MINISTRY OF LOCAL GOVERNMENT

Transcription

1 THE REPUBLIC OF UGANDA MINISTRY OF LOCAL GOVERNMENT COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME- PROJECT III (CAIIP III) IDB LOAN NO.UG0081 COMPONENT FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 TH JUNE 2015 TOGETHER WITH THE REPORT AND OPINION THEREON BY THE AUDITOR GENERAL OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 TH JUNE iv REPORT OF THE AUDITOR GENERAL ON THE INTERNAL CONTROL STRUCTURE FOR THE YEAR ENDED 30 TH JUNE vi REPORT OF THE AUDITOR GENERAL ON THE SPECIAL ACCOUNTS OPERATIONS FOR THE YEAR ENDED 30 TH JUNE viii REPORT OF THE AUDITOR GENERAL ON THE STATEMENTS OF EXPENDITURES FOR THE YEAR ENDED 30 TH JUNE x 1.0 INTRODUCTION PROJECT BACKGROUND PROJECT OBJECTIVES PROJECT COMPONENTS AUDIT OBJECTIVES AUDIT PROCEDURES PERFORMED COMPLIANCE WITH FINANCING AGREEMENT AND GOVERNMENT OF UGANDA FINANCIAL REGULATIONS PROJECT PERFORMANCE AGAINST THE LOGICAL FRAME WORK STATUS OF THE PRIOR YEAR AUDIT RECOMMENDATIONS... 8 ii

3 LIST ACRONYMS Acronym CAIIP GOU IDB SDR UA UG SHS USD Meaning Community Agricultural Infrastructure Improvement Programme Government of Uganda Islamic Development Bank Special Drawing Rights Unit of Account Uganda Uganda Shillings United States Dollar iii

4 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME- PROJECT III (CAIIP III) - IDB LOAN NO.UG0081 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 TH JUNE 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of Community Agricultural Infrastructure Improvement Programme-Project III (CAIIP III) - IDB Loan No.UG0081 for the year ended 30 th June The financial statements set out on pages 12 to 21 comprise of; Statement of cash receipts and payments Statement of comparative budget and actual amounts Cash flow statement Special account statement Notes to the accounts which contain a summary of significant accounting policies. Management s Responsibility for the financial Statements Management is responsible for the preparation and fair presentation of the project financial statements in accordance with the loan (IDB) guidelines and the cash basis of accounting as described under section 6 of the financial statements and for such internal controls as management determines is necessary for the preparation and fair presentation of the project financial statements that are free from material misstatements whether due to fraud or error. Auditor s Responsibility My responsibility is to express an opinion on the financial 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 about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor s judgment, including the assessment of the risks of material misstatements of the 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 the iv

5 financial statements in order to design audit procedures that are appropriate in the circumstances. 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 audit opinion. Part A of this report sets out my 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. PART A Opinion In my opinion, the Project financial statements present fairly in all material respects the fund balances of the Community Agricultural Infrastructure Improvement Programme Project III (CAIIP III) IDB Loan Component as at 30 th June 2015 and the receipts and payments for the year then ended in accordance with the accounting policies stated on pages 13 to 18 of the financial statements. John F.S. Muwanga AUDITOR GENERAL KAMPALA 19 th October, 2105 v

6 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME- PROJECT III (CAIIP III) - IDB LOAN No.UG0081 REPORT OF THE AUDITOR GENERAL ON THE INTERNAL CONTROL STRUCTURE FOR THE YEAR ENDED 30 TH JUNE 2015 I have audited the financial statements of the Community Agricultural Infrastructure Improvement Programme-Project III (CAIIP III) IDB Loan No.UG0081, and reviewed the Internal Control procedures relevant to generation of accounting information presented in the financial statements, and those relevant to control over programme finances and the safeguard of its assets. I obtained all the information and explanation I considered necessary for the audit. Management Responsibility for the Internal Control System Programme management is responsible for the designing, establishing and maintaining a control structure that provides management with reasonable assurance that adequate procedures are followed for generation of accounting information for reliable financial statements, and control over finances and safeguarding assets against loss and unauthorized use or disposal. Management is also responsible for ensuring that conditions provided for in the funding agreements and other legal requirements are observed. Auditor s Responsibility My responsibility is to express an opinion on the internal control system based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the internal control mechanisms for generation of accounting information and for the safeguard of assets are adequate. I assessed the control risk in order to confirm that my audit procedures are adequate to express an independent opinion on the control system. I believe that my audit provides a reasonable basis for my qualified opinion. I obtained an understanding of the design of the relevant policies and procedures and whether they have been in operation and I assessed the control risk. vi

7 Opinion In my opinion, the programme management maintained an adequate internal control system for the preparation of reliable financial statements, control over finances and safeguard of the programme assets during the year ended 30 th June John F.S. Muwanga AUDITOR GENERAL KAMPALA 19 th October, 2015 vii

8 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME- PROJECT III (CAIIP III) IDB LOAN NO.UG0081 REPORT OF THE AUDITOR GENERAL ON THE SPECIAL ACCOUNTS OPERATIONS FOR THE YEAR ENDED 30 TH JUNE 2015 I have audited the Special Accounts Statements of the Community Agricultural Infrastructure Improvement Programme-Project III, (CAIIP III) IDB Loan No.UG0081 for the year ended 30 th June 2015 which are set out on pages 16 and 17 of Appendix 1 respectively. Management Responsibility for the Special Accounts Statement Programme management is responsible for preparation of the special account statement and its fair presentation in accordance with the requirements of the Government of Uganda regulations and loan (IDB) guidelines. Management is also responsible for designing and implementing internal controls relevant to the preparation of the Special Account Statements that is free from material misrepresentation, whether due to fraud or error and selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility My responsibility is to express an opinion on the special account statement based on my audit. I conducted my audit in accordance with International Standards on Auditing and the Donor guidelines on auditing. Those standards and the Donor guidelines require that I plan and perform the audit to obtain reasonable assurance about whether the Special Account statement is free from material misstatement. I believe that the audit evidence I have obtained provides a reasonable basis for my opinion. Opinion In my opinion, Programme management complied in all material respects with loan rules and procedures and the Special Accounts Statements for the Community Agricultural Infrastructure Improvement Programme-Project (CAIIP III) IDB Loan No.UG0081 present viii

9 fairly in all material respects the accounts transactions and the closing balances as at 30 th June John F.S. Muwanga AUDITOR GENERAL KAMPALA 19 th October, 2015 ix

10 COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME- PROJECT III (CAIIP III) - IDB LOAN NO.UG0081 REPORT OF THE AUDITOR GENERAL ON THE STATEMENTS OF EXPENDITURES FOR THE YEAR ENDED 30 TH JUNE 2015 I have audited the Statements of Expenditures supporting Disbursement requests of the Community Agricultural Infrastructure Improvement Programme-Project III (CAIIP III) IDB Loan No.UG0081 for the year ended 30 th June 2015, as summarized in the Statement of Disbursement Requests on page 18 of Appendix 1. Management is responsible for the preparation and fair presentation of the Statements of Expenditures to support Disbursement Requests in accordance with ADB Funding guidelines. Auditor s Responsibility My responsibility is to express an opinion on the statements of expenditure based on my audit. I conducted the audit in accordance with International Standards on Auditing (ISA) and IDB Financial Reporting Guidelines. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether Statements of Expenditure are adequate to support the claims for reimbursements of expenditure for the year. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, adequate documentation has been maintained to support the claims for reimbursement of expenditures incurred as provided in the Statements of Expenditures and the expenditures are eligible under the financing agreement. John F.S. Muwanga AUDITOR GENERAL KAMPALA 19 th October, 2015 x

11 REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION

12 PART B DETAILED REPORT OF THE AUDITOR GENERALON THE FINANCIAL STATEMENTS OF THE COMMUNITY AGRICULTURAL INFRASTRUCTURE IMPROVEMENT PROGRAMME-PROJECT III IsDB COMPONENT FOR THE YEAR ENDED 30 TH JUNE, 2015 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 (as amended) requires me to audit and report on the public accounts of Uganda and 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 above Project to enable me report to Parliament. 2.0 PROJECT BACKGROUND The Government of Uganda secured funding amounting to approximately USD million from the African Development Bank (ADB), IDB and Government of Uganda (GoU) to finance the Community Agriculture Infrastructure Improvement Programme Project III (CAIIP - III) over a period of 5 Years from CAIIP- III is a follow-on project to two already existing projects, namely, CAIIP-I and CAIIP- II. The project consists of three components, namely: (i) Rural Infrastructure Improvement (ii) Community Mobilization and (iii) Project Management. The Project was expected to commence in 2011 and run for 5 years, however, it became operational in April The total project cost, excluding taxes and duties, is estimated at USD million which is to be financed by; ADB (USD 60m), IDB (USD8m) and GOU (USD3.45m). The Project is implemented in 32 districts in the Western, Central, Northern and Eastern regions of Uganda. These districts comprise of: Ibanda, Ntungamu, Kisoro, Busia, Rukungiri, Kabarole, Kyegegwa, Apac, Hoima, Kanungu, Oyam, Kiruhura, Bushenyi, Kamwenge, Isingiro, Sheema, Kasese, Bundibugyo, Bugiri, Mayuge, Masindi, Nakaseke, Kole, Mbarara, Khiruhura, Luwero, Namayingo, Rubirizi, Kabale, Mitooma, Buhweju and Ntoroko. This report relates to the audit of the component financed through the IsDB loan. 1

13 3.0 PROJECT OBJECTIVES The overall goal is to contribute to poverty reduction and economic growth in Uganda through enhanced commercialization of agriculture. This is to be achieved through; Enhancing farmers access to markets Attracting competitive prices Increasing incomes through improvements in rural infrastructure and their management by well mobilized Communities. 4.0 PROJECT COMPONENTS Under the IsDB loan, the components include; Rural infrastructure development km Studies and supervision consultancy Programme management and capacity building 5.0 AUDIT OBJECTIVES The audit was conducted in accordance with International Standards on Auditing and included a review of the accounting records, accounting policies used and agreed procedures as was considered necessary. The Audit was carried out with regard to the following objectives; a. To express an opinion on whether the financial statements for the year ended 30 th June 2015 present fairly in all material respect the receipt and payments of the project as well as the cash position and are in conformity with generally accepted accounting principles. b. To establish whether the special account has been maintained in accordance with the provisions of the Loan Agreements c. To evaluate and obtain a sufficient understanding of the Internal control structure of the project, assess control risk and identify reportable conditions, including material internal control weaknesses. d. To establish whether Programme Managers are managing the programme in compliance with the covenants contained in the financing agreements as well as Government of Uganda financial regulations. e. To establish whether all procurements of goods and services under the programme have been undertaken in accordance with GOU procurement guidelines and procedures as specified in the PPDA Act 2003 and

14 f. To establish whether all necessary supporting documents, accounting records as well as books of account have been kept in respect of all programme activities. g. Whether programme activities have been implemented as stated in the work plans and budgets. 6.0 AUDIT PROCEDURES PERFORMED a. Revenue/Receipts Obtained a schedule of all programme funds provided by ADF, IDB and Government of Uganda and reconciled the amounts to the programme s cash books and bank statements. b. Expenditure Reviewed the programme funding agreement to ascertain agreed budget line activities for the IDB and GOU funding and checked whether funds had been utilized in accordance with the approved work plan; Vouched transactions of the programme in particular funding received and expenditures incurred during the period covered by the audit in order to establish that documentation in support of expenditure agreed with the amount and description on the payment vouchers and or applications, bank statements and was properly controlled and accounted for. c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period. d. Procurement Reviewed procurement of goods and services for the project and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed use and management of project assets during the period under review. f. Periodic Reports about project Activities Reviewed the programme agreement provisions, and reconciled it to the project activities during the period under review. 3

15 g. Programme Financial Statements Examined on a test basis, evidence supporting the amounts and disclosures in the programme financial statements; assessed the accounting principles used and significant estimates made by Programme Management as well as evaluating the overall financial statement presentation. 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of findings The following system of profiling of the audit findings has been adopted to better prioritise the implementation of audit recommendations: Category Description 1 High 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. 2 Moderate significance 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. 3 Low significance 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. 7.2 Summary of Findings No Finding Significance Delayed release of IDB funds High Delayed works on IDB funded projects High 9.0 Project performance against the logical framework Moderate 10.0 Status of prior year audit recommendations Low 8.0 DETAILED FINDINGS 8.1 COMPLIANCE WITH FINANCING AGREEMENT AND GOVERNMENT OF UGANDA FINANCIAL REGULATIONS It was noted that management had complied in all material aspects of the financing and GoU financial regulations except for the matters below; 4

16 8.1.1 Delayed release of IDB funds According to the annual work plan for the year under review, the project planned to receive USD 4,679,895 from Islamic Development bank (IDB) to rehabilitate 375 kilometres of Community Access Roads in western Uganda. However, IDB did not release any funds to the project. This was contrary to the agreement signed between IDB and GoU. Management explained that delayed release of funds was attributed to the releases that were tagged to civil works. This was however not achieved because the procurement for supervising consultant for the civil works was delayed. With the finalization of this procurement, funds will be disbursed expeditiously. I advised management to expedite the procurement process and ensure that the required funds are released as planned to implement budgeted activities Delayed works on IDB funded projects It was observed that some roads were abandoned by the contractors and others are behind schedule. This was partly because the contractors were not paid as agreed in the contracts. Delayed release of funds results into delayed completion of project activities thus hindering the achievement of projects objectives. The status of some of the projects visited are indicated in the table below; Details 1 Mitooma District Lot 15 Katenga Sub county Lukaya T/C-Karire Bridge 4km Nyamizi-Rwagashani 2.9km Rwentunda-Ruboroga 3km Nyihanda-Nyabubare 2.2km Igambiro-Parliament-Nyabubare- Rubare3.9km Karire Bridge Contract amount UGX. 1,227,983,591 start date 20/1/2015 End date 20/7/2015 Remarks There is a delay in completing the works of this project as the completion date should have been 20 th July, The physical works were estimated at 50%. 5

17 2 Mitooma District Lot 16 Mayanga Sub county Ibiri Mayanga-Kishande-Mayanga Play Ground 3.2km Kagashe-Kenshomba-Kyabakama- Keteme 1.5km Rusheregyenyi-Rwanyakatura-Omuruti- Mayanga Modern P/S- sec 1(2.3 km) Rusheregyeni-Rwanyakatura-Omuruti- Mayanga Modern P/S Section 2 (1.7 km) There was a delay in completion of these works as the activities should have been completed by 20 th July, Further, the road works were abandoned. The physical progress was estimated at 60%. Rutoome-Nyamisheshe-Alakastore- Kakyeza P/S-Omukikazi-Kanganga 2 (3 km) Rwamujori-Nyambabi-Kahama-Bukuma- Mutanoga (5.5 km) Rweitanzi Bridge-Kanyarohinda (1.2 km) Kanyarohinda Bridge 1 Contract amount UGX.1,522,300,678 start date 20/1/2015 End date 20/7/2015 progress 60% Physical 3 Mitooma District IDB Lot 14 Kanyabwanga Subcounty Omukarere Nyandago - Kati 2.6km Omukebishuba Kanyabwanga - Rwenshama PS - Rwenkurija Market Section 1 4.7km There was a delay in finalizing the contract as its end date should have been 20 th July, The physical progress was estimated at 60%. Omukebishuba-Kanyabwanga - Rwenshama PS - Rwenkurija Market Section 2 1km Omukebishuba Kanyabwanga - Rwenshama PS - Rwenkurija Market Section 3 2km Rwamuniori Omukayaga - Butembe2.6km Contract amount UGX.622,642,197 Start date 20/1/2015 End date 20/7/2015 Management explained that civil works under IsDB funding were majorly affected by the delays in the procurement of supervising consultants because of rigorous 6

18 evaluation by IsDB. In addition releases of funds from IsDB have been affected by donor requirement of recruiting an independent external auditor to undertake the verification of all payments. I advised management to liaise with the funders closely to enable overcome the bottleneck so that budgeted funds are released on time to enable smooth implementation of project activities. 9.0 PROJECT PERFORMANCE AGAINST THE LOGICAL FRAME WORK The Project was expected to commence in 2011 and run for 5 years ending 31 st December 2016, however, operations begun in April A review of the project implementation plan and project progress reports revealed delays in the implementation of activities as indicated below; Activity Target Progress to date Rehabilitation of Community Access Roads 2,845Km Rehabilitation of 913Km of CARs completed and handed over to the beneficiary LGs. About 1,316km of Batch A & B CARs are still ongoing with physical averaging 60% and are expected to be completed by December Contracts for another 574.6Km of the re-advertised Batch A & B awarded and works are expected to commence in October Supply and Installation of Agro-processing Facilities 79 assorted APFs Procurement of 79 assorted Agro processing facilities is now at contract award stage. Contracts submitted to Solicitor General for clearance. Execute civil works for shelters for agro processing facilities. Rural Electrification of APF sites About 1,170Km Civil works are ongoing on 58 APF shelter contracts in 29 districts. 100km Procurement of contractors to extend grid to APF sites is now at evaluation stage. Evaluation report submitted to the bank for review and no-objection. Financial performance 100% 32% disbursed and 70% committed Ongoing procurements of grid extension, supply and installation of assorted APFs and the readvertised Batch A and B CARs will increase the 7

19 project total disbursements including commitments to over 90%. Management explained that they have now put in place measures to ensure that all activities are implemented within the project lifetime. I advised management to intensify the supervision and monitoring and ensure that the project implementation is fully undertaken within the agreed timelines STATUS OF THE PRIOR YEAR AUDIT RECOMMENDATIONS The status of the prior year audit issues and follow up status is summarized below: No Audit Issue Recommendation Current Status 1 Budget Performance-Low Absorption Capacity The approved Project expenditure estimates for the financial year amounted to Shs.45, 015,592,384. However, only Shs.2,249,801,651 was spent during the year, representing an absorption capacity of only 5%. 2 Spending at source It was noted that GoU contribution amounting to Shs.199,728,000 was released by Ministry of Finance, Planning and Economic Development to the project through the Ministry of Local Government Treasury General Account, where funds were spent on non-project activities contrary to the Project s operations manual I advised management Partially to undertake implemented procurements early enough and ensure that budget implementation is carried out as planned and in agreed time period. I advised management Not implemented to ensure strict adherence to controls of project accounts such as authorization and purpose of the expenditure for proper monitoring and control. 8

20 APPENDIX 1 FINANCIAL STATEMENTS 9