TABLE OF CONTENTS · 2015-04-17 · TABLE OF CONTENTS TABLE OF CONTENTS ... KWAMP Kirehe Community Based Watershed Management Project LEVEMP Lake Victoria Environmental Management

REPORT OF THE AUDITOR GENERAL OF STATE FINANCES

FOR THE YEAR ENDED 30 JUNE 2013

Office of the Auditor General of State Finances

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TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................................... I

FOREWORD BY THE AUDITOR GENERAL ................................................................ 7

EXECUTIVE SUMMARY ............................................................................................... 12

1.1 HISTORICAL BACKGROUND................................................................................................ 13

1.2 MANDATE AND FUNCTIONS OF THE AUDITOR GENERAL ............................................. 13

1.3 OAG VISION, MISSION AND CORE VALUES ....................................................................... 14

1.4 OAG STRUCTURE AND STAFFING ............................................................................................... 14

1.5 STRATEGIC PLAN IMPLEMENTATION ............................................................................... 15

1.6 FINANCIAL MANAGEMENT AT OAG .................................................................................. 21

AUDIT COVERAGE AND AUDIT RESULTS ............................................................... 22

2.1 AUDIT COVERAGE................................................................................................................. 22

2.2 OVERVIEW OF AUDIT RESULTS .......................................................................................... 25

TRACKING IMPLEMENTATION OF PREVIOUS AUDIT RECOMMENDATIONS

........................................................................................................................................... 26

3.1 FOLLOW UP MECHANISMS ON OAG RECOMMENDATIONS ........................................... 26

3.2 STATUS OF IMPLEMENTATION OF PREVIOUS AUDIT RECOMMENDATIONS.............. 27

KEY FINDINGS AND CROSS CUTTING ISSUES FROM THE AUDITS .................. 29

4.1 PERSISTENT ACCOUNTING ERRORS AND WEAKNESSES IN PREPARATION OF

FINANCIAL STATEMENTS ................................................................................................ 29

4.2 IRREGULAR AND UNAUTHORISED EXPENDITURE INCURRED BY PUBLIC ENTITIES

.............................................................................................................................................. 33

4.3 FINANCIAL MISMANAGEMENT AT EWSA ..................................................................... 35

4.4 LIQUIDITY AND OPERATIONAL PROBLEMS AT ONATRACOM .................................. 39

4.5 CHALLENGES OF SUPERVISION OF GOVERNMENT PROGRAMMES IMPLEMENTED

THROUGH DECENTRALIZED ENTITIES .......................................................................... 40

4.6 IMPLEMENTATION OF PROGRAMMES IN EDUCATION SECTOR ............................... 41

4.7 ISSUES AFFECTING THE HEALTH SECTOR .................................................................... 47

4.8 IMPLEMENTATION OF GOVERNMENT SOCIAL PROGRAMMES ................................. 54




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4.9 ISSUES FROM AGRICULTURE SECTOR........................................................................... 63

4.10 ISSUES FROM LOCAL GOVERNMENTS........................................................................... 66

4.11 CONCERNS OVER PROCUREMENT AND CONTRACT MANAGEMENT IN PUBLIC

ENTITIES ............................................................................................................................. 69

4.12 DELAYS IN IMPLEMENTATION OF GOVERNMENT PROJECTS AND PROGRAMMES

.............................................................................................................................................. 71

4.13 LACK OF VALUE FOR MONEY ON INVESTMENT IN IT/COMPUTER SYSTEMS ......... 73

4.14 WEAKNESSES IN MANAGEMENT OF FIXED ASSETS AND STOCK ITEMS IN PUBLIC

ENTITIES ............................................................................................................................. 74

4.15 TOURISM BOAT ACQUIRED BY RDB AT MUNEZERO ON LAKE KIVU GROUNDED

FOR 3 YEARS ....................................................................................................................... 76

4.16 WEAKNESSES IN MANAGEMENT OF REVENUE GENERATED BY PRISONS ............. 77

4.17 NON COMPLIANCE WITH TAX AND SOCIAL SECURITY LAWS AND REGULATIONS

.............................................................................................................................................. 79

4.18 RECOVERY OF FUNDS REPORTED IN FRADULENT CASES ......................................... 80




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ABBREVIATIONS AND ACRONYMS

AFD Agence Française de Développement AFROSAI-E African Organization of Supreme Audit Institutions-English speaking AGF Automobile Guarantee fund AGI Adolescent Girls Initiative BCR Banque Commerciale du Rwanda/Commercial Bank of Rwanda

BNR National Bank of Rwanda BRD Banque Rwandaise de Développement CEPEX Central Public Investment and External Finance Bureau CHUK University Teaching Hospital- Kigali CNLG National Commission For The Fight Against Genocide

CNLS National Commission for the Fight Against AIDS CSR National Social Security Fund CSRP Civil Service Reform Project CTAMS Mutual Health Technical Support Cell EAAPAC East Africa Association of Public Accounts Committees EAPHLN East Africa Public Health Laboratory Networking Project EARP Electricity Access Rollout Program

EASSDP Electricity Access Scale-Up and Sector Wide Approach Development Project

EATTFP East Africa Trade and Transport Facilitation Project EDPRS Economic Development and Poverty Reduction Strategy EIF Enhanced Integrated Framework EWSA Energy, Water and Sanitation Authority FARG Genocide Survivors Fund FER Fond d’Entretien Routier (Road Maintenance Fund) GBEs Government Business Enterprises GMO Gender Monitoring Office GoR Government of Rwanda ICPAR Institute of Certified Public Accountants of Rwanda IDF Institutional Development Fund IFMIS Integrated Financial Management Information System

INTOSAI International Organisation of Supreme Audit Institutions IPPIS Integrated Personnel and Payroll Information System IRST Institute of Technology and Scientific Research ISAE Institute of Agriculture and Animal Husbandry KHI Kigali Health Institute KIE Kigali Institute of Education KWAMP Kirehe Community Based Watershed Management Project LEVEMP Lake Victoria Environmental Management Project LWH Land Husbandry Water harvesting and Hillside Irrigation MDTF Multi Donor Trust Fund




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MHC Media High Council MIDIMAR Ministry of Disaster Management and Refugee Affairs MIFOTRA Ministry of Labour and Skills Development MINADEF Ministry of Defense MINAFFET Ministry of Foreign Affairs MINAGRI Ministry of Agriculture MINALOC Ministry of Local Government MINEAC Ministry of East African Community MINECOFIN Ministry of Finance and Economic Planning MINEDUC Ministry of Education MINICOM Ministry of Commerce MINIFOM Ministry of Forestry and Mines MINIJUST Ministry of Justice MININFRA Ministry of Infrastructure MININTER Ministry of Internal Affairs MINIRENA Ministry of Natural Resources MINISANTE Ministry of Health MINISPOC Ministry of Sports and Culture MINIYOUTH Ministry of Youth, Culture and Sports NBA Non Budget Agency NCDC National Curriculum Development Centre NCHE National Council for Higher Education NDIS National Decentralization Implementation Secretariat NEC National Electoral Commission NHRC National Human Rights Commission NID National Identification Project NIMR National Institute of Museums of Rwanda NISR National Institute of Statistics NPPA National Public Prosecution Authority NUR National University of Rwanda NURC National Unity and Reconciliation Commission OAG Office of the Auditor General of State Finances OCIR CAFÉ Rwanda Coffee Development Authority OCIR THE Rwanda Tea Authority ONATRACOM Rwanda Public Transport Authority OP Payment Order ORINFOR National Office for Information OTR Ordonnateur Trésorier du Rwanda (Central Treasury of Rwanda) PAC Public Accounts Committee PADAB Bugesera Agricultural Development Support Project PAIGELAC Inland Lakes Integrated Development and Management Support Project PAPSTA Support Project to the Strategic Plan for the Agriculture Transformation PAREF Projet d'Appui à la Reforestation PAYE Pay As You Earn




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PDCRE Smallholder Cash and Export Crops Development Project PFM Public Financial Management Reform Basket Fund PHHS TF Post Harvest Handling and Storage Task Force PPF (LISP) Project Preparation Facility of the Livestock Infrastructure Support

Programme PPPMER Rural Small And Micro Enterprises Project PRIMATURE Prime Minister's Office PSCBP Public Sector Capacity Building Project PSGG Project for Strengthening Institutional Framework for Good Governance RAB Rwanda Agricultural Board RBC Rwanda Biomedical Board RCA Rwanda Cooperative Agency RCAA Rwanda Civil Aviation Authority RCE Rukara College of Education RCIPRW Regional Communication Infrastructure Program – Rwanda Project RCS Rwanda Correctional Services RDB Rwanda Development Board RDRP Rwanda Demobilization And Reintegration Programme REB Rwanda Education Board REMA Rwanda Environment Management Authority RHA Rwanda Housing Authority RHODA Rwanda Horticulture Development Authority RIAM Rwanda Institute of Administration & Management RLDSF Rwanda Local Development Support Fund RNP Rwanda National Police RNRA Rwanda Natural Resources Authority RPPA Rwanda Public Procurement Authority RRA Rwanda Revenue Authority RSSB Rwanda Social Security Board RSSP III Rural Sector Support Project Phase III RTDA Rwanda Transport Development Agency RURA Rwanda Utilities Regulatory Agency

SADCOPACs Southern Africa Development Community Organisation of Public Accounts Committees

SEDP Sustainable Energy Development Project SFAR Student Financing Agency of Rwanda SFB School of Finance and Banking SONARWA Société Nouvelle d’Assurances du Rwanda TCT Tumba College of Technology TSC Teachers Service Commission TSDP Transport Sector Development Project UAF Universal Access Fund UBPR Union des Banques Populaires du Rwanda UNAIDS United Nations Programme on HIV/AIDS




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UP Umutara Polytechnic USPLS Public Sector Umbrella in Fight Against Aids VUP Vision Umurenge program WDA Work Force Development



Office of the Auditor General of State Finances 7

FOREWORD BY THE AUDITOR

GENERAL

Article 184 of the Constitution of the Republic of Rwanda of 4 June 2003,

as amended to date stipulates that the Auditor General shall submit each

year to each Chamber of Parliament, prior to the commencement of the

session devoted to the examination of the budget of the following year, a

complete report on the state financial statements for the previous year.

That report must indicate the manner in which the budget was utilised, unnecessary

expenditure which was incurred or expenses which were contrary to the law and whether

there was wasteful expenditure or misappropriation.

Accordingly, I now submit to Parliament a report on the audits conducted during the period

from June 2013 to 30 April 2014. The audits mainly covered expenditure incurred by

Government entities for the year ended 30 June 2013. This report presents cross cutting

issues identified during financial audits and performance audits. Individual reports containing

the audit opinion and details of all findings have been issued for each audited entity.

This report also covers other activities of the Auditor General’s office for the year ended 30

June 2013 and achievements realized during the year.

Audit coverage

The audit coverage represents the percentage of expenditure incurred by the entities audited

when compared to the total national expenditure for the financial year, as presented in State

consolidated financial statements. The expenditure incurred by entities audited during the

period June 2013 to 30 April 2014 represents 79% of the reported Government Expenditure

for the year ended 30 June 2013, compared to 75% for the year ended 30 June 2012. The total

Government expenditure reported in State consolidated financial statements for the year

ended 30 June 2013 amounted to Frw 1,520,633,876,485 compared to Frw

1,377,747,090,152 for the previous year ended 30 June 2012. This coverage is in line with

PFM coverage target of 78% of expenditure incurred by Government during the year ended

30 June 2013.

The above coverage was achieved, alongside audit of the State consolidated financial

statements and increased number of audits for Government Business Enterprises, including




EWSA. With its wide span of operations across the country and various activities of the

Development unit, EWSA audit took a significant investment of OAG resources during the

year. The final report was submitted to Parliament and I am aware that PAC is examining this

report in exercise of the oversight duties of Parliament.

Non budget agencies

The office also audited five (5) non- budget agencies per district covering: an administrative

sector, VUP sector, Mutuelle de sante at District level, District pharmacy and one school.

This required more time than is usually spent on audit of districts. The office has also

outsourced audits of 4 District hospitals and 4 Provincial Hospitals to CPA member firms of

ICPAR and their audits are still ongoing. The office will progressively increase coverage of

audit of Non budget agencies in years to come.

Audit of Universities to facilitate formation of One University of Rwanda

The office conducted audits of the seven (7) Public universities to support Government in

preparations to form One University of Rwanda. The former Universities are now constituent

colleges of One University of Rwanda and the audits provided financial closure to their

operations prior to incorporation into the newly created holding entity (the One University).

Value for money audits

In regards to value for money audits, the Office also conducted six (6) value for money audits

during the current year, as listed below:

Topic Status of the report

1 Health Care wastes management Report being finalized and will be submitted to Parliament by 30 May 2014

2 Water Management sector focusing on water production and distribution in Kigali city

Report being finalized and will be submitted to Parliament by 30 May 2014

3 Effectiveness of Boards of Directors Report being finalized and will be submitted to Parliament by 30 May 2014

4 Tax collection system in decentralized entities Report being finalized and will be submitted to Parliament by 30 May 2014

5 Follow up audit of SFAR Bursary/ Loan disbursement and Loan recover


6 Follow up audit of Management of Aid Management Report being finalized and will be submitted to Parliament by 30 May 2014

Involvement in PAC activities

OAG continued to work closely with PAC during the year, especially during the month of

November 2013. Progressive submission of reports to PAC during the year also meant that

OAG was engaged throughout the year with PAC regarding completed reports submitted

progressively during the audit cycle.




Overview of audit results

There was notable improvement across board and 32% of all audit reports (45 reports)

obtained unqualified (clean) audit opinion, compared to 28% last year, as shown in table

below:

Type of opinion issued No. of reports Percentage of reports

Disclaimer 1 1%

Adverse 61 44%

Except for 32 23%

Unqualified (clean) 45 32%

Total 139 100%

This trend is positive and shows that public entities are making tremendous efforts to ensure

proper accountability for public funds. These improvements were noted across board, expect

for Government Business Enterprises, Government Boards and Universities, where there

seems to be a declining trend. The majority of audit issues during this audit cycle arose from

these three clusters, alongside some districts which are not showing improvement.

Summary of key cross cutting issues

Despite the notable improvements above, the majority (68%) of public entities still have

fundamental accounting, corporate Governance, financial management, contract management

and value for money issues to address. Some of them had not implemented many of the audit

recommendations made in the previous audit.

• In terms of specific Government sectors, the education sector still faces many challenges

in implementing Government programmes like the one laptop per child, the school based

mentorship programme, school interconnectivity programmes. The Universities still have

challenges with accounting for their resources. Some equipment procured by WDA for

technical and vocational training schools has remained idle for more than 2 years.

• In the energy and water sector, Government needs to undertake a holistic review of

EWSA and address the serious financial management problems identified during the

audits. There are also corporate Governance gaps that need to be addressed to improve

delivery of services at EWSA.

• The health sector is faced with challenges of inadequate follow up on activities at low

level units as illustrated through delayed completion of construction works at Bushenge

hospital which have not been completed after 5 years even though the construction was

responding to a disaster that occurred in 2008. In addition, some equipments delivered to

improve service delivery at different hospitals are idle for long or malfunctioned but not




fixed timely. In terms of health care waste management, there is no comprehensive legal

framework to guide health care waste management. Incinerators at King Faisal and

CHUK emit smoke which is hazardous. In some district hospitals, incinerators distributed

did not function properly.

• In terms of social programmes rolled out by Government to support the population, there

are cases where these social programmes have not been effectively monitored and

implemented to realise the desired objectives. This was the case with some FARG

programmes which were not realising the intended targets; challenges of recoverability of

VUP loans; and concerns over some delays in delivery of milk in schools under the one

cup of milk per child programme managed by RAB. A major concern from the audit is

the plight of people who have been living in emergency shelters in Rubavu district since

March 2010. There seems to be no programme in place to relocate them or get them

habitable structures.

• In the Agriculture sector, there are concerns over the inadequate tracking of productivity

of seeds distributed by Government under the Crop Intensification Programme

implemented by RAB. The distribution process also has various weaknesses which may

result in misappropriation of seeds earmarked for farmers. The Post Harvest Handling and

Storage Task Force is still having challenges to recover old fertiliser debts from

distributors despite improvements in recoveries for fertilisers distributed during the year.

• In Local Governments, there are concerns of inadequate follow up and lack of

accountability for funds managed by the Non Budget agencies. These entities did not

prepare budget execution reports to track utilisation of funds managed. Non budget

agencies managed revenue of Frw 175,849,296,305 and expenditure of Frw

163,037,470,479 and yet these were not incorporated in financial statements of districts.

These were ultimately omitted from fund balances presented in the state consolidated

financial statements.

• In the Accountability sector, the main concerns relate to: the persistent weaknesses in

preparation of financial statements and many errors noted during the audits; the high level

of wasteful, unauthorised and irregular expenditure totalling Frw 3,207,188,658;

increasing cases of fraudulent transactions where Frw 1,092,490,786 in fraudulent cases

identified since 2011 have not been recovered; and the persistent weaknesses reported in

management of Government assets that resulted in stolen assets worth Frw 660,573,078

and idle assets not in use worth Frw 1,162,132,816. A tourism boat acquired by former




ORTPN (now RDB) at Frw 308,134,375 in 2008 has remained grounded for 3 years since

May 2011 and requires significant expenditure for repairs and procurement of a new

engine to get it back into operations.

There are concerns over the significant delays in implementation of Government projects

which has necessitated many to seek extensions in order to implement planned activities.

There are also problems in contract management where implementation of forty five (45)

contracts totalling Frw 23,729,538,334 was significantly delayed and nine (9) contracts

worth Frw 908,562,999 were abandoned by contractors. There are concerns over the lack

of value for money in the investment made by Government entities in IT systems.

Specific recommendations have been made in individual reports to address the above

concerns and there is need for the responsible oversight and supervising agencies of

Government to make proper follow up with those entrusted with the fiduciary duty in the

respective implementing agencies.

Acknowledgement

I would like to acknowledge the support from Government (Executive) for initiating and

implementing PFM reforms and taking initiatives aimed at creating a conducive audit

environment necessary to enhance public financial management. We highly commend the

new Organic Law on state finances and property (law no 12/2013/OL of 12/09/2013). I also

acknowledge Parliament of the Republic of Rwanda for its oversight mandate and enacting

enabling laws and regulations to strengthen OAG independence. The passing of the new

OAG law (Law no 79/2013 of 11/09/2013) is testimony to the commitment of Government to

ensure independence of the Auditor General’s office.

I extend my gratitude to Development Partners who have continued to support OAG to build

its holistic capacity to execute its mandate.

Last but not least, special thanks to my staff for their continued exhibition of Professional

resilience and patriotic resourcefulness in ensuring that OAG executes its mandate.

Obadiah R.BIRARO

AUDITOR GENERAL

KIGALI, .………………………………. 2014




EXECUTIVE SUMMARY

According to Article 183 of the Constitution of the Republic of Rwanda as amended to date,

and Articles 6 and 14 of Law no 79/2013 of 11/09/2013 determining the mission,

organization and functioning of the Office of the Auditor General of State Finances, the

responsibilities of the Office of the Auditor General include the following:

• Auditing and reporting on accounts of all public entities, local administrative entities,

public enterprises, parastatal organizations and projects;

• Conducting financial and value for money, economy and efficiency audits in respect of

expenditure in all institutions referred to above;

• Conducting accountability, management and strategic audits of accounts in the institutions

mentioned above.

Article 184 of the Constitution of the Republic of Rwanda of 4 June 2003, as amended to date

stipulates that the Auditor General shall submit each year to each Chamber of Parliament,

prior to the commencement of the session devoted to the examination of the budget of the

following year, a complete report on the state financial statements for the previous year.

Accordingly, I submit the Annual audit report of OAG covering audits of financial statements

of public entities for the year ended 30 June 2013 and performance audits conducted during

the period.

The report is presented in five (5) volumes:

Volume I: Executive Summary

Volume II: Report on State Consolidated Financial Statements;

Volume III: Key findings from audit of Local Governments (Districts and City

of Kigali);

Volume IV, PART 1: Key findings from audit of Ministries, and other Central

Administration entities and projects;

Volume IV, PART 2: Key findings from audit of Boards and Government Business

Enterprises; and

Volume V: Key findings from Performance audits and Special assignments.




SECTION 1

REPORT ON OAG ACTIVITIES DURING THE YEAR

1.1 HISTORICAL BACKGROUND

The Office of the Auditor General was established 1998. Its first annual report covering 17

entities audited was issued to Parliament in 2000. The annual report currently has 139 reports

from 127 entities and projects, alongside the audit report on state consolidated financial

statements.

1.2 MANDATE AND FUNCTIONS OF THE AUDITOR GENERAL

Article 183 of the Constitution of the Republic of Rwanda of 4 June 2003, and Articles 6 and

14 of Law no 79/2013 of 11/09/2013 determining the mission, organization and functioning

of the Office of the Auditor General of State Finances (OAG) require the Auditor General to

audit and report to Parliament on the Public Accounts of Rwanda and of all Public offices

including local government organs, public enterprises and parastatal organizations, privatized

state enterprises, joint enterprises in which the State is participating and government projects.

The responsibilities of the Office of the Auditor General include the following:

• Auditing and reporting on accounts of all public entities, local administrative entities,

public enterprises, parastatal organizations and projects;

• Conducting financial and value for money, economy and efficiency audits in respect of

expenditure in all institutions referred to above;

• Conducting accountability, management and strategic audits of accounts in the institutions

mentioned above.

In addition, Article 184 of the Constitution, as amended to date, stipulates that the Auditor

General shall submit each year to each Chamber of Parliament, prior to the commencement

of the session devoted to the examination of the budget of the following year, a complete

report on the state financial statements for the previous year. That report must indicate the

manner in which the budget was utilized, unnecessary expenditure which was incurred or




expenses which were contrary to the law and whether there was wasteful expenditure or

misappropriation.

1.3 OAG VISION, MISSION AND CORE VALUES

Vision

“To promote an accountable, honest and effective Government administration”.

Mission

“To promote accountability, transparency and best practice in Government operations as a

means to good governance”.

Core Values

The Auditor General and the staff of the Office of the Auditor General, in executing their

responsibilities are committed to live by the office’s core values of:

• Integrity: Being upright and honest;

• Objectivity: To display impartiality and professional judgment;

• Independence: from the audited entity and other outside interest groups;

• Accountability: by providing assurance that activities were carried out as intended and

with due regard for fairness, propriety, and good stewardship;

• Confidentiality: respect of the confidentiality of information acquired in the course of

work; and

• In Public Interest: by making decisions with the public interest in mind.

1.4 OAG structure and staffing

The OAG structure comprises 150 positions by year 2014/2015. Our current staffing level

stands at 123 staff and this is expected to increase to 134 staff in the year 2014/2015. The

staffing level expected in 2014/2015 is below the planned 150 positions due to budget

constraints.




1.5 STRATEGIC PLAN IMPLEMENTATION

OAG is now in its 3rd year of the implementation of the OAG Strategic plan of 2011/12-

2015/16 operated under OAG PFM Sub-basket fund Project. The Strategic Plan is built

around five pillars, namely:

i. Enhancing the independence of the OAG;

ii. Strengthening institutional capacity in line with its mandate;

iii. Building and strengthening professional audit capacity;

iv. Strengthening OAG’s capacity to engage stakeholders effectively; and

v. Coordination, implementation and monitoring.

The achievements realized on each pillar are herewith elaborated:

1.5.1 Enhancing the independence of the OAG

The main objective of this pillar was the enactment of the new Audit bill to enhance the

independence of the OAG. The office saw its bill enacted into law on 11/11/2013 under the

law no 79/2013. This law enhances the independence and autonomy of the Office and has

enabled OAG to comply with requirements of ISSAI 10,20,3000 and 3100, which are

necessary to attain Level 3: the established level classification of SAIs under AFROSAI-E.

The Office is now planning to embark on institutional review to align its current structure to

the new Audit Act.

1.5.2 Strengthening institutional capacity in line with its mandate

Under this pillar, the Office has planned to continue upgrading its IT infrastructure in

preparation of the automation of the audit and administration process. The major output of

this project is transforming OAG workplace into a paperless environment. The activities done

this year include: acquisition of more laptops, digital cameras (to help in capturing audit

evidence), mobile phones for auditors (to facilitate smooth communication and transmission

of data between the auditors in the field and the office), portable scanners necessary for the

Teammate software users during fieldwork, acquisition of new servers in preparation of

offsite backup and finalizing the tender process for e –archiving.

The Office actively seeks to exploit ICT developments to improve the efficiency of work and

to enhance the security of transfer of information from auditees to Office systems. All staff




working off site currently have the facility to access directly the Office’s central information

systems, and to process and store information centrally.

1.5.3 Building and strengthening professional audit capacity

Under this pillar, the Office achieved the following:

a. Teammate audit Software

As stated above, the office embarked on the project of automating the audit function.

According to the roadmap drawn last year, this year a pilot group of 6 teams has been

selected to start using the teammate audit software. This annual report contains in total 28

Assignments that have been produced via that system. The overall feedback on the software

from our auditors is positive and a formal evaluation report is being prepared with the aim of

enrolling the remaining OAG audit staff in the system in the next audit year of 2014/2015.

The advantages of using this system are many and include among others:

• Deliver high quality audit work through consistent execution of the audit methodology

• Perform the audit and issue the audit report more efficiently

• Follow best practice to assess and test controls

• Document results & issues consistently

• Review work, regardless of location

b. Graduate recruitment program (GRP)

Due to financial constraints, the Office could not implement its staff structure as indicated in

the Strategic plan, and it only managed to replace the 4 staff who had resigned in the previous

year by recruiting 4 staff through its graduate recruitment program. This program consists of

attracting the best students in Accounting faculties at universities after their graduation and

give them a recruitment test and retain those who succeed.

c. Professional Training and development

During the year, the Office sponsored its staff for professional courses. A total of 102 OAG

students sat for December 2013 professional exams and are now preparing the June 2014

professional exams, as shown in table below:

Professional course Number of staff enrolled

ACCA 60 CIPS 1 CPA 31 CIA 10

102

The Office developed a standard training plan to be followed up to 2016.




Besides the accounting profession certification courses, the Office has, during the year,

sponsored its staff in different trainings in different areas as planned in the standard training

plan.

d. Outsourcing of the Audits

The Office embarked on the outsourcing of some of the financial audits to CPA audit firms

that are members of ICPAR. This was a means of addressing increasing demand from our

stakeholders. The office started with the Healthcare sector where 4 District hospitals and 4

Provincial Hospitals are being audited by 4 CPA firms that are members of ICPAR. OAG

requires the work to be carried out to the same standards and specifications used by its own

audit teams, and reports on the audits are subject to the normal process of senior management

review.

1.5.4 Strengthening OAG’s capacity to engage stakeholders effectively

During the year, OAG engaged with various stakeholders in order to enhance good

governance and accountability as envisioned by the Vision 2020 and the EDPRS 2. OAG’s

engagement with the stakeholders included:

1.5.4.1. Domestic Relations

I. Induction of the new Parliament

During the year, our country got new members of parliament after the end of the term of the

previous one. With the elections taking place in September 2013, OAG prepared itself for the

task of inducting the new members of Parliament in Public Financial Management. This is

always done with other stakeholders including among others; MINECOFIN and RPPA.

II. Participation in the Public Finance Management working groups

OAG is among key PFM institutions in Rwanda. It operates under the component of External

Oversight and Accountability. During the year, OAG participated actively in all the planned

activities by the PFM Secretariat based in the MINECOFIN.

III. One of University of Rwanda

A law has been passed, merging the various universities in the country into One University.

The Senate then invited the Auditor General to give guidance on PFM issues to the Minister




of Education and his task force team so as to facilitate a smooth transition. The purpose was

to separate the financial management of the old system from the new dispensation.

IV. Engagement with the Accountability forum of Permanent Secretaries

The AG and the Minister of Justice were invited to be facilitators at the meeting of the

Accountability Forum, a forum of all the Permanent Secretaries organized by the Prime

Minister’s Office. The objective of the meeting was to identify areas relating to PFM where

Ministries were still having problems. The AG led the discussion on the State of

Accountability in the Country, during which he went through the salient issues as raised in

his report to Parliament. One important point that came out of the meeting was consensus on

the need to involve Ministers and all Chief Budget Managers in the implementation of the

AG’s recommendations that are highlighted in audit reports of their respective audited

entities. This will accelerate improvement in financial management that will in the end lead

to achieving unqualified audit opinion.

V. Justice Sector Revenue Generation and Collection

The Auditor General contributed to the Justice Sector debate and discussions on how best the

revenue being generated in the sector can be traced and accounted for. The meeting was

attended by Permanent Secretaries from MINECOFIN, Ministry of Justice and some staff

from the judicial system.

VI. OAG meeting with the press

In January 2014, OAG met the Senior Editors with the aim of explaining to them the process

of an audit from the engagement letter to the signature of the final report all in conformity

with International standards. As the media helps with the interpretation and communication

of the AG’s report, they are therefore critical stakeholders of the OAG. It is therefore

important for OAG to regularly interact with the media.

VII. OAG interaction with Civil society organizations (TI-Rw)

In the framework of analysis of the Auditor General report for the year ended 30th June 2012,

the Office interacted with the Transparency International Rwanda. The objective of the




discussion was for OAG to comment on the analysis done before being published. This is the

1st time, OAG is consulted on this exercise conducted for the 2nd time by TI-Rw. The

management of TI-Rw committed to always engage OAG in this activity.

VIII. Engagement with the Local Government Authorities Forum

The Auditor General met the Governors, Mayors and the Executive Secretaries of all the

Provinces and the districts in a meeting organized by the Ministry of Local Government to

discuss on the persistent issues highlighted in Local Government audit reports and how to

overcome them.

1.5.4.2 International Relations

During the year, the Office of the Auditor General maintained its relations with a number of

International Organizations and other SAIs for knowledge and experience sharing. Staff from

the Office (OAG) participated in different relevant activities organized by relevant

organizations and other SAIs to learn and share experiences with them.

A. INTOSAI and AFROSAI-E

I. INTOSAI and IDI

INTOSAI is an organization or association of Supreme Audit Institutions (SAIs) of countries

who are members of the United Nations. IDI is the training arm of the INTOSAI through

which members of INTOSAI share knowledge, skills and information through training. The

Office of the Auditor General subscribes to and is a permanent member of INTOSAI. During

the year, two OAG staff participated in an IDI training workshop in Arusha /Tanzania and

other 2 staff participated in the Working Group on Environmental Auditing that took place in

new Delhi/India.

II. AFROSAI and AFROSAI-E

AFROSAI is a continent wide organization of Supreme Audit Institutions (SAIs) of Africa

and a Regional African continental member of the INTOSAI. Through participating in the

programs and events of AFROSAI, member SAIs share knowledge, information and

experiences on public sector audit issues. The Office of the Auditor General subscribes to and

is a member of AFROSAI.




AG attended the AFROSAI-E Board meeting which took place in May 2013 in Mauritius. In

this meeting, the AGs of the SAI members of AFROSAI-E discussed on the performance of

the organization and agreed on its strategic priorities for the following year as well as their

own SAI performances.

During the year, nine staff attended trainings by AFROSAI in the following areas;

management development programs, audit supervision and review and performance audit

trainings. One staff participated as AFROSAI-E external reviewer for SAI Lesotho and one

staff provided expertise as performance auditor trainer for AFROSAI-E in Mauritius. As

required by AFROSAI, in order to monitor progress in compliance with international

standards the office carried out the ICBF assessment for the year 2012 and the report was

submitted to AFROSAI in time.

SAI Rwanda was among the countries selected in the evaluation of the support provided by

AFROSAI-E conducted by the SAI of SWEDEN in February 2014.

III. Other SAIs

During the year, 2 staff were trained in information system audit in SAI India, 1 senior staff

attended an international auditors fellowship program at the United States Government

Accountability Office.

IV. International Delegations

OAG received different international delegations during the year as follows:

• Delegation from World Bank

• Delegation from AfDB

• Delegation from Global Fund

• Delegation from EU

• Malawi- Minister for Good Governance

V. Audit of East African Community

During the year, the Office sent two (2) Senior audit staff to join other 9 members from other

East African Community SAI’s to conduct the joint audit of the East African Community

(EAC) and its organs, for the year ended 30th June 2013. The Audit report will be issued in




May 2014.The office also sent an Audit Director to participate in a special assignment

conducted at one of EAC organs.

1.6 FINANCIAL MANAGEMENT AT OAG

For the year ended 30th June 2013, the Office had a total budget of Frw 3,511,779,000

composed of Frw 2,107,722,000 of Government funding and Frw 1,404,057,000 as

contribution from Development partners. It has been executed at the rate of 87.3%. OAG’s

financial statements were audited by a member firm of ICPAR and received an unqualified

(clean) audit opinion. The audit report was submitted to Parliament.

For the year 2013/2014, in which this report has been produced, the Office has a budget of

Frw 3,607,662,404 composed of Frw 2,105,345,205 of Government funding and Frw

1,502,317,199 as contribution from Development partners.




SECTION 2

AUDIT COVERAGE AND AUDIT RESULTS

2.1 AUDIT COVERAGE

The audit coverage represents the percentage of expenditure incurred by the entities audited

when compared to the total national expenditure for the financial year, as presented in State

consolidated financial statements. The expenditure incurred by entities audited during the

period June 2013 to 30 April 2014 represents 79% of the reported Government Expenditure

for the year ended 30 June 2013. The total Government expenditure reported in State

consolidated financial statements for the year ended 30 June 2013 amounted to Frw

1,520,633,876,485 compared to Frw 1,377,747,090,152 for the previous year ended 30 June

2012. This coverage is above the PFM coverage target of 78% of expenditure incurred by

Government during the year ended 30 June 2013.

The proportion of expenditure covered by audits reported within this year’s report of 79% is

higher than that in previous reports, and this has been increasing over the years, as shown in

the graph below:

The above audit coverage was achieved, alongside audit of the State consolidated financial

statements and increased number of audits for Government Business Enterprises, including

EWSA. With its wide span of operations across the country and various activities of the

Development unit, EWSA audit took a significant investment of OAG resources during the




year. The final report was submitted to Parliament and I am aware that PAC is examining this

report in exercise of the oversight duties of Parliament.

Non budget agencies

The office also audited five (5) non- budget agencies per district covering: an administrative

sector, VUP sector, Mutuelle de sante at District level, District pharmacy and one school.

This required more time than is usually spent on audit of districts. The office will

progressively increase coverage of audit of Non budget agencies in years to come.

Audit of Universities to facilitate formation of One University of Rwanda

The office conducted audits of the seven (7) Public universities to support Government in

preparations to form One University of Rwanda. The former Universities are now constituent

colleges of One University of Rwanda and the audits provided financial closure to their

operations prior to incorporation into the newly created holding entity (the One University).

Value for money audits

In regards to value for money audits, the Office also conducted six (6) value for money audits

during the current year, as listed below:

Topic Status of the report

1 Health Care wastes management Report being finalized and will be submitted to Parliament by 30 May 2014

2 Water Management sector focusing on water production and distribution in Kigali city


3 Effectiveness of Boards of Directors Report being finalized and will be submitted to Parliament by 30 May 2014

4 Tax collection system in decentralized entities Report being finalized and will be submitted to Parliament by 30 May 2014

5 Follow up audit of SFAR Bursary/ Loan disbursement and Loan recover


6 Follow up audit of Management of Aid Management Report being finalized and will be submitted to Parliament by 30 May 2014

Involvement in PAC activities

OAG continued to work closely with PAC during the year, especially during the month of

November 2013. Progressive submission of reports to PAC during the year also meant that

OAG was engaged throughout the year with PAC regarding completed reports submitted

progressively during the audit cycle.

In terms of entities audited, the number covered by the audits represents 38% of all entities

included in the State consolidated financial statements. This slight decline from 39% last year




appears to indicate that OAG covered less entities in comparison to prior year. On the

contrary, the office increased coverage, through audit of five (5) Non budget agencies

(NBAs) per district although these NBAs are not counted as separate budget agencies when

computing coverage. In addition, the audits of EWSA and ONATRACOM also took

significant OAG resources, which could have been used to cover more entities of smaller

operations and less complexity. Generally, Government Business Enterprises and Boards take

longer to audit than other clusters of public entities. Increased coverage of the GBEs and

Boards affects coverage of other clusters, as more time is taken on these audits. The total

number of entities and projects audited during this reporting period is 127 out of the 331

entities and projects consolidated.

In terms of clusters, the audits covered all Ministries, all Districts, all Provinces, all Public

Universities, all World Bank projects, alongside increased coverage of Government Business

Enterprises. The audits also covered five (5) out of the 8 Government Boards and other

selected number of high risk Government agencies as shown in the table below:

Summary

Reports from

audited

entities (2013)

Entities

audited

(2013)

No. of

consolidated

entities (2013)

%ge of entities

covered by

audits (2013)

%ge of entities

covered by

audits (2012)

Projects 43 35 153 23% 18%

Other central Govt agencies 34 31 104 30%

44%

Boards 5 5 8 63% 75%

GBEs 5 4 14 29% 9%

Ministries 17 17 17 100% 100%

Provinces 4 4 4 100% 100%

Districts 31 31 31 100% 100%

Total 139* 127 331 38% 39%

* There are more reports than the number of entities audited, because 12 entities were audited for more than

one year.




2.2 OVERVIEW OF AUDIT RESULTS

The audit of the 127 entities and projects covered during this reporting period resulted in

OAG issuing 139 audit reports (excluding the audit report on the State consolidated financial

statements) because twelve (12) entities were audited for more than one financial year.

Out of the 139 reports covered by this report, 45 reports (representing 32%) had unqualified

audit opinion. This is an improvement from last year where 37 reports (28% of all audited

entities) obtained unqualified (clean) audit opinion. This trend is positive and shows that

public entities are making tremendous efforts to ensure proper accountability for public

funds. These improvements were noted across board, expect for Government Business

Enterprises, Government Boards and Universities, where there seems to be declining trend.

The majority of audit issues during this audit cycle arose from these three clusters, alongside

few selected districts which are not showing improvement.

Many Districts made notable improvements when compared to previous years and this

resulted in three (3) of the District reports (Kamonyi, Gakenke and Ruhango) obtaining an

“Except for” audit opinion, mainly because of inadequate follow up and accountability for

funds managed by Non Budget Agencies. This is the first time such opinion is being issued

on financial statements of Districts and is a commendable step which shows that Districts are

on track to ensuring full accountability decentralised resources. However, the City of Kigali

and some five (5) districts of Gatsibo, Karongi, Gasabo, Nyarugenge and Ngororero

implemented utmost 60% of previous audit recommendations and hence no major

improvements. There is need for better coordination and supervision of activities in budget

agencies and continued commitment to track implementation of audit recommendations.

Effective audit committees will play a key role in monitoring implementation of audit

recommendations.

Despite the notable improvements above, the majority (68%) of public entities still have

fundamental accounting, corporate Governance, financial management, contract management

and value for money issues to address. Some of them had not implemented many of the audit

recommendations made in the previous audit (See section 3 of this report). The key findings

and cross cutting issues identified during the audits are highlighted in section of 4 of this

report.




SECTION 3

TRACKING IMPLEMENTATION OF PREVIOUS

AUDIT RECOMMENDATIONS

3.1 FOLLOW UP MECHANISMS ON OAG RECOMMENDATIONS

3.1.1 Tracking implementation status of previous audit recommendations at entity

level

Article 69 of Organic Law No. 12/2013 of 12/09/2013 on State Finances and Property

requires each Chief Budget Manager and Directors of public bodies to implement

recommendations of the Auditor General of State Finances aimed at improving the effective

management of finances under their control. Many entities tracked implementation of audit

recommendations through an action plan, whose status was reported to MINECOFIN as an

attachment to the monthly financial statements. This was a notable improvement especially,

since the status tracking reports sent to MINECOFIN were signed by the Chief Budget

managers as evidence of their responsibility.

This good initiative from MINECOFIN to track audit recommendations monthly for all

entities will go a long way in addressing issues raised in audit reports in a timely manner, if it

is properly monitored and followed up. MINECOFIN alongside the office of Chief

Government Internal Auditor should consider setting implementation targets for each entity

and ensure that they are monitored on monthly basis whenever the entities submit their

reports. Any entity failing to reach its targets should be specifically followed up to identify

the causes so that appropriate action is taken to facilitate necessary improvements.

3.1.2 Government Accountability Fora (including forum for Cabinet Ministers)

Different fora were organised by Government where Chief Budget managers and key

stakeholders had an opportunity to discuss the Auditor General’s report and

recommendations. This included the Prime Minister’s Accountability forum that targeted all

Chief Budget Managers and Cabinet Ministers. The different fora adopted various actionable

plans to facilitate Chief Budget Managers to implement audit recommendations and prevent

recurrence of similar issues in future reports. Implementation of the resolutions from the

various fora will improve accountability in Public entities.




3.1.3 PAC hearings and Parliament resolutions

The Public Accounts Committee of Parliament examined the Auditor General’s report and

held public hearings with officials from audited entities. Their report to the Parliament was

adopted with specific recommendations on how to enhance accountability in public entities.

This has enhanced public participation in accountability process and Chief Budget Managers

and their officials are now more cognizant of public interest in accountability. This has

improved the attitude of Chief Budget Managers towards the audit process and is having a

positive impact on accountability within public entities.

3.1.4 Auditor General’s assessment of implementation of previous Audit

recommendations

An assessment of status of implementation of previous audit recommendations was

performed for each budget agency audited (where applicable) and results of the assessments

discussed to seek further management commitment to address the issues raised. See status of

implementation in section 3.2 below.

3.2 STATUS OF IMPLEMENTATION OF PREVIOUS AUDIT

RECOMMENDATIONS

Overall the level of implementation of prior year audit recommendations remained the same

like last year. Out of 2,329 audit recommendations made to respective entities in the previous

audits, 1,391 audit recommendations (60%) had been fully implemented while 938

recommendations (40%) had not been fully implemented by the time of the current audits, as

shown in the table below:

Total recommendations

made in prior year audits

%ge of

recommendations fully

implemented

%ge of

recommendations not

fully implemented

Projects 224 69% 31% Other central Government Agencies* 705 55% 45% Boards 248 52% 48% GBEs 234 38% 62% Ministries 147 78% 22% Provinces 24 83% 17% Districts 747 67% 33% Total 2,329 60% 40%

* includes Universities

The level of implementation of audit recommendations remained at the same level of 60%

when compared to last year. This was mainly caused by high number of recommendations

not implemented by Boards, Government Business Enterprises (GBEs) and Public

universities. Each of these three clusters implemented less than 55% of audit




recommendations and account for 48% of all recommendations not implemented, as shown in

the table below:

Total

findings

Fully

implemented

Not fully

implemented

%ge of fully

implemented

%ge of not fully

implemented

Boards 248 128 120 52% 48%

GBEs 234 89 145 38% 62%

Universities 343 158 185 46% 54% 825 375 450 45% 55%

As percentage of total findings 35% 27% 48%

Entities which implemented less than 60% of audit recommendations

In general, majority of entities implemented more than 60% of audit recommendations.

However, twenty nine (29) entities (representing 23% of all audited entities) implemented

less than 60% of the audit recommendations made in previous audits. Notably, 75% of GBEs

and 60% of Boards audited, as well as other ten (10) central Government agencies, four (4)

Districts of Gatsibo, Karongi, Nyarugenge and Gasabo, City of Kigali and Ministry of Youth

and ICT implemented less than 60% of recommendations. The analysis of these entities is

provided below:

No. of entities which

implemented less than

60% recommendations

Number of entities

audited

Percentage of audited

entities with less than 60%

implementation

Projects 8 35 23% Other central Govt 10 31 32% Boards 3 5 60% GBEs 3 4 75% Ministries 1 17 6% Provinces 0 4 0% Districts 5 31 16% 30 127 23%




SECTION 4

KEY FINDINGS AND CROSS CUTTING ISSUES

FROM THE AUDITS

4.1 PERSISTENT ACCOUNTING ERRORS AND WEAKNESSES

IN PREPARATION OF FINANCIAL STATEMENTS

4.1.1 Accounting errors corrected in State Consolidated financial statements

The problem of accounting errors continues to be manifested in State Consolidated financial

statements, where balances presented in state consolidated financial statements approved by

Cabinet at 30 September 2013 were adjusted to correct errors identified during the audits of

financial statements of individual budget agencies. The adjustments arose from errors

discovered during audits of different budget agencies which were corrected before signing of

audit reports. The extent of these errors is demonstrated by increase of Frw 30,630,904,946 in

revenue and Frw 30,389,088,854 in expenditure reported in the adjusted State Consolidated

financial statements, when compared to balances presented in the State Consolidated

financial statements approved by Cabinet on 30 September 2013. Analysis of differences is

as shown in table below.

Balances in State

Consolidated financial

statements approved

by Cabinet at

30/9/2013

Adjustments made

on State

Consolidated

financial

statements after

approval

Balances in Revised

State Consolidated

financial statements

issued at 30 April

2014

Frw Frw Frw

Opening fund balance at 1/7/2012

134,405,235,179 0 134,405,235,179

Adjustments on opening balance

10,364,660,743

(324,612,685) 10,040,048,058

Adjusted opening balance (A) 144,769,895,922 (324,612,685) 144,445,283,237

Revenue (B) 1,651,780,730,735 30,630,904,946 1,682,411,635,681

Expenditure (C ) (1,520,633,876,485) (30,389,088,854) (1,551,022,965,339) Surplus/(deficit) for the year

D=(B-C) 131,146,854,248 538,127,332 131,388,670,342

Accumulated surplus as at

30/6/2013 (A+D) 275,916,750,170 (82,796,591) 275,833,953,579




Accounting errors not corrected in financial statements of Budget Agencies

While most of the errors were corrected by Budget agencies at the time of finalising their

audits, some were omitted and are therefore not reflected in State Consolidated financial

statements. These include:

• Omitted Creditors of Frw 15,225,941,147 (2012: Frw 975,298,511).

• Omitted debtors of Frw 1,286,624,121 (2012: Frw 2,901,876,558).

• Omitted bank balances of Frw 78,990,028 (2012: Frw 218,558,389).

The significant adjustments made by budget agencies during the audit process and errors not

progressively corrected in State Consolidated financial statements are indicators of

inadequate review of monthly financial statements submitted by budget agencies to

MINECOFIN. There is need for budget agencies to strengthen the review mechanisms for

financial statements before they are submitted to MINECOFIN. The Accountant General’s

office should provide necessary support and training to staff in budget agencies to improve

the reliability of monthly financial statements. Appropriate reviews should be performed on

the monthly financial statements submitted by Budget agencies to minimise significant errors

in the annual State Consolidated financial statements.

4.1.2 Mispostings and distortion of monthly budget execution reports

Like in previous years, Budget agencies still had various mispostings in their financial

statements but MINECOFIN allowed them to adjust and correct these mispostings in their

financial statements before signing of audit reports. The adjustments at the time of audits

were made across board for majority of budget agencies and is an illustration that budget

execution reports submitted monthly by budget agencies were unreliable and distorted

variances indicated in budget execution reports. Therefore, budget tracking done by

Government through monthly financial statements submitted to MINECOFIN was not

appropriately implemented and information provided by budget agencies was misleading.

Some entities budgeted for activities under incorrect budget lines while other entities

attributed the mispostings to delayed release of funds from Treasury, which forced them to

utilise funds available on alternative budget lines to implement activities. With the Integrated

Financial Management system (IFMS) where the chart of accounts is linked to the budget,

transactions were recorded in budget lines where they were not budgeted for and hence

mispostings. Management in budget agencies did not perform adequate review of monthly




financial reports and budget utilization reports to identify such mispostings and facilitate

timely correction of the mispostings during the year.

Chief Budget Managers should make every effort to ensure that due care is taken during

budgeting so that budgets prepared reflect the intended activities of their entities. In addition,

there should be regular review of budget execution reports and financial statements so that

any errors are identified early and corrected timely to enable compilation of reliable monthly

financial statements and budget execution reports.

4.1.3 Unsupported and unusual balances in financial statements of budget agencies

Like in previous years, financial statements of budget agencies still contain unsupported and

unusual balances as shown below:

• Unreconciled bank balances: There are thirteen (13) entities which had bank balances

not properly reconciled. Ten (10) bank accounts with balances totaling Frw 16,028,629

had no bank reconciliations; Thirty one (31) bank accounts with balances totaling Frw

2,563,984,796 had bank reconciliations with unexplained differences; and thirteen (13)

bank accounts with balances totaling Frw 1,787,787,520 had reconciliations with

irregular reconciling items.

• There are still unsupported adjustments processed through books of account of many

public entities, mainly affecting opening balances. These cases were mainly noted in

Government Boards and Government Business Enterprises.

• There were unsupported creditors totalling Frw 4,401,676,756 and debtors totalling

Frw 1,635,633,475 in entities’ financial statements where management did not provide

any support documents. In addition, there were liabilities (Frw 3,519,658,798) and

receivables (Frw 3,236,083,340) where management did not provide individual listings to

identify them. These cases were mainly noted at REB, ONATRACOM, RIAM and in

Public Universities.

• For the case of EWSA, there were no books of account (General ledger) provided to

support balances in financial statements. The financial statements included a series of

suspense accounts with unknown credit balances totalling Frw 28,948,502,332 as shown

below:

Account balance Description of suspense account Balance at 30/6/2012

(Frw)

Fixed assets Assets clearing account 10,551,626,850 Stock Stock clearing account 12,968,191,168




Stock Cost variance 4,765,113,557 Bank Bank clearing account 663,570,757

28,948,502,332

• For the case of KIST, management was unable to provide financial statements for the

year ended 30 June 2013. Accordingly, the audit could not be conducted. The financial

statements for the year ended 30 June 2012 had significant errors and suspense accounts.

Management sought more time to make necessary corrections before they could produce

financial statements for the year ended 30 June 2013.

A similar case was noted during the audit of NAEB, where financial statements submitted

to MINECOFIN for the year ended 30 June 2012 were significantly changed after

MINECOFIN had issued consolidated financial statements for the year ended 30 June

2012. These are all indicators that Chief Budget managers submit incomplete or

erroneous financial statements to MINECOFIN and these wrong balances end up in state

consolidated financial statements.

There is need for MINECOFIN (Accountant General’s office) to carry out detailed review

of monthly financial statements submitted by budget agencies. This may also require

MINECOFIN to undertake a proper risk profiling of public entities to identify those with

high risk of accounting errors and challenges and provide targeted support to improve

financial management and reporting. Entities identified as high risk should be monitored

more regularly and their monthly financial statements should be subject to critical

reviews. Such entities may require additional reporting templates and disclosures and

their year- end financial statements should be subject to internal audit before they are

incorporated in State Consolidated financial statements. This would require such entities

to submit their financial statements early enough to facilitate the internal audit so that

timelines are adhered to.

It should be noted that despite having full staffed departments of finance, both KIST and

NAEB utilised Government resources to hire Consultant firms to help them correct the

errors and prepare financial statements. This is an indicator that staff in finance

departments of some public entities may not be having appropriate competencies to

execute their tasks. There is need for proper use of the Staff performance management

system put in place by Government as a tool of Human Resource Development. This

should help to identify training needs and facilitate capacity building and training to

improve staff skills and competencies. The staff performance management system should




also be used to monitor performance of trained staff to identify high performing staff and

those whose performance needs improvement, so that high performers are appropriately

rewarded and underperformers are helped to improve.

4.2 IRREGULAR AND UNAUTHORISED EXPENDITURE

INCURRED BY PUBLIC ENTITIES

4.2.1 Unsupported expenditure

Public entities are required to maintain appropriate documentation necessary to support all

payments made using public resources. However, Chief Budget Managers in 22 public

entities did not provide the necessary documents to account for utilisation of Frw

2,011,170,818 received by these entities during the year, as shown below:

Description Amount

Frw

Partially supported 1,268,975,601

Unsupported 742,195,217

Total 2,011,170,818

Most of the unsupported expenditure was incurred by the National University of Rwanda

(Frw 863,021,437), EWSA (Frw 454,800,179), Gatsibo District (Frw 204,504,630), City of

Kigali (Frw 141,632,755) and Rwanda Cooperative Agency (Frw 133,612,600).

There is need for Chief Budget managers to adhere to public financial management

guidelines and ensure proper accountability for all funds appropriated to public entities. All

funds should be adequately supported and utilised for only authorised purposes.

4.2.2 Wasteful expenditure

The problem of wasteful expenditure is still persistent and was noted across the Universities,

various Districts, Boards and Government Business Enterprises (GBEs). Forty one (41) of the

entities audited incurred wasteful expenditure amounting to Frw 1,050,497,553 during the

year. Such expenditure could have been avoided had the entities complied with laws,

regulations and procedures in force. See summary in table below:

30 June 2013 30 June 2012

Nature of expenditure considered as wasteful Amount (Frw) Amount (Frw)

Penalties/interest and fines to RRA & CSR 258,526,178 591,074,461 Supplier penalties 145,895,802 0




Court fines and claims for damages 550,103,046 166,452,613 Excessive payments for services/goods not delivered 35,276,841 19,645,640

Ineligible staff benefits and incentives 59,720,436 Others 975,250 72,338,278

Total 1,050,497,553 849,510,992

4.2.2.1 Court cases

In this year, the highest amount of wasteful expenditure arose from court cases, with public

entities paying damages and penalties to the tune of Frw 550,103,046 for court cases lost to

former employees and suppliers. Notable among these were court cases lost by EWSA,

Nyarugenge District and City of Kigali. Government entities lost many court cases, especially

relating to wrongful termination and management of employees; inappropriate handling of

contracts with suppliers; failure to follow proper procedures in handling transactions; and due

to negligence in enforcement of laws and regulations.

4.2.2.2 Other types of wasteful expenditure

Continued instances of non-compliance with existing tax and social security laws and

regulations resulted in penalties and interest to Rwanda Revenue Authority and Rwanda

Social Security Board. A new category of wasteful expenditure included penalties charged by

suppliers for delayed settlement of invoices and payment for services which should ordinarily

be done by staff in public entities.

Chief Budget Managers should pay much attention to issues of regulation and compliance

with existing laws and regulations to eliminate wastage of public resources. A comprehensive

database of all ongoing court cases should be compiled and monitored regularly by Ministry

of Justice.

4.2.3 Unauthorized expenditure

4.2.3.1 Unauthorised staff benefits and staff advances

There are still cases where public entities granted their staff additional benefits like

communication, transport and overtime allowances without appropriate approval. A total of

Frw 145,520,287 was spent on these benefits during the year, when compared to Frw

85,768,835 in 2012. There is need for Chief Budget Managers to put in place appropriate

mechanisms to avoid unauthorised expenditure.




4.3 FINANCIAL MISMANAGEMENT AT EWSA

EWSA provided financial statements for the year ended 30 June 2012 to the Auditor

General’s office in June 2013 (one year after year end) but they were incomplete and not

supported by underlying accounting records to account for all resources at the disposal of

EWSA. Management had invested USD 1.1 million (Frw 648,958,517) on acquisition,

installation and operationalization of ORACLE system but this system expected to have been

fully operational by 18/05/2010 has not been working, even at the time of audit in August

2013 and was the main reason for failure to prepare financial statements. No books of

account were provided and the financial statements had so many errors, including a series of

suspense accounts with unknown credit balances totalling Frw 28,948,502,332, unknown

balances of fixed assets, unexplained balances of stock, unreconciled bank balances,

unknown customer balances, unreported expenditure of the Development unit, unrecorded

loans; to the extent that the Auditor General was unable to issue an audit opinion (had a

disclaimer of opinion) of the financial position and operations of EWSA.

4.3.1 Lack of an integrated system and no proper coordination

EWSA also had many IT systems which had not been integrated, and the commercial unit of

EWSA maintains different data of customers from that in the billing systems. These billing

systems are not integrated with accounting information and information from commercial

unit is not regularly reconciled with that in billing systems to facilitate tracking of customer

bills and ensure accountability for all collections from customers. This lack of regular

reconciliation information in different departments resulted in the following:

• Misappropriation of Cash collections amounting to Frw 115,500,000 for electricity sales

to a cash power dealer at Karongi branch and this had not been recovered by the time of

audit in August 2013.

• Cases where Cash power loaded for dealers (excluding commissions) was higher than the

amount of cash collected from the dealers and yet no follow up had been done.

• Cases of 6,937 unjustified adjustments made to change balances for water customers in

the month of June 2012. This resulted into increase in some customer balances by Frw

956,838,216 and reduction in balances of other customer by Frw 1,879,398,730. Seventy

seven percent (77%) of adjustments were made in 7 branches of: Gikondo, Kanombe,

Remera, Kacyiru, Musanze, Huye and Nyamirambo, with Kanombe and Remera having

adjustments with the highest monetary value.




• Stock balances of Frw 15,996,085,619 reported in financial statements was higher than

the value of Frw 13,835,902,892 for stock physically counted by EWSA at 30 June 2012.

No reconciliation/response was prepared to explain the stock shortfall of Frw

2,160,182,725, hence the risk of misappropriated or stolen stock items. Water and

electricity stock items worth Frw 23,437,934 could not be traced in the Water and

Electricity central stores at Gikondo at the time of audit.

• EWSA had a large stock of water pipes worth Frw 1,004,724,093 (at Nzove store mainly

& Training Centre at Gikondo) and most of them had not been utilised for almost 18

months, since December 2011. Management did not provide a plan on how they are going

to utilize the pipes in the near future. The pipes are not stored in good conditions and are

exposed to risk of theft/wastage.

• A total of 40,108 water customers in the EWSA customer database (LIVE CIS) that

were not billed by the Commercial department. Fifty two percent (52%) of these

unbilled customers are attributed to 7 branches: Gikondo (3,349 unbilled customers),

Kacyiru (2,324 unbilled customers), Remera (2,945 unbilled customers), Kanombe (3,295

unbilled customers), Muhima (1,837 unbilled customers), Musanze (3,785 unbilled

customers) and Rusizi (3,311 unbilled customers).

4.3.2 High volume of non-billed Water and inadequate accountability for revenue

EWSA had a high volume of water (14,125,050 m3, representing 42.38% of water produced

and distributed) worth Frw 10,452,537,000 was not billed. This unbilled water could

represent water used by customers freely or water collections which are not accounted for. It

could also represent water loss through broken pipes or leakages. The water and electricity

revenue reported in the billing systems could not be reconciled with that reported in the

financial statements, hence a lack of accountability for billed revenue and electricity revenue.

The 42.38% level of non-billed water is far higher than targets set in the National Policy and

Strategy for Water Supply and Sanitation Services developed in February 2010 by

MININFRA. This strategy set targets for non-revenue water for urban water supply to be

reduced to 28%, 26%, 24% and 22% for the years 2010/2011, 2011/2012, 2012/2013 and

2013/2014 respectively.




4.3.3 Damage of water pipes during construction works not compensated

There were fourteen (14) cases noted where water infrastructure was damaged by different

road construction projects within Kigali City. In all these cases, EWSA met the full cost of

repairing and reinstating the damaged infrastructure to a tune of Frw 349,275,972. No

compensation was sought from the party that caused the damage. In addition, EWSA lost

plenty of water when the water mains were damaged. Such practices exacerbate the problem

of water scarcity experienced in multiple locations in Kigali City. The open points also

expose the distribution network to contamination and cross-contamination which ultimately

affects the quality of supplied water. There is need for project owners to coordinate with

EWSA to understand the water distribution infrastructure before they commence their works,

in order to avoid damaging them.

4.3.4 Lack of water master plan

EWSA does not have a water master plan that would enable planners to know the quantity of

water needed to meet current demand and determine the quantity needed to meet future

demand and plan accordingly. This has resulted in EWSA’s inability to assess and quantify

when and what pipes need to be maintained, replaced or upgraded and the types of pipes that

have the capacity of connecting other customers without weakening the existing distribution

system. As a consequence, many customers get connected to the water grid but actually never

receive water.

4.3.5 Seven (7) micro Hydropower plants

EWSA had also experienced Contract implementation problems for the 7 micro Hydropower

plants, which resulted in:

• Delays in completion of all the power plants ranging from 7 months (for Rugezi) to 33

months (for Mukungwa II, which was still ongoing at the time of field visit in September

2013).

• The power generated at 5 out of 7 power plants was significantly below the expected

capacity. Only Rugezi and Nshili Hydropower plants had the expected power capacity

• Four (4) of the 7 hydropower plants (Rugezi, Nyabahanga, Nyirabuhombohombo and

Nshili) had broken down and were not operational at the time of the site visits in

September 2013. Machines at 6 out of 7 power plants broke down in less than 1 year since

commencement of operations




• Repairs had not been done/completed at most hydropower plants since their breakdown

for a period ranging from 4 months to 21 months due to lack of spare parts

• The total cost of the project had increased by USD 8,571,060 from USD 15,147,984 to

USD 23,719,044 by the time of finalizing the audit in September 2013

4.3.6 Corporate Governance gaps

There was lack of strong Corporate Governance at EWSA and the entity did not have its own

Strategic plan against which it operates. In addition, the Prime Minister’s order provided

EWSA with an approved organisation structure, instead, EWSA operates a parallel structure

different from the one approved by the Prime Minister’s order. The Board had not been

provided with any management accounts to review performance of EWSA on regular basis

and no action had been taken to hold management to account for such significant omissions.

I am aware that the Public Accounts Committee of Parliament (PAC) is already following up

on the audit findings in the report of EWSA and believe their recommendations will go a long

way in helping EWSA management and Board, to improve corporate Governance,

accountability and financial management. Strengthening Corporate Governance at EWSA

and better strategic planning are needed to enhance accountability and guide EWSA

operations and streamline investments. Better monitoring needs to be undertaken in respect to

high water losses and regular reconciliations need to be performed between information

provided from different departments. A water sector master plan needs to be developed to

guide water distribution. In addition, an appropriate framework should be agreed with project

owners to minimise cases of damage of water pipes during construction works and to define

compensation guidelines for damaged pipes.

There is need to link the billing systems to accounting systems. Proper operationalisation of

ORACLE would help in this area. Government through MINECOFIN and MININFRA need

to support the Board to monitor performance of EWSA and to account for public resources.

Given the significant findings at EWSA and the key role the institution is required to play in

Rwanda, there is a need to holistically assess the entire organisation to establish the

congruence between staff (skills, competences and numbers), strategic direction, structures

(including governance and reporting lines) and the systems or processes (including IT

systems, HR systems, project development processes, Financial management, monitoring &

evaluation and performance management).




4.4 LIQUIDITY AND OPERATIONAL PROBLEMS AT

ONATRACOM

The audit concluded that ONATRACOM has liquidity and operational problems which have

forced it to scale down its operations, almost to the point of ceasing operations. The entity

was unable to pay its obligations and the suppliers were threatening legal action and

withdrawal of services, forcing ONATRACOM to seek intervention of Government for a

financial bailout to facilitate settlement of Frw 5,723,173,308 that ONATRACOM was owing

suppliers, bankers and other service providers for so long. ONATRACOM has continued to

seek handouts from Government to survive and pay for its operating expenses because it is

not realizing enough revenue from bus services to sustain its operations.

4.4.1 Old fleet of buses, mostly in garage

The financial challenges facing ONATRACOM are partly explained by the old fleet of buses

which are most of the time in the garage and unable to operate on designated routes. Out of

143 buses owned by ONATRACOM as at 31st December 2012, 105 buses were past their

economic useful life, requiring replacement but could not be replaced because

ONATRACOM has not been saving funds for asset replacement over the years. Seventy (70)

of these old buses (representing 49% of all ONATRACOM buses) are no longer operational

and have been in the garage for a long period of time. There are even cases where buses with

minor mechanical problems have remained in the garage for long due to liquidity problems

being experienced by ONATRACOM. Long durations out of service have worsened the

condition of such buses and they have not been brought back on the road.

4.4.2 Declining Bus routes and revenue

Due to problems with old fleet of buses, the number of bus routes operated by

ONATRACOM had reduced to just 27 routes in September 2013 (compared to 50 routes in

December 2011). Bus revenue declined significantly over the last 5 years from Frw

5,418,220,437 in 2008 to Frw 1,943,565,905 in 2012, yet cost of maintenance and service of

an old fleet of buses is high. This has consequently been wiping out most revenue collections

from the buses over the years.

Management contracted a consultant to help them come up with a sustainability strategy but

this has not been implemented. Efforts were ongoing to get a private investor to run

ONATRACOM on behalf of Government but progress is still slow and no concrete results




have been realised yet. The survival of ONATRACOM requires Government to evaluate

different investment options and overall goal of setting up ONATRACOM. A proper

strategic plan needs to be put in place to guide any future investments in ONATRACOM,

along with clear performance results agreed with management and monitored to avoid

recurrence of current challenges facing the organisation. The bottom line is to ensure that

ONATRACOM operates as an independent commercial entity that is capable of sustaining its

activities with minimal or no external bailouts.

4.5 CHALLENGES OF SUPERVISION OF GOVERNMENT

PROGRAMMES IMPLEMENTED THROUGH

DECENTRALIZED ENTITIES

The audits identified challenges of supervision of Government programmes implemented

through decentralized entities, mainly districts. Many of the supervising entities are not

taking responsibility to make follow up of programmes and seem to have restricted their

mandate to making disbursement of funds and delivery of materials and equipment at

districts. This has resulted in slow pace of implementation of certain programmes, since

supervising entities do not seek accountability from districts for the resources availed for

their specific programmes.

This was noted for MINISANTE, where no proper follow up was made with equipment

distributed in District hospitals; FARG, where funds disbursed to districts were not being

followed up to confirm how they are utilised; RLDSF where loans disbursed through districts

were not being followed up to enhance recoverability; RAB where seeds distributed to

sectors and milk distributed to schools were not being properly followed up to ensure their

distribution is properly done; and REB where books distributed to schools and materials were

not being followed up to confirm implementation of activities. Most of these supervising

entities did not request or obtain accountability reports for utilization of resources or items

delivered at the district.

There is need for better coordination between central Government agencies and

implementing agencies at decentralized level, to facilitate efficient delivery of Government

programmes. There is need for Government to streamline the framework for implementation

of activities through decentralized entities. Responsibilities and roles of the different

stakeholders: line ministry and central Government agency responsible for the national




programmes; the local Governments; and the implementing agencies carrying out the

activities; should be clearly defined and follow up mechanisms put in place, to avoid

conflicting interests and enhance supervision of Government programmes.

Proper supervision and follow up should be made to hold Districts more accountable for

implementation of decentralized programmes and to ensure realization of national objectives.

4.6 IMPLEMENTATION OF PROGRAMMES IN EDUCATION

SECTOR

4.6.1 Accounting and financial management issues in public Universities

The audits of Universities identified that in many of them, the accounting function is not

effective and financial statements prepared did not reflect a true picture of transactions

processed through these institutions. Universities implemented only 47% of prior year audit

recommendations, with Umutara Polytechnic implementing only 20% of the

recommendations. At NUR, a Consultancy company created was closed after realising it was

not feasible and yet the University had invested Frw 369,738,149 in set up costs. At KIST,

assets and transactions of the consultancy Company created by KIST are not accounted for,

and management was not able to provide documents to show operations of the company. The

Universities have issues of student debtors and unallocated collections from students not

properly reconciled and confirmed. Some student debtor balances are long outstanding and

relate to students who have since left the Universities.

Since Government took a decision to create One University of Rwanda which merges all the

7 public Universities into one University, there is need to pay clear attention to ensure that

issues identified in each of the universities are appropriately resolved. A clear accounting

framework, policies and chart of accounts need to be put in place, to ensure that opening

balances inherited from the individual universities are properly accounted for. The structure

of the accounting function should be appropriately reviewed, to ensure that it is effective in

delivering financial statements that reflect the operations of the University. The operations of

the Consultancy companies created by the Universities need to be reviewed, to enhance

transparency and accountability.




4.6.2 Implementation of One Laptop per Child programme in schools

The audit of Rwanda Education Board (REB) identified that the One laptop per child

programme handed over by MINEDUC to REB during the year had operational challenges

which may limit the programme from achieving the intended objectives. Out of 2,334 schools

targeted by this program for distribution by 2017, only 407 schools had received laptops by

April 2014 and there was no clear roll out plan covering the remaining schools. There is no

integration plan showing how the One Laptop programme will be integrated with the Primary

schools curriculum in Rwanda and no assessment criteria for children under the One Laptop

programme.

Site visits made to different schools across the country revealed that a number of laptops have

gone missing in schools (528 laptops were missing in 35 out of 67 schools visited). In most

schools, laptops are still kept in the boxes and store rooms and have not been put to use (42

out of 67 schools visited had laptops in boxes). The laptops are not yet loaded with E-

learning modules and many schools use few of them for ICT lessons. Many schools do not

have teaching of ICT or use of laptops on their school timetables. This has limited pupils’ use

of the laptops as a tool for learning. See pictures of laptops still in boxes below:

Karambi primary school-Nyagatare (in boxes) Groupe Scolaire de Nyakarambi-Kirehe (in boxes)

Groupe Scolaire de Nyakarambi-Kirehe GS Runda-Kamonyi (in boxes)

There were 4,730 laptops distributed to 13 schools which had no access to electricity

between 2010 and 2013. These laptops stayed unutilized for between 1-4 years and were only

re-distributed to other schools in March 2014. The frequent changes in technology may

adversely impact the ability to use the laptops that remain unutilized for years. REB is also




not tracking the pupil enrollment in schools regularly to facilitate matching of laptops

distributed to pupil enrollment per year. There are cases of schools with high number of

excess laptops and others with fewer laptops due to changing number of pupils enrolling per

year.

With the high investment so far made in the One Laptop per Child Programme, Government

needs to put in place a clear strategy to guide implementation of the programme and facilitate

realization of intended objectives. Clear linkage needs to be made between the one laptop per

child programme and existing primary school curriculum and national examinations. There is

need for increased supervision and follow up of school activities to ensure that programme is

incorporated in school timetables and that laptops are utilized by the target pupils to enhance

their learning abilities and skills. A clear curriculum showing what needs to be taught through

the use of these laptops needs to be provided to schools and teachers appropriately trained.

4.6.3 Implementation of the School Based Mentors programme

The Government through the Rwanda Education Board started a programme for English

School based mentors to support teaching of English language in schools. However, the

programme does not have a clear and comprehensive plan to guide its implementation. There

are no documented guidelines and policies to clearly show the expected deliverables from the

mentors and what results Government expects to achieve from the mentoring program before

it is phased out.

There is inadequate supervision of the mentors by REB and no evidence of any regular

follow up visits made to schools to supervise mentors during the year. No performance

evaluations had been undertaken and documented by the time of the audit in April 2014 to

assess performance of mentors and to establish whether REB was realizing value from the

activities of mentors. A total of Frw 25,376,985 had been paid to mentors who were no

longer in service due to lack of timely monitoring reports.

Ministry of Education and Rwanda Education Board need to put in place a comprehensive

plan and detailed policies to guide implementation of the English School based mentors

programme. Clear performance targets should be set for mentors and supervision should be

strengthened to realise the intended benefits from this programme.




4.6.4 Schools not using text books distributed by Government

The audit of Rwanda Education Board identified some schools in the Country which received

text books procured to facilitate learning and have not started using them yet. In some of

these schools, the text books are kept in shelves and have not been put to use to achieve the

intended objective of helping the students to learn. See pictures below:

GS Camp Kigali (Nyarugenge District) EP Bitare-Kamonyi district

GS Bukure - Gicumbi District GS Gishororo (Nyagatare district)

In all schools visited, some schools still had books in boxes and in shelves and not in use.

In other schools, Government supplied books which were not required by those respective

schools. This ultimately implies that some schools have books which will not be used at all,

and yet there could be other schools that require these books.

To avoid risk of wastage of public resources on purchase of unutilized text books, the

concerned ministry (MINEDUC) and relevant agencies (REB and Districts) should make

urgent follow up in schools across the country and engage with all relevant stakeholders to

address the challenges limiting the use of text books procured so that students can start




benefiting from their use. In addition, a detailed report should be prepared and submitted to

MINEDUC indicating which books are redundant in which schools so that they can be

collected and redistributed to those schools which offer the relevant programmes.

4.6.5 Challenges with Internet connectivity in Secondary schools

The Education Sector Strategic plan 2013/2014-2017/2018 indicates that REB was expected

to provide internet connectivity to 93 schools (8% of all secondary schools) as at 30 June

2013 and increase these to 164 schools as at 30 June 2014. However, available contract

documents show that little progress has been made. A contract signed by MINEDUC in

September 2011 for Internet connectivity in secondary schools covered only 38 schools and

was terminated in January 2013. Since termination of the contract for Internet connectivity in

the 38 schools, REB had not put in place new contracts for continued provision of Internet

connection services in schools by the time of the audit in April 2014. There are no monitoring

progress reports prepared by REB to monitor progress made in the programme and no

evidence to show that Government is on course to meet the targets set for Internet

connectivity of the schools as detailed in the Education Sector Strategic plan.

REB in Consultation with Ministry of Education should review the progress made in

implementing this programmme and take appropriate measures to ensure that the connectivity

services continue to be offered in all schools as required on the Education Sector Strategic

plan.

4.6.6 Persistent challenges in tracking disbursements and recoveries for SFAR/REB

student loan beneficiaries

As highlighted in my previous reports, REB does not have complete information in the

database on SFAR student loans and recoveries. In addition, many entities did not facilitate

REB/SFAR in the process of recovering loans from their employees. There are also

difficulties for REB/SFAR to get the information on SFAR beneficiaries because many

employers did not cooperate. REB/SFAR issued various letters requesting many employers to

declare their new staff who could have benefited from the loan scholarship scheme but the

majority of the institutions did not respond.

Even where employers deducted and remitted loan recoveries to REB/SFAR, they did not

provide detailed schedules to show the individual employees/beneficiaries repaying the

SFAR loans.




These challenges make it difficult to ascertain whether indeed management of the Loan

scheme is recovering the loans to sustain its operations in the medium and long term. There is

need for REB to expedite the process of gathering information on all sponsored students and

their repayments status so that the students’ loan database is updated to reflect all loans

disbursed and recovered and ensure that the current status of the fund reflects a true picture of

the unrecovered loan balances. In addition, there is need to strengthen the legal framework

and enforce the law, to ensure that employers make declarations to REB for deductions made.

A strong legal framework should enable REB officials to make regular audits and follow up

on recoveries of SFAR loans with the employers.

4.6.7 Idle equipment acquired by WDA for Technical and Vocational education

training

In October 2011, WDA acquired Technical and Vocational Education Training (TVET)

equipment worth Frw 2,420,436,060 which was shared between VTC Gaculiro, IPRC West

and IPRC East. Though the total contract amount was paid, there was partial installation of

equipment. Commissioning and training had not been done by the time of the audit in

October 2013 (2 years after acquisition) and yet these activities were supposed to have been

completed not later than November 2011. Since installation of the equipment at these training

centres was aimed at equipping students with necessary practical skills for the labour market

to eventually address the issue of youth unemployment, their delayed utilisation means

delayed realisation of Government objectives of skilling the population and reducing youth

unemployment. WDA and MINEDUC need to make appropriate follow up and ensure that

these equipment are put to appropriate use.

4.6.8 Gatsibo Secondary Technical School constructed but not in use for long

In Gatsibo District, a contract worth Frw 450,823,088 was signed on 25/06/2010 to construct

a secondary technical school of Gatsibo. The construction works were supposed to be

completed within 8 months from the date of signing the contract, but due to some delays, the

construction of this school was completed and provisionally handed over to the District on

27/03/2013. However, this school was not in use by January 2014 (after 8 months) and had

no students or trainers to carry out the activities envisaged at the time of constructing the

school. There is no indication of when this school is expected to commence operations, since

there are no staff and student admissions. These are indicators of improper planning and lack

of appropriate coordination in programme implementation. There is need for better planning




in future projects and coordination to maximise benefits from Government programmes.

Responsible Government agencies need to make appropriate follow up to ensure that

facilities in this school are put to the intended use.

4.7 ISSUES AFFECTING THE HEALTH SECTOR

4.7.1 Concerns over sustainability of services at King Faisal Hospital

4.7.1.1 Poor working capital situation at King Faisal Hospital and concern over

sustainability of services at the hospital

Assessment of financial performance of King Faisal Hospital shows that the hospital is

struggling financially, with poor working capital situation, which is affecting its ability to

sustainably provide high quality healthcare services and continue operating effectively as a

going concern. In the past four (4) financial years since 2009/2010, KFH, K has not been able

to generate sufficient funds to cover its operations and to meet its obligations from suppliers

timely. The hospital cost of providing services and operations exceeded revenue by an

average of 87% annually over the last four (4) years and operations were only made possible

with the injection of funds from Government in form of subsidies.

The above poor financial situation has resulted in accumulation of unremitted statutory

deductions in form of taxes and social security contributions not paid to Rwanda Revenue

Authority and Rwanda Social Security Board respectively. The Hospital has also acquired an

operating overdraft from Bank of Kigali which stood at Frw 304,795,868 at 30 June 2013 and

was only able to cover 86% of its current liabilities as at 30 June 2013 (current ratio). This

adjusted for stock which is slow moving in nature, KFH was only able to cover 48% of its

current liabilities (acid test/quick ratio) assuming all reported receivables are collectible. The

available cash balance at 30 June 2013 was particularly low at Frw 14,541,929 representing a

mere 0.4% of current liabilities and many debtors are long outstanding (recoverability

problems). Overall the liquidity position of KFH requires urgent attention.

This poor liquidity position coupled with continuous inability to generate enough revenue to

cover operational expenditure poses a challenge on the sustainability of services in the

absence of Government subsidy. With KFH now a private entity where Government

subsidies are not envisaged, the ability to continue to provide quality service may negatively

be affected due to the poor liquidity position.




There is urgent need for the line ministry and MINECOFIN to engage with King Faisal

management to discuss the extent of Government subsidy over the long term and to come up

with a clear plans on how to control costs, increase revenues, recover debts and manage

liquidity in order to sustain the operations of the hospital.

4.7.1.2 Challenges with Rehabilitation and expansion of King Faisal Hospital-Kigali

The audit of King Faisal Hospital identified that the Hospital had plans for rehabilitation, up-

grading and expansion to include a Physicians’ Plaza, a new services extension building and

Biomedical Centre. The key objectives of this project were:

a) To increase the quality and level of health care services, technology and facilities

provided at KFH,K;

b) To increase the training capacity of KFH,K; and

c) To develop KFH, K and the associated educational and research institutions to match

medical care standards with those of modern international clinical, educational and

research institutions.

The schematic designs for the rehabilitation and expansion of King Faisal Hospital-Kigali

were approved by Hospital management on 02/04/2012 and implementation of these designs

would require an estimated construction budget of USD 191,500,000. Management at King

Faisal Hospital has indicated that they do not have funds to finance such a large scale project

and it has ultimately stalled. Government through the Ministry of Health has taken over the

component relating to National Reference Laboratory Building but no implementation plans

are available for the remaining components of the rehabilitation and expansion plans. The

Hospital incurred total costs of Frw 1,824,338,720 to complete the schematic designs and

budgets, needed to implement the project.

The above state of affairs is an indicator that KFH, K expansion and rehabilitation project

was launched prior to confirming availability of necessary funds for full implementation of

the project. It appears like the hospital started the designs without a clear financing plan. This

is an indicator of poor project conception. There were no concrete steps being taken by

management to raise finances for the project and no evidence that this project will take-off in

the foreseeable future. Consequently, expenditure (Frw 1,824,338,720) incurred on the

schematic design may become wasteful, especially if the designs developed for this project

are not put to use by Government.




A proper assessment is needed to establish whether all components of the rehabilitation and

expansion designs are still necessary. The Hospital should then engage with Government

(through line Ministry and MINECOFIN), to come up with a clear financing plan to support

implementation of the remaining components of the designs found necessary to achieve the

project objectives.

4.7.2 Inappropriate medical waste management practices in referral hospitals

4.7.2.1 Lack of a strong legal framework to guide healthcare waste management

(HCWM) issues in Rwanda

The audit conducted to assess whether healthcare waste (HCW) generated by the five (5)

referral hospitals was appropriately managed and disposed of with due regard to the safety of

medical workers, patients, waste handlers, community and the environment identified that

there is no specific law regulating healthcare waste management (HCWM) issues in Rwanda.

Consequently, there is no uniform set of standards that referral hospitals have to adhere to.

Lack of uniform set of standards exposes medical staff, patients, waste handlers and the

community to the dangers of hazardous HCW without any clear legal fall-back and

safeguards. Lack of a national law and uniform set of standards has contributed to numerous

deficiencies in the management of HCW within the referral hospitals. These generally

include poor segregation, handling, treatment and disposal of waste.

There is an urgent need for MOH to initiate and spearhead the process of drafting a national

law that will provide a uniform set of standards for management of healthcare waste

throughout the country. After formulation of the relevant law, MOH should then develop,

approve and roll out a national uniform set of guidelines to guide healthcare waste

management practices throughout the country. This will provide a much needed legal

framework and guide healthcare facilities on best practices in management of healthcare

waste. Other key issues MOH should address with regards to healthcare waste management

activities include; providing adequate funding, continuous training of key staff, initiating a

public health awareness campaign and closely monitoring all health facilities to ensure that

all activities are carried out in line with recommended World Health Organisation standards.




4.7.2.2 Emission of black unfiltered smoke from the incinerators at King Faisal Hospital

and CHUK

King Faisal hospital and CHUK received new incinerators in June 2013 for health care waste

management. However, these incinerators in the two hospitals emit heavy black smoke that is

polluting the surrounding atmosphere. The emission of black smoke from the incinerators is a

sign that the incinerator is either inadequate or is not being operated properly. The continued

unchecked emission of black unfiltered smoke from the incinerators pollutes the environment

with substances such as dioxins, furans and mercury. These chemicals are known to be

particularly toxic to children and pregnant women. Incinerator emissions are also known to

have the capability to spread hundreds of miles from the incinerator source as well as

accumulate in water bodies and food supplies. See picture below:

Black smoke is emitted from the incinerator chimney of New incinerator model ATI Muller CP 50

during operation in King Faisal hospital. Photo taken on 9th September 2013.

There is urgent need for Ministry of Health to engage the hospitals to establish the cause of

the black unfiltered smoke for the incinerators and ensure that appropriate action is taken to

address the problem. The emission of the black smoke could result from:

• Lack of training: No training was provided to the incinerator operators by the supplier of

the new incinerators. Without appropriate training they cannot properly operate the new

incinerators.




• Combustion temperature: Both incinerators are operated below the minimum

recommended combustion temperatures of 800 °C (primary chamber) and 1100 °C

(secondary chamber).

• Filtration mechanism: The new incinerators are not equipped with filters which could

retain or significantly reduce the amount of smoke emitted from the chimney. The ATI

MULLER CP 50 model of incinerators can be equipped with filters to remove toxic

gases, incinerator fly ash and other particulate matter resulting into reduced emissions.

• Incineration of plastics: A lot of Health Care waste being incinerated still contains a

significant amount of plastics. These contribute to the emission of black smoke as well as

toxic by-products like dioxins, furans and mercury.

4.7.3 Malfunctioning medical equipment and incinerators in District Hospitals

4.7.3.1 Malfunctioning incinerators in District hospitals

The Ministry of health procured incinerators and distributed them to different hospitals in the

country. However, the incinerators were not functioning properly in some hospitals and the

supplier had delayed to fix the defects reported by hospitals. The hospitals were therefore not

realising the benefits of waste disposal envisaged from the installed incineration equipment.

This was noted at KABAYA, MUNINI and KIBIRIZI District Hospitals where medical

waste was not properly disposed off, due to lack of appropriate incineration facilities. There

have also been delays in installation of incinerator at the Mageragere site. Installation of

incinerator equipment delivered by the supplier in May 2011 had not been completed, hence

denying users incinerator facilities for over 2 years and 9 months (since date of delivering

equipment).

There seems to be inadequate follow up by the Ministry and hence the need for the Ministry

of Health to make appropriate follow up and ensure that the supplier fixes all defects

identified with incinerators distributed to hospitals. In addition, the Ministry should ensure

that Hospitals adhere to acceptable waste management disposal standards by making

appropriate use of the incinerators.




4.7.3.2 Medical equipment supplied by MINISANTE in different Hospitals not working

and others not in use

The Ministry of health acquired and distributed various equipment needed by hospitals to

improve quality of service delivery. However, equipment in some hospitals are not functional

and in other hospitals, they have not been put to any use. Examples include:

• Oxygen plant at CHUB: An Oxygen Plant was installed to facilitate production of

oxygen at the hospital but it has never been used since installation. It was delivered at the

hospital over 23 months ago and was still not operational at the time of audit in January

2014. The Hospital continues to incur expenditure on purchase of Oxygen.

• Various medical equipments at Ntongwe Hospital: Equipments including Laveuse,

Essoreuse et Secheuse were supplied and installed but they are not in use due to fear of

their high electricity consumption. Other equipments such as Lavabo steriliser,

defibrillator, steriliser 300 litres, electro surgical unit, spray matic, anaesthesia machines

(6) and aerosol generator were just kept in the store at hospital and were not being used.

Management of the hospital explained that these items are not used due to lack of

specialised doctors to use them.

• Various medical equipment at Bushenge District Hospital: Various medical

equipments supplied for installation in the operating theatre, imaging room and Mortuary

were still packed in boxes due to the lack of completed buildings in which medical

equipments were to be installed for use. These will only be installed after completion of

construction works at the hospital.

There seems to be inadequate follow up by the ministry and hence the need for the Ministry

of Health to make appropriate follow up and ensure that the supplier fixes all defects

identified with medical equipment distributed to hospitals. Where the equipment are idle, the

ministry should engage with the hospitals to identify reasons and take necessary steps to

ensure that the equipment are put to appropriate use to improve service delivery to the

Rwandan population.

4.7.4 Delay in reconstruction of Bushenge Hospital

Bushenge hospital in Nyamasheke district was destroyed by an earthquake in 2008. On 15th

December 2009, Ministry of Health (MOH) on behalf of the government, contracted

Entreprise Rwagasana Tom (ERT) to reconstruct the hospital. The contract amounting to




Euros 2,982,604.57 (Frw 2,409,944,993) was expected to be executed within 12 months

ending in December 2010. In June 2011, eighteen months after signing the initial contract,

the contractor and MOH realized that some works were either understated or not considered

during the preparation of technical specification. An addendum to the original contract

amounting to Euros 530,154.38 (equivalent to Frw 463,354,928) was signed on 9th June

2011. Below are specific findings on the different contracts.

4.7.4.1 Delays in execution of works under the initial contract: The execution of

construction works under the initial contract started in December 2009 and took very long

time to complete. By November 2012, works that were supposed to be handed over in

December 2010 had not been completed. When MOH realized that the works were taking

long to complete, it requested the contractor to partially handover completed works and

continue with the finalization of the remaining ones. This was done in a bid to partially

resolve the problem of patients who were still being treated in tents since 2008.

During the partial provisional handover in November 2012, some defects highlighted were

supposed to be corrected. It was also agreed that the final handover would take place 12

months later, in November 2013. However, by November 2013, no correction works were

done and consequently the final handover had not yet taken place.

4.7.4.2 Delay in execution of works under the addendum to the contract: Works under

the addendum to the contract were supposed to be completed within 3 months starting 9th

June 2011. However, by November 2013, these works had not been completed.

In April 2014, MOH terminated the contract with ERT due to long delays in completion of

works and five years after construction began, the hospital is not yet complete. MOH could

not provide reliable information on when construction is likely to be completed since no new

contractor had yet been selected to finalize the incomplete works.

There is need for MOH to resolve the standoff expeditiously by appointing another contractor

who has the means and willingness to finalise the construction works in a timely manner.




4.8 IMPLEMENTATION OF GOVERNMENT SOCIAL

PROGRAMMES

4.8.1 People still living in Emergency shelters since March 2010

To prevent people who lived around Rubavu Mountain from disaster, Rubavu District

relocated them in March 2010 and distributed plots of land of 15 by 20 meters to each family.

The district was supposed to give 45 iron sheets to each family that had erected walls for their

houses.

By September 2010, 301 out of 1,222 families were living in emergency shelters because

they were not able to make soil bricks and erect walls for their houses, hence could not get

iron sheets. Some of them were old and others were widows and could not erect walls on

their own. A follow up audit in November 2013, identified that 266 families are still living in

emergency shelters in Rubavu district. In addition, they do not have appropriate latrines.

They are exposed to wind, rain and poor hygienic conditions that could result in outbreak of

diseases. See photo below:

Types of shelters and latrines used by families living in Kanembwe site and have not been able to construct their

houses. Photos taken on 14th November 2013.

There is need for Rubavu district and MIDIMAR to resolve the problem of the concerned

families as a matter of urgency to save them from the vulnerable life they have been living in

for the past 4 years.




4.8.2 Implementation of FARG Programmes

4.8.2.1 Inadequate follow up on FARG earmarked funds sent to Districts

In recent years, most of the support provided by FARG to beneficiaries in Districts is

channelled as earmarked funds sent directly from the Treasury to the Districts. The transfers

are based on work plans and budgets agreed between FARG and different districts.

Allocation for the year ended 30 June 2013 is provided in the table below:

Activity Amount allocated

Frw

Education 5,118,377,112 Direct support 1,893,510,000 Projects 1,755,220,000 Shelter 3,061,180,325 Total 11,828,287,437

The audit identified the following:

• FARG does not make any follow up with Treasury to establish all transfers made to the

different districts in order to reconcile them with agreed budgets and workplans. It is

therefore not clear, whether the Districts receive all planned funds for FARG activities to

facilitate implementation of FARG programmes. These transfers are also not recognised

in FARG budget and financial statements. Management of FARG made various

monitoring visits to different districts during the year, but without appropriate

reconciliation between funds disbursed by Treasury and the workplans, these monitoring

visits may not be very effective.

There is need for management of FARG to appropriately coordinate with Treasury and

regularly obtain information on earmarked FARG transfers disbursed to different districts

and link these disbursements to agreed workplans and budgets. MINECOFIN should

review the way earmarked funds are accounted for in financial statements, with a view of

involving FARG in the accountability chain since these funds are based on FARG

workplans and utilised for FARG activities.

• The audits further identified that Districts do not maintain separate bank accounts for

funds received for FARG activities, to facilitate tracking of funds and their utilisation.

FARG funds are mixed with other operating funds at the district. The financial statements

of districts do not also clearly separate FARG transactions from operating activities of




districts hence making it difficult to confirm whether the money for FARG was only

utilised for FARG related activities.

FARG should consider engaging with MINECOFIN and Districts to ensure that Districts

open separate bank accounts for FARG activities. All funds related to FARG activities

should be banked in the special FARG bank account at the District.

• As reported in my previous reports, many districts did not submit financial and activity

reports to FARG to facilitate timely monitoring of implementation of FARG activities in

Districts. There is need for better coordination of FARG activities between National and

district levels to ensure timely interventions that benefit the survivors. Timely

accountability for FARG funds is key to enhancing better service delivery to the

beneficiaries, since FARG is expected to take timely action to address any

gaps/challenges pointed out in the regular accountability and progress reports on FARG

activities

4.8.2.2 Slow pace of rehabilitation and construction of FARG houses

Utilisation reports received at FARG Secretariat from different districts indicate low level of

implementation of FARG activities in districts. The reports show that while progress is being

made in respect to rehabilitation of houses and construction of new ones, the pace is slow and

is taking long to complete these activities. For example, comparison of reports from

Ngororero, Karongi, Musanze and Rutsiro districts and FARG workplan revealed that 77

houses which were planned to be rehabilitated during the financial year ended 30 June 2013

were not rehabilitated as expected, as shown below:

District Expected houses to be rehabilitated

as per FARG activity plan 2012-2013

Total budgeted amount for houses as

per FARG activity plan

Frw

Ngoreroro 9 3,931,893 Musanze 8 3,495,016 Karongi 40 17,475,080 Rutsiro 20 8,737,540 Total 77 33,639,529

The reports from Bugesera and Nyaruguru districts show that out of 146 houses that were

planned to be constructed, only 105 houses were constructed (41 houses were not

constructed) as shown the table below:




District Expected

houses to be constructed

as per FARG

activity plan

2012-2013

No of

houses construct

ed as per

District

report

Houses

not construct

ed as per

District’s

report

Budgeted

amount as per FARG

activity plan

Frw

Actual amount

spent as per the District’s

report

Frw

Remaining

amount as per District’s

report Frw

Bugesera 101 70 31 224,122,838 194,696,600 29,426,238 Nyaruguru 45 35 10 99,856,710 17,500,000 82,356,710 Total 146 105 41 323,979,548 212,196,600 111,782,948

Beneficiaries living in incomplete houses in some Districts

The slow pace of rehabilitation and construction of FARG houses has resulted in some

beneficiaries living in incomplete houses due to lack of alternative shelter. See examples in

pictures below:

Examples of the 25 incomplete houses occupied by FARG beneficiaries in Rusatira, Gishamvu and Rwaniro Sectors

(Huye). Photo taken by OAG on 27.03.2014

Some of delays like in Huye District were attributed to contractor failures, with some

contractors abandoning works. Twenty five (25) out of 30 houses (contract was signed in

November 2012) for genocide survivors in Rusatira, Gishamvu and Rwaniro Sectors had not

been completed by the time of audit site visits in March 2014. Huye District management

indicated that the contractor abandoned works. Some of the abandoned works are shown in

picture below:

Two (2) houses left at foundation level in Gishamvu sector. Photo taken by OAG on 28 March 2013




FARG did not prepare a detailed monitoring report explaining why districts were not meeting

the targeted outcomes and what kind of support is required to expedite the process. FARG

management needs to engage with the Districts to address any challenges responsible for the

slow pace of implementation so that decent housing is urgently provided to the needy FARG

beneficiaries.

4.8.2.3 Services offered to individuals not traced in FARG database of eligible

beneficiaries

In order to keep proper track of beneficiaries, FARG has in place a database for different

categories of eligible beneficiaries identified based on clear guidelines. All those certified as

eligible are included in this database. Previous audits of FARG pointed out cases of errors in

the database and various cases where beneficiaries could not be traced to the FARG database.

The above challenges have not been resolved with FARG database and cases were noted

where individuals benefited from FARG but could not be traced in the database. The audit of

FARG identified 16 beneficiaries who received different FARG services and yet they could

not be traced in the database. See summary below:

Service received from FARG No. of beneficiaries not traced in database

Received Health care services 7

Pig rearing project 3

Received cows 3

Received houses 3

Total 16

The above weaknesses could result in loss of public funds if not addressed timely. The

database of FARG beneficiaries needs to be cleaned and updated with complete information

to facilitate proper tracking and monitoring of beneficiaries. In addition, there is need for

FARG to ensure that only those identified as eligible in their database benefit from their

services to minimize any risk of abuse of the fund. The 16 cases of beneficiaries that do not

appear in the FARG database need to be investigated and concluded before the next audit

cycle.

4.8.2.4 Concerns over cows distributed by FARG to beneficiaries

The contract signed between districts and various contractors relating to the distribution of

cows to genocide survivors required the suppliers to deliver cows which were at least four

(4) months gestating. However, the audits identified that some beneficiaries received cows




which were not gestating at the time of distribution. Some of the cows were still not gestated

as late as March 2014 and all of them were expected to have delivered calves at the latest by

December 2013, 10 months after distribution in July 2013. It should be noted that

beneficiary Districts accepted all cows supplied as meeting the contract specifications and

paid for at the price of gestating cows agreed in the contract. The cows were distributed to

beneficiaries in various districts across the country.

Concern over Beneficiaries’ ability to manage the cows

There are some indicators noted during the audits that point to likelihood of some

beneficiaries not having the ability to take good care of the cows distributed to them. These

indicators include:

• Some beneficiaries who failed to construct the prescribed sheds for the cows. Some did

not construct them at all, while others constructed substandard ones;

• Some beneficiaries (though isolated), who have sold the cows distributed to them and

utilized the proceeds;

• Some cases where cows reportedly died because the beneficiaries were not able to

properly tend to the cows or feed them properly or lacked funds for veterinary services,

especially for the 50% of Friesian or Jersey.

FARG needs to strengthen supervision controls at district level, to enhance value for money

on cows procured and realization of intended goals of poverty reduction through animal

husbandry. Districts need to appropriately evaluate the capacity of the beneficiaries to

manage the cows distributed so that necessary support is sought from concerned agencies

(like FARG) for those found not to be capable of handling the animals on their own.

Consideration should be given to strengthening of common services like veterinary, water

points, feeding areas etc, to facilitate better care of animals distributed to the vulnerable

people.

For distributed cows which were not gestating, FARG in collaboration with the related

districts should make proper follow up to recover any excess funds paid to the suppliers that

delivered cows which were not gestating as required in the contract.




4.8.2.5 Delays in transfer of funds for implementation of projects for FARG

beneficiaries

• Audit visits conducted to inspect projects financed by FARG earmarked funds in

Nyaruguru and Huye districts revealed that there were significant delays in transfer of

funds for project implementation. For example, some associations received funds

earmarked to implement activities in the financial year ended 30 June 2013, after year

end, between September 2013 and March 2014.

• The money transferred to the projects was also less than that disbursed by FARG to the

districts. For example, each project was entitled to receive Frw 1,000,000 but only Frw

600,000 had been received by each association by the time of audit visits in March 2014.

For ten (10) projects visited in Mata and Kibeho sectors in Nyaruguru District, and seven

(7) projects in Kinazi and Rusatira sectors in Huye District, projects had not received Frw

6,700,000 (39%) out of the 17,000,000 earmarked by FARG for their activities.

• In Gasabo District, two (2) associations in Nduba Sector and two (2) associations in

Rusororo sector had not received funds from the district for their activities. These

associations had ultimately not started their operations. See table below for projects not

yet started by these associations:

Name of Association Sector Project

TWIYUBAKE SHA Nduba Planned to keep pigs

TWIYUBAKE SHANGO Nduba Planned to keep pigs

ABIZERA association Rusororo rearing goats RUSORORO survivors association Rusororo rearing goats

The above cases are all indicators of inadequate follow up of FARG activities in Districts,

hence the need for FARG management to enhance follow up of activities in Districts to

ensure that all financed projects are implemented in the required time frame.

4.8.3 VUP loan repayment rate at VUP sectors is below agreed rate and timing

As noted in previous reports, there are still challenges in the recovery of loans given to

beneficiaries of Vision Umurenge Program (VUP) in districts. A report of RLDSF on loan

recoveries shows that out of the Frw 12,038,173,507 expected to be recovered from loan

beneficiaries as at 30 June 2013, only Frw 7,858,014,708 was recovered as at that date. This

represents 65% which is still low and likely to hamper Government’s efforts to realize the

intended objectives. For new loans disbursed during the year ended 30 June 2013, the




recovery rate was at 43%, indicating that most of the recoveries made during the year related

to old loans, as shown in the table below:

Particulars Amount

disbursed

Amount supposed to

be repaid back as at

30 June 2013 (a)

Amount repaid

back as at 30 June

2013

Rate of

repayment

(b) b/a

Frw Frw Frw %

Year ended 30 June 2013 3,592,317,386 464,837,795 201,030,423 43 Year ended 30 June 2012 4,202,089,892 2,988,353,833.00 1,660,821,114.00 56 Year ended 30 June 2011 5,391,854,898 4,190,694,684 2,794,716,745 67 Year ended 30 June 2010 4,308,124,701 4,394,287,195 3,201,446,426 73 Total 17,494,386,877 12,038,173,507 7,858,014,708 65%

Analysis of performance per district revealed that 15 districts (50%) across the country had

recovered less than the overall average recovery rate of 65% realised country wide, as

summarised in table below:

No. of districts with

below average

recoveries

Total number of

district per province

%ge of districts with

below average

recoveries

City of Kigali 3 3 100% Eastern 3 7 43% Northern 3 5 60% Southern 2 8 25% Western 4 7 57%

15 30 50%

In Rulindo District, average recovery over the last three years stood at 43% of all loans

disbursed and this recovery rate stood at 50% for Gicumbi; 52% for Gisagara; 54% for

Ngororero; 55% for Gasabo; 56% for Nyamagabe; 57% for Bugesera and Karongi; 58% for

Nyarugenge and Musanze districts.

The recovery rate is worse if only loans disbursed in the financial year ended 30 June 2013

are considered. Districts have put more effort on recovering loans disbursed in previous years

and less attention is being given to recovery of newly disbursed loans. Only 43% of loans

disbursed during the year ended 30 June 2013 had been recovered. Seven (7) districts of

Ngororero, Gatsibo, Gakenke, Burera, Musanze, Karongi and Gasabo, had recovered less

than 25% of loans they disbursed during the year, as shown in the table below:

District

Amount given to

Financial services

beneficiaries in 2012/2013

Amount supposed to

be repaid as at

30/06/2013

Amount paid

back as at

30/06/2013

Percentage

of recovered

amount (%)

1 Ngororero 112,307,660 9,409,415 3,541,200 1.9% 2 Gatsibo 170,672,225 19,808,330 6,721,760 4.1% 3 Gakenke 109,350,838 31,607,365 3,005,000 9.5% 4 Burera 185,110,800 68,899,403 10,170,850 14.8% 5 Musanze 105,264,250 23,702,984 8,791,730 17.9% 6 Karongi 124,753,400 3,251,250 132,400 20.8% 7 Gasabo 24,765,000 6,677,600 1,608,400 24.1%




Since the funds paid back are supposed to be used to redistribute the loans to other potential

beneficiaries, the intended objectives of Government through the VUP financial services

component may not be realized timely due to slow pace of recovery of loans disbursed.

There is need to put efforts in addressing loan recovery challenges to ensure that loans

disbursed through VUP offices are recovered to enable realisation of program objectives and

sustainability.

4.8.4 Damaged milk and milk shortages in schools under one cup per child

programme

The audits identified cases of damaged milk in schools such as Ecole Primaire Rulindo in

Bugesera, Ecole Primaire Matongo in Ngoma district, Groupe Scolaire Cyivugiza in Rutsiro

district and Ecole Primaire Muhondo in Gakenke district. The damaged milk was discovered

by schools at the time of distributing milk to the children. There are also cases where the milk

suppliers delayed to deliver the milk at the schools, as was the case at Ecole Primaire

Musenyi in Bugesera District, Ecole Primaire Rulindo in Bugesera, Groupe Scolaire

Cyivugiza in Rutsiro district.

The schools did not escalate this problem of damaged milk to Rwanda Agriculture Board

(RAB) as the responsible agency to pursue it with the milk suppliers. Consequently, RAB

paid the suppliers for all milk delivered without considering the damaged milk. No claims

have been made for suppliers to replace the damaged milk and the contracts with the milk

suppliers do not have any provision regarding damaged milk discovered after date of

delivery.

There is need for RAB to review the contract terms with milk suppliers to hold them

accountable for delayed deliveries and milk found damaged at the time of distribution to the

kids, as long as it has not reached the indicated expiry dates. In addition, RAB should

enhance the reporting system between RAB and schools, to allow schools to report deliveries

and any cases of damaged milk and delayed deliveries to facilitate timely follow up with the

milk suppliers.




4.9 ISSUES FROM AGRICULTURE SECTOR

4.9.1 Seeds distributed under the Crop Intensification programme

4.9.1.1 Inadequate tracking of productivity of seeds distributed

The Government through Rwanda Agriculture Board (RAB) manages the Crop

Intensification Programme (CIP) under which it distributes seeds freely to selected people in

different districts. The selection of the beneficiaries is made by each district after considering

land consolidated to grow similar seeds. These seeds are distributed to farmers through

sectors and districts. The CIP program focuses on six priority crops namely maize, wheat,

rice, Irish potato, beans and cassava. The main objective of the programme is to increase

production of food crops across the country. Costs totaling Frw 2,948,930,428 were incurred

on this programme by Government during the year ended 30 June 2013.

However, RAB has not put in place a mechanism that enables tracking of productivity of the

seeds distributed. There is no report showing whether the expected production from the seeds

distributed under CIP program was realized. The MINAGRI Crop assessment team prepares

reports which show production country wide but these reports do not highlight productivity

of seeds distributed by Government. Accordingly, it was not possible to ascertain whether the

Government policy of providing the seeds through the Crop Intensification Programme was

having impact since no link was made between expected production from the seeds

distributed per season and actual production realized during the different seasons of the year.

There is need for RAB and MINAGRI to come up with an enhanced mechanism of tracking

productivity of seeds distributed by Government. Such focused tracking will enable

Government to identify whether seeds procured are having the desired impact and whether

seed multiplication programmes undertaken by RAB are having yield impact expected.

4.9.1.2 Weaknesses identified in distribution of seeds to beneficiaries

The following weaknesses were noted in the process of management and distribution of seeds

to beneficiaries:

• Distribution done by fertilizer Dealers and not supervised: In most sectors, the seeds

delivered there are subsequently handed over to the agro dealers of fertilizers (sub-

contracted by Post Harvest Taskforce to sell fertilizers) to distribute them to beneficiaries

whenever they come to buy fertilizers. However, distribution lists of seeds to farmers are

kept by the agro dealer and are not approved by agronomist and the executive secretary of




the sector at the end of each agricultural season. There is no reconciliation between

quantity received by the agro dealer and the quantity distributed to the farmers, hence an

increased risk of misappropriation of seeds.

• Inappropriate tracking of seeds returned to RAB: Cases were noted where some seeds

returned to RAB and Districts from different sectors could not be traced at RAB and

District levels. They were acknowledged by drivers hired by RAB to return to RAB stores

or to district. No follow up had been done by RAB management to identify the

whereabouts of the seeds. See cases below:

District Sector Type of the

seed

Quantity received by

the sector

Returned

to

Quantity

returned

Bugesera Musenyi Maize 5,000 Kgs RAB 4,300 Kgs MUSANZE NYANGE Beans 2,400 Kgs RAB 1,477.5 Kgs BUGESERA MAYANGE Maize 10 Tons District 5 Tons

• Beneficiaries not acknowledging receipt of seeds: In some sectors, beneficiaries did not

acknowledge the reception of seeds. This was the case in the sectors below:

Season District Sector Seed Quantity of seeds distributed

as per RAB records

2013 B Nyagatare Karangazi Maize 50.28 tons

2013 A Bugesera Gashora Maize 7.5 tons 2013 A Bugesera Manyange Maize 10 tons

• Differences between seeds issued by RAB and those received by sectors: Comparison

between seeds delivered as per RAB records and those acknowledged as received by

sectors revealed differences, with sectors received less than what was issued by RAB in

most cases. No follow up had been done by RAB management to identify the

whereabouts of the seeds. See table below:

Season District Sector Seed

Quantity of

seeds

distributed as

per RAB

records

Quantity of

seeds received

as per delivery

note at sector

level

Difference

Kgs Kgs Kgs

2013 B Nyagatare Karama Maize 10,000 5,000 (5,000)

2013A Musanze All sectors Wheat 83,000 71,000 (12,000) 2013A Musanze All sectors Maize 146,000 149,000 3,000 2013 A Nyamasheke Rangiro Maize 5,000 6,960 1,960 2013 B Nyamasheke Rangiro Maize 2,500 2,433 (67) 2013A&B Nyamasheke Karengera Maize 10,000 9,932 (68) 2013A Karongi Mutuntu Maize 14,350 9,000 (5,350) 2013A Karongi Rugabano Maize 22,000 17,000 (5,000)




• Unspecified quantity of seeds to be distributed per acreage: The quantity of seeds to

be distributed differ from person to person and from a season to season. There is no

standardized quantity to be taken per cultivatable area and inconsistencies were noted in

what was distributed to different farmers for the same acreage without any justification.

The table below provides examples:

Sector Cell Village Site Beneficiary ID Cultivata

ble area

Quantity of

maize seeds

received

2013A Ha Kg

Mutenderi Mutenderi Nyanyonga

Cyanyonga Hitimana Jean Baptiste

1196780056506025

0.5 ha 10kg

Mutenderi Mutenderi Agatonde

Not specified

Ntakavuro Dieudonne

1199280070350020

0.5 ha 15 kg

Karangazi Rubagabaga

Iraba Not specified

Kagarama James

Not specified 1ha 30kg

Karangazi Rubagabaga

Iraba Not specified

Mutuyimana Not specified 0.5ha 45 kg

2013B

Mutenderi Muzingira Rusave Nyamateke NdabahakaniyeMichel

1196380057675053

0.5 ha 10 kg

Mutenderi Mutenderi Cyanyonga

Cyanyonga Bahati Jean de Dieu

1198080137871000

1 ha 10 kg

Due to weaknesses noted in the process of distributing seeds, there is a risk that seeds may

not be reaching the intended beneficiaries. Government may not realise the intended goals of

the Crop Intensification Programme. There is urgent need to streamline and strengthen the

seeds distribution process alongside tracking of productivity, to establish whether

Government is realising the intended objectives of the Crop Intensification Programme.

4.9.2 Concerns over slow pace of recovery of funds from sale of fertilizers

Despite improvements noted in recovery of sale proceeds for fertilisers during the financial

year, the Post Harvest Handling and Storage Task Force is still having challenges to recover

old fertilizer debts of Frw 5,256,036,324 from distributors. I am aware that efforts are being

made together with MINECOFIN to recover these balances from the distributors. This should

continue to ensure that all fertilisers are fully paid for by the distributors.




4.10 ISSUES FROM LOCAL GOVERNMENTS

4.10.1 Inadequate follow up and accountability for funds managed by Non Budget

Agencies (NBAs)

While acknowledgement is given to positive steps that have been taken by MINECOFIN to

ensure that Districts compile a listing that shows revenue, expenditure and fund balances of

each Non Budget Agency within the district, more needs to be done to enhance accountability

for resources at the disposal of Non Budget Agencies (NBAs) and to get balances of NBAs

consolidated in District financial statements and ultimately in State Consolidated financial

statements.

A listing of NBAs with their balances that was consolidated at National level shows that

NBAs had total revenue of Frw 175,849,296,305 and expenditure of Frw 163,037,470,749

during the year ended 30 June 2013. A significant portion of the revenue and expenditure

comprises of funds generated and spent directly by the Non budget agencies and were

therefore not subjected to existing public financial management guidelines that guide

financial management in budget agencies. In addition, fund balances totaling Frw

30,588,735,834 that were held by these NBAs at year end were not consolidated with

balances reported in district financial statements. Consequently state consolidated financial

statements are incomplete and do not contain all balances held by Government entities as at

30 June 2013.

No budget execution reports

The listing of balances for NBAs per district had no budget comparison to facilitate

assessment of whether NBAs had proper budgets and whether funds at their disposal were

utilized in accordance with envisaged priorities of the NBAs.

Gaps in information provided by NBAs and listing of NBA balances unreliable

The information provided by the NBAs that was used by Districts to compile a listing of

NBA balances was sometimes not accurate and reliable. The audits identified balances

included in the NBA listing at district level that were sometimes not verified by officials at

the district and differed from balances reported in accountability reports of NBAs.

Ultimately, the NBA listings prepared at District level and national level are unreliable and

misleading to users and stakeholders.




Even at National level, the listing of NBAs included in state consolidated financial statements

has balances which differ from those included in District financial statements by a net

balance of Frw 15,458,275,494 as shown in the table below:

Balance included in

Disclosure note in state

consolidated financial

statements (A)

Consolidated

balance from

Disclosure notes in

financial

statements of

Districts (B)

Difference (B-A)

Frw Frw Frw

Opening balance 33,879,005,822

36,335,765,531 2,456,759,709

Revenue 175,849,296,305 184,562,917,789 8,713,621,483

Expenditure (163,037,470,749)

(189,666,127,435) (26,628,656,686)

Closing balance 46,690,831,378

31,232,555,884 (15,458,275,494)

No follow up and review of NBA financial transactions by District officials

While NBAs have started compiling accountability reports and submitting them to the

Districts, there is no evidence of adequate follow up done to verify the accountability reports.

Such follow up should have been done by Internal Audit unit but in some districts, few NBAs

were covered during the internal audits. As a consequence, there are more cases of funds

misuse being perpetuated through NBAs (especially in respect to Mutuelle de sante) due to

weak controls and lack of proper oversight and follow up of NBA activities by the Districts.

I am aware that in line with the PFM Strategy, MINECOFIN is taking further steps to

strengthen the financial management function of the subsidiary entities, through the rollout of

a Subsidiary Entities Accounting and Financial Reporting System (SEAS) to assist the

subsidiary entities to:

• Process payments;

• Process Receipts and manage Accounts receivables for institutional clients

• Produce management and statutory financial reports;

• Deliver services to the public more efficiently, effectively and economically through

increased accountability and transparency.

The SEAS system was launched by the Hon. Minister of Local Governments during a

sensitization session held in April 2013 for all the District Executive Secretaries and other

key stakeholders and targeted to cover 88 sectors across 7 districts by February 2014.




As an accounting package with all functionalities, this system will enhance accountability by

the Non Budget Agencies. There is need for Government to deploy appropriately skilled

Accountants at NBA level and provide them with necessary training to use the system and

ensure that Government resources at NBA level are appropriately monitored and accounted

for.

Proper risk assessment needs to be done by Internal audit of all NBAs in the district and clear

audit plan drawn indicating when the audits of these NBAs will be undertaken by internal

audit at District level. Follow up from the district is necessary to build capacity of staff at

NBA level and to provide supervision of activities undertaken at NBA level. The financial

statements generated by NBAs should be submitted for consolidation at District level.

4.10.2 Lack of reconciliations and delayed banking of revenue collections

• With introduction of IFMIS, internally generated revenue in local Governments should be

directly uploaded in the general ledger through the revenue module within IFMIS.

However, there were cases where revenue reported in the revenue module differed from

that recorded in the general ledger and financial statements. Management in districts did

not prepare regular reconciliations to identify the cause of the differences and ensure they

are timely resolved.

These differences could be a pointer to configuration problems in IFMIS which need to

be addressed to enhance its effectiveness. There is need for MINECOFIN to ascertain the

causes of these unusual differences and ensure that any system problems are addressed

before user acceptance is provided to the vendor of the system.

• Cases of delayed bankings for revenue collections are still persistent in various public

entities, especially districts. For example, banking of cash collections totalling Frw

26,165,865 was delayed, with delays ranging from a few days in some entities up to 450

days (almost 1.5years) in Rwamagana District and 516 days in Burera District (almost 2

years). In some cases, collections had not been banked by the time of the audit.




4.11 CONCERNS OVER PROCUREMENT AND CONTRACT

MANAGEMENT IN PUBLIC ENTITIES

4.11.1 Tenders awarded without complying with existing public procurement

procedures

Cases of non compliance with procurement laws and regulations have significantly reduced

in public entities audited. Despite this tremendous progress, ten (10) entities used

inappropriate procurement methods to award tenders worth Frw 6,434,769,789 during the

year. Notable among these tenders is one at RTDA worth Frw 5,300,000,000 for completion

of works of rehabilitation of KIGALI-RUHENGERI road that was awarded using single

sourcing instead of competitive bidding. There were also cases where public entities failed to

provide support documents to justify tendering procedures undertaken prior to award of

tenders. Eleven (11) entities awarded tenders worth Frw 1,080,901,601 without appropriate

supporting documents.

There is need for Chief Budget Managers to apply the appropriate procurement methods in

award of tenders. In addition, Chief Budget Managers should ensure that all necessary

documents are kept to support each tender awarded. Without complete procurement

documents, it is difficult to ascertain whether the procurement process complied with the six

(6) fundamental principles of transparency, competition, economy, efficiency, fairness and

accountability required of all public procurements in Article 4 of law no 12/2007 of

29/03/2007 on Public procurement.

4.11.2 Weaknesses with contract management in public entities

The problem of delayed completion of construction works still persists in many public

entities, where works and services contracted are not completed within the contract period.

Delays ranged from 1 month to almost 5 years and in some cases like in Rusizi and

Nyamasheke, construction works at some sites were abandoned. The problem of poor

contract management was more apparent at EWSA, MINISANTE and in districts where

construction works for roads, school buildings, sector buildings and other structures were not

done timely. There were forty six (46) instances noted where contracts worth Frw

23,771,011,119 were delayed. Additional nine (9) contracts worth Frw 908,562,999 were

abandoned, as shown in the table below:




Entity

No. of instances of

delayed contracts

Contract amount

(Frw)

A Delayed contracts

1 RDRC 1 230,595,444 2 WDA 1 2,420,436,060 3 NUR 2 238,779,417 4 MINISANTE 1 2,873,299,921 5 NAEB 1 62,000,000 6 EWSA 4 10,235,614,852 7 City of Kigali 1 490,915,508 8 Gasabo District 2 321,088,315 9 Gatsibo District 16 2,843,882,224

10 Nyabihu District 1 34,417,031 11 Nyamasheke District 1 145,625,074 12 Ruhango District 4 938,452,137 13 Rusizi District 2 288,072,999 14 RAB 3 295,319,051 15 Huye District 1 896,049,008 16 Muhanga District 1 232,387,914 17 Ngororero District 1 1,066,483,060 18 Nyaruguru District 1 87,500,000 19 Musanze District 1 41,472,785 20 KFH 1 28,620,319

Sub-total 46 23,771,011,119

B Delayed and abandoned contracts

1 RSSP III 2 295,528,000 2 Musanze District 1 41,472,785 3 Nyamagabe District 1 17,108,250 4 Rusizi District 4 504,044,364 5 MINICOM 1 50,409,600

Sub-total 9 908,562,999

Total 55 24,679,574,118

For the nine (9) abandoned contracts, a total of Frw 606,076,480 had been paid to the

contractors by the time of abandoning the works. These delays and abandonment of works

imply that Government programmes were not realised within envisaged timeframes and this

has had negative impact on service provision to the population. For these abandoned

contracts, management was unable to determine the value of work done at the time of

abandonment of works by contractors.

For the case of EWSA, the delays are in respect of construction of seven (7) micro hydro

power plants worth Frw 10,235,614,852 which had been delayed for over 4 years. Works

were expected to be completed by 30th June 2009 but by the time of audit in September 2013,

works at some power plants had not been completed. For MINISANTE, the delays are in




respect to construction of Bushenge Hospital. Construction works have delayed for over 3

years, and were not complete by the time of issuing the report of MINISANTE in April 2014.

Increased cost of supervision of works due to delayed works

Due to delayed completion of works, many public entities incurred extra supervision costs for

the additional time required to supervise delayed works. This has ultimately increased costs

of construction works. Such cases were noted with EWSA (for power plants), MINAGRI

Livestock Single Project Implementation unit (for development of Gashora Marshland); RDB

where the entity had a supervision contract at the time when there was no fencing ongoing at

the Akagera National Park.

Public entities need to pay close attention to the capacity of contractors when engaging them

for civil works to minimize cases of delayed works. In addition, there is need for proper

follow up of construction works to ensure that the contract terms are adhered to. In the case

of abandoned works, there is need for proper evaluation of works done so that clear steps can

be taken to have the works completed. Entities where works were abandoned need to report

such cases to RPPA for possible sanctions against the contractors. Legal action should be

considered against such contractors who abandon contracted works.

There is also need to pay due attention in design of contracts for supervising companies to

allow for flexibility in case of stalling of construction works. A clear linkage needs to be

made between construction works and supervision fees, to minimize additional expenses

incurred on supervision. The construction contracts should also be designed to ultimately

meet the cost of supervision for any delays caused by the contractor.

4.12 DELAYS IN IMPLEMENTATION OF GOVERNMENT

PROJECTS AND PROGRAMMES

The audits identified various cases of low budget absorption by Government projects, which

resulted in seeking of project extensions in order to implement many of the planned project

activities. Most of the projects obtained extensions requested, but such delays in

implementation of government projects and programs implies that beneficiaries have to wait

longer to enjoy the benefits envisaged from the projects. Such cases were noted at LVEMP II

(REMA); CEDP, EIF, G 4 C TAP (MINICOM); WDA/SDP (WDA) and EATTFP (RTDA).

Other cases were noted where projects had not commenced as envisaged, as shown below:




• At RTDA, management failed to utilize a grant of USD 20,000 obtained to support the

development of a policy for non- monotorised Transport (NMT) in Rwanda. The first

disbursement was received in January 2012 and final installment in May 2013 but no

activity had been implemented by April 2014. The grant expired on 31stDecember 2013

and RTDA is required to refund these funds to the donor.

• At EWSA, Government secured funding in March 2009 to support a project for

Multinational Interconnection of Electrical Grid of Nile Equatorial Lake Countries aimed

at facilitating electricity transmission and interconnectivity between Rwanda and

neighbouring countries. The project closing date is 31 December 2014 but works had not

commenced by the time of auditing EWSA in September 2013. The process of

expropriating people affected by the project had not been finalised after 5 years since

commencement of the project. Project implementation cannot start prior to finalisation of

the expropriation process. Government was considering extension of closure date for this

project.

• At MINAGRI (Livestock Single Project Implementation Unit), there were delays in

works to develop Gashora marshland and install equipment at the milk collection centres

built across the country to facilitate milk producers. An addendum was signed extending

installation of equipment at the milk collection centres. The works at the marshland had

stalled and contract was terminated due to non-performance.

• At EATTP (RTDA), project implementation started in 2007 and is expected to end on 30

September 2014. However, out of USD 15,000,000 allocated to the project throughout its

implementation period, only USD 8,107,878 representing 54.05% had been utilised as at

30 June 2013. Funds allocated to some of the project activities like ‘Improvement of

corridor security and transport policy (comprising mainly installation of National Cargo

Tracking Systems)’ and ‘Border crossing improvement/joint border posts (construction of

Gatuna One Stop Border Post)’ had not been utilised. Status of implementation of these

two activities had remained the same since June 2012 and budget utilisation stood at 0.3%

and 4.0% respectively as at 30 June 2013 same as at 30 June 2012.

The delayed implementation of Government projects and programmes is an indicator of lack

of appropriate preparedness on part of Government agencies to implement the approved

projects. There is need for Government agencies to undertake appropriate review of their




readiness for project implementation and put in place necessary structures and appropriate

measures to facilitate timely implementation of Government projects and programmes.

4.13 LACK OF VALUE FOR MONEY ON INVESTMENT IN

IT/COMPUTER SYSTEMS

The Government is making significant investments in IT system for the purpose of improving

competitiveness and efficiencies in service delivery and productivity. However, some of the

IT systems acquired are not effectively utilised and others are redundant or not functionally

configured to deliver the desired outcomes. Examples are provided below:

• At EWSA, the entity acquired an integrated IT system “ORACLE” to enhance

accountability and improve efficiencies in service delivery. As at the time of the audits,

USD 1.1 million had been invested in the system but it was not fully functional as some

modules were not operating and financial statements generated through this system were

found to be unreliable with significant omissions and errors. The entity also continues to

operate various key stand-alone systems especially those related to billing outside the

ORACLE integrated system.

• At NUR, the University completed the development of a Management Information

System (MIS) in September 2012 in order to resolve problems related to poor

performance of existing systems, lack of systems integration and the absence of reliable

systems. However, at the time of auditing NUR in October 2013, it was noted that some

components of the installed MIS modules were not operational and yet all the required

modules had been successfully installed and were live by September 2012. Management

did not provide justifiable reasons to explain why these components were not operational

for approximately 1 year after the successful installation of the modules. NUR spent Euro

1,744,000 on the development of this system. The MIS was developed after failure of an

ORACLE system previously acquired by the University.

• At RDB, Government spent USD 1,754,932 to roll out an electronic Document Tracking

and Workflow Management System (DTWMS) in selected government institutions, to

ease the tracking and long term preservation of documents through streamlined and

automated processes within the public sector. DTWMS was installed in 55 Government

institutions and 4,069 users were trained on how to use this system. However, there are no

measurable performance targets and expected outputs for each of the key objectives of the




DTWMS to facilitate proper assessment of performance of DTWMS. There are some

institutions like MINAGRI, MINICOM and MINISPOC which did not process any

documents through the system throughout the year. Even for those using the system, the

level of utilisation is still low, as noted in Nyagatare, Rutsiro, Rusizi and Karongi

districts, MINIRENA and MIDIMAR.

• At MINECOFIN, the Government acquired 50 licenses (30 licenses in September 2011

and additional 20 licenses in August 2013) for Internal audit management software

(TeamMate) for Government internal Auditors from Ministries, Districts and other

Agencies to improve the efficiency and effectiveness of internal audit function of various

budget agencies in Rwanda. However, many Internal Auditors trained had never used the

system up to December 2013 and a few who are still not using the system todate. The

Ministry had incurred USD 203,470 to acquire, install and train users of the system as of

April 2014.

The above cases are an illustration that Government is not obtaining value for money on

investments made in IT systems and there is need to put the systems installed to better use in

order to enhance efficiency in service delivery. A detailed review of IT investments should be

undertaken by RDB/IT and recommendations to facilitate efficient acquisition and utilisation

of systems in public entities across the country.

4.14 WEAKNESSES IN MANAGEMENT OF FIXED ASSETS AND

STOCK ITEMS IN PUBLIC ENTITIES

4.14.1 Inadequate tracking and monitoring of Government assets and stock items

As highlighted in my previous reports, fixed assets registers maintained by some entities did

not have adequate information to facilitate proper tracking of the fixed assets. In some cases,

fixed assets were not coded and no physical verification had been carried out. In addition,

most Government assets are not insured, and there are no title deeds for Government

properties. It is therefore difficult to ascertain the right of ownership in case disputes in

ownership arise. Government property can be misappropriated in absence of proper

monitoring and title deeds.




4.14.2 Reported cases of stolen assets and stock items

Weaknesses in controls over assets materialised during the year, resulting in various cases of

stolen assets or failure to account for some assets in the register. Cases were noted where

weaknesses in controls over fixed assets resulted in loss of assets worth Frw 660,573,078.

Public entities need to strengthen controls over management of assets and stock items to

minimise instances of stolen items. In addition, efforts should be made to recover the stolen

items.

4.14.3 Idle equipment and materials in public entities

There are some budget agencies which acquired assets and other equipment but have not put

them to use for long. Cases of idle equipment and materials worth Frw 1,162,132,816 were

noted in seven (7) public entities, alongside those highlighted in the health sector and WDA.

See table below:

Item

number Entity Item

Cost of the

equipment/service

(Frw)

Rationale for idle equipment

1 NAEB Spares and machinery

444,020,775

Stock of spare parts and machinery which have not been utilized for long. There were no movements on stock cards of these items for over 2 years as NAEB no longer owns factories. These stock items are only tying down funds with no indication of when they will be utilised or sold. The stock items and machinery are prone to becoming obsolete if no immediate measures are undertaken to utilise or sell them. Value for money may not be realized from these spares.

2 ISAE Milk processing equipment

10,647,144

ISAE incurred expenditure of Frw 10,647,144 for transportation relating to the milk processing plant equipments. The equipment supplied was the donation from NUFFIC (Netherland Organisation for International Cooperation in higher Education). These equipment were delivered by C.VAN’T RIET TECHNOLOGY B.V on 3rd November 2010. During the audit visit on 26/9/2013, the milk processing plant is not operating. Management took a decision to conduct an architectural study aiming at transforming the building to allow installation of equipment but works had not been completed. Key equipments for milk processing supplied were still missing some accessories such as boiler, the reception tank.

3 NUR Laboratory equipment

16,268,647

An equipment called Leica RM 2265 fully Motorized Rotary microtome acquired by NUR from Wagtech International Ltd at cost of GBP 19,469.42 equivalent to Frw 16,268,647 for Biology department is not functioning since delivery. This was due to the fact that the laboratory technicians are not able to use it. The staff who had been trained on how to operate this equipment left NUR and no efforts were made to train other staff so as to operate the equipment.




Item

number Entity Item

Cost of the

equipment/service

(Frw)

Rationale for idle equipment

4 IRST Biodiesel plant 187,920,000

IRST acquired a bio-diesel plant at a cost of Frw 187,920,000. However, IRST ceased to produce bio-diesel in May 2012 and the plant has been redundant to date. This was due to the fact that among the chemicals used in production of bio-diesel, two of potassium methylate and karifisher reagent could not be got through normal procurement procedures (national and international open competitive tendering). In addition, owing to stoppage of bio-diesel production, other raw materials (palm oil and methanol) which had been purchased were disposed of at a loss of Frw 7,272,700.

5 Kirehe District

Construction materials-FARG activities in Kirehe District

9,676,250

Construction materials (cement, iron sheets and nails) were supplied for rehabilitation of houses of Genocide Survivors in Nyamugali, Muhama, Nyarubuye, Kigina, Nyabitare and Kirehe sectors, but were still stores at sectors by time of audit visit on 28th January 2014.

7 MINALOC Laptops at MINALOC

493,600,000

There are 1,000 laptops (worth Frw 493,600,000) in a MINALOC store that were supplied on 23 February 2010 by DIDADA Supply S.a.r.l for distribution to Executive Secretaries of cells. MINALOC rejected the laptops when it was discovered at the time of checking that they did not meet the technical specifications. MINALOC had only paid an advance Frw 98,720,000 which is not yet recovered. The high court of Kigali ruled in favour of MINALOC but the supplier appealed against the ruling in the Supreme court. These computers, though not accepted by MINALOC have been idle in the MINALOC store for the past 4 years.

Total 1,162,132,816

The above cases imply that Government is not realising the benefits related to the acquisition

of these assets and hence no value for money. There is need for better planning and due care

in procurement of assets so that they are put to appropriate use when acquired.

4.15 TOURISM BOAT ACQUIRED BY RDB AT MUNEZERO ON

LAKE KIVU GROUNDED FOR 3 YEARS

In December 2008, RDB (the former ORTPN) acquired a modern tourism boat worth Frw

308,134,375 (€ 328,000) to cover the gap of high-end tourists to ensure ease of connection

between Rubavu District and Rusizi District, and other districts along Lake Kivu. The boat

was the only modern high end tourist boat within the country to address the tourists’ needs in

the Western Province.




However, in May 2011, the boat’s propeller got damaged during one of the boat cruises and

sunk in the lake. The boat has since been grounded. Procurement of the spare parts to replace

the damaged propeller was poorly handled and delayed for over one and half years up to 4th

December 2012 when it was installed. Upon fixing the propeller, management realised that

the boat could still not operate because other parts of the boat had become damaged during

the period it was grounded, and required other spare parts to fix them. These other spare parts

were acquired on 12 April 2013 at a cost of Frw 2,418,661 (€ 2,883) and installed on the boat

one month later on 10 May 2013.

Despite the repair costs incurred to fix the propeller and other spare parts, grounding the boat

for such a long time, had significantly affected the functioning of the engine and test drive

conducted by management on 16th July 2013 found out that the engine power was not as

strong as it initially used to be and was consuming more fuel than normal. The boat is still not

functioning and has ultimately been grounded for about 3 years since 21 May 2011 up to 27

May 2014, the time of conducting my current audit. For these 3 years the boat has been

grounded (idle), RDB has not only lost potential tourism revenue from the boat cruises but

also promotion of tourism activities in the country has been negatively affected.

I understand that management has contacted RPPA requesting for a no objection to use single

source procurement method to purchase a new boat engine. This will require RDB to incur

additional costs to put the boat back in operation. Such additional significant costs could have

been avoided, if RDB had taken timely steps to fix the propeller when it got damaged within

reasonable time after May 2011. RDB needs to speed up the procurement process for the new

engine to resume the boat cruises and boost tourism activities in the country.

4.16 WEAKNESSES IN MANAGEMENT OF REVENUE

GENERATED BY PRISONS

A review of management of revenue generated through prisons identified the following:

• Lack of appropriate information in production reports: Prisons under Rwanda

Correctional Services (RCS) produce various products from agriculture, handcraft, and

artisanal products but the monthly and annual reports do not contain information on stock

quantities for the opening balance, production during the period, quantities sold and

closing balance of items in stock. The reports prepared only show the value of sales,

without reconciling them to quantities sold and quantities in stock, hence lack of proper




accountability for production made at different prisons. Some of these sales were not

banked timely and others were utilized at source.

• Inconsistencies in tariffs set by different prisons for different products sold: RCS did

not have documented procedures to guide them in setting tariffs at which to sell a variety

of items such as agriculture products; handcrafts, arts products etc. In addition, there is no

evidence that RCS top management was involved in checking the reasonableness of

tariffs applied by different prisons during the year, implying that revenue realized from

sale of such products at different prisons cannot easily be tracked.

• Lack of standardized prices for hiring out services of prisoners: RCS generates

revenue by offering prisoners to provide services at a fee to interested customers.

However, management did not avail policy documents that provide guidelines for setting

standardized prices to be charged for hiring out services of prisoners. As a result, different

prisons determined contract prices differently without any consistent basis of determining

the contract price. For example, some contract prices were determined on the basis daily

rate per prisoner, while others were determined on the basis on outputs to be delivered in

the contract. In other cases, there was no basis for determining the contract price. The

rates charged by RCS varied from contract to contract and from prison to prison. There

was no guidance on which rates should be applied on which contract or on which

services.

• Failure to record and track invoices: RCS signed contracts with other Government

entities and private persons for construction of roads, buildings etc and issued invoices to

these customers. However, the entity did not maintain an invoice register for monitoring

the invoices issued, paid and those outstanding. Invoices amounting to Frw 437,278,582

outstanding as at 30 June 2013 were omitted from RCS financial statements.

• Lack of accountability for Receipt books: RCS did not maintain a stock card of receipt

books purchased and those handed over to production unit. The opening stock balance for

receipt books is not known and hence final closing stock balance could not easily be

established. In addition, there was also no evidence of reconciliation of the revenue

collected using receipt books and amount reported and deposited on bank account. The

production reports from prisons do not indicate any references to receipt books used in

revenue collection. Used receipt books are kept at prisons are not returned to RCS

headquarters for accountability before issue of new receipt books.




• Revenue collected in Canteens at prisons not properly tracked and accounted for:

There were irregularities noted in management of rental income from canteens at the

different prisons. Management of RCS did not maintain a statement of account for each

of the canteens to monitor and track actual balance outstanding at any reporting date. Any

outstanding balances at the beginning of the year and at year end are not known and no

reconciliations were provided by management to confirm whether all outstanding

balances from canteens had been recorded as debtors in financial statements as at 30 June

2013.

For example, some rental income for June 2012 of Frw 5,527,550 was recorded during

the year and had not been recovered by the time of audit in November 2013. There was

also a difference of Frw 5,441,832 between revenue from rental income from canteens in

the books of account and expected rental income from contracts. This difference would

have increased if the missing contracts for July 2012 (for Remera, Butare and Gitarama

prisons) and August 2012 (for Remera prison) had been provided. A case at Huye prison

shows that rental income from the canteen of Frw 2,000,000 for four (4) months of April,

May, June and July 2011 was diverted and utilised to settle bills for staff meals and had

not been recovered as at November 2013.

There is need for management of RCS to strengthen controls over management of

internally generated revenue at different prisons and ensure that all revenue generated is

properly accounted for, to supplement Government funding of prisons’ activities.

Appropriate guidelines and policies should be put in place, to ensure consistence in

management and accountability of revenue generated at different prisons.

4.17 NON COMPLIANCE WITH TAX AND SOCIAL SECURITY

LAWS AND REGULATIONS

The problem of non compliance with existing tax laws and CSR regulations has persisted and

many entities did not remit the required taxes and pension contributions as required by the

law. Some institutions did not deduct the required taxes from suppliers or PAYE from staff

while others deducted but failed to remit amounts withheld to Rwanda Revenue Authority or

RSSB by the fifteenth day of the following month as required by law. In some cases, the

withholding tax was remitted late. A total of Frw 592,061,304 was not deducted by public

entities during the current year compared to Frw 564,571,091 in my previous report. An




amount of Frw 2,702,538,125 was deducted but not remitted, when compared to Frw

52,286,870 in previous year. Analysis of the taxes not deducted and/or not remitted is

elaborated below:

Taxes

• An amount of Frw 77,192,016 was not deducted as 18% VAT from suppliers. In addition,

an amount of Frw 15,346,418 deducted was not remitted to Rwanda Revenue Authority

by some entities.

• An amount of Frw 2,178,337 was not deducted as 3% withholding tax from suppliers. In

addition, an amount of Frw 1,903,650 deducted was not remitted to Rwanda Revenue

Authority by some entities.

• An amount of Frw 83,671,357 was not deducted as 15% withholding tax from service

providers.

• Pay As You Earn (PAYE) amounting to Frw 214,063,845 was not deducted while Frw

2,220,936,341 was deducted but not remitted to RRA.

CSR

• An amount of Frw 214,955,749 relating to social security contributions (CSR) was not

deducted. In addition, social security contributions (CSR) amounting to Frw 464,351,716

were deducted but not remitted to RSSB.

This continued failure to remit taxes to RRA and social security contributions to RSSB

attracts a lot of penalties and ultimately results into diversion of Government resources. There

is need for public entities to ensure full compliance with the existing tax and social security

laws and regulations.

4.18 RECOVERY OF FUNDS REPORTED IN FRADULENT

CASES

The issue of misappropriation of public funds has persisted in some entities. A total of Frw

1,092,490,786 in fraudulent activities had not been recovered by the time of audits this year.

This unrecovered balance includes amounts for fraud cases identified during the audits, and

outstanding recoveries from previously reported fraudulent cases, as shown in table below:

Fraud cases Amount not recovered

Frw




Fraud cases identified during the 2013/2014 audit cycle 532,675,121 Fraud cases identified in previous audit cycle and not recovered 22,725,312 Fraud cases identified over 2 year ago and not recovered 537,090,353

1,092,490,786

Fraud cases identified during the 2013/2014 audit cycle

The fraudulent cases of Frw 532,675,121 reported during the year were identified in eight (8)

public entities of EWSA, Rwanda National Police, ONATRACOM, NUR, Rwanda Housing

Authority (RHA), Rubavu, Musanze and Rusizi Disricts. Like was the case last year,

fraudsters are exploiting weakness in controls in Non budget agencies to divert public

resources for personal gain. Two of the fraudulent cases identified this year occurred at the

branch for EWSA (Frw 115,500,000) and at the health centre in Musanze District (Frw

44,128,333). The case at Rwanda National Police (Frw 294,896,986) points to abuse of

power at BNR where funds were transferred to a beneficiary different from one in payment

authorisation documents handed to the bank by Rwanda National Police officials. Other cases

involved failure to account for physical assets and cash in the custody of various officials at

the public entities. There is need to enforce the controls stipulated in Government financial

management policies manuals to minimise future cases of fraud. Chief Budget Managers

should ensure that due care is taken to review all the necessary support documents before

approval of payments.

Fraud cases identified in previous audits

An assessment of status of recovery of reported cases of fraud in previous reports shows slow

progress in recovery. Out of Frw 650,936,302 reported as funds misappropriated in

fraudulent cases over the past two years, only Frw 98,500,872 had been recovered and/or

accounted for and the remaining balance of Frw 552,435,430 (85% of funds

misappropriated) was yet to be recovered/accounted for, as shown in table below:

Reported

amount

Amount

recovered

Unrecovered

balance at time of

current audits

Frw Frw Frw

Fraudulent cases previously reported in 2012 annual report 628,210,990 98,500,872 529,710,118 Fraudulent cases previously reported in 2013 annual report 22,725,312 0 22,725,312

650,936,302 98,500,872 552,435,430




The majority of the above cases are either still in the courts of law or have been dismissed

due to lack of sufficient evidence. For the eight (8) cases (relating to stolen nails at

MINALOC stores; missing materials for 9YBE at Kicukiro Warehouse of MINEDUC and

stolen computers at NISR), Government was unable to provide convincing evidence against

the suspects and ultimately lost the case, and hence failed to recover public funds worth

Frw 279,294,890 diverted/misappropriated in these cases. For the case of misappropriated

funds at ONATRACOM, management stopped pursuing those responsible and has written off

a balance of Frw 19,891,681. See progress on recovery of Frw 552,435,430 in the table

below:

Summary of status No. of cases Amount (Frw)

Cases where case decided in favour of Government pending recovery 5 168,452,931

Cases dismissed due to lack of evidence or where Government lost 8 279,294,890

Cases where legal process is ongoing 8 33,716,862

Cases where no evidence of follow up 3 38,173,694

Cases where Government has decided not to pursue culprits 1 19,891,681

Cases not followed during OAG audits (ORINFOR was not audited) 1 12,905,372

26 552,435,430

Where Government has won court cases, the recovery procedures were still ongoing, and

public entities had not yet received the money from culprits.

Documents

TABLE OF CONTENTS · 2015-04-17 · TABLE OF CONTENTS TABLE OF CONTENTS ... KWAMP Kirehe Community Based Watershed Management Project LEVEMP Lake Victoria Environmental Management