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Annual General Report on the audit of LGAs for the financial
year 2018/19 i
THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE
Controller and Auditor General, National Audit Office, Audit
House, 4 Ukaguzi Road, P.O. Box 950, 41104 Tambukareli, DODOMA.
Telegram: “Ukaguzi",
Telephone: 255 (026) 2321759, Fax: 255(026)2117527, E-mail:
[email protected], Website: www.nao.go.tz
In reply please quote: Ref: CGA.319/421/01/12 30th March, 2020
His Excellency Dr. John Pombe Joseph Magufuli, President of the
United Republic of Tanzania, State House, P. O. Box 1102, 1 Julius
Nyerere Road, Chamwino, 40400 DODOMA.
SUBMISSION OF THE ANNUAL GENERAL REPORT
ON THE AUDIT OF LOCAL GOVERNMENT AUTHORITIES FOR THE FINANCIAL
YEAR 2018/19
I am delighted to submit the Annual General Report of the
Controller and Auditor General on the audit of Local Government
Authorities for the financial year 2018/19 pursuant to Article 143
(4) of the Constitution of the United Republic of Tanzania of 1977
(as amended from time to time) and Section 34 of the Public Audit
Act No. 11 of 2008.
Charles E. Kichere CONTROLLER AND AUDITOR GENERAL
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Annual General Report on the audit of LGAs for the financial
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VISION, MISSION AND CORE VALUES 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 in S.10 (1) of the Public Audit Act
No. 11 of 2008. Vision To be a highly regarded Institution that
excels in public sector auditing. Mission To provide high quality
audit services that improve public sector performance,
accountability and transparency in the management of public
resources. Core Values in providing quality services; NAO is guided
by the following core values:
✓ Objectivity: We are an impartial public institution,
offering audit services to our clients in unbiased manner.
✓ Excellence: We are professionals providing high quality audit
services based on standards and best practices.
✓ Integrity: We observe and maintain high standards of ethical
behaviour, rule of law and a strong sense of purpose.
✓ People focus: We value, respect and recognize interest of our
stakeholders.
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Annual General Report on the audit of LGAs for the financial
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✓ Innovation: We are a learning and creative public institution
that promotes value added ideas within and outside the
institution.
✓ Results Oriented:
We are an organization that focuses on achievement based on
performance targets.
✓ Team work Spirit:
We work together as a team, interact professionally, and share
knowledge, ideas and experiences.
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 involving 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 Annual General Report is intended for use by the
designated Government Authorities. However, it becomes a Public
document after being tabled in the Parliament
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Annual General Report on the audit of LGAs for the financial
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TABLE OF CONTENTS VISION, MISSION AND CORE VALUES
....................................... ii ABBREVIATIONS AND
ACRONYMS ......................................... xvi FOREWORD
................................................................
xviii ACKNOWLEDGEMENTS
...................................................... xx EXECUTIVE
SUMMARY ..................................................... xxii
CHAPTER 1
....................................................................
1 BACKGROUND AND GENERAL INFORMATION ..............................
1 CHAPTER 2
....................................................................
5 TYPES AND TREND OF AUDIT OPINIONS
................................... 5 CHAPTER 3
...................................................................
10 IMPLEMENTATION STATUS OF PRIOR YEARS’ AUDIT RECOMMENDATIONS
........................................................ 10 CHAPTER
4
...................................................................
16 BUDGET PREPARATION AND EXECUTION
................................. 16 CHAPTER 5
...................................................................
28 AUDIT OF FINANCIAL STATEMENTS
....................................... 28 CHAPTER 6
...................................................................
34 EVALUATION OF INTERNAL CONTROL, RISK MANAGEMENT AND GOVERNANCE
SYSTEMS ..................................................... 34
CHAPTER 7
...................................................................
43 PAYROLL AND HUMAN RESOURCES MANAGEMENT ...................... 43
CHAPTER 8
...................................................................
67 EVALUATION OF DEVELOPMENT PROJECTS AND OTHER PROJECTS .. 67
CHAPTER 9
...................................................................
81 PROCUREMENT AND CONTRACT MANAGEMENT ......................... 81
CHAPTER 10
................................................................
222 EXPENDITURE MANAGEMENT
............................................ 222 CHAPTER 11
................................................................
241 REVENUE MANAGEMENT
.................................................. 241 CHAPTER 12
................................................................
265 ASSETS MANAGEMENT
.................................................... 265 CHAPTER 13
................................................................
276 RESULTS OF SPECIAL AUDITS
............................................ 276 CHAPTER 14
................................................................
294
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CONCLUSION AND RECOMMENDATIONS ................................
294 APPENDICES
................................................................
308
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LIST OF TABLES
Table 1-1: Number of the audited LGAs for 2018/19
................... 3 Table 2-1: LGAs with unfavourable trend of
Audit Opinion ........... 8 Table 2-2: Trend of Audit Opinion over
period of four years ......... 9 Table 2-3: Summary of Audit
Opinions Issued to LGAs ................. 9 Table 3-1:
Implementation status of the prior years’ audit recommendations for
three consecutive years ......................... 12 Table 3-2:
Implementation status of recommendations in the Annual General
Report for LGAs for three consecutive years ................. 13
Table 3-3: Trend of Implementation status of LAAC directives ......
15 Table 4-1: Councils with Modified Opinion
.............................. 17 Table 4-2: Trend of approved
budget vs. actual collections ......... 17 Table 4-3: Trend of own
source revenue collected against recurrent expenditure
..................................................................
18 Table 4-4: LGAs percentage of dependence on recurrent grants
.... 19 Table 4-5: LGA percentage of independence on recurrent
grants... 20 Table 4-6: Percentage of under collection of own
source revenue . 21 Table 4-7: Trend of under released capital
development grants .... 23 Table 4-8: Trend of under released
recurrent grants ................. 24 Table 4-9: Trend of
unutilized recurrent grants ....................... 25 Table 4-10:
Trend of unspent development grants .................... 26 Table
5-1: Trend of long outstanding receivables and prepayments 30 Table
5-2: Trend of long outstanding payables ........................ 31
Table 6-1: Fraud issues noted in some of the LGAs
.................... 41 Table 7-1: Trend for staffing level in LGAs
for four consecutive years
................................................................................
44 Table 7-2: Trend analysis on LGAs staff in acting capacity
........... 45 Table 7-3: LGAs with employees’ who received their
net salaries below 1/3 of their monthly basic pay
................................... 47 Table 7-4: Trend analysis of
excessive deductions for four consecutive years
..........................................................................
48 Table 7-5: Inadequate staff performance review and appraisal
..... 50 Table 7-6: Ineffective data cleaning on employees’
information in the HCMIS
.........................................................................
52 Table 7-7: Unpaid staff claims and salaries arrears
................... 53 Table 7-8: LGAs with employees whose
promotions were delayed .. 55 Table 7-9: Institutions to whom
deductions were not remitted by LGAs
................................................................................
56 Table 7-10: Statutory deductions not remitted to respective the
institutions for four consecutive years
.................................. 57
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Table 7-11: Payment of salaries or deductions to non-existing
staff
................................................................................
59 Table 7-12: Unclaimed salaries/refunded salaries not remitted to
Treasury
......................................................................
61 Table 7-13: Payments made to temporary workers without valid
contracts
.....................................................................
63 Table 7-14: Non-contribution to workers’ compensation fund (WCF)
................................................................................
64 Table 7-15: Staff not taking their annual leave
........................ 66 Table 8-1: Projects’ financial
performance ............................. 68 Table 8-2: Trend of
Capital Development Expenditure ............... 70 Table 8-3: List
of LGAs which have diverted the Projects Funds .... 73 Table 8-4:
Outstanding contributions to Women and Youths ........ 74 Table
8-5: Trend of unrecoverable Women and Youth loans for four
consecutive years
........................................................... 75
Table 8-6: Status of school infrastructures in primary and
Secondary schools
........................................................................
79 Table 9-1: Value of procurements made by LGAs for three
consecutive years
..........................................................................
82 Table 9-2: Level of procurement compliance to LGAs for two years
................................................................................
83 Table 9-3: Inadequate preparation and implementation of annual
procurement plans
.......................................................... 84 Table
9-4: Trend of procurements made without competitive bidding
................................................................................
87 Table 9-5: LGAs that procured goods and services without Tender
Board approval
.............................................................. 88
Table 9-6: Trend of procurement of goods and services without
Tender Board approval for three consecutive years
................... 89 Table 9-7: List of LGAs that procured goods
and services from unapproved
suppliers....................................................... 90
Table 9-8: Trend of procurement from unapproved suppliers for a
period of three consecutive years
........................................ 90 Table 9-9: List of LGAs
that procured goods and services using imprest beyond allowed limit
....................................................... 91 Table
9-10: List of LGAs that received goods without being inspected
................................................................................
93 Table 9-11: Trend of procured goods received without inspection
. 93 Table 9-12: List of LGAs that procured goods, works and
services out of annual procurement plan
............................................... 94
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Table 9-13: Trend of procurements out of annual procurement plan
................................................................................
95 Table 9-14: LGAs with procured goods but not delivered
............ 96 Table 9-15: Maintenance of motor vehicles without
approval by TEMESA
.......................................................................
97 Table 9-16: List of LGAs with stores not recorded in ledgers
........ 98 Table 9-17: List of LGAs with micro procurements not
reported to Tender Boards and PPRA
................................................. 100 Table 9-18:
List of LGAs with irregular disqualification of the lowest
evaluated bidder
.......................................................... 102
Table 9-19: List of LGAs with contract variations without Tender
Board approval
............................................................ 103
Table 9-20: List of LGAs executed contracts without performance
bond
........................................................................
104 Table 9-21: List of LGAs that executed contracts without being
published on PPRA Journal and Tender Portal .......................
105 Table 9-22: LGAs that Delayed in Payment/honoring of
contractors certificates
................................................................
106 Table 9-23: LGAs that made payment to the contractor without
measurement of work done
............................................. 107 Table 9-24: Audit
Universe for Comprehensive Contracts Management Audit
........................................................................
108 Table 9-25: Scope of the Audit
......................................... 110 Table 9-26: Projects
implemented without EIA ...................... 111 Table 9-27:
Payments to Contractors for Unexecuted Works ...... 112 Table 9-28:
Contracts with Unapproved Tender Documents ....... 114 Table 9-29:
Contracts Not Included in APP and Budget ............. 116 Table
9-30: Contracts in which Single Sources and Restricted Tendering
were used ..................................................... 118
Table 9-31: Contracts Sum and Actual Funds Received .............
120 Table 9-32: Unpublished Tenders Notices and Awards Information
121 Table 9-33: Loss Resulted from Irregular Disqualifications of
the Lowest Evaluated Bidders
............................................... 122 Table 9-34:
Contracts with Limited Competition .................... 124 Table
9-35: Irregularities Noted ........................................
126 Table 9-36: Projects Initiated Without Building Permits
............ 129 Table 9-37: Unjustifiable Cost Items in BoQs
......................... 130 Table 9-38: Contracts whose Covenant
Declaration Forms were not Signed
......................................................................
132 Table 9-39: Contracts Awarded to Non-Responsive Bidders
........ 133 Table 9-40: Contracts Awarded to Ineligible
Contractors .......... 136
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Table 9-41: Contracts which cool off period not fully granted
.... 137 Table 9-42: Irregularities noted
........................................ 139 Table 9-43: Inclusion
of VAT for Exempted Projects ................ 140 Table 9-44:
Contracts Awarded without Approval by the Finance and Planning
Committee ......................................................
141 Table 9-45: Contracts Executed without Post-Qualification
Examination
............................................................... 143
Table 9-46: Contracts with Irregularities in Tender Opening ......
145 Table 9-47: Contracts Signed and Implemented with Unregistered
Joint Ventures
............................................................. 146
Table 9-48: Contracts whose Copies of Award Letters were not Sent
to PPRA
.....................................................................
148 Table 9-49: Unsupported Payment of TZS 40,737,922 and
Overpayment of TZS
66,539,685........................................ 149 Table 9-50:
Irregularities Noted on Arithmetic Errors Correction . 152 Table
9-51: Contracts Executed without Performance Securities . 154 Table
9-52: Deficiencies Noted in Submitted Performance Security
..............................................................................
156 Table 9-53: Contracts with Deficiencies on Advance Payments and
Their Guarantee
.......................................................... 159
Table 9-54: Contracts with Unauthorized Variations ................
161 Table 9-55: Contracts without Insurance Covers
..................... 164 Table 9-56: Irregularities Noted in
Negotiation ...................... 166 Table 9-57: Executed Works
Paid without Being Measured ......... 168 Table 9-58: Contracts
with Delayed Payments ....................... 169 Table 9-59:
Contracts with Unjustifiable Delays in Signing and Commencing
............................................................... 172
Table 9-60: Delays in Implementation and Completion of Projects175
Table 9-61: Contracts with Irregularities in Extension of Time ....
182 Table 9-62: Materials Test for Construction Projects Not
Performed
..............................................................................
185 Table 9-63: Projects Initiated Without Acquiring Tittle Deeds
.... 186 Table 9-64: Contractors Abandoned Sites for More Than Five
Months
..............................................................................
187 Table 9-65: Contracts whose Liquidated Damages were not Charged
..............................................................................
188 Table 9-66: Contracts Whose Updated Programs of Work were not
Submitted
..................................................................
190 Table 9-67: Unproductive Water Projects
............................. 191 Table 9-68: Omitted BoQ Items in
Tender Documents .............. 193
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Table 9-69: Withholding Tax not Deducted from Contractors’
Claims
..............................................................................
197 Table 9-70: Unconfirmed Utilization of Various Building
Materials 204 Table 9-71: Excavation of Trenches without Specified
Rates in BoQ
..............................................................................
207 Table 9-72: LGA’s spent more than 102 days in all stages of
Procurement Cycle
....................................................... 216 Table
10-1: Deficiencies noted in expenditure managements ..... 222 Table
10-2: List of twenty one LGAs with high value of unsupported
payments
...................................................................
224 Table 10-3: Trend of unsupported payments for the past three
years
..............................................................................
225 Table 10-4: List of LAGs with un vouched expenditure
............. 226 Table 10-5: Nugatory expenditure
..................................... 227 Table 10-6: Expenditure
charged to incorrect account code ...... 228 Table 10-7: LGAs made
payments without being pre-audited ..... 230 Table 10-8: List of
LGAs with un-refunded inter-account .......... 232 Table 10-9:
Number of LGAs with withholding taxes anomalies ... 233 Table
10-10: A list of LGAs whose payments for goods not received
..............................................................................
234 Table 10-11: LGAs with un-refunded deposit amount
............... 235 Table 10-12: Inadequate management of imprests
.................. 237 Table 10-13 below shows the list of LGA with
weakness in utilization of procured fuel and the amount involved.
........................... 239 Table 10-13: Weaknesses in the
utilization of procured fuel ...... 239 Table 10-14: Payments made
in respect of undisclosed prior years’ payables
....................................................................
240 Table 11-1: LGAs without updated and approved By-laws
.......... 242 Table 11-2: LGAs that were still using manual
receipt books ...... 243 Table 11-3: Missing manual revenue
receipts books ................. 243 Table 11-4: List of LGAs
without GOT-HoMIS ......................... 245 Table 11-5: Service
levy not collected ................................ 246 Table 11-6:
POS which were not registered in LGRCIS .............. 247 Table
11-7: Variances of revenue collected in various reports .... 248
Table 11-8: Revenue agents without binding contracts .............
250 Table 11-9: Bills adjustments requested and approved by the
same person
......................................................................
252 Table 11-10: Adjustments made in LGRCIS not supported
.......... 253 Table 11-11: Revenue collected but not remitted by
agents ...... 256 Table 11-12: Delay in banking of revenue
collected ................ 257 Table 11-13: Unresolved defaulters
due to unknown reasons ...... 258
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Table 11-14: LGAs with weaknesses in operating LGRCIS
........... 259 Table 11-15: Shortage of 258 POS devices
............................ 261 Table 11-16: List of POS devices
with negative log-in status ...... 264 Table 12-1: LGAs with
expired medical drugs ........................ 267 Table 12-2:
Non-current assets not insured ........................... 268
Table 12-3: List of LGAs with assets not coded
...................... 271 Table 12-4: List of LGAs without
maintenance register ............. 272 Table 12-5: List of LGAs
with improper maintenance of non-current asset registers
............................................................. 273
Table 12-6: Unutilized non-current Assets
............................ 274 Table 13-1: Special audits
conducted during the financial year 2018/19
....................................................................
276
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LIST OF APPENDICES Appendix 2-1: Status of Audit Opinion for
each LGA ................ 308 Appendix 2-2: LGAs with Modified
Opinions and their basis ........ 311 Appendix 2-3: Trend of audit
opinion for four consecutive years . 322 Appendix 3-1: Outstanding
audit recommendations for a period of two to more than five years
.................................................. 330 Appendix
3-2: Implementation status of the prior years’ audit
recommendations to LGAs
............................................... 333 Appendix 3-3:
Implementation status of General Report recommendations for the
financial year 2017/18 ................... 338 Appendix 3-4:
Implementation status of LAAC directives for the financial year
2018/19 ................................................... 352
Appendix 4-1: Own Source Revenue Trend against Approved Budget
..............................................................................
356 Appendix 4-2: Own Source Revenue Collected against Recurrent
Expenditure
................................................................
362 Appendix 4-3: LGAs with under collection of own source revenue
in percentage
.................................................................
367 Appendix 4-4: LGAs with Collection of Own Source Revenue above
the Approved Budget
.......................................................... 372
Appendix 4-5: List of LGAs with over released Development Grants
..............................................................................
374 Appendix 4-6: List of LGAs with Over released Recurrent Grants
. 375 Appendix 4-7: LGAs with under released Development Grants
.... 376 Appendix 4-8: LGAs with Under released Recurrent Grants
........ 380 Appendix 4-9: Unutilized recurrent grants
............................ 384 Appendix 4-10: Un-utilized Capital
Development Grants ........... 389 Appendix 4-11: Own Revenue not
allocated to Development Projects
..............................................................................
394 Appendix 5-1: Long Outstanding amount of Accounts Receivable .
397 Appendix 5-2: Long Outstanding Amount of Accounts Payable ....
401 Appendix 5-3: Pending Litigations against LGAs
...................... 405 Appendix 5-4: List of LGAs with Modified
Audit Opinions due to Misstatements
............................................................. 408
Appendix 6-1: Inadequate Information Technology general controls
..............................................................................
410 Appendix 6-2: Inadequate Performance of Audit Committees .....
415 Appendix 6-3: Weaknesses of Internal Audit Units
................... 419 Appendix 6-4: Weaknesses in Risk Management
...................... 424 Appendix 6-5: Weaknesses on Fraud Risk
Management Framework 426
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Appendix 7-1: Shortage of 162,342 staff in 169 LGAs
............... 427 Appendix 7-2: Acting staff and vacant posts
.......................... 432 Appendix 7-3: Deductions not
remitted to respective institutions 434 Appendix 7-4: Transfer
particulars of 731staff not updated in LAWSON
..............................................................................
436 Appendix 7-5: Inadequate management of biometric attendance
registers in LGAs
.......................................................... 437
Appendix 8-1: Projects implementation funds not entirely spent .
438 Appendix 8-2: Unspent Capital development funds
................. 444 Appendix 8-3: Anomalies noted during
execution of the Projects 451 Appendix 8-4: List of LGAs with
unimplemented projects .......... 466 Appendix 8-5: List of LGAs
with uncompleted Projects ............. 470 Appendix 8-6: LGA’s
with completed projects which are not in use
..............................................................................
478 Appendix 8-7: Non contribution of 10% own source to WYDF ......
481 Appendix 8-8: Outstanding loans due to WYDF
....................... 483 Appendix 8-9: Non disbursement of 20%
General Purpose Grant to villages
.....................................................................
486 Appendix 8- 10: Claims rejected by NHIF
............................. 487 Appendix 8-11: Under release of
Capitation Grants ................. 488 Appendix 8-12: Concerns
noted on implementation of Community Health Fund schemes
..................................................... 490 Appendix
8-13: Shortage of Physical Infrastructure in Secondary Schools
.....................................................................
491 Appendix 8-14: Shortage of Physical Infrastructure in Primary
Schools
..............................................................................
493 Appendix 9-1: Procurement of goods, consultancy and services ..
495 Appendix 9-2: LGAs which did not comply with the PPA, 2011 ....
500 Appendix 9-3: Weaknesses in performance of PMU and Tender
Boards
..............................................................................
503 Appendix 9-4: LGAs that Made Procurements without Competitive
Bidding
.....................................................................
506 Appendix 10-1: Inadequately supported payments
.................. 508 Appendix 10-2: List of Councils that
incurred ineligible expenditure
..............................................................................
510 Appendix 10-3: List of LGAs with unbudgeted expenditure
........ 511 Appendix 10-4: Number of LGAs with withholding taxes
anomalies
..............................................................................
512 Appendix 10- 5: Uncontrolled payments and overdrawn amount in
deposit account
........................................................... 513
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Appendix 10-6: Payments to suppliers without demanding EFD
receipts.....................................................................
514 Appendix 10-7: Imprests directly charged to expenditure code
... 515 Appendix 10-8: LGAs with unretired imprest
......................... 516 Appendix 10-9: Imprest not recorded
in register .................... 517 Appendix 10-10: Fuel whose
utilization records are missing ....... 518 Appendix 10-11: Fuel
issued to Private Cars without approval .... 519 Appendix 11-1:
Service Levy without turnover particulars ......... 520 Appendix
11-2: Revenue not banked ................................... 521
Appendix 11-3: Revenue not collected from various own sources . 522
Appendix 11-4: List of POS devices that were offline for long time
..............................................................................
524 Appendix 12-1: List of LGAs with grounded Assets
.................. 526 Appendix 12-2: List of LGAs with Abandoned
Assets ................ 528 Appendix 12-3: LGAs missing ownership
documents for Assets .... 532
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LIST OF FIGURES Figure 2-1: Audit Opinion Hierarchy
...................................... 6
Figure 3-1: Status of implementation of prior year
recommendations
for 2017/18
..................................................................
12
Figure 3-2: Implementation status of LAAC Directives
................ 15
Figure 11-1: Trend of amount not banked for four consecutive
years
..............................................................................
254
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ABBREVIATIONS AND ACRONYMS
AG Attorney General APP Annual Procurement Plan BoQ Bill of
Quantity CAG Controller and Auditor General CAP Crime Action Policy
CDCF Constituencies Development Catalyst Fund CHF Community Health
Funds Co. Company COWSO Community Owned Water Supply
Organisations CRB Contractors Registration Board DC District
Council DE District Engineer DED District Executive Director DWE
District Water Engineer EFD Electronic Fiscal Device EIA
Environmental Impact Assessment EMA Environmental Management Act
FFARS Facility Financial Accounting and Reporting
System GCC General Conditions of Contract HDPE High Density Poly
Ethylene HPMU Head of Procurement Management Unit ICT Information
and Communications Technology IFAC International Federation of
Accountants IFMS Integrated Financial Management System IPC Interim
Payment Certificate IPSAS International Public Sector
Accounting
Standards ISA International Standards of Auditing ISSAIs
International Standards for Supreme Audit
Institutions ITT Instructions to Tenders LAAC Local Authorities
Accounts Committee LAAM Local Authority Accounting Manual LGAs
Local Government Authorities LGDG Local Government Development
Grant LGFM Local Government Financial Memorandum LGLB Local
Government Loans Board
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Annual General Report on the audit of LGAs for the financial
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LGRCIS Local Government Revenue Collection Information
System
Ltd. Limited M/s Messieurs (French) meaning Gentlemen MC
Municipal Council MDAs Ministries, Departments, and Agencies MSD
Medical Stores Department MTEF Medium Term Expenditure Framework
NAO National Audit Office NHC National Housing Corporation No.
Number P4R Program for Results Financing Para. Paragraph PCCB
Prevention and Combating of Corruption
Bureau PMU Procurement Management Unit PO-PSM President’s Office
– Public Service
Management PO-RALG President’s Office – Regional
Administration
and Local Government POS Point of Sale PPA Public Procurement
Act PPR Public Procurement Regulations PPRA Public Procurement
Regulatory Authority PSO Public Sector Organisations PV Payment
Voucher Reg. Regulation SCC Special Conditions of Contract SDGs
Sustainable Development Goals Sect. Section STD Standard Tendering
Document TANROADS Tanzania National Roads Agency TBA Tanzania
Building Agency TC Town Council TZS Tanzania Shillings URT United
Republic of Tanzania VAT Value Added Tax WSDP Water Sector
Development Programme WYDF Women and Youth Development Fund
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Annual General Report on the audit of LGAs for the financial
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FOREWORD
This Annual General Report has been prepared pursuant to the
requirements of Article 143 of the Constitution of the United
Republic of Tanzania of 1977 (as amended from time to time) and
Section 34 of the Public Audit Act No. 11 of 2008.
Further, Regulation 88 of the Public Audit Regulations, 2009,
requires me to submit Annual General Report on the Audit of Local
Government Authorities annually to the President of the United
Republic of Tanzania on or before 31st March. Therefore, the Annual
General Report of LGAs for the year 2018/19 is due for submission
under the aforementioned legal bases. Annual General Report is the
outcome of the consolidated summary of my findings and
recommendations from the individual management letters and audit
reports from 185 Local Government Authorities for the year ended
2018/19. This report covers both compliance and financial audits.
The compliance audit evaluates whether the LGAs complied with the
parliamentary decisions, laws, legislative acts, Government
policies and Directives. The financial audit part of my report
communicates my audit opinion stating whether the respective LGAs’
financial statements were prepared in accordance with Accrual Basis
International Public Sector Accounting Standards (IPSASs) and other
governing legislations. My report also highlights on the results of
special and comprehensive contract audits conducted and the status
of implementation of the prior years’ audit recommendations and
Local Authorities Accounts Committee (LAAC) directives issued from
time to time.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 xix
My audit findings were made after consultation and extensive
discussion with the auditees and after due consideration of the
responses from the Government and managements of respective LGAs. I
am therefore assured that, my audit recommendations will add value
to the prevailing Government interventions towards better
stewardship of public resources and provision of improved quality
of services particularly to the local communities. In order to cut
across language barriers which may arise, my report is presented in
both English and Swahili languages. I also issue special citizens’
edition of my reports entitled “Toleo Maalum la Mwananchi” which
narrates key issues using simple language and drawings to portray
and convey my message to a wide range of stakeholders including
local communities.
Charles E. Kichere Controller and Auditor General of the United
Republic of Tanzania 30th March, 2020
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Annual General Report on the audit of LGAs for the financial
year 2018/19 xx
ACKNOWLEDGEMENTS
At the outset, I acknowledge and commend His Excellency, Dr.
John Pombe Joseph Magufuli, the President of the United Republic of
Tanzania for his commitment towards combating corruption,
inefficiencies and embezzlement of public resources. His emphatic
efforts on tax collection have helped Tanzania to reduce dependency
on budgetary support from development partners. I would also like
to acknowledge the working relationship between my Office and the
Parliamentary Oversight Committees pursuant to Section 38 of the
Public Audit Act, 2008. Upon completion of tabling of my reports,
the Local Authorities Accounts Committee (LAAC) had from time to
time been issuing directives which contribute largely to the
accountability of public resources.
I would also like to express my appreciations to the President’s
Office – Regional Administration and Local Governments, all
accounting officers and management of the audited entities who took
keen interest to see that the audits and field visits were well
organized and successful. I honestly commend such high level of
positivity and commitment during the audit process. It has always
been my pleasure to see such good working relationship been
extended in the future audits.
On the other hand, I acknowledge various professional
contributions from a number of stakeholders including the NGOs,
Development Partners, Government oversight bodies, law enforcement
bodies and professional bodies while discharging my constitutional
mandate. I sincerely acknowledge good relationship between my
office and Media. The Media have shaped the public attitude towards
my office and have certainly enhanced my office reputation. I have
learnt that the media messages are absorbed easily especially by
the local communities. So I am grateful for my office to have
access to the media to convey essential audit findings and
recommendations to the community.
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Annual General Report on the audit of LGAs for the financial
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Finally, if this report is a success, I dedicate it to the
National Audit Office staff for their dedication, professionalism,
enthusiasm and invaluable assistance. Without all this, I might not
be able to complete this task properly and timely. Besides, I
sincerely acknowledge their practical suggestions in the
improvement of the report and its presentation.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 xxii
EXECUTIVE SUMMARY
As stated in my foreword, the Annual General Report is the
product of the consolidated summary of audit findings from the
individual management letters and audit reports of 185 Local
Government Authorities for the year ended 2018/19. In that regard,
this report highlights on vital audit findings, provides
recommendations to the Government and suggests the possible
solutions and way forward.
(i) Types and trend of audit opinions
Out of 185 audited financial statements of LGAs, 176 (95
percent) had unqualified opinion and 9 (5 percent) had qualified
opinion. However, despite of significant number of unqualified
audit opinion, respective LGAs still had observation arising from
deviated parliamentary decisions, laws, legislative acts,
Government policies and directives though do not have direct impact
on the correctness of the submitted financial statements.
(ii) Implementation status of prior year audit
recommendations
My assessment on the implementation status of prior year audit
recommendations noted that 82 percent of 11 recommendations that
were issued on the General Report in the financial year 2017/18 had
not been implemented by the Government.
Further, my analysis of implementation of recommendations issued
separately to 185 LGAs revealed that, out of 10,428
recommendations, 3,334 (32%) recommendations were implemented;
2,891 recommendations (28%) were under implementation; 2,139
recommendations (20%) have not been implemented; 1,802
recommendations (17%) were reiterated and 262 recommendations (3%)
were overtaken by events.
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Annual General Report on the audit of LGAs for the financial
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(iii) Budget preparation and execution Analysis of trend of own
source revenue for the year under review revealed that 176 LGAs
collected TZS 639,401,151,405 as against the budget of TZS
725,633,451,671 which is 89 percent of the budgeted own source
revenue. This analysis did not include nine LGAs with qualified
opinion.
Further, I continued to observe unsteady releases of funds as
compared to the approved budget. For instance, 26 LGAs had approved
development grants budget of TZS 73,433,637,673 but received TZS
96,250,291,206 resulting to over release by TZS 22,816,653,533. In
addition, 157 LGAs had approved development grants budget of TZS
1,185,489,718,682 but received TZS 628,636,740,919 resulting to
under release by TZS 556,852,977,763. Similarly, 18 LGAs had
approved recurrent grants budget of TZS 369,440,284,951 but
received TZS 395,432,102,867 resulting to over release by TZS
25,991,817,916. While 167 LGAs had approved recurrent grants budget
of TZS 4,935,980,658,547 but received TZS 3,947,829,713,378
resulting to under release by TZS 988,150,945,169. Besides, I noted
a delay in the release of funds from Treasury for development
activities which led to significant balances of unutilized funds at
the year-end from 182 LGAs amounting to TZS 258,656,962,461.
(iv) Audit of financial statements
Reviewed Financial Statements noted outstanding receivables
amounting to TZS 131,854,275,521 in respect of 170 LGAs which
remained uncollected for a period exceeding twelve months.
Similarly, I have noted outstanding payables amounting to TZS
207,235,717,133 in respect of 169 LGA which have remained unpaid
for a period exceeding twelve months.
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Annual General Report on the audit of LGAs for the financial
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With regards to contingent liabilities, out of 185 LGAs
assessed, 115 LGAs had contingent liabilities totalling TZS
127,991,906,171 which were disclosed in the Financial Statements.
Majority of the pending legal cases resulted from land disputes and
termination of contracts.
(v) Evaluation of Internal Controls, Governance and Risk
Management Review of internal controls, governance and risk
management continued to reveal some issues which need immediate
management and Government intervention.
In the area of governance, I have noted Audit Committees from 38
LGAs to have not complied with Order 12 (5) (a) of LGFM, 2009 which
requires them to meet at least once in a quarter to review internal
and external audit reports including other matters of concern to
the LGAs. Internal Audit functions in 185 LGAs had inadequate human
resources and other key facilities for effective performance of
internal audit units. The consequences include failure to perform
and finalize all the planned audits for the financial year 2018/19.
Further, internal audit staff in 185 LGAs had not attended
trainings on IT systems and other area of importance as part of
capacity building. I performed assessment on risk management and
noted suspected fraudulent transactions involving TZS 1,247,399,461
in 12 LGAs which require Government attention. Existence of these
fraud cases is an indication that the LGAs involved lack
appropriate fraud detection measures as a result of ineffective
internal controls.
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Annual General Report on the audit of LGAs for the financial
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(vi) Payroll and Human Resources Management
My assessment on Payroll and Human Resources Management in 185
LGAs noted a continued decline in staffing level whereby 169 LGAs
had a shortage of 162,342 staff. The noted staff shortage had
adverse impact on service delivery particularly in the health and
education sector which have been mostly affected.
Similarly, 137 LGAs had 554 officers who are working under
acting capacity as either Heads of Departments or Units for more
than six months without confirmation. This was caused by either
lack of appropriate qualifications for the posts of the respective
officers or delays in appointing qualified persons for the
respective posts by the appointing authority. Examination of
payroll and its related supporting documents noted that 5,873
employees in 55 LGAs are receiving less than one third of their
basic salaries. I am concerned with such massive deductions from
salaries as it may lead to public servants being easily tempted to
engage in fraudulent practices. Further assessment revealed that 29
LGAs had outstanding staff claims amounting to TZS 11,136,486,194
which had remained outstanding for more than 12 months without
being paid. Non settlement of outstanding staff claims for long
time may demotivate employees and ultimately may affect their
performance. My review also noted 12 LGAs had unclaimed salaries
amounting to TZS 301,979,043 in respect of the retired, deceased,
absconded, and dismissed employee which had no documentation of its
remittance to Treasury. Recurrence of these payments indicates that
my previous years’ recommendations on improvement of payroll
management have not been effectively implemented.
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Annual General Report on the audit of LGAs for the financial
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(vii) Evaluation of development and other projects Assessment
made on the implementation of development projects noted
uncompleted projects worth TZS 77,509,365,805 in 81 LGA mainly
caused by late release of funds, inadequate community participation
in development activities, inadequate project management and
abandonment of projects for a long time.
Further, in the financial year 2018/19, I noted 19 LGAs could
not implement the planned capital development projects worth TZS
24,695,407,306 due to non-release of funds by central government or
under collection of own source revenue to finance these projects;
and also activities worth TZS 1,272,425,624 were not implemented in
12 LGAs despite the fact that the funds for implementation of these
projects were available. In addition to the aforesaid, 13 LGAs
diverted a total amount of TZS 1,251,851,985 meant for development
projects to finance activities which were not intended. I have also
learnt that 42 projects worth TZS 12,664,534,104 in 33 LGAs to have
been completed but were not in use. Assessment made on the
performance of Women, Youth and People with Disabilities Revolving
Fund noted that 115 LGAs did not contribute total amount of TZS
9,930,902,514 to the Fund; and also, in 111 LGAs due loans issued
to women, youths and people with disabilities groups amounting to
TZS 13,794,359,981 had not been recovered. I draw attention to 52
LGAs after noting rejected claims amounting to TZS 2,022,980,474
which were submitted to NHIF in respect of health service rendered
to patients with NHIF cards due to improper filling and reviewing
of claim forms by the responsible officers leading to existence of
various anomalies.
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Annual General Report on the audit of LGAs for the financial
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(viii) Procurement and contract management
I noted during the audit that 74 LGAs made uncompetitive
procurements worth TZS 32,461,005,953 without proper
justifications; that 47 LGAs procured goods and services worth TZS
9,234,451,830 without obtaining Tender Board approval; 34 LGAs have
made procurement worth TZS 4,353,203,757 from unapproved suppliers;
39 LGAs made procurements amounting to TZS 1,476,172,521 using
imprest; while 43 LGAs received procured goods worth TZS
5,007,530,026 without being inspected by Inspection and Acceptance
Committee.
Further, I noted that 38 LGAs procured goods, works and services
amounting to TZS 25,928,485,461 which were not in the respective
LGAs annual procurement plan; 27 LGAs ordered and paid TZS
1,090,741,646 for goods, but the same were not delivered by
suppliers; 8 LGAs paid a total amount of TZS 350,635,246 to private
garages for repair and maintenance of vehicles without being
approved by TEMESA; and 36 LGAs procured goods worth TZS
2,604,166,883 but were not recorded in stores ledgers. I performed
Comprehensive Contract Management Audit (CCMPA) in 29 LGAs for the
financial year 2018/2019. I have identified systemic irregularities
and set out conclusions and recommendations as detailed in chapter
nine of my report. I draw the attention to the following key
weaknesses noted during the audit. ✓ Payments to contractors for
unexecuted works TZS
101,006,500 ✓ Irregular disqualification of the lowest bidders
which denied
the opportunity to save TZS 176,800,000 ✓ Limited competition
for procurement worth TZS 588,853,945 ✓ Contracts awarded to
ineligible contractors TZS
9,100,000,000
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✓ Contracts signed and implemented with unregistered joint
ventures TZS 2,074,528,581
✓ Unauthorized contracts variations of TZS 1,003,083,139 ✓
Misappropriation of borrowed funds for construction of
commercial market at Namtumbo DC TZS 282,000,000 ✓ Construction
of unproductive water projects worth TZS
1,439,026,692
I also cast in my report, the PPRA annual performance evaluation
report for financial year 2018/19 by highlighting some of key
issues addressed by the Authority. PPRA is our key partner in
exercising watchdog and oversight roles.
(ix) Expenditure Management
In 38 LGAs, I noted that expenditures totalling TZS
10,623,048,421 were incurred out of the approved budgetary
provision for the year under review. In addition, no authority was
produced to regularize the noted unbudgeted expenditures.
Similarly, expenditures of TZS 1,133,435,958 in 28 LGAs were
either charged to items not relating to the effected expenditure
codes or charged to expenditure codes not budgeted for without
obtaining the necessary authority contrary to the prevailing
Regulations. Incorrect expense charging and reporting led to
unnecessary misclassifications of expenses as well as increased
costs associated with error corrections in the financial
statements. My review also noted expenditures amounting to TZS
3,450,794,429 in 92 LGAs had no proper supporting documents. In the
absence of supporting documents, I could not verify authenticity of
the expenditures incurred by the aforementioned LGAs. Unsupported
expenditures indicate ineffective controls in the LGAs over custody
and documentation of accounting records.
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Annual General Report on the audit of LGAs for the financial
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Besides, examination of accounting records have revealed missing
payment vouchers of TZS 630,203,898 in 14 LGAs as could not be
availed for audit purpose when requested. I am doubtful with
expenditure incurred in respect of the missing vouchers as may have
been involved in fraudulent transactions leading to a loss to the
government.
I also noted that 29 LGAs had not deducted withholding tax
amounting to TZS 310,708,788 from payments made in respect of
various procurements of goods, services, works and non-consultancy
services. Non-compliance with the tax laws and regulations may
attract penalties from Tanzania Revenue Authority. In addition,
deducted withholding taxes amounting to TZS 248,860,698 in 23 LGAs
were not remitted to the Authority. My examination of stores
records such as store ledgers, requisition and issue vouchers noted
fuel worth TZS 1,360,912,044 in 46 LGAs had no utilization records.
Further, there were no evidence availed by 9 LGAs for the
accountability of fuel worth TZS 218,764,015 issued to private
vehicles. It was therefore difficult to establish full
accountability of the procured fuel. I also observed that 14 LGAs
were charged a total of TZS 417,247,259 being penalties for
non-compliances with legislations or compulsory obligations. I
consider such payments to be nugatory since the respective LGAs
received no value for the expenditures incurred. In my report, I
have also probed ineligible payments totalling TZS 1,555,339,716 in
30 LGAs. I found that such payments violated provision of laws,
regulations and other provisions governing the expenditure of
public funds. I cast doubt on the adequacy of internal controls
system of aforesaid LGAs in detecting and preventing losses of
public monies.
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Annual General Report on the audit of LGAs for the financial
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I noted with concern uncontrolled payments in deposit accounts
in 67 LGAs totalling TZS 9,676,882,553. It appears to me that the
LGAs deposit accounts are not properly streamlined because deposit
registers are not adequately maintained or not being maintained at
all thus limiting the monitoring of deposits account transactions.
A review on management of imprest noted unrecorded, unretired and
imprests charged directly to expenditure code aggregating to TZS
2,214,575,172 from 99 LGAs. Likewise, I noted that payments
totalling TZS 1,511,055,580 in 28 LGAs were made before being
verified by the respective pre-audit sections. The noted shortfall
earmarks key control gaps of which in my opinion if not addressed,
could result into losses or misappropriations of the public
funds.
(x) Revenue Management
My assessment on revenue management noted adjustments made by 19
LGAs pertaining to deletion of erroneously recorded revenue
transactions in the LGRCIS totalling TZS 626,646,141. The
adjustments were requested and approved by the same person and
without Accounting Officer’s approval. I cast doubt on such
deviation from segregation of duties designed to prevent error and
fraud.
A look at banking of revenue noted that 84 LGAs reported
collections of revenue from various sources totalling TZS
10,392,553,320 without producing evidences of banking the same in
their respective bank account. In the absence of the banking
particulars; I cannot assure the public on the accountability of
the unbanked collections. I further noted that 206 health centers
and dispensaries in 8 LGAs had not installed the electronic revenue
collection system. This is contrary to Order issued on 17th
October, 2016 by Permanent
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Annual General Report on the audit of LGAs for the financial
year 2018/19 xxxi
Secretary (PO-RALG) vide a letter with Ref No.
CEB.151/297/02/“N”/61.
Likewise, 5 LGAs were still using manual revenue receipts in
parallel with LGRCIS. This violates PO-RALG instructions issued on
14th June, 2016 vide a letter with Ref. No. EB.151/297/01/92.
Further, I noted that 58 LGAs collected revenue amounting to TZS
5,839,093,607 pertaining to service levy without being supported by
turnover particulars from the respective corporate entities to
justify the adequacy of the amount collected. The aforementioned
list of weaknesses on revenue management is not conclusive. I
continued to note several unrectified anomalies emanating from my
previous years reports. I reiterate my recommendations on the five
LGAs which outsourced revenue sources to 143 agents without binding
contracts or agreement with the revenue collecting agents, 60 LGAs
which had 1,464 POS devices which were offline for the period
ranging from 2 to 1,249 days and two LGAs which had 14 POS devices
not been registered in the LGRCIS system.
(xi) Assets Management
Regarding Assets Management, it came to my attention that 3 LGAs
had their non-current assets registers not regularly updated.
Further, 8 LGAs did not maintain non-current assets registers
thereby making it difficult to verify the value as well as the
physical existence of some of the assets owned by the LGAs.
In addition, assets owned by 13 LGAs worth TZS 604,066,669 were
not engraved with the identification code numbers by the time of my
audit, this will make it difficult to identify an asset in case of
loss. During field inspection, I observed government vehicles and
plants in 121 LGAs grounded in either LGAs yards, private
garages
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Annual General Report on the audit of LGAs for the financial
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or TEMESA for the period ranging from 6 months to 20 years. Some
of the defects were observed to be very minor for the vehicles such
as ambulances which are supposed to discharge services, to be
abandoned for that unnecessary length of time. Some vehicles are
rusting away and the parts being removed or stolen indicating that
they are no longer serviceable. I also attended annual stock taking
exercises to assess the amount of stock held by LGAs at the end of
financial year and observed expired drugs worth TZS 7,334,114,927
in 14 LGAs. Expired drugs not only occupy a limited space but also
a delay in boarding them off can result into misuse of expired and
obsolete drugs due to lack of secure custody and storage facilities
of the same. I associated the accumulation of expired drugs in LGAs
with either procurement or in-kind deliveries and stockage of low
use or peculiar drugs from MSD to health centers and Dispensaries
without consultations. Lack of funds to meet disposal costs and
lengthy process of obtaining disposal approvals have further
fuelled the problem which needs immediate Government
intervention.
(xii) Results of special audits
During the year under review, I conducted special audits in
seven LGAs. In addition to other noted irregularities, I detected
apparent fraud and losses totalling TZS 6,197,041,125 as summarised
in the table below.
S/N Name of
Auditee Financial year Requested
by Suspected fraud and losses (TZS)
1. Bahi DC 2013/14 to 2017/18
PCCB 61,797,235
2. Kondoa DC 2013/14, 2011/12 to 2018/19
PCCB 1,952,002,379
3. Chemba DC 2013/2014, 2011/12 to 2018/19
PCCB 164,855,242
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Annual General Report on the audit of LGAs for the financial
year 2018/19 xxxiii
S/N Name of Auditee
Financial year Requested by
Suspected fraud and losses (TZS)
4. Kongwa DC 2011/12 to 2018/19
PCCB 481,219,673
5. Mpwapwa DC
2015/16 to 2017/18
PCCB 20,320,000
6. Masasi TC 2014/15 to 2017/18
PCCB 238,093,000
7. Handeni DC 2008/09 – 2018/19 PCCB 3,278,753,596 Total
6,197,041,125
More insight on the findings from special audits have been
provided in Chapter 13 of my report. However, the detailed reports
have been issued separately to the Authorities which requested
special audits.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 1
CHAPTER 1
BACKGROUND AND GENERAL INFORMATION 1.1 Introduction
In exercise of the provisions under Article 143 of the
Constitution of the URT of 1977 (as amended from time to time), and
Sect. 10 (1) of the Public Audit Act No.11 of 2008 together with
Sect. 45 of the Local Government Finances Act No.9 of 1982 (Revised
2000), I have audited the financial statements of 185 Local
Government Authorities for the financial year ended 30th June,
2019. Detailed audit findings and recommendations arising from the
audit were reported in the management letters issued separately to
management of the respective LGAs. Key audit findings in those
management letters were used to compile this report. The report
also covers the results of special and comprehensive contract
audits conducted during the financial year 2018/19.
1.2 Audit Objectives My audit aimed at achieving the following
key objectives: ✓ To express an independent opinion on the
financial
statements prepared in accordance with Accrual Basis
International Public Sector Accounting Standards (IPSASs) and
relevant legislation. These financial statements comprise the
Statement of Financial Performance, Statement of Financial
Position, Cash Flow Statement and Statement of Changes in Net Asset
for the year then ended, and a Summary of Significant Accounting
Policies and Other Explanatory Information; and
✓ The objective of the compliance audit, according to the
International Standards of Supreme Audit Institutions, ISSAI
4000, was to provide the intended users with information on whether
the audited public entities actually complied
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Annual General Report on the audit of LGAs for the financial
year 2018/19 2
with parliamentary decisions, laws, legislative acts, policy,
established codes and agreed upon terms. Compliance audit was
performed on procurement of works, goods and services aimed at
examining in detail how the accounting officers of the audited
entities exercised their responsibilities regarding the procurement
process.
1.3 Audit Scope
The audit was carried out in accordance with the International
Standards of Supreme Audit Institutions (ISSAIs) and other audit
procedures as were deemed appropriate under the circumstances. This
covered the evaluation of the effectiveness of the financial
accounting system and internal controls over various activities of
LGAs. The audit was conducted 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. Audit findings and recommendations arising from
examination of the accounting records, appraisal of the activities
as well as evaluation of the internal control systems which require
management’s attention and actions, are set out in the management
letters that were issued separately to 185 LGAs. Because of the
inherent limitations of an audit, together with the inherent
limitations of internal control, there is an unavoidable risk that
some material non-compliance may not be detected, even though the
audit was properly planned and performed in accordance with the
ISSAIs. The total number of LGAs audited in 2018/19 has not changed
when compared to the total number of LGAs audited in 2017/18. The
number remained the same at 185.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 3
During the financial year 2018/19, my office audited 185 Local
Government Authorities as analysed by their respective categories
in Table 1-1 below:
Table 1-1: Number of the audited LGAs for 2018/19 S/N Category
of the Reporting Entity No. of Entities 1. City Councils 6 2.
Municipal Councils 20 3. Town Councils 22 4. District Councils
137
Total 185 1.4 Audit Methodology
Office of the Controller and Auditor General being a member of
professional bodies (INTOSAI, AFROSAI and AFROSAI-E) applies
standards and guidelines issued by these bodies. INTOSAI issues
external auditing standards (ISSAIs) for public sector entities and
the United Nations. These standards require auditors to comply with
ethical requirements, plan and perform the audits to obtain
reasonable assurance whether the financial statements are free of
material misstatements whether due to fraud or errors.
My audit dwells on performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements. The procedures selected include evaluating the
appropriateness of accounting policies used, assessing
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial
statements.
Also, I consider internal control relevant to the subject
matter, but not for the purpose of expressing an opinion on the
effectiveness of the audited entities’ internal controls.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 4
1.5 Reporting process The audit process follows a participatory
approach; whereby. the audited entity is fully involved throughout
the process. The participatory audit approach takes on board the
accounting officers, senior management officers, audit committees
and internal audit units, as we believe they are in the top
position to provide appropriate responses regarding the accuracy of
the financial statements and other documents that are relevant to
the audit including their compliance with laws and regulations.
Further, audit findings are reported against the defined criteria
or best practices, and I recommend action for future improvements
to the management of the audited LGAs through issuance of
management letters. Also, I issue an audit opinion/report featuring
on material findings in the audited financial statements,
compliance with relevant laws and regulations, as well as
significant deficiencies in internal controls.
1.6 Preparation and submission of the Financial Statements
Order 31(1) of LGFM, 2009 requires Accounting Officers to
prepare final accounts and submit them to the Controller and
Auditor General for audit purposes on or before 30th September of
each financial year. The same Order places responsibility on the
LGAs’ management to prepare financial statements in accordance with
the laws, regulations, directives issued by the Minister
responsible for Local Governments, the LGFM, 2009 and IPSASs
accrual basis of accounting.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 5
CHAPTER 2
TYPES AND TREND OF AUDIT OPINIONS 2.1 Introduction
According to International Standards of Supreme Audit
Institution (ISSAIs), the objectives of conducting audit of
financial statements is to enable an auditor to express independent
audit opinion as to whether the financial statements are prepared
in all material respect in accordance with the applicable financial
reporting framework and thus give a true and fair view or fairly
present in all material respect, the state of affairs of the entity
in a given financial year.
The requirement of me to express an audit opinion is spelt under
Sect. 10 (2) of the PAA No.11 of 2008. Besides, pursuant to Sect.
48(3) of the Public Procurement Act No.7 of 2011, I am required to
state in my annual audit report whether or not the audited entity
has complied with the provisions of the Public Procurement Act and
its accompanying Regulations.
2.2 Types of Audit Opinions Generally, there are two categories
of audit opinions, unmodified (unqualified) and modified audit
opinion. The Controller and Auditor General may issue unqualified
opinion on the financial statements which were prepared and
complied in all material respect with applicable accounting
standards.
In accordance with ISSAI 1705 (Modifications to the Opinion in
the Independent Auditor's Report), Modified Opinion has three
categories of opinion that are issued on the Financial Statements
which indicate that financial statements are not prepared in all
material respect in compliance with applicable accounting
standards. These are qualified opinion, adverse opinion and
disclaimer of opinion.
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✓ Qualified Opinion is issued to the Financial Statements when
concludes that misstatement existing in the financial statement are
material but those misstatements are not pervasive. It is issued
when the misstatement revealed by auditor affects only specific
balances and not whole financial statements.
✓ An Adverse Opinion is expressed after an auditor obtains
sufficient appropriate audit evidence and concludes that there are
material misstatements. The International Standard of Supreme
Auditing Institution requires auditors to express an adverse
opinion if the material misstatements, significantly affect the
whole financial statements.
✓ Disclaimer of opinion is issued when auditors could not obtain
sufficient appropriate audit evidence to support their opinion.
Figure 2-1:Audit Opinion Hierarchy
2.3 Emphasis of Matter paragraph A paragraph included in the
auditor's report that refers to a matter appropriately presented or
disclosed in the financial
Audi
t O
pini
on
Modified Opinion
Qualified Opinion
Adverse Opinion
Disclaimer of OpinionUnmodified (Unqualified) Opinion
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Annual General Report on the audit of LGAs for the financial
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statements that in the auditor's judgment, is of such importance
that it is fundamental to users' understanding of the financial
statements.
2.4 Other matters paragraph Other matters paragraph means a
paragraph included in the auditor's report that refers to a matter
other than those presented or disclosed in the financial report
that in the auditor's judgement, is relevant to users'
understanding of the audit, the auditor's responsibilities or the
auditor's report.
2.5 Key audit matters paragraph Communicating key audit matters
provides additional information to users of the financial
statements to assist them in understanding those matters that in
the auditor's professional judgment, were of most significance in
the audit of the financial statements of the current period.
2.6 Trend of Audit Opinion During the year under review, I
issued 176 unqualified opinion the same number as in previous
financial year, implying that nine LGAs were issued with qualified
opinions. No adverse or disclaimer of opinion issued during 2018/19
unlike previous financial year where I issued one adverse opinion
and one disclaimer of opinion.
2.7 LGAs with unfavorable trend of audit opinion I draw
attention to nine LGAs which dropped from Unqualified Opinion in
previous financial year to Qualified Opinion in the financial year
under review. I am concerned with declining performance of the
respective LGAs on the aspect of Financial Statements preparation.
Details of the LGAs with unfavorable trend of Audit Opinion are
shown in Table 2-1 below.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 8
Table 2-1: LGAs with unfavourable trend of Audit Opinion SN Name
of the LGA 2017/18 2018/19 1. Buhigwe DC Unqualified Qualified 2.
Butiama DC Unqualified Qualified 3. Handeni DC Unqualified
Qualified 4. Karatu DC Unqualified Qualified 5. Mkalama DC
Unqualified Qualified 6. Nkasi DC Unqualified Qualified 7. Songea
DC Unqualified Qualified 8. Songea MC Unqualified Qualified 9.
Tabora MC Unqualified Qualified
2.8 LGAs with favorable trend of audit opinion
It is worth noting that I express unqualified opinion based on
the applicable financial reporting standards. Therefore,
unqualified opinions issued during the year under review shall not
be perceived or concluded that the respective LGAs are spotless in
terms of their operations.
In the respective LGAs where unqualified opinion were issued, I
still noted several non-compliance issues and deviations from the
parliamentary decisions, laws, legislative acts, government
policies and directives which as per applicable financial reporting
standards do not necessitate me to modify my audit report. However,
I communicate separately such irregularities in the management
letters for further management action.
Kigoma/Ujiji Municipal Council which had Adverse Opinion for
four consecutive years and Nyang’hwale District Council which had
Disclaimer of Opinion both revealed significant improvement and
were issued with Unqualified Opinion during the financial year
2018/19. Further, 167 LGAs continued to maintain the same status of
Unqualified Opinion like previous financial year.
A trend of audit opinion issued to LGAs during a span of four
consecutive years is shown in Table 2-2 below.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 9
Table 2-2: Trend of Audit Opinion over period of four years
Opinions Unqualified Qualified Adverse Disclaimer
Tota
l LG
As
Years Total % Total % Total % Total %
2018/19 176 95 9 5 - - - 185 2017/18 176 94 7 4 1 1 1 1 185
2016/17 166 90 16 9 3 2 - - 185 2015/16 138 81 32 19 1 1 - -
171
Detailed status of audit opinion, basis of opinion and trend of
audit opinion for four consecutive years are shown in Appendix 2-1,
Appendix 2-2 and Appendix 2-3 respectively to this General
Report.
2.9 Audit opinions issued to different classes of LGAs As stated
in the previous chapters, operations of LGAs are carried out in
four categories of Councils. Table 2-3 shows categories of LGAs and
Audit Opinions issued during the year under review. Table 2-3:
Summary of Audit Opinions Issued to LGAs
I call for the management of LGAs with declining performance to
ensure that sufficient controls are in place to prevent the
recurrence of similar misstatements in the Financial Statements
which led to modification of my audit opinion.
Category of LGA
No. of LGAs
Types of Opinion Unqualified Qualified Adverse Disclaimer
City 6 6 - - - Municipal 20 18 2 - - Town 22 22 - - - District
137 130 7 - - Total 185 176 9 - -
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Annual General Report on the audit of LGAs for the financial
year 2018/19 10
CHAPTER 3
IMPLEMENTATION STATUS OF PRIOR YEARS’ AUDIT RECOMMENDATIONS
3.1 Introduction
This chapter provides status of the agreed action plans by
Accounting Officers to ensure my recommendation and LAAC directives
are implemented in line with the agreed timeframe and the actions
undertaken have effectively mitigated the weaknesses identified
during the previous audits. Section 40 of the Public Audit Act No.
11 of 2008 (as amended by Miscellaneous Amendment No.1 of 2013)
requires me to incorporate in the Annual Audit Report, the
implementation status of the action plan prepared by Accounting
Officers and consolidated by the Paymaster General (PMG). To meet
this requirement of the law, status of the remedial actions taken
in the implementation of my recommendations and LAAC directives are
further discussed in this chapter. My assessment on the
implementation status revealed that management of the Councils has
been slow in implementing my previous years’ recommendations.
Failure on the part of the Councils to implement my previous years’
audit recommendations has resulted to recurrence of similar
observations which contributes to ineffective control of resources
thus affecting service delivery to the public. Some of the audit
recommendations have been outstanding for a period of two to more
than five years. Generally, a total of 2387 audit recommendations
from audit of 172 LGAs have been outstanding for a period of two
years or more as detailed in Appendix 3-1 of this report. In my
previous reports, I expressed my concerns regarding unsatisfactory
implementation of the long outstanding audit
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Annual General Report on the audit of LGAs for the financial
year 2018/19 11
recommendations and repetition of queried issues relating to
general, individual, special audit reports and LAAC directives.
Furthermore, for the year under review, there are weaknesses that
were reported in my previous years’ reports but also recurring in
current year’s report. The consolidated responses and action plan
submitted by the Paymaster General have not fully addressed my
previous years’ recommendations. Implementation status of the
previous years’ audit recommendations regarding the General Report,
Individual Reports, and Special Audit Reports as well as LAAC
directives are as follows:
3.2 Implementation status of the prior years’ recommendations to
LGAs A total of 10,428 recommendations were issued to 185 LGAs
during the financial year 2017/18. My analysis on implementation of
the recommendations issued shows that, 3,334 (32%) recommendations
were implemented; 2,891 (28%) were under implementation; 2,139
(20%) have not been implemented; 1,802 recommendations (17%) were
reiterated and 262 (3%) were overtaken by events as represented on
the pie chart 3-1 below. Detailed status of these recommendations
is shown in Appendix 3-2.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 12
Figure 3-1: Status of implementation of prior year
recommendations for 2017/18
Table 3-1: Implementation status of the prior years’ audit
recommendations for three consecutive years Status 2017/18 2016/17
2015/16 Implemented 3,334 4,469 4,251 Under implementation
2,891 2,768 2,993
Not implemented 2,139 2,168 3,213
Reiterated 1,802 0 0 Overtaken by events 262 1,830 2,256 Total
recommendations
10,428 11,756 12,643
Generally, the implementation pace of my recommendations is not
satisfactory. Therefore, more efforts are called for to fully
implement the outstanding recommendations especially those which
have remained unimplemented for more than a year.
Implemented32%
Under implementatio
n28%
Not implemented
20%
Reiterated17%
Overtaken by event
3%
2017/18
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Annual General Report on the audit of LGAs for the financial
year 2018/19 13
Leaving audit recommendations unattended for a long time, may
result into recurrence of similar observations in the coming year
thus contributing to inadequate performance of operations which in
turn affect service delivery to the public. I insist to the
Accounting Officers of the Local Government Authorities to exert
more efforts towards implementation of my audit recommendations in
order to enhance transparency and sense of accountability to the
public.
3.3 Implementation status of the prior years’ audit
recommendations based on the General Report of Local Government
Authorities I received the Government responses to my annual
reports for the financial year ended 30th June, 2018 through a
letter with Ref. No. CHA.116/474/01 dated 5th July, 2019. I commend
the effort made by the Paymaster General on behalf of the
government in providing detailed responses to my recommendations.
However, my assessment on the implementation status of my
recommendations shows that out of 11 recommendations that were
issued in the financial year 2017/18, two (18%) recommendations
were under implementation and nine (82%) have not been implemented.
Details of the outstanding General Report recommendations are as
shown in Appendix 3-3 of this General Report. Table 3-2:
Implementation status of recommendations in the Annual General
Report for LGAs for three consecutive years Status 2017/18 2016/17
2015/16 Implemented 0 0 0 Under implementation 2 3 9 Not
implemented 9 2 5 Reiterated 0 8 0 Overtaken by events 0 0 0 Total
recommendations 11 13 14
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Annual General Report on the audit of LGAs for the financial
year 2018/19 14
Generally, implementation of the recommendations incorporated in
my Annual General Report of Local Government Authorities is not
satisfactory due to inadequate efforts towards addressing the
weaknesses noted in my reports. Failure to timely act on my
recommendations could result into recurrence of similar weaknesses
in subsequent years which could result into negative impact on the
effectiveness and efficiency of LGAs operations. I insist Paymaster
General to timely respond to my General report recommendations so
as to improve accountability and reduce recurrence of the noted
weaknesses.
3.4 Implementation status of LAAC Directives My assessment of
implementation status of LAAC directives for the financial year
2018/19 shows that most of the directives issued by LAAC have
remained outstanding for a long period without actions from
management of Local Government Authorities. Out of 958 directives
issued by LAAC to 158 LGAs during the year 2017/18, 388 (41%)
directives were implemented; 274 (28%) were under implementation;
281 (29%) had not been implemented and 16 (2%) were overtaken by
events as shown in Appendix 3-4 of this General Report.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 15
Figure 3-2: Implementation status of LAAC Directives
Generally, the implementation status of LAAC directives is not
satisfactory. I therefore urge all Accounting Officers of the
respective LGAs to discharge their managerial role and ensure all
outstanding directives are acted upon and similar weaknesses will
not recur in future for the purpose of improving LGAs’ performance.
Table 3-3: Trend of Implementation status of LAAC directives
Fina
ncia
l yea
r
No.
of
LGA
s
No.
of
Dir
ecti
ves
Impl
emen
ted
unde
r im
plem
enta
tion
Not
Im
plem
ente
d
Ove
rtak
en b
y ev
ents
2017/18 158 958 388 274 281 16 2016/17 138 882 391 322 169 0
2015/16 115 748 233 256 259 0
I recommend to the Government through PO-RALG to direct LGAs to
timely work on LAAC directives and ensure that LAAC directives are
responded as early as possible so as to improve performance of the
LGAs.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 16
CHAPTER 4
BUDGET PREPARATION AND EXECUTION
4.1 Introduction This chapter focuses on LGAs performance
towards plans and
budgets, collecting and making efficiency use of financial
resources which are in the form of own source revenue, grants from
Central Government as well as assistance from Development
Partners.
4.2 Budget overview
Sect. 43 (1) of the Local Government Finances Act, 1982 (Revised
2000) requires every Local Government Authority not less than two
months before the beginning of every financial year, at a meeting
specially convened for the purpose, pass a detailed budget of the
estimates of the amounts respectively (a) expected to be received
and (b) expected to be disbursed, by the Authority during the
financial year, and whenever circumstances so require, an authority
may pass a supplementary budget in any financial year.
The Medium Term Expenditure Framework (MTEF) usually
prepared for the current financial year as well as subsequent
two years is aligned with five years development plan (FYDP II),
policies and other National Planning Frameworks. In the year under
review, I made an assessment on the LGAs budget processes and noted
the following:
4.2.1 Council’s own source revenue trend against approved
budget for five years Own source revenue includes money received
in the form of
produce cess, fees, fines and penalties, license fees, building
permits and other own sources. These monies are solely utilized to
complement Central Government Funds and grants from Development
Partners.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 17
During the financial year 2018/19, I assessed 176 LGAs which
recorded a total collection of TZS 639,401,151,405 as own source
revenue out of the approved estimates of TZS 725,633,451,671
resulting into under collection of TZS 86,232,300,266 equivalent to
11 percent as detailed in Appendix 4-1. I could not reliably assess
the own sources revenues collected and Central Government grants in
9 LGAs issued with modified opinion due to material misstatements
in the financial statements as shown in Table 4-1 below. Table 4-1:
Councils with Modified Opinion SN Name of the LGA Type of Opinion
for
2018/19 1. Buhigwe DC Qualified 2. Butiama DC Qualified 3.
Handeni DC Qualified 4. Karatu DC Qualified 5. Mkalama DC Qualified
6. Nkasi DC Qualified 7. Songea DC Qualified 8. Songea MC Qualified
9. Tabora MC Qualified
Table 4-2 below shows a trend of Councils’ own source revenue
collection against approved budget over a period of five
consecutive years. Table 4-2: Trend of approved budget vs. actual
collections
F/Year Approved
budget (TZS) Actual
collection (TZS)
Variance Over/(under)
(TZS) %
2018/19 725,633,451,671 639,401,151,405 (86,232,300,266) 11
2017/18 677,965,549,714 566,729,291,189 (111,236,258,525) 16
2016/17 628,045,048,644 523,564,835,716 (104,480,212,928) 17
2015/16 536,203,527,158 482,898,501,332 (53,305,025,824) 10
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Annual General Report on the audit of LGAs for the financial
year 2018/19 18
F/Year Approved
budget (TZS) Actual
collection (TZS)
Variance Over/(under)
(TZS) %
2014/15 471,192,301,516 409,100,130,028 (62,092,171,489) 13
The table above shows that for five consecutive years there was
under-collection of own source revenue compared to the approved
budget.
4.2.2 Own source revenue collection trend against recurrent
expenditure Recurrent expenditure denotes various payments made by
LGAs to cover for their daily operations. They include wages and
salaries, purchase of goods and services and minor maintenances
made to LGAs’ assets. These are proportionally financed by
recurrent grants from Central Government and own source revenue.
During the financial year 2018/19, a total of 175 out of 176 LGAs
assessed, collected TZS 639,401,151,405 as own source revenue and
spent TZS 4,139,568,491,180 on recurrent activities. Refer to
Appendix 4-2 on expenditure financing from recurrent grants. Table
4-3 below summarizes five years trend of own source revenue
collected against recurrent expenditure. Table 4-3: Trend of own
source revenue collected against recurrent expenditure
Financial year
Actual collection
(TZS)
Recurrent expenditure
(TZS)
% of independ
ence 2018/19 639,401,151,405 4,139,568,491,180 15 2017/18
566,729,291,189 4,373,555,868,608 13 2016/17 523,564,835,716
4,656,643,395,963 11 2015/16 482,898,501,334 4,453,470,809,033 11
2014/15 409,100,130,028 3,569,212,750,970 11
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Annual General Report on the audit of LGAs for the financial
year 2018/19 19
Table 4-3 above depicts that LGAs can only sustain an average of
15 percent of total recurrent expenditure using own source revenue.
This implies that 85 percent of its recurrent expenditure depends
on grants. In this regard, LGAs are unable to perform their
operations effectively and may perhaps fail to deliver services to
the community in the event that Central Government financing comes
to an end. Table 4-4 below shows percentage of LGAs’ dependence on
grants to finance recurrent expenditure for three consecutive
years. Table 4-4: LGAs percentage of dependence on recurrent
grants
Percentage interval Number of LGAs
2018/19 2017/18 2016/17 91-100 85 103 118 81-90 68 57 45 71-80 9
11 13 61-70 8 15 05 51-60 2 - - 41-50 4 - -
From the table above, it is clear that 175 out 176 LGAs
assessed, depend on Central Government financing for 41 percent or
more. Besides, Dar es Salaam City Council has collections which
exceeded recurrent expenditures by TZS 11,410,338,000 as indicated
in Table 4-5 below.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 20
Table 4-5: LGA percentage of independence on recurrent
grants
Name of LGA
Actual Collection (TZS)
Recurrent Expenditures
(TZS) Variation (TZS)
% of Independence
Dar es Salaam CC 14,420,447,981 3,010,109,981 11,410,338,000
479
I recommend the LGAs to boost their revenue collection through
widening own source revenue base in order to reduce their
dependence on grants from Central Government.
4.3 Own Source Revenue Collection The main sources of revenue
for LGAs’ own source are produce cess, service levy, market fees
and charges, specific service levy, license fees and permits in
business activities.
During financial year under review, the scrutiny of own source
revenue collected by 185 LGAs noted the following issues:
4.3.1 Under collection of own source revenue TZS 121,456,501,136
During the financial year 2018/19, total of 126 LGAs budgeted to
collect TZS 463,951,507,416 from own source revenue but managed to
collect TZS 342,495,006,580 thus resulting to under collection of
TZS 121,456,501,136 equivalent to 26 percent of the total budgeted
own source revenue. Refer Appendix 4-3. Table 4-6 below shows a
score percentage-wise each LGA has recorded for under collection of
own source revenue.
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Annual General Report on the audit of LGAs for the financial
year 2018/19 21
Table 4-6: Percentage of under collection of own source revenue
Percentage interval
Number of LGAs 2018/19 2017/18 2016/17
81-90 2 - - 61-80 5 5 7 41-60 23 22 20 21-40 39 44 47 01-20 57
80 107
I am concerned with LGAs whose actual collection fell
significantly below the estimated amount classified in the range of
21-40% and above. This suggests that there is a possibility that
all potential sources of revenue were not fully exploited. Thus,
some of the planned activities to be financed using own source
revenue were not implemented. In order to enhance revenue
collections and enable LGAs to discharge their mandated obligations
more efficiently, I call upon LGAs to identify and exploit new
revenue sources including but not limited to: a) Formalizat