NaO_PublicFinInstns 0607

UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

REPORT OF THE CONTROLLER AND AUDITOR GENERAL

On the Financial Statements of Public Authorities and Other

Bodies for the Financial Year ended 30th June, 2007

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THE UNITED REPUBLIC OF TANZANIA NATIONAL AUDIT OFFICE

Telegram: “Ukaguzi" Telephone: 255(022)115157/8 Fax: 255(022)117527/2133555 E-mail: [email protected] In reply please quote

Ref. No.EAC.103/2006/2007

Office of the Controller and Auditor General

Samora Avenue,

P.O. Box 9080,

DAR ES SALAAM.

26th March, 2008

Letter of Transmittal Your Excellency, Jakaya Mrisho Kikwete The President of the United Republic of Tanzania P.O. Box 9120 State House Dar es Salaam Re: Submission of Annual Audit Report of Public Authorities and

Other Bodies 2006/07

Pursuant to Article 143 of the Constitution of the United Republic of Tanzania of 1977 (revised 2005), I hereby present to you my annual audit report for the audits carried out on the Public Authorities and other Bodies (PA&oBs) operations for the year ended 30th June 2007.

Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL

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Office of the Controller and Auditor General, National Audit Office

The statutory duties and responsibilities of the Controller and Auditor General are given in the Public Finance Act No. 6 of 2001 (revised 2004).

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

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

Our Core Values are:-

Objectivity: We are an impartial organization, offering

services to our clients in an objective, and unbiased manner;

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

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

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

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

Best resource utilisation:

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

© This report is intended to be used by Government Authorities. However, upon tabling of this report in Parliament, the report becomes a matter of public record and its distribution may

notbe limited.

(Established under Article 143 of the Constitution of the URT)

Office of the Controller and Auditor General PA&oBs 2006/2007 v

Table of Contents FOREWORD....................................................... ix AKNOWLEDGEMENT............................................. xii EXECUTIVE SUMMARY........................................... xvi CHAPTER ONE.................................................... 1 1.0 RESPONSIBILITIES OF CAG AND LEGAL FRAME WORK...................................................... 1 1.1 The Responsibilities of CAG............................ 2 1.2 PA&oBs responsibilities................................. 3 1.3 Organisation of Audit work............................. 5 1.4 Legal Framework Governing Financial Reporting in PA&oBs................................................. 6 1.5 Responsibilities of the Accounting Officer........... 8 1.6 Reporting Procedures................................... 9 CHAPTER TWO.................................................... 10 2.0 BASIS AND TYPES OF AUDIT OPINIONS ISSUED TO PA&oBs.................................................... 10 2.1 Introduction.............................................. 10 2.2 Audit Opinions............................................ 11 CHAPTER THREE.................................................. 31 3.0 DETAILED AUDIT FINDINGS.............................. 31 Part A:...................................................... 31 Part B (i)................................................... 47 3.2.5 Assets Management........................................ 51 Part B (ii)................................................... 61 3.3.0 Specific Audit Findings.................................. 61 CHAPTER FOUR.................................................... 85 4.0 PUBLIC AUTHORITIES AND OTHER BODIES WITH GOING CONCERN PROBLEMS............................. 85 4.1 Tanzania Electrical Supply Co. Ltd (TANESCO)....... 86 4.2. Board of External Trade (BET)........................... 87 4.3. Dar es Salaam Water Supply and Sewerage Authority (DAWASCO)..................................... 87 4.4. National Insurance Corporation (NIC)................... 88

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4.5. Mtwara Urban Water Supply and Sewerage Authority (MTUWASA)................................................. 88

4.6 Tanzania Posts Corporation (TPC)...................... 88 4.7. Tanzania Railways Corporation.......................... 89 PERFORMANCE REVIEW........................................... 90 4.8 Public Authorities and other Bodies operational

performance and financial standing................... 90 4.9 Summary of the Operational Performance of the

PA&oBs...................................................... 90 4.10 Cumulative surplus or loss............................... 91 4.11 Unremitted statutory deductions....................... 92 4.16 Outstanding Guarantees.................................. 93 4.17 Outstanding loans issued by the Government ........ 94 4.18 Questionable deletion of government Investments from records................................................ 94 4.19 Treasury Registrar’s Statement of Revenue as at 30th June 2007............................................. 95 CHAPTER FIVE...................................................... 99 5.0 PRIVATIZATION OF PUBLIC ENTITIES.................... 99 5.1 Privatized entities......................................... 99 5.2 Revenue earned from Privatisation..................... 102 5.3 Outstanding Revenue Proceeds......................... 102 5.4 Status of some of the Public Authorities and other

Bodies........................................................ 102 5.5 Public Authorities and other Bodies under privatization process....................................... 103 5.6 Public Authorities and other Bodies not operating.... 104 5.7 Public Authorities and other Bodies under liquidation

process....................................................... 107 5.8 Public Authorities and other Bodies under restructuring process...................................... 109 5.9 Public Authority undergoing winding up process...... 110 5.10 Public Authorities and other Bodies under Joint Venture Remarks on Information on Privatisastion... 110 CHAPTER SIX........................................................ 115 6.0 PUBLIC PROCUREMENT ISSUES........................... 115

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6.1 Report on Compliance with Procurement Legislation................................................... 115

6.2 Lack of Procurement Planning........................... 116 6.3 Absence of Management Procurement Units.......... 117 6.4 Procurements made without approval of tender

board......................................................... 119 6.5 Specific Procurement Problems.......................... 119 CHAPTER SEVEN................................................... 122 7.0 CORPORATE GOVERNANCE.............................. 122 7.1 Treasury Registrar’s Responsibilities................... 122 7.2 The CEOs’ Accountability Obligations Relating to Good Governance......................................... 123 7.3 Members of Parliament’s vs. Board membership.... 124 7.4 Internal Audit Services.................................. 124 7.7 General Observation on Governance of PA&oBs...... 133 CHAPTER EIGHT.................................................... 134 8.0 LEGAL ISSUES AND CONTRACTS MANAGEMENT........ 134 8.1 Introduction................................................ 134 8.2 Breach of Contract: the failure without legal excuse, to perform....................................... 134 8.3 Weak and vague contracts.............................. 135 8.4 Breach of contracts...................................... 141 8.5 Absence of contracts..................................... 144 CHAPTER NINE..................................................... 145 9.0 SPECIAL AUDITS AND INVESTIGATIONS................. 145 9.1 Special Audit Investigation on BoT EPA Account..... 145 9.2 Special Audit of Tanzania Electric Supply Co Ltd

(TANESCO).................................................. 146 9.3.0 Special Audit of the Air Tanzania Holding Corporation................................................ 153 CHAPTER TEN...................................................... 162 10.0 CONCLUSION AND RECOMMENDATIONS................ 162 10.1 Introduction................................................ 162 10.2 Weak Information Technology Systems................ 163 10.3 Preparation of financial and operational manuals... 163

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10.4 Good Governance......................................... 164 10.5 Compliance with Public Procurement Law............ 165 10.6 Public Authorities with Going Concern Problems.... 166 10.7 Water Billing in Water Authorities...................... 166 10.8 Contracts Management................................... 167 10.9 Assets Management....................................... 167 10.10 Non recovery of Loans.................................... 168 10.11 Improvement in financial management and

control...................................................... 168 10.12 Results of BOT Special audit on EPA account......... 169 10.13 Results of TANESCO Special audit...................... 169 10.14 Muhimbili National Hospital Assets verification...... 170 Annexures.................................................. 172 Glossary................................................. 224

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FOREWORD I have the pleasure of presenting my report on the audit of the financial statements of Public Authorities and other Bodies in the country as defined under Section 37 of the Public Finance Act 2001 (revised 2004) for the period ended 30

th June, 2007.

This is my first general annual report on the audit of the accounts of Public Authorities and other Bodies of the United Republic of Tanzania; but also the first general report of its kind in the history of our country. Traditionally, I have been issuing annual general audit reports on the accounts of the Central and Local Government Administration. These reports have also been issued in this year as well. Before coming into effect of the PFA, 2001 (revised 2004) all accounts of the PA&oBs were being audited by the defunct Tanzania Audit Corporation. With the enactment of the Public Finance Act 2001 (revised 2004), my office is mandated to audit accounts of the PA&oBs by virtue of powers vested in me under Sections 30-37 of the same Act. However, it has taken some time for my office to start exercise. Therefore, considering the diversified nature of the PA&oBs my office has not been able to streamline information of all Public Authorities and other Bodies. However this will be realized in the coming years as I am continuously building capacity of and strengthening my staff alongside resource mobilization. This report aims at providing our stakeholders - the National Assembly, the Government, Development Partners, civil society, and the general public - with a summary of my findings arising from the audit of the accounts of Public Authorities and other Bodies in the country for the financial year ended 30th June 2007.

The report gives a general assessment of the audit findings and observations on the state of the financial position, status of compliance with the laws and regulations; and on accountability

Office of the Controller and Auditor General PA&oBs 2006/2007 x

and governance. It covers the audits of 158 PA&oBs that have been registered in my office.

The Parliament looks to the Controller and Auditor General and the National Audit Office (NAO) for assurance in relation to financial reporting and public resources management in PA&oBs. We also contribute, through our recommendations, towards improvements in public sector performance. In this regard, both PA&oBs and NAO have a role in contributing towards building parliamentary and public confidence in public resources management. However, while the roles of public sector entities and NAO may differ, their drive towards efficient utilization of public resources remains a common ground. NAO continually reviews its audit approaches to ensure that the audit coverage provides an effective and independent review of the performance and accountability of public sector entities. Moreover, we seek to ensure that our audit coverage is well targeted and addresses priority areas so as to maximize our contribution. Since our work acts as a catalyst in improving financial management, we continually discuss contemporary issues and developments that impact on public sector management, particularly financial reporting and governance. It is my intention to put more emphasis on compliance with the country’s laws as part of our financial statement audits. The action taken by His Excellency the President of the United Republic of Tanzania when held discussions with all Accounting Officers regarding non compliance with rules and regulations reported in my last year’s audit reports is an important development to reinforce compliance which is highly appreciated. It is worth noting that while there is a key role for audit committees to play in overseeing legislative compliance across the public entities, ultimately, the responsibility for the maintenance of a compliant framework lies with each Accounting Officer.

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I would like to recognize with appreciation efforts being undertaken by the Government through the Treasury Registrar’s Office in overseeing operations of Public Authorities and other Bodies in the country. It has been said that the auditors’ role in auditing Government, amounts to looking at its activities in a rear-view mirror. This belief, however, ignores the value adding recommendations that we make. We don’t end up recommending best practice but later, we follow up and report on the progress accomplished since our previous audits. In this way, we contribute towards maintaining healthy PA&oB’s financial management and reporting systems. I hope that the National Assembly will find the information in this report useful in holding the PA&oBs to account for public funds entrusted to them for delivery of quality services to Tanzanians. In this regard, I will appreciate to receive feedback on how to further improve this report in the future. True, we have been through a demanding year but we have delivered on our set goals to timely inform the Parliament and the public on the issues arising from our audit coverage. I would like to acknowledge the professionalism and commitment of my staff in our ambitious audit programme goals, despite the fact that we have been working in very difficult conditions marked with insufficient funding, working tools, low salaries, and sometimes working in very remote and un-easily accessible locations.

Ludovick S.L. Utouh CONTROLLER AND AUDITOR GENERAL ______________________________________________________

Office of the Controller and Auditor General, National Audit Office, Dar es Salaam,

26th March, 2008

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AKNOWLEDGEMENT I am obliged to extend my regards to His Excellency Jakaya Mrisho Kikwete, the President of the United Republic of Tanzania, for always drawing attention to and laying emphasis on my general reports, particularly my last year’s reports. I wish to express my appreciation to the Chairpersons and Honorable members of various oversight Committees of Parliament for their commitment to deliberate on the contents of the report and the separate individual reports issued to the PA&oBs. I would like to express my gratitude to all those who created for me an enabling environment to discharge my constitutional obligations and timely completion of the report thereon. It is my belief that since this general report of PA&OBs is being issued for the first time and within the statutory due date, it will expedite the Committee’s hearing so that their oversight function is brought up to date. I wish to express my gratitude to the Executive Officers, and their Chief Finance Officers for the much needed support and information availed to me. I also would like to thank the Government Printer for expediting the printing of this report and therefore making it available for distribution to stakeholders on time. Further, I wish to express my deepest gratitude to the donors who have been supporting my office especially the Swedish National Audit Office (SNAO), the Government of Sweden and well wishers who have contributed immensely towards modernization of my office.

I also wish to thank all the 44 private auditing firms that have been working hard with my office in the audits of the PA&oBs. They have done a commendable job which should be sustained in my future audit of the PA&oBs. Last but not least, I would like to thank staff members of my office who have worked tirelessly towards the timely release of this report. Their commitment and dedication has been very useful. I urge them to uphold the same team spirit they have demonstrated in all their future endeavors.

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Report Layout and Highlight

Chapter 1 Deals with the responsibilities of the Controller and Auditor General and the Legal frame work governing financial reporting in PA&oBs and other key players in the audit process.

Chapter 2 Deals with the basis and types of audit opinions

issued to the accounting officers by the auditor which are unqualified, unqualified opinion with emphasis of matter, qualified, adverse and disclaimer of opinion.

Chapter 3 Part A of this report deals with outstanding

matters from previous audit findings and recommendations made by the CAG which have not been implemented by the PA&oBs management.

Part B deals with current findings that have

significant effect on the PA&oBs audited in the financial year ended June 30th 2007

Chapter 4 Deals with financial performance and going

concern of PA&oBs for the period under review. It further analyses entities that have operated with profits or losses as well as those which failed to remit statutory deductions to relevant authorities.

Chapter 5 Deals with the privatization of Public Authorities

and other Bodies. It further gives information on privatized entities, revenue earned from privatization, outstanding revenue proceeds. The chapter also deals with the results and gives brief analysis of privatization activities of public entities by the Government of Tanzania through the then Presidential Parastatal Sector Reform Commission. This function has now been vested to Consolidated Holdings Corporation. It further gives information

Office of the Controller and Auditor General PA&oBs 2006/2007 xiv

on the Public Authorities and other Bodies that are not operating, under liquidation, undergoing wind up process, under restructuring process and those operating jointly with private investors.

Chapter 6 This chapter deals with compliance with the Public

Procurement Legislation. It analyzes the compliance of Accounting Officers with requirements of the Public Procurement Act No. 21 of 2004 together with its related Regulations of 2005. Sect. 44 of the Public Procurement Act requires Accounting Officers to ensure that the procurement of goods, works, or services is done in accordance with procedures prescribed by the said laws or related regulations.

Chapter 7 This chapter deals with governance issues

regarding operations of PA&oBs in line with the requirements of Regs. 28 -35 of the PFR 2001 which states that each Accounting Officer of PA&oBs is required to establish an effective internal audit service unit and audit committee.

Chapter 8 Deals with issues relating to management and

administration of contracts and legal agreements within the public entities covered in this report.

Chapter 9 Deals with special audit investigations carried out

by the Controller and Auditor General during the period of reporting.

Chapter 10 General concluding remarks and recommendations

In accordance with Sect. 34 of PFA, the CAG is empowered to make recommendations to the Government on issues which he considers necessary to minimize loss of public resources or to maximize the collection of public revenues. After the analysis of audit results covered in this report I

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have come up with recommendations which are dealt with in this chapter.

ANNEX 1 Show the trend of opinions issued for the past

three years. ANNEX 2 Trend of profit/loss making (PA&oBs) for the past

three years and accumulated surplus or deficit ANNEX 3 Shows the Treasury Registrar’s statement of

Investment and Public Interest to the PA&oBs. ANNEX 4 Shows a list of pre qualified audit firms that have

been authorized to audit accounts of Public Authorities and other Bodies on behalf of CAG. Sect 37(5) of Public Finance Act 2001 (revised 2004) empowers the CAG to appoint any authorized person(s) to carry out the audit on his behalf.

Office of the Controller and Auditor General PA&oBs 2006/2007 xvi

EXECUTIVE SUMMARY

(i) Responsibilities, Functions and Powers of the CAG General responsibilities, functions and powers of the Controller and Auditor General are stipulated under Article 143 of the Constitution of the United Republic of Tanzania and amplified in Sections 30 - 37 of the Public Finance Act 2001 (revised 2004).

(ii) The responsibilities of the National Audit Office

Section 26 (1) of the Public Finance Act 2001 (revised 2004) states that there shall continue in existence a Public National Audit Office which shall be headed by the Controller and Auditor General appointed by the President. The National Audit Office is the Supreme Audit Institution (SAI) in Tanzania which has a unique responsibility to ensure that there is proper accountability, financial discipline and transparency within the United Republic of Tanzania. Furthermore, NAO has a unique responsibility to issue timely and good quality audit reports on how best public resources have been put into use.

(iii) Responsibilities of the Board of Directors and CEOs

The Boards of Directors of public bodies are responsible for the preparation of financial statements that show a true and fair view of the state of affairs and the operating results of their respective entities as at the end of each financial year in accordance with the International Financial Reporting Standards and any other applicable standards/guidelines either enshrined in the laws of the Country or issued by the regulatory bodies like the National Board of Accountants and Auditors (NBAA) of Tanzania. The Board of Directors of the PA&oBs are also responsible for safeguarding the assets of their respective entities. The Board of Directors of PA&oBs are also responsible for developing suitable accounting policies

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that are consistently applied in making reasonable judgments in preparing the entity’s financial statements.

(iv) Responsibilities of the Treasury Registrar The Treasury Registrar Ordinance Cap 418 and Sect. 6 of the Public Corporations Act No. 16 of 1983 in relation to functions of Public Corporations, state that the Treasury Registrar has the functions and responsibilities for oversight over PA&oBs and closely monitoring, controlling and managing them effectively in collaboration with the Governing Boards of the respective entities.

(v) Scope and the Legal Framework Article 143 (5) of the Constitution of the United Republic of Tanzania 1977 (revised 2005) amplified in Sect. 30 (1) (c) of the Public Finance Act No 6 of 2001 (revised 2004) requires the Controller and Auditor General to audit all Public Authorities and other Bodies at least once in every financial year. This report covers the audits of PA&oBs for the financial year ended 30th June 2007. Specifically, it covers audited accounts of the financial year ended, 30th September 2006, 31st December 2006 and 30th June 2007. It also covers outstanding and unimplemented audit recommendations made in previous years.

(vi) Public Authorities and other Bodies data base I am responsible for the audit of the accounts of all Public Authorities and other Bodies as defined in Sect. 37 o PFA 2001. Since this is my first annual report of the PA&oBs, I was able to identify 158 authorities. Efforts are being made to ensure that the exact number of PA&oBs is obtained from the relevant authorities. Information from the Treasury Registrar and from the Ministries regarding Public Authorities and other Bodies somehow differs and therefore needs reconciliation. My office is working hard in establishing a Public Authorities and other Bodies data base. Therefore, the reported list of the Public

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Authorities and other Bodies is not exhaustive and should you be among the excluded ones please feel free to come forward with the information about your entity for inclusion in our data base and in any subsequent repots.

(vii) Delay and non-submission of Draft Accounts to the CAG for audit It is a statutory requirement that draft accounts be submitted for audit within three months after the closure of the financial year as provided for under Section 25(4) of the Public Finance Act. However it was noted that the draft accounts of fifty one (50) PA&0Bs were submitted late. Moreover, seventeen (17) PA&oBs did not submit their accounts at all for audit.

(viii) Private eligible audit firms Sub-Section 5 of Section 37 of the Public Finance Act, empowers me to authorise anybody eligible to be appointed as an auditor under the Auditors’ and Accountants (Registration) Act No. 33 of 1972 to conduct the audit of public authorities and other bodies on my behalf and make a report to me for the subsequent processing to Parliament. My office is currently working with forty four (43) private audit firms out of the 133 registered and authorized by the National Board of Accountants and Auditors (NBAA) to carry out accounting and audit functions in the United Republic of Tanzania.

(ix) Types and basis of audit opinions Basis of opinions issued As a matter of statutory requirement, I am obliged to give assurance to stakeholders of the respective PA&oBs whether the information given in the financial statements prepared by them present fairly the results of the operations, cash flows and financial position of the PA&oBs for each financial year. This certification provides stakeholders the audit assurance as to the veracity of the financial operations of the PA&oBs including the PA&oB’s compliance with prescribed requirements. Based on the International Standards on Auditing (ISA) and

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International Organisation of Supreme Audit Institutions (INTOSAI) standards, unqualified opinion, unqualified opinion with emphasis of matters, qualified (except for) opinion, and disclaimer of opinion have been issued as a measure of the assessment made on the financial information presented.

(x) Status of the accounts of PA&oBs This report has covered 158 accounts of Public Authorities and other Bodies during the year ended 30th June 2007. Accounts submitted for the audit during the year under review were 141. Out of the 141 accounts submitted for audit, I was able to issue audit reports on 91 accounts by the date of issue of this report (31st March 2008). The 67 accounts on which I could not issue reports was due to failure by the 50 bodies to submit their financial statements for audit on the statutory due date and 17 bodies did not submit their accounts for audit up to the time of issuing this report. The ninety one (91) individual audit reports were also issued to the respective governing boards or board of trustees and their Ministries respectively. In short, the above information can be summarised in the table below as follows:

S/No Category of the Entity

Audited Accounts

Audit in Progress

Accounts not

Submitted

Total

1 Water Authorities

20 12 - 32

2 Regulatory Bodies

14 9 4 27

3 Higher Learning Institutions

12 15 - 27

4 Public Parastatals

33 11 9 53

5 Government Institutions

9 6 4 19

Total 91 50 17 158

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On the other hand, six (6) audits were in arrears as summarized in the following table:

S/N Client Name Last Audit

1 Muhimbili University of Health and Allied Science

2005/2006

2 Ardhi University 2005/2006

3 Institute of Social Work 2005/2006

4 Muhimbili University College of Health Science

2005/2006

5 Tanzania Fisheries Research Institute 2005/2006

6 Tanzania Wildlife Research Institute 2005/2006

(xi) Audit opinions issued to PA&oBs During the year under review, various audit opinions were issued to the audited accounts of the Public Authorities and other Bodies audited. Out of the 91 accounts audited, 80 accounts representing 88% were issued with unqualified (clean) audit opinion, 10 accounts were issued with qualified (except for) opinion representing 11%; no account was issued with an adverse opinion and 1 account was issued with a disclaimer of opinion representing 1%. In short, these opinions are summarised in the following table:

S/No Category of the Entity

Unqualified Opinion

Qualified (Except

for) Opinion

Adverse Opinion

Disclaimer Opinion

Total

1 Water Authorities

15 4 - - 19

2 Regulatory Bodies

18 1 - - 19

3 Higher Learning Institution

15 - - - 15

4 Public Parastatals

19 3 - 1 23

5 Government Institutions

13 2 - - 15

Total 80 10 - 1 91

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From the above analysis, it is evident that financial reporting within Public Authorities and other Bodies was generally satisfactory. The outcome of this period’s audit exercise is considered satisfactory as regards to proper control and management of public resources.

(xii) Summary of main audit findings

The following are main audit the summary of main audit findings:

Unremitted statutory deductions During the period under review, five PA&oBs failed to remit statutory deductions amounting to Shs.29,336,119,602 to relevant receiving agencies. Of the amount in question, unremmited statutory deductions (i.e. PAYE, PPF and NSSF PSPF) were Shs.23,643,858,878 while taxes were Shs. 2,210,703,119. Moreover, the Tanzania Posts Corporation failed to remit deductions of Shs.6,613,767 and Shs.196,741,985 relating to insurance premiums on staff life assurance policy and SACCO’s loan repayment deductions respectively while the Board of External Trade failed to remit land rent amounting to Shs.142,859,539. Pictorially, the above information can be shown in a pie chart as follows:

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This indicates a critical situation of non compliance with related laws. Remedial measures should be sought to avoid penalties which may be charged by the respective receiving agencies for failure to remit statutory deductions on due dates. On the other hand, this situation may cause insurmountable problems in the payment of employee’s terminal benefits on retirement age.

The National Social Security Fund (NSSF) has failed to

recover loans extended to seven debtors amounting to Shs.4,881,818,964 as per loan agreements (chapter five)

The National Insurance Corporation’s working capital for the current year and the preceding four years has been on a decline trend from a negative balance of Shs.31.1 billion (2002) to a negative balance of Shs.58.7 billion (2006). Over a period of five years to 31st December, 2006, the Corporation’s working capital had been negative. This indicates that it can not discharge in full all its maturing obligations. Over this period the current ratios indicate that on average the Corporation had only Shs.15 available to pay liabilities amounting to Shs.100.

Non Remittance of Statutory Deductions

STAMICO1%

TPC84%

BET2%

MNH11%

NRC2%

STAMICO TPCBETMNH NRC

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Non payment of liquidated damages due from M/S Dowans Holdings Shs.2,683,800,000 as provided in terms of contract agreement (chapter three)

• The NIC has uncollected long outstanding rent from its tenants amounting to Shs.933,137,060 (Chapter three).

Dodoma Urban Water Supply and Sewerage Authority had expenditure in excess of the approved budget the tune of spent to Shs.136,061,758.

Muhimbili National Hospital (MNH) had long outstanding receivable amounting to Sh.998, 543,766.

The analysis of financial statements of 20 Public Entities shows long outstanding receivables and payables amounting to Shs.58,191,036,467 and Shs.11,154,027,688 respectively as shown in chapter 4.

Several customers of the Tanzania Postal Bank had not paid

their dues in compliance to their loan agreements amounting to Shs.196,973,814.

Officials of Air Tanzania Holding Co. facilitated evasion of

Capital Gain Tax amounting to Shs.25,225,000 as shown in chapter 9

Officials of Air Tanzania Holding Co converted an official

imprest of USD.2,642.67 for personal use and no retirement was made after the return from safari as shown in chapter 9.

There was extended unauthorized and personal use of the

Corporation vehicles at the expense of the Corporation (chapter 9)

• Uncertainty on the accounting treatment for the funds

received from the Government of Tanzania amounting to Sh.5 billion revealed in the financial statement of DAWASCO as shown in Chapter 3.

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• Delays in Billing New Customers & Non-Employees enjoying Discounted Electricity bills as shown in chapter 9.

SIMU 2000 Ltd had no title deeds of the balance of properties

for sale stated in the financial statements at Shs.1,956,800,000 as shown in chapter three.

Tanzania National Park TANAPA deposited a tax payer’s

moneys amounting to Shs.1.9 billion to a supplier contrary to public procurement procedure as shown in chapter 6.

Tanzania Electrical Supply Co. Ltd (TANESCO), Dar es Salaam

Water Supply and Sewerage Authority (DAWASCO), National Insurance Corporation (NIC),Tanzania Posts Corporation (TPC), Tanzania Railways Corporation, Board of External Trade (BET), Mtwara Urban Water Supply and Sewerage Authority (MTUWASA have been experiencing persistent negative working capital to the extent of facing difficulties in discharging their maturing obligations.

A number of public entities operated during the period without

Procurement Planning, Management Procurement Units and Tender Boards as shown in chapter six of this report.

Tanzania Tobacco Board made Procurements of goods and

services without competitive tendering amounting to Shs.223,695,649.00.

The Chief Executive Officer of BOT, who incidentally happens

to be the Chairman of the Board of Directors, is also the Chairman of the Audit Committee. This practice may impair the independence of the Audit Committee and hence make the Committee ineffective. This is contrary to the principles of good governance.

Thirty (19) Public Authorities and Other Bodies did not comply

with Reg. 30 of the Public Finance Regulations 2001of establishing and maintaining Audit Committees (chapter 7).

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Some of the Board of Directors or Board of Trustees has membership of Members of Parliament. Principles of good governance forbid Members of Parliament who have an oversight role to be members of Board of Directors or Board of Trustees of Public Authorities and other Bodies.

Nineteen (11) Public Authorities and other Bodies failed to

comply with Reg. 28 of the Public Finance Regulations of 2001, which requires the establishment of an effective Internal Audit Unit.

Further to earlier payment of legal fees of Shs. 2,990,221,907

made by the Bank of Tanzania in the previous year to M/s Mkono and Company Advocates, the lawyers handling the Valambhia case, an additional amount of Shs.5,138,153,330 was paid during the year, almost twice as much as the amount paid in the previous year, making total payments of Shs.8,128,375,237 as at 30th June 2006 as shown in chapter 3 of this report.

National Insurance Corporation is running on an old Informix

computer system under UNIX platform developed and installed in 1993. Since development, the system has not undergone any major upgrade. This has resulted to poor performance, poor reliability, and lack of data integrity and availability of both services and data as shown in chapter three of this report.

The Government earned revenue amounting to

Shs.120,133,616,259 and USD 291,396372 as revenue from privatization of public entities while Government’s investments in the privatised entities was Shs.49,4006,730,416 and USD.3,035,898,250 respectively as shown in chapter five of this report.

Long outstanding revenue proceeds due to the Government

amounting to Shs.7,942,247,030 from sale of Public Parastatals.

Office of the Controller and Auditor General PA&oBs 2006/2007 xxvi

The Government had Invested Shs.14,928,597,881 in Public Authorities and other Bodies that were under restructuring process as at 30thJune 2007.

Government had invested Shs.10,691,261,115 in Public

Authorities and other Bodies which were under liquidation process as at 30th June 2007.

The Public Authority undergoing winding up process as at 30th

June 2007 had a negative investment of Shs.12,506,598,308. During the year under review, 10 Public Authorities and other

Bodies were noted to have weak information technology systems.

Tanzania Ports Authority Container Terminal was leased to a

private operator M/s Tanzania International Container Terminal Services (TICTS) since May, 2000. Initially, the lease agreement was to last for a period of ten years. However, the lease agreement was extended for another term of fifteen years vide Addendum No.2 to the lease agreement executed on 30.12.2005 to make the lease period to be twenty five years of which in my opinion there were irregularities as shown in chapter 8.

Under the terms of the production sharing agreement between

Pan African Energy Tanzania Ltd and Tanzania Petroleum Development Corporation (TPDC), where income tax is paid by the former (Pan Africa Energy Tz. Ltd), the same is recoverable from the profit available to the latter (TPDC). In this case the amount paid as corporation tax is deducted from the remittable proceeds to Government from the sale of additional gas. Audit examination of the financial statements during the year under review revealed that Shs. 1,887,186, 871 was deducted from proceeds which were supposed to be remitted to the government as shown in chapter eight of this report.

Office of the Controller and Auditor General PA&oBs 2006/2007 xxvii

DAWASCO has been consistently suffering a penalty equal to 0.5% of weekly revenue for each week for breach of contract with DAWASA relating to First Time New Domestic Water Supply Connection Fund as shown in chapter eight of this report.

The special audit of the BoT EPA account concluded that

Shs.133 billion was paid out of account of which Shs.90 billion was fraudulently paid, while the Shs.44 billion needs further investigation.

A number of water authorities have been reporting deficits or

decreasing profits due to wrong depreciation computations which do not base on realistic useful life of individual assets, in particularly the water and sewerage system. In the circumstances, the carrying amounts of property, plant and equipment reported does not reflect fair values to most of the water authorities.

Overpayment of VAT amounting to Shs.375,144,226 paid to

Commissioner of Domestic Revenue by Tanzania standard Newspaper (Shs. 268,610,275) and Tanzania Postal Bank (Shs. 106,533,951) due to wrong interpretation of VAT Act.

(xiii) Summary of main Recommendations

Chief Executive Officers of the PB&oBs should implement all recommendations issued in the respective individual management letters addressed to the chairman of the Board of Directors of these entities as well as highlights pointed below:

(a) Billing Improvement in Water Authorities

I recommend the following: Management of Water Authorities should identify

all billable customers; Meter installation to customers should be hastened

to ascertain accuracy of bills receivables;

Office of the Controller and Auditor General PA&oBs 2006/2007 xxviii

Management of Water Authorities should make sure that only genuine customers are billed;

Management of Water Authorities should come up with improved accounting policies that will allow realistic depreciation rates of the assets; and

The Ministry of Water and Irrigation should take the initiatives of identifying a water billing software package to be used by the Water Authorities in the country.

(b) Operational performance

In summary, I recommend the following: Efforts should be taken to increase revenue and

reduce operating expenses; Lost public confidence in some public organisations

should be regained by cutting down overheads and improve efficiency;

Loss making units/branches should be identified and recommended for closure or restructuring;

Obsolete assets should be sold, especially investments with poor returns;

External financing should be secured to turn around the loss making PA&oBs to profitable organizations;

Employees’ morale/motivation should be enhanced to improve performance;

PA&oBs should ensure that statutory deductions are promptly remitted to the appropriate receiving agencies in order to avoid unnecessary heavy penalties and minimize the inconvenience that would be subjected to retiring officers.

(c) Establishment of financial and operational manuals Operational and financial manuals together with sound accounting policies should be prepared in order to improve efficiency in implementation of PA&oBs objectives and reduce disparity in decision making whenever there is a change in key management personnel or operational parameters.

Office of the Controller and Auditor General PA&oBs 2006/2007 xxix

(d) Internal audit and audit committees In order for the Internal Audit Units and Audit Committees to fulfill their intended objectives, I recommend the following:- The Internal Audit Units must be manned by

professionally competent staff with pre requisite resources and facilities to enable them to professionally execute their responsibilities;

The head of Internal Audit Unit should report directly to the Chief Executive Officers and not to the Chief Accountant or Finance Manager as noted in some PA&oBs;

The membership of the Audit Committees as stipulated in Reg.31 of the Public Finance Regulations 2001 should be reviewed to allow for more external membership of the Committee in order to be effective in giving the Chief Executive Officer appropriate and unbiased advice.

(e) Compliance with Public Procurement Law

In order to ensure compliance with PPA and its related Regulations, we also have the following recommendations:- There is an urgent need for capacity building at all

levels of the procurement process; The Public Procurement Regulatory Authority

(PPRA) needs to be given adequate capacity and full mandate to regulate the procurement function in the Country;

Effective Tender Boards and Procurement Management Units should be established.

(f) Privatization of Public Parastatals

The Government should: Institute sound debt collection policies for long

overdue debts from defaulting investors; Take legal action against investors who fail to

fulfill their contractual obligations on privatisation; Hasten resolution of cases relating to privatization;

Office of the Controller and Auditor General PA&oBs 2006/2007 xxx

Either revive or liquidate Public entities that are not operating;

Either claim the outstanding revenue proceeds due from privatisation of Public entities or otherwise repossess the assets from the defaulting investors;

Instruct the Consolidated Holdings Corporation, the successor of PSRC and LART; to commission or carry out a ‘Post Sale Audit’ of all divestitures to ascertain the conformance to the business objectives and any other developments as per sales agreements with the respective investors.

(g) Assets Management

I recommended that: Legal ownership of the properties like title deeds

should also be sought. Revaluation of assets should be done and

impairment tested in recommended interval of time pursuant to International Accounting Standard No 16 in order to ascertain the fair value of assets.

Fixed assets registers should be maintained for

proper management and safeguarding of the assets.

(h) Specific Recommendations

Disciplinary action should be taken against BOT officials involved in the actions of initiating, processing, authorising and approving payments for EPA debts in line with the established civil service and labour law procedures to avoid possible legal actions by the affected individuals.

Office of the Controller and Auditor General PA&oBs 2006/2007 xxxi

Further investigation should be performed on the other EPA payments made to the remaining 9 assignee companies amounting to Shs.42,656,107,416.61 for which the audit team could not conclude about their validity and authenticity at this stage.

The Ministry of Finance/Treasury should consider

establishing a debt oversight mechanism or function within the Ministry of Finance/Treasury and whose remit should include monitoring of EPA transactions and provide a central link between MOF/Treasury and BOT.

The management of DUWASA should seek

retrospective approval on the amount overspent Shs.136,061,758

The management of Tanzania Standard Newspaper

and Tanzania Postal Bank should ensure recovery of Shs. 268,810,275 and Shs. 106,533,951 respectively overpaid to the Commissioner Domestic Revenue as VAT.

Air Tanzania Holding Co Management should ensure

that capital gain tax of Shs. 23,500,000 which have facilitated to evade has been recovered;


that capital gain tax amounting to Shs.1,750,000 and the transfer fee which it has facilitated to evade have been recovered;


that capital gain tax totaling Shs. 21,500,000 and the transfer fee which it has facilitated to evade have been recovered;


that successful bidders were eligible to own the landed property or revert the transactions

Office of the Controller and Auditor General PA&oBs 2006/2007 xxxii

The management of TANESCO should ensure that liquidated damages amounted to Shs. 2,683,800,000 are paid by the defaulter (M/ Dowans Holdings) as per provision of the contract agreement and any delay in paying the amount in question attract interest charges.

The Government to revoke un-procedural extension

of the TICTs agreement and conduct a thorough evaluation of the 10 years agreement period before extension of the same is decided upon. Should there been need for an extension the Government is strongly advised to adhere to Public Procurement Regulations.

I hope this section has provided a summary of the

key audit findings and related recommendations that have been linked to chapters that extensively narrate the audit findings together with relevant authoritative information in chapter one to ten, together with annexure I to V. appended thereto.

Ludovick L. S. Utouh CONTROLLER AND AUDITOR GENERAL ____________________________________ Office of the Controller and Auditor General, National Audit Office, Dar es Salaam, 26th March, 2008.

Office of the Controller and Auditor General PA&oBs 2006/2007 1

CHAPTER ONE

1.0 RESPONSIBILITIES OF CAG AND LEGAL FRAME WORK

Introduction Article 143 sub section (5) of the Constitution of the United Republic of Tanzania 1977 (revised 2005) and amplified under sections 30 (1) (c) and 37 of the Public Finance Act No 6 of 2001 (revised 2004) requires the Controller and Auditor General to audit all Public Authorities and other Bodies at least once in every financial year. Moreover, Section 37 sub sect (5) of the Public Finance Act 2001 (revised 2004) allows the Controller and Auditor General to authorize any person eligible to be appointed as an auditor of a company or any officer to inspect, examine or audit on behalf of the Controller and Auditor General the books of accounts of any body that the CAG may be required to audit. This section read together with section 38 (1) and (2), gives the CAG the sole responsibility to certify accountability of all public funds to the Parliament.

The office of the Controller and Auditor General is therefore keen to undertake this statutory obligation smoothly to ensure that all stakeholders and the public in general benefit from timely, high quality public auditing services and reports.

As such, interim and annual audits of the accounts of any public body shall be undertaken in accordance with the International Standards of Auditing (ISA), International Organisation of Supreme Audit Institution (INTOSAI) standards and guidelines and any other procedures that the Controller and Auditor General shall find appropriate under the circumstances.


1.1 The Responsibilities of CAG

The Office of the Controller and Auditor General of the United Republic of Tanzania was established in accordance with Article 143 of the Constitution of the URT of 1977. The Office is mandated to conduct both financial and performance audits of public accounts (both Central and Local) including the audit of the financial statements of all Public Authorities and other Bodies as defined in Section 37 of the Public Finance Act No. 6 of 2001 (revised in 2004). The Office is also empowered to conduct special audits and audit investigations when required to do so. Sect. 34 of the Public Finance Act No.6 of 2001 further empowers the Controller and Auditor General to make recommendations for the purpose of:- • Preventing or minimizing the unproductive

expenditure of public moneys. • Maximizing the collection of public revenues; • Averting loss by negligence, carelessness, theft,

dishonesty, fraud and corruption relating to public moneys and resources.

In fulfilling the above responsibilities, the CAG carry out annual audits of the submitted final accounts of the Ministries, Independent Departments of Government, Local Government Authorities, Public Authorities and other Bodies. Article 143 (4) of the Constitution of the URT of 1977 requires the Controller and Auditor General to submit the CAG’s annual reports to the President of the URT by 31

st

March. Upon receipt of such reports the President shall direct the persons concerned to submit those reports before the first sitting of the National Assembly which shall be held after the President has received the reports and it shall have to be submitted to such a sitting before the expiration of seven days from the day the sitting of the National Assembly began. If the President does not take steps of submitting such reports to the National


Assembly, then the Controller and Auditor General shall in accordance with Section 36 (2) of the PFA 2001 submit such reports to the Speaker of the National Assembly (or the Deputy Speaker if the office of the Speaker is vacant then, or if for any reasons the Speaker is unable to perform the functions of his office) who shall submit the report to the National Assembly. Sect 25 (1) and (2) of the PFA 2001 stipulates that the Accounting Officers shall be responsible for the preparation of the financial statements of PA&oBs based on generally accepted accounting principles (GAAP) and submit them to the Controller and Auditor General for audit within 3 months after the end of the financial year.

The National Audit Office is a Supreme Audit Institution (SAI) which has a unique responsibility to ensure that there is proper accountability, financial discipline and transparency in the use of public resources within the United Republic of Tanzania. Furthermore, NAO has a unique responsibility to provide timely audit reports of good quality. These reports give detailed results of revenue collections and expenditure analysis and governance issues of the PA&oBs. The audit findings in this report have been reported to the Chairmen of the Board of Directors and the Accounting Officers of the individual PA&oBs as well as the respective Parent Ministries.

1.2 PA&oBs responsibilities The responsibility for the preparation and presentation of the financial statements for audit purposes lies with individual Board of Directors and the Management of the PA&oBs. International Financial Reporting Standard one (IFRS I) and International Accounting Standards one (IAS 1) specifies the types of financial statements to be prepared. PA&oBs in Tanzania are required to prepare their financial statements in compliance with the


International Financial Reporting Standards (IFRS) or the International Public Sector Accounting Standards (IPSAS) depending on the nature and objectives of the PA&oBs in question. This is in line with the decision taken by the National Board of Accountants and Auditors and endorsed by the Government that reporting entities in Tanzania shall embrace the International Accounting reporting standards. The preparation and submission of PA&oBs accounts is a legal requirement as per the requirements of the individual enabling Acts, the Companies Act of 2002 or Sect. 25 of the PFA 2001 as revised in 2004. PA&oBs annual reports provide information to assist citizens to assess the performance of these entities and hold them to account for their performance in the use of public resources. Timely information is necessary for this to occur. This is the whole essence of accountability in the use of public resources. As a matter of best practices and in accordance with the requirements of Reg. 8 (5) of the PFR 2001 every PA&oBs shall be responsible to ensure that information is available to the general public in respect of its activities and finances and for this purpose each PA&oBs shall prepare and make available to the general public an Annual Report stating the following:- (a) the overall budget strategy; (b) the nature and objectives of each main programme; (c) assessments for output and performance against

objective; (d) a summary of the financial results for the fiscal year; (e) the plans for the year ahead, as approved by the

respective authorities; (f) the provisional plans for the two subsequent years.

From the requirements of this regulation it is therefore a legal responsibility for Accounting Officers to ensure that


information is available to the general public in respect of their activities and financial performance through the publication of the audited financial statements which will be incorporate in the PA&oBs annual reports. It is therefore illegal for any Accounting Officer to forbid any person access to information on the performance of the entity. PA&oBs in the country are expected to have in place effective financial reporting arrangements that underpin financial statements preparation procedures, including early recognition and resolution of issues that impact on the financial statements themselves. This involves having in place effective internal control systems which include the establishment of functional internal audit units and audit committees in line with the requirements of Regs. 28 – 35 of the Public Finance Regulations 2001 (revised 2004).

The results of my audit in this financial year, have shown that PA&oBs that maximized the alignment of their year end financial reporting processes with effective internal control systems, segregation of duties, monthly bank reconciliations, proper custody of accountable documents, establishment of internal audit units together with audit committees were more successful in meeting the deadlines for submission of better quality accounts for audit purposes, than those which did not.

1.3 Organisation of Audit work The report provides a summary of the final results of the audit exercise, which was carried out on my behalf through outsourcing of this task to private audit firms registered with my Office for such purpose. In order for my Office to effectively handle this task of auditing all PA&oBs in the country, I decided to use the constitutional power vested in me and contracted out the audit of some of the Public Authorities and other Bodies. In executing this responsibility the office either singly or jointly did


the audit of the PA&oBs while the majority of such audits were wholly outsourced. Such audits were subject to the quality review of my office. During the year under review my office worked hand in hand with 44 private audit firms registered with my office.

1.4 Legal Framework Governing Financial Reporting in PA&oBs This report is issued in accordance with the requirements of Article 143 (4) of the Constitution of the United Republic of Tanzania of 1977 (revised 2005). The report comprises the results of audits of financial statements of the PA&oBs for the financial years ended 31st September 2006, 31st December 2006 and 30

th June,

2007. According to the Constitution of the United Republic of Tanzania, Article 143 (2), I am required to: (i) Satisfy myself that any withdrawal of funds from

the Consolidated Fund are authorized or are provided for under Article 136 of the Constitution, and if I am satisfied that these conditions were met, I approve such withdrawals.

(ii) Satisfy myself that all funds which have been authorized as payments and charged from the Consolidated Fund or the funds which have been authorized by Parliament to be spent were applied solely for the purpose for which they were appropriated and that those expenditures were made in accordance with the rules of the requisite authority.

(iii) Perform audit, at least once in every year, and submit reports on the financial statements of the Government of the United Republic of Tanzania,


financial statements prepared by all officers of the government of the United Republic of Tanzania, financial statements of all Public Authorities and Bodies of the United Republic of Tanzania.

On the other hand, Sect. 30 (1) of the Public Finance Act No. 6 of 2001 (revised 2004) specifies that, “In addition to the functions assigned to the Controller and Auditor-General by the Constitution, the Controller and Auditor-General shall be responsible for examining, inquiring into, auditing and reporting on the accounts of:- (a) All Ministries and departments of Government and

their accounting officers; (b) All persons entrusted with the collection, receipt,

custody and issue of payment of public monies or with the receipt, custody, issue, sale, transfer or delivery of any stamps, securities, stores or other public property;

(c) All public authorities and other bodies; (d) Any authority or body which receives funds from the

Consolidated Fund or from public moneys for a public purpose;

(e) Any authority or body which is authorized by law to receive money for a public purpose; and

(f) Any authority or body required by law to be audited by the Controller and Auditor-General”

In understanding of the legal framework governing the audit of PA&oBs, one has to take into consideration the fact that a number of PA&oBs are required to operate under the accrual accounting system which will necessitate these PA&oBs to be IFRS compliant. In such situation, the PA&oBs legal framework governing their financial reporting and auditing will either be the Companies Act No.12 of 2002 or the enabling Acts of Parliament of the respective PA&oBs.


1.5 Responsibilities of the Accounting Officer Sect.25 (2) of the PFA 2001 states, “Each Accounting Officer shall, within a period of three months after the end of each financial year, prepare and transmit to the Controller and Auditor General in respect of past financial year and in respect of the revenues and moneys for which he is responsible:- (a) a balance sheet showing the assets and liabilities; (b) a statement of the source and application of funds

showing the revenues, expenditures and financing of the fund for the year;

(c) a summary statement of revenue and expenditure, being a summary of all the statements signed by accounting officers under subsection (2) (a) and (2) (c) of this section;

(d) a statement of the amounts guaranteed by the Government at the end of the financial year in respect of bank overdrafts, loans, public loan issues and other contingent liabilities;

(f) a statement of the amount outstanding at the end of the year in respect of loans issued by the Government;

(g) a summary statement of arrears of revenue for each revenue head being a summary of the statements of arrears of revenue signed by accounting officers under subsection (2)(d) of this section”.

Sect.25 (4) states, “All accounts submitted under this section shall: (a) Be prepared in accordance with generally accepted

accounting practice; and (b) State the basis of accounting used in their

preparation and identifies any significant departures therefrom and the reason for that departure.”

The audit results of the financial statements of the PA&oBs were submitted to the respective Accounting Officers.


Furthermore, pursuant to Companies Act No. 12 of 2002 Section 152, the directors of every company shall prepare individual accounts for each accounting period and lay before the company general meeting in accordance with Section 166 of this Act, and such accounts shall indicate:

(a) a profit or loss account or, in the case of a company

not trading for profit, an income statement of account;

(b) a balance sheet as at the last day of the accounting period; and

(c) A cash flow statement.

This report is the outcome of the summary of issues observed in the specific audit reports of each PA&oBs.

1.6 Reporting Procedures Being a member of the International Organisation of Supreme Audit Institutions (INTOSAI), NAO is required to comply with the requirements of carrying out audits of the financial statements of PA&oBs in conformity with the requirements of the INTOSAI standards and the International Standards on Auditing (ISA).

During the audit, the auditors critically examined and verified the financial statements together with their supporting documents of the PA&oBs to establish their validity to be charged as PA&oBs expenditure. At the end of the audit, various audit opinions were expressed on the financial statements based on the audit findings.


CHAPTER TWO

2.0 BASIS AND TYPES OF AUDIT OPINIONS ISSUED TO PA&oBs

This chapter deals with the basis and types of audit opinions that were issued to PA&oBs during the financial year ended either on 30th September 2006, 31st December 2006 or 30th June, 2007

2.1 Introduction In this chapter, an endeavor is made to give a detailed analysis of the issues and matters which influenced the auditors in issuing the type of audit opinion issued i.e. unqualified opinion, unqualified opinion with emphasis of matter, adverse opinion, qualified and disclaimer of opinion to the PA&oBs in question. As explained in earlier chapter of this report, the basis of issuing a certain type of opinion is based on very clear criteria including the materiality tolerable error benchmark.

2.1.1 Basis of Opinions Issued

As a matter of statutory requirement, auditors are obliged to give assurance to stakeholders of the respective PA&oBs whether the information given in the financial statements prepared by them present fairly the results of the operations, cash flows and financial position of the PA&oBs for the year under review. This certification provides to stakeholders the audit assurance as to the reality of the financial operations of the PA&oBs including the PA&oBs compliance with prescribed requirements. Based on the International Standards on Auditing (ISA) and INTOSAI standards, the following opinions are issued as a measure of the assessment given on the financial information presented. These are unqualified opinion, qualified (except for) opinion, adverse opinion and disclaimer of opinion.


2.2 Audit Opinions

2.2.1 Definition of Audit Opinion

The Oxford English dictionary of accounting defines an audit opinion as an opinion contained in an auditor’s report. It expresses a view as to whether or not the financial statements audited have been prepared consistently using appropriate accounting policies in accordance with relevant legislation, regulations, and applicable accounting standards/principles.

According to International Standards on Auditing (ISA) “the opinion should clearly indicate the financial reporting framework used to prepare the financial statements and state the auditor’s opinion as to whether the financial statements give a true and fair view and where appropriate, whether the financial statements comply with statutory requirements”

The opinion also has to state whether there is adequate disclosure of information relevant to the proper understanding of the financial statements or not.

For the purpose of accountability and transparency to the National Assembly, regardless of the opinion given in the individual audit reports, audit findings are narrated alongside their implications, recommendations, clients’ responses, and auditors’ comments. I believe that this form of presentation of audit findings and reporting, promotes the obligations conferred to the Accounting Officer to prepare the financial statements and to the auditor to audit them.

2.2.2 Unqualified Opinion

According to International Standards on Auditing “an unqualified opinion should be expressed when the auditor concludes that the financial statements give a true and fair view (or presented fairly, in all material respects) in accordance with the applicable financial reporting framework”. An unqualified opinion also indicates


implicitly that any changes in accounting principles or in the method of their application, and the effects thereof, have been properly determined and disclosed in the financial statements

An unqualified opinion is issued when I am satisfied that the PA&oB’s financial statements are presented fairly in all material respects; in accordance with applicable financial reporting framework and applicable accounting principles. However, issuance of an unqualified opinion does not mean that the PA&oBs has a clean whole system of internal control. It only means that nothing has come to my attention to warrant a qualified opinion. Accordingly, each PA&oBs issued with an unqualified opinion has also been issued with a management letter giving details of the material issues that are equally potential to risks of financial and/or stores losses which, if not addressed could lead to qualified opinion in the future. In the year under review, seventy four (74) PA&oBs have been issued with unqualified opinion without emphasis of matter. The PA&oBs are as listed below:.

PA&oBs issued with unqualified opinion

S/N Name of PA&oBs Type of Opinion

1 Tanzania Fertilizer Company Ltd Unqualified 2 Ngorongoro Conservation Areas Unqualified 3 Parastatal Pension Fund Unqualified 4 Tanzania Postal Bank Unqualified 5 Tanzania Petroleum Development

Corporation. Unqualified

6 Arusha International Conference Centre. Unqualified 7 Tanzania Industrial Research and Development

Organisation (TIRDO). Unqualified

8 Tanzania Engineering and Manufacturing Design Organisation

Unqualified

9 National Ranching Company(NARCO) Unqualified


10 National Environment Management Council (NEMC)

Unqualified

11 Consolidated Holding Corporation Unqualified 12 National Development Corporation Unqualified 13 State Mining Corporation Unqualified 14 National Health Insurance Fund Unqualified 15 Muhimbili National Hospital Unqualified 16 Deposit Insurance Board Unqualified 17 The Mwalimu Nyerere Memorial Academy Unqualified 18 Unit Trust of Tanzania Unqualified 19 Ngorongoro Pastoralist Council(NPC) Unqualified 20 National Social Security Fund Unqualified 21 Arusha Urban Water Supply and Sewerage

Authority Unqualified

22 Moshi Urban Water Supply and Sewerage Authority

Unqualified

23 Tanga Urban Water Supply and Sewerage Authority

Unqualified

24 Musoma Urban Water Supply and Sewerage Authority

Unqualified

25 Lindi Urban Water Supply and Sewerage Authority

Unqualified

26 Songea Urban Water Supply and Sewerage Authority

Unqualified

27 Mwanza Urban Water Supply and Sewerage Authority

Unqualified

28 Dodoma Urban Water Supply and Sewerage Authority

Unqualified

29 Bukoba Urban Water Supply and Sewerage Authority

Unqualified

30 Mbeya Urban Water Supply and Sewerage Authority

Unqualified

31 Tabora Urban Water Supply and Sewerage Authority

Unqualified

32 Sumbawanga Urban Water Supply and Sewerage Authority

Unqualified

33 Shinyanga Urban Water Supply and Sewerage Authority

Unqualified

34 Morogoro Urban Water Supply and Sewerage Authority

Unqualified

35 Architects and Quantity Surveyors Registration Unqualified


Board 36 Tanzania Tobacco Board Unqualified 37 Gaming Board of Tanzania Unqualified 38 Sugar Board of Tanzania Unqualified 39 Tanzania Cotton Board Unqualified 40 Presidential Parastatal Sector Reform

Commission. Unqualified

41 Engineers Registration Board. (ERB) Unqualified 42 Energy and Water Utilities Regulatory


43 Tanzania Institute of Bankers Limited Unqualified 44 Tanzania National Parks(TANAPA) Unqualified 45 Tanzania Communication Regulatory


46 Dar es Salaam institute of Technology Unqualified 47 National Institute for Productivity Unqualified 48 Institute of Adult Education Unqualified 49 Institute of Finance Management Unqualified 50 Dar es Salaam Maritime Institute Unqualified 51 Tanzania Standard Newspaper Unqualified 52 Capital Market and Security Authority Unqualified 53 Tanzania Education Authority Unqualified 54 TCRA Consumer Consultative Council Unqualified 55 National Council for Technical Education Unqualified 56 Co-Operative Audit and Supervision

Corporation Unqualified

57 College of African Wildlife Management(MWEKA)

Unqualified

58 National Board of Accountant and Auditors Unqualified 59 Twiga Bancorp Limited Unqualified 60 Tanzania Commission for Universities Unqualified 61 Public Procurement Regulatory Authority Unqualified 62 National Economic Empowerment Council Unqualified 63 National Institute of Transport Unqualified 64 Contractors Registration Board Unqualified 65 Dar es Salaam University College of

Education (DUCE) Unqualified

66 Tanzania Library Services Board(TLSB) Unqualified


67 Moshi University College of Cooperative and Business Studies

Unqualified

68 Institute of Accountancy Arusha Unqualified 69 Tanzania Coffee Board Unqualified 70 Centre for Agricultural Mechanization and Rural

Technology Unqualified

71 National Sugar Institute Unqualified 72 National Housing Corporation Unqualified 73 National Board of Materials Management Unqualified 74 Mbinga Water Supply and Sewerage Authority Unqualified

2.2.3 Unqualified opinion with Emphasis of Matter

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


PA&oBs issued with unqualified opinion with emphasis of matters

S/N Name of PA&oBs

Type of Opinion

Basis for expressing unqualified opinion

1. Tanzania Port Authority

Unqualified opinion with emphasis of matters

TPA assets in particular those taken over from the predecessors, namely, Tanzania Harbours Authority and Marine Services Company Limited, have not been revalued at any point in time in the last five years and the results incorporated in the books of account. International Accounting Standard No 16 recommends revaluation of assets to be done in an interval of between three and five years. In this regards, we could not ascertain and report on the fair value of assets as reflected in the financial statements at net carrying amount of Shs. 102,610,191,087.

2. Tanzania Railways Corporation

Unqualified opinion with emphasis of matters.

• The Corporation has sustained deficits in the past four years which have accumulated from Shs. 18,219,202,000 as at 31st December, 2003 to Shs.54,489,166,000 as at 31st December 2006 resulting in a decline in the Corporation’s net worth.

• The Corporation’s current liabilities exceeded current assets by Shs. 9,990,291,000 as at 31st December, 2006 which indicates that the Corporation was unable to honour current obligations


as they fall due 3. Kigoma

Urban Water Supply and Sewerage Authority


Improperly vouched expenditure Shs14,621,593

Revenue lost due to water leakages Shs.127,826,100

Long outstanding receivables Shs.391,791,808 and payables Shs.41,775,376

Stores worth Shs. 4,004,110 queried during the previous year (2005/2006) is still not accounted for.

4. Board of External Trade


The Board had negative working capital of Shs.152,924,130 and it has been:

- Unable to meet her maturing obligations.

- For the past five years, the Board had been unable to generate sufficient income to cover operating expenses. As at 30th June, 2007, the Board had accumulated deficits amounting to Shs.2,371,528,127.

- The current ratio is below normal. As at 30th June, 2007, the current ratio was 0.80:1 compared to standard ratio of 2:1. In this regard, the Board may in the future face a going concern problem if no additional working capital is injected from external sources, and review of its operating


expenses to turn around the deficit trend is undertaken.

5. Simu 2000 Limited


- Going Concern problem - Post Balance Sheet Event - Pursuant to the

amendment of the National Bank of Commerce (Reorganisation and Vesting of Assets and Liabilities) Act, Cap 404 dated 18th May, 2007 where it was decided that SIMU 2000 Ltds existence will come to an end on 31st December, 2007. All pending issues in favour or against SIMU 2000 Limited will thereafter be dealt with by Consolidated Holding Corporation.

6. Tanzania Investment Bank Limited


The Bank has not consolidated its accounts with its wholly owned subsidiary.

2.2.4.1 Qualified Opinion A qualified opinion is issued when the auditor conclude that an unqualified opinion cannot be issued but due to disagreement with management or limitation of scope is not so material and pervasive and except for the effect of the matter giving rise to the modification of audit opinion; the financial statements were prepared in accordance with the applicable financial reporting framework and not misleading thus they do not require an adverse opinion.


2.2.4.2 Circumstances that may result other than an unqualified opinion

(a) Limitation on Scope

According to Sect. 32(5) of the Public Finance Act No. 6 of 2001 as revised in 2004; I am empowered to access all records, books, payment vouchers, documents, securities, stores or public property in the possession of any officer or any other person who has received any public money or property. When I am unable to obtain full information regarding the financial statements’ preparations or documents and the scope of audit is limited to full access of documents or such financial statements, and I am unable to issue an Opinion. In such case there may well exist the following Circumstances:

• Payments are made without payment vouchers; • Goods or services procured were not supported

by delivery notes; • Various payments were not supported by proper

documents; • Revenue receipt books were not submitted for

audit verification; • Purchases were not supported by schedules,

this may lead to doubtful existence of the asset;

• Unavailability of confirmation from the payees on the payments made;

(a) Disagreement in best practice on records

keeping and non compliance with Laws and Regulations. In order to comply with the requirements of the Public Finance Regulations 2001 as revised in 2004, Regs 28-35 the Accounting Officers of each PA&oBs are required to establish sound system of internal


controls including the establishment of effective internal audit units and audit committees.

Disagreement with management The auditor may disagree with management about matters such as:

• the acceptability of accounting policies selected; • the method of their application; • the adequacy of disclosures in the financial

statements If such disagreements are material to the financial statements, the auditor should express a qualified or an adverse opinion. In this year under review, ten (10) PA&oBs have been issued with qualified opinion as listed below:.

PA&oBs with Qualified Opinion S/N Name of

PA&oBs Type of opinion issued

Remarks

1 Tanzania Posts Corporation

Qualified opinion

The liability in respect of the employees’ defined benefits plan included in the accounts at a debit balance of Shs. 547,595,995 is not stated at fair value because actuarial computations to determine the employees’ benefits earned in return for their services in the current and prior period have not been done. The present value of the defined benefits could not be determined by discounting the estimated future cash flows, as the interest rates have not


been determined by the actuary. In the circumstances the liability of pensions and provident funds included in the financial statements could not be reliably measured.

2. Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO)

Qualified opinion

• Computation of NSSF and PPF deductions based on basic pay instead of gross pay. As a result amount remitted was understated

• Disconnection and

connections not updated in the system

• Foreign currency cash

book not maintained • Delay in billing new

customers

• Un authorized adjustments on customer bills Shs.497,740,043

• Lack of the documented

accounting policies for the corporation

• Loss of Shs. 324,000,000

(more clarification is needed)

• The use for First Time


New Domestic Water Supply Connection Fund (FTNDWSCF) for unapproved purposes Shs.231,0000,000

• The billing system not

intergraded into the accounting system

3. Dar es

Salaam Water Supply and Sanitation Project Interna-tional Develop-ment Association

Qualified opinion

Article III section 3.04 of the Development Credit Agreement between the United Republic of Tanzania and the International Development Association (IDA) and article II section 2.04 of the Project Agreement between DAWASA and IDA, require DAWASA to open and maintain a project bank account for deposit of counterpart fund/contribution to the project. This account must be replenished to Shs 750,000,000 at the end of each project quarter or when the balance falls below Shs 250,000,000. However, as at 30th June 2007 the balance in the project account was only Shs.93,575,267. This is a breach of a credit agreement covenant which could lead to suspension of financing by the financiers as provided for under Article V of the


Development Credit Agreement with IDA and Article 1.07 of the Finance Agreement with EIB.

4. Singida Urban Water Supply and Sewerage Authority

Qualified opinion

Assets The Authority doesn’t posses title deeds of its landed properties and motor vehicles are not registered under its name and balance per physical count. Fixed Assets at year end was not reconciled with that per accounts. I was therefore unable to ascertain the Authority’s legal ownership over building and motor vehicles disclosed in the accounts at Shs. 150,988,223 and Shs. 43,171,518 respectively and the correctness of movable fixed assets disclosed in accounts at Shs.70.5 million could not be ascertained. Debtors and Prepayments Debtors and prepayments include water bills debtors totaling Shs. 42.2 million that have been disconnected due to non payment. The amount has not been provided for as doubtful debts. Recoverability of these debts is therefore doubtful.

5. Tea Board of Tanzania

Qualified opinion

Assets and liabilities of the defunct Tanzania Tea Authority (TTA) are yet to be formally transferred to the


Board and Tanzania Small Holders Tea Development Agency, which are its successors. Under the circumstances, all fixed assets which formerly belonged to the Authority and are currently utilized by the Board, are not incorporated in the accounts. Similarly, corresponding annual charges on the assets which are supposed to be made in the income and expenditure account in form of depreciation, arising in the course of their utilization for normal operational activities, are not recognized in the accounts. In this respect, the cost for the use of the assets to generate income has not been matched with income generated, contrary to sound accounting principles.

6. Mtwara Urban Water Supply and Sewerage Authority

Qualified opinion

Depreciation computations were not based on estimated useful life of individual assets as indicated on note 2 of the Authorities accounting policies. In the circumstances, the carrying amounts of property, plant and equipment reported at a net book amount of Shs. 2,694,078,399 are not stated at fair value

7. Tanzania Broadca-

Qualified opinion

Revenue from commercial advertisements


sting Services

The TBS receives commercial orders and raises broadcasting confirmation orders (BCOs), and programme certificates for programme and commercial advertisements aired. The invoices to customers are prepared on the basis of BCOs that are approved by the Director of Marketing. The TBS did not maintain lists of all commercial orders received and processed and BCOs raised during the year. Furthermore there was no list of all programme and commercial advertisements aired. Due to limitation with respect to the recording and accuracy of revenue transactions the completeness of the programme and commercial revenue could not be substantiated with appropriate audit evidence by using other audit procedures. We are therefore uncertain on the completeness of commercial revenue of Shs 2,672,924,063 included in the financial statements.

8. National Insurance Corporation (T) Limited

Qualified opinion

Accounting for income There were no calculation details to support interest income on policy loans amounting to Shs. 54,959,092 and the same was not matched with relevant accounting


periods as the interest income was recognized on loans which had reached maturity contrary to International Accounting Standards (IAS 18) which call for accrual over the relevant period. Lack of Subsidiary Records For Outstanding Claims Outstanding claims reported in the accounts Shs.26,103,256,042 (Non Life Insurance Business Shs.13,487,798,517 and Life and Pensions Assurance Business Shs.12,615,457,525) had no subsidiary ledger whose totals could be reconciled with their corresponding control accounts in the general ledger thereby rendering verification of their accuracy difficult.

9. Babati Urban Water Supply and Sewerage Authority

Qualified opinion

(a) Limitation of scope • There were

questionable procurement and use of fuel worth Shs.4,292,400

• Records to supports stocks figure of Shs.28,088,704 were not available.

(b) Disagreement with best practice on records keeping and non compliance with Laws and Regulations The Authority management has not established a sound


internal control system since there is no proper segregation of duties and separation of responsibilities. Also there is no secured cash office room separate from other accounting duties. As a result, the Authority is prone to high risk of loses without management detection. The Authority has no internal audit unit and an audit committee. There were non competitive procurements worth Shs.51,835,500

10. Tanzania Small Holder Tea Develop-ment Agency

Qualified opinion

- Assets and liabilities of the defunct Tanzania Tea Authority (TTA) are not incorporated in the accounts

- Similarly, corresponding annual charges on the assets which are supposed to be made in the income statement in form of depreciation are not recognised

2.2.5 An Adverse Opinion

An adverse opinion is issued when the effect of a disagreement with Management has a material and pervasive effect on the financial statement such that the financial statements are not prepared in accordance with the applicable financial reporting framework or are misleading as a whole. In this case, a qualified opinion is not adequate to disclose the misleading nature of the financial statements.


However, for the period under review there was no PA&oBs that was issued with an adverse opinion.

2.2.6 Disclaimer of Opinion A disclaimer of opinion is expressed when the auditor is unable to obtain sufficient appropriate audit evidence in the financial statements so prepared and submitted. In this case, the situation has a material effect on the financial statements such that the auditor is unable to express an opinion on the financial statements.

In the circumstances that a disclaimer of opinion is issued on the financial statements, disclosure is made of any unknown material misstatements or other reservations about the fair presentation of the financial statements in conformity with the applicable reporting framework.

For the period under review only one public authority was issued with a disclaimer of opinion. The concerned PA&oBs and the reasons for the disclaimer are as indicated below:

Tanzania Electric Supply Company Limited (TANESCO)

Disclaimer of Opinion

Inventories: The company has experienced problems in updating its inventory records since 2005 due to the introduction of new accounting software. Subsequently, prior year adjustment of Shs 18.5 billion has been made to correct the value of these inventories. In addition, some of the inventory transactions in respect of the year 2006 were recorded during the year 2007 and the resulting quantity balances as at 31st December 2006 could not be reconciled with physical quantities of stock at that date. Due to the foregoing, I was unable


to determine whether inventories stated in the balance sheet at Shs 24.3 billion are fairly stated and whether no further adjustments are required in respect of prior year inventory problems. Adjustments to inventories would result in similar adjustments to property, plant and equipment and loss for the year. Trade and other payables The audit revealed that the Company’s accounting and control systems in relation to trade and other payables had not operated effectively during the year under review, resulting in key accounts balance remaining unreconciled at the time of the commencement of the audit. In addition as a result of work undertaken during the course of the audit substantial adjustments were made to increase the level of trade and other payables. This included the work undertaken by the Company’s staff to reconcile supplier statements and creditors audit confirmation of balances to the accounts payable records to certain key suppliers. Since the work undertaken did not cover all the key Company’s suppliers of goods and services, I was unable to determine the extent to which further adjustment is required to the amount at which trade and other payables are stated.


I have taken efforts of identifying the reasons for issuing the type of opinion issued so that the affected PA&oBs should be aware of the weaknesses and short comings of their financial reporting with the view of making improvements in the future.


CHAPTER THREE

3.0 DETAILED AUDIT FINDINGS This chapter has two parts, A and B. Part A deals with outstanding audit recommendations of previous audit recommendations while part B deals with current year audit findings. Part B is further divided into two parts. Part one of part B deals with common issues and part two of part B deals with specific issues.

Part A:

3.1.0 Outstanding previous audit recommendations These are various matters that arose from the previous audit which were either not yet implemented or were under the process of implementation at the time of issuing the specific/individual audit reports. The financial statements of the concerned bodies might be affected if purposive efforts will not be made by the respective authorities to clear the outstanding audit recommendations. Details of the outstanding audit recommendations which require attention of the management are as follows:

3.1.1 List of Outstanding Previous Audit Recommendations S/N PA&oB Previous

Recommendation Status

1. Tanzania Engineering and Manufacturing Design Organisation

-Devising strategies geared at widening income generating activities. -Recovery of long outstanding debts. -Differences between VAT control account balance and monthly VAT. Claims should be investigated

Not Implemented

2. Institute of Adult

Title deeds • Increase efforts to

Not implemented


Education obtain the requisite title deeds for the institute’s properties.

• Non control over cash at Regional centre.

3. State Mining Corporation (STAMICO)

Management should re-possess equipment held in Burundi

Not implemented

4. Tanzania Ports Authority

-Non payment of rent by commercial tenants. -Amount due from Dunhill Motors. Close follow-up should be made to ensure that the case in court involving Dunhill Motors and the authority is concluded and the fate of the amount due from the latter is determined.

Not implemented

5.

Tanzania Postal Bank

-Depositors Account Balances. The suspected items on the depositors accounts Should be cleared -Reconciliation with Tanzania Posts Corporation should be done to establish whether the purported fraudulent withdrawn amounts by TPC staff on the Bank’s customers’ accounts are received. -Detailed age analysis of the suspected forgeries amounts by the Bank’s staff included under sundry receivables

Not implemented


should be prepared. Assessment whether this amounts are to be recovered in full should be made.

6. Sugar Board of Tanzania

-To obtain title deed for the building on ; • Plot No 45 at

Agakhan Road. • 6 houses on plot No

303 at Masaki. • Residential houses at

Makambako Iringa.

Not implemented

7. SIMU 2000 LIMITED

-Review of present documents governing the establishment of the company and appropriate changes effected to suit the working environment of the company. -Collection of rental charges /fees for the entire period during which the properties remained with TTCL pending compliance with the subscription and Shareholders’ agreement by TTCL. -Follow up with TTCL and National Housing Corporation with a view to sorting out the legal ownership of the block of residential flats situated in Tabora Municipality at Cheyo Area included in the Company’s financial statements as available

Not implemented


property for sale. 8. Tanzania

Railways Corporation

Obtain Title Deeds/ Right of Occupancy Certificates. The legal documents of the following plots have not been obtained.

Block No 228 Kurasini Dar es Salaam.

2 Blocks Dodoma (DCE’s Office).

Railway Club Uluguru Road Tabora.

DTM’s Mwanza North Port.

Not implemented

9. Tanzania Tobacco Board

Vigorous follow up efforts to ensure that TRA raises final tax assessments and therefore claim the tax credit on the Corporation tax paid in advance.

Not implemented

10. Tanzania Library Services Board

1. Requirement of financial assistance to tackle the problems facing the regional libraries.

2. Carry out practical counting of inventory items at the year end for inclusion in the financial statements.

3. Management should ensure that the books sent to regional

Not implemented


libraries are processed and exposed to users in time.

4. Board of Directors

should be appointed without further delay.


-Inclusion of TTA’S assets and liabilities. -Management should liaise with responsible authorities to ensure that the assets of the defunct Tanzania Tea Authority are distributed to its successors (Tanzania Small Holders Tea Development Agency) as appropriate.

Under process of implementation

12. National Environment Management Council

-No insurance cover for the office furniture and equipment.

Not implemented

13. TCRA –Consumer Consultative Council

-Financing of the council; the management of the council should liaise with the government through the Ministry of Infrastructure Development with the view of ensuring that funds to support the planned programme are provided and realized by the Council.

Not implemented


-Staff compliments. The council should consider recruiting an assistant accountant to handle bookkeeping matters of the Council.

14. Presidential Parastatal Sector Reform Commission (PSRC)

-Claim unpaid purchase price Shs.184,266,641. -Missing expenditure returns amounting to Shs.492,857,554.90

Partly implemented Shs.78,000,000 still outstanding

15. National Board of Accountants and Auditors

-No internal audit was carried out during the year under review. -Control over consumable stocks -Institute disaster recovery and business continuity plan.

16. Tanzania Standard Newspapers

-TSN to have lease agreements with all its tenants. -TSN to take appropriate action on long outstanding creditors of Shs.23,142,896 due to Kidaba Auto Works Ltd Shs.2,689,968 to Reuters Ltd settled.

Not implemented

17. Tanzania Industrial Research and Development Organisation (TIRDO)

-Obtain new certificate of occupancy for two plots and two separate title deeds for plots 1408 and 1409. -Revalue TIRDO’s land and buildings.

Not implemented


-A qualified competent internal auditor should be employed. -TIRDO to evolve strategies that will lead to recovery of substantial amount of outstanding accounts receivables. -TIRDO should plan its procurements in accordance with the Public Procurement Regulations, 2005. -Follow up of the scheme of service and incentive scheme with the Treasury and fill all key vacant posts.

18. Tanzania Broadcasting Service

The management should make effort to employ more staff in the Internal audit unit.

Not implemented

19. Tanzania Fertilizer Company Limited

-Management should increase efforts of revamping the Company’s operations focused at coming up with a practical consistent profit making trend. -Management should discharge the liability due to Treasury or negotiate its conversion

Not implemented


to Equity. -Outdated accounting manual, financial regulation and scheme of service -Management should tighten control over cost particularly the operating expenditure. -Have registered office in accordance with the Companies Act, 2002 where every company must keep at its registered office some important documents and register to facilitate inspection by creditors and other interested parties. Contrary to the requirement of the law all important documents are maintained at the Company’s head office in Dar es Salaam.

20. Tanzania Coffee Board

-The management should continue liaising with the Government on how to boost the Board’s income. Also efforts should be made to cut down operating expenses to the minimum possible level. -Dormant Long outstanding Receivables

Not fully implemented due to difficulty in changing policy


Management Should intensify efforts in collecting long outstanding receivables with a view to strengthening liquidity position of the Board. Bad debts amounting to Shs.1,148,598,000 were written off during the year under review.

21. Dar es salaam Institute of Technology

-Updating the Unqualified Fixed register updated - Properly staffing the internal audit section. -Non review of financial regulation manual,

Under process of implementation

22. Unit Trust of Tanzania

-Absence of financial regulation and accounting manual -Formation of internal audit unit and audit committee

Partly implemented

3.1.2 Bank of Tanzania (i) Claims on Government External Payment Arrears -

NBC (EPA) Shs.131,725,294,000 The balance on NBC – EPA Account represents losses on exchange rate differentials between the exchange rate ruling when the funds were initially deposited with the National Bank of Commence (NBC) and exchange rate prevailing when the beneficiaries are paid. The exchange losses are recoverable from the Government. However, as the Government could not in the short term raise the required levels of local currency (TZS) to


compensate the Bank for the losses, it has converted the losses into EPA stock to be held by the Bank.

The Bank maintains two ledger accounts; one is to source part of the required payment of the original deposits and the other (EPA Losses in Exchange – NBC Account) is to source the difference of amounts which arose from the exchange rates differentials. We noted that the NBC External Payment Arrears Special Deposit (TZS) Account closed with a balance of Shs.2,288,418,663.41 as at 30th June 2006 and total payments of Shs.4,227,632,787.60 were made during the year. On the other hand, the total EPA Losses in Exchange – NBC was Shs.131,725,294,000. Clause 4.2.1 of the BOT Debt Management Operations and Procedures Manual, 1997 require that, a beneficiary claimant (debt assignee) shall apply to the Bank of Tanzania, identifying a debt being claimed with all necessary particulars. An assignee claimant must also produce a legally binding Deed of Assignment from the respective creditor.

We noted that, the claims were supported with application letters attached with Deeds of Assignments and other relevant particulars but were not supported with the supplier’s original documents such as invoices, bills of lading and letters of credit. In addition the claims were not pre-audited by the Internal Audit Directorate before effecting payments.

In the absence of the supplier’s original documents in support of the debts, we are of the view that the debt assignment may not be complete and can raise problems in case of disputes that may arise.

(ii) Excessive Legal fees Paid

Further to earlier payment of legal fees of Shs.2,990,221,907 made in the previous year to M/s


Mkono and Company Advocates, the lawyers handling the Valambhia case, an additional amount of Shs.5,138,153,330 was paid during the year, almost twice as much as the amount paid in the previous year, making total payments of Shs.8,128,375,237 as at 30th June 2006. The contingent liability to the Government regarding this case is about Shs.60 billion. Considering the fact that neither the outcome nor the time frame the case will take is known, there is a danger that the Bank may end-up paying excessively high legal fees on the case.

3.1.3 Tanzania Post Corporation

(i) Distribution of assets and liabilities The task of distributing the assets of the former Tanzania Posts and Telecommunications Corporation (TP&TC) between TTCL and TPC was in progress but yet to be completed by 31st December, 2006.

(ii) Property, Plant and Equipment Title Deeds The corporation's properties stated at a total cost of Shs.77,400,000 as at 31.12.2006 had no title deeds. In the absence of title deeds, we could not ascertain the corporation's legal ownership of such properties. However, follow up is at an advanced stage to obtain the remaining title deeds.

3.1.4 Pension and similar obligations Ex-East African

Community staff The liability of defined benefit plan created in the accounts is wholly unfunded by the Corporation. No contributions have been made by the Corporation into the defined benefit plan due to liquidity problems facing the Corporation. As a result the corporation has been forced to pay dues to retiring officers from sources not intended for that purpose. Furthermore, it was noted that the accounting for defined benefit plans was not compliant with accounting policies and IAS 19, in that: -


(a) Actuarial techniques were not used to estimate employees’ benefits earned in return for their services in the current and prior period.

(b) The present value of defined benefits could not be determined by discounting the estimated future cash flows, as the actuary has not determined applicable interest rates.

(c) Actuarial gains and losses could not be determined and included in the accounts.

As a result the liability in respect of pensions included in the accounts, which exceeded payments by Shs.547,595,995 could not be reliably measured in the absence of computation made by a qualified Actuarial Valuer.

We are aware that the Ministry of Infrastructure Development has prepared a cabinet paper, recommending that the Government should take over the burden of settling the Ex-East African Community staff pension benefits. To date, nothing has come out from that proposal.

3.1.5 Tanzania Ports Authority

(i) Dormant Capital Work In Progress Capital works in progress stated at Shs.11,830,974,758 as at 30.6.2007 includes Shs.391,174,929 related to the proposed HQ Investment Property on plot number 2459/35 along Shaban Robert Street and Garden Avenue which has remained dormant for over thirteen years. We learned that the Authority had acquired plot number 2459/35 with an area of 11,376 square meters together with 5 government houses constructed on it at a cost of Shs.362,692,440 in 1995 and a title deed number 53410 for a term of 99 years was granted. However the project could not take off as planned because the Authority was specified for divestiture and it was not allowed to invest in a project whose payback period exceeds two years. We


noted however that in July, 2004 the Presidential Parastatal Sector Reform Commission vide a letter reference PSRC/1/13/48 allocated house number 15 Garden Avenue (one of the 5 houses in plot number 2459/35) to Capital Markets and Securities Authority for construction of offices. It was further noted that there has been a move to sub-divide the plot on which the project was to be erected in favour of CMSA.

Of late, the management of the Authority confirmed that the project was no longer feasible because the Government had decided to reallocate the plot to the Ministry of Foreign Affairs and subsequently the Authority has surrendered the title to the Ministry of Lands. In this regard the cost pertaining to this project has no future economic benefits to the Authority and therefore should be provided for in the books of accounts.

(ii) Non Payment of Rent by Commercial Tenants

We noted that some of the commercial tenants maintained their status quo of not paying rent. As a result of that behavior, some tenants have accumulated substantial balances of unpaid rent. Efforts by the management to have the rent paid have not been successful.

As at 30.6.2007, unpaid rent balance stood at Shs. 245,834,324 made up as follows:- Long outstanding Rent Station Shs. TPA Headquarters 218,204,888 TPA Tanga Port 27,629,436 Total 245,834,324

Some of the individual commercial tenants with outstanding rent balances (above 5 million) are listed below to support this query.


Tenant Name Balance at 06.2007

Shs TAZARA 55,7 49,127 Msasani Nursery School 26,819,500 Infotech Investment Group 23,734,114 Victoria Technology 15,657,153 Vodacom Sokoine 14,672,103 H.J.lmpex (1st&2nd Floor) 14,582,407 Julius Chambers 13,865,814 Polisi Wanamaji 13,608,000 Amba Freight 11,341,000

Jamex International Supplies 10,214,071 Rose Mahendeka 9,432,676 Computer Centre 7,596,064

" Vodacom Kurasini 6,605,337 Isle Freight Forwarder 6,367,500 Inter Tourism Limited 5,581,500

(iii) Amount due from Dunhill Motors

An amount of Shs.133,179,200 was paid to Dunhill motors for supply of motor vehicles seven years ago. However, Dunhill motors could not supply the motor vehicles and eventually the matter was referred to the court of law for determination. Up to the time of concluding the audit field work in October, 2007 the case had not yet been concluded. We noted, however, that full provision for impairment in value has been made in the financial statements

(iv) Performance review

Results from the audit performance review show that Tanzania Ports Authority’s management should take measures geared at promoting the ports of Tanga and Mtwara to boost revenue generation capacity and control expenditure to enable the ports to break even and or to generate surplus.


3.1.6 National Insurance Corporation

(i) IT Problem in Hardware and Software The Corporation is running an old infomix computer

system under UNIX platform developed and installed in 1993. The system has not undergone any major upgrade since its installation. This has resulted in poor performance, unreliability of data. System failure is recorded at least once per month especially on database system.

Maintenance and recovery of data from the computer system especially main database once the failure has occurred takes a lot of time, even up to three days and causes other services to be placed on hold or being processed elsewhere. Lack of system automated features has also been causing many problems and delays including the following:- (a) Manual verification of processed records and data; (b) Manual confirmation of tapes from branches during

processing of records; (c) Loading of incorrect tapes into the computer system;

Decentralization of data processing between branches and head office has also created several other problems, which include; - Data inconsistency between head office and

branches; - Poor control on preparation of tapes to be

transported to head office; - Poor control on transportation of media data

tapes; - Poor control on handling of tapes at head office.

(ii) Amount Due From Reinsurers Shs.4,578,501,546

Dues from Reinsures are stated in the accounts at Shs.4,578,501,546 (gross) as at 31st December, 2006. Our examination of the balance revealed that there were long


outstanding receivables in respect of premium from reinsurance companies amounting to Shs.698,618,596 thus casting doubt on the accuracy and existence of receivables due to the possibility that they were received in the past but books were not posted appropriately. No confirmation was available to auditors to prove existence of the receivables. We were informed that some of the companies have merged; hence seeking confirmations from the companies was useless. However, the outstanding payables in respect of premium to Re-Insurers were Shs.3,375,903,617 as at 31st December, 2006.

3.1.7 Muhimbili National Hospital During the physical verification of the assets owned by the Muhimbili National Hospital it was noted that one building which was being constructed within the Hospital land is owned by a private person.

The Hospital management explained that one person identified as Mr. Kiluvia approached management of the then Muhimbili Medical Centre to construct a commercial building currently housing National Micro Finance Bank, Pharmacy, Restaurant and other business units.

The copy of agreement between the then Muhimbili Medical Centre and H.A.Kiluvia trading as Agent Store is available; agreement was signed on 11th April, 1987. The tenant (A.H.Kiluvia) was to occupy the building for five years with effect from 22nd December, 1987.

The agreement period expired, but the building is still under ownership of the developer contrary to the agreement.


Part B (i)

3.2.1 Current year audit findings This part deals with the audit findings which were revealed during the audit of the current financial year 2006/07. Part B is divided into two parts as mentioned earlier. Part one of part B deals with common audit findings which cut across PA&oBs in the country while part two of part B deals with specific audit findings which do not cut across PA&oBs as follows:

Part B (i) Common Audit Findings The common issues that were revealed during the period under review include overpayments, excess expenditure over budget, outstanding imprests advances, outstanding staff receivables, long outstanding receivables, assets management, non compliance with statutory deductions requirement, non reconciliation of bank statements and cash book entries and observations regarding to banking. Detailed current year audit findings are as follows:

3.2.2 Over Payments and Excess Expenditure Examination of payments vouchers and the related records revealed that a total of Shs.375,144,226 was overpaid to the Commissioner of Domestic Revenue due to wrong interpretation of the VAT Act. It was also noted that some of the Public Authorities and other Bodies spent more that the approved budget to the tune of Shs.136,061,758 during the year under review as summarised below:

S/N

Client Name VAT/Tax Shs.

Excess Expenditure

Shs. 1 Tanzania Standard

Newspapers 84,349,499


136,061,758


3 Tanzania Standard Newspapers

184,260,776

4 Tanzania Postal Bank 106,533,951 Total 375,144,226 136,061,758

It implies that the activities of the respective Public Authorities and other Bodies suffered to the tune of the amount of the VAT overpaid to the Commissioner of Domestic Revenue. Furthermore, the Dodoma Urban Water Supply and Sewerage Authority should seek retrospective approval from the Board for the excess expenditure of Shs.136,061,758 incurred during the year under review.

3.2.3 Long outstanding imprests, advances and staff

receivables During the year under review some of the Public

Authorities and other Bodies closed their respective financial years with outstanding imprest, staffs advances and staffs receivable amounting to Shs.64,903,047. This is contrary to the financial regulations and best practice. Regulation No. 103 of the PFA of 2004 requires retirement of all imprests as soon as the necessity for them ceases to exist; while staff advances are required to be recovered before or by the close of business on the last day of the financial year in which they were issued. Analysis of the outstanding amounts is as follows:

S/N Client Name O/S

Imprest O/S

Advances Staffs

Receivables Amount

SHS SHS SHS 1 Tanzania Standard

Newspapers 29,428,647 29,428,647


11,888,822 30,059,601

41,948,423

3 NEMC 22,954,624 22,954,624 4 Tanzania Tobacco

Board

6,535,600

6,535,600 Total 47,853,069 30,059,60

1 22,954,624 100,867,29

4


The management of the respective PA&oB were negligent in ensuring that the aforementioned financial regulations were taken into account in effecting payments of staff imprest and advances.

3.2.4 Long Outstanding Receivables and Payables The audit of the financial statements of the PA&oBs

during the year of reporting revealed material amounts of outstanding receivables and payables amounting to Shs.58,191,036,467 and Shs.11,154,027,688 respectively. These were caused by some of the Public Authorities and other Bodies failing to collect the outstanding debts and discharge their due debts. The accounting procedures requires that where it is established beyond reasonable doubt that an outstanding receivable balance cannot be collected, then appropriate approval to write off from the books of accounts that amount should be sought from relevant management levels.

The audit team was not given reason(s) for non recovery

of the outstanding amounts and recoverability of the same could not be ascertained. Furthermore, no provision for impairment of receivables was made in the financial statements. The analysis of the outstanding amounts is as follows:

Outstanding receivable and payables S/No

Auditee Name O/S Receivables O/S Payables

1 National Development Corporation (NDC)

611,850,000

2 Tanzania Ports Authority (TPA)

379,013,524

3 SIMU 2000 LIMITED 1,373,514,499 4 Tanzania Education

Authority (TEA) 5, 705,009,906

5 Tanzania Standard Newspaper LTD

1,574,660,254


6 Tanzania Postal Bank

196,973,814

7 State Mining Corporation (STAMICO)

213,094,332

8 Arusha International Conference Centre (AICC)

86,385,415

9 Tanzania Petroleum Development Corporation (TPDC)

103,315,841

10 Tanzania Cotton Board

430,782,985


493,478,776 24,070,863


252,234,884 31,148,664

13 Cooperative Audit and Supervision Corporation (COASCO)

1,860,000,000

14 National Insurance Corporation (NIC)

33,179,238,931

15 Tanzania Electric Supply Limited (TANESCO)

16,800,000,000

16 Tanzania Industrial Research Development Organisation (TIRDO)

584,686,433

17 National Social Security Fund (NSSF)

965,299,082 2,012,559,823

18 Muhimbili National Hospital (MNH)

1,264,423,677 3,124,322,338

19 Tanzania Broadcasting Services (TBC)

2,360,891,699

20 Tanzania Coffee Board

5,961,926,000

Total 58,191,036,467 11,154,027,688


3.2.5 Assets Management. A number of Public Authorities and other Bodies were noted to have poor and/or improper management of the non current assets. These were evident by lack of ownership, un-updated fixed asset registers, and non valuation of non current assets, lack of insurance cover and lack of assets identification code numbers. Detailed analysis of the concerned PA&oBs is as follows:

S/No Auditee

Name Title Deeds /Ownership

Non /over /under

Valuation

Insura-nce

cover

Assets Identification/

Existence 1. Tanzania

Ports Authority (TPA)

Lack of title deeds/right of occupancy certificates for lake Victoria Ports. These ports are Bukoba, Kemondo Bay, Nansio, Musoma, and Shirati.

A TPA‘s motor vehicle at Mwanza was still in Ugandan Registration No. UAG 299 K.

2. SIMU 2000 Lack of title deed for blocks of residential flats located in Tabora Municipality at Cheyo Area.

3. National Ranching Company Limited (NARCO)

-Lack of title deeds for ranches at Ruvu, Kongwa, Kalambo, Kagoma, Kikulula, Makata and Mabale. amounting to Shs. 169,800,483

Motor vehicles not registered in the name of the company. -Title deeds are not in the name of NARCO. These ranches are Misenyi,


Kitengule, Mkata, West Kilimanjaro and Plot 285 Regent Estate

4. National Social Security Fund (NSSF)

Lack of title deeds to the Fund’s properties.

5. Dar es Salaam Institute of Technology (DIT)

Missing title deed of the college

Non valuation of the Property, Plant and Equipment

Lack of Insura-nce cover

6. Institute of Adult Education

Lack of title deed.

Included in stocks and stores are reading materials reported at Shs.78,065,005. The item was acquired by the institutes some years back. Considering the prevailing reforms in education these items appear to be obsolete.

7. TCRA –Consumer Consulta-tive Council

No insura-nce cover on office furniture and equip-ment

Lack of Assets identifica-tion code numbers


against various risks


PPE overstated to the tune of Shs.383,719,204. The ownership of PPE of this amount were taken over by Tanzania Building Agency but still are shown in the books of STAMICO

9. Ngoro-ngoro Conservative Area Authority (NCAA)

NCAA has not obtained title deed for its property in Njiro –Arusha

10. Tanzania Petroleum Develo-pment Corpora-tion (TPDC)

Unsecured title deeds to some of its plot of land in Ujiji plot 79 block A Kibirizi area, plot135 Katonga, Bangwe and plot 1/8 Mpanda

Non incorpora-tion of values of the carrying costs of land plots which corporation intends to develop

11. Tanzania Library Services Board (TSLB)

No title deed for Board’s properties amounting to Shs.27,455,050.

Uninsu-red building, machi-nery and equip-ment

No coding and addi-tion in the register

12. Muhimbili Non availability Failure


University of Health and Allied Science

of property title deed

to insure its assets

13. Tanga Urban Water Supply and Sewerage Authority

No title deed for PPE amounting to Sh.19,642,570,800

14. Dar es salaam Water and Sewerage Corporation (DAWASCO)

Fixed assets not coded Shs.129,406,841

15. Tanzania Tobacco Board (TTB)

Unemployment of a competent valuer to state fair value of the PPE

16. Unit Trust of Tanzania (UTT)

Lack of control of fixed assets: Neither physical count nor coding of newly acquired fixed assets amounting to Shs.508,973,184

17. Tanzania Bureau of Standards (TBS)

Non valuation of PPE contrary to IAS 16

Fixed assets register not updated for additions and deprecation


18. Mtwara Urban Water and Sewerage Authority

No title deed for buildings amounting to Sh.608,352,800

Fixed assets are not valued

Fixed assets are not insured

Fixed assets are not updated in the books


Lack of the title deed for the building on; -Plot No 45 at Alykhan Road. -6 houses on plot No 303 at Masaki. -Residential houses at Makambako Iringa.

3.2.6 Non Compliance with the internal accounting manual &

staff regulations During the year under review some of the PA&oBs were found to have not been complying with their internal generated accounting manuals and staffs regulations. For the matter of best practice each entity should have its own procedures or regulations in order to carry out its business in an effective and efficient manner. Furthermore there are statutory requirements which must be complied with by every entity. These statutory requirements are the prevailing laws, regulations and directives issued by appropriate authorities. Detailed analysis of Public Authorities and other Bodies that do not comply with their accounting and staff regulations are as follows:

S/N Auditee Name Remarks 1. Dar es salaam Water and

Sewerage Corporation (DAWASCO)

-Outdated procedures manual - Uncertain on the accounting treatment for the funds received from the Government of Tanzania of Sh.5 billion.


Outdated accounting manual


3. Dar Es Salaam Institute of Technology (DIT)

Outdated financial regulation and accounting manual

4. Tanzania Petroleum Development Corporation (TPDC)

Outdated financial and staff regulation which fails to accommodate changes resulting from the Corporation’s current needs.

5. Songea Urban Water and Sewerage Authority

Late submission of financial statements


Non compliance with TTB accounting manual on asset coding

7. Tanzania Electric Supply limited (TANESCO)

Ilala region where new customers were connected and added in the Custima without paying deposits as required by Company’s regulations. -Late submission of financial statement

8. Tanzania Institute of Bankers

-Absence of accounting manual -Outdated financial regulation


-Late submission of financial statements

10. Muhimbili college of Health Science

Late submission of financial statements

11. Public Procurement Regulatory Authority (PPRA)

No Accounting and operational manuals have been established at the Authority

3.2.7 Non bank reconciliation items, bank reconciliation and

delays in banking The Public Finance Reg. No. 78 (1) of 2004 requires that all collections of revenue or other public moneys be paid


into a bank daily or if this is not possible, at the earliest possible opportunity. It further states that when depositing collections into a bank, the full particulars of the amount and serial number of the cheque and the name of the bank shall be recorded with the departmental copy of the bank lodgement slip. However, contrary to the above regulation, a total of Shs.73,458,924 was not banked by the Parastatal Sector Reform Commission as required by law. However, during the audit of the financial statements and the related records of PA&oBs we noted that bank reconciliation statements were not prepared on a monthly basis as required by the financial regulations. Bank reconciliation statements should be prepared monthly and be checked by a senior person and approved by senior officers. Furthermore, public moneys were noted to have not been banked daily or at the earliest possible opportunity as required by regulation. Detailed analysis of the concerned PA&oBs that did neither prepare bank reconciliation statements on monthly basis nor banked public moneys as required by regulations are as follows:

S/No Auditee Name Reconciliation and banking

1. Tanzania Engineering and Manufacturing Design Organisation (TEMDO)

Un-reconciled difference in bank reconciliation statements in all three accounts. -Recurrent A/c No. 014103000316- NBC -Project A/c No. 014103012343- NBC -Account No. 01J10337520 - CRDB


.Wrong bank reconciliation statement. The prepared bank reconciliation as at June, 2006 had overstated balance as per cash book of Shs.61,137,289.57


-Delay in banking of Shs.73, 458,924 for more than 30 days.


Unreconciled items between physical count Sheets and stores ledger

4. Singida Urban Water and Sewerage Authority

Unreconciled balance as physical and as per accounts for fixed assets hence balance of Shs. 70.5 million of movable fixed assets disclosed in the accounts could not be ascertained

5. National Social Security Fund

Non reconciliation of movable fixed Assets.

6. National Insurance Corporation (NIC)

Difference of Shs.228,045,531 between Performance analysis report and the General ledger

7. Tanzania Electric Supply limited (TANESCO)

-Inventory balance of Sh.36 billion as per subsidiary ledger do not tally with Scala (trial balance) -Un reconciled general ledger and schedule of capital WIP difference of Shs.915 million -There were discrepancies between the number of customers reported in the monthly sales reports as extracted from Custima and monthly engineers’ reports for, Ilala, Shinyanga, Arusha, Kilimanjaro, Mwanza, Morogoro and Mbeya regions. -In 31 December 2006 Shinyanga Branch reported cash transit of Shs.24,399,886 in the general ledger and Shs.9,172,789 of the reported cash in transit way banked. There was no satisfactory explanation provided by management to


support the difference of Shs.15,167,020.

8. Tanzania Broadcasting Services (TBC)

-Bank reconciliation statements at zones are not prepared and submitted to the head office -There is a difference of Shs.61,561,884 between output VAT per sales summary and general ledger -Daily cash collections at Dodoma are kept at the office and banked at the end of the month

3.2.8 Poor Information Technology Systems

Poor information systems in one way or another hinders smooth performance of PA&oBs and may also impair their internal control systems. The following Public Authorities and other Bodies were noted to have weak Information technology systems:

S/No Auditee Name Status of Information technology

system 1. Tanzania Ports

Authority (TPA) Weak IT system.

2. Dar es salaam Water and Sewerage Corporation (DAWASCO)

-Lack of an IT security policy. The Corporation should formulate an IT security policy which should be documented, communicated to staff and tested regularly. -Lack of Business Continuity plan (BCP) which incorporates a Disaster Recovery Plan (DRC)

3. National Insurance Corporation (NIC)

The computer hardware and software are outdated causing poor performance, thus risking integrity of data and suffers from


availability of both service and data back up. The maintenance and recovery of data from the computer system, especially main database, when there is a failure, takes a lot of time. The consequences of these problems have been to frequently interrupt the IT system manually to ensure accuracy of reports which is not a recommended IT practice.

4. Tanzania National Parks (TANAPA)

Neither standards accounts for consistent reporting nor standard template for validation, control and reconciliation to improve reports

5. National Board of Accountants and Auditors (NBAA)

-Computerized database is not efficient to generate the update report on the member subscription at any point in time. -Lack of Business Continuity plan (BCP) which incorporates a Disaster Recovery Plan (DRC)


No Business Continuity plan and Information Technology policy.

7. Tanzania Broadcasting Services (TBC)

No intergraded accounting software package. In addition the existing revenue package (MYOB) can not run other useful reports such as daily activities summary, journal vouchers and final accounting preparation.

8. Twiga Bancorp -IT function does not monitor all the user accounts to identify dormant accounts or accounts with insignificant usage. The risk involved is that, people may have


access to company data, information and resources after they have left the office for extended period of time. -Also, it was noted that there is insufficient control of passwords the weakness detected includes; log of unsuccessful logons is not maintained and reviewed by senior personnel, the password history is not kept and alphanumeric complexity is not enforced. -The IT function does not have proper segregation of duties, the following activities have not been separated; • User administration and system administration roles • System modification and

moving applications to production

• System modification and system

administration The existing IT strategy is outdated and it does not provide necessary initiation and strategies to develop client’s information system needs.

Part B (ii)

3.3.0 Specific Audit Findings Part two of part B deals with specific audit findings which were revealed during the year under review. Some specific audit findings which need high attention and priorities are observed in Tanzania Electric Supply Company, Dar es salaam Water Supply Company, National


Insurance Corporation, Tanzania Industrial Research Development Organisation, Co-operative Audit and Supervision Corporation, National Social Security Fund, Tanzania Library Service Board, Tanzania Tobacco Board, Muhimbili National Hospital, Arusha International Conference Centre, Tanzania Broadcasting Services, Tanzania Postal Bank, Tanzania Coffee Board, Capital Market and Securities Authority, Tanzania National Parks, and Simu 2000 Limited. Detailed current year audit findings under category of specific observations are as follows:

3.3.1 Tanzania Electric Supply Company Limited (TANESCO)

(i) Hydro-Generation Facilities.

The Company has been operating at a loss for a number of years. In addition, the prolonged drought situation in the country had limited the Company’s hydrogenation capacity. Due to this, management and government sought alternative sources of power generation. These included gas, coal and thermal generation. Other alternative sources of power such as wind generated power are also being reviewed.

As a result, the management need to assess the future plans on its reliance on hydrogenation from the existing dams and as to whether they will be used to full capacity. Should this not be the case, there may exist possible impairment of the assets.

(ii) Pangani Hydro-Generation In our review of the additions to hydrogenation

assets, we noted the purchase of air conditioning units amounting to Shs 315 million at the Pangani hydro-generation facility. From discussion with management we were informed that this asset was a replacement to the older unit


Management was unable to write off the replaced asset as the unit cost could not be separated from the fixed assets register.

(iii) Attainment of Key Mile Stones. Key milestones included in the Financial Recovery

Plan [FRP] of TANESCO included: • IPTL buy-out by March 2007; • IPTL conversion by June 2008; • Songas re-financing to create monthly savings of

US$ 340,715; • Syndicated loan finalization by June 2007; • Permanent gas generation at Ubungo & Tegeta

all to be completed by August 2007; and • Improvement of line transmission and

connection of new service lines.

These factors noted above have to date only been partially met or not met at all as follows: • IPTL buy-out negotiations are still on-going. • IPTL conversion has been halted until the above

mentioned negotiations are finalised • Songas re-financing is still being negotiated. • Syndicated loan is in the final stages of being

disbursed. • Permanent gas generation at Ubungo & Tegeta

is on-going. • Plans in progress to improve the transmission

line.

(iv) Unreleased Project Funds Shs.2,097,999,000 During the year 2005 and 2006, the Government

issued funds to TANESCO through the Ministry of Energy and Minerals for Rural Electrification Projects amounting to Shs.2,097,999,000


However, verification of the amounts on the projects could not be made as the respective amounts were credited to TANESCO main account.

(v) Non Capitalization of Capital Work Order Totaling Shs.382,140,366

Audit scrutiny of materials and capital work orders against records at various regions disclosed materials and capital work orders to have not been capitalized as shown below:- • Capital work order at Ilala regional office not

posted in general ledger Shs.53,891,857. • Materials undercapitalized from Ilala

Shs.112,957,147 • Materials issued from Ilala regional office not

capitalized Shs.23,072,352 • Materials undercapitalization from Ilala region

Shs.8,193,708.16 • Contribution to capital work orders from

Temeke region not capitalized Shs.96,706,308 • Advance received but not reflected in general

ledgers Shs.18,592,006. • Under collection of advances against completed

capital work order – Temeke Shs.5,328,704 • Unpaid contribution towards capital advance

Shinyanga Region Shs.63,398,282.84

(vi) Investment in Songas Shs.2,249,597,714. According to the audited financial statements of

the SONGAS Ltd for the year ended 31st December, 2006 the Company recorded a loss of

USD 7,410,000. In addition, total assets were less than total liabilities by USD 3,568,000 indicating that the company is insolvent.

TANESCO has agreed to temporarily finance

additional investment in SONGAS and up to 30th June, 2007 a total of Shs.2,249,597,714 being


revenue of gas due to TANESCO have been retained by SONGAS for the additional Investment.

However the investment is being made to a loss

making company, a move which may result to loss of TANESCO funds.

(vii) Independent Power Tanzania Limited (IPTL) It was noted that the Capacity payment charge

from IPTL is given in blanket without the analysis of the involved components of cost or the module.

(viii) Liquidated Damages Due From M/S Dowans Holdings

Shs.2,683,800,000 Audit review of Power-Off Agreement disclosed

that M/S Dowans Holdings failed to commission at full capacity of 100MW generation on the Commercial operation date (COD) effective from 2nd February, 2007 through 31st August, 2007 contrary to the agreement. (As at the time of writing this report in September 2007 i.e. 210 days, the default had attracted in a liquidated damages of USD 10,000 per day accumulating to USD 2,100,000 equivalent to Shs.2,683,800,000). The amount in question was not paid to the TANESCO up to the time of writing this report. No reasons were given to auditors for non payment of the liquidated damages.

(ix) Delays In Billing New Customers & Non-

Employees Receiving Discounted Electricity We noted that in Ilala, Arusha, Kilimanjaro,

Kinondoni South, Morogoro and Mbeya, newly connected customers received their first bills two or more months after connection.


Also our review of staff accounts entitled for discounted electricity in Ilala, Arusha and Mbeya regions noted several names of ghost staff who are not employees of TANESCO as at 31 December 2006.

3.3.2 Dar es Salaam Water Supply Company (DAWASCO)

(i) Accounting for the Government Grant

During the year under audit, the Government of the United Republic of Tanzania disbursed Shs.5 billion. At the time of disbursing the funds, the Government through the Ministry of Finance specified that the full amount should be accounted for in the books of account as shareholders equity. However, the Board of Directors and management elected to recognize Shs.2 billion as contribution towards capital fund under shareholders’ interests in line with the Government notice number 139 dated 20 May 2005, and posted the remaining amount of Shs. 3 billion to income.

In the absence of formal clarification from the Government, we are unable to confirm whether or not a portion of the disbursement (i.e. Shs. 3 billion) represents a revenue grant. Any adjustment to the shareholders equity account would result in a similar adjustment to the loss for the year.

(ii) Issues on revenue reported

As part of our audit procedures, we conducted a site visit sampling 40 customers, with the aim of identifying whether the customers were metered, receives bills regularly, had running water on their taps and whether connected or disconnected. Of the sample chosen, we managed to locate 25 customers out of the 40. Refer to the summary table below:


Original sample sele-cted

Number of

custom-mers

located

Number of customers metered

Number of

custom-mers

receiving bills

Number of customers who do not

receive water

Number of customers

disconnected but still

receiving bills

Number of customers

receiving water but not

receiving bills

40 25 12 12 13 4 2

This implies potential misstatement of revenue 3.3.3 National Insurance Company (NIC)

(i) Interest on Policy Loan The Corporation charges interest at a rate of 9% on loans issued to policy holders. During the year under review, the total amount of Shs.54,959,092 was earned as interest and included in other income. The following anomalies were observed: - Non availability of workings showing how the

interest was arrived at. The information given is that computer generates the amount automatically though no transactions print out was generated for audit.

- Interest was charged on loans whose policies have matured whereas un-recovered loans whose policies are still in force are not charged.

- Computation of interest is done at the time of maturity of policies, interest charge is not done on monthly basis and the allocation is not done correctly to appropriate financial year.

(ii) Investment properties.

Due to past historical and political factors, the corporation has tied up significant portion of its assets in properties. The investment in properties reported under life and pensions business is Shs.32.2 billion whereas total asset under the same business is Shs.55.6 billion. The ratio of total assets to investment in property is 58% and the return on this for the year under review is 7.6% equivalent to Shs.1.7 billion. The Commissioner for insurance


allows the 15% of the investments in properties in determining solvency margin, whereas other classes 100% is allowed. In this view, the assets are over invested in properties which contribute to financial difficulties in liquidating maturity obligations some of which have remained unpaid since 1992. This handicap has significantly eroded customers’ confidence in the Corporation.

3.3.4 Tanzania Industrial Research and Development

Organisation (TIRDO)

(i) Encroachment on Plots 1408 and 1409 The previous management letters raised the issue of encroachment made by Comprehensive Community Based Rehabilitation in Tanzania (CCBRT) on Plots No. 1408/09 owned by TIRDO prior to 17th April, 1999. For unknown reasons the Organisation’s Plots No. 1408/09 issued with original certificate of occupancy No. 35626 dated 1st April 1994 tenured for period of 99 years was claimed to have been revoked by the President and CCBRT was issued a certificate of occupancy No. 47430 dated 17th April 1999 for plot No. 1409/1 within the original plot No. 1408/09 for a period of 99 years. CCBRT have already developed the plot. Further we observed that CCBRT have fenced the plot and some TIRDO’s properties are in CCBRT plot i.e. buildings and sewerage pits. Since 1989 the organisation has been making a follow up in order to resolve the matter without success. In view of the foregoing, TIRDO has no legal right of occupancy to the plot in which its properties are located.


3.3.5 Co-operative Audit and Supervision Corporation (COASCO)

(i) Property, Plant and Equipment (PPE)

We observed during our site visit of the Corporation’s buildings that various houses such as those listed below with a total carrying amount of Shs.359,122,800 at 30th June,2007 were in dire need of renovation as their conditions were dilapidated:

S/N Type /Location of Building Value at 30th 06, 2007 Shs.

1 House on Plot No.24 Block J. Makongoro Rd, Moshi Municipality

64,550,600

2 Residential house on Plot 113 Bock C Chang’ombe Dar es Salaam

38,000,000

3 Residential House on Plot 26 Block 2 Shinyanga

33,407,700

4 Office Block on Plot 54 Mwanza Rd, Shinyanga Municipality

223,164,500

Total Shs. 359,122,800 Management explained that the bad state of the Corporation’s buildings was as a result of lack of funds for renovation as much of its internal revenue was tied up in trade and other receivables.

(ii) Long outstanding Business Receivables

The bulk of the Corporation’s business receivables constitute audit and consultancy fees earned over the years from various co-operative societies and/or unions across the country but remain uncollected. Various reasons for not collecting the debts have been advanced but notably economic factors, particularly agricultural cooperative societies/unions have been cited as the main reasons. We observed that as at 30th June, 2007 the Corporation was owed an amount of Shs.1.86 billion (2005/06): Shs.1.65 billion by the Cooperative societies/unions. Out of


this, an amount of Shs. 1.17 billion (2005/06: Shs.1.15 billion) had been impaired or set aside as bad debts. The management had requested the Board to write off an amount of Shs.720,000,000 of cooperative debts which the government had earlier announced that it would take over.

3.3.6 National Social Security Fund (NSSF) 3.3.6.1 Investment and Loans.

(i) Non-Repayment of Loans As pointed out in our previous reports, some of the beneficiaries of investment loans have not complied with terms and conditions of the loans granted to them. Specifically, they have not paid the installments as scheduled, thus resulting into accumulation of accrued interest. This is illustrated hereunder:-

Borrower

Name

Date of

Borrowing

Principal Amount

Shs

Accumulated Interest up

to 30th 06 2007

Shs

Total Loan as at 30th 06

2007 Shs.

Remarks

New Kilimanjaro Bazaar

03.04.1990 26.08.1991 and 07.09.1992

99,445,000

750,849,846

850,294,846

Legal action taken

Mbowe Hotel Ltd

10.03.1990

7,500,000

229,898,516

237,398,516

It was repayable fully by December, 1997. - Legal action taken. Shs 50m had been paid on 15.12.06 and Shs. 5m was paid on 22.01.07.

Ubungo Plaza Ltd

04.02.2004

834,188,285

340,648,593

1,174,836,878

It was repayable by July, 2004. So far only


Shs.200m has been paid. Explained that loan rescheduled to 31st .12 .2006. The agreement yet to be seen.

Kagera Sugar Company Ltd

11.02.2003

12,000,000,000

4,479,457,592

16,479,457,592

Repayment was to commence from September, 2004

General Tyre East Africa

08.02.2005

12,240,000,000

1,577,191,814

13,817,191,814

Repayment due date was as follows:- Interest-31.12.05 Principal-30.03.07 Apart from 85% govt. guarantee, security was specified receivables aggregating to $ 3,398,551.55 as at the date of agreement. Nothing has been collected so far in this regard However, out of the above amount, $1,465,837.60


was subsequently considered irrecover-able and written off.

IMRA Holding

03.02.2006

474,000,000

106,857,143

580,857,143

Repayment due date was as follows :- Interest-December, 06 Principal-December, 07

Contine-ntal Ventures

15.09.2005

4,438,000,000

443,818,964

4,881,818,964

Repayment due date was as follows:- Interest-June, 06 Principal-December, 07

Despite the management’s follow up efforts, we are of the opinion that some of these loans and their respective accumulated accrued interests are doubtful of recovery.

3.3.6.2 Documents Relating to Loans

We also observed that some documents pertaining to some of the loans granted to borrowers by the Fund, as provided for in the respective loan agreements, were not available for verification. These are illustrated hereunder:-

S/N Name of the Loan

Holder Details Remarks

1. Imra Holdings Ltd Evidence that security to the loan was currently insured against insurable perils.

Date of Agreement; 19th January, 2006 Amount Loaned; Shs 474,000,000.


Balance as at 30th 06 07.

Shs.80,857,143 2. Continental

Ventures (T) Performance progress reports (the loan agreement requires that quarterly progress reports are provided to the lender regularly) Government guarantees agreement. (The agreement stipulates that the government has guaranteed the loan by 100%)

Date of Agreement: 19th April, 2005 Amount Loaned: USD 3.5 million Balance as at 30th 06 07. Shs.4,881,818,964

3.3.6.3 Loan to M/s Meditech Shs.1,525,368,425

The Fund had extended a loan of Shs.1,525,368,425 to M/s Meditech on 30th April, 2003 and agreed due date for repayment was December, 2004. We were notified that the loan was subsequently rescheduled for repayment to commence from 30th June, 2006. Agreement to substantiate this later development was yet to be availed for our verification. Furthermore, current correspondences made by the Fund regarding the loan, were observed to be addressed to M/s Emunio Tanzania Limited as the borrower. Legality for change of loan liability from M/s Meditech Ltd to M/s Emunio Tanzania Ltd could not be substantiated as no documentary support was availed to us in this regard.


3.3.6.4 Sale of Houses - Kinyerezi Project In our review of transactions relating to the sale of low cost houses project at Kinyerezi, Phase 1 Housing Scheme, we observed that some of the purchasers did not comply with the terms and conditions of their agreements. The agreements provide that under no circumstances should the purchasers withhold the monthly repayments. Further, the agreements grant the seller (the Fund) the right to repossess the property once the purchaser withholds the monthly installments for three consecutive months. Cases of default in payment of the monthly installments for over six months were, however, observed and the purchasers still occupy the premises. We give the following cases observed during the audit for the year ended 30th June, 2007. S/N Defaulter

Name Amount

Defaulted Shs

No. of Months

in Default

Subsequently Paid Shs.

1 Ishengoma J. Balyagati

4,012,000 34

2 Ally Mohamed Libaba

4,836,000 29 300,000

3 Monica Demelo

5,954,000 26 500,000

4 Ben Mahenge

4,528,000 26

5 Gaddiel S. Meena

3,448,000 15 450,000

6 Sixmuind Kapungu

1,580,000 14 326,000

7 Valeriano Ngairo

653,000 8 113,000

8 Paschal 836,000 7


Chuwa 9 Patricia

Bulemela 1,104,000 6 526,000

10 Samwel Kilungu

702,000 6

Total 27,653,000 2,215,000

3.3.6.5 Social Health Insurance Benefits (SHIB)

(i) SHIB Monitoring and Evaluation Committee Section 60 of the Social Health Insurance Benefits

regulations (NSSF Act), stipulates that SHIB monitoring and evaluation committee should be formed. The main aim of the committee is to act as an administrative body for the arrangement, stakeholders’ involvement forum and grievances administrative overseer. We noted that such a committee was yet to be established.

(ii) Operational Guidelines for Fee per Case System

The Fund uses two modes of operations in implementation of the Social Health Insurance Benefit scheme, namely capitation and fee per case.

We observed, however, that the operational manual governing routine activities of the Social Health Insurance Benefit scheme covers only capitation system of operations but fee per case system was not covered. It should be noted that the SHIB regulations provide for only capitation system.

3.3.6.5 Tanzania Library Services Board (TSLB).

The regional libraries were observed to have significant problems; this includes Arusha, Bukoba, Kilimanjaro, Mbeya, Musoma, Shinyanga, Songea, Rukwa, Tabora and Tanga. Detailed analysis of problems observed is as follows:


(i) Old and dirty buildings (Bukoba, Kilimanjaro, Mbeya, Musoma, Rukwa, Shinyanga and Tanga).

Buildings are leaking, walls are cracked, roofs are collapsing, and window glasses are broken. Some buildings are too small to accommodate growing number of users in such a way that readers are required to sit under nearby trees. The buildings are not safe for employees and readers.

(ii) Shortage of furniture (Arusha, Bukoba,

Kilimanjaro, Musoma, Shinyanga, Songea, Tabora and Tanga)

There is shortage of chairs and tables to accommodate the users; some lack shelves in such a way that reading materials are kept in boxes.

(iii) Defective toilets and water problem (Mbeya,

Songea, Rukwa and Tabora) The toilets are very dirty causing foul smell to

the surrounding. There is no water in the toilets (especially Tabora) causing the toilets to be blocked with tissues, which is not hygienic and threatens the health of users.

(iv) Books and Lights ( Arusha and Kilimanjaro) It was noted that Arusha and Kilimanjaro

Regional Libraries are experiencing shortage of books, compared to the increasing number of users. It was also noted that lighting in these libraries was inadequate. Some lights were not working and hence readers are not comfortable with the reading environment.

3.3.6.7 Tanzania Tobacco Board (TTB)

(i) Poor Maintenance of Non current assets Register

TTB maintains its register for non current assets manually as noted during the audit. The practice seems to attract more errors such as the


purchase of motor vehicle SU 36720 which was recorded with the following information;- • Date of purchase: 05-09-2007 which is the

date of audit and hence not correct as it is depreciated from 05-09-2006

• Invoice number: 05-09-2007 which is not the invoice number but the date of invoice.

• Other vehicles carried less information as compared to others like

• Vehicle No. SU 36920, lack year of manufacturing (contrary to requirement of accounting manual chapter 7 item 5.0 (ii)

• Motor vehicle register had many alterations.

Furthermore, the intangible asset bought in July 2006 for Shs 11,880, 184 were noted not to have been recorded in the register of assets. In the circumstance above the assets of TTB were noted to be poorly recorded and this may be an avenue for loss of public assets.

3.3.6.8 Muhimbili National Hospital

(i) Issue on trade receivable amounting to Shs.998, 543,766.

Audit review of the schedule of trade receivables and underlying records revealed the following shortcomings:

(ii) Expired service agreement Service agreement with AAR Health Services (T)

Limited and University of Dar es salaam had expired, hence no legal contractual agreement was in place despite the fact that the hospital was continuing to extend services to the two institutions.

(iii) Lack of Credit Policy. The hospital had no credit policy in place to guide

how credit facilities extended to the hospital


customers (such as health insurers) should be managed and controlled to ensure that the customers pay for the services enjoyed. In this regard, internal control over trade receivables emanating from credit facilities extended to the hospital customers was lacking.

3.3.6.9 Arusha International Conference Centre

(i) Hospital Income During the year under review, the centre realised

Shs.623,369,608 as medical income (budgeted medical income was Shs.578,643, 925). Medical expenses amounted to Shs.722,119,463 (budgeted expenditure was Shs.544, 209,668). Thus, the year ended with a deficit amounting to Shs.98,749,855, against budgeted surplus of Shs.34,434,257. From the above details, it can be noted that the Hospital operations continued to be financed by other profitable operations of the Centre during the year under review as has been the case in the past.

We further noted that, plans to down-size

operations of the Hospital, though already given a nod by the Centre’s Board of Directors were yet to be implemented.

3.3.6.10 Tanzania Broadcasting Services (TBC)

(i) Accuracy and Completeness of revenue The marketing department raises broadcasting

orders (BCOs) for the commercial advertisements and programme aired. However, no complete list of all BCOs raised during the year is maintained by the department. Furthermore, no complete records are kept for all commercial orders that were received from the customers. The Director of Marketing confirmed to the auditors that no such list and records are prepared and maintained by the department. Our review of minutes of the Board of Directors meetings revealed that such


reports are not prepared, submitted and discussed by the board. Furthermore, we noted that the Programme section does not produce and maintain reports for all programme and commercial advertisement made. Lack of the above information makes it difficult to ascertain the completeness of revenue reported by the corporation for the financial year ended 30 June 2007.

Also there are no monitoring procedures put in place for all programme and commercial advertisements made by the Corporation. Monitoring of programme and commercial advertisements enables management to ascertain whether all scheduled programme and commercial advertisements have been made in accordance with terms of contract with the customer and are invoiced for. Any discrepancies can be followed up and reconciled. Lack of the monitoring process at the Corporations makes it difficult to ascertain the completeness of the reported revenue.

This may lead to loss of income resulting from un-invoiced aired programme and commercial advertisements. Any disputes by the customer can not easily be resolved.

Unauthorized programme and commercial advertisements can be aired without management knowledge.

The accuracy and completeness of the reported corporation’s revenues is uncertain.

3.3.6.11 Tanzania Postal Bank

Loan Recoveries During the year under review, we observed that several customers were still not paying their dues in compliance with their loan agreements. As a result we noted large amounts remained unsettled beyond the expiry date of


the loans i.e. the recovered amount is small compared to the amount taken in relation to the period elapsed. Although efforts were being made by the bank management to recover overdue debts by use of the courts law, and the auctioneers to dispose the mortgage property, there was still no progress on recovery of overdue debt particularly from customers for business loans.

Examples to substantiate our findings are as follows:

Name of Borrower

Contract Date

Principal loan amount

Expiry date

Balance as at 31.12.2006

Business loans (over 5 Mill.)

Salim Koja 21.12.2004 13,970,726 21.08.2004 5,301,726 Suzan Ernest Kisanji

16.12.2003 17,468,926 16.12.2005 8,414,108

Muywangwa Gen. Ent. Co

02.01.2002 35,079,845 19.09.2003 15,831,043

Kiswigo Kanga Mwakajinga

05.08.2004 13,500,000 05.08.2006 5,472,628

EM Trucing Co. Ltd

16.08.2005 30,000,000 16.11.2005 9,420,598

Rochoice Engineering Works Ltd

31.12.2003 41,206,954 28.09.2006 23,653,656

Venance Methusalah Mwamtoto

19.03.2003 19,000,000 27.03.2005 16,240,586

Hassy H.B Kitine 24.12.2004 41,916,788 24.12.2006 38,390,797 Pili Hamis Mwamba

27.04.2004 7,000,000 27.08.2005 5,909,349

Medson Andrea Sanga

31.01.2002 15,125,000 08.02.2004 5,803,546

Malongoza Hesaya Godson

30.06.2003 8,200,000 30.12.2004 5,762,608

Makala Idi Makala

30.06.2003 8,100,000 30.12.2004 7,729,464

Samweli Frank Samweli

30.06.2003 11,200,000 30.12.2005 8,470,460

Nicolaus Wilson Mushi

29.09.2003 8,462,671 29.09.2005 5,792,068


Karia Rajabu Msuya

31.12.2003 12,778,106 31.12.2005 9,920,619

Omary Mahela 31.12.2003 5,876,946 31.12.2005 4,985,552 Alawi Mkwema 17.12.2003 8,604,096 17.12.2005 7,337,035 Abdalah Kivara 17.12.2003 5,394,029 17.12.2005 5,247,930 Isaka Juma 11.03.2004 14,427,778 11.03.2004 7,290,041 Customer loan (over 1 Mill) Iluminata Jane Ndile

13.02.2003

7,000,000

27.02.2006

3,098,016

Saidi Idi Ndumbogani

06.10.2004 10,000,000 06.10.2006 4,513,184

Total Shs. 334,311,865 456.1103 204,585,014 This list is not exhaustive. If concerted follow up on long outstanding loans is not taken the bank’s funds would be tied up in debts thus adversely affecting its working capital.

3.3.6.12 Tanzania Coffee Board (i) Coffee Loss Shs.64,378,000

Trade and other payables stated in the accounts at Shs.5,961,926,000 includes a balance of Shs.64,378,000 payable on account of coffee loss occasioned at Dar es salaam branch sometimes in 2005. However, on verification of the same, we noted an unexplained differences of Shs.74,856,435 between the amount disclosed in the accounts as coffee loss of Shs.64,378,000 and actual loss provided by the management totaling Shs.139,234,435 (USD 110,597.44) as Shown below:

Name of Coffee buyer Un refunded coffee

loss as at 30.06.2007 USD Shs Kagera Co-operative Union KDCU Limited Total Exchange rate @ 1,258.93 Less: Balance as per accounts Un explained difference

91,627.76 18,969.68 110,597.44

115,352,936 23,881,499 139,234,435 64,378,435 74,856,435


In view of the above anomalies, we are of the opinion that the liability in relation to the coffee loss as disclosed in the accounts as at 30th June, 2007 is not fairly stated.

3.3.6.13 CAPITAL MARKETS AND SECURITIES AUTHORITY

(i) Accounting for employees’ terminal benefits

funds Included in the balance sheet under non current

liabilities is an amount of Shs.461,370,960 being a fund from employee’s terminal benefits. The purpose of the account is to provide for a fund to cater for terminal benefits to the employees when an employee retires voluntarily, compulsorily or on medical grounds or who has served the authority for at least twenty years. The account was established pursuant to section 6.11 and 6.12 of the authority’s staff regulations and duly approved by the Board of Directors. In the context of International Accounting Standards (IAS No. 19) the authority is running a Defined Benefit Plan (BBP) in which case the authority is obligated to make good the difference in the event that the plan assets fall short of the actual benefit due at the material time the payment is to be effected.

During the year under review the management made evaluation of the scheme in line with IAS No. 19 and established that the would-be total constructive obligations as at 30th June 2007 stood at Shs.759,061,592 while the size of the fund is only Shs.461,370,960 as shown in the balance sheet there by reflecting a would be shortfall of Shs.295,631,799. Assuming a payment to all employees was due at 30th June 2007, the management would have to raise the extra Shs.295,631,799 to meet the dues.


How the extra funds would be raised poses a dilemma to the management.

The authority’s management should consider relieving itself of the risk of managing the employee’s terminal benefits funds so as to avoid unnecessary burden of paying further compensation in the event that the plan assets fall short of the expectation. Management should therefore transfer the fund to a suitable pension or trust fund whereby it will be appropriately managed under a defined contribution scheme (DCS). In this case the Authority will only be paying the fixed amount to the scheme and avoid any legal or constructive obligation to pay additional contribution in case the fund assets are insufficient to meet the expectation of the employees. Thus CMSA will be full compliant with IAS 19.

3.3.6.14 Tanzania National Parks

(i) Management information System TANAPA operates a manual accounting system

where all transactions are recorded in manual books and records. Some subsidiary records are maintained on spreadsheet.

The characteristic and risk inherent in such a system is as follows: • Higher risk of errors and/or irregularities occurring

without being detected by management; • Time consuming exercise to prepare accounts and

extract information; • Lack of audit trail and effective control; • More difficult monitoring.

With this system, all energy is on recording, reconciliation and validation of accounting information with little time left for financial analysis and management.


With such a system, there should be enhanced management and supervisory control with alternative information being prepared and circulated to senior management for control and monitoring.

3.3.6.15 Simu 2000 Unsold properties for which the company has no title

deed Balance of properties for sale stated in the financial

statements at Shs.1,956,800,000 as at 31st December 2006 include blocks of residential flats located in Tabora Municipality at Cheyo Area which were said to be owned by National Housing Corporation (NHC). This implies that SIMU 2000 Ltd had no title on the property although the same was included in the list of assets taken over from TTCL as per Government Notice No.87 published on 11th May, 2005. We further noted that at the time of taking over of the assets by SIMU 200 Ltd, an agreement between the two parties TTCL and NHC had not been concluded, hence the title of the property has remained with NHC to date.

In view of the foregoing, we could not ascertain the correctness of the balance of properties for sale stated in the financial statements as at 31st December, 2006. The Company’s management in collaboration with TTCL should liaise with the National Housing Corporation to sort out the legal ownership of the block of residential flats situated in Tabora Municipality, Cheyo Area included in the Company’s financial statements as available property for sale.


CHAPTER FOUR FINANCIAL MANAGEMENT ISSUES

4.0 PUBLIC AUTHORITIES AND OTHER BODIES WITH GOING

CONCERN PROBLEMS The International Accounting Standard No.1 (IAS 1), states that when preparing financial statements, management shall make an assessment of an entity to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or has no realistic alternative but to do so.

Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of the business.

When financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern.

During the year of reporting, we have noted a number of Public Authorities and other Bodies that have all indicators of going concern problems though the financial statements were prepared on going concern basis. Some of the specific indicators or assumptions of going concern problem include the following:

• Deteriorating working capital; • Operating in losses for a number of years;


• Increasing in expenses with decreasing revenue; • Inability of the entity to meet its maturing obligations

i.e. an increase in outstanding amounts payable.

The following are some of the Public Authorities and other Bodies that have been experiencing liquidity problems: (i) Tanzania Electrical Supply Co. Ltd (TANESCO) (ii) Board of External Trade (BET) (iii) Dar es Salaam Water Supply and Sewerage Authority

(DAWASCO) (iv) National Insurance Corporation (NIC) (v) Mtwara Urban Water Supply and Sewerage Authority

(MTUWASA) (vi) Tanzania Posts Corporation (TPC) (vii) Tanzania Railways Corporation

4.1 Tanzania Electrical Supply Co. Ltd (TANESCO) The Company’s financial position has continued to deteriorate over the years mainly as a result of expensive energy purchases from Independent Power Producers mainly being Independent Power Tanzania Limited and Songas Limited. This has come as a result of prolonged drought in the country which has limited the Company’s hydro-generation capacity and therefore forced it to buy energy from the independent power producers (IPP’s).

In the financial year 2006 the cost of power purchase exceeded revenue generated by Shs 4,045 million. The impact of this is that the company is operating at a gross loss of Shs.137,959 million as compared to Shs.54,563 million in 2005.

As at 31 December 2006, the liquidity position of company was in a critical phase as; • The level of creditors’ dues had reached Shs. 87 billion; • The overdraft facility used had reached Shs. 65,221

million which is an increase of Shs. 42,810 million from previous year;


• Net cash outflow of Shs 10,901 million (2005: Shs. 5,281 million);

• Continued growth in debtor position mainly due to interest charges indicative of low level of collections for long outstanding debts;

• Current liability position indicative of weak working capital

4.2. Board of External Trade (BET) For the past five years i.e. from 30th June 2003 through 30th June 2007; the Board has been realising deficits from its operations. The increase in operating expenses has been not proportional to increase in revenue. Whereas operating expense increased by Shs.444,222,892 during the year ended 30th June 2007, revenue increased by Shs.1,377,074,978,833. Accumulated losses has soared from Shs.1,377,074,344 on 30th June 2003 to Shs.2,371,528,127 on 30th June 2007.

On the other hand, the Board’s working capital position improved slightly. During the year, the Board had negative working capital of Shs.152,924,130 compared to a negative of Shs. 167,972,831 for the previous year. Despite a slight improvement however, the Board would not meet her maturing obligations including statutory deductions in the event that the same matured at once.

Current Ratio and Acid Test Ratio have been below normal ratios except for the year ended 30.06.2005 when the Acid Test Ratio was slightly above normal.

Under the above circumstances, unless deliberate efforts are made to reverse the position, the Board’s survival as a going concern may be in danger.

4.3. Dar es Salaam Water Supply and Sewerage Authority (DAWASCO) The Corporation has reported a material loss during the year ended 30 June 2007. Furthermore, certain


performance targets stipulated in the Lease Contract between DAWASCO and DAWASA were not complied with during the year. If this trend continues it would be difficult for the Corporation to operate as a going concern in the foreseeable future. The Board through management should device strategies to improve the financial performance as well as comply with the requirements of the Lease Contract.

4.4. National Insurance Corporation (NIC) Deteriorating Working Capital The Corporation’s working capital for the current year and the preceding four years is summarized in Annexure 5. It is distinctly seen in the annexure that the working capital has been on the decline from a negative balance of Shs.31.1 billion (2002) to a negative balance of Shs.58.7 billion (2006). Over a period of five years to 31st December, 2006, the Corporation’s working capital had been negative. This indicates that it can not be able to discharge in full all maturing obligations. Over this period the current ratios indicate that on average the Corporation had only Shs.15 available to pay liabilities amounting to Shs.100.

4.5. Mtwara Urban Water Supply and Sewerage Authority (MTUWASA) The Authority’s financial position has continued to deteriorate. Over the past three years it has consistently been making losses mainly caused by reduction of Government subvention. The Authority may cease to be a going concern as it had negative operating deficit of Shs.66,674,798; Shs.32,447,649; and Shs.310,310,890 for operating results for financial years ending 30th June 2005; 30th June 2006; and 30th June 2007 respectively.

4.6 Tanzania Posts Corporation (TPC) The Corporation’s working capital position as at 31st December 2006 continued to deteriorate steadily from negative balance of Shs.7,799,003,000 as at 31.12.2004; down to negative Shs.20,516,944,000 as at 31.12.2005 and


further to negative Shs.25,659,701,000 as at 31.12.2006. The decrease in the Corporation’s working capital was mainly due to increase in un-remitted statutory deductions and the respective fines and penalties. Un-remitted payroll deductions increased from Shs.13,819,470,000 as at 31.12.2004 to Shs.18,681,610,000 as at 31.12.2005 and further to Shs.22,353,638,000.

As at 31.12.2006 VAT remittances were still in arrears rising from Shs.1,674,963,000 as at 31.12.2004 to Shs.1,787,993,000 as at 31.12.2005 and accumulated to Shs.3,448,072,000 as at 31.12.2006.

In general, creditors and other payables had increased from Shs.19,790,856,000 as at 31.12.2004 to Shs.25,905,505,000 as at 31.12.2005 and Shs.31,973,855,000 as at 31.12.2006.

In the circumstances the Corporation may cease to be a going concern unless external funds are injected to improve the working capital position.

4. 7. Tanzania Railways Corporation The Corporation’s Liquidity position over the past four years from 2003 to 2006 are summarized below:-

Position

as at 31/12/2006

Shs.

Position as at as at

31/12/2005 Shs.


31/12/2004 Shs.


31/12/2003 Shs.

Item

000 000 000 000 Current Asset 14,618,032 14,794,048 16,513,251 23,728,532 Current Liabilities

24,608,322 22,005,950 19,427,160 18,921,906

Working capital (9,990,290) (7,211,902) (2,913,909) 4,806,626

The Corporation’s working capital position reflected a decreasing trend from Shs.4,806,626,000 (positive) as at 31st December, 2003 to Shs.2,913,909,000 (negative) as at 31st December,2004, to Shs.7,211,902,000 (negative) as at 31st December, 2005 and to Shs.9,990,290,000 (negative) as at 31st December,2006.


The current and acid test ratios are far below the standard of 2:1 and 1:1 for current ratio and acid test ratio respectively.

In view of the above, I consider that if the trend is not reversed timely, the corporation will fail to achieve its establishment obligations.

PERFORMANCE REVIEW

4.8 Public Authorities and other Bodies operational performance and financial standing Audit of the accounts of Public Authorities and other Bodies revealed that some entities have been profitably operating while others have been operating at a loss. Operational performances of these entities have been measured in terms of the profit or loss generated during the year under review. Financial standing of these entities has also been evaluated in terms of the accumulated surplus or loss as at 30th September 2006, 31st December 2006 and 30th June 2007 for the respective entities closing their financial years at those dates. Paragraph 4.9 and 4.10 explain operational performance and financial standing of PA&oBs respectively.

4.9 Summary of the Operational Performance of the PA&oBs During the year under review, operational performance of Public Authorities and other Bodies were measured in terms of the surplus or deficit made by these entities. The following is an overall performance of the Public Authorities and other Bodies:

Category of the

Entity Surplus for the

year Deficit for the

year Overall

performance for the year

Water Authorities 513,326,431 (1,640,910,109) (1,127,583,678) Regulatory Bodies 40,353,856,228 (959,457,267) 39,394,398,961 Higher Learning Institutes

7,104,614,520 (1,496,270,873) 5,608,343,647


Public Parastatals 170,256,301,796 (211,387,124,998) (41,130,823,202) Government Institutions

38,638,309,748 (520,972,389) 38,117,337,359

Total 256,866,408,723 (216,004,735,636) 40,861,673,087

Interpretation The operational performance of Public Authorities and other Bodies during the year under review shows that Regulatory Bodies were leading in surplus making while Public Parastatals were leading in loss making.

4.10 Cumulative surplus or loss During the year under review, financial standing of Public Authorities and other Bodies were measured in terms of the accumulated surplus or deficit created over the life time of the entities. The following is an overall cumulative profit or surplus of Public Authorities and other Bodies:

Cumulative surplus or loss

Category of the Entity

Accumulated surplus

Accumulated deficit

Overall cumulative

surplus or deficit Water Authorities 16,782,404,626 (4,886,062,810) 11,896,341,817 Regulatory Bodies 155,612,182,600 (2,371,528,127) 153,240,654,473 Higher Learning Institutes

8,676,428,845 (7,172,682,203) 1,503,746,642

Public Parastatal 753,028,723,434 (772,968,182,901) (19,939,459,467) Government Institutions

161,905,510,034 NIL 161,905,510,034

Total 1,096,005,249,539 (787,398,456,041) 308,606,793,499

Interpretation The financial standing of Public Authorities and other Bodies during the year under review shows that Government Institutions were leading in accumulating surplus while Public parastatals were leading in accumulating losses. The continuing accumulating losses being created by the Public Parastatals will eventually be borne by the Government. The earlier efforts are taken to


arrest the situation the better for the economy of this country.

4.11 Unremitted statutory deductions During the period under review, five PA&oBs failed to remit statutory deductions amounting to Shs. 29,336,119,602 to relevant authorities. Of the amount in question, unremmited employee’s benefits (i.e. PAYE, PPF and NSSF PSPF) were Shs.23,643,858,878 while taxes were Shs. 2,210,703,119. Moreover, the Tanzania Posts Corporation failed to remit deductions of Shs.6,613,767 and Shs.196,741,985 relating to insurance premiums on staff life assurance policy and SACCO’s loan repayment deductions respectively while Board of External Trade failed to remit land rent amounting Shs.142,859,539. The table below summarises the situation:

PA&oBs Name

Employees Benefits

Taxes VAT & PAYE

Others Insurance, SACCOS,

Land Rent

Total

Shs Shs Shs Shs. State Mining Corporations

127,480,646 135,018,821 - 262,499,467

Tanzania Posts Corporation.

20,229,572,555 4,451,932,167 203,355,752 24,884,860,474

Board of External Trade

433,995,067 142,859,539 576,854,606

Muhimbili National Hospital

2,913,339,535 204,064,237 - 3,117,403,772

National Ranching Company Limited

373,466,142 121,035,141 - 494,501,283

Total 23,643,858,878 5,346,045,433 346,215,291 29,336,119,602

Pictorially, the above information can be shown as follows:


This indicates a critical situation of non compliance with related laws. Remedial measures should be sought to avoid penalties which may be charged by the respective authorities for failure to remit statutory deductions on due dates. On the other hand, this situation may cause insurmountable problems in the payment of employee’s final benefit on retirement age.

TREASURY REGISTRAR

4.16 Outstanding Guarantees-Shs.175,396,043,686 During the year under review, loans amounting to Shs.175,396,043,686 were issued to Public Parastatals under Government guarantees. Up to the time of writing this general audit report i.e. March 2008, the amount in question has not been repaid by the respective Parastatals. However, the reasons for failure to repay the loans and efforts of the guarantor in fulfilling the guaranteed conditions were not disclosed.

Non repayment of these loans may lead the government to bear the liability and loss of tax payer’s moneys.

Non Remittance of Statutory Deductions

STAMICO1%

TPC84%

BET2%

MNH11%

NRC2%

STAMICO TPCBETMNH NRC


Government and the respective Accounting Officers should ensure that the outstanding loans are recovered and remitted to the respective authorities.

4.17 Outstanding loans issued by the Government Shs 63,241,256,898 The statement of outstanding loans issued by the Treasury Registrar, regarding loans issued by the Government to various beneficiaries, showed a cumulative overdue balance of Shs. 63,241,256,898. Even so, no explanations were given to justify the non recovery of the amounts in arrears.

Management responded that the amount of Shs 15,239,348,940.88 is a TTCL loan which is being dealt with by the Technical Debt Management Committee (TDMC) under debt swap arrangements. The amount of Shs. 35,450,684,674.47 is a SONGAS loan which TANESCO has defaulted to repay. Efforts have been made to recover the arrears including issuing reminder letters to concerned institutions.

4.18 Questionable deletion of government Investments from records An examination of the Statement of Public Investments against PSRC reports on privatized Parastatal noted that though the government retained some shares with the organisations listed below, the investments have been deleted from the Treasury Registrar statement without any explanation. The concerned Public Authorities and other Bodies are as follows:

Entity Share Sold

Retained by the Government

Tanzania Tea Authority Lupembe Branch

70% 30%

Morogoro Shoes Company 70% 30% Moro Tanneries 55% 45% Industrial Promotion Services 70% 30% Tanzania Electrical Goods Manufacturer

70% 30%

Kilombero Sugar Company 75% 25%


Thus the statement of Public Investments issued by the Treasury Registrar has been misstated and there is an obvious risk of loss of government shares in the concerned entities. Also there is a possibility of falsifications regarding cancellation of the investments. The Accounting Officer is advised to make reference to the government investment records and reconcile with the PSRC report in order to justify reasons behind the deletion. On the contrary, original Share certificates and the statement of investments should be adjusted accordingly.

4.19 Treasury Registrar’s Statement of Revenue as at 30th June 2007 Audit examination on the Treasury Registrar’s statement of revenue and related records revealed outstanding dividend and loans in arrears amounting to Shs.143,392,007 and Shs.46,010,427,626 respectively making total outstanding arrears of Shs.46,153,819,633. According to the Treasury Registrar’s Statement of revenue, the concerned Public Authorities and other Bodies are as follows:

(i) Treasury Registrar’s statement of Dividend as at

30th June 2007 S/N Name of

Parastatals Dividend

Arrears B/F up to

2005/2006 Shs.

Dividend in Arrears as at 30.6.2007

Shs.

Remarks

1 General Tyre (E.A)

Ltd

143,392,007 143,392,007 Loss making entity. Possibility of repayment is nil. Cash flow does not allow

Sub Total 143,392,007 143,392,007


(ii) Treasury Registrar’s statement of outstanding loans issued by the Government as at 30th June 2007

S/N Name of Parastatals Total Balance/

Arrears as at 30.6.2007

Remarks

1 Steel Rolling Mills Ltd 78,750,428 Liquidation process was done under LART. The sale price was Shs.1.4 bill. Shs. 1.1 billion has already being paid. The buyer has requested for review of the balance sale price.

2 TACOSHILI 6,790,000 Liquidated under PSRC. Request for write off under consideration.

3 Tanzania Airport Authority

470,811,316 Efforts are being made to make sure that the loan is paid

4 Tanzania Civil Aviation Authority

1,119,831,430 Efforts are being made to make sure that the loan is paid

5 Tanzania Railway Corporation

18,307,984,228 11% interest per annum. TRC under restructuring

6 Tanzania Railways Corporation

940,480,000 0% interest per annum. TRC under restructuring

7 Tanzania Railways Corporation

8,707,184,603 7.92% interest per annum. TRC under restructuring

8 Tanzania Telecommunication Co. TTCL

16,378,595,621 Merger of loan No. 324, 325, 326, 380 and 381. Request for debt swap is under consideration by TDMC

Sub total 46,010,427,626 Grand total 46,153,819,633


The respective authorities should ensure that: • Dividends in arrears are remitted to the MOF accordingly; • Outstanding loans or balance in arrears are collected as agreed

in the first place.


CHAPTER FIVE

5.0 PRIVATIZATION OF PUBLIC ENTITIESℵ This chapter deals with privatization of PA&oBs that were found to be material and that were captured from Treasury Registrar’s Statement of Government Investments and Public Interests and Presidential Public Parastatal Sector Reform Commission annual review report as at 30th June 2007.

5.1 Privatized entities Privatization activities during the period under review had recorded significant progress. A number of divestitures were concluded, whereby 336 public entities were privatized to the stage of signing sales agreements while major divestitures were completed at the sale agreement signing stage during the year 2006/07.

As at 30th June 2007, divestitures of 192 companies and 251 units were at sales agreement completion stage. All these had been approved by Cabinet and handed over to investors; the total number available for divestitures was 337 and 361 respectively; (whereas memoranda of understanding for divestiture in respect of 17 companies and 20 units were completed). These awaited either Cabinet approval or investors’ payment before signing of the Sales Agreement and handover of assets to the investors. Another 65 companies and 65 units were forwarded to LART for liquidation.

Completed divestitures as at 30th June 2007 were 277 companies and 366 units. These companies had reached the signing of Memorandum of Understanding (or Sales agreement initialing) stage or handed over to LART.

ℵ Information on Privatisation from PSRC Annual Review 2006/07


During the period 21 companies and 180 units due for divestitures units were acquired by Tanzanian Investors by 100% while 27 companies and 27 units were acquired by foreign investors by 100%. On the other hand, 16 companies and 25 units were in the process of divestiture at various stages. Below is a summary of Parastatal Sector Reform PSRC performance as at 30th June 2007:

Description of Status

Companies

Units REMARKS

Completed divestitures at Sale Agreement stage

192 251 All have been approved by Cabinet and handed over to investors

Completed divestitures at Memorandum of Understanding stage

17 20 Either Cabinet approval or payment by investor awaited before signing Sale Agreement and handover of assets to investors

Total completed by PSRC as at 30th June 2007

205 271

Completed Under LART as at June 2007

65 65 These represent parastatals sent to LART for liquidation

Total Completed Divestitures as at 30th June 2007

270 336 PSRC's level of effort is measured by counting all those which have reached the Memorandum of Understanding (or Sales agreement initialing) stage or handed over to LART, as completed

Total number of Parastatals for Divestiture as at 30th June 2007

337 361 These total figures represent parastatals available for divestiture


Non-Core Assets Disposed off as at 30th June 2007

67 666 These represent physical assets, mainly property, considered non-core to the main assets of the parastatals divested.

Total number of parastatals in the process for Divestitures as at 30th June 2007

17 25 Parastatals in this category are at various stages of divestiture

Parastatals privatised 100% to Tanzanians Investors as at 30th June 2007

121 180 These represent companies acquired by Tanzania Investors by 100%

Parastatals privatised 100% to Foreign Investors as at 30th June 2007

27 27 These represent companies acquired by foreign Investors by 100%

Pie chart of the status of divestitures is shown below:-

Categories of Privatisation by Nationality

82%

18%

Priivatisation to Tanzanians Priivatisation to Foreigners


5.2 Revenue earned from Privatisation The Government earned revenue amounting to Shs.120,133,616,259 and USD291,396372 from privatisation of public entities while investment was Shs.49,4006,730,416 and USD.3,035,898,250.

5.3 Outstanding Revenue Proceeds As at 30th June 2007, a total of Shs.7,942,247,030 was receivables due to the government from investors of some of the divestitures that had been completed.

5.4 Status of some of the Public Authorities and other Bodiesµ According to the Treasury Registrar’s statement of Government Investments and Public Interest, there are 183 Public Authorities and other Bodies. Some of these PA&oBs operates under non going concern concept. Audit examination of the Treasury Registrar’s statement revealed that, fifteen (15) PA&oBs are not operating at all, eight (8) are under privatisation process, fourteen (14) are under liquidation process, two (2) are under restructuring, one (1) is undergoing winding up process and twenty five (25) operates under joint venture with various private firms. In summary, Public Authorities and other Bodies that are undergoing various legal processes are as shown in the table below:

Summary of the status of the PA&oBs

S/N Status of Public Entities Entity No Total Investment Shs 1. PA&oBs not operating 15 21,411,004,827 2. PA&oBs under privatisation

process 8 113,850,245,230

3. PA&oBs under liquidation process

14 10,691,271,115

4. PA&oBs under restructuring process

2 14,928,597,881

5. PA&oBs undergoing wound up process

1 (12,506,598,308)

6. PA&oBs under joint venture operations

25 275,874,849,133

µ Source: Treasury Registrar’s Statement


Pictorially, the above information can be presented in a pie chart as follows:

STATUS OF PUBLIC ENTITIES

1523%

812%

1422%2

3%

12%

2538%

PA&oB not Operating

PA&oB underprivatisation processPA&oB under liquidationprocessPA&oB underrestructuring processPA&oB undergoingwound up processPA&oB under jointventure operations

5.5 Public Authorities and other Bodies under privatization process According to the Treasury Registrar’s statement of Government Investment and Public Interest as at 30th June 2007, eight (8) Public Authorities and other Bodies are under privatization process. Audit examination of the aforementioned statement revealed that government invested a total of Shs. 113,850,245,230 being paid up share capital and other investments to the PA&oBs that are under privatization process. The following are the Public Authorities and other Bodies that are under privatization process:

S/N Name Of The

Parastatal Audited Accounts Date

Total

Shs

Gvt. Ownership%

Remarks

1. Datel Tanzania Limited

31-Dec-05 -323,000 35 Joint Venture (privatize-tion).


2. National Insurance Corporation

31-Dec-06 55,448,880,000 100 Under Privatization

3. National Micro Finance Bank (NMB)

31-Dec-06 46,484,735,4000 51 49% Privatized

4. Tembo Chipboards Ltd.

31-Dec-94 975,000,000 80 To be Privatized. Sale agreement signed. Deal not yet concluded.

5. Usafiri Dar-Es-Salaam (UDA)

30-Jun-06 846,631,959 49 To be Privatized

6. Tanzania Cotton Lint & Seed Board

30-Jun-06 9,069,370,881 100 Undergoing restructuring /To be a Regulatory Body

7. Teleshop Co. Limited

31-Dec-02 50,950,000 49 Not operating. Under privatization at PSRC

8. Tembo Chipboards Ltd.

31-Dec-94 975,000,000 80 To be privatized. Sale agreement signed. Deal not yet concluded.

Total 113,850,245,230

The respective management of the PA&oBs should speed up the process of the restructuring in order to avoid liquidation.

5.6 Public Authorities and other Bodies not operating According to the Treasury Registrar’s statement of Government investment and Public interest, fifteen (15) Public Authorities and other bodies were noted to have been not operating. Audit examination on the Treasury


Registrar’s statement revealed Government had invested Shs.21,411,004,827 being paid up share capital and other investments. The concerned Public Authorities and other Bodies that have ceased to operate are as follows:

S/N Name of the

Parastatal

Audited Accounts

Date

Total

Shs

Gvt. Ownership

%

Remarks

1. Embassy Hotel Limited Company

31-Dec-00 58,603,264 40 Not operating. Government to sell its shares

2. Kisarawe Brick Factory (KIBRICO)

31.12.2003 -144,065,000 30 Not operating. Govt minority shares Sale in process.

3. Kilimanjaro Machine Tools

31-Dec-89 -652,989,944 100 Not operating. Transferred to NDC to be used for development of export Processing Zone.

4. Kiltimbers Co Ltd

31-Dec-90 69,093,720 100 Not operating. Was placed under liquidation (LART). The successor of LART to take over the liquidation process.

5. LART Tribunal

31-Dec-06 43,346,350 100 Ceased to exist legally on 30/6/06, transferred to CHC May, 2007.

6. Loans Advances Realization Trust (LART)

30-Jun-06 1,575,250,000 100 Ceased to exist legally on 30/6/06, transferred to CHC May, 2007.

7. Mikumi Wildlife Lodges

30-Jun-96 1. 100 Not operating.


8. MMT – Mang’ula

31-Dec-87 191,355,469 100 Not operating. Privatized by PSRC. The process of handing over to the new investor (St. Mary International Schools) is in progress

9. National Milling Corporation

30-Jun-94 14,511,600 100 Not operating. Placed under PSRC for privatization.

10. Nyanza Glass Works

30-Jun-00 7,710,570,174 100 Not operating. Handed over to NDC by PSRC in March 2007.

11. PEHCOL 30-Jun-00 4,601,072,024 100 Not operating. Placed under PSRC for asset sale

12. Tanzania Automobile Manufacturing Company (TAMCO)

31-Dec-99 2,532,882,162 100 Not operating. Transferred to NDC to be used for development of export Processing Zone.

13. Tanzania Fertilizer Company

31-Dec-05 5,094,295,942 100 Parastatal

14. Tanzania Fishing Company (TAFICO)

30-Jun-94 266,129,065 100 Not operating. Under privatization.

15. TeleShop Co. Limited

31-Dec-02 50,950,000 49 Not operating. Under privatization at PSRC

Total 21,411,004,827

Despite the successes gained from privatization of other public bodies such as Tanzania Breweries Ltd and National Microfinance Bank, the Government does not seem to have any future plans on the above Public Authorities.


Government should put more efforts to ensure either the above Public Authorities resume their operations or are sold to private investors.

5.7 Public Authorities and other Bodies under liquidation process Audit examination of the Treasury Registrar’s Statement of Government Investments revealed that some PA&oBs are undergoing liquidation process. These are PA&oBs that can not settle their short and long term liabilities without selling their non current assets. According to the Treasury Registrar’s statement a total potential paid up share capital and other Government investment in these PA&oBs was Shs.10,691,261,115. The following are the PA&oBs that are under liquidation process:

S/N Name of The

Parastatal

Audited Accounts

Date

Total Gvt. investment

Shs

Gvt. Ownership

%

Remarks

1.

Basuto Farm

30-Sep-02

644,449,423

100

Under Liquidation. The successor of LART (CHC) to take over the liquidation process.

2.

BHESCO

30-Jun-01

104,285,208

100


3. Cooper Motors Services Company(CMSC)

30-Sep-98

270,570,498 100 Under Liquidation. The successor of LART (CHC) to take over the liquidation process.


4. Gidagamowd 30-Sep-98


6. Imara Wood Products

31-Dec-91


7. Kiltimbers Co Ltd

31-Dec-90

69,093,720 100 Not operating. Was placed under liquidation (LART). The successor of LART to take over the liquidation process.

8. Mulbadaw Farm

30-Sep-98


9. Murjanda Farm

30-Sep-98


10. National Shipping Co. Ltd

30-Jun-99

6,320,069,245 100 Under Liquidation. The successor of LART (CHC) to take over the liquidation process.

11. Setchet Company

30-Sep-00

1,010,576,396 100 Under Liquidation. The successor of LART (CHC) to take over the liquidation process.


5.8 Public Authorities and other Bodies under restructuring process Restructuring is the process of recapitalising the business after being incapable of meeting short and long term liabilities. This is a good method of rescuing an entity from being liquidated. According to the Treasury Registrar’s annual statement of Government investments, Public Authorities and other Bodies that are undergoing restructuring process had a paid up share capital and other Government investments amounting to Shs. 14,928,597,881. The following are the Public Authorities and other Bodies that are undergoing restructuring process:

12. Tanga -RTC 30-Jun-01


14. Tanzania Elimu Supplies

30-Jun-94

347,400,197

100


Total 10,691,261,115

S/N Name of The Parastatal

Audited Accounts Date


Shs

Gvt. Ownership

%

Remarks

1. Tanzania Cotton Lint & Seed Board

30-Jun-06 9,069,370,881.00 100 Undergoing restructuring /To be a Regulatory Body

2. Tanzania Postal Bank

31-Dec-06 5,859,227,000.00 45.3 To be restructured

Total 14,928,597,881


The respective management of the entities in question should speed up the process of restructuring in order to avoid liquidation.

5.9 Public Authority undergoing winding up process Audit examination of the Treasury Registrar’s statement of Government investment noted that the Tanzania Hotels Investment Co. Ltd (TAHI) can not settle its short and long term liabilities and is subject to windup process. The Tanzania Hotels Investment Co. Ltd (TAHI) operates under negative investment of Shs. 12,506,598,308 according to the annual Treasury Registrar’s statement of investment.

The respective authority is advised to speed up the windup process in order to avoid further deterioration.

5.10 Public Authorities and other Bodies under Joint Venture According to the Treasury Registrar’s statement of the Government investment and Public interest, twenty five (25) Public Authorities and other Bodies were noted to have been jointly operated. Audit examination revealed that the aforementioned authorities operate with a total government paid up share capital and other investments amounting to Shs.21,411,004,827. The concerned Public Authorities and other Bodies that operate under joint venture agreements are as follows:

S/N Name of The Parastatal

Audited Accounts Date


Shs

Gvt. Owners

hip %

Remarks

1. Tanzania Hotels Investment Co. Ltd (TAHI)

30-Jun-04

(12,506,598,308) 100 To be wound up. All subsidiary companies divested under PSRC

Total (12,506,598,308)


S/N Name Of The

Parastatal

Audited Accounts

Date

Total

Shs

Gvt. Owner- ship %

Remarks

1. Aboud Soap Oil Industries

31-Dec-04

2,750,000,000.00 20 Joint venture with Aboud Soap Enterprises Ltd

2. BP (T) Ltd 31-Dec-05

48,566,000,000.00 50 Joint venture with BP Africa Ltd

3. Celtel 31-Dec-05

136,687,334,000 40 Joint venture with CELTEL International Ltd

4. Datel Tanzania Limited

31-Dec-05

-323,000.00 35 Joint venture (privatization).

5. Friendship Textile Co.

31-Dec-06

28,913,245,000.00 49 Joint venture with Dieqiu Textile Dyeing and Printing Group Co Ltd (51%)

6. General Tyre EA Ltd

30-Jun-03

-322,000,000.00 74 Joint venture with Continental NA (26%). Specified under PSRC. Investigative audit requested.

7. Keko Pharmaceuticals Ltd

31-Aug-05

733,725,000.00 40 Joint venture with Diocare Ltd (60%)

8. Kilimanjaro Airport Development Company Ltd

30-Jun-06

2,222,101,000.00 24 Joint venture with Mott-Macdonald Ltd, SA Infrastructure fund and Inter Consult Ltd


9. Kilombero Sugar Co.

31-Mar-07

244,000,000.00 25 Joint venture with Illovo & ED & F. Man (75%)

10. Kiwira Coal Mines

30-Jun-04

2,172,760,559.00 30 Joint venture with TAN Power Resources Company. 2005 Accounts with the auditors.

11. Light Source Manufactu-rers

30-Jun-05

254,166,000.00 49 Joint venture with TATA Exports (51%). Govt is in process of disposing its 49% Shareholding.

12. Mbeya Cement CO. Ltd

31-Dec-06

2,424,712,000.00 25 Joint Venture

13. Mbinga Coffee Curing

30-Jun-06

1,287,092,000.00 43 Joint venture with Coop. Unions

14. Mbozi Coffee Curing

30-Jun-06

901,560,384.00 32 Joint venture with Coop. Unions

15. Mwananchi Engineering And Construction Company (MECCO)

31-Dec-06

443,732,000.00 25 Joint venture with Sisi Construction Ltd (75%)

16. New African Hotel

30-Jun-05

1,150,000,000.00 23 Joint venture with TADEMA Overseas Ltd (77%). 2005/06 Accounts with auditors

17. TANICA 30-Sep-05

1,110,400,000.00 10 Joint venture. Other Shares held by Unions


18. Tanzania Breweries Co. Ltd

31-Mar-07

1,179,713,900.00 4 Joint venture with Indol International BV (96%)

19. Tanzania Cigarette Co. Ltd (TCC)

31-Dec-06

50,000,000.00 2.5 Joint venture with RJ Reynolds Tobacco Ltd (51%), JT International Hold BV (24%), Tanz. Public (19.5%)

20. Tanzania Daesung Cables

31-Dec-06

159,820,540.00 29 Joint venture with east African Cables Kenya (71%)

21. Tanzania Pharmaceutical Ltd

30-Jun-04

1,152,971,000.00 40 Joint venture with Pharmaceutical Investments Ltd (60%)

22. Tanzania Planting Co.(TPC)

30-Jun-06

831,724,250.00 25 Joint venture with Sukari Investment Co Ltd (75%)

23. Tanzania Zambia Railways Authority (TAZARA)

31-Dec-05

68,707,000,000 50 Joint venture with Zambian Government

24. TIPER 31-Dec-06

7,135,894,500.00 50 Joint venture with Oryx Oils

25. Williamson Diamond Mines

31-Dec-05

-32,880,780,000.00

30 Joint venture with Will croft Co. Ltd (30%)

Total 275,874,849,133

The audit is uncertain whether terms of the joint venture agreements are still valid.

5.11 Remarks on Information on Privatisastion The sources of information on privatisation of Public entities have been obtained from the Consolidated Holdings


Corporation (pages 1 through 3) and the Treasury Registrar (page 12).

These two sources give inconsistent sets of information on the same theme as it can be viewed throughout this chapter such as the exact number of the PA&oBs that have been privatized so far. It is therefore recommended to the said sources to harmonies the two sets of information for consistency and reliability.


CHAPTER SIX

6.0 PUBLIC PROCUREMENT ISSUES This chapter deals with Procurement issues that were found to be material to be highlighted in this report and that were reported in the management letters to the respective PA&oBs during the financial year ended 30th June 2007.

6.1 Report on Compliance with Procurement Legislation According to the Public Procurement Act No.21 of 2004

sect. 3(1) ‘‘Procurement’’ means buying, purchasing, renting, leasing or acquiring any goods, works or services by a procuring entity.

Sect. 44 (2) of the PPA 2004 and Reg 31 of the Public Procurement Regulations of 2005 require every auditor of a public body in his annual report to state whether or not these regulations have been complied with in relation to competitive tendering and approval of procurement or disposal by tender by the appropriate tender boards.

In view of my responsibility on the procurement legislation, I state that, I did not have a chance to adequately audit the procurement processes of all PA&oBs for the period under audit. However some significant weaknesses have been noted in some of the PA&oBs.

The audit of Public authorities for the period covered in the report, has revealed significant weaknesses and irregularities regarding compliance with Section 44 of the Public Procurement Act No 21 of 2004 which states that “notwithstanding instructions given under any law, it is the responsibility of every accounting officer to ensure that the procurement of goods, works or services is done in accordance with the procedures prescribed under the said Act and related Regulations”


Major deficiencies that have been cited in the procurement process of PA&oBs are such as unlawful tendering process, absence of Procurement management unit, lack of procurement specialists, lack of tender boards, and other procurement related gaps. Detailed audit findings are as follows:

6.2 Lack of Procurement Planning According to Section 45 of the Procurement Act, 2004, a procuring entity shall plan its procurement in a rational manner and in particular shall: • Avoid emergency procurement whenever possible; • Avoid splitting of procurement to defeat the use of

appropriate procurement methods unless such splitting is to enable wider participation of local consultants, suppliers or contractors in which case the Authority shall determine such undertaking; and

• Integrate its procurement budget with its expenditure programme.

However, contrary to Sect. 45 of PPA, the following PA&oBs did not have proper procurement plans for their procurement requirements during the year under review;

S/N Name of PA&oBs Remarks 1. Tanzania Industrial

Research and Development Organisation (TIRDO)

Lack of procurement planning as stipulated in the procurement regulations, 2005.


Non compliance with the PPA and its related regulations of 2005

3. Dar es Salaam Water Supply and Sewerage Authority (DAWASCO)

Non compliance with Public Procurement Act, 2004

4. Tanzania Tobacco Board

Non compliance with Public Procurement Act and its regulation on procurement totalling


Absence of Procurement Management

5. Tanzania Broadcasting Services

Lack of procurement plan for 2006/07. All contract awards for the year 2006/07 were not advertised to the public through a public media. The Authority Management has not established a sound internal control system since there is no proper segregation of duties.


There were non competitive procurements worth Shs.51,835,500

7. Tanzania Standard Newspapers Ltd

Non compliance with procurement procedures. TSN procured stocks (printing materials) worth Shs.26,384,077, however no evidence of competitive tendering procedures were made. Furthermore, no procurement plan has been prepared and produced for audit verification.

In the absence of the procurement planning, it implies the following; • Loss of efficiency and economy in procurement

process • Emergency, costly procurements • Risk of breaching procurement thresholds; and • Delay in the whole procurement process.

6.3 Absence of Management Procurement Units Sect. 3(1) of Public Procurement Act No.21 of 2004 defines ‘‘Procurement Management Unit’’ as a division or department in each procuring entity responsible for the execution of the procurement functions;


In line with the above law, Sect. 34 of the PPA, 2004 requires every procuring entity to establish a procurement management unit staffed to an appropriate level. Furthermore, Sect. 35 of the same Act spells out the main functions of such a unit. Contrary to the above sections, the following Public Authorities and other Bodies were yet to establish Management Procurement Units:

S/N Name of PA&oB Remarks 1. Unit Trust of Tanzania Absence of Procurement

Management Unit contrary to Sec.34 (i) of the Public Procurement Act, 2004 Absence of Good Received Notes for newly acquired equipment.

2.

Songea Urban Water Supply and Sewerage Authority

Absence of Procurement Management Unit

3. Tanzania Tobacco Board Non compliance with Public Procurement Act and its regulation on procurement totalling Absence of Procurement Management Unit

4 Tanzania Broadcasting Services

The TBC has not established a Procurement Management Unit contrary to Section 34 of the Procurement Act, 2004.

5 Babati Urban Water Supply and Sewerage Authority

The Authority Management has not established a Procurement Management Unit (PMU) contrary to Sect 34(1) of the Public Procurement Act No. 21 of 2004

6 National Environmental Management Council (NEMC)

Council has established a Procurement Management Unit (PMU). The PMU was however, not headed by a person with the requisite academic qualifications and experiences in procurement


functions. The PMU is headed by the Chief Administrative Officer who acts as a Secretary to the Tender Committee which is contrary to procedures set out under sec,34 of the Public Procurement Act 2004 and Public Procurement Regulation 2005

6.4 Procurements made without approval of tender board Tanga Urban Water Supply and Sewerage Authority made payments to suppliers of water treatment chemicals, pipes and pipes fittings on the strength of quotations without being approved by the tender board as explained below:

PV No. Payee Remarks Amount (Shs.)

155/7 Twiga Chemicals Industries

No Tender Requested five quotations, responded two.

32,400,000

161/10 Emje Enterprises No Tender Quotations

13,908,000

162/10 Gomu Enterprises Three quotations No tender

17,255,000

163/10 SN-Tech Limited Three quotations No tender

10,650,000

562/12 Side out Enterprises

Three quotations No tender

18,859,500

Total 93,072,500 The Authority should ensure close adherence to the supply contracts. However, the whole process may cause the authority to incur high costs if tender procedures are not taken into account.

6.5 Specific Procurement Problems 6.5.1 Tanzania Tobacco Board

Non Competitive Procurements Shs.223,695,649.00 Audit review of the procurement procedures during the audit of Tanzania Tobacco Board revealed that purchases


were made without competitive tendering amounting to Shs. 223,695,649 contrary to the requirements of PPA No.21 of 2004.

Analysis of the procurements is as follows:

BV.No CHQ PAYEE/DETAILS AMOUNT 14/04 001116 Oryx Wananchi Service

Station 1,230,250.00

19/11 001076 Oryx Wananchi Service Station

1,598,320.00


1,447,160.00


1,709,880.00


788,100.00

29/02 Oryx Wananchi Service Station

1,424,850.00


1,056,000.00


1,685,385.00

13/06 Oryx Wananchi Service Station

1,132,175.00

04/07 Toyota (T) LTD 199,743,345.00 01/07 Software Applications (T)

LTD 5,461,000.00

02/09 Software Applications (T) LTD

6,419,184.00

Total 223,695,649.00

6.5.2 Tanzania National Park

Deposit to Supplier As at 30th June, 2007, TANAPA made deposit to suppliers amounting to Shs.1.9 billion, principally in relation to the purchase of furniture and equipment for phase II of building at TANAPA’s headquarter in Arusha. Deposit ranges from 50% to 70% of the contract value for certain suppliers.


We understand that procurement procedures were strictly adhered to for acquisition of these furniture and equipment and that these items have already been supplied after 30th June 2007. However, with such a large deposit made to the supplier while there was no security availed to TANAPA, TANAPA exposed itself to unnecessary and very higher risk in event of any force majeure forcing the supplier to be unable to fulfil his part of the obligations. Whereas price is an important factor in selection of the best quote from supplier, other terms and conditions are also important. Advance to suppliers should be minimised to avoid exposure of TANAPA to risk of non performance of the supplier In case of a significant deposit being required to be made to suppliers, TANAPA should use alternative financial instruments like bank guarantees or recoverable letters of credit to safeguard its position in case of default by the supplier.

6.5.3 Singida Urban Water Supply and Sewerage Authority (SUWASA)

The Tender Board of SUWASA has six members. Our review of the tender board deliberations revealed that it does not convene regularly and even when it sits, it does so relatively late. We were availed with tender board‘s minutes that indicated that the committee convened on 29/06/2007 to open tender bids for 2007/08 it then convened on 10/08/2007 to evaluate the tenders before sitting on 17/08/2007 to award the tender. Going by this scenario, SUWASA operated for about 3 months without approved suppliers by tenders’ procedures or they operated without purchasing due to lack of approved suppliers.


CHAPTER SEVEN

7.0 CORPORATE GOVERNANCE This chapter deals with corporate governance issues that were found to be material to be highlighted in this report and that were reported in the management letters to the respective PA&oBs during the financial year ended 30th June 2007.

Corporate governance is a term often used to describe the systems and practices in place to manage information, resource and economic incentives problems inherent in the separation of ownership from control of the entity.

The Government places significant trust in its Chief Executive Officers (CEOs) of Public Organisations and provides them with the tools necessary for the management of their entities in order to achieve the required outcomes. The required outcomes include: effective resource management, effective delivery of public services, compliance with the various statutory requirements and best practice. In return, CEOs are required to perform their duties honestly, openly, in good faith and with a high order of care and diligence. These requirements are essential principles of good management and can also be referred to as principles of corporate governance.

7.1 Treasury Registrar’s Responsibilities As provided in the Treasury Registrar Ordinance Cap. 418 and Sect. 6 of the Public Corporations Act No. 16 of 1983 the Treasury Registrar functions in relation to Public Corporations are:

Shall keep or cause to be kept under permanent review the business and affairs of all persons and bodies of person in respect of which the Treasury Registrar holds any property or any interest in the property;


(a) render advice to the Government relating to the establishment of public or statutory corporations, and the vesting of any business or property in any such organisations;

(b) review the financial performance of public and

statutory corporations with a view to recommending measures aimed at amalgamation, disestablishment or improvement of their performance;

The Treasury Registrar shall unless the appointment is by virtue of office ensure that no person shall be appointed to be a member of more than three Boards of Directors at the same time.

7.2 The CEOs’ Accountability Obligations Relating to Good Governance The current climate of increased accountability in public sector organisations has brought to public attention the ethical dimension of corporate governance.

The framework of accountability in government requires that CEOs are primarily accountable for their entity’s activities. Public sector corporate governance encompasses a wide range of areas in which the CEO is accountable. Public sector entities have to satisfy a complex range of political, economic and social objectives and operate according to a different set of external constraints and influences than do businesses in the private sector. For instance, PA&oBs are required to operate within a system of checks and balances and value systems that emphasize issues of ethics, openness and public accountability. In contrast, private sector corporate governance pays greater attention to shareholders’ returns and preservation of shareholders’ values.

A critical element of effective corporate governance in government is that entity decisions are not only fair, open and accountable, but are seen to be so. Decision makers


should understand their responsibilities when making decisions. Decision makers also need access to relevant information, including government policies. CEOs are responsible for the conduct of their staff. It is necessary to set the public entity’s values and the minimum standard of acceptable behaviour (such as the duty to avoid potential conflict of interest and to disclose such potential should it arises).

The Public Finance Regulations 2001 makes it mandatory for Accounting Officers to institute sound resource management, including the establishment of sound internal control systems, effective internal audit function, and audit committee as a way of enhancing good governance and accountability in PA&oBs which are the basic principles of credibility, independence and transparency.

7.3 Members of Parliament’s vs. Board membership I have noted instances where political leaders are vested

with roles of public entity oversight. This can be reflected in some members of Parliament being members of board of directors or chairpersons of some board of directors of public entities. This is considered as departure from best practices as far as good governance is concerned.

7.4 Internal Audit Services According to Reg. No. 33 of the Public Finance Regulations

internal audit means an independent appraisal activity established within reporting unit which operates as a service to the head of unit involved. It controls functions by examining and evaluating the adequacy and effectiveness of internal controls to the unit reviewed and for conducting value for money audit throughout the unit in order to ensure that proper system of internal control and accounting system exist throughout the unit.

Reg 34 (1) of the PFR 2004, describe duties and responsibilities of the Internal Audit Service Unit. Among the duties vested in the internal audit service are:


(1) To evaluate the adequacy and effectiveness of the

internal control in the entity. (2) To review and report on the adequacy of actions

taken by managements in response to Internal and External Audit Reports.

(3) Review and report on proper control over receipt, custody and utilization of all financial resources of the unit.

(4) Review and report on conformity with financial and operational procedure laid down and good practice as from time to time

Reg.28 of the Public Finance Regulation of 2001 requires the Accounting Officers of each public entity to establish an effective internal audit service unit. Contrary to the above regulations, we have noted some entities which were yet to establish the internal audit unit as shown in the table below:

Public Authorities and other Bodies with no Internal Audit Unit

S/No Name of PA&oBs Internal Audit Unit


Failure to establish an internal audit unit.

2. Singinda Urban Water Supply and Sewerage Authority

Absence of internal audit unit

3. Songea Urban Water Supply and Sewerage Authority

Absence of internal Audit Unit

4. Tanzania Commission for Universities




6. Mwalimu Nyerere Memorial Academy

Absence of internal audit unit

7. Tanzania Institute of Bankers Absence of internal audit unit

8. Tanzania Engineering and Absence of internal


Manufacturing Design Organisation (TEMDO)

audit unit; no authorised accountant/auditor

9. Tanzania Industrial Research and Development Organisation


10. Tea Board of Tanzania Absence of internal Audit Unit

11. Centre for Agricultural Mechanization and Rural Technology (CARMATEC)

No internal audit unit; no authorised accountant

7.5.1 Audit Committees

Reg. 30 of the Public Finance Regulations 2005 stipulates requirements for establishment and existence of audit committees in every government entity for maintaining a sound financial and risk management and internal control system as well as maintaining an effectively functioning system of internal audit. In addition, the committees assist respective accounting officers in overseeing: • The safeguarding of assets; • The operation of adequate systems and control

processes; • The preparation of accurate financial reporting and

statements in compliance with all applicable legal requirements and accounting standards.

The audit committee must comment in the annual report

on; • The effectiveness of internal control • Its evaluation of the respective PA&oB’s financial

statements.

An important role of the committee is to monitor and supervise the effective functioning of internal audit, ensuring that the roles and functions of the external audit are sufficiently clarified and coordinated with internal audit in order to provide an objective overview of the operational effectiveness of the respective PA&oB’s internal control systems.


7.5.1.1 Functions of Audit Committees According to Reg. 32(1) of PFR, the audit committees have the following responsibilities: (1) To approve the internal annual and strategic plans

of the Public Authorities and other Bodies (2) To review all internal and external audit reports. (3) To advice the Accounting Officers on action to be

taken on matters raised in the reports of the Internal Auditors and External Auditors.

(4) Act as coordinators of audit programme conducted by Internal Auditors and External Auditors.

(5) Provide advice to the Accounting Officers on the preparation, review and presentations of financial statements.

(6) To prepare annual reports on its function copy of which shall be sent to the Accountant General and the Controller and Auditor General.

(7) To meet at least quarterly.

7.5.1.2 Public Authorities and other Bodies with No Audit Committees Public Authorities and other Bodies that do not have Audit Committees contrary to Reg. 30 of the PFRs 2005 are as follows:

S/No Name of PA&oBs Audit

Committee 1. Tanzania Engineering and

Manufacturing Design Organisation (TEMDO)

Failure to establish audit committee

2. Institute of Adult of Education Lack of an audit committee

3. Singinda Urban Water Supply and Sewerage Authority

Absence of audit committee



5. Tanzania Tobacco Board Absence of audit committee


6. Tanzania Bureau of Standards (TBS) Absence of audit committee

7. Tanzania Commission for University Absence of audit committee

8. Dar es salaam Institute of Technology (DIT)


9. Mwalimu Nyerere Memorial Academy Absence of audit committee

10. Tanzania Institute of Bankers Absence of audit committee

11. National Insurance Corporation (NIC) Absence of audit committee

12. Kariakoo Market Corporation No audit committee



14. Singida Urban Water and Sewerage Authority


15. Tanzania Industrial Research and Development Organisation


16. Tea Board of Tanzania Absence of audit committee

17. Centre for Agricultural Mechanizations and Rural Technology (CARMATEC)


18. Institute of Accountancy Arusha Absence of audit committee

19. Moshi University College of Co-operative and Business Studies


7.5.2 Specific Audit findings in regarding to Audit

Committees We have noted weaknesses during the period under review where a number of public entities have either operated without or with weak audit committees a sample of which are listed below along with brief explanation of the issues:

7.5.2.1 Bank of Tanzania (BoT) An audit committee is supposed to be a specialised, independent oversight body of an organisation designed


to improve the organisation’s overall governance framework, enhance the control framework and consequently assist the Chief Executive Officers to fulfil their stewardship, leadership and control responsibilities.

However, I have noted that the Chief Executive Officer of BOT, who incidentally happens to be the Chairman of the Board of Directors, is also the Chairman of the audit committee. This practice may impair the independence of the audit committee and hence render it ineffective.

7.5.2.2 Tanzania Petroleum Development Corporation (TPDC)

During the audit and review of the minutes of the audit committee, it was disclosed that they did not zero in and address the issue pertaining to the function of the audit committee as stipulated in the Public Finance Act no. 6 Reg.32 (1) of 2001; hence the committee is under performing.

7.5.2.3 Tanzania Broadcasting Services The Corporation has audit committee that is required to

meet at least four times in a year in pursuant with Reg. 32 (1) of the Public Finance Act, 2001. We noted that the audit committee at the Corporation met only twice during the year under review contrary to the above regulation. In order for an audit committee to be effective it should meet on regular basis as stipulated in the finance regulation and the notice and reports of such meetings should be communicated to the CAG.

7.6.0 Internal Control System This is a system operated by an Organisation to ensure that financial and other records are reliable and complete.

Pursuant to Reg 33 of the Public Finance Act 2001 (revised 2004) internal control system is a set of systems operated by an Organisation to ensure that financial and


other records are reliable and complete and they adhere to management policies orderly and efficient conduct of the business and proper recording and safeguarding of assets and resources.

We evaluated the efficiency and effectiveness of the internal control system and ascertained whether or not there are proper controls in place and duties of internal audit units have been carried out in accordance with the laid down rules and procedures of the respective PA&oBs.

However, the following PA&oBs were noted to have deficiencies which might affect efficiency and effectiveness of the internal control system as follows:

7.6.1 Tanzania Petroleum Development Corporation (TPDC) Our view of the work of internal audit department shows the following shortcoming:

• Internal Audit working paper file In order to carry out the function of internal audit

department effectively they were supposed to plan each audit assignment and conduct the examination and evaluation of information as per plan. Work performed was supposed to be supported by evidence, properly documented and filed in an audit work file.

It was further expected that sufficient, relevant and reliable evidence is obtained on which the internal auditor should draw reasonable conclusion and recommendation.

We also evaluated performance of the internal audit department by scrutinizing the internal audit file and we noted that; the file does not contain any audit assignment, audit planning, notes/memorandum, audit programme, audit observation notes etc.


The internal audit file contained therein internal audit reports with no backup details of audit working papers. We were of the opinion that the performance is not satisfactory.

• Annual Audit work plan

We observed that, though the annual audit work plan was prepared and approved by the Board, yet most of the activities shown in the plan for the year 2006/07 were not accomplished.

• Other audit functions

We also observed that the internal audit unit has not carried out verification of the accounting data provided by contractors under the Profit Sharing Agreements (PSA) such as Songas Tanzania Limited and Pan African Tanzania Limited. Data provided with regard to costs incurred by the two companies in relation to production and marketing of gas under the PSA have not been verified.

The Corporation has been accepting accounting data as given and no cross check has been made by the Corporation’s Internal Audit Department to ascertain its accuracy. In this case the Corporation may end up paying expenses which are unlawful.

7.6.2 Twiga Bancorp We noted that internal auditors engage in management activities by conducting what is known as pre-audit (reviewing and approving payment vouchers) before payment is effected. In this case the internal audit department may not discharge its function properly as it engages in pre auditing activities.

7.6.3 Dodoma Urban Water Supply and Sewerage Authority

(DUWASA)

During the year under review it was observed that nearly all the internal auditors’ quarterly reports focus on the


accounts department weaknesses. Other sections such as stores, technical and commercial departments had not been examined and included in the internal auditors’ reports. This shows weakness in internal audit unit which should try as much as possible to audit all the Authority departments and report their undertakings and not concentrate in one department.

7.6.4 National Institute of Transport (NIT)

It was observed that, the Internal Audit Section which was manned by one person was understaffed considering the volume of operation transactions at the institute, hence monitoring of the accounting and operational transactions was inadequate.

Under the circumstances, some of the operations were not examined by the auditor.

7.6.5 Tanzania Broadcasting Services (TBC) Internal audit function at the Corporation is not effective.

This is attributed to limited staff in the unit. Total staff establishment of the unit is 4; however, currently there is only one staff. The unit is required to prepare internal audit report on a quarterly basis. We however, noted that only two quarterly reports were prepared during the financial year 2006/2007. Given the size and operations of the organisation we think that one audit staff can not adequately cover all operations of the Corporation hence limited internal audit function.

Weaknesses and errors can not be detected timely due to lack of proper internal review.

7.6.6 Public Procurement Regulatory Authority (PPRA)

We noted that the internal audit unit of PPRA did not carry out quarterly audits during the financial year 2006/2007. This was attributed to the limited human resources and lack of internal audit manual when the unit was established in October 2006. Consequently only one audit that covered the whole financial year was carried


out. Furthermore the auditors are not clear whether the internal audit reports are submitted and discussed by the Board of Directors. The review of the internal audit work plan for 2007/2008 revealed that the plan did not include the review of compliance with the PPA, 2004 such as audit of procurement processes and contract management review. Also we observed that the internal audit unit does both pre and post audits of transactions at the Authority. In this way the independence of the internal audit unit is impaired when carrying out audits of the transactions that it was involved in during the approval stages.

7.7 General Observation on Governance of PA&oBs A departure from best practice as far as good governance is concerned has been noted in a number of public entities. There are instances where political leaders or some members of parliament, vested with roles of public entity oversight, are members of the boards of directors.

Reg.28 of the Public Finance Regulation of 2001 requires the Accounting Officers of each public entity to establish an effective Internal Audit Service Units within their organisations; to the contrary a substantial number of public organisations have been noted to have not established the internal audit units as shown in paragraph 7.4 above.

On the other hand; a substantial number of Public Authorities and other Bodies have not formed Audit Committees which are tools for monitoring and supervision of the functioning of internal control systems together with their roles, contrary to provisions of Reg. 30 of the PFRs 2005. That is why a number of PA&oBs have been noted to have been improperly structured and have weak internal audit sections as well as weak internal controls.


CHAPTER EIGHT

8.0 LEGAL ISSUES AND CONTRACTS MANAGEMENT This chapter deals with legal issues and contracts that were found to be material and that were reported in the management letters to the respective PA&oBs during the financial year ended 30th June 2007.

8.1 Introduction Contract is defined as an agreement based on sufficient consideration between two or more competent parties to do or not to do something that is legal. It is a legally enforceable agreement between two or more individuals or entities that confers rights and duties on the parties.

Public Procurement Act No.21 of 2004 and its Regulation 2005 define contract as an agreement made between a procuring entity and a supplier or contractor or asset buyer, supply of goods or for the execution of works or for sale of public asset;

In order to acquire goods, works or non consultancy

services from external source there must be a contractual agreement between the parties.

8.2 Breach of Contract: is the failure of one part without

legal excuse, to perform obligation according to contract agreement. Breach of contract attracts penalty and fines which may have bad reputation to an entity.

During the year under review, we have noted some observations regarding legal issues and contracts which if left unresolved by the respective authorities might have negative future economic impact.

Most of the observations are as the result of non compliance with statutory requirements, which may lead to misappropriation of public funds, hence obliterate the entity and bring doubtful reputations to the public.


The common practice includes weak and vague contracts, breaching of contracts and absence of contracts. Outcomes of the review of some legal contracts that were entered into by some of the PA&oBs are as analysed below:

8.3 Weak and vague contracts Some contracts that were entered into by some PA&oBs are either not well defined or lack clauses that can cater for stewardship of public resources as explained in proceeding paragraphs.

8.3.1 Tanzania Port Authority (TPA) Leased Container Terminal

TPA Container Terminal was leased to a private operator M/s Tanzania International Container Terminal Services (TICTS) in May, 2000. Initially, the lease agreement was to last for a period of ten years. However, towards the end of year 2005, the lease agreement was extended for another term of fifteen years vide Addendum No.2 to the lease agreement executed on 30.12.2005 to make the lease period to be twenty five years. This is contrary to Section 69 (1) of the PPA 2004 which states that “A procurement contract shall not be altered or amended in any way after it has been signed by both the parties unless such alteration or amendment is to the benefit of the Government or is not disadvantageous to the Government”.

Furthermore, Public Procurement Regulation No.117 (1) of 2005 states that “Once signed, the contract or written agreement may not be altered, except when an alteration is necessary for the benefit of the procuring entity or when an alteration does not put the procuring entity in a disadvantageous position”.


This extension is also a breach of a clause of the specific agreement No. 9.1 Amendment of Lease which states that “This lease including the schedules and appendixes, shall not be amended except by an instrument in writing agreed to and signed on behalf of each parties or their assignees, hereto after due consultation with all the parties who may be affected by such an amendment. Amendments of the term shall not be permitted”.

This clause sets the conditions for amendments to the contract, but explicitly rules out amendments to the terms of lease. As such the extension should be considered null and void. The extension made no reference to the Public Procurement Regulatory Authority, as required by law. PPRA is the body charged, among other things, with ensuring application of fair, competitive, transparent, and non discriminatory and value for money procurement standards and practices. In particular, given that the terms of extension were so unfavorable to the Government, the extension was clearly in breach of the PPA 2004. Operational problems have characterized the leased container terminal as evidenced by congestion of containers at the port. Whereas stakeholders were directed to work round the clock to ensure that there was no congestion of containers at the port, TPA (lessor) decided among other things to investigate the situation and came up with a report attributing the situation to varying factors among them being:- • Economic life span of 66% of the equipment at the

Terminal had expired and therefore performance efficiency of the same has been significantly reduced.


• The few types of equipment procured by the lessee were not brand new and some of them had surpassed their economic lifetime.

• It was established that the lessee has been involved in

cannibalization of equipment and typical example cited include one locomotive crane and one RTG (Rubber Tired Gantry) crane originating from the lessor.

• Reluctance by the lessee to transfer containers from

port area to Ubungo Inland Container Depot has further complicated the situation of container congestion at the port while the depot at Ubungo remained underutilized. No investment has been made by lessee to replace the aged equipment which is used to transfer containers from port area to Ubungo Depot.

• Operating the terminal beyond its designed capacity,

citing the capacity of the pavement base constructed to stack three (3) containers but currently the lessee has been stacking five (5) containers.

Generally, it can be observed that the lessee has not invested enough in operational equipments. The current prevailing situation at the terminal such as long queue of lorries/vehicles waiting to load and offload containers, container congestion, increased dwell time, and ship waiting time are the signs of existing problems. Despite of the shortfall pointed out above no remedial action has been taken to rectify the situation. In addition, the lease agreement itself does not contain a provision for mid review of the lease agreement and does not empower the lessor to force the lessee to implement provisions of the lease agreement in particular those related to the efficient operation of the terminal. In this


regard, if there is no intervention by higher authorities in the government the lessee may end up running down the terminal and eventually forcing the lessor to re-invest in operating equipment at the expense of taxpayers’ money. We noted however that the Board of Directors wrote a letter to the Minister of Infrastructure Development regarding the matter which contained recommendations on the way forward to address the operational problems facing the terminal and shortcomings contained in the current lease agreement for Government consideration and decision. However, until the time of issuing this report there is still congestion at the port.

8.3.2 Tanzania Tobacco Board (TTB) 8.3.2.1 Contract No TTB/C/LCS/01/01 (TTB and Current

Director General)

The Board had entered into the above contract between the named parties on 28 July 2005. The review of the contract revealed the following weaknesses • The contract does not specify the amount to be paid

for utility, entertainment and promotion and states it as refundable, which may be a loophole for misuse of TTB resources.

• In the contract it is stated that the employee in this contract will be entitled to the “cell phone prepaid to the tune of Shs 300,000 + Official Cell phone” However it is not made clear in this provision whether the cell phone is bought once, monthly or annually. This circumstance may be used to misuse the resources of the Board.

• On the other hand the contract refers to gratuity stating that the rate will be 25% of total remuneration received by him. On this matter the total remuneration is not clearly defined whether it


means net or gross pay or remuneration includes fringe benefits or not and the time for calculating the total remuneration is not well stated which may be another loophole for misuse of TTB resources.

• This contract lacks legal attestation and therefore there may be problems in case of breach of agreements between the parties. Also the witness for the employee was found to be a director who is a member of the engaging authority i.e. TTB-BOD.

• The contract of employment was signed on 28th July 2005 but backdated to 29th April 2005 at the salary of Shs.2,700,000 per month. The scrutiny however established that the employee started to work with TTB as a Director General at Shs 1,168,345 (TGS 18) before signing the engagement contract contrary to financial regulation 4.2.2 which requires the details to be made open before starting work. The contract signing led into computation of arrears and amendment of salary as authorized by the Finance Manager via item M. 52 of personal file no TTB/PF/U.3

• The review of the recruitment process forming this contract seems to bear ambiguities as the BOD minutes from 7th to 10th meeting only specify TGS 18 as the salary which is Shs.1,168,345 per month but the contract was signed at Shs.2,700,000 per month without a clear authority (this calls for recovery of differences)

• The contract is not under seal contrary to S.31 (2) which requires all contracts to be under seal.

It implies that TTB may have entered into agreement that might be with ambiguities.

8.3.2.2 The contract of security services This contract was between TTB and MOKU Security Company to offer security services at the house used by the Director General. Review of this contract found the following:-


• The contract is not under seal contrary to S.31 (2) which requires all contracts to be under seal.

• The contract requires MOKU to provide one security guard for 12 hours daily and TTB agrees to pay consideration of Shs 75,000 p.m per guard. However the scrutiny establishes that the number of guards required per month is uncertain as it has been proved via BV no 9/12 of 29/11/2006 that Shs 510,000 was paid to M/S MOKU being payment for 6 guards, 4 guards and 2 guards without clarification.

• The contract also requires MOKU to have insurance of Shs.100 million and deposit the copy of insurance policy and receipt of premium with TTB. The same were not provided to the audit team for perusal though requested.

• The contract does not show time limit of the parties’ relationship. Therefore it may be perceived to last forever.

Also TTB office premises are under MOKU security but the contract for this service was not provided despite efforts of the auditors to request the same. It implies that legal procedures are not well observed by TTB management and therefore may lead into unforeseeable litigations.

8.3.2.3 Medical service contract

Despite of the contract of medical service TTB continues to refund the medical bills and purchases of medicines contrary to staff regulation 6.10 (Medical benefits) and article 8 of the contract which details procedures for non working days and the procedures for handling cases above Aga Khan hospital capacity.

8.3.3 Songosongo Gas Operations

8.3.3.1 Payment of Corporation Tax Under the term of the production sharing agreement between Pan African Energy Tanzania Ltd and TPDC,


where income tax is paid by the former (Pan Africa Energy Tz. Ltd), the same is recoverable from the profit available to the latter (TPDC). In this case the amount paid as corporation tax is deducted from the remittable proceeds to Government from the sale of additional gas. Audit examination of the financial statement during the year under review revealed that Shs.1,887,186,871 was deducted from proceeds which were supposed to be remitted to the government if the contract was in the benefit of the Government. This contract is not to the benefit of the Government or people of the Republic United of Tanzania.

8.4 Breach of contracts A number of Public Authorities and other Bodies have demonstrated significant weakness in the management of contracts. The situation has been manifested in breaches of contracts by several PA&oBs as explained in the proceeding paragraphs.

8.4.1 Dar es Salaam Water Supply and Sewerage Corporation

(DAWASCO) Article 36.3 of the lease contract between DAWASCO and DAWASA requires that the First Time New Domestic Water Supply Connection Fund (FTNDWSCF) be used for provision of First Time New Domestic Water Supply Connections to domestic customers.

During our audit we noted cumulatively Shs.965 million of the totals FTNDWSCF have been used for activities not related to first time water connection to domestic customers. This is non-compliance with the lease contract between the operator (DAWASCO) and DAWASA. For instance the Lease Contract stipulates that following an audit of the First Time New Domestic Water Supply Connection Fund where the auditors determine that the First Time New Domestic Water Supply Connection Fund has been used


for purposes other than the provision of First Time New Domestic Water Supply Connections to domestic Customers, the operator shall immediately repay the amount determined by the auditors as used for activities other than the First Time New Domestic Water Supply Connection Fund. Persistent misapplication of the First Time New Domestic Water Supply Connection Fund by the operator shall make the operator liable to pay the amount set out in Article 46.1(f) of the lease contract and may be considered as material breach of the lease contract which could lead to termination of the agreement under Article 50. It implies that the misapplication of the Fund by the DAWASCO attracts penalty equal to 0.5% of weekly revenue for each week of delay from the date when the Fund was misapplied until the misapplication is remedied.

8.4.2 Dar es Salaam Water Supply and Sanitation Project

International Development Association IDA Credit 3771-TA Article III 3.04 of the Development Credit Agreement between the United Republic of Tanzania and the International Development Association (IDA) and article II section 2.04 of the Project Agreement between DAWASA and IDA, require DAWASA to open and maintain a project bank account for deposit of counterpart fund/contribution to the project.

This account must be replenished to Shs.750,000,000 at the end of each project quarter or when the balance falls below Shs.250,000,000.

However, as at 30th June 2007 the balance in the project account was only Shs.93,575,267. This is a breach of a credit agreement covenant which could lead to suspension of financing by the financiers as provided


for under Article V of the Development Credit Agreement with IDA and Article 1.07 of the Finance Agreement with EIB.

8.4.3 Tanzania Broadcasting Services

Corporation uses agents to get customers for programme and commercial advertisements. We however noted that most of the agents do not pay their outstanding balances promptly. For instance as at 30th June 2007, ZK Advertising had an outstanding balance of Shs 360m, Lowe Scanad Shs.73m, M&M Communication Shs.27m and FCB Shs.122m. Furthermore the detailed review of contract no TBS/TV/07/66, TBS/Radio/07/62 for ZK Advertising revealed that the customer is always required to pay outstanding balances within 5 days after the end of the month in which the transaction was carried out and any delays would amount to a penalty of 5% on the outstanding balances.

However, there was no evidence that the Corporation applied the penalty clause on defaulted customers. In addition there was no clear justification from the management as to why the corporation kept on giving services to defaulting customers. The review of contracts with agents also revealed that contractual relationship between the Corporation and Agents is not that of agency but rather buyer-seller relationship and consequently they do not act on behalf of the corporation.

It implies that the corporation may face financial difficulties because it is financing its customers’ businesses and thus contractual relationship with the agents is not clear.


8.5 Absence of contracts It has come to our light that some PA&oBs have been involved into a number of agreements without legally binding contract arrangements. The situation has been violating best practices and several other laws as well as exposing the concerned PA&oBs to several risk as elaborated in the proceeding paragraphs.

8.5. 1 Ngorongoro Conservation Area Authority (NCAA)

NCAA has been employing staff as casual workers and there were some instances where these casual workers have been working for a long time without contracts contrary to employment and labour relation Act, 2004-sec.14 (1) which requires a person to be offered a contract which can either be for specific or unspecific period of time and for specific task. It implies that NCCA does not comply with regulation which might expose the Authority to unnecessary penalties and future contingencies against workers.

8.5.2 The Presidential Parastatal Sector Reform Commission

(PSRC)

The commission entered into contractual agreement with Central Security Services Ltd for provision of security services on various assets under the Commission located at difference places. The original contract covered the period of three months from 25/08/2003 to 24/11/2003, and later extended to 31/07/2006. However, on expiration of the extended contract, the Commission continued to use the service of the firm and paid an amount of Shs.75,900,340 without renewing the contract agreement. It implies that extending services in the above manner deprived the Commission any opportunity for more economical services provided by similar or more competent firm.


CHAPTER NINE

9.0 SPECIAL AUDITS AND INVESTIGATIONS This chapter deals with special audits carried out during the financial years ended 30th September 2006, 31st December 2006 and 30th June 2007. The Controller and Auditor General is empowered to conduct special audits and audit investigations when required to do so. Sect. 34 of the Public Finance Act No.6 of 2001 further empowers the Controller and Auditor General to make recommendations for the purpose of:- • Preventing or minimizing the unproductive

expenditure of public moneys; • Maximizing the collection of public revenue; • Averting loss by negligence, carelessness, theft,

dishonesty; fraud and corruption relating to public moneys and resources.

Special audits and investigation are audits that do not follow normal audit procedures. They are audits that go beyond accounting cycle and normally all audit opinion is not issued. During the year under review, Controller and Auditor General conducted special audit of the financial statements and its related records of the Bank of Tanzania (BOT), TANESCO and Air Tanzania Holding Company (ATHCO). The Special Audits were conducted following the request from the Government and the Board of Directors of the respective Parastatal. Outcomes of the special audit of the aforementioned parastatals are analysed in the proceeding paragraphs.

9.1 Special Audit Investigation on BoT EPA Account 9.1.1 Introduction

Treasury EPA Stock represents External Payment Arrears (EPA) that date back to 1980’s when the defunct National Bank of Commerce had external commercial obligations that were in arrears for lack of foreign exchange. These were later on transferred to the BoT to facilitate their


administration and control. According to the arrangement of sharing such obligations, the externalization of EPA obligations is done on the basis of agreed exchange rates. The exchange rate differential between the TZS exchange rate prevailing when the beneficiaries are paid and the rate ruling when the funds were initially deposited to the commercial banks resulted into exchange losses, which are recoverable from the government.

9.1.2 Audit Results

The special audit of the BOT EPA account, concluded that Shs.134 billion was spent under the account out of which Shs.90 billion was fraudulently paid, while the Shs.44 billion needs further analysis to determine whether the amount was properly spent, and or accounted for. The matter is now under investigation by a special committee commissioned by the President of the United Republic of Tanzania, the deliberations and outcome of which will be dealt with later.

9.2 Special Audit of Tanzania Electric Supply Co Ltd (TANESCO)

9.2.1 Introduction The objective of this assignment was to undertake a consultancy on financial and management audit of the Tanzania Electricity Supply Company (TANESCO) in order to assess the financial and managerial performance of the Management Support Services Contractor (MSSC) as provided in the Terms of Reference of the contract signed on 12th April, 2002 (and as amended on 30th December, 2004). The assignment was jointly carried out by Deloitte and the National Audit Office from August to November 2006.

9.2.2 Financial Performance

TANESCO’s financial performance significantly declined during NETGroup’s tenure. In 2006 TANESCO’s gross margin was -41% which mandates the consistent reliance on GoT subventions and on bank overdrafts. Return on


assets and equity have also significantly declined from -9.3% in 2000 to -32.7% in 2004 without government and donor fund injection. From our analysis, over 75% of the terms of reference were either not implemented or were minimally addressed during NETGroup’s tenure. Accounts Receivable As at July 2006, TANESCO’s total receivables were Shs 201 billion, equivalent to one year annual revenue which added to the significant liquidity crisis to the company. It was noted however that the ratio of private individual accounts leapt from 25% in 2000 to 83.7% by July 2006. This signifies declining control of collections from private accounts. It was noted that most of the collection efforts undertaken by the MSSC campaign was on large power customers while efforts to collect from the smaller Tariff “A” customers were limited. Cash Management (Liquidity Position) TANESCO’s liquidity position has continued to deteriorate significantly since 2004 with the shortfall registered in hydro generation. The combined costs of independent power purchase (IPP) capacity charges, new leased generation and fuel cost by far outstrips the income generated by TANESCO’s revenue. With the gross margin at approximately -41% for 2005, overdraft in august 2006 was at -60 billion and the IPPs taking approximately 62% of TANESCO of the money. Emergency Power Producers (Aggreko (40MW), Richmond (100MW) and Alstom (100MW) continued to further deplete a significant portion of revenues through the capacity and energy charges. The external power purchase (EPP) during the period was approximated to be


US$ 7 million per month which is approximately 30% of TANESCO’s monthly revenue.

9.2.3 Power Generation:

The 2006 power crisis resulted from a culmination of factors emanating from poor planning by the MSSC. In 2003, there was a significant discharge of water (6.77meters) at the Mtera reservoir without allowing a period of reservoir replenishment.

The continued use of water resulted in the reduction of hydro generation from approximately 400MW in 2003 to 98MW by early 2006, a 75% drop.

In addition to the hydropower shortfalls, lack of maintenance to existing thermal plants added to the power crisis.

Lack of maintenance of thermal plants led to the closure of up to 80% of grid connected thermal plants.

Power Losses Power losses have also increased substantially over time. By 2005, TANESCO was losing 33% of the power generated through both technical and non-technical losses.

The greatest percentage of these losses in the year 2006 was on the distribution network. The technical losses here result from the overloading of lines and transformers while meter tampering and power theft accounted for the larger component of non-technical losses.

A table showing Percentage of Power Losses to Total Generatiotn

Year 2001 2002 2003 2004 2005 %Losses* 29% 23% 28% 36% 33%

*%Units Generated less Units Sold

Source: Tanesco generation reports and consolidated distribution reports


9.2.4 SONGAS & IPTL (IPP’s)

It was observed that during 2006, Songas experienced outages that cost TANESCO a combined total of approximately 170,000Kwhrs equivalent to Shs 13 billion of lost revenue for TANESCO. Inspite of all these losses, the payments made to Songas did not reflect a significant change particularly in relation to capacity charges1 which are based on project costs.

This formed the basis of the approximately US$ 5 million monthly capacity charges that continue to significantly cripple TANESCO’s liquidity.

With regard to paying Songas and IPTL invoices, there has been no internal validation of invoices received by TANESCO personnel since inception. This displays a lack of control within TANESCO of invoices that constitute approximately 80% of total monthly payables.

9.2.5. Metering & Billing

It was established that between 2005 and 2006 TANESCO lost approximately Shs 9 billion in revenue due to meter fraud and equipment tampering.

With regard to connections, the backlog to new connections had significantly increased to 10 months in 2006 i.e. approximately 10,000 customers countrywide who fully paid for their service line charges were desperately awaiting connection. Further, accounts were not billed for up to 3 months after being connected due to lack of transparency between the operations and billing departments.

1 The calculation of capacity charge is purely based on the cost of equity and cost of debt used to finance the power plant. It is not a factor of the power generated.


9.2.6 Shortcoming of the Billing System

The CUSTIMA system has developed both technical and non technical weaknesses that have affected its performance. Due to these weaknesses the system has been the biggest cause of revenue losses to the Company. The sample evidence from internal audit reports showed that there were 46 occurrences of system manipulations that led to revenue losses amounting to Shs. 9,132,188,078 between August 2005 and May 2006.

9.2.7 Corporate Governance

During our review, it was noted that apart from policy support, the MEM has been involved in committing TANESCO into contracts that were not fully vetted by the company’s Board or management.

An example of such commitment of TANESCO by MEM is the IPTL, Songas and Kiwira power purchase agreements (PPAs). We did not come across any tender Board evaluation or meeting minute’s documentation relating to the procurement of power from the IPPs. The result of these PPAs has been a significant reduction in TANESCO’s liquidity due to capacity and energy charges that are inhibitive to TANESCO’s growth and sustainability.

Another example is the commissioning of Richmond Development Co. Ltd as an Emergency Power Producer in April 2006 by MEM. Minutes from the tender board of 28th March 2006 reflected that none of the bids received for the 100MW gas generation tender qualified. Specifically Richmond had quoted for 2 year and 5 year periods as opposed to the stipulated 12 month period. TANESCO is now locked into a 2 year contract with Richmond now Dowans where TANESCO pay emergency power charges even if favourable hydrological conditions resume. Our findings indicated that the contract with Kiwira Coal Power was also signed while various stipulations pertaining to the power purchase agreement were still pending.


9.2.8 Procurement

There exists a weak tendering evaluation process that allows unqualified contractors to be approved for undertaking projects. The problem area identified however is in the evaluation of vendors which on many occasions has resulted in substantial financial losses to TANESCO. For example:

• Poorly executed construction of a 16km 33KV line in 2005 from Tegeta substation to Mwenge whereby 3 companies were contracted at a cost Shs 450 million. Poor workmanship resulted in TANESCO incurring an extra Shs. 81 million to rectify the problems.

• The upgrade of Custima to HiAffinity, (US$1.3 million project) contracted to M/S CPA Consultants in January 2004 that cost TANESCO Shs 1.12 billion was aborted before completion. CPA was contracted despite the company having no track record of implementing HiAffinity upgrades, failing to produce performance bond equivalent of 10% of the contract value from their bankers, and failing to avail their financial statements to TANESCO as was required.

• Selection of Rousant International Pty to provide 30 MW of leased generation in 2004 who then were not able to secure financing for the project thus resulting in TANESCO lacking a contingency to mitigate the consumption of the water in the Mtera reservoir.

• Emergency Procurement of 90 MVA, 132/33 KV Transformer in 2005 worth US$ 1,198,200 from India which was marred with irregularities:

On arrival at the Dar es Salaam port the transformer was not inspected;

• US$ 20,000 was paid to Crompton Greaves Ltd for a site Engineer to supervise the commissioning of the Transformer, who left prior to commissioning of the transformer;


• TANESCO paid TANROADS Shs.159 million as overload surcharge fees for transporting the transformer without a permit; and

• Poor clearing and handling of the transformer by M/s Utegi, who was paid Shs.44 million and was offered the job without tendering.

9.2.9 Inventory Management

Inventory management in 2006 continued to be one of the major areas of weakness within TANESCO. The company is faced with a problem of physical controls and poor record keeping as evidenced by the differences between stock cards and physical counts of stock. Electronic information differed from the manual system by Shs.97 billion, as at the end of August 2006.

9.2.10 Fuel Purchases

TANESCO continued to suffer material fuel losses due to theft and supply of poor quality fuel. Examples include 12,190 litres (approximately Shs.13 million) were stolen at Ubungo storage Tank yard in March 2005; 27,205 litres (approximately Shs 27 million) were reported stolen at Kigoma region in November 2004; and 9,263 litres of sludge valued at Shs 4 million were disposed at Kigoma in 2002 because of poor quality fuel supplied by M/s GAPOIL(T).

9.2.11 Internal Audit

It was noted that the Internal Audit Directorate at TANESCO performs rigorous investigations into areas where TANESCO resources have been illegally diverted or decisions made that are detrimental to the performance of the company. It was noted however that limited action is taken on a significant number of the perpetuators.

However, the staffing of the Internal Audit department should be re-evaluated to increase auditors and mitigate the current shortfall which has resulted in the non-coverage of all TANESCO regions annually.


9.3.0 Special Audit of the Air Tanzania Holding Corporation Capital Gain Tax and Transfer Fees not paid in the

transfers facilitated by ATHCO

9.3.1 Landed property situated on plot 988 Msasani Peninsula Audit scrutiny of invitation for tender’s documents, list of applicants, evaluation reports, minutes of management meetings, tender committee meetings, and those of the Board of Directors, ATHCO offer of 25th May 2006 disclosed that the landed property situated on plot No 988 Msasani Peninsula was sold to M/s SMART HOLDING CO. (a legal person as per the Company’s Act.) for a total amount of Shs.235,000,000.

However, subsequent verification made to the Sale Agreement disclosed that the title to the landed property bear the name of the entity’s Managing Director Mr. Hassan Abdul Khan as an individual indicating the transfer from successful bidder M/s Smart Holding to Mr. Khan without evidence of payment of the 10% capital gains tax as per Section 90 of the Income Tax Act amounting to Shs.23,500,000 and the transfer fees required by the land Act.

Note that non payment of the 10% capital gains tax as per Section 90 of the Income Tax Act and transfer fees as per the Land Act, in the transaction between Smart Holding and Mr. Khan is contrary to the laws.

9.3.2 Landed Property situated on plot no 598A Kalenga Upanga West, Flat No KF. 3 Audit review of documents relating to properties sold by ATC and ATHCO disclosed a transaction whereby M/s Pirbhai and Bharwani were awarded a landed property situated on plot No 598A Kalenga Upanga West, Flat No KF. 3 for Shs 17,250,000 by the ATC (now defunct). The transaction was concluded by the Sale Agreement dated 19th November 2002.


Subsequent reviews disclosed that ATHCO replaced the first sale agreements by issuing other sale agreements dated 4th August 2005, in favour of M/s Nasimbanu Mustafa Hassanali Pirbhai and Sofia Munir Bharwani without having evidence confirming eligibility for ownership of landed properties as per the Tanzania laws for the first bidders; payment of the 10% capital gain tax totaling Shs 1,725,000 as per Section 90 of the Income Tax Act and transfer fees as required by the Land Act. ATHCO facilitated in circumventing the law that does not allow foreigners to own such landed property by participating through re-issuing Sale Agreements to transfer a property from ineligible successful bidders to other persons. By so doing, ATHCO has facilitated to deprive the Government an amount of Shs.1,725,000 as the 10% capital gain tax contrary to Section 90 of the Income Tax Act, and the transfer fees required by the Land Act.

9.3.3 Landed properties Nos 121 Uganda Avenue and 12 flat No OBF 12B Oyster-bay.

Audit scrutiny of the process for disposition of assets vested on ATHCO disclosed that Captain Milton L. Lazaro was awarded to purchase by the now defunct ATC house No. 121 Uganda Avenue at an agreed amount of Shs 215,000,000.

We also noted that Captain Lazaro was the lowest bidder

offering a price of Shs.15,000,000. Persons with higher bids with their respective amounts in brackets were ZEK Group (Shs 215,000,000); Furniture Centre (Shs 200,000,000); Shellys Pharmaceuticals Ltd (Shs 191,000,000).

We further noted that Captain Lazaro was given privilege

as a sitting tenant and ex-employee of ATC to purchase the house. He proceeded to purchase it. However, for


reasons not made clear to us, the purchase was made on behalf of Elizabeth Thomas Ulotu and Frida Mbwilo whose names were not in the list of applicants therefore the consideration of ex-employee or sitting tenant privilege had not been properly applied because actual successful bidders were deprived what they deserved.

It was further noted that the same Elizabeth Ulotu was

given plot No12 flat No OBF 12B having title No 186037/140 resulting in double allocation while other contestants missed the landed properties on sale.

ATHCO participated in transferring the controversial right

by sale agreements dated 19th March 2004 (E. Ulotu vs. ATHCO); and that of 28th December 2005 (between F. Mbwilo & E.Ulotu vs. ATHCO) without evidence confirming payment of the 10% capital gain tax totaling Shs 21,500,000 as per Sec. 90 of the Income Tax Act and the transfer fees required by the Land Act.

The property of a company was given to an individual who

had not participated in the tendering process contrary to the Public Procurement Act;

ATHCO has violated section 68 the Public Procurement

Act of 2004, amplified in PPR No. 96 of 2005 that require successful bidder to be awarded the tender.

9.3.4 Expenditure incurred without budgetary provision

Shs.5,000,000 An amount of Shs 5,000,000 was noted to have been paid

to a supplier vide cheque number 130668 of March 1st 2006 supported by an official memo dated 27th February 2006, in respect of residential furniture of the General Manager. According to Regulation 3.7 of the ATHCO Staff Regulations and Fringe Benefits 2003 the furniture is an entitlement of the General Manager after every three years period since the General Manager received the first furniture entitlement. However, the expenditure has


neither had a budget provision nor was sanctioned by the Board of Directors. No evidence was provided to indicate that the three years period had lapsed.

It is implied that the internal control system of the ATHCO allows transaction to be executed without adherence to the Financial Regulations and management override the controls in place.

9.3.5 Conversion of other person imprest to private use US

$2,642.67 Audit scrutiny of the accounts and their related records revealed an amount of US $2,642.67 paid vide cheque number 342118 on 30th December 2004 to General Manager as imprest on behalf of Ambassador Mzale who was in Riyadh Saudi Arabia, who agreed to assist, in collaboration with ATHCO and the Ministry of Foreign Affairs in Tanzania, to recover a debt from a debtor in Oman. However, the Tanzania part of delegation delayed to reach Oman as agreed which caused Ambassador Mzale to return to Riyadh. Imprest totaling to US $2,642.67 which was entitled to Ambassador Mzale remained with the General Manager and was not accounted for to ATHCO up to 20th March 2006 (a delay of about 14 months). We were not given satisfactory explanations about the procedures used to regularize the conversion of other person’s imprest to be a private imprest and surcharges or penalties for violation of both financial regulations and for delays in recovery of the amount. It implies that the internal controls over payments of imprest are weak as a result transaction may be executed without adherence to financial regulation and management overrides the controls in place.

9.3.6 Tender Board minutes

Audit verification made on the tender board minutes disclosed that some of the meeting minutes were found


missing and others were not endorsed by the chairman and the secretary of the meetings as shown below:

Description Minutes Missing

Minutes not endorsed

Tender Board Meeting

1st,,2nd 3rd, 4th and 12th

5th,6th,7th,and 14th

The authenticity of the minutes and the decision covered by the missing minutes and their implementation were not established.

9.3.7 Questionable approach used to release ATHCO right of

tenancy Public Leadership Code of Ethics Act No. 13 of 1995 Part II Sec.6 (g)-(i) institute and invoke the following principle in respect of the conduct of public leaders, I quote:- “(g) in relation to preferential treatment, that public leaders Shall not step out of their official roles to assist private entities or persons in their dealing with the Government where this would result in preferential treatment to any person; (h) in relation to inside information, that public leaders Shall not knowingly take advantage of, or benefit from information which is obtained in the course of their official duties and responsibilities and that is not generally available to the public; (i) in relation to government property that public leaders Shall not directly or indirectly use, or allow the use of government property of any kind, including property leased to the government, for purpose of according economic benefit to the leader”. However audit scrutiny of documents relating to the tenancy of ATHCO offices disclosed that ATHCO inherited right of tenancy as well as debt for rent arrears which amounted to Shs.127,080,958.95 in connection with apartment’s Nos 005,006, 007 and 102 TANCOT House.


The rent in arrears were for the period from December 1999 to November 2002 (refer ATHCO/B4/1295/730 of 22nd November 2005).

ATHCO management approached NHC management in response to NHC threat to evict ATHCO following its failure to pay outstanding rent amounting to Shs.127,080,958.95 inherited from ATC. The ATHCO management requested to be allowed to seek tenants for apartments No 007 and 009 who would settle part of the debt by paying Shs.10,000,000 each on the explanation that the same would be used to reduce the unpaid ATC rent arrears. However it was the officials who ended occupying the apartments or people known to them who ended up acquiring the rights of tenancy. Furthermore the transaction was noted to have a number of controversies as follows: The transaction has not been passed through transparent way that would enable the government to be relieved by paying less on the rent arrears left by defunct ATC by relinquishing its right of tenancy. Had the approach been competitive and transparent, more than Shs.20,000,000 would have been received therefore reduce the burden to the government in respect of rent in arrears left by the defunct ATC. The transaction appears to have been done inconsistent with sub section (g)-(h) above of the Public Leadership Code of Ethics Act No. 13 of 1995.

9.3.8 Motor vehicle uses

Audit review of financial documents and their related records noted that ATHCO has two motor vehicles, one Nissan pick-up bought from D.T DOBIE (T) LIMITED on 5/4/2004 vide invoice no 12460 (value Shs.31,166,669) with registration number SU 35994 and a Land Rover with registration number SU 35541 bought on 27/02/03 vide


receipt no. 0060 (value Shs.36,698,355) which was delivered on 11/3/03. The above vehicles have been allocated to General Manager (Land Rover Freelander), while the Finance and Administration Manager, Legal and Estate Manager were using the Nissan pick- up in common. Scrutiny of claim form from insurance company indicated that the Land Rover Freelander was involved in accident on 24/11/2004 and after the accident the Nissan pick up was handed over to the General Manager. Review of documents indicated that the maintenance of the Land Rover after the accident was done at Spring Enterprise Garage and the payment was done by the insurance company. However the Land Rover continued to have mechanical problem and frequently maintenance record indicated that the Land Rover was maintained at the CMC Land Rover with the following particulars of the dates taken to garage, dates released from garage as well as the speed meter reading on specific dates.

Date received Date Issued Mileage(in

kilometres) 27/7/2005 01/09/2005 56841 (differ) 06/10/2005 10/10/2005 57171 330 31/10/2005 22/10/2005 58747 576 23/01/2006 14/02/2006 59603 856

In trying to establish the whereabouts of the Land Rover Freelander which was not at ATHCO office during the hand over of the office by the General Manager, we were informed that the vehicle was first taken to a garage at Sinza where the Acting General manager collected it and transferred it to a garage in Mwenge Survey. On 11/08/06 audit made a physical inspection of the Land Rover at the


garage and found the mileage read 63520 kilometres run. The vehicle had mechanical problems of the gear box and the air conditioning system, and the interior seat covers were torn. The garage to which the vehicle was taken estimated the maintenance cost of the vehicle to range from Shs.2,082,600 to Shs.4,080,000 depending on whether the gear box was to be overhauled or damaged spare parts replaced. The under listed general anomalies were also noted in connection with management of vehicles: • The log book record for control of the use of the Land

Rover Freelander was only up to 19/04/04 that is few days prior to engaging in accident. Despite of the progressive running of the meter shown in the maintenance review noted above no clear controls were kept to confirm the purpose for which the vehicle was put into.

• Log book controlling use of the Nissan Pick up has records of up to 28/09/2004. When the Land Rover Freelander was involved in the accident, the Nissan Pick up was released to the General Manager, we could not establish track record of its usage as from there.

The vehicles may be subjected to unauthorized use and at the expense of the ATHCO with respect to the running cost, maintenance as well as wear and tear. There is also possibility of fabricated maintenance bills to be charged to the ATHCO account if the releases to garages are not properly checked.

9.3.9 Use of official bank account to sponsor son in United

States. Audit review of record and interview made with officers revealed that the General Manager Mr. Gembe requested his subordinate Mr. Ngwanasayi to write a letter to USA Embassy giving his official standing (refer ATHCO/S.1/906 of 13th September 2004) while processing studies for his son Benjamin Lazaro Gembe.


In the process the ATHCO bank statement was also released to USA for the purpose of indicating the financial credibility of the father. Audit is in the opinion that the manager allows personal interest to conflict with official one and unfair disclosure of office records contrary to leadership code of ethics.

Contingent liability may be looming over the ATHCO accounts in case the General Manager fails to meet fees obligation for his two children in USA.


CHAPTER TEN

10.0 CONCLUSIONS AND RECOMMENDATIONS

10.1 Introduction This chapter deals with conclusions and recommendations on the key audit findings which need attention of the Government and the management of the respective Public Authorities and other Bodies. These recommendations come from the mandate given to the Controller and Auditor General under Sect. 34 of the Public Finance Act No.6 of 2001 (revised 2004) for the purpose of preventing or minimizing unproductive expenditure of public moneys, maximizing the collection of public revenues; and averting loss by negligence, carelessness, theft, dishonesty, fraud and corruption relating to public moneys and resources. Having reviewed and concluded the audit of the financial statements of the PA&oBs for the period covered in this report, and using the powers vested in me, the following are my conclusions and recommendations.

Addressing privatisation issues

During the year under review, it was noted that the Treasury Registrar’s Office had not collected outstanding proceeds from investors arising from the sale of the privatized Public Parastatals. However, despite the success gained from privatization together with the lessons learnt in the process, some of the Public Authorities and other Bodies are not operating as intended while others have changed the original purposes of production and others have completely ceased operating.

Recommendations

Treasury Registrar’s Office should ensure that: • Sound debt collection measures for long overdue debts

from defaulting investors are instituted.


• Legal action is taken against investors who fail to fulfill their contractual obligations on privatisation;

• Public entities which are not operating are either revived or liquidated;

• Assets from defaulting investors are either repossessed or they made to pay.

• The Consolidated Holding Corporations the successor of PSRC and LART; is strongly advised to commission or carry out a ‘Post Sale Audit’ of all divestitures to ascertain the conformance of the privatised entities to the business objectives and any other developments as per the sales agreements.

10.2 Weak Information Technology Systems During the year under review some Public Authorities and other Bodies were noted to have weak information technology systems while others are running old computer systems developed and installed as far way back as 1990s. It was also noted that since the adoption of the systems, they have not undergone any major upgrading or systems audit. This has resulted in the PA&oBs operating with unreliable operating information systems. Recommendations

The respective PA&oBs should ensure that they install new and modern information technology systems.

The existing information technology systems should be improved.

10.3 Preparation of financial and operational manuals During the period under review, it was noted that a number of Public entities lacked important operational and financial manuals as working tools in ensuring that operations and financial functions are properly carried out.

Recommendations • PA&oBs management should ensure that the operational

and financial manuals are prepared and put in use.


• PA&oBs management should ensure that sound accounting policies are formulated so as to improve efficiency in implementing the PA&oBs objectives.

10.4 Good Governance It has also been noted that a number of Public Authorities and other Bodies have governance problems as explained below: • have established neither internal audit units nor audit

committees as required by law; • internal Audit Units are not manned by professionally

competent staff. • head of Internal Audit Units are not reporting directly to

the Chief Executive Officer; they are reporting to the Chief Accountant or Finance Manager;

• have ineffective internal audit units; • internal auditors were carrying out pre-audit functions;

and, • some members of Parliament are members of some

Boards of Directors of Public Bodies contrary to the principles of good governance.

Recommendations • PA&oBs management should establish effective Internal

Audit Units manned by professionally competent staff with pre requisite resources and facilities to enable them to professionally execute their responsibilities;

• The Heads of Internal Audit Unit should report directly to the Chief Executive Officer and not to the Chief Accountant or Finance Manager;

• The membership of the Audit Committee as stipulated in Reg.31 of PFR 2001 (revised 2004) should be reviewed to allow for more external membership of the Committee in order for it to be more effective in giving the Chief Executive Officer appropriate and unbiased advice;

• In order to avoid conflict of interest, in as far as the oversight function is concerned, members of Parliament


should not be members of the Board of Directors of public entities.

10.5 Compliance with Public Procurement Law A substantial part of the PA&oBs financial resources are utilized through procurement of works, goods, equipment, and acquisition of consultancy services so as to provide services to the public. In the course of audit examination of the accounts of Public Authorities and other Bodies, we have noted the following: • Some PA&oBs have not established Procurement

Management Units; • Non adherence to best procurement methods and

practices; • Some PA&oBs have not established tender boards; • Procurements are made without approval of the tender

boards • Major weaknesses in procurement contracts

management; • Procurement Management Units not manned by

professionally competent staff with pre requisite resources and facilities to enable them to professionally execute their responsibilities;

Recommendations In order to ensure compliance with the requirements of PPA No. 21 of 2004 and its related Regulations, I recommend the following:- • Establish capacity building at all levels in the

procurement process; • The Public Procurement Regulatory Authority (PPRA)

needs to be given adequate capacity to regulate the procurement function in the country;

• Improvement in record keeping regarding procurement proceedings, and;

• Effective Tender Boards and Procurement Management Units should either be formed or substantially improved.


10.6 Public Authorities with Going Concern Problems We noted that some public corporations have been experiencing persistent negative working capital to the extent of facing difficulties in liquidating their maturing obligations, a situation that does not reflect a healthy financial position of the entities. Recommendations • Efforts should be taken by PA&oBs to increase/boost

revenue and reduce operating costs;

• Loss making units/branches of PA&oBs should be identified and recommended for closure, divestiture or restructuring;

• Idle assets and investments of PA&oBs with poor returns should be sold; External financing should be secured to turn the loss making PA&oBs to profitable organizations;

• Employees’ morale/motivation should be enhanced to improve performance.

• Furthermore, prospective restructuring of particular entities should be well researched, hastened and considerations of the factors that bring inefficiencies and losses to the PA&oBs taken and rectified.

10.7 Water Billing in Water Authorities Audit of Water Authorities have revealed significant weaknesses in water billing. The gaps arise from incorrect application of rates and failure to collect data on water consumption, as well as problems in locating billed customers resulting into over or under billing customers. The effect of this weakness has been inaccuracy of records and accumulation of uncollectible debts. In addition, there has been enormous loss of treated water in most authorities above the accepted normal loss standard. These problems have resulted into most Water Authorities having


negative net operating results thus experiencing operational difficulties.

Recommendations • The respective Water Authorities should identify all

billable customers; • Meter installation to customers should be hastened to

ascertain accuracy of bills receivables; • The Water Authorities should make sure that only

genuine customers are billed. • The Ministry of Water and Irrigation, should assist the

Water Authorities in improving their billing systems by recommending an appropriate software billing package to be uniformly applied. This should be coupled with the appropriate training on the application of the recommended software package.

10.8 Contracts Management A review of contracts entered by a substantial number of PA&oBs have revealed major weaknesses that have resulted into contractual problems and pending court cases that have adverse liquidated damages to the authorities. Recommendations • PMUs and tender boards should be involved in the

preparation of the procurement contracts; • Improve capacity of PMUs and tender boards in contract

management executions. • Maintain contracts registers.

10.9 Assets Management A review of a number of Public Authorities revealed that they do not posses title deeds of some landed properties, poor record keeping, under or overstatement of the assets; non-revaluation for a long time and impairment not tested periodically.


Recommendations Movable fixed assets should be properly recorded,

disclosed and accounted for; Legal ownership of the properties should also be sought; Revaluation of assets should be done and impairment

tested at recommended time interval. Management should regularly verify and ascertain the

existence and conditions of the assets; Record keeping of assets should be improved.

10.10 Non recovery of Loans It was noted that large amounts of loans advanced to some customers by some PA&oBs have remained uncollected beyond the agreed dates.

Recommendations • The respective PA&oBs should carry out rigorous follow

up on the outstanding amounts; • Improve existing lending policies,

10.11 Improvement in financial management and control We noted during the year that some of the PA&oBs had weak financial management systems. The general weakness noted among PA&oBs include non submission of statutory deductions to the respective authorities, weak management of debtors and creditors and lack of key financial directives. Recommendations In view of the above weaknesses, I recommend the following:- • Management of the entities should ensure that there is

compliance with the requirements of the laws and the effective financial control systems are in place;

• Debtors and creditors are to be dealt with promptly so

as to safeguard public resources and protect the image of the entities in dealing with third parties.


10.12 Results of BOT Special audit on EPA account The special audit conducted on the BOT- EPA Account which concluded that there was a misappropriation of funds, is found out to be a result of weakness in the financial management and control at the Central Bank. Recommendations To ensure such misappropriations do not recur, I recommend the following: • Disciplinary action should be taken against BOT officials

involved in the actions of facilitating the misappropriation

• Further investigation be performed on other EPA payments made to the remaining assignee companies for which the audit team could not conclude about their validity and authenticity during the investigation.

• It is further recommended that a clear Memorandum of Understanding, which should govern the relationship between the BOT and MOF on management of EPA transactions, should be drawn up as proposed in the investigation report.

• BOT functions should be streamlined, and the Institution should be relieved from non core functions of the Central Bank.

10.13 Results of TANESCO Special audit

It was found out during special audit that TANESCO is overburdened by the liabilities imposed by various power purchase agreements (PPA) mostly entered without compliance with the requirements of Public Procurement Act and its regulations. Recommendations • In decisions to enter into any contract in respect to

TANESCO, the law governing public procurements in Tanzania should be complied with.

• The Government’s interference in the management of TANESCO should be minimized in order for it to be held accountable.


10.14 Muhimbili National Hospital Assets verification During physical verification of the assets owned by the Muhimbili National Hospital, it was noted that one building constructed within the Hospital land is owned by a private person. Verification of the agreement between the then Muhimbili Medical Centre and H.A.Kiluvia Trading as Agent Store disclosed that the agreement was signed on 11th April, 1987 and the tenant was to occupy the building for five years with effect from 22nd December, 1987 up to 21st November 1992. Although the agreement period expired, but the building is still under the ownership of the developer contrary to the contract agreement. Recommendations

The Hospital management should ensure that the terms of the contract agreement are complied with.

10.15 Liquidated Damages Due From M/S Dowans Holdings

Audit review of Power-Off Agreement disclosed that M/S Dowans Holdings failed to commission at full capacity of 100MW generation on the Commercial operation date (COD) effective from 2nd February, 2007 through 31st August, 2007 contrary to the agreement. Recommendations The management of TANESCO should ensure that liquidated damages are paid by the defaulter as per provision of the contract agreement and any delay in paying the amount in question attracts interest charges.

10.16 Over payments and excess expenditure

Examination of payment vouchers and the related records revealed that a total of Shs.375,144,226 was overpaid to


the Commissioner of Domestic Revenue due to wrong interpretation of the VAT Act. It was also noted that some of the Public Authorities and other Bodies spent more than the approved budget to the tune of Shs.136,061,758 during the year under review. It implies that the activities of the respective Public Authorities and other Bodies suffered to the tune of the amount of VAT over paid to the Commissioner of Domestic Revenue.

Recommendation The management of Tanzania Standard Newspaper and

Tanzania Postal Bank should ensure recovery of Shs.268,810,275 and Shs.106,533,951 respectively ooverpaid to the Commissioner Domestic Revenue as VAT.

The management of DUWASA should seek retrospective

approval on the amount overspent. 10.17 Irregular Contract agreement

Tanzania Ports Authority Container Terminal was leased to a private operator M/s Tanzania International Container Terminal Services (TICTS) since May, 2000. Initially, the lease agreement was to last for a period of ten years. However, the lease agreement was extended for another term of fifteen years vide Addendum No.2 to the lease agreement executed on 30.12.2005 to make the lease period to be twenty five years of which in my opinion there were irregularities.

Recommendation The Government should revoke the un-procedural extension of the TICTs agreement and conduct a thorough evaluation of the 10 years agreement period before extension of the same is decided upon. Should there be need for an extension the Government is strongly advised to adhere to the Public Procurement Law and Regulations.

_________________________________________________________________________ Office of the Controller and Auditor General PA&oBs 2006/2007

172

11.0 ANNEXURES Annexure I

Trend of audit opinion issued to PA&oBs for the past three years S/N Entity name 2006/07 2005/06 2004/05 Regulatory Bodies

1. Architects & Quantity Surveyors Registration Board

Unqualified Unqualified Unqualified

2. Board of External Trade( BET) Unqualified Unqualified Unqualified 3. Cashewnut Board of Tanzania Audit in progress Unqualified Unqualified

4. Contractor Registration Board (CRB) Unqualified Unqualified Unqualified 5. Deposit Insurance Board Unqualified Unqualified Unqualified 6. Energy and Water Regulatory Authority

(EWURA) Unqualified Not in

operation Not in operation

7. Engineers Registration Board (ERB) Unqualified Unqualified Unqualified 8.

Gaming Board of Tanzania Unqualified Unqualified Unqualified

9. Higher Education Student Loans Board (HESLB)

Audit in progress Unqualified Not in operation

10. National Board of Accountants and Auditor (NBAA)


11. National Board of Materials Managements (NBMM).



173




Unqualified Not in operation

Not in operation

14. Sugar Board of Tanzania Unqualified Unqualified Unqualified 15. Tanzania Coffee Board Unqualified Unqualified 16. Tanzania Commission for Universities Unqualified Unqualified Unqualified 17. Tanzania Communication Regulatory

Authority (TCRA) Unqualified Unqualified Unqualified

18. Tanzania Cotton Board Unqualified Unqualified Unqualified- 19. Tanzania Library Service Board (TLSB) Unqualified Unqualified Unqualified 20. Tanzania Sisal Board (TSB) No accounts No accounts No accounts 21. Tanzania Tea Board Qualified Qualified Qualified 22. Tanzania Tobacco Board (TTB) Unqualified Unqualified Unqualified 23. Tanzania Tourist Board Audit in progress Unqualified Unqualified


174

S/N Entity name 2006/07 2005/06 2004/05

Government Institutions 2 Capital Market and Security Authority Unqualified Unqualified Unqualified 3 Loans and Advances Realization Trust

(LART) Taken by CHC Unqualified Unqualified

5 National Bureau of Statistics (NBS) Unqualified 6 National Construction Council (NCC) Audit in progress Unqualified Unqualified 7 National Council for Technical

Education (NACTE) Unqualified Unqualified Unqualified

8 National Economic Empowerment Council-(NEEC)




11 National Housing Corporation (NHC) Unqualified Unqualified Unqualified 12 National Museum of Tanzania Unqualified Unqualified 14 Ngorongoro Pastoralist Council Unqualified Unqualified 15 Rufiji Basin Development Authority

(RUBADA) Accounts not submitted

Unqualified Unqualified

16 Tanzania Broadcasting Services Qualified Unqualified Unqualified 17 Tanzania Education Authority (TEA) Unqualified Unqualified Unqualified 18 Tanzania Industrial Research and

Development Organisation (TIRDO) Unqualified Unqualified Unqualified

19 Tanzania National Parks (TANAPA) Unqualified Unqualified Unqualified 20 Tanzania Port Authority (TPA) Unqualified Unqualified Unqualified


175

21 Tanzania Standard Newspaper (TSN) Unqualified Unqualified Qualified 22 TCRA - Consumer Consultative Council Unqualified Unqualified Unqualified 23 Unit Trust of Tanzania (UTT) Unqualified Unqualified Unqualified


176

S/N Entity name 2006/07 2005/06 2004/05 Public Parastatal 1 Arusha International Conference

Centre (AICC) Unqualified Unqualified Unqualified

2 Centre for Agricultural Mechanisation and Rural Technology

Audit in progress Unqualified Unqualified

3 Consolidated Holding Corporation Unqualified Unqualified 4 Co operative Audit and Supervision

Corporation (COASCO) Audit in progress Unqualified Unqualified

5 Dar es Salaam Stock Exchange (DSE) Audit in progress Unqualified Unqualified 6 Dar es salaam Water Supply Company

(DAWASCO) Qualified

7 Kariakoo Market Cooperation (KMC) Audit in progress Unqualified-EM Qualified-Except for

8 Muhimbili National Hospital Unqualified Qualified Qualified 9 National Development Corporation

(NDC) Unqualified Unqualified Unqualified

10 National Health Insurance Fund (NHIF) Unqualified Unqualified Unqualified 11 National Insurance Corporation (NIC) Qualified Qualified Qualified 12 National Land Use Planning Commission Audit in progress Unqualified Unqualified 14 National Social Security Fund (NSSF) Unqualified Unqualified Unqualified 15 Ngorongoro Conservative Area Authority

(NCAA) Unqualified Unqualified Unqualified

16 Parastatal Pension Fund (PPF) Unqualified Unqualified Unqualified 17 SIMU 2000 LIMITED Unqualified Unqualified Unqualified


177

18 State Mining Corporation (STAMICO) Unqualified Unqualified Unqualified 19 Tanzania Atomic Energy Account not

submitted Unqualified Unqualified

20 Tanzania Bureau of Standards (TBS) Audit in progress Unqualified Unqualified 21 Tanzania Electricity Supply Company

Limited (TANESCO) Disclaimer

22 Tanzania Engineering and Manufacturing Design Organisation (TEMDO)


23 Tanzania Fertilizer Company Ltd Unqualified Unqualified Unqualified 24 Tanzania Investment Bank Limited (TIB) Unqualified Unqualified Unqualified 25 Tanzania Petroleum Development

Corporation (TPDC) Unqualified Unqualified Unqualified

26 Tanzania Post Corporation Account not submitted

Qualified Qualified

27 Tanzania Postal Bank Unqualified Unqualified Unqualified 28 Tanzania Railway Corporation (TRC) Unqualified Unqualified 29 Twiga Bancorp Limited Unqualified 30 Usafiri Dar es Salaam Limited Audit in progress Unqualified Unqualified


178

S/N Entity name 2006/07 2005/06 2004/05 Higher Learning Institutions 1 Ardhi University Audit in progress Unqualified Unqualified 2 College of Africa Wildife Management

(Mweka) Unqualified Unqualified Qualified

3 College of Business Education (CBE) In progress Unqualified Unqualified 4 Dar es salaam University of College

Education (DUCE) Unqualified

Not in operation

Not in operation

5 Dar es Salaam Institute of Technology (DIT)


6 Dar es Salaam Maritime Institute (DMI) Unqualified Unqualified Unqualified 7 Institute of Accountancy Arusha Unqualified Unqualified Unqualified 8 Institute of Adult Education Unqualified Unqualified Unqualified 9 Institute of Finance Management (IFM) Unqualified Unqualified Unqualified 11 Muhimbili University College of Health

Science (MUCHS) Audit in progress Qualified Qualified

12 Mwalimu Nyerere Memorial Academy Unqualified Unqualified Unqualified 13 Mzumbe University Audit in progress Unqualified Unqualified 14 National Institute for Productivity Unqualified Unqualified Unqualified 15 National Institute of Transport (NIT) Unqualified Unqualified Unqualified 16 National Sugar Institute Unqualified Unqualified Unqualified 17 Open University of Tanzania Audit in progress Unqualified Unqualified 18 Sokoine University of Agriculture (SUA) Audit in progress Unqualified Unqualified 19 Tanzania Fisheries Research Institute Audit in progress Unqualified Unqualified


179

(TAFIRI) 20 Tanzania Forest Research Institute

(TAFORI) Audit in progress Unqualified Unqualified

22 Tanzania Institute of Bankers Unqualified Unqualified Unqualified 23 Tanzania Institute of Education Unqualified Unqualified 25 Tanzania Wildlife Research Institute

(TAWIRI) Accounts not submitted

Accounts not submitted


25 University of Dar es salaam Accounts not submitted

Unqualified Unqualified


180

S/N Entity name 2006/07 2005/06 2004/05 Water Bodies 1 Arusha Urban Water Supply and

Sewerage Authority Unqualified Unqualified Unqualified


Qualified Unqualified Unqualified



4 Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO)

Qualified Unqualified Unqualified



7 Iringa Urban Water Supply and Sewerage Authority


8 Kigoma/Ujiji Urban Water Supply and Sewerage Authority

Unqualified Unqualified Qualified

9 Kyela Urban Water Supply and Sewerage Authority


Qualified Not in Operation


Unqualified Qualified Unqualified

11 Makambako Urban Water Supply and Sewerage Authority



Not operation




181

13 Mbinga Urban Water Supply and Sewerage Authority

Unqualified Unqualified Not operation

14 Morogoro Urban Water Supply and Sewerage Authority

Unqualified Unqualified Qualified



16 Mpanda Urban Water Supply and Sewerage Authority

Audit in progress Audit in progress

Unqualified

17 Mtwara Urban Water Supply and Sewerage Authority

Qualified Qualified Qualified


Unqualified Adverse Adverse



20 Njombe Urban Water Supply and Sewerage Authority






22 Singida Urban Water Supply and Sewerage Authority

Qualified Qualified Qualified


Unqualified Unqualified qualified

24 Sumbawanga Urban Water Supply and Sewerage Authority


25 Tabora Urban Water Supply and Unqualified Unqualified Qualified


182

Sewerage Authority 26 Tanga Urban Water Supply and

Sewerage Authority Unqualified Unqualified Unqualified

27 Tukuyu Urban Water Supply and Sewerage Authority


Qualified Not in Operation


183

Annexure II Trend of profit and loss made by PA&oBs for the past three years

S/N REGULATORY BODIES

Cumulative Profit or Loss 2006/2007 2005/2006 2004/2005

Shs. Shs. Shs. Shs.

1. Architects & Quantity Surveyors Registration Board

259,697,611

23,670,773

(5,149,734)

76,289,449

2. Board of External Trade (BET)

(2,371,528,127)

(455,633,294.00)

(352,389,235.00)

(183,721,258.00)

3.

Tanzania Cotton Board

573,242,711

(184,792,034.00)

738,388,145

19,646,600


774,881,160

(271,680,973)

887,060,515

149,549,944

5. Deposit Insurance Board

21,895,207,692

6,502,171,807.

5,057,277,168.00

3,714,938,985.00

6. Energy and Water Utility Regulatory Authority (EWURA)

525,770,000

525,770,000

Not in operation

Not in operation

7. Engineering registration Board (ERB)

273,600,965

(41,528,489)

219,987,661

8. Gaming Board of Tanzania (GBT)

1,222,709,572

439,752,793.00

(32,858,261.00)

118,299,512.00

9. Tanzania Coffee Board 3,903,596,000

98,100,000

(986,966,000)

35,369,000

10. National Board of Accountants and Auditor

3,543,410,000

1,320,188,000

525,846,000

546,725,000


184

(NBAA)

11. National Board of Materials Managements (NBMM).

142,899,419

(1,513,872)

23,563,158

29,297,697


1,846,548,000

98,267,000.00

581,368,000.

329,103,000

13. Tanzania Commission for Universities

136,190,209

(4,308,605)

(40,703,146)

(39,302,124)


645,767,826

645,767,826

Not in operation

Not in operation

15. Tanzania Communication Regulatory Authority(TCRA)

17,474,939,505

6,927,596,276

10,547,343,229

7,206,232,030


232,900,722

246,482,493

1,590,619

17,959,299

17. Contractor Registration Board (CRB)

3,545,977,000

361,146,000

219,856,000

No accounts


98,614,844,208

23,164,943,260

75,449,900,948

19. Higher Education Student Loans Board (HESLB)

1,061,557,106 Audit in progress

1,061,557,106 Not in operation

TOTAL

154,302,211,579 39,274,142,060 93,895,672,173 12,020,387,134

GOVERNMENT INSTITUTIONS

1 National Environment Council (NEMC)

244,092,214

168,264,729.00

56,427,451

18,817,900

2 Capital Market and Security Authority

414,477,198

9,682,722.00

(55,897,576)

108,174,523


185

3 National Council for Technical Education (NACTE)

88,336,760

(188,445,489.00)

183,361,075

(158,623,077)

4 Ngorongoro Pastoralist Council (NPC)

256,754,033

(24,458,841.00)

34,100,058

5 Tanzania Education Authority (TEA)

8,014,594,925

1,293 513, 654

669,332,456

(890,601,388.00)

6 Tanzania Ports Authority (TPA)

84,624,388,508

24,118,502,065.

26,188,205

7 Tanzania Industrial Research and Development Organisation (TIRDO).

485,601,850

(142,610,573)

(224,053,216)

8 Unit Trust of Tanzania (UTT)

4,458,775,629

(165,457,486)

(110,782,532)

1,769,954,043.00

9 Tanzania Standard Newspaper (TSN)

357,275,607

501,334,202.00

477,467,715 23,895,070,498

10 National Housing Corporation (NHC)

12,893,631,536

1,034,260,736

255,179,321

1,108,623,637

11

Tanzania Broadcasting Services

4,871,829,592

1,487,898,831.00

1,286,363,693

12 Tanzania National Parks (TANAPA)

45,195,752,182

10,024,852,809

8,624,914,906

5,636,407,795

TOTAL

161,905,510,034 25,930,167,646 2,597,686,650 31,487,823,931

PUBLIC PARASTATALS

1. Arusha International Conference Centre (AICC)

849,450,214

849,450,214.00

340,620,109.00

(454,278,329.00)


186

2. Centre for Agricultural Mechanization and Rural Technology (CAMARTEC)

148,809,893

89,305,550

(27,329,615.00)

31,183,998.00

3. Consolidated Holding Corporation

(6,326,000,000)

2,150,000,000

2,844,000,000

4. Co 0perative audit and Supervision Corporation (COASCO)

218,060,433

(84,438,471.00)

18,966,034.00

(71,258,075.00)

5. Twiga Bancorp Limited

1,044,556,000

876,570,000

1,239,643,000 515,803,000

6. National Development Corporation (NDC)

2,660,929,000

1,767,599,000

1,617,574,000

(219,720,000)

7. National Health Insurance Fund (NHIF)

127,763,426,655

39,887,267,718

28,882,963,790

20,499,867,968

8. National Ranching Company (NARCO)

706,564,000

36,734,000

47,532,000

9. Tanzania Electricity Supply Company Limited (TANESCO)

(676,788,000,000)

(183,343,000,000

)

(862,000,000)

10. SIMU 2000 LIMITED

3,067,828,842

409,084,382.00

188,720,509.00

1,384,458,912.00


170,151,099

91,085,970.00

30,373,642.00

(819,697.00)

12. Tanzania Fertilizer Company Ltd (TFC)

(456,443,002)

269,685,930.00

677,802,902.00

886,732,193

13. Tanzania Investment Bank Limited (TIB)

4,729,822,000

1,889,216,000

2,089,051,000

2,072,201,000


187

14. Tanzania Petroleum Development Corporation(TPDC)

(278,694,572)

(354,240,251.00)

(229,521,736.00)

5,516,500,331

15. Tanzania Post Corporation (TPC)

(25,828,877,327)

(4,340,634,276.0

0)

(5,647,775,489)

16. Tanzania Postal Bank (TPB)

4,207,205,000

924,199,000

609,378,000

1,573,546,000 17. Tanzania Railway

Corporation (TRC)

(54,489,166,000)

(11,964,131,000.00)

(13,226,033,000)

18. State Mining Corporation

(STAMICO)

21,682,585

101,955,195

(80,272,610)

(22,866,822) 19. Ngorongoro Conservative

Area Authority (NCAA)

10,798,087,232

2,035,841,724.00

3,339,098,859

1,485,437,095


596,642,150,481

118,878,307,113

78,707,966,799 67,885,249,527

21. Dar es Salaam Water Supply and Sewerage Corporation (DAWASCO)

(8,801,002,000)

(11,300,681,000)

2,499,679,000

TOTAL

(19,939,459,467)

(81,107,396,470)

103,060,437,194 100,566,234,101

GOVERNMENT HIGHER LEARNING INSTITUTES

1.

Ardhi University

(3,630,555,196)

(496,095,674)

(558,406,577)

(577,531,278.00)


188

2. College of Africa Wildife Management (Mweka)

(1,242,675,328)

86,220,291

89,790,250

398,152,773

3. Dar es salaam University College of Education (DUCE)

3,541,913,000

3,541,913,000


(1,756,649,135)

(1,000,175,199.0

0)

(48,985,791.00)

(338,862,582)

5. Institute of Accountancy Arusha (IAA) 1,056,311,903

549,598,685. 62,894,958 281,070,388

6. Institute of Adult Education

839,096,644

354,171,021

(442,859,679.00)

766,097,826.

7. Institute of Finance Management (IFM)

2,475,598,000

1,675,651,000

176,098,000 428,557,000

8. National Institute for Productivity (NIP)

27,789,709

35,541,474

37,563,001

(13,864,714)

9. National Institute of Transport (NIT)

324,348,833

171,819,879

(27,260,594)

(316,027,636)

10. Moshi University College of Cooperative and Business Studies

(425,509,000)

214,354,000

(703,383,000)

11. Mwalimu Nyerere Memorial Academy

411,370,756

379,467,615

31,903,141 53,741,104

12. National Sugar Institute (117,293,544)

95,877,555

(187,897,239)

TOTAL 1,503,746,642 5,890,085,321 (867,160,530)

681,332,881

WATER BODIES


189

1. Arusha Urban Water Supply and Sewerage Authority

1,494,626,000

264,355,000

62,134,000

382,903,000


49,146,891.35

34,325,772.01

14,821,119.34

(4,460,795.55)

3. Bukoba Urban Water Supply and Sewerage Authority

(36,730,736.64)

(28,122,517.27)

(42,264,078.91)

(28,122,517.27)

4. Dodoma Urban Water Supply and Sewerage Authority

(470,959,659)

(124,066,322.00)

(649,757,567.00)

57,741,504.00

5. Kigoma/Ujij Urban Water Supply and Sewerage Authority

96,371,240.14

25,360,539.05

(29,514,915)

(143,657,603)

6. Lindi Urban Water Supply and Sewerage Authority

11,018,252,876

56,603,657.00

16,829,796.10

42,185,654.79

7. Mbeya Urban Water Supply and Sewerage Authority

380,730,454

6,808,026

5,377,912

8. Moshi Urban Water Supply and Sewerage Authority

734,612,000

86,372,000

34,901,000.

194,500,000

9. Mtwara Urban Water Supply and Sewerage Authority

(439,375,506)

(271,754,755)

49,703,842

55,128,614

10. Musoma Urban Water Supply and Sewerage Authority

(338,293,120)

(160,271,217.00)

(254,017,238.00)


190

11. Mwanza Urban Water Supply and Sewerage Authority

699,155,696

(134,569,522)

38,304,208.00


(352,770,521)

(124,883,323.00)

(61,342,678.00)

(182,550,149.00)

13. Sumbawanga Urban Water Supply and Sewerage Authority

275,851,368.01

26,687,981.08

175,276,509.62

73,886,877.31

14. Tabora Urban Water Supply and Sewerage Authority

2,340,756.

12,813,455.82

271,796,111.84

181,819,374.30

15. Tanga Urban Water Supply and Sewerage Authority

(3,083,010,000)

(197,558,000.00)

(367,062,000)

(534,745)

16. Morogoro Urban Water Supply and Sewerage Authority

2,031,317,345 (561,017,165) (479,904,773 (45,292,871.00


(164,923,267) (38,667,288.00) (48,700,388.00)

Sub Total 11,896,341,817 (1,192,445,654) (783,514,366) 628,839,215

Grand Total 308,606,793,499 (11,205,447,097) 196,841,564,015 145,384,617,262


191

Annexure III The Treasury Registrar’s Statement of Government Investments and Public Interests

S/N Name Of The Parastatal

Audited Accounts

Date

Total Investment

Shs

% Gvt. owners

hip

Remarks

1 Aboud Soap Oil Industries

31-Dec-04 2,750,000,000.00 20 Joint Venture with Abound Soap Enterprises Ltd

2 Air Tanzania Company Ltd

31-Mar-06 18,034,359,000.00 100 Parastatal

3 Arusha International Conference Centre (AICC)

30-Jun-06 20,057,644,235.00 100 Parastatal

4 Audio Visual Institute/Television Tanzania (Taasisi ya Utangazaji Tanzania TUT)

30-Jun-06 22,504,436,872.00 100 Government Institution

5 Bank of Tanzania (BOT)

30-Jun-06 588,811,438,000.00 100 Parastatal

6 Baraza La Kiswahili Tanzania

30-Jun-06 121,611,213.00 100 Government Institution

7 Basuto Farm 30-Sep-02 644,449,423.00 100 Under Liquidation. The successor of LART(CHC) to take


192

over the liquidation process.

8 BHESCO 30-Jun-01 104,285,208.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

9 Board of External Trade (BET)

30-Jun-06 960,898,128.00 100 Parastatal

10 BP (T) Ltd 31-Dec-05 48,566,000,000.00 50 Joint Venture with BP Africa Ltd

11 Celtel 31-Dec-05 136,687,334,000.00 40 Joint Venture with CELTEL International Ltd

12 Capital Development Authority(CDA)


13 Capital markets and Securities Authority

30-Jun-06 2,229,627,569.00 100 Regulator

14 Carmatec 30-Jun-06 242,375,647.00 100 Parastatal

15 Centre for Foreign Relations



193

16 Chinese Tanzania Shipping Company Ltd

31-Dec-04 45,147,921,192.78 50 Joint venture with Chinese Govt.

17 College of Business Education

30-Jun-05 319,394,437.00 100 Government Institution. 2005/06 Accounts with Auditors.

18 Consolidated Holding Corporation Ltd

31-Dec-06 6,939,000,000.00 100 Government Institution

19 Construction Registration Board


20 Cooper Motors Services Company(CMSC)

30-Sep-98 270,570,498.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

21 Community Development Trust Fund


22 Cooperative Audit and Supervision Corporation(COASCO)


23 Dar es Salaam Institute of Technology(DIT)



194

24 Dar-es-Salaam Maritime Institute


25 Datel Tanzania Limited

31-Dec-05 -323,000.00 35 Joint Venture (privatisation).

26 DAWASA 30-Jun-06 63,453,000,000.00 100 Government Institution

27 Embassy Hotel Limited Company

31-Dec-00 58,603,264.00 40 Not operating. Government to sell its Shares

28 Engineers Registration Board


29 Friendship Textile Co.

31-Dec-06 28,913,245,000.00 49 Joint Venture with Dieqiu Textile Dyeing and Printing Group Co Ltd (51%)

30 Gaming Board of Tanzania

30-Jun-06 894,562,279.00 100 Regulatory Board

31 General Tyre EA Ltd

30-Jun-03 -322,000,000.00 74 Joint Venture with Continental NA (26%). Specified under PSRC. Investigative audit requested.


195

32 Gidagamowd 30-Sep-98 239,723,885.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

33 Government Employee Provident Fund

30-Jun-06 24,180,600,018.00 100 Government Fund

34 Imara Wood Products

31-Dec-91 194,300,000.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

35 Institute of Accountancy Arusha (IAA)


36 Institute of Finance Management (IFM)

30-Sep-06 20,884,633,000.00 100 Government Institution

37 Institute of Rural Development Planning

30-Jun-05 445,103,190.00 100 Government Fund

38 Insurance Deposit Fund



196

39 Insurance supervisory Department


40 Joint Finance Commission


41 Kariakoo Market 30-Jun-04 1,851,413,119.00 100 Parastatal

42 Keko Pharmaceuticals Ltd

31-Aug-05 733,725,000.00 40 Joint Venture with Diocare Ltd (60%)

43 Kibaha Education Centre


44 Kisarawe Brick Factory (KIBRICO)

31.12.2003 -144,065,000.00 30 Not operating. Govt minority Shares Sale in process.

45 Kilimanjaro Airport Development Company Ltd

30-Jun-06 2,222,101,000.00 24 Joint Venture with Mott-Macdonald Ltd, SA Infrastructure fund and Inter Consult Ltd

46 Kilimanjaro Machine Tools

31-Dec-89 -652,989,944.00 100 Not operating. Transferred to NDC to be used for development of export Processing


197

Zone.

47 Kiltimbers Co Ltd 31-Dec-90 69,093,720.00 100 Not operating. Was placed under liquidation (LART). The successor of LART to take over the liquidation process.

48 Kilombero Sugar Co.

31-Mar-07 244,000,000.00 25 Joint Venture with Illovo & ED & F. Man (75%)

49 Kivukoni College (Mwalimu Nyerere Memorial Academy)


50 Kiwira Coal Mines 30-Jun-04 2,172,760,559.00 30 Joint venture with TAN Power Resources Company. 2005 Accounts with the auditors.

51 LART Tribunal 31-Dec-06 43,346,350.00 100 Ceased to exist legally on 30/6/06,


198

transferred to CHC May, 2007.

52 Light Source Manufacturers

30-Jun-05 254,166,000.00 49 Joint Venture with TATA Exports (51%). Govt is in process of disposing its 49% Shareholding.

53 Local Authority Provident Fund


54 Loans Advances Realization Trust (LART)

30-Jun-06 1,575,250,000.00 100 Ceased to exist legally on 30/6/06, transferred to CHC May, 2007.

55 Marine Service Co. 31-Dec-06 11,617,182,854.00 100 Recently Established.

56 Mbeya Cement CO. Ltd

31-Dec-06 2,424,712,000.00 25 Joint Venture

57 Medical Stores Department

30-Jun-05 44,362,791,187.00 100 Government Institution. 2005/06 Accounts with Auditors.

58 Mbinga Coffee Curing

30-Jun-06 1,287,092,000.00 43 Joint Venture with Coop. Unions


199

59 Mbozi Coffee Curing

30-Jun-06 901,560,384.00 32 Joint Venture with Coop. Unions

60 Mikumi Wildlife Lodges

30-Jun-96 1.00 100 Not operating. Under privatisation.

61 MMT – Mang’ula 31-Dec-87 191,355,469.00 100 Not operating. Privatised by PSRC. The process of handing over to the new investor (St. Mary International Schools) is in progress

62 Moshi University College of Cooperative and Business Studies (MUCCOBS)


63 Muhimbili National Hospital (MNH)

30-Sep-06 19,544,458,351.00 100 Government Institution

64 Muhimbili orthopedic Institute (MOI)



200

65 Mulbadaw Farm 30-Sep-98 902,699,681.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

66 Murjanda Farm 30-Sep-98 461,940,530.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

67 Mwananchi Engineering And Construction Company(MECCO)

31-Dec-06 443,732,000.00 25 Joint Venture with Sisi Construction Ltd (75%)

68 Mzumbe University 30-Jun-06 11,298,079,799.00 100 Government Institution

69 National Agricultural Food Co. (NAFCO)

30. 06. 1996 279,888,449.00 100 To be wound up. All subsidiary companies divested under PSRC.

70 National Arts Council


71 National Bank of Commerce (NBC)

31-Dec-06 24,561,300,000.00 30 Joint Venture


201

72 National Board of Accountants and Auditors (NBAA)

30-Jun-06 3,020,183,000.00 100 Regulatory Institution

73 National Board of Architects Quantity Surveyors and building Contractors

30-Jun-06 259,697,611.00 100 Regulatory Institution

74 National Board of Materials Management (NBMM)

30-Jun-06 144,702,172.00 100 Regulatory Institution

75 National Bureau of Statistics


76 National Construction Council


77 National Council for Technical Education


78 National Development Corporation (NDC)


79 National Examination Council



202

80 National Health Insurance Fund


81 National Housing Corporation

30-Jun-06 222,094,480,695.00 100 Parastatal

82 National Institute for Medical Research


83 National Institute for Productivity


84 National Institute of Transport (NIT)


85 National Insurance Corporation

31-Dec-06 55,448,880,000.00 100 Under Privatization

86 National Land use Planning Commission (NLPC)

30-Jun-05 10,458,086.00 100 To be transformed into Rural Land use Planning Commission

87 National Micro Finance Bank (NMB)

31-Dec-06 46,484,735,400.00 51 49% Privatized

88 National Milling Corporation

30-Jun-94 14,511,600.00 100 Not operating. Placed under PSRC for privatisation.

89 National Museum of Tanzania


90 National Ranching Company (NARCO)

30-Jun-06 1,102,313,056.00 100 Under Privatization


203

91 National Shipping Co. Ltd

30-Jun-99 6,320,069,245.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

92 National Social Security Fund

30-Jun-06 430,790,110,414.00 100 Parastatal

93 National Social Welfare Institute


94 National Sports Council

30-Jun-06 -5,630,784.00 100 Government Institution

95 National Sugar Institute


96 New African Hotel 30-Jun-05 1,150,000,000.00 23 Joint venture with TADEMA Overseas Ltd (77%). 2005/06 Accounts with auditors

97 Ngorongoro Conservation Area Authority


98 Nyanza Glass Works

30-Jun-00 7,710,570,174.00 100 Not operating. Handed over to NDC by PSRC in March 2007.


204

99 Open University of Tanzania


100 Parastatal Pension Fund

31-Dec-06 266,674,752,000.00 100 Parastatal

101 Parastatal Sector Reform Commission (PSRC)


102 PEHCOL 30-Jun-00 4,601,072,024.00 100 Not operating. Placed under PSRC for asset sale

103 Pride Tanzania 30-Jun-06 4,499,411,755.00 100 A Project Incorporated Under Cap. 212 as a limited Co. by Guarantee

104 Public Service Pension Fund (PSPF)


105 Rufiji Basin Development Authority (RUBADA)


106 Setchet Company 30-Sep-00 1,010,576,396.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.


205

107 SIMU 2000 Ltd 31-Dec-06 43,219,372,955.00 100 Government Agency

108 Small Industries Development Org.


109 Sokoine University 30-Jun-06 21,412,861,917.00 100 Government Institution

110 State Mining Corporation (STAMICO)

31-Dec-06 3,417,652,762.00 100 To be an Executive Agency

111 Sugar Board 30-Jun-05 7,735,220,000.00 100 Regulator

112 Suma JKT 30-Jun-03 1,368,287,722.10 100 Government Institution

113 TAFORI 30-Jun-05 767,159,747.00 100 Government Institution

114 Tanga -RTC 30-Jun-01 126,152,332.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

115 Tanganyika Pyrethrum Board

30-Jun-05 -115,028,900.00 100 Regulator

116 TANICA 30-Sep-05 1,110,400,000.00 10 Joint Venture. Other Shares held by Unions


206

117 Tanzania Airports Authority


118 Tanzania Atomic Energy Commission


119 Tanzania Automobile Manufacturing Company (TAMCO)

31-Dec-99 2,532,882,162.00 100 Not operating. Transferred to NDC to be used for development of export Processing Zone.

120 Tanzania Automobile Technology Centre

30-Jun-05 3,655,986,000.00 100 Parastatal

121 Tanzania Breweries Co. Ltd

31-Mar-07 1,179,713,900.00 4 Joint Venture with Indol International BV (96%)

122 Tanzania Building Agency

30-Jun-06 104,169,000.00 100 Government Agency

123 Tanzania Bureau of Standards(TBS)


124 Tanzania Cashew nut Board

30-Sep-05 1,947,440,000.00 100 Regulatory Body

125 Tanzania Central Freight Bureau(now SUMATRA)

30-Jun-06 1,720,462,655.00 100 Changed to SUMATRA(Surface and Marine Transport Regulatory Authority)


207

126 Tanzania Cigarette Co. Ltd (TCC)

31-Dec-06 50,000,000.00 2.5 Joint Venture with RJ Reynolds Tobacco Ltd (51%), JT International Hold BV (24%), Tanz. Public (19.5%)

127 Tanzania Civil Aviation Authority


128 Tanzania Coffee Board

30-Sep-06 1,235,820.00 100 Regulatory Body

129 Tanzania Commission for Science & Technology


130 Tanzania Commission for Universities

30-Jun-06 205,339,023.00 100 Government Institution. Originally Higher Education Accreditation Council

131 Tanzania National Re-Insurance Corporation Ltd (TAN-RE) 31-Dec-05

35,471,447.98 1 Private Company. Government owns one Golden Share


208

132 Tanzania Communication Regulatory Authority (TCRA)

30-Jun-06 15,610,400,955.00 100 Government Institution/Regulator

133 Tanzania Cotton Lint & Seed Board

30-Jun-06 9,069,370,881.00 100 Undergoing restructuring /To be a Regulatory Body

134 Tanzania Daesung Cables

31-Dec-06 159,820,540.00 29 Joint Venture with east African Cables Kenya (71%)

135 Tanzania Development Finance Ltd

31-Dec-05 7,037,476,000.00 32.1 All Government Shares to be sold

136 Tanzania Education Authority


137 Tanzania Electric Supply Co. Ltd. (TANESCO)

31-Dec-05 453,388,000,000.00 100 Parastatal

138 Tanzania Elimu Supplies

30-Jun-94 347,400,197.00 100 Under Liquidation. The successor of LART(CHC) to take over the liquidation process.

139 Tanzania Fertilizer Company

31-Dec-05 5,094,295,942.00 100 Parastatal


209

140 Tanzania Fishing Company (TAFICO)

30-Jun-94 266,129,065.00 100 Not operating. Under privatisation.

141 Tanzania Fishing Research Institute (TAFIRI)


142 Tanzania Food and Nutrition Centre (TFNC)

30-Jun-05 1,790,842,978.00 100 Parastatal

143 Tanzania Harbours Authority Now (Tanzania Ports Authority(TPA)

30-Jun-06 46,495,785,619.00 100 Parastatal

144 Tanzania Hotels Investment Co. Ltd (TAHI)

30-Jun-04 -12,506,598,308.00 100 To be wound up. All subsidiary companies divested under PSRC

145 Tanzania Institute of Accountancy


146 Tanzania Institute of Adult Education


147 Tanzania Institute of Education


148 Tanzania Institute of Research and Development



210

Organisation (TIRDO)

149 Tanzania Investment Bank (TIB)

31-Dec-06 25,093,084,000.00 99.00 Parastatal

150 Tanzania Investment Centre (TIC)

30-Jun-05 3,390,592,206.00 100.00 Government Institution

151 Tanzania Library Service


152 Tanzania Meteorological Agency


153 Tanzania Merine Parks


154 Tanzania National Parks (TANAPA)


155 Tanzania Oxygen Ltd

31-Dec-06 356,319,476.00 11 Joint Venture

156 Tanzania Petroleum Development Corporation

30-Jun-06 14,133,058,431.00 100 Oil exploration Govt. Dept and oil business liberalised.

157 Tanzania Pharmaceutical Ltd

30-Jun-04 1,152,971,000.00 40 Joint Venture with Pharmaceutical Investments Ltd (60%)


211

158 Tanzania Planting Co.(TPC)

30-Jun-06 831,724,250.00 25 Joint Venture with Sukari Investment Co Ltd (75%)

159 Tanzania Postal Bank

31-Dec-06 5,859,227,000.00 45.3 To be restructured

160 Tanzania Posts Corporation

31-Dec-05 4,018,596,507.00 100 Specified

161 Tanzania Pyrethrum Board

30-Jun-06 -113,047,500.00 100 Regulatory body

162 Tanzania Railways Corp.

31-Dec-06 90,056,490,549.00 100 Parastatal (under privatization)

163 Tanzania Revenue Authority (TRA)

30-Jun-06 45,502,835,159.00 100 Executive Agency

164 Tanzania Sisal Board

31-Dec-05 142,928,575.00 100 Government Institution

165 Tanzania Standard Newspapers (TSN)

31-Dec-06 3,655,797,433.00 100 Parastatal

166 Tanzania Tea Board

30-Jun-06 291,482,270.00 100 Regulatory body

167 Tanzania Tea SmallHolders Development Agency

30-Jun-06 197,855,048.00 100 Tea Agency

168 Tanzania Telecommunication Company Ltd (TTCL)

31-Dec-06 353,894,000,000.00 65 Public Corporation(35% Privatized)


212

169 Tanzania Tobacco Board

30-Mar-06 1,614,700,456.00 100 Government Institution

170 Tanzania Tourist Board (TTB)


171 Tanzania Wildlife Research Institute (TAWIRI)


172 Tanzania Zambia Railways Authority (TAZARA)

31-Dec-05 68,707,000,000.00 50 Joint venture with Zambian Government

173 TeleShop Co. Limited

31-Dec-02 50,950,000.00 49 Not operating. Under privatization at PSRC

174 Tembo Chipboards Ltd.

31-Dec-94 975,000,000.00 80 To be privatised. Sale agreement signed. Deal not yet concluded.

175 TIPER 31-Dec-06 7,135,894,500.00 50 Joint Venture with Oryx Oils

176 Tropical Pesticides Research Institute


177 Twiga BankCorp 31-Dec-05 3,624,155,000.00 100 Government Institution

178 Unit Trust of Tanzania

30-Jun-06 17,356,469,962.00 100 Government Institution.


213

179 University College of Lands, Architecture and Surveys (UCLAS)


180 University of Dar es Salaam


181 Usafiri Dar-es-Salaam (UDA)

30-Jun-06 846,631,959.00 49 To be Privatised

182 Vocational Education Training Authority(VETA)


183 Williamson Diamond Mines

31-Dec-05 -32,880,780,000.00 30 Joint Venture with Willcroft Co. Ltd (30%)

TOTAL 4,463,097,740,897.90


214

Annexure IV AUDITED ACCOUNTS SUBMITTED TO CAG

S/No Client Name Year End Audited Accounts Submitted

Auditors

WATER AUTHORITIES 1 Tanga Urban Water Supply and

Sewerage Authority 30th June 2006/2007 Shebrila & Company

2 Dar es Salaam Water and

Sewerage Corporation (DAWASCO)

30th June 2006/2007 Joint Audit NAO & PWC

3 Mtwara Urban Water Supply and Sewerage Authority

30th June 2006/2007 Shebrila & Company

4 Arusha Urban Water Supply and Sewerage Authority

30th June 2006/2007 AMAS Associates

5 Singida Urban Water Supply and Sewerage Authority

30th June 2006/2007 Quintex Financial Services

6 Iringa Urban Water Supply and Sewerage Authority

30th June 2006/2007 Malundo & Company


30th June 2006/2007 AMAS Associates


30th June 2006/2007 Trion & Company

9

Sumbawanga Urban Water Supply and Sewerage Authority

30th June 2006/2007 National Audit Office


215









15 Tabora Urban Water Supply and Sewerage Authority


16 Kigoma Urban Water Supply and Sewerage Authority



30th June 2006/2007 Trion & Company


30th June 2006/2007 SMW

19

Morogoro Urban Water Supply and Sewerage Authority






PUBLIC PARASTATALS

1 Tanzania Fertilizer Company Ltd 31st 2006 TAC Associates


216

December 2 Ngorongoro Conservation Areas 30th June 2006/2007 ERNST & Young

3 Parastatal Pension Fund 31st

December 2006 TAC Associates

4 Tanzania Post Corporation 31st December

2006 Global Accountancy

5 Tanzania Postal Bank 31st December

2006 TAC Associates

6 Tanzania Petroleum development Corporation.

30th June 2006/2007 SBC Consultants

7 Arusha International Conference Centre.

30th June 2006/2007

TAC Associates

8 Tanzania Industrial Research and Development Organisation (TIRDO).

30th June 2006/2007 Reliable Consultants.

9 Tanzania Engineering and Manufacturing Design Organisation

30th June 2006/2007 TAC Associates

10 National Ranching Company(NARCO)

30th June 2006/2007

Shebrila & Company

11 National Health Insurance Fund 30th June 2006/2007

TAC Associates

12 National Insurance Corporation (T) Limited.

31st December

2006 TAC Associates


217

13 Simu 2000 limited 31st December

2006 TAC Associates



15 Consolidated Holding Corporation 31st December

2006 PriceWaterHouseCoopers

16 Tanzania Investment Bank Limited

31st December

2006 TAC Associates

17 National Development Corporation

31ST December

2006 TAC Associates

18 Tanzania Electric Supply Company Limited.

31st December

2006 Joint Audit NAO & PWC

19 Tanzania Commission for Universities.

30th June 2007 TAC Associates

20 National Environment Management Council.


21 State Mining Corporation 31st December

2006 TAC Associates

22 Tanzania National Park Authority 30th June 2006/2007 De Chazal Du Mee

23 Tanzania Ports Authority 30th June 2006/2007 TAC Associates 24 Muhimbili National Hospital

(MNH) 30th June 2006/2007 TAC Associates.

25 Tanzania Broadcasting Services 30th June 2006/2007 Innovex Auditors 26 Public Procurement Regulatory 30th June 2006/2007 Innovex Auditors


218

Authority 27 TWIGA BANCORP LIMITED 31ST

December 2006 Ernst &Young

28 Unit Trust of Tanzania 30th June 2006/2007 TAC Associates 29 Tanzania Investment Bank 31st


30 National Social Security Funds 30th June 2006/2007 TAC Associates 31 Tanzania Railways Corporation 31st


32 COASCO 30th June 2006/2007 TAC Associates 33 CARMATEC 30th June 2006/2007 TAC Associates

REGULATORY BODIES 1 Architects and Quantity Surveyors

Registration Board 31st December

2006 TAC Associates

2 Deposit Insurance Board 30th June 2006/2007 TAC Associates 3 Tanzania Tobacco Board 30th June 2007 National Audit Office

4 Board of External Trade 30th June 2006/2007 TAC Associates 5 Gaming Board of Tanzania 30th June 2007 Philip & Co.

6 Sugar Board of Tanzania 30th June 2007 TAC Associates 7 Tanzania Cotton Board 30th June 2007 TAC Associates 8

National Board Of Accountants and Auditors

30th June 2007 PKF


219

9 Tanzania Tea Board 30th June 2007 TAC Associates 10 Engineers Registration Board.

(ERB) 30th June 2007 Reliable Consultants

11 Contractors Registration Board 31st

December 2006 Philip & Co.

12 Tanzania Small Holders Tea

Development 31st December

2006 TAC Associates

13 Tanzania Coffee Board 30th June 2006/2007 TAC Associates 14 National Board of Material

Management 30th June 2006/07 TAC Associates

GOVERNMENT INSTITUTIONS

1 Tanzania Standard Newspaper 31st

December 2006 National Audit Office

2 Capital Market and Security

Authority 30th June 2007 TAC Associates

3 Presidential Parastatal Sector reform Commission.

30th June 2007 National Audit Office

4 Tanzania Education Authority 30th June 2007 E.K. Mangesho & Company

5 TCRA Consumer Consultative Council


6 Tanzania Communication Regulatory Authority



220

7 Energy and Water Utilities Regulatory Authority (EWURA)

30th June 2006/2007 MEKONSULT

8 National Council for Technical Education


9 National Economic and Empowerment Council

30th June 2006/07 Trion and Co.

HIGHER LEARNING INSTITUTES

1 Dar es Salaam institute of Technology


2 Institute of Finance Management 30th September

2006 TAC Associates

3 Tanzania Institute of Bankers 31st December

2006 TAC Associates

4 National Institute for Productivity 30th June 2007 TAC Associates 5 Institute of Adult Education 30th June 2006/2007 TAC Associates 6 Moshi University College of Co

operative 30th June 2006/2007 TAC Associates

7 College of African Wildlife Management- MWEKA

30th June 2006/2007 Reliable Consultants

8 Mwalimu Nyerere Memorial Academy


9 National Institute of Transport 30th June 2006/2007 TAC Associates


221

10 Dar es Salaam University College of Education

30th June 2006/2007 Global Accountancy

11 Institute of Accountant Arusha 30th June 2006/2007 TAC Associates 12 National Sugar Institute 30th June 2006/2007 TAC Associates 13 Open University 30th June 2006/2007 Trion & Co

14 Sokoine University of Agriculture 30th June 2005/2006 TAC Associates


222

Annexure V

Pre-qualified list of audit firms that are working with the CAG

S/N Category A S/N Category C

1 PricewaterHouse

Coopers,

1 Reliable consultants,

2 Deloitte & Touché 2 Pima Associates,

3 KPMG 3 SMW management

consultants,

4 Ernest & Young 4 MURL-AATEC Associates,

5 De Chazal Du Mee

(DCDM),

5 Kavugha & Musambwa

Auditors,

6 PKF Tanzania 6 Y.H Malundo & co,

7 Nyange & Associates,

Category B 8 SR Financial & Business

consultants,

1 Trion& Co, 9 Tanna & co,

2 MEKONSULT 10 RS & Partners,

3 Cooperative Audit and

Supervision Corp,

11 C.H. Halinga &

Associates,

4 SBC Consultancy Services, 12 Amas Associates,

5 E.K. Mangesho & Company 13 Ndolimo & Co

6 Financial consultants&

Services,

14 Micro Business

Consultants

7 Mhasibu consultants, 15 AA - Adolph Associates,


223

8 Organisation & efficiency

consultant,

16 Pan & Associates,

9 Martec & company, 17 W.M. Kilele & Company,

10 Baccon Certified Public

Accountants,

11 Globe Accountancy

Services

12 Quintex Financial Services,

13 TAC Associates,

14 D.G Patel & co,

15 Shebrila & company,

16 INNOVEX Auditors

17 Philips& company,

18 Stephen Shayo

19 Haron and Company

20 Hassanali Rutakyamirwa & Co


224

12.0 GLOSSARY ABC Activity Based Costing AFDUC Allowance for Equity Funds Used During Construction BBP Defined Benefit Plan BET Board of Directors BoT Bank of Tanzania BPC Botswana Power Corporation CAG Controller and Auditor General CAGR Compounded Annual Growth Rate CAIDI Customer Average Interruption Duration Index CAPEX Capital Expenditure CARMATEC Centre for Agricultural Mechanizations and Rural

Technology CCBRT Comprehensive Community Based Rehabilitation in

Tanzania CEB Central Electricity Board, Mauritius CEO Chief executive Officer CHC Consolidated Holdings Corporation CMS Customer Management Support CMSA Capital Markets and Securities Authority CPA Computer and Programme Africa CRDB CRDB Bank DA District Accountant DANIDA Danish International Development Agency DAWASA Dar es Salaam Water and Sanitation Authority DAWASCO Dar r Es Salaam Water and Sewerage Co. Ltd DCS Defined Contribution Scheme DF Director of Finance DIS Director of Information System DIT Dar es salaam Institute of Technology DoD Director of Operations DSTi DAYSTAR TECHNOLOGIES, INC. DUCE Dar es Salaam University College of Agriculture EDM Electricidade de Mocambique ENE Empresa Nacional de Electricidade, Angola EPA External Payment Arrears ERB Engineers Registration Board


225

ERB Engineers’ Registration Board ERP Enterprise Resources Planning ERV Exchequer Receipt Voucher ESCOM Electricity Supply Corporation of Malawi Ltd. FIFO First In First Out FM Financial Manager FTNDWSCF First Time New Domestic Water Supply Connection

Fund GAAP Generally Accepted Accounting Principles GoT Government of Tanzania GoT Government of Tanzania GRN Good Received Note GTEA General Tyre East Africa HR Human Resources IAS International Accounting Standards IDA International Development Association IFRS International Financial Reporting Standards INTOSAI International Organisation of Supreme Audit

Institutions IPP Independent Power Producers IPPs Independent Power Producers IPTL Independent Power Tanzania Limited ISA International Standards on Auditing IT Information Technologies JFC Joint Finance Commission JICA Japanese International Cooperation Agency KPLC Kenya Power and Lighting Company Ltd. LAN Local Area Network LART Loans and Advances Realisation Trust LEC Lesotho Electricity Corporation LPOs Local Purchasing Orders LPP Late Payment Penalty LUKU Lipa Umeme Kadri Unavyotumia MAS Meter Advance Slip MC Monitoring Consultant MD Managing Director MEM Ministry of Energy and Minerals MSSC Management Support Service Contract MTUWASA Mtwara Urban Water Supply and Sewerage Authority


226

NamPower Nambia Power, Namibia NAO National Audit Office, Tanzania NAOT National Audit Office Tanzania NARCO National Ranching Company NBAA National Board of Accountant and Auditors NBC National Bank of Commence NBC National Bank of Commerce NCAA Ngorongoro Conservation Area Authority NDC National Development Corporation NEMC National Environment Management Council NHC National Housing Corporation NIC National Insurance Corporation NMB National Microfinance Bank NORAD Norwegian Agency for Development Cooperation NPC Ngorongoro Pastoralist Council NSSF National Social Security Fund NSSF National Social Security Fund PA&oBs Public Authorities and Other Bodies PACA Principal Accountant Customer Accounts PA PAMP Principal Accountant Major Projects PAYE Pay As You Earn PAYE Pay As you Earn PFA Public Finance Act 2001 (revised 2004) PFR Public Finance Regulations PMU Procurement Management Unit PoS Point of Sales PPAs Power Purchase Agreements PPCB Prevention of Corruption Bureau PPE Property Plant and Equipment PPE Property, Plant and Equipment PPF Parastatal Pensions Fund PPF Public Pension Fund PPRA Public Procurement Regulatory Authority PSRC Presidential Sector Reform Commission PWC Pricewaterhousecoopers Reg. Regulation RFA Regional Financial Accountant ROA Return on Assets ROE Return of Equity


227

RRA Regional Revenue Accountant RTP Requisition to Purchase RUBADA Rufiji Basin Development Authority SDL Skills and Development Levy SEB Swaziland Electricity Board Sect. - Section Shs. Tanzanian Shillings SIDA Swedish International Development Cooperation

Agency SMZ Serikali ya Mapinduzi Zanzibar STAMICO State Mining Corporation STAMICO State Mining Corporation TAC Tanzania Audit Cooperation TACOSHILI Tanzania Coastal Shipping Ltd TAHI Tanzania Hotels Investment Co. Ltd TANAPA Tanzania National Parks TANESCO Tanzania Electric Supply CO. Ltd TANESCO Tanzania Electricity Supply Company Ltd. TANROAD Tanzania Road Agency TAZARA Tanzania Zambia Railways Authority TBS Tanzania Broadcasting Services TBS Tanzania Bureau of Standards TCRA Tanzania Communication Regulatory Authority TDMC Technical Debt Management Committee TEMDO Tanzania Engineering and Manufacturing Design

Organisation TEMDO Tanzania Engineering and Manufacturing Design

Organisation TICTS Tanzania International Container Terminal TICTS Tanzania International Container Terminal Services TIRDO Tanzania Industrial Research and Development

Organisation TP&TC Tanzania Posts and Telecommunications Corporation TPC Tanzania Posts Corporation TPDC Tanzania Petroleum Development Corporation TRA Tanzania Revenue Authority TSLB Tanzania Standard Newspapers Ltd TTA Tanzania Tea Authority TTB Tanzania Tobacco Board


228

TTCL Tanzania telecommunication Co. Ltd TTCL Tanzania Telecommunication Corporation Limited UMEME UMEME Limited, Uganda URT United Republic of Tanzania UTT Unit Trust of Tanzania VAT Value Added Tax VAT Value Added Tax WAN Wide Area Network

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