-serviceable noncurrent assets,
partial
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valuation of assets, improper recognition of intangible assets,
misclassification of transfer funds and unsettled liabilities.
Government through its respective accounting officers of MDAs/RS
should ensure that internal controls are strengthened to avoid
occurrence of the below noted anomalies in the coming years
.Detailed findings are in chapter nine of this report.
(k) Special audit
Section 29 (2) of the Public Audit Act, 2008 underpinned by
Regulation 78 of the Public Audit Regulations, 2009 allows me to
conduct special audits. Under this mandate, therefore, during the
year 2012/13 I carried out four (4) special audits for MDAs.
Separate reports have been compiled and availed to the Accounting
Officers concerned. However, details of the special audits
conducted are in chapter eleven of this report. Salient issues
raised from the special audits are summarized below:
A special audit on payrolls and other charges in respect of
referral hospitals, district designated hospitals and voluntary
agency hospitals for the years 2010/2011 and 2011/2012 noted
payment of salaries to non-existing employees Shs.754,992,183,
Unclaimed salaries retained in hospitals Shs.Shs.3,047,574,792 were
used to finance other unintended activities.
A special audit on procurement of MV Misungwi noted inadequate
supervision and monitoring of the contract between Permanent
Secretary, Ministry of Works and Sinnautic International.
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MV Misungwi was not officially handed over to the Ministry of
Works and Spare parts for MV Misungwi costing Euro 41,140 were not
delivered by M/S Sinnautic International even though they have been
paid for.
A special audit on National Agriculture Input Vouchers Scheme
noted that people who were not in the approved list of
beneficiaries received agriculture input vouchers without following
formal procedures; Inadequate supervision by the Agricultural
Extension officers on the seeds issued by Agro dealers and lack of
seeds and fertilizers inspection. Delays in procurement and
distribution of the agriculture input vouchers and lack of
operational manual of the system, information on fertilizer and
seed supply in the country and poor recording keeping of the
systems transactions.
Another special audit on Mkomaindo Nursing Training Centre noted
improper record keeping and misappropriation of fees
collections.
(l) Other issues
I came up with other issues as the results of the power vested
in me under Sect. 12 of Public Audit Act of 2008 and Reg. 34 of
Public audit regulation, 2009 which gives me power to make
recommendations to the Government for any matter that the CAG
considers to be better for the management of Public monies, Stores,
Securities Stamps and other Properties issues. Matters dealt with
in this regard are in chapter
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twelve where I have exercised my power and have made
recommendation on:
1) Operations of Government Executive
Agencies, 2) Government (MDAs) rental cost of office
buildings. 3) Issues relating to Management of Prisons
Department. 4) Role of CAG in auditing PPP Project and
Issues raised on Auditing of Political parties
Summary of Recommendations It is the duty of the Accounting
Officers to ensure the existence of a sound and effective internal
control system within the Votes operations in order to reduce the
enormous internal control deficiencies noted. Apart from the
detailed recommendations issued to Accounting Officers and sub
accounting officers for votes and Embassies/High commissions
through the individual management letters issued to the Accounting
Officer, I have the following general recommendations to make for
this year of audit:
Non implementation of some of the previous years audit
recommendations The government should put more efforts to ensure
that the issued audit recommendations are attended accordingly. The
Paymaster General should instruct Accounting Officers to take
necessary measures to improve documentation, which is one of the
main causes that contribute to missing documentation and therefore
failure to reply to some of the raised audit issues.
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Accounting Officers lack clearly documented action plans to
guide the implementation of the CAGs recommendations. The action
plan will be specific for issues which cannot be done within a
reasonable short period of time, i.e. those medium and long terms
recommendations. Insistence of having a register of implementation
of CAGs recommendation to be kept by every Accounting Officer is
another important mechanism. A register is a good tool to record
and track outstanding audit issues not attended to including the
progress attained so far.
Lack of Debt Management Office The need for a unified Debt
Management Office at the Ministry of Finance is one of the key
issues that were addressed during the financial year 2010/2011. I
advised the government to hasten the establishment of a unified DMO
in order to effectively and efficiently execute the government's
debt management functions. The government also needs to take
proactive and bold measures including but not limited to,
refraining from periodically converting liquidity papers for budget
financing, improvement on government revenue collection through
TRAs Revenue Gateway System, fiscal discipline and effective budget
estimates.
Bonded warehouses The government is advised to ensure adequate
controls over the operation of Customs and Bonded Warehouses in
order to collect respective custom
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dues. In addition, TRA is urged to comply and enforce existing
legislations. IPSAS implementation and Assets Management Since the
Government has a provision of five years as first adopter of IPSAS
accrual basis, the Government is advised to do the following so as
to effectively use this transition period:
Allocate enough resources in terms of finances and human capital
to facilitate smooth operation of the exercise.
The government through SSRA to fully comply with IPSAS 25
(Employee benefits) over accounting for Defined Benefit Plans in
order to determine its initial liability for defined benefit plans
due to IPSAS accrual first year adoption.
Establish IPSAS National Coordination Committee made up of
professional accountants/auditors and other professions who will be
overseers of the five years roadmap to make sure each step is taken
seriously and on time. So far one year has lapsed remaining with
four years. The committee should be chaired by the Accountant
General.
DGAM should work closely with stakeholders so as to enhance the
implementation of the action plan for smooth compliance with IPSAS
17, and make necessary adjustments in the financial statements by
separating land and building into two distinct asset
categories.
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The government is advised to initiate the process of
consolidating the financial statements of LGAs, RSs and controlled
entities in the financial statements of URT.
To properly configure the IFMS Epicor and the government's
budget systems for these systems to process transactions and
generate financial statements according to IPSAS accrual
requirements.
Procurement Management Government through PPRA has to conduct
several seminars with the aim of building capacity of PMUs, Tender
Boards, Accounting Officers and User Departments on the importance
of complying with the Public Procurement Act and its regulations.
Also its important to have Procurement Information Management
Systems (PIMS) in effective operation. This system is hosted by
PPRA. PPRA has to make sure that this system is user friendly to
end users so that MDAs/RS can easily use this system to improve
procurement activities. Human resource and Payroll management The
PO-PSM should revisit the establishment levels of MDA and RS and
come up with the ideal required level. In order to ensure good
performance within the government, the audited entities noted with
high level of understaffing, should find ways of filling the
vacancies to comply with the establishment level. Accounting
officers of MDAs and RS should work hard to ensure that they are
equipped with sufficient and qualified number of
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staff. Shortage of staff should be communicated to the
respective authorities including PO-PSM.
Salaries Paid to non Exiting Employees To avoid such losses in
future, Accounting Officers of the respective MDAs/RS should check
their payrolls periodically to confirm validity of all entries.
Communication should also be enhanced to ensure that names of
retirees, absconders or terminated employees are deleted from
payrolls once they cease to be in employment. Apart from that,
Accounting Officers should ensure unclaimed salaries in respect of
employees who are no longer in public service for one reason or
another are surrendered timely to Treasury as per given
instructions. Furthermore, Accounting Officers should ensure that
Human Capital Management Information System (LAWSON) is fully
utilized in order to obtain the anticipated value for money in
installing the software package. Expenditure Management This is one
of the areas noted during audit to accommodate a number of
challenges. Mostly, these challenges are caused by having Internal
Controls which are not correctly supervised and/or overridden by
the entrusted officers. Accounting Officers of MDAs/RS/Missions
should ensure all payments are authenticated by proper authorities
and proper supporting documents in line with the requirement of
Regulation 95(4) of the Public Finance Regulations of 2001.
Internal check need to be strengthened including strengthening the
pre-audit functions.
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Operation of overseas Tanzania missions A separate study is
ongoing in this area. However, basing on what was noted during
audit; I have the following general recommendations to make:
The respective Embassies/High Commissions, in corroboration with
MFAIC should cease paying Foreign Service allowances to the retired
officers who were in the missions and make arrangement for
immediate repatriation to their place of domicile. I also recommend
that management/relevant authority should consider recovery of the
amount paid to this staff.
Embassies/High Commissions management should communicate with
the MFAIC for the need of replacement of home based staff who
overstayed in one station. This will have positive effects in the
services delivery of the respect embassy/missions.
MFAIC management should consider a possibility of setting aside
fund in the budget for carrying out economic diplomacy and
promoting tourism attraction, taking into consideration that this
is an important task to the Countrys economy.
Special audits
The MoHSW in collaboration with the Treasury should improve
communication with Hospital managements to ensure immediate
deletion of ghost workers who are still in the Government Computer
Payrolls. District Designated and Voluntary Agency Hospitals to
adhere to the contract agreement signed between MoHSW and the
respective Hospitals on Board members' appointment.
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Appropriate action should be taken against the public officers
who failed to supervise and manage the execution of the Procurement
contract of MV Misungwi and Legal action should be taken against
M/S Sinnautic International who failed to implement all works and
deliver spare parts of MV Misungwi as per contracts despite of
being paid.
In respect of the National Agricultural Inputs Voucher Scheme
(NAIVS), the Beneficiaries registered list should be reviewed and
assessed if they truly exists and are meeting the criteria for
their existence; Agricultural Extension Officers, the Agriculture
Seeds Agency and Agriculture Research Institutions should be
involved in the review and assessment of the seeds and fertilizers
issued in the country. The procurement and distribution of vouchers
should be timely done and the Ministry should to come up with a
simplified Swahili version of an operational manual of the
system.
In respect of special audit conducted on Mkomaindo Nursing
Training Centre, the Accounting Officer is urged to strengthen
internal control system including improvement of record
keeping.
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CHAPTER ONE 1.0 BACKGROUND AND GENERAL INFORMATION
1.1. Audit Mandate and Rationale for Audit. 1.1.1 Audit
Mandate
This report is issued in accordance with Article 143 of the
Constitution of the United Republic of Tanzania, and Section 10 of
the Public Audit Act No. 11 of 2008, I am required to examine,
inquire into and audit Ministries, Regions, Independent Government
Departments and Agencies.
I am required by Article 143 (2) (C) of the Constitution of the
United Republic of Tanzania to audit and issue audit report at
least once every year in respect of the financial statements
prepared by Accounting Officers of the Government of the United
Republic of Tanzania, financial Statements of all Courts of the
United Republic of Tanzania and financial statements prepared by
the Clerk of the National Assembly. On the other hand, Section 10
(2) (a) of the Public Audit Act No. 11 of 2008 requires the
Controller and Auditor General to satisfy that all audited
financial statements have been kept in accordance with generally
accepted accounting principles. Currently, Ministries, Regions,
Independent Government Departments and Agencies are required to
prepare and present financial statements in
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accordance with either International Public Sector Accounting
Standards accrual basis of accounting or International Financial
Reporting Standards (IFRS). The submitted financial statements of
the MDAs RS and Embassies/High Missions were prepared in compliance
with IPSASs -accrual basis of accounting. Also Section 25(4) (a)
and (b) of the Public Finance Act require Accounting Officers to
submit to the Controller and Auditor General financial statements
prepared in accordance with generally accepted accounting practice
and in accordance with any instructions issued by the Accountant
General and approved by the Permanent Secretary to the Treasury and
stating the basis of accounting used. Accounting Circular No. 11 of
2012/2013 issued by Accountant General requires Accounting Officers
to prepare and present financial statement using IPSAS accrual
basis of accounting. A complete set of financial statements
prepared according to IPSAS - accrual basis includes the following
components: i. Statement of financial position; ii. Statement of
financial performance; iii. Statement of changes in net
assets/equity; iv. Cash flows statement; v. Statement of
comparison of budget and
actual amount and
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vi. Accounting policies and notes to the financial
statements.
Section 34 of the Public Audit Act, 2008 and Regulation 88 of
the Public Audit Regulations, 2009 requires the Controller and
Auditor General after examination and audit of all financial
statements to prepare and submit an annual general report. The
annual general report shall be submitted by the Controller and
Auditor General to the President of URT by 31st March each year and
shall be laid by the Minister or appropriate Minister to the
National Assembly within seven days of the next sitting of the
National Assembly.
1.1.2 Rationale for Audit 1.1.2.1 Audit objectives
The main objective of conducting the audit is to enable the
Controller and Auditor General to express an independent audit
opinion on the financial statements of Ministries, Independent
Government Departments, Agencies, Regional Administrative
Secretariats, Tanzania Revenue Authority and Consolidated National
Accounts for the year ended 30th June, 2013. Also, to establish
whether the financial statements were prepared in all material
respects, in accordance with the International Public Sector
Accounting Standards (IPSAS) accrual basis of accounting.
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1.1.2.2. Audit methodology A risk based audit methodology is
used in auditing financial statements. It emphasizes the need for a
detailed understanding of the entity and its environment, including
its internal controls and risk assessment analytics, and seeks to
place reliance where possible on governance arrangements and
organization's processes. The Offices audit methodology is
supported by a robust Regularity Audit Manual and TeamMate
Electronic Working papers.
To ensure that the audit methodology is kept up to date, NAOT
Management through TSSU performs an annual update to the existing
audit methodology. This upgrade incorporates all relevant changes
to the audit, accounting, and legal frameworks.
1.1.2.3 Audit scope
The audit was carried out in accordance with the International
Standards of Supreme Audit Institutions (ISSAIs) to provide
reasonable assurance as to whether the financial statements are
free from material misstatement. Audit procedures include
examination of records, internal controls, information systems,
control procedures and statutory disclosure requirements. The
general audit report summarizes findings from the audit that was
conducted
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on a sample basis; therefore, the findings are confined to the
extent that records, documents and information requested for the
purpose of the audit were made available to me.
1.2.0 Applicable Auditing Standards and
Reporting Procedures. 1.2.1 Applicable Auditing Standards
The National Audit Office of Tanzania is a member of the
International Organization of Supreme Audit Institutions (INTOSAI),
the African Organization of Supreme Audit Institutions (AFROSAI),
and the African Organization of Supreme Audit Institutions -
English Speaking Countries (AFROSAI-E). Cooperation with other
Supreme Audit Institution (SAIs) allows NAOT to share knowledge and
information about best practice and development in public sector
auditing. For the purpose of MDAs, the National Audit Office audits
in accordance with the International Standards of Supreme Audit
Institutions (ISSAIs) issued by the International Organization of
Supreme Audit Institutions (INTOSAI).
1.2.2 Reporting Procedures. The effectiveness of my audit relies
heavily on good communication with the Management of the audited
entities. Communication is necessary throughout the
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audit process which involves the following steps: i. Issuing
engagement letter to auditees
before the audit commences, to explain the nature, timing and
scope of the audit;
ii. Preparing Overall Audit Strategy at the end of planning to
explain the audit approach to be adopted basing on the preliminary
evaluation of the audited entity;
iii. Conducting Entrance meeting with the management of the
audited entity;
iv. Issuing an interim management letter or audit queries to
provide a list of audit findings and to provide management with an
opportunity to respond at the end of an audit;
v. Issuing draft management letters to inform the audited
entities of all issues found during the audit and provide
management with an opportunity to respond.
vi. Conducting exit meeting with the auditee to discuss audit
findings.
vii. Issuing final management letters to inform the audited
entities of all significant issues found during the audit and
provide management with an opportunity to respond.
viii. Issuing individual audit report to provide an overall
opinion on the financial statements and other aspects included in
the engagement letter.
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1.3.0 Number of audited entities and NAOTs set up
1.3.1 Number of Auditees
During the financial year 2012/2013, I audited 116 government
entities comprising of 59 MDAs, 25 Regional Administrative
Secretariats and 32 Tanzania Missions abroad. Individual audit
reports were issued for each of them. The proportional
distributions of these auditees are as shown in the table below:
Table 1: Number of Auditees
Auditee Total Percentage
MDAs 59 51
RSs 25 21
Tanzania Missions abroad
32 28
Total 116
Apart from audit of government entities mentioned above, I
audited the Consolidated National Accounts; pre audit of terminal
benefits and the accounts of Tanzania Revenue Authority.
1.3.2 Set up of NAOT The office is organized into audit teams, a
framework that attempts to align related audit entities and to
foster expertise in various areas of audit activities. The audit
teams are headed by Resident Auditors, who oversee and are
responsible for the audits
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within the assigned teams. Resident auditors are assisted by the
second in-charge. The auditors under each Resident Auditor are
divided in teams and each team is managed by the team leader. The
Resident Auditors are under the supervision of Assistant Auditors
General.
We have found it is useful to group our auditees into smaller
manageable locations named Zones which are headed by Assistant
Auditors General who report to the Deputy Auditors General.
According to NAOT structure, Deputy Auditors General report
directly to the Controller and Auditor General. The extract of the
NAOT organogram is as shown below:
Figure No. 1: NAOT organogram extract
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1.4.0 Statutory Responsibilities of the audited entities
1.4.1 Preparation and submission of the financial statements
Section 25(4) (a) and (b) of Public Finance Act, 2001 (revised
2004) requires Accounting Officers to submit financial statements
prepared in accordance with generally accepted accounting practice
and in accordance with any instructions issued by the Accountant
General approved by the Permanent Secretary to the Treasury. Also
the Accounting Officers are required to state the basis of
accounting used in the preparation of the financial statements.
Further, Accounting Circular No. 11 of 2012/2013 issued by the
Accountant General requires MDAs and RS to prepare and present
financial statements in line with section 25 of PFA and in
accordance with International Public Sector Accounting Standards
accrual basis. MDAs and RS have migrated from IPSAS cash basis to
IPSAS accrual basis of accounting during the financial year
2012/2013 towards achieving and improving good governance and
Accountability in the management of public resources. However, the
Government adopted transitional provisions and it is expected that
the Government will be fully compliant with IPSAS accrual basis of
accounting by the end of the financial year 2016/2017.
Management of MDAs and RS are required to establish and maintain
appropriate internal
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control systems to ensure that financial and other records are
reliable and complete, and they adhere to management policies,
orderly and efficient conduct of the MDAs business and guarantee
the existence of proper recording and safeguarding of assets and
resources.
Furthermore, Regulation 71(1) of the Public Audit Regulation,
2009 requires Accounting Officer to prepare and submit financial
statements to the Controller and Auditor General within three
months after closure of the respective financial year, i.e. 30th
June. In addition, Reg. 71(2) of the Public Audit Regulations, 2009
requires the Accountant General to prepare and submit consolidated
financial statements to the Controller and Auditor General within a
period of four months after the end of each financial year, i.e.
30th June.
1.4.2 Preparation and submission of management responses/replies
Regulation 86(1) (3) of the PAR, 2009 stipulates that, the
Controller and Auditor General shall compile the audit findings and
prepare a management letter and submit the same to the management
of the audited entity. The management of the MDAs shall provide
responses on the audit observations and submit the same to the
Controller and Auditor General within twenty one days from the date
of receipt of the management letter. In case of failure by the
management to respond to the management letter within
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twenty one days, then such management letter will be concluded
with the management responses and the issues raised may be
incorporated into the CAG's Annual General Report.
In addition, Regulation 93 of the PAR, 2009 requires every
Accounting Officer of the audited entity within twenty one days
from the date the general report is tabled before the National
Assembly, to prepare responses on the individual reports submitted
to them. The accounting officers shall submit responses to the
Public Accounts Committee and a copy to the Controller and Auditor
General.
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CHAPTER TWO AUDIT OPINION OVERVIEW, TYPES, BASIS AND THE
ACTUAL AUDIT RESULTS 2.0 An overview of the audit opinion
As started in the preceded chapters, the central government has
embarked on a bold and a major transformation by migrating into
IPSAS accrual basis as the framework of the preparation of the
government's financial statements, which was adopted effectively
from 1st July 2012. This is a very commendable milestone made by
the government for the improvement of its financial reporting.
Thus, this being the first time IPSAS compliant accrual financial
statements are being audited, the transition provisions adopted
under note 8 of the audited financial statements were taken into
consideration in forming the audit opinions. However, this
migration has impacted on the audit opinions issued during the year
because, unlike the previous years, this year the number of MDAs
issued with unqualified opinions dropped and MDAs issued with
qualified opinions increased significantly. It has also resulted
into Embassy of Tanzania in Muscat getting adverse opinion and
National Consolidated Accounts getting a disclaimer opinion. The
main objective of any audits conducted is to enable the auditor to
express an independent audit opinion as to whether the
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audited financial statements have been prepared in accordance
with applicable financial reporting framework and that they present
fairly the financial state of affairs of the audited entity.
However, this being a public sector audit, the objective has been
broaden to include assessment of the auditees compliance with laws
and regulations and the effectiveness of the internal controls
systems. An audit opinion is the certification from an independent
external auditor on whether the audited financial statements
present fairly in all material respect, the financial position,
financial performance and the cash flows of the audited entity.
This certification gives the users of the financial statements an
assurance on the validity and correctness of the financial
statements in order for them to make appropriate informed
decisions.
2.1 Types of the audit opinions Given the audit circumstances,
the following types of audit opinions may be expressed. Referred to
annexure 'A'
Unqualified Audit Opinion
Qualified Audit Opinion
Adverse Audit Opinion
Disclaimer Audit Opinion
Under given circumstances, I have also included salient issues
which do not affect audit opinions which in my opinion I considered
them to be of such importance
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for the users' understanding of the financial statements. In
this case I have included the following paragraphs;
Emphasis of matter paragraph, and
Other matters paragraph
2.2 Basis of the audit opinion and the actual audit results
2.2.1 Unqualified opinion This type of audit opinion is issued
when I conclude that, given the sufficiency and appropriateness of
the audit evidences, the financial statements of the audited
entities present true and fair view. This means that the
appropriate IPSAS compliant accounting policies have been applied
consistently in preparing the financial statements, applicable laws
and regulations have been complied with and that there are adequate
disclosures of all information relevant to the proper understanding
of the financial statements. During the year under review; 117
central government entities were audited which consisted of 60
MDAs, 25 RS and 321 Embassies/High Commissions, high commission and
permanent missions under the Ministry of Foreign Affairs and
International Cooperation. Out of these entities; 262 entities were
issued with unqualified opinion which is (22%) of the
1 18 Embassies, 12 High Commissions & 2 Permanent
Missions
2 21 MDAs, 2 RS & 3 Embassies
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total audited entities. These recorded a decrease of 43% as
compared to the last year audit. The table 2 below shows the list
of audited entities issued with unqualified opinion.
Table 2: List of the audited entities issued with
unqualified opinion S/N Vote Name
1. 8 Constitutional Review Commission
2. 9 Tanzania Public Service Remuneration Board
3. 12 Judicial Service Commission
4. 13 Financial Intelligence Unit
5. 20 President's Office State House
6. 25 Prime Minister's Private Office
7. 26 Vice President's Office
8. 27 Registrar of Political Parties
9. 30 President's Office and Cabinet Secretariat
10. 31 Vice President's Office
11. 33 Ethics Secretariat
12. 34 Ministry of Foreign Affairs and International
Cooperation
13. 39 National Service
14. 47 Simiyu Regional Secretariat
15. 57 Ministry of Defense and National Service
16. 58 Ministry of Energy and Minerals
17. 59 Law Reform Commission of Tanzania
18. 62 Ministry of Transport
19. 67 President's Office Public Service Recruitment
20. 84 Singida Regional Secretariat
21. 94 President's Office - Public Service Commission
22. 97 Ministry of East Africa Cooperation
23. 98 Ministry of Works
24. 2012 Tanzania High Commission in Ottawa
25. 2018 Tanzania Embassy in Washington
26. 2027 Tanzanian Embassy in Abu Dhabi Source: CAGs individual
reports for 2012/2013
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2.2.2 Emphasis of matters The emphasis of matters paragraph was
included in the audit report to draw users attention to a matter or
matters properly presented or disclosed in the financial statements
that are of such importance that they are fundamental to the users
understanding of the financial statements. This paragraph is
usually included immediately after the respective audit opinion
According to the ISSAIs3, the following issues formed the basis of
inclusion of the emphasis of matter in my reports; i. a substantial
doubt on the sustainability
of services delivery of the audited entities,
ii. lack of consistency in application of Generally Accepted
Accounting Principles,
iii. uncertainties related to future outcomes of exceptional
litigation,
iv. a situation where there was an early adoption of the
reporting standard, and
v. material inconsistency of fact in the annual report and
commentary in the financial statements where an amendment was
necessary and the entity refused to make the amendment.
3 ISSAI 1706: Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditors Report
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During year, out of 1174 audited entities; 545 of them were
issued with unqualified opinion with emphasis of matter paragraph
which is 46% of the total audited entities. List of these entities
is attached to this report as referred into annexure 'B'.
2.2.3 Other matters Other matters paragraph was included in the
audit report to draw users attention to any matter or matters other
than those presented or disclosed in the financial statements that
are relevant to users understanding of the audit, the auditors
responsibilities or the auditors report. This paragraph is usually
included immediately after the respective audit opinion and
emphasis of matter (if any). Accordingly, the following issues
formed the basis of inclusion of the other matters paragraph in my
audit reports; i. The identified material misstatement of
fact in other information in annual report which required
amendments but the management of the audited entities refused to do
so,
ii. Issues related to ineffective and inefficient audit
committees, internal audits and procurement management units,
iii. Immaterial non compliance with laws and regulations.
4 60 MDAs, 25 RAS and 32 Embassies 5 24 MDAs, 6 RS & 24
Embassies
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During year, out of 1176 audited entities; 57 of them were
issued with unqualified opinion with other matter paragraph which
is (4%) of the total audited entities. The detailed list of these
entities and the basis of the other matters is shown in table 3
below:
Table 3: List of audited entities issued with
unqualified opinion with other matters S/N Vote Name
1 16 Attorney General's Chamber
2 65 Ministry of Labour
3 78 Mbeya Regional Secretariat
4 2007 Lusaka High Commission
5 2032 Kuala Lumpur High Commission Source: CAGs individual
reports for 2012/2013
2.2.4 Qualified opinion
This type of opinion was issued following my conclusions based
on the audit evidence obtained that,
The identified misstatements in the financial statements,
individually or in the aggregate, were material but not pervasive
to the financial statements, or
In the situation where I was not able to obtain sufficient
appropriate audit evidence on which to base my opinion, and
concludes that the possible effects on the financial statements of
undetected misstatements could be material but not pervasive.
6 60 MDAs, 25 RAS and 32 Embassies 7 2 MDAs, 1 RS & 2
Embassies
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This means that, there was either; (i) a material limitation of
scope imposed
by the management of the audited entities or by the
circumstances which were not pervasive, or
(ii) a material disagreement due to inadequate disclosure or
inappropriate accounting treatment which were not pervasive.
The concept of material pointed out here means that, the
limitation of scope or disagreement is confined to a specific area
of the financial statements but the rest of the financial
statements show true and fair View. Specifically, the followings
were issues which were considered in issuing qualified
opinions;
i. Material misstatement in the financial statements,
ii. Material unsupported expenditures and revenues,
iii. Material non-compliance with laws and regulations such as;
unauthorized expenditure and use of revenue, unreported accounts,
breaches of procurement rules and regulations, unaccounted stocks
and fixed assets, failure to maintain stores and fixed assets
register and irregular or wasteful expenditure as well as material
losses through criminal conduct.
iv. Material expenditure incurred for which the government did
not receive the desired benefits
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When forming this opinion, the requirements of ISSAI 1706 was
also taken into consideration8. During the year, 309 entities were
issued with qualified opinion out of 117 audited entities which is
equivalent to 26%. This marks an increase of 6 times as compared to
the last years audit results which indicates that, these entities
have regressed. Annexure 'C' shows the list of entities issued with
qualified opinion.
2.2.5 Adverse opinion This type of opinion is issued after
having obtained sufficient appropriate audit evidence, and
concludes that financial statements contain misstatements due to
disagreement (whether inadequate disclosure or inappropriate
accounting treatment) which either, individually or in aggregate,
are both material and pervasive. This means that, the disagreements
distort the reliability of the financial statements as a whole.
Under this circumstance, we conclude that, the financial statements
do not present true and fair view. Specific issues leading to this
type of opinion included;
8 Inclusion of other matters/and emphasis of matters 9 12 MDAs,
16 RS & 2 Embassies
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i. fundamental misstatement in the financial statements,
ii. fundamental unsupported expenditures and revenues,
iii. fundamental non compliance with laws and regulations such
as; unauthorized expenditure and use of revenue, unreported
accounts, breaches of procurement rules and regulations,
unaccounted stocks and fixed assets, failure to maintain stores and
fixed assets register and irregular or wasteful expenditure as well
as material losses through criminal conduct.
iv. Significance expenditures incurred for which the government
did not receive the desired benefits.
During the year, one10 out of 117 audited entities, which is 1%,
was issued with adverse opinion.
2.2.6 Disclaimer of opinion In the real sense over the word a
disclaimer of opinion is not an opinion but a statement of fact
that the audit could not form an opinion. It is issued when the
auditor is unable to obtain sufficient appropriate audit evidence
on which to base the opinion, and the auditor concludes that the
possible effects on the financial statements of undetected
misstateme