OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA UGANDA EMBASSY, ADDIS ABABA

Transcription

1 OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA UGANDA EMBASSY, ADDIS ABABA REPORT AND OPINION OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA EMBASSY, ADDIS ABABA FOR THE YEAR ENDED 30 TH JUNE 2016 DECEMBER, 2016 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS ACRONYMS... iii 1.0 INTRODUCTION BACKGROUND ENTITY FINANCING OBJECTIVES OF THE EMBASSY AUDIT OBJECTIVES AUDIT PROCEDURES PERFORMED AUDIT FINDINGS... 7 FINANCIAL STATEMENTS ii

3 ACRONYMS Acronym A/C AfDB AU GoU IGAD MoFA MoFPED NTR Meaning Account African Development Bank African Union Government of Uganda The Inter-Governmental Authority on Development Ministry of Foreign Affairs Ministry Of Finance Planning and Economic Development Non Tax Revenue PFMA Public Finance Management Act 2015 PRC PV TAI UCF UGX UN-ECA USD VAT Permanent Representative Committee Payment Voucher Treasury Accounting Instructions Uganda Consolidated Fund Uganda Shillings United Nations Economic Commission for Africa United States Dollars Value Added Tax iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA EMBASSY - ADDIS ABABA FOR THE YEAR ENDED 30 TH JUNE, 2016 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of the Uganda Embassy, Addis Ababa for the year ended 30 th June These financial statements comprise of the Statement of Financial Position as at 30 th June, 2016, Statement of Financial Performance, and Cash Flow Statement together with other accompanying statements, notes and accounting policies. Management Responsibility for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act (PFMA), 2015, the Accounting Officer is accountable to Parliament for the funds and resources of the Embassy. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance Management Act, 2015 and the Financial Reporting Guide, 2008, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda (as amended) and Sections 13 and 19 of the National Audit Act, 2008 is to audit and express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing (ISA). Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor s judgment including the assessment of risks of material misstatement of financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances but not for purposes of expressing an 1

5 opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Part A of this report sets out my unqualified opinion on the financial statements. Part B which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management and form part of my annual report to Parliament. PART A Unqualified Opinion In my opinion, the financial statements of the Uganda Embassy, Addis Ababa for the year ended 30 th June, 2016 are prepared, in all material respects, in accordance with Section 51 (1) of the Public Finance Management Act, 2015 and the Financial Reporting Guide, Emphasis of matter Without qualifying my opinion, I draw attention to the following matter presented in the financial statements that, in my judgment, is of such importance and fundamental to users understanding of the financial statements; Unauthorised Over Expenditure on Goods and Services UGX.79,948,584 Contrary to Section 22 of the Public Finance Management Act (PFMA), 2015, I noted that actual expenditure on some budget items exceeded the budgeted amounts by UGX.79,948,584. I have not obtained any evidence to show that this amount was spent with proper authorization by the Minister as required by the regulation. Other matter In addition to the matter raised above, I consider it necessary to communicate the following matter other than those that are presented or disclosed in the finanical statements that, in my judgement, is relevant to the users understanding of the audit report. 2

6 Un-funded Mission Priority Activity I noted that due to the fixed MTEF budget ceilings, there were always expenditure pressures on the available funds. The situation was aggravated by additional funds requirement as a result of Uganda s selection to the membership of African Union Peace and Security Council in 2013 for a three (3) year term. Although the Embassy prepared a budget request of UGX.683,001,961 to cover this important assignment, it remained unfunded. There is a risk that the embassy will fail to facilitate Uganda s obligations as a member of the AU, Peace and Security Council. John F.S. Muwanga AUDITOR GENERAL KAMPALA 20 th December,

7 PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA EMBASSY - ADDIS ABABA FOR THE YEAR ENDED 30 TH JUNE, 2016 This section outlines the detailed audit findings, management responses and my recommendations in respect thereof; 1.0 INTRODUCTION Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended), requires me to audit and report on the public accounts of Uganda and of all public offices including the courts, the central and local government administrations, universities and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the Uganda Embassy - Addis Ababa, to enable me report to Parliament. 2.0 BACKGROUND The Uganda Embassy, Addis Ababa is located at Kirkos Kifle Ketema, Kebele 35, H. No. 031, Addis Ababa, Ethiopia. It is a multilateral station with a duty of representing Uganda in Ethiopia, Djibouti, and also accredited to the AU, UN-ECA, IGAD, AfDB, as well as member of the Peace and Security Committee (PSC) on South Sudan, in addition to offering consular services to Ugandans in the countries stated. 3.0 ENTITY FINANCING The Uganda Embassy, Addis Ababa was financed by grants from Central Government to the tune of UGX.2,892,876,369. Non-tax revenue of UGX.810,834,234 was collected, bringing total revenue to UGX.3,703,710,603. The total revenue of UGX.3,703,710,603 constituted 118% of its approved budget estimates of UGX.3,169,285,169 for the year under review. 4.0 OBJECTIVES OF THE EMBASSY The Embassy has the following objectives; To remain engaged with AU Peace and Security Council and other AU relevant organs to be supportive of various peace-building initiatives/processes of interest to Uganda and the Great Lakes Region. 4

8 Identify and lobby the AU, its affiliated organizations and the ADB to increase technical and/or financial support to Uganda. Identify and lobby the placement of Uganda/Ugandans in at least 10 influential positions in the AU and other AU relevant organs. Lobby the AU for its understanding and appreciation of Uganda's positions on various issues including; social, political, cultural, etc. Actively engage Ethiopia for coordinated positions on the Nile issues. Engage Ugandan Diaspora in Ethiopia to actively contribute to development at home (i.e. through remittances, direct investment, partnerships building, skills etc.) Handle at least 100,000 requests for consular services per year. Identify and facilitate acquisition, development and maintenance of at least one Government properties in Addis Ababa per year. Lobby Ethiopian inward investment transfers of at least USD.100m annually. Promote at least USD.50m worth of Uganda exports to Ethiopia per year. Facilitate attraction of at least 20,000 tourists from Ethiopia annually. 5.0 AUDIT OBJECTIVES The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish whether; a. The financial statements were prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures for the period and of the financial position as at the end of the period. b. All Mission funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Goods and services financed were procured in accordance with the Government of Uganda procurement regulations. d. To evaluate and obtain a sufficient understanding of the internal control structure of the Mission, assess control risk and identify reportable conditions, including material internal control weaknesses 5

9 e. The Management of the Mission complied with the Government of Uganda financial regulations. f. All necessary supporting documents, records and accounts had been kept in respect of all Mission activities, and were in agreement with the financial statements presented. 6.0 AUDIT PROCEDURES PERFORMED The following procedures were undertaken; a. Revenue Obtained schedules of all NTR collected and reconciled the amounts to the Embassy s bank statements and Navision Accounting System. b. Expenditure A sample of the Embassy s payment vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period audited. d. Procurement Reviewed the procurement of goods and services under the Embassy during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the Embassy assets during the period audited. f. Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessed the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. 6

10 7.0 AUDIT FINDINGS 7.1 CATEGORIZATION OF FINDINGS The following categorization of the audit findings has been adopted to enable a better prioritisation of the implementation of audit recommendations; Table showing categorisation of findings No Category Description 1 High significance 2 Moderate significance 3 Low significance Has a significant / material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. It is a matter of low risk or low stakeholder interest. Accordingly, the table below contains a categorized summary of the findings that follow in the subsequent paragraphs of the report; Table showing categorized summary of the findings NO FINDING SIGNIFICANCE 7.2 Unremitted NTR - UGX.45,157,384 High 7.3 Un authorised expenditure on Goods and Services High UGX.79,948, Budgeting for the Mission Activities Moderate 7.5 Monitoring Performance of the Mission in relation to the Mission Moderate Charter 7.6 Human Resource Management Matters Low 7.7 Inspection Government Properties Low 7.8 Status of prior year audit recommendations Low 7.2 UNREMITTED NON TAX REVENUE (NTR) - UGX.45,157,384 Embassies are required to collect NTR which should regularly be transferred to the Consolidated Fund intact. I noted that an amount totalling to UGX.45,157,384 collected as NTR remained unremitted at the closure of the financial year. This implies that management did not fully adhere with the requirement to promptly transfer such funds to the Uganda Consolidated Fund (UCF), thus denying government revenue to implement its planned activities. 7

11 The Accounting Officer explained that the reason for the delayed remittance was that the collections had been received just before the closure of the financial year. I advised the Accounting Officer to always ensure that all NTR collected is promptly transferred to the UCF. 7.3 UN AUTHORISED EXPENDITURE ON GOODS AND SERVICES UGX.79,948,584 Section 22 of the Public Finance Management Act (PFMA), 2015, states that the Minister may, upon request by an Accounting Officer, vary within a vote, the amount of money allocated to the vote. However a review of the financial statements for the year revealed that actual expenditure on the following items exceeded the budget amounts; Table showing budget lines overspent SN Expenditure Item Approved Budget - UGX Actual Expenditure - UGX Over Expenditure - UGX 1 Employee Costs 1,303,874,093 1,328,520,338 24,646,245 2 Goods and Services 1,045,163,192 1,100,465,530 55,302,339 Total 2,349,037,285 2,428,985,868 79,948,584 I did not obtain evidence of authorization by the Minister as required by the PFMA, This brings about distortions in budgeted items, and is an indication of weaknesses in budgetary control. In response, the Accounting Officer acknowledged the anomaly and committed to adhere to approved budget allocations in future. He however explained that the need for a virement becomes obvious in the last quarter of the financial year, making the timing very late to start the virement process. I advised the Accounting Officer to always comply with the law and adhere to the approved budget, or else initiate virement procedures in a timely manner, in case of unavoidable circumstances, in accordance with the PFMA. 7.4 BUDGETING FOR THE MISSION ACTIVITIES The Uganda Embassy in Ethiopia has a duty of representing Uganda in Ethiopia, Djibouti, and is also accredited to the Africa Union (AU), the United Nations Economic Commission for Africa (UN-ECA), IGAD and the African Development Bank (AfDB). The Embassy also represents Uganda on the African Union Peace and Security Council which is the continental body charged with managing and resolving conflict situations all over 8

12 Africa. The Embassy additionally provides consular services to Ugandans in the countries stated above. According to the Ambassador, this scope of work involves a lot of activities and travel which require adequate funding and time. For the financial year 2015/16 a total of UGX.2,892,876,369 (compared to UGX.2,543,908,170 for 2014/15) was released to implement planned activities of the Embassy in the above areas of accreditation. This indicated an increase in Embassy funding by Government of Uganda of about UGX.348,968,199 (i.e. 13.7%). It was noted that due to fixed MTEF budget ceilings, there were always expenditure pressures on the available funds. The situation was aggravated by Uganda s selection for a 3 year membership of African Union Peace and Security Council in 2013 and its membership was again renewed in The Embassy accordingly prepared a budget request of UGX.683,001,961 to cover this important assignment, but this has since remained unfunded. This matter was also raised in my previous audit report, but remained unaddressed. As a result, the Embassy continues to encounter budgetary challenges in order to fully meet its obligations in the implementation of its mission charter. Accordingly, the Embassy is faced with a risk of diverting appropriated funds to finance its new obligations. In response, the Accounting Officer explained that, this demanding assignment continues to heavily strain the Mission s regular budget, and that the matter has been explained to the concerned authorities but no supporting budget has been approved for this activity. He promised, as per my recommendation, to continue pursuing possibilities of having the Mission budget enhanced to enable it to adequately support its new obligations and activities as stipulated in its Mission Charter. 7.5 MONITORING PERFORMANCE OF THE MISSION IN RELATION TO THE MISSION CHARTER The Embassy has a Mission Charter dated 16 th January 2015 for the year 2015/16 as authorized by the Minister of Foreign Affairs and constitutes a contract between the appointing authority and the Embassy, which is further broken down into annual work plans and schedules of duties for staff. It was noted that a work plan for 2015/16 was drawn and performance reports are available from July 2015 to June It was also agreed that the performance reporting shall accordingly follow this revised charter and 9

13 annual work plans to be derived from the 3 year plan starting in the financial year 2015/16. However, I noted that there was no monitoring mechanism established to monitor and evaluate performance. The lack of a monitoring mechanism may lead to failure to analyze and identify possible solutions to mitigate the gaps between planned and actual performance. This in turn can affect the attainment of mission objectives as stipulated in the Charter. In response, the Accounting Officer explained that, following my recommendation, management will design a monitoring mechanism to enable constant monitoring of the progress of implementation of the Charter. The mechanism developed would capture not only the successes scored, but also the gaps registered and the challenge encountered. I await the outcome of this Management action. 7.6 HUMAN RESOURCE MANAGEMENT MATTERS A review of staff records and interviews conducted with management revealed the following in regard to the mission staff; a. Staff Work Overload During the audit, I was informed by the Ambassador that the current staffing level at the Mission was inadequate, given the areas of accreditation. The Embassy is both a bilateral station accredited to Ethiopia and Djibouti but also a multilateral station accredited to the African Union (AU), UN-ECA and IGAD. The Mission is therefore involved in handling numerous high level and technical delegations per month, daily committee meetings, and frequent official visits especially by the Head of State, which calls for extra logistical support. The respective budgets for extra activities and responsibilities like IGAD and the AU Peace and Security Council have not been funded for the financial years 2013/14, 14/15 and 15/16. The above implies that staff are constantly bogged down with extra work, leading to work overload. Under the circumstances, there is a risk of staff demotivation and inefficiencies due to work overload. The Accounting Officer, stated that the matter had severally been tabled to the Ministry of Foreign Affairs headquarters and that the Mission has finally been given assurance of 10

14 re categorisation to Large status during the on-going structural review and will therefore be adequately staffed. The Accounting Officer is advised to continue following up this matter with the Ministry Headquarters until the ongoing initiatives to reclassify the Mission category are completed and adequate staff posted accordingly. b. Staff Accommodation Challenges During the audit, the Ambassador explained that given the rising cost of rent in Addis Ababa brought about by housing shortage, there are unreasonable rent revisions every year, hence the need to constantly negotiate with landlords and to maintain long term tenancy, if staff are to have decent and safe accommodation. He further explained that the best alternative would be construction of staff accommodation, if the Embassy is allocated a sufficient capital development budget. In response, the Accounting officer stated that the issue of expensive rental accommodation had been tabled at the Ministry of Foreign Affairs headquarters, and had been informed that property development has now been prioritised, and shall be done in phases, starting with offices and later staff accommodation. The Accounting Officer is advised to liaise with the relevant authorities in respect of this decision in an effort to solve the staff accommodation challenge. 7.7 INSPECTION OF GOVERNMENT PROPERTIES The Uganda government owns two properties in Addis Ababa which comprise of the official residence in Yeka sub city Kebele 05, house number 046, Meganagna and an empty plot in Lebu, Addis Ababa, which is supposed to house the Chancery, VIP suite and staff apartments. An audit inspection of the properties revealed the following; a. Official Residence An audit inspection of the Official residence (house number 046) in Meganagna, an upscale suburb revealed that renovations had been undertaken on the external drainage, driveway, fence and fountain. However, the main house (bungalow) and servants quarters are aged, not regularly maintained, with rusty iron sheet roofing and a faulty plumbing system. By the time of inspection, the Embassy had acquired title for the official residence after completing payment for the land on which it sits. The Ambassador stated that the 11

15 Embassy was holding consultations with the Ministry of Foreign Affairs, Kampala to have the official residence replaced with a modern Chancery, and to secure alternative accommodation for the Ambassador until the issue of the empty plot is sorted and executive accommodation constructed. The house also lacked appropriate furniture as the current set was found too old and unbefitting of an official residence. The Accounting Officer is advised to follow up with the Ministry of Foreign Affairs, Kampala in regard to this matter. b. Embassy Vehicles During the year under review, the Embassy had a fleet of three vehicles comprising of one new Toyota Land cruiser, one Mercedes Benz car and one utility van. The two cars (i.e. the Mercedes Benz and the utility van) are all aged according to the Accounting Officer, and are becoming increasingly costly to maintain, with repair and maintenance costs which totaled to UGX.56,322,656 during FY 2015/16, compared to UGX.29,915,757 during FY 2014/15, with a registered increase of UGX.26,406,899. I however noted that with the acquisition of a new official vehicle, it is expected that the mission should experience a decrease in vehicle maintenance costs going forward. In response, the Accounting Officer stated that he shall consider boarding off the old Mercedes Benz in the financial year 2017/18. I await the outcome of this action by the Accounting Officer. 7.8 Prior Year Audit Matters A review of the implementation status of the prior year audit recommendations revealed the following; SN Summary of Audit Observation 1 Un funded Mission Priority Activity 2 Absence of quarterly procurement returns 3 Un recorded visa fees due (USD.1,400) 4 Lack of Staff Medical insurance Audit Recommendation Accounting Officer (AO) to engage stakeholders to improve the budget. AO to ensure submission of quarterly returns to PPDA AO should follow up on recovery AO to continue engaging stakeholders 12 Remarks There has been a slight improvement in budget release of 13.7%. However, the joint peace and security budget remains unfunded. Implemented Amount still outstanding Staff still not covered by a medical insurance scheme

16 SN Summary of Audit Observation 5 Inspection of Mission properties: a. Chancery: The plot not utilized b. Dilapidated Official residence c. Allocated land at Lebu- Unpaid for and encroached on d. Old Fleet and costly embassy fleet Audit Recommendation AO to engage stakeholders AO to engage the parent Ministry for adequate resources Expedite the follow up option AO should dispose and replace Remarks Issue still stands Issue still stands Issue still stands Partly implemented, some two old vehicles have not been disposed. The above summary shows that not all recommendations have been fully implemented by the Mission. The Accounting Officer is advised to ensure that all audit recommendations are always implemented. 13

17 APPENDIX 1 FINANCIAL STATEMENTS 14